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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 May 28, 1994 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
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(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 June 30, 1994
- - --------------------------------- ----------------------------
Common Stock, $.33-1/3 Par Value 13,313,756
<PAGE>
APOGEE ENTERPRISES, INC.
FORM 10-Q
TABLE OF CONTENTS
FOR THE QUARTER ENDED MAY 28, 1994
<TABLE>
<CAPTION>
Description Page
----------- ----
PART I
- - ------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of May 28, 1994
and February 26, 1994 3
Consolidated Results of Operations for the
Quarters Ended May 28, 1994 and May 29, 1993 4
Consolidated Statements of Cash Flows for the
Quarters Ended May 28, 1994 and May 29, 1993 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 11
</TABLE>
<PAGE>
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<TABLE>
<CAPTION>
May 28, February 26,
1994 1994
-------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 9,949 $ 10,824
Receivables, net of allowance for doubtful accounts 148,899 144,597
Inventories 52,990 52,732
Deferred income taxes 8,754 8,454
Other current assets 3,563 4,679
-------- --------
Total current assets 224,155 221,286
-------- --------
Property, plant and equipment, net 67,619 64,917
Intangible assets, at cost less
accumulated amortization 2,041 1,972
Investments in and advances to
affiliated companies 11,582 11,826
Deferred income taxes 3,826 3,526
Other assets 2,199 2,661
-------- --------
Total assets $311,422 $306,188
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 40,009 $ 51,488
Accrued expenses 40,136 40,916
Billings in excess of costs and earnings
on uncompleted contracts 15,444 15,911
Accrued income taxes 6,616 4,524
Notes payable 36,900 23,850
Current installments of long-term debt 4,154 4,157
-------- --------
Total current liabilities 143,259 140,846
-------- --------
Long-term debt 35,666 35,688
Other long-term liabilities 15,473 14,260
Minority interest 1,343 1,331
Shareholders' equity
Common stock, $.33 1/3 par value;
authorized 50,000,000 shares; issued
and outstanding 13,314,000 and
13,312,000 shares, respectively 4,438 4,437
Additional paid-in capital 17,737 17,718
Retained earnings 93,506 91,908
-------- --------
Total shareholders' equity 115,681 114,063
-------- --------
Total liabilities and shareholders' equity $311,422 $306,188
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED RESULTS OF OPERATIONS
FOR THE QUARTERS ENDED MAY 28, 1994 AND MAY 29, 1993
(Thousands of Dollars Except Share and Per Share Amounts)
<TABLE>
<CAPTION>
Quarter Ended
----------------------------
May 28, May 29,
1994 1993
-------------- ------------
<S> <C> <C>
Net sales $ 178,927 $ 148,752
Cost of sales 153,539 128,805
----------- -----------
Gross profit 25,388 19,947
Selling, general and administrative expenses 20,670 18,798
Equity in net (earnings) of affiliated companies (177) (864)
----------- -----------
Operating income 4,895 2,013
Interest expense, net 562 544
----------- -----------
Earnings before income taxes and cumulative
effect of change in accounting for income taxes 4,333 1,469
Income taxes 1,733 551
----------- -----------
Net earnings before cumulative effect
of change in accounting for income taxes 2,600 918
Cumulative effect of change in
accounting for income taxes - 525
----------- -----------
Net earnings $ 2,600 $ 1,443
=========== ===========
Earnings per share:
Earnings per share before cumulative effect
of change in accounting for income taxes $ .19 $ .07
Cumulative effect of change in
accounting for income taxes - .04
----------- -----------
Earnings per share $ .19 $ .11
=========== ===========
Weighted average number of
common shares and common share
equivalents outstanding 13,376,000 13,212,000
=========== ===========
Cash dividends per common share $ .075 $ .070
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED MAY 28, 1994 AND MAY 29, 1993
(Thousands of Dollars)
<TABLE>
<CAPTION>
1994 1993
--------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 2,600 $ 1,443
Adjustments to reconcile net earnings to net
cash used in operating activities:
Cumulative effect of change in accounting for income taxes - (525)
Depreciation and amortization 3,667 3,848
Provision for losses on accounts receivable 753 601
Noncurrent deferred income taxes (300) (299)
Equity in net (earnings) of affiliated
companies (177) (864)
Other, net 483 (73)
Changes in operating assets and liabilities,
net of effect of acquisitions:
Receivables (5,011) (4,458)
Inventories (248) 1,035
Other current assets 1,116 2,731
Accounts payable and accrued expenses (12,259) (6,877)
Billings in excess of costs and earnings
on uncompleted contracts (467) (2,002)
Accrued and current deferred income taxes 1,792 (2,596)
Other long-term liabilities 1,213 174
-------- -------
Net cash used in operating activities (6,838) (7,862)
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INVESTING ACTIVITIES
Capital expenditures (6,069) (2,512)
Acquisition of businesses, net of cash acquired (272) (898)
Investments in and advances to affiliated companies 421 (86)
Other, net (164) (1,054)
-------- -------
Net cash used in investing activities (6,084) (4,550)
-------- -------
FINANCING ACTIVITIES
Increase in notes payable 13,050 -
Payments on long-term debt (25) (100)
Proceeds from issuance of long-term debt - 11,500
Proceeds from issuance of common stock 20 550
Dividends paid (998) (927)
-------- -------
Net cash provided by financing
activities 12,047 11,023
-------- -------
Decrease in cash (875) (1,389)
Cash at beginning of period 10,824 8,908
-------- -------
Cash at end of period $ 9,949 $ 7,519
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
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
May 28, 1994 and February 26, 1994, and the results of operations and cash
flows for the thirteen weeks ended May 28, 1994 and May 29, 1993. Certain
prior year amounts have been reclassified to conform to the current period
presentation.
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
financial statements and notes.
The results of operations for the thirteen-week periods ended May 28, 1994
and May 29, 1993 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.
2. Inventories
-----------
Inventories consist of the following:
<TABLE>
<CAPTION>
May 28, February 26,
1994 1994
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<S> <C> <C>
Raw materials and supplies $11,626 $ 9,994
In process 4,098 3,413
Finished goods 26,061 29,565
Costs in excess of billings 11,205 9,760
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$52,990 $52,732
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</TABLE>
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SALES AND EARNINGS
- - ------------------
First quarter revenues rose 20% to $179 million from $149 million a year
earlier. Net earnings rose 80% to $2.6 million, or $0.19 per share, from $1.4
million, or $0.11 per share, a year ago. Last year results included a $525,000,
or 4 cents per share, one-time gain due to the adoption of FASB No. 109 -
Accounting for Income Taxes. Exclusive of the accounting change, earnings were
up 183% from a year ago.
Each of the Company's divisions reported improved operating results as well as
healthy sales growth. With the exception of the Commercial Construction Division
(CCD), each of the divisions had operating earnings in the quarter. The
following table presents the percentage change in sales and operating income for
the Company's four divisions and on a consolidated basis for the first quarter,
when compared to the corresponding period a year ago.
<TABLE>
<CAPTION>
Percentage Change
---------------------------
Division Sales Operating Income
-------- ------ -------------------
<S> <C> <C>
Commercial Construction 25% Loss in both years
Window Fabrication 9% Loss a year ago
Glass Fabrication 21% 54%
Installation and Distribution 13% 21%
Consolidated 20% 143%
</TABLE>
Commercial Construction
- - -----------------------
Greater overseas activity and stronger detention/security sales accounted for
CCD's revenue growth in the first quarter. Although the division recorded
slightly improved project margins, CCD continued to experience tough market
conditions. Low margins along with higher overhead on international operations
accounted for the division reporting an operating loss. On the bright side, the
division reduced domestic overhead, which when combined with strong results from
the detention/security group, helped CCD to cut its loss by half when compared
to a year ago. The detention/security segment's strong sales and solid earnings
were its best quarterly results since the segment's units were acquired in
fiscal 1992.
The division believes industry conditions are slowly improving. The extent of
future operating gains is dependent on the successful implementation of steps
taken to improve project management and project bidding. At this time, the
division expects to report better results for the remainder of the year when
compared to fiscal 1994.
CCD's backlog stood at $339 million, 7% behind the division's February 1994
balance, but 12% ahead of a year ago. The Company's overall consolidated
backlog decreased 5% from year end to $386 million, but was up 15% compared to
twelve months earlier. The Company estimates that approximately $110 million of
CCD's current backlog will not be realized until fiscal 1996 or later.
Window Fabrication
- - ------------------
The Window Fabrication Division (WFD), which also serves the commercial and
institutional construction markets, reported a small operating profit for the
quarter, compared to a small operating loss a year ago. Stronger volume at the
window coverings units and decreased operating costs at both the window
coverings and architectural units resulted in improved revenues and earnings.
Order rates during the first quarter were good for the division's architectural
units. The division continues to look at manufacturing processes and cost
controls to further improve earnings. Like CCD, the division anticipates
favorable comparisons with year-ago results for the rest of the fiscal year.
7
<PAGE>
Glass Fabrication
- - -----------------
The Glass Fabrication Division (GFD) produced outstanding revenue and earnings
results, largely attributable to brisk auto glass sales and improved margins for
its architectural glass products.
Viracon, GFD's architectural glass unit, operated near full capacity and
benefited from improved pricing levels. The unit is currently expanding its
facility to provide greater manufacturing capacity. The auto glass unit,
Curvlite, reported record sales and earnings for the quarter due to strong unit
demand. Curvlite is also investing in increased capacity. Marcon Coatings, a
50%-owned joint venture, had a strong quarter, showing 63% growth in pretax
earnings when compared to a year ago. The increase is largely due to the strong
activity of Viracon and Marvin Windows, the entity's other joint venture
partner. Order rates for each of these units have been strong, suggesting
continued solid operating results for the foreseeable future.
Tru Vue, GFD's picture framing glass unit, had solid results, with both sales
and operating income slightly ahead of a year ago. Tru Vue's acquired matboard
unit, Miller Tru Vue (Miller), experienced a loss in the first quarter. Miller
is in the process of relocating its operations from New York to Chicago,
adjacent to Tru Vue. Reduced operating costs are expected, but additional sales
volume will be required to bring the unit up to breakeven.
Installation and Distribution
- - -----------------------------
The Installation and Distribution Division (IDD) generated sales and earnings
growth for the first quarter. While unit volume remained essentially unchanged
from a year ago, modest price increases, as well as reduced operating costs, led
to the improvement. The division's network segment, which subcontracts auto
glass repair/replacement sales nationwide, reported unit volume up 10%. IDD
continues to work on new marketing programs and improving its information
systems.
The division added six retail stores and four wholesale locations, ending the
quarter with 242 retail units and 49 distribution centers. Expansion
opportunities are continually looked at to determine areas of favorable growth.
Viratec Thin Films
- - ------------------
Viratec Thin Films (Viratec), a 50%-owned joint venture, develops and applies
optical-quality coatings to glass and other substrates. Viratec reported
significantly lower sales and earnings when compared to a year ago due to a
number of factors. Line speed, uptime and yield performance of manufacturing
coating equipment was below satisfactory levels, while pricing of coated
products has become more competitive. New coating equipment and related product
development projects which were scheduled to be in operation in the current
fiscal year are behind schedule due to modifications and process startup
delays. Plans are under way to deal with all of the above issues.
8
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Consolidated
- - ------------
The following table compares quarterly results with year-ago results, as a
percentage of sales, for each caption.
<TABLE>
<CAPTION>
Percentage of Sales
-------------------
1994 1993
--------- --------
<S> <C> <C>
Net sales 100.0 100.0
Cost of sales 85.8 86.6
----- -----
Gross profit 14.2 13.4
Selling, general and
administrative expenses 11.6 12.6
Equity in net (earnings) of
affiliated companies (0.1) (0.6)
----- -----
Operating income 2.7 1.4
Interest expense, net 0.3 0.4
----- -----
Earnings before taxes 2.4 1.0
Income taxes 1.0 0.4
----- -----
Net earnings before cumulative
effect of change in accounting
for income taxes 1.5 0.6
Cumulative effect of change in
accounting for income taxes - 0.4
----- -----
Net earnings 1.5 1.0
===== =====
Effective tax rate 40.0% 37.5%
</TABLE>
On a consolidated basis, cost of sales, as a percentage of net sales, fell
largely due to stronger pricing at GFD and IDD, which was offset partly by weak
pricing at CCD. Selling, general and administrative (SG & A) expenses decreased
as a percentage of sales due to greater sales volume. However, in absolute
dollars, SG & A increased about 10% as expenses relating to that higher activity
also increased -- commissions, marketing programs, bad debt expense, bonus and
profit sharing.
Equity in net earnings of affiliated companies decreased as a result of lower
sales and earnings at Viratec. Net interest expense remained essentially even
in absolute dollars, but tapered off a bit as a percentage of sales.
The effective income tax rate grew from a year earlier with the increase in
earnings. The lower rate last year reflected the non-taxability of our equity
in net earnings of affiliated companies, which was a significant portion of our
net earnings. The Company adopted FASB Statement No. 109 in the first quarter of
fiscal 1994. As a result of the adoption, the Company benefited by a $525,000
gain. The gain reduced long-term deferred tax liabilities (netted against long-
term deferred tax assets). The gain was largely due to the restatement of
deferred tax depreciation originally booked at historically higher tax rates
(46% Federal) and restated to reflect current tax rates (34% Federal).
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
At quarter end, the Company's working capital (current assets less current
liabilities) and current ratio were essentially unchanged from the beginning of
the fiscal year. However, current bank debt increased $13 million, to $37
million, while accounts payable and accrued expenses decreased $12 million.
This substitution was caused primarily by normal variations in trade payables.
The Company counts, as one of its competitive strengths, the ability to handle
these variations. The Company believes that it has adequate credit facilities
to meet its liquidity requirements.
Additions to property, plant and equipment totaled approximately $6.1 million.
Major projects included expenditures for GFD's manufacturing facilities and data
management, information processing and technical systems throughout the Company,
particularly IDD.
9
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(a) Exhibits:
Exhibit 11. Statement of Determination of Common Shares and
Common Share Equivalents.
(b) The Company did not file any reports on Form 8-K during the quarter for
which this report is filed.
10
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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: July 8, 1994 Donald W. Goldfus
------------------------- ------------------------------------
Donald W. Goldfus
Chairman of the Board and
Chief Executive Officer
Date: July 8, 1994 William G. Gardner
------------------------- ------------------------------------
William G. Gardner
Treasurer, Chief Financial Officer
and Secretary
11
<PAGE>
EXHIBIT 11
STATEMENT OF DETERMINATION OF COMMON SHARES AND COMMON SHARE EQUIVALENTS
------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average No. of Common Shares
& Common Share Equivalents
Assumed to be Outstanding
During the Quarter Ended:
----------------------------
<S> <C> <C>
May 28, May 29,
1994 1993
---------- ----------
Weighted average number of
common shares outstanding (a) 13,313,043 13,191,078
Common share equivalents
resulting from the assumed
exercise of stock options (b) 62,694 20,533
---------- ----------
Total primary common shares
and common share equivalents 13,375,737 13,211,611
========== ==========
</TABLE>
(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.
12
