Apogee’s Architectural Glass Segment Grows 13 Percent in Second Quarter

Apogee Enterprises Inc.’s fiscal 2020 second quarter results were lower than its results during the second quarter of the past year overall and in the architectural framing systems segment. This is according to the company’s Fiscal 2020 Second Quarter Results. However, its architectural glass segment experienced high growth.

Apogee’s 2020 second-quarter revenue was $357.1 million, compared to $362.1 million in the second quarter of fiscal year 2019. Apogee is the parent company of EFCO, Harmon, Linetec, Sotawall, Tubelite and Viracon, among others.

Architectural Framing Systems

Architectural framing systems revenue in the second quarter was $187.4 million, compared to $189.9 million in the prior year period. Second-quarter operating income was $15.5 million, compared to $18.3 million in the prior year quarter. Last year’s second quarter included $1.1 million of expense for the amortization of short-lived acquired intangibles. Excluding that expense, adjusted operating income in the prior year quarter was $19.4 million. Second quarter operating margin was 8.3%, down from 9.6% and adjusted operating margin of 10% in last year’s second quarter, primarily due to a less favorable project mix. Segment backlog stands at $388 million, compared to $407 million a quarter ago.

Architectural Glass

Architectural glass grew 13% in the second quarter, with revenue of $99.1 million compared to $88.1 million in the prior year quarter, primarily driven by increased volume and more favorable sales mix. Operating income improved to $6.5 million and operating margin increased to 6.5%, compared to $1.7 million and 2% respectively in last year’s second quarter, primarily driven by operating leverage on the higher volume, more favorable mix and improved productivity compared to the prior year, partially offset by start-up costs related to strategic growth initiatives.

Architectural Services

As expected, architectural services’ revenue decreased to $61.6 million in the second quarter, compared to $76.5 million in the prior-year quarter, on lower volumes due to the timing of project activity, according to the company. Second-quarter operating income was $4.0 million with operating margin of 6.5%, compared to $7.6 million and 10% respectively in the prior year period, reflecting reduced operating leverage on the decreased volumes. The segment continued to have strong order flow during the quarter, with segment backlog increasing to $502 million, from $483 million last quarter.

“We delivered solid operational and financial performance in the second quarter, with results largely in-line with our expectations,” says Joseph F. Puishys, CEO. “Our architectural glass segment made significant year-over-year improvements, with increased revenue and margins, and architectural services continued to build on its record backlog. We also made substantial progress toward completing the last remaining legacy EFCO project, tracking as expected to our schedule and cost estimates. We are delivering on our commitments and see positive momentum in our business.”

“Looking forward, we remain confident that our strategy to diversify revenue streams, broaden our growth opportunities and improve the efficiency and productivity of our operations positions the company well for future earnings growth and more consistent operating performance,” adds Puishys. “During the quarter we progressed on a number of initiatives to advance this strategy. We completed a facility upgrade that we expect to significantly enhance productivity and margins in our EFCO business. We also began to implement plans to enhance profitability across the entire framing systems segment and took initial steps to increase supply chain integration, reduce procurement costs and optimize our facility footprint. Finally, we made significant progress on a new operation that will be focused on the short lead-time segment of the architectural glass market, which continues our efforts to diversify our business mix and provide new opportunities for long-term growth.”

Outlook

The company reaffirmed its guidance for fiscal 2020. For the full-year the company continues to expect revenue growth of 1-3%, with growth in three of the company’s segments, partially offset by a decline in architectural services due to the execution schedules for projects in backlog.

Operating margins between 8.2-8.6%, with margin improvement in architectural glass and architectural framing systems, offset by reduced margins in architectural services due to reduced leverage on lower volumes and less favorable project maturity compared to fiscal 2019. Margins will also be negatively impacted by start-up costs related to the strategic growth investment in architectural glass, costs associated with supply chain initiatives and increased corporate costs from higher legal and other advisory expenses.