CONFORMED COPY


                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC  20549


                                   FORM 10-Q


              [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                                       OR

                [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
                  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For Quarter Ended   September 2, 1995          Commission File Number   0-6365
                    -----------------                                   ------

                           APOGEE ENTERPRISES, INC.
              --------------------------------------------------
              (Exact Name of Registrant as Specified in Charter)

            Minnesota                               41-0919654
     ------------------------                  ---------------------
     (State of Incorporation)                  (IRS Employer ID No.)


      7900 Xerxes Avenue South, Suite 1800, Minneapolis, Minnesota  55431
      -------------------------------------------------------------------
                   (Address of Principal Executive Offices)


                Registrant's Telephone Number   (612) 835-1874
                                                --------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.    YES    X     NO 
                                           -----       -----


                     APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the latest practicable date.


             Class                            Outstanding at September 30, 1995
- - --------------------------------              ---------------------------------
Common Stock, $.33-1/3 Par Value                         13,496,818

 
                   APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
                                   FORM 10-Q
                               TABLE OF CONTENTS
                    FOR THE QUARTER ENDED SEPTEMBER 2, 1995


Description Page ----------- ---- PART I - - ------ Item 1. Financial Statements Consolidated Balance Sheets as of September 2, 1995 and February 25, 1995 3 Consolidated Results of Operations for the Three Months and Six Months Ended September 2, 1995 and August 27, 1994 4 Consolidated Statements of Cash Flows for the Six Months Ended September 2, 1995 and August 27, 1994 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-9 PART II Other Information - - ------- Item 6. Exhibits 10 Exhibit Index 12 Exhibit II 13
-2- APOGEE ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Thousands of Dollars)
September 2, February 25, 1995 1995 ------------ ------------ ASSETS Current assets Cash and cash equivalents (including restricted funds of $874 and $885, respectively) $ 14,686 $ 2,894 Receivables, net of allowance for doubtful accounts 164,341 165,099 Inventories 55,243 54,559 Costs and earnings in excess of billings on uncompleted contracts 17,409 19,606 Deferred tax assets 10,984 10,384 Other current assets 2,174 4,278 -------- -------- Total current assets 264,837 256,820 -------- -------- Property, plant and equipment, net 72,349 75,028 Investments in and advances to affiliated companies 16,042 15,016 Intangible assets, at cost less accumulated amortization 8,515 8,383 Deferred tax assets 5,682 5,082 Other assets 2,121 1,599 -------- -------- Total assets $369,546 $361,928 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 51,208 $ 53,793 Accrued expenses 46,185 41,168 Billings in excess of costs and earnings on uncompleted contracts 16,729 17,717 Accrued income taxes 10,024 10,454 Notes payable 7,600 7,065 Current installments of long-term debt 5,369 5,522 -------- -------- Total current liabilities 137,115 135,719 -------- -------- Long-term debt 79,689 80,566 Other long-term liabilities 20,382 21,014 Shareholders' equity Common stock, $.33-1/3 par value; authorized 50,000,000 shares; issued and outstanding 13,488,000 and 13,443,000 shares, respectively 4,496 4,481 Additional paid-in capital 20,124 19,345 Retained earnings 107,740 100,803 -------- -------- Total shareholders' equity 132,360 124,629 -------- -------- Total liabilities and shareholders' equity $369,546 $361,928 ======== ========
See accompanying notes to consolidated financial statements. -3- APOGEE ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED RESULTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 2, 1995 AND AUGUST 27, 1994 (Thousands of Dollars Except Share and Per Share Amounts)
Three Months Ended Six Months Ended --------------------------- ------------------------------ September 2, August 27, September 2, August 27, 1995 1994 1995 1994 ------------- ------------ ------------- ------------ Net sales $ 222,186 $ 185,971 $ 441,218 $ 364,898 Cost of sales 190,362 156,731 377,469 310,270 ----------- ----------- ----------- ----------- Gross profit 31,824 29,240 63,749 54,628 Selling, general and administrative expenses 21,126 21,765 45,253 42,435 ----------- ----------- ----------- ----------- Operating income 10,698 7,475 18,496 12,193 Interest expense 1,711 821 3,463 1,383 Other income, net (161) - (161) - ----------- ----------- ----------- ----------- Earnings before income taxes and other items below 9,148 6,654 15,194 10,810 Income taxes 3,301 2,779 5,698 4,512 Equity in net earnings of affiliated companies 226 (294) 149 (471) Minority interest (25) (125) 220 (125) ----------- ----------- ----------- ----------- Net earnings $ 5,646 $ 4,294 $ 9,127 $ 6,894 =========== =========== =========== =========== Earnings per share: $ .41 $ .32 $ .67 $ .51 =========== =========== =========== =========== Weighted average number of common shares and common share equivalents outstanding 13,637,000 13,447,000 13,630,000 13,412,000 =========== =========== ============ =========== Cash dividends per common share $ .08 $ .075 $ .16 $ .15 =========== =========== =========== ===========
See accompanying notes to consolidated financial statements. -4- APOGEE ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 2, 1995 AND AUGUST 27, 1994 (Thousands of Dollars)
1995 1994 -------- -------- OPERATING ACTIVITIES Net earnings $ 9,127 $ 6,894 Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation and amortization 8,283 7,649 Provision for losses on accounts receivable 632 1,037 Noncurrent deferred income taxes (1,200) (600) Gain on sale of Nanik Window Coverings Group (4,709) - Equity in net earnings of affiliated companies 149 (471) Minority interest in net earnings 220 (125) Other, net (343) 315 Changes in operating assets and liabilities, net of effect of acquisitions: Receivables (3,892) 1,406 Inventories (5,280) (5,796) Costs and earnings in excess of billings on uncompleted contracts 2,197 (1,451) Other current assets 1,959 480 Accounts payable and accrued expenses 1,671 (11,101) Billings in excess of costs and earnings on uncompleted contracts (988) 2,327 Accrued and current deferred income taxes (430) 1,238 Other long-term liabilities 780 512 ------- -------- Net cash provided by operating activities 8,176 2,314 ------- -------- INVESTING ACTIVITIES Capital expenditures (9,536) (11,909) Acquisition of businesses, net of cash acquired (446) (272) Investments in and advances to affiliated companies (2,807) 613 Proceeds on sale of Nanik Window Coverings Group 18,250 - Other, net 231 (156) ------- -------- Net cash provided by (used in) investing activities 5,692 (11,724) ------- -------- FINANCING ACTIVITIES Increase/(decrease) in notes payable 535 (5,350) Proceeds from issuance of long-term debt - 15,000 Payments on long-term debt (1,030) (423) Proceeds from issuance of common stock 819 1,356 Purchase and retirement of common stock (240) - Dividends paid (2,160) (2,005) ------- -------- Net cash (used in) provided by financing activities (2,076) 8,578 ------- -------- Increase/decrease in cash 11,792 (832) Cash and cash equivalents at beginning of period 2,894 10,824 ------- -------- Cash and cash equivalents at end of period $14,686 $ 9,992 ======= ========
See accompanying notes to consolidated financial statements. -5- APOGEE ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies Principles of Consolidation In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of September 2, 1995 and February 25, 1995, and the results of operations for the three months and six months ended September 2, 1995 and August 27, 1994 and cash flows for the six months ended September 2, 1995 and August 27, 1994. The financial statements and notes are presented as permitted by Form 10-Q and do not contain certain information included in the Company's annual consolidated financial statements and related notes. The results of operations for the six-month period ended September 2, 1995 and August 27, 1994 are not necessarily indicative of the results to be expected for the full year. Accounting period ----------------- The Company's fiscal year ends on the Saturday closest to February 28. Each interim quarter ends on the Saturday closest to the end of the months of May, August and November. The first quarter of fiscal 1996 consisted of 14 weeks while the first quarter of fiscal 1995 had 13 weeks. Consequently, Fiscal 1996 is a fifty-three week year while 1995 is a fifty-two week year. 2. Inventories Inventories consist of the following:
September 2, February 25, 1995 1995 ------------ ------------ Raw materials and supplies $14,383 $14,802 In process 2,708 3,232 Finished goods 38,152 36,525 ------- ------- $55,243 $54,559 ======= =======
-6- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SALES AND EARNINGS - - ------------------ Second quarter net earnings of $5.6 million, or 41 cents per share, were 31% greater than last year's $4.3 million, or 32 cents a share. Revenues rose 19%, to $222 million, from $186 million a year ago. Year-to-date net earnings were up 32% to $9.1 million, or 67 cents per share, from $6.9 million, or 51 cents per share, a year ago. Revenues for the first six months jumped 21%, to $441 million, as both of the Company's segments reported double-digit increases in each of the two quarters. The following table presents the percentage change in sales and operating income for the Company's two segments and on a consolidated basis, for three and six months when compared to the corresponding periods a year ago.
THREE MONTHS ENDED SIX MONTHS ENDED ------------------------------ ------------------------------- SEPT. 2, AUG. 27, % SEPT. 2, AUG. 27, % 1995 1994 CHANGE 1995 1994 CHANGE ============================== =============================== SALES Building products & Services $147,155 $117,633 25 $293,686 $231,878 27 Automotive glass 75,031 68,338 10 147,532 133,020 11 ------------------------------ ------------------------------- Total $222,186 $185,971 19 $441,218 $364,898 21 ============================== =============================== OPERATING INCOME Building products & Services $2,180 -$623 NM $4,665 -$22 NM Automotive glass 8,090 8,199 -1 13,663 13,960 -2 Corporate and other 428 -101 NM 168 -1,745 NM ------------------------------ ------------------------------- Total $10,698 $7,475 43 $18,496 $12,193 52 ============================== ===============================
Building Products & Services (BPS) - - ---------------------------------- BPS reported 25% revenue growth and produced a small operating profit for the quarter, versus a minor operating loss a year ago, building on similar results experienced in the first quarter. The segment's revenue gains primarily reflected strong activity levels at Harmon Contract and record sales of high- performance architectural glass by the Viracon unit, which benefitted from improving market conditions and the additional capacity placed in service last year. The segment's operating income gain was due to Viracon's improved profitability and modest margin improvements at Harmon Contract. Operating margins remained historically low, however, as both Harmon and Wausau, the segment's architectural metals group, continued to be hampered by sluggish market recoveries and very thin-margin projects entered into before improvements in project screening procedures were initiated last year. On July 28, 1995, the Company sold selected assets and liabilities of the Nanik Window Coverings group for $18.3 million cash, subject to post-closing audit adjustments, if any, which are being finalized pursuant to the sale agreement. The net gain on the sale was $4.7 million and is included under the caption, "Other income" in the Consolidated Results of Operations. On September 2, 1995, Apogee's consolidated backlog stood at $353 million, slightly more than first quarter's backlog of $349 million, but down 10% from the $394 million reported a year ago. Most of Harmon's and Wausau's low-margin business referred to above is expected to be completed by fiscal year-end. With better-margin projects coming on stream and strong order levels at Viracon, the segment anticipates improved operating earnings during the second half of fiscal 1996. -7- Automotive Glass (AG) - - --------------------- AG increased sales by 10% for the quarter. Despite competitive pricing conditions and lower industry demand, AG's Harmon Glass and Glass Depot groups were able to improve same-location sales slightly. The National Call Center, formerly the Harmon Glass Network, reported 16% unit growth for the quarter. The segment's Curvlite windshield fabricating unit generated slightly higher windshield sales, outpacing industry measures. Curvlite's sales also grew due to a new program involving the redistribution of tempered automotive glass parts fabricated by another manufacturer. Despite the improved sales, AG had essentially flat operating income compared to the year-ago period. Competitive pricing and rising costs associated with ongoing information systems and marketing initiatives and programs offset the benefit of the sales gains. For the first six months, the segment has opened 3 wholesale depots and 16 retail stores, while closing 7 locations, bringing the quarter-end total to 265 retail units and 56 depots. Expansion opportunities, including both possible acquisitions and start-up operations, continued to be investigated. AG continues to anticipate a solid operating profit for the year. However, weak demand for automotive replacement glass and softening prices, along with the added costs of its selling and administrative initiatives, may cause the segment to report lower operating earnings than a year ago. Viratec Thin Films - - ------------------ Viratec Thin Films (Viratec), a 50%-owned joint venture and leading supplier of coated glass for computer anti-glare screens, reported stronger sales but lower operating income than a year ago. Profitability was affected by a decline in product pricing and higher research and development expenditures on future products and process improvements. Viratec's order backlog almost doubled over a year ago and stood at $20.6 million at quarter end. Consolidated - - ------------ The following table compares quarterly results with year-ago results, as a percentage of sales, for each caption.
Three Months Ended Six Months Ended ----------------------- ----------------------- Sept. 2, Aug. 27, Sept. 2, Aug. 27, 1995 1994 1995 1994 ---------------------- ----------------------- Net sales 100.0 100.0 100.0 100.0 Cost of sales 85.7 84.3 85.6 85.0 ---- ---- ---- ---- Gross profit 14.3 15.7 14.4 15.0 Selling, general and administrative expenses 9.5 11.7 10.3 11.6 ---- ---- ---- ---- Operating income 4.8 4.0 4.2 3.3 Interest expense, net 0.8 0.4 0.8 0.4 Other income, net (0.1) - - - ---- ---- ---- ---- Earnings before income taxes and other items below 4.1 3.6 3.4 3.0 Income taxes 1.5 1.5 1.3 1.2 Equity in net (earnings) of affiliated companies 0.1 (0.2) - (0.1) Minority interest - (0.1) - - ---- ---- ---- ---- Net earnings 2.5 2.3 2.1 1.9 ==== ==== ==== ==== Income tax rate 36.1% 40.0% 37.5% 40.0%
-8- On a consolidated basis for the three-month and six-month periods, gross profit, as a percentage of net sales, declined as lower margins at AG and a shift in revenues towards BPS, which has lower margins than AG, negatively affected gross profits. Selling, general and administrative expenses (SG & A) decreased slightly due to cost reduction programs, and the sale of the Nanik group. SG &A fell significantly as a percent of sales primarily due to the increase in net sales. Net interest expense rose with higher borrowing levels in the first five months of the year. Other income consisted of the $4.7 million gain from the sale of the Nanik Window Coverings Group, reduced by charges totaling $4.5 million. These charges related primarily to the write-down of a minority investment in a start-up venture and an adjustment to the Company's insurance reserves. The effective income tax rate of 36.1% declined due to a change in the Company's jurisdictional mix. LIQUIDITY AND CAPITAL RESOURCES - - ------------------------------- Cash balances were higher at quarter end due in large part to cash held by a captive insurance subsidiary. Receivables and inventories increased reflecting higher sales levels, though the Nanik sale offset the increases to reflect a net reduction. Accrued expenses and accounts payable also grew with the increased activity levels. Borrowing levels remained almost even with fiscal year end, with a total debt balance of $92.7 million at September 2, 1995, which represented 34% of invested capital. Additions to property, plant and equipment totaled $9.5 million for the first half of the fiscal year. Major components of these additions included expenditures for information and communications systems throughout the company, particularly at in the AG segment. -9- PART II OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders - - ------------------------------------------------------------ Apogee Enterprises, Inc. Annual Meeting of Shareholders was held on June 20, 1995. The total number of outstanding shares on the record date for the Annual Meeting was 13,463,137. Eighty-four percent of the total outstanding shares were represented in person or by proxy at the meeting. The candidates for election as Class III Directors listed in the proxy statement were elected to serve three-year terms, expiring at the 1998 annual meeting. The proposals to ratify the adoption of the proposed amendments to the 1987 Stock Option Plan and the appointment of KPMG Peat Marwick LLP as independent auditors for the Company were also approved. The results of these matters voted upon by shareholders are listed below.
Number of Shares ------------------ In Favor Withheld Abstained -------- -------- --------- Election of Class III Directors: Paul B. Burke 11,335,961 16,743 Donald W. Goldfus 11,333,558 19,145 James L. Martineau 11,333,558 19,145 Ratification of the adoption of the proposed amendment to the 1987 Stock Option Plan 10,567,745 106,928 60,416 Ratification of the appointment of KPMG Peat Marwick LLP as independent auditors 11,123,685 4 164,077
ITEM 6. Exhibits and Reports on Form 8-K - - ----------------------------------------- (a) Exhibits: Exhibit 11. Statement of Determination of Common Shares and Common Share Equivalents. Exhibit 27. Financial Data Schedule (EDGAR filing only). (b) Registrant filed a Current Report on Form 8-K, dated July 26, 1995, in respect of amendments to the Rights Agreement between the Registrant and American Stock Transfer & Trust Company. -10- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. APOGEE ENTERPRISES, INC. Date: October 16, 1995 Donald W. Goldfus ------------------------ -------------------------------- Donald W. Goldfus Chairman of the Board and Chief Executive Officer Date: October 16, 1995 Terry L. Hall ------------------------ -------------------------------- Terry L. Hall Vice President of Finance and Chief Financial Officer -11- EXHIBIT INDEX Exhibit Page - - ------- ---- Exhibit 11 Statement of Determination of Common Shares and Common Share Equivalents 13 Exhibit 27 Financial Data Schedule (EDGAR filing only) 14

 
                                                                      EXHIBIT 11


    STATEMENT OF DETERMINATION OF COMMON SHARES AND COMMON SHARE EQUIVALENTS
    ------------------------------------------------------------------------
Average No. of Common Average No. of Common Shares & Common Share Shares & Common Share Equivalents Assumed to Equivalents Assumed to be Outstanding During be Outstanding During the Three Months Ended the Six Months Ended ------------------------ ------------------------- September 2, August 27, September 2, August 27, 1995 1994 1995 1994 ------------ ---------- ------------ ----------- Weighted average number of common shares outstanding (a) 13,482,119 13,364,988 13,450,941 13,339,016 Common share equivalents resulting from the assumed exercise of stock options (b) 154,499 82,408 158,707 72,551 ---------- ---------- ---------- ---------- Total primary common shares and common share equivalents 13,636,618 13,447,396 13,609,648 13,411,567 ========== ========== ========== ==========
(a) Beginning balance of common stock adjusted for changes in amount outstanding, weighted by the elapsed portion of the period during which the shares were outstanding. (b) Common share equivalents computed by the "treasury" method. Share amounts represent the dilutive effect of outstanding stock options which have an option value below the average market value for the current period.
 


 
5 1,000 6-MOS MAR-02-1996 FEB-26-1995 SEP-02-1995 14,686 0 172,195 7,854 55,243 264,837 163,070 90,721 369,546 137,115 0 4,496 0 0 127,864 369,546 441,218 441,218 377,469 63,749 0 632 3,463 15,194 5,698 0 0 0 0 9,127 0.67 0.67