Apogee Reports Healthy Architectural Operations, Auto Glass in Transition

Apogee Enterprises Inc., the parent company of Viracon/Curvlite, the aftermarket windshield manufacturer, as well as architectural glass fabricator Viracon, reported a healthy first quarter for the current fiscal year.

However, the company said that its auto glass sales were down and that it is looking for a new market direction with its supply agreement with PPG Industries ending later this year.

Overall, the Minneapolis-based company had revenues of $164.1 million, up 12 percent versus the prior-year period, for the first quarter of its fiscal year, with the architectural segment accounting for the majority of the growth.

"We started the fiscal year exceeding our expectations and are optimistic that momentum is building," said Russell Huffer, Apogee chairman and chief executive officer. "Our first quarter revenues and earnings were ahead of prior year and our fiscal 2006 plan, as our architectural segment continues to grow market share in an improving commercial construction market and our picture framing business experiences better than expected conversion to higher value-added glass products."

However, automotive replacement glass and services revenues were $8.6 million, down 12 percent from the prior-year period. Operating income for the segment was $100,000, compared to earnings of $1.1 million in the prior-year period. The segment met expectations for break-even results in difficult market conditions, Huffer said.

The company reported that earnings were $200,000 from investment in PPG Auto Glass, LLC, an improvement from a prior-year period loss of $600,000. Operations are improving in a market impacted by reduced volume and lower pricing, Huffer pointed out.

The company said that auto glass segment revenues are expected to be approximately 4 percent lower than in fiscal 2005 (prior guidance had been 3 percent).

According to Huffer, "Despite challenging market conditions leading to slightly lower pricing and volume, we are winning new independent customers for aftermarket windshields."

The long-term supply agreement with PPG Industries for auto replacement windshields expires in the second quarter of fiscal 2006, the current quarter, so the company is looking to market to independent distributors.

Apogee Enterprises, Inc. & Subsidiaries Consolidated Condensed Statement of Income
(Dollar amounts in thousands) Thirteen Weeks
May 28, 2005
Thirteen Weeks
May 29, 2004
% Change
Net sales $164,132 $145,900 12%
Cost of goods sold 134,283 120,087 12%
Gross profit 29,849 25,813 16%
Selling, general and administrative expenses 23,663 21,516 10%
Operating income 6,186 4,297 44%
Interest income 187 1,083 -83%
Interest expense 617 897 -31%
Other income (expense), net (34) (43) 21%
Equity in income (loss) of affiliated companies 190 (649) N/M
Earnings from continuing operations beforeincome taxes and other items below 5,912 3,791 56%
Income taxes 1,972 702 181%
Earnings from continuing operations 3,940 3,089 28%
Earnings from discontinued operations -- 67 N/M
Net earnings $3,940 $3,156 25%
Business Segments Information
Sales Thirteen Weeks
May 28, 2005
Thirteen Weeks
May 29, 2004

% Change
Architectural $134,829 $117,549 15%
Large-Scale Optical 20,766 18,548 12%
Auto Glass 8,610 9,819 -12%
Eliminations (73) (16) N/M
Total $164,132 $145,900 12%
Operating income (loss)      
Architectural $3,606 $3,176 14%
Large-Scale Optical 3,083 575 436%
Auto Glass 73 1,140 -94%
Corporate and other (576) (594) 3%
Total $6,186 $4,297 44%

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