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 December 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 December 29, 1995
- -------------------------------- --------------------------------
Common Stock, $.33-1/3 Par Value 13,504,618
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
FOR THE QUARTER ENDED DECEMBER 2, 1995
Description Page
----------- ----
PART I
- ------
Item 1. Financial Statements
Consolidated Balance Sheets as of December 2, 1995
and February 25, 1995 3
Consolidated Results of Operations for the
Three Months and Nine Months Ended
December 2, 1995 and November 26, 1994 4
Consolidated Statements of Cash Flows for
the Nine Months Ended December 2, 1995 and
November 26, 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 1. Legal Proceedings 11
Item 6. Exhibits 11
Exhibit Index 12
Exhibit 11 13
-2-
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
December 2, February 25,
1995 1995
----------- ------------
ASSETS
Current assets
Cash and cash equivalents (including restricted funds of
$208 and $885, respectively) $ 8,312 $ 2,894
Receivables, net of allowance for doubtful accounts 170,050 165,099
Inventories 53,186 54,559
Costs and earnings in excess of billings on uncompleted
contracts 26,750 19,606
Deferred tax assets 11,284 10,384
Other current assets 2,627 4,278
-------- --------
Total current assets 272,209 256,820
-------- --------
Property, plant and equipment, net 74,434 75,028
Investments in and advances to
affiliated companies 16,914 15,016
Intangible assets, at cost less
accumulated amortization 8,457 8,383
Deferred tax assets 5,982 5,082
Other assets 2,543 1,599
-------- --------
Total assets $380,539 $361,928
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 49,630 $ 53,793
Accrued expenses 50,110 41,168
Billings in excess of costs and earnings
on uncompleted contracts 18,990 17,717
Accrued income taxes 9,902 10,454
Notes payable 12,550 7,065
Current installments of long-term debt 5,369 5,522
-------- --------
Total current liabilities 146,551 135,719
-------- --------
Long-term debt 75,439 80,566
Other long-term liabilities 20,296 21,014
Minority interest 1,787 -
Shareholders' equity
Common stock, $.33-1/3 par value;
authorized 50,000,000 shares; issued
and outstanding 13,505,000 and
13,443,000 shares, respectively 4,501 4,481
Additional paid-in capital 20,315 19,345
Retained earnings 111,650 100,803
-------- --------
Total shareholders' equity 136,466 124,629
-------- --------
Total liabilities and shareholders' equity $380,539 $361,928
======== ========
See accompanying notes to consolidated financial statements.
-3-
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED RESULTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED
DECEMBER 2, 1995 AND NOVEMBER 26, 1994
(Thousands of Dollars Except Share and Per Share Amounts)
Three Months Ended Nine Months Ended
-------------------------- --------------------------
December 2, November 26, December 2, November 26,
1995 1994 1995 1994
----------- ------------ ----------- ------------
Net sales $ 215,487 $ 186,253 $ 656,705 $ 551,151
Cost of sales 187,223 160,049 564,692 470,319
----------- ----------- ----------- -----------
Gross profit 28,264 26,204 92,013 80,832
Selling, general and
administrative expenses 20,027 19,831 65,280 62,266
----------- ----------- ----------- -----------
Operating income 8,237 6,373 26,733 18,566
Interest expense, net 1,145 1,134 4,608 2,517
Other income, net - - (161) -
----------- ----------- ----------- -----------
Earnings before income
taxes and other items
below 7,092 5,239 22,286 16,049
Income taxes 2,509 1,823 8,207 6,335
Equity in net earnings of
affiliated companies (305) (153) (156) (624)
Minority interest (284) (194) (64) (319)
----------- ----------- ----------- -----------
Net earnings $ 5,172 $ 3,763 $ 14,299 $ 10,657
----------- ----------- ----------- -----------
Earnings per share $ .38 $ .28 $ 1 .05 $ .79
=========== =========== =========== ===========
Weighted average number of
common shares and common
share equivalents
outstanding 13,599,000 13,587,000 13,620,000 13,470,000
=========== =========== =========== ===========
Cash dividends per common
share $ .085 $ .080 $ .245 $ .230
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
-4-
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 2, 1995 AND NOVEMBER 26, 1994
(Thousands of Dollars)
1995 1994
-------- --------
OPERATING ACTIVITIES
Net earnings $ 14,299 $ 10,657
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization 12,615 11,446
Provision for losses on accounts receivable 421 797
Noncurrent deferred income taxes (1,800) (900)
Gain on sale of Nanik Window Covering Group (4,709) -
Equity in net earnings of affiliated companies (156) (624)
Minority interest in net earnings (64) (319)
Other, net (1,172) 375
Changes in operating assets and liabilities,
net of effect of acquisitions:
Receivables (8,336) (2,132)
Inventories (3,223) (8,493)
Costs and earnings in excess of billings on
uncompleted contracts (7,144) (3,362)
Other current assets 1,506 649
Accounts payable and accrued expenses 4,018 (14,826)
Billings in excess of costs and earnings
on uncompleted contracts 1,273 4,176
Accrued and current deferred tax assets (552) 2,179
Other long-term liabilities 709 1,579
-------- --------
Net cash provided by operating activities 7,685 1,202
-------- --------
INVESTING ACTIVITIES
Capital expenditures (16,677) (17,746)
Acquisition of businesses, net of cash acquired (446) (272)
Investments in and advances to affiliated companies (1,318) 1,057
Proceeds from sale of Nanik Window Coverings Group 18,250 -
Other, net 248 (143)
-------- --------
Net cash provided (used in) investing activities 57 (17,104)
-------- --------
FINANCING ACTIVITIES
Increase in notes payable 5,485 (23,850)
Payments on long-term debt (5,280) (4,051)
Proceeds from issuance of long-term debt - 40,645
Proceeds from issuance of common stock 1,015 1,508
Repurchase and retirement of common stock (240) -
Dividends paid (3,304) (3,079)
-------- --------
Net cash (used in) provided by financing
activities (2,324) 11,173
-------- --------
Increase (decrease) in cash 5,418 (4,729)
Cash and cash equivalents at beginning of period 2,894 10,824
-------- --------
Cash and cash equivalents at end of period $ 8,312 $ 6,095
======== ========
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
December 2, 1995 and February 25, 1995, and the results of operations for
the three months and nine months ended December 2, 1995 and November 26,
1994 and cash flows for the nine months ended December 2, 1995 and November
26, 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 notes.
The results of operations for the nine-month period ended December 2, 1995
and November 26, 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:
December 2, February 25,
1995 1995
----------- ------------
Raw materials and supplies $13,725 $14,802
In process 2,464 3,232
Finished goods 36,997 36,525
------- -------
$53,186 $54,559
======= =======
-6-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SALES AND EARNINGS
- ------------------
Earnings for the third quarter rose 37 percent to $5.2 million, or 38 cents per
share, from $3.8 million, or 28 cents per share, a year earlier. Sales for the
period rose 16 percent to $215.5 million, up from $186.3 million a year ago.
Year-to-date earnings and sales climbed 33 percent and 19 percent, respectively.
Earnings per share grew to $1.05, compared to 79 cents a year ago.
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 nine
months when compared to the corresponding periods a year ago.
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
DEC. 2, NOV. 26, % DEC. 2, NOV. 26, %
1995 1994 CHANGE 1995 1994 CHANGE
--------------------------------- ---------------------------------
SALES
Building products & Services 152,713 125,750 21 446,399 357,628 25
Automotive glass 62,774 60,503 4 210,306 193,523 9
--------------------------------- ---------------------------------
Total 215,487 186,253 16 656,705 551,151 19
================================= =================================
OPERATING INCOME
Building products & Services 4,554 1,844 147 9,218 1,822 406
Automotive glass 3,343 3,368 -1 17,006 17,328 -2
Corporate and other 340 1,161 NM 509 -584 NM
--------------------------------- ---------------------------------
Total 8,237 6,373 29 26,733 18,566 44
================================= =================================
Building Products & Services (BPS)
- ----------------------------------
Despite the absence of the Nanik Window Coverings Group, which was sold during
the second quarter, BPS reported sharply higher sales and improved operating
income. The sales increase reflected substantial revenue growth at Harmon
Contract, the segment's curtainwall subcontractor and another record sales
performance by Viracon, the segment's architectural glass fabricator. Operating
income more than doubled from the figure earned in the year ago quarter.
Viracon was the key driver of the improved earnings, leveraging its record sales
into strong profits. The segment's Harmon Contract and Wausau architectural
metals units continued to experience slim margins, with both operations posting
small operating losses for the period. Strong order rates at Viracon, the
reduction in the number of old, lower margin projects at Harmon Contract and
Wausau and continued efforts to reduce costs throughout the segment should allow
BPS to report further sales and operating income improvements for the last
quarter of the year.
Apogee's consolidated backlog stood at $363 million on December 2, 1995, down 5%
from the $381 million reported at the end of last year's third quarter, but was
only slightly under the February 1995 year end total of $366 million. More
disciplined project selection, focusing on jobs with stronger margins, has
contributed to the slightly lower order rate.
Automotive Glass (AG)
- ---------------------
AG's revenues rose modestly in the third quarter, while operating income was
essentially flat compared to a year ago. Demand for automotive replacement glass
continued to be soft, with U.S. unit sales well below last year. The lower unit
movement coincided with very competitive pricing. The segment reported earnings
nearly equal with a year ago by increasing market share, limiting the impact of
thinning margins and higher costs associated with information systems and
marketing programs initiatives.
-7-
For the first nine months of the year, the segment has opened 4 wholesale depots
and 17 retail stores, while closing 7 locations, bringing the quarter-end total
to 266 retail units and 57 depots. Expansion opportunities continued to be
actively explored.
During November, AG's Curvlite operation, a manufacturer of automotive
windshields and other transportation glass, broke ground on the National
Distribution Center (NDC). The NDC is a wholesale distribution facility
designed to improve inventory management for retail and wholesale units
throughout the company as well as expand the units product offerings to outside
customers. Total building and equipment costs are approximated at $5 million.
Viratec Thin Films
- ------------------
Viratec Thin Films (Viratec), a 50%-owned optical-grade glass coating joint
venture, reported solid revenue and operating income gains for the period. Sales
of Viratec's coated flat glass for anti-glare computer screens remained robust.
The unit made improvements in the direct coating of cathode ray tubes during the
period, helping to generate the positive earnings gains noted above. Although
Viratec's backlog dropped from the prior quarter's level, order rates remained
solid with the December 2, 1995 backlog standing at $14.1 million, 5% ahead of
a year ago.
Consolidated
- ------------
The following table compares quarterly results with year ago results, as a
percentage of sales, for each caption.
Three Months Nine Months
Ended Ended
------------------- -----------------
Dec. 2, Nov. 26, Dec. 2, Nov. 26,
1995 1994 1995 1994
------------------- -----------------
Net sales 100.0 100.0 100.0 100.0
Cost of sales 86.9 85.9 86.0 85.3
----- ----- ----- -----
Gross profit 13.1 14.1 14.0 14.7
Selling, general and
administrative expenses 9.3 10.6 9.9 11.3
----- ----- ----- -----
Operating income 3.8 3.4 4.1 3.4
Interest expense, net 0.5 0.6 0.7 0.5
Other income, net - - - -
----- ----- ----- -----
Earnings before income taxes
and other items below 3.3 2.8 3.4 2.9
Income taxes 1.2 1.0 1.2 1.1
Equity in net earnings of
affiliated companies (0.1) (0.1) - (0.1)
Minority interest (0.1) (0.1) - (0.1)
----- ----- ----- -----
Net earnings 2.4 2.0 2.2 1.9
===== ===== ===== =====
Income tax rate 35.4% 34.8% 36.8% 39.5%
===== ===== ===== =====
For the three and nine months ended December 2, 1995, gross profit, as a
percentage of net sales, declined due to more competitive pricing at AG and a
shift in revenue mix towards BPS, which has lower margins than AG. Selling,
general and administrative expenses (SG & A) rose only marginally for the
quarter, reflecting the benefits of cost reduction efforts and the absence of
the sold Nanik group. SG & A fell as a percentage of sales as expenses have
risen at a rate well short of the Company's sales growth.
-8-
Year-to-date net interest expense rose due to higher borrowing levels during the
first half of the fiscal year, but dropped slightly for the quarter as borrowing
levels were lower during the quarter. The income tax rate was down sharply
compared to a year ago as our year-to-date rate was lowered slightly to 36.8%.
The lower rate was partially due to higher export sales which are not fully
taxable for Federal income tax purposes.
Liquidity and Capital Resources
- -------------------------------
The November balance sheet and the statement of cash flows reflect the working
capital needs associated with the higher sales levels. Accounts receivable have
risen 3% from the beginning of the year compared to nine-month sales growth of
19%. Inventory levels are slightly under the previous year end levels largely
due to the absence of the Nanik Window Coverings group. Costs in excess of
billings and earnings on uncompleted contracts and Billings in excess of costs
and earnings rose with Harmon Contract's higher level of construction activity.
Additions to property, plant and equipment totaled $16.7 million for the first
nine months of the fiscal year. Major components of these additions included
expenditures for information and communications systems throughout the Company,
most notably at AG.
During the quarter, the company raised its quarterly cash dividend 6%, to 8.5
cents a share.
-9-
PART II
OTHER INFORMATION
ITEM 1. Legal Proceedings
- -------------------------
Apogee Enterprises, Inc. and W.S.A., Inc., d/b/a Viracon, are defendants in a
lawsuit entitled Marvin Lumber & Cedar Company v. Apogee Enterprises, Inc.;
W.S.A., Inc., d/b/a Viracon; Marcon Coating, Inc.; and Viratec Thin Films, Inc.,
filed on November 3, 1995 in Rice County District Court, Third Judicial
District, State of Minnesota. Viracon and Marvin are each 50% shareholders in
Marcon and Viratec Thin Films is a wholly-owned subsidiary of Marcon. Marvin
alleges in its complaint that the boards of Marcon and Viratec are deadlocked
and that Marvin is entitled to court ordered relief, including dissolution or a
judicially-ordered buy out of Marvin's interest in Marcon and Viratec by Apogee
and Viracon. Marvin also is seeking damages based on Apogee and Viracon's
management of Marcon and Viratec. Apogee and Viracon have filed an answer
agreeing that the boards are deadlocked, but denying all claims by Marvin, and
have counterclaimed against Marvin seeking a judicially-ordered buy out by
Apogee and Viracon of Marvin's interest in Marcon and Viratec at a fair price to
be judicially determined. The Company is unable to predict the outcome of the
litigation at this point but does not currently believe the results would be
materially adverse to the Company.
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) The Company did not file any reports on Form 8-K during the quarter for
which this report is filed.
-10-
CONFORMED COPY
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: January 15, 1996 Donald W. Goldfus
-------------------- -----------------------------------
Donald W. Goldfus
Chairman of the Board and
Chief Executive Officer
Date: January 15, 1996 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 Nine Months Ended
------------------------- -------------------------
December 2, November 26, December 2, November 26,
1995 1994 1995 1994
----------- ------------ ----------- ------------
Weighted average number of
common shares outstanding (a) 13,499,523 13,424,944 13,480,512 13,367,659
Common share equivalents
resulting from the assumed
exercise of stock options (b) 99,613 162,348 139,009 102,483
---------- ---------- ---------- ----------
Total primary common shares
and common share equivalents 13,599,136 13,587,292 13,619,521 13,470,142
========== ========== ========== ==========
(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.
-13-
5
1,000
9-MOS
MAR-02-1996
FEB-26-1995
DEC-02-1995
8,312
0
176,557
6,507
53,186
272,209
170,086
94,598
380,539
146,551
0
4,501
0
0
131,965
380,539
656,705
656,705
564,692
65,280
0
421
4,608
22,286
8,207
14,299
0
0
0
14,299
1.05
1.05
