Apogee Enterprises Inc. (APOG) reported its fourth quarter and full year results delivering a net loss of 16 cents per share versus earnings of 2 cents per share in the year-ago quarter, falling behind the Zacks Consensus Estimate by 9 cents.
Net sales as reported by the company were flat at $148 million compared with the prior-year quarter, beating the Zacks Consensus Estimate by $145 million.
For the full year the company reported a loss of 37 cents per share compared with earnings of $1.15 per share in the year-earlier period, moving ahead of the Zacks Consensus Estimate of a loss of 45 cents.
Net sales as reported by the company declined 16% year over year to $582.8 million, slightly above the Zacks Consensus Estimate of $580 million.
Cost and Margins
Cost of goods sold as reported by the company increased 3% to $124.7 million versus $121 million in the year-earlier quarter. Gross profit for the quarter decreased 16% substantially to $23.2 million from $27.5 million in the year-ago quarter.
Consequently, gross margins decreased 300 basis points year over year to 16% in the quarter. Selling, general and administrative expenses increased 4% year over year to $28.8 million. The company reported an operating loss of $5.6 million versus a loss of $0.2 million in the year-earlier quarter. Consequently, operating margin decreased 400 basis points year over year to 4%.
In the full year, cost of goods sold improved 7% to $499.7 million versus $534.6 million in the year-ago period. Gross profit declined 49% to $83.1 million from $162.1 million in the year-earlier period, thereby contracting gross margin by 1600 basis points year over year to 14%.
Selling, general and administrative expenses as reported by the company declined 11% year over year to $104.1 million. The company also reported an operating loss of $21 million versus a profit of $45.4 million in the prior year, thereby contracting operating margin by 1200 basis points year over year to 4%.
Segmental Performance
Architectural Segment: The segment reported net sales of $128 million in the reported quarter versus $130.5 million during the year-ago quarter. Operating loss as reported by the segment increased to $9.9 million from a loss of $3.6 million during the year-earlier quarter. The revenue declines in this segment slowed and backlog increased during the quarter, indicating the stability in the markets.
For fiscal 2011, the segment reported net sales of $507.4 million and operating loss of $37.7 million versus $626 million and a profit of $31.6 million, respectively.
Large-Scale Optical Segment: Net sales as reported by the segment during the fourth quarter improved substantially to $19.9 million compared with $18.1 million in the prior-year quarter. The segment also reported an operating profit of $5.5 million, which improved 54% from $3.6 million in the year-ago quarter.
For fiscal 2011, the segment reported net sales of $75.4 million; improving 7% from $70.7 million in the year-ago period. Segment’s operating profit went up 22% year over year to $20.5 million versus $16.9 million in the prior year.
Financial Position
At the end of the quarter cash and short-term investments amounted to $60.6 million, as of February 26, 2011 versus $102.6 million as of February 27, 2010.
Long-term debt of the company was $21.4 million as of February 26, 2011, up from $8.4 million as of February 27, 2010.
Non-cash working capital was $39.4 million as of February 26, 2011; increasing from $15.1 million as of February 27, 2010.
Cash outflow from operating activities amounted to $8 million at the end of fiscal 2011, versus an inflow of $97.2 million during the year-ago period.
The debt-to-capitalization ratio was 6.1% as of February 26, 2011 and November 27, 2010 and 5.7% as of August 28, 2010.
Outlook
For fiscal 2012, the company is expecting a marginal increase in its revenue, with a profit in the second half offsetting losses in the first half. The company believes that increased prices for architectural glass will continue in the second half as well. The company is also expecting lower margins for its installation business.
Moreover, the company believes that the efforts taken including a price increase, productivity improvements, project selection changes, etc. are certainly going to have positive effects on the 2012 results.
Our Take
Management seems confident of its long-term strategies, which have helped the company survive the loss making environment and maintain its strong balance sheet. The strategy includes a number of cost cutting initiatives which helps the company to remain focused on productivity improvements in order to counter the ill effects of a downturn in commercial construction.
The company maintained its capacity and workforce to re spond to potential growth in fiscal 2012, and continues to emphasize longer-term strategies to expand its energy-efficient architectural glass offerings both domestically and all over the world. Apogee currently retains a Zacks #3 Rank (short-term Hold rating).
Apogee Enterprises is a leader in technologies for the design and development of value-added glass products, services and systems. The company presently has two reportable segments – The Architectural segment and The Large-Scale Optical Technologies. Apogee competes with PPG Industries Inc. (PPG), a privately held Guardian Industries Corp. and Pilkington Group Limited.
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