<PAGE>
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
For the quarterly period ended June 3, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
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 (952) 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, 2000
-------------------------------- ----------------------------
Common Stock, $.33 1/3 Par Value 27,829,167
<PAGE>
APOGEE ENTERPRISES, INC.
FORM 10-Q
TABLE OF CONTENTS
FOR THE QUARTER ENDED June 3, 2000
<TABLE>
<CAPTION>
Description Page
----------- ----
<S> <C>
PART I
------
Item 1. Financial Statements
Consolidated Balance Sheets as of June 3, 2000
and February 26, 2000 3
Consolidated Results of Operations for the
Quarters Ended June 3, 2000 and May 29, 1999 4
Consolidated Statements of Cash Flows for the
Quarters Ended June 3, 2000 and May 29, 1999 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11-12
PART II Other Information
-------
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Exhibits Index 15
Exhibit 27 Financial Data Schedule (EDGAR filing only)
Exhibit 27.1 Financial Data Schedule (EDGAR filing only)
</TABLE>
2
<PAGE>
Item 1. Financial Statements
-----------------------------
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 3, 2000 AND FEBRUARY 26, 2000
(Thousands of Dollars)
<TABLE>
<CAPTION>
June 3, 2000 February 26, 2000
------------------ -------------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 8,679 $ 7,192
Receivables, net of allowance for doubtful accounts 124,337 125,064
Inventories 66,907 68,184
Deferred tax assets 10,173 8,435
Other current assets 2,564 5,547
------------- -----------
Total current assets 212,660 214,422
------------- -----------
Property, plant and equipment, net 180,461 186,039
Other assets
Marketable securities - available for sale 24,590 24,951
Investments 410 418
Intangible assets, at cost less accumulated amortization
of $12,271 and $11,668, respectively 50,493 50,549
Other 4,658 4,775
------------- -----------
Total assets $ 473,272 $ 481,154
============= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 63,923 $ 57,989
Accrued expenses 52,450 56,624
Current liabilities of discontinued operations, net 2,709 2,907
Billings in excess of costs and earnings on uncompleted
contracts 9,046 9,827
Accrued income taxes 5,750 7,868
Current installments of long-term debt 151 182
------------- ----------
Total current liabilities 134,029 135,397
------------- ----------
Long-term debt, less current installments 152,081 164,371
Other long-term liabilities 25,948 25,248
Liabilities of discontinued operations, net 22,409 18,366
Commitments and contingent liabilities (Note 5)
Shareholders' equity
Common stock, $.33 1/3 par value; authorized 50,000,000
shares; issued and outstanding 27,844,000 and 27,743,000
shares, respectively 9,281 9,248
Additional paid-in capital 45,766 45,106
Retained earnings 85,151 84,608
Unearned compensation (1,064) (888)
Net unrealized (loss)/gain on marketable securities (329) (302)
------------- ----------
Total shareholders' equity 138,805 137,772
------------- ----------
Total liabilities and shareholders' equity $ 473,272 $ 481,154
============= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED RESULTS OF OPERATIONS
FOR THE QUARTERS ENDED JUNE 3, 2000 AND MAY 29, 1999
(Thousands of Dollars Except Share and Per Share Amounts)
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended
June 3, 2000 May 29, 1999
------------------- -------------------
<S> <C> <C>
Net sales $ 237,253 $ 209,663
Cost of sales 189,339 162,600
------------------- -------------------
Gross profit 47,914 47,063
Selling, general and administrative expenses 40,959 36,329
------------------- -------------------
Operating income 6,955 10,734
Interest expense, net 2,783 2,567
------------------- -------------------
Earnings from continuing operations before income taxes and
other items below 4,172 8,167
Income tax provision 1,460 2,940
Equity in net loss of affiliated companies 692 440
------------------- -------------------
Earnings from continuing operations 2,020 4,787
Earnings (loss) from operations of discontinued businesses,
net of income taxes -- (217)
------------------- -------------------
Net earnings $ 2,020 $ 4,570
=================== ===================
Earnings (loss) per share-basic
Continuing operations $ 0.07 $ 0.17
Discontinued operations -- (0.01)
------------------- -------------------
Net earnings $ 0.07 $ 0.17
=================== ===================
Earnings (loss) per share-diluted
Continuing operations $ 0.07 $ 0.17
Discontinued operations -- (0.01)
------------------- -------------------
Net earnings $ 0.07 $ 0.16
=================== ===================
Weighted average basis shares outstanding 27,801 27,635
Weighted average diluted shares outstanding 27,801 27,747
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED JUNE 3, 2000 AND MAY 29, 1999
(Thousands of Dollars)
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended
June 3, 2000 May 29, 1999
---------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 2,020 $ 4,570
Adjustments to reconcile net earnings to net cash provided by
continuing operating activities:
Net loss (earnings) from discontinued operations --- 217
Depreciation and amortization 9,795 8,319
Provision for losses on accounts receivable 1,112 806
Deferred income tax (benefit) expense (1,543) 634
Equity in net loss of affiliated companies 692 440
Net cash flow (to) from discontinued operations (530) (574)
Other, net (64) 49
---------------- ----------------
Cash flow before changes in operating assets and liabilities 11,482 14,461
Changes in operating assets and liabilities, net of
effect of acquisitions:
Receivables (385) 6,137
Inventories 1,277 (1,102)
Other current assets 2,983 533
Accounts payable and accrued expenses 1,711 (15,532)
Billings in excess of costs and earnings on uncompleted
contracts (781) 92
Refundable income taxes and accrued income taxes (1,918) 2,105
Other long-term liabilities 524 464
---------------- ----------------
Net cash provided by continuing operating activities 14,893 7,158
---------------- ----------------
INVESTING ACTIVITIES
Capital expenditures (3,587) (24,874)
Acquisition of businesses, net of cash acquired --- (1,981)
Purchases of marketable securities (4,821) (2,924)
Sales/maturities of marketable securities 5,140 6,040
Investments in and advances to affiliated companies (684) (390)
Proceeds from sale of property and equipment 23 42
Net cash flow from discontinued operations 4,375 ---
Other, net (26) (169)
---------------- ----------------
Net cash provided by (used in) investing activities 420 (24,256)
---------------- ----------------
FINANCING ACTIVITIES
Payments on long-term debt (12,321) (376)
Proceeds from issuance of long-term debt --- 22,100
Increase in deferred debt expense (521) ---
Proceeds from issuance of common stock 517 2,140
Repurchase and retirement of common stock (50) (852)
Dividends paid (1,451) (1,457)
---------------- ----------------
Net cash (used in) provided by financing activities (13,826) 21,555
Increase in cash and cash equivalents 1,487 4,457
Cash and cash equivalents at beginning of period 7,192 1,318
---------------- ----------------
Cash and cash equivalents at end of period $ 8,679 $ 5,775
================ ================
</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
------------------------------------------
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position as
of June 3, 2000 and May 29, 1999, and the results of operations and cash
flows for the fourteen week period ended June 3, 2000 and for the thirteen
week period ended May 29, 1999. As explained in note 4, the Company's
curtainwall contracting and detention/security contracting businesses are
reported as discontinued operations, along with the Company's interest in
VIS'N Service Corporation. Accordingly, 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 information included in this Form 10-Q
should be read in conjunction with Management's Discussion and Analysis and
financial statements and notes thereto included in the Company's Form 10-K
for the year ended February 26, 2000. The results of operations for the
fourteen week period ended June 3, 2000 and the thirteen week period ended
May 29, 1999 are not necessarily indicative of the results to be expected
for the full year.
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. Earnings Per Share
------------------
The following table presents a reconciliation of the denominators used in
the computation of basic and diluted earnings per share.
<TABLE>
<CAPTION>
June 3, 2000 May 29, 1999
------------------- -------------------
<S> <C> <C>
Basic earnings per share -
Weighted common shares outstanding 27,801,040 27,635,067
Weighted common shares assumed upon exercise of
stock options -- 111,826
Diluted earnings per share -
Weighted common shares and potential common ------------------ ------------------
shares outstanding 27,801,040 27,746,893
================== ==================
<CAPTION>
3. Inventories
-------------
(Thousands of Dollars) June 3, 2000 February 26, 2000
---------------------- ----------------------
<S> <C> <C>
Raw materials $18,927 $18,966
Work-in process 5,136 4,995
Finished 40,790 43,439
Cost and earnings in excess of billings on
uncompleted contracts 2,054 784
--------------------- ---------------------
Total inventories $66,907 $68,184
===================== =====================
</TABLE>
6
<PAGE>
4. Discontinued Operations
-----------------------
In fiscal 1999, Apogee's Board of Directors authorized the divestiture of
the detention/security and domestic curtainwall operations. In late fiscal
2000, Apogee's Board of Directors authorized the exit from the Company's
interest in VIS'N Service Corporation (VIS'N), a non-auto glass focused,
third party administered claims processor. On December 3, 1998, the Company
executed the sale of its detention/security business, effective November 28,
1998. On May 13, 1999, the Company completed the sale of 100% of the stock
of its large-scale domestic curtainwall business, Harmon, Ltd. The sale of
Harmon, Ltd. and the Company's detention/security business combined with the
fiscal 1998 exit from international curtainwall operations effectively
removed the Company from the large-scale construction business. Accordingly,
these businesses are presented as discontinued operations in the
accompanying financial statements and notes. Prior periods have been
restated.
At June 3, 2000, accruals totaling $25.1 million represented the remaining
estimated (net) future cash outflows associated with the exit from
discontinued operations. The majority of these cash expenditures are
expected to be made within the next one to two years. The primary
components of the accrual relate to the completion of certain construction
projects, as well as costs to exit the VIS'N business, associated legal and
advisory fees and related costs.
5. Commitments and Contingent Liabilities
--------------------------------------
At June 3, 2000, the Company had ongoing letters of credit related to its
risk management programs, construction contracts and certain industrial
development bonds. The total value of letters of credit under which the
Company is obligated as of June 3, 2000 was approximately $6.6 million. The
Company has also entered into a number of noncompete agreements for the
benefit of the Company. As of February 26, 2000, we were committed to make
future payments of $3.5 million under such agreements.
The Company has been party to various legal proceedings incidental to its
normal operating activities. In particular, like others in the construction
industry, its discontinued construction business is routinely involved in
various disputes and claims arising out of construction projects, sometimes
involving significant monetary damages. Although it is impossible to
predict the outcome of such proceedings, the Company believes, based on
facts currently available to it, that none of such claims will result in
losses that would have a material adverse effect on its financial condition.
<TABLE>
<CAPTION>
6. Comprehensive Earnings
----------------------
(Thousands of Dollars) June 3, 2000 May 29, 1999
---------------------- ----------------------
<S> <C> <C>
Net earnings $2,020 $4,570
Change in unrealized gains on marketable
securities, net of $15 and $62, tax benefit,
respectively (27) (118)
---------------------- ----------------------
Comprehensive earnings $1,993 $4,452
====================== ======================
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
--------------------------------------------------------------------------------
of Operations
-------------
The following selected financial data should be read in conjunction with the
Company's Form 10-K for the year ended February 26, 2000 and the consolidated
financial statements, including the notes to consolidated financial statements,
included therein.
Sales and Earnings
------------------
Fiscal 2001 figures include one extra week in the quarter as compared to the
same quarter a year ago. Net sales for the first quarter ended June 3, 2000 were
$237.3 million, a 13% increase over the $209.7 million reported for the prior
year quarter. First quarter earnings from continuing operations fell 58% to $2.0
million, or 7 cents per share-diluted, from $4.8 million, or 17 cents per share-
diluted, for the prior year quarter. Last year's net sales have been restated to
reflect the planned exit of the Company's interest in
7
<PAGE>
VIS'N Service Corporation (VIS'N). Accordingly, the results of this business,
along with the Company's detention/security and domestic curtainwall operations,
are reported as discontinued operations.
First Quarter Fiscal 2001 Compared to First Quarter Fiscal 2000
---------------------------------------------------------------
The following table compares first quarter results with year-ago results, as a
percentage of sales, for each caption. Fiscal 2000 results have been restated
to reflect the effect of discontinued operations.
<TABLE>
<CAPTION>
Percentage of Net Sales
-----------------------------------------
Quarter Ended
-----------------------------------------
June 3, 2000 May 29, 2000
----------------- ------------------
<S> <C> <C>
Net sales 100.0 100.0
Cost of sales 79.8 77.6
----------------- ------------------
Gross profit 20.2 22.4
Selling, general and administrative expenses 17.3 17.3
----------------- ------------------
Operating income 2.9 5.1
Interest expense, net 1.2 1.2
----------------- ------------------
Earnings from continuing operations before before
income and other items 1.8 3.9
Income taxes 0.6 1.4
Equity in net loss of affiliated companies 0.3 0.2
----------------- ------------------
Earnings from continuing operations 0.9 2.3
Earnings (loss) from discontinued operations 0.0 (0.1)
----------------- ------------------
Net earnings 0.9 2.2
================= ==================
Effective tax rate 35.0% 36.0%
</TABLE>
On a consolidated basis, gross profit, as a percentage of net sales, decreased
from 22.4% to 20.2%, due primarily to decreased margins as a result of
operational difficulties at Viratec and pricing pressures at the auto glass
businesses, partially offset by improved margins at Viracon, Tru Vue, Apogee
Wausau Group (AWG) and Harmon, Inc.
Selling, general and administrative (SG&A) expenses, as a percentage of sales,
remained constant from a year ago, but rose by $4.6 million, or 13% due
primarily to increases in depreciation, timing of bonus and incentive accruals
and allowance for bad debts.
Net interest expense rose 8% during the quarter as lower borrowing levels were
offset by higher borrowing rates. The effective income tax rate of 35.0%
reflected a marginal decrease from the effective rate of 36% a year ago.
The following table presents sales and operating income data for the Company's
two segments and on a consolidated basis for the first quarter, when compared to
the corresponding period a year ago. Operating results are discussed below.
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------
<S> <C> <C> <C>
June 3, May 29, Percentage
(Thousands of Dollars) 2000 1999 Change
========== =============== ============
Net Sales
Glass Technologies $ 103,034 $ 88,531 16%
Glass Services 135,984 121,245 12
Intersegment elimination (1,765) (113) NM
---------- ---------------
Net sales $ 237,253 $ 209,663 13%
========== ===============
Operating Income (Loss)
Glass Technologies $ 2,729 $ 4,019 (32)%
Glass Services 5,337 7,941 (33)
Corporate and other (1,111) (1,226) 9
---------- ---------------
Operating income (loss) $ 6,955 $ 10,734 (35)%
========== ===============
NM = Not meaningful
</TABLE>
8
<PAGE>
Glass Technologies (GT)
-----------------------
Net sales increased 16% over the prior period as a result of strong demand
throughout the segment and corresponding utilization of increased production
capacity. First quarter operating income decreased 32% to $2.7 million compared
to $4.0 million in the year-ago quarter as continued progress at Linetec, Tru
Vue and Wausau Window & Wall Systems was more than offset by lower results at
Viracon and disappointing results at Viratec.
Viracon, the segment's largest operating unit, reported a 32% decline in
operating income despite a sales gain of 17% as compared to the prior year's
quarter. Higher depreciation costs from prior year capital additions and timing
differences between production and shipments contributed to the operating income
decline from the prior year's quarter.
GT's Viratec unit reported a larger operating loss over the same period a year
ago. The relocated Optium CRT coating operation in San Diego, CA reported
continued increases in volume and efficiency. However, these results were not
enough to offset the losses reported by the flat glass line in Faribault, MN due
to on-going operational difficulties with more complex products and increased
depreciation costs.
Although the first quarter is typically soft for Tru Vue, it recorded a 73%
operating income increase on an 18% sales increase compared to the prior year's
quarter due to continued increased operational efficiencies and demand for Tru
Vue's higher margin, value-added glass products.
The Apogee Wausau Group (AWG), which consists of Wausau Window and Wall Systems
and Linetec, reported combined sales gain of 13% and an operating income
increase of 11%, reflecting higher volume.
Glass Services (GS)
-------------------
Compared to the prior year quarter, GS sales for the quarter increased 12% to
$136.0 million. The segment's operating income for the first quarter decreased
33% to $5.3 million from the year-ago quarter, as excellent results by Harmon,
Inc. were more than offset by continuing weakness in auto glass.
The auto glass business reported a 6% increase in sales compared to the first
quarter of the prior year. Net sales of the auto glass retail unit remained
flat compared with those of a year ago, although unit volume decreased by 8%.
Net sales of the distribution and manufacturing units of auto glass increased
over a year ago. A significant decrease in operating income was primarily the
result of continued soft demand and pricing pressures in the retail auto glass
business. To respond to changing market conditions, the retail auto glass
business was restructured during fiscal 2000. Approximately 40 retail stores are
expected to be closed during fiscal 2001.
Harmon, Inc., the Company's full service building glass installation and repair
business, reported a 42% increase in sales and a significant increase in
operating income for the quarter as compared to the same quarter a year ago.
On June 13, 2000, the Company and PPG Industries of Pittsburgh announced that
they have agreed to combine their U.S. automotive replacement glass distribution
businesses in a new entity, PPG Auto Glass. On June 26, 2000, the Company and
PPG were notified by the Federal Trade Commission that they had received early
termination of the waiting period for their filings under the Hart-Scott-Rodino
Improvement Act regarding the proposed joint venture. The venture is
anticipated to close and begin operations later this summer. See Item 5 for
more information.
Discontinued Operations
------------------------
In fiscal 1999, Apogee's Board of Directors authorized the divestiture of the
detention/security and domestic curtainwall operations. In late fiscal 2000,
Apogee's Board of Directors authorized the exit from the Company's interest in
VIS'N Service Corporation (VIS'N), a non-auto glass focused, third party
administered claims processor. On December 3, 1998, the segment executed the
sale of its detention/security business, effective November 28, 1998. On May 13,
1999, the Company completed the sale of 100% of the stock of its large-scale
domestic curtainwall business, Harmon, Ltd. The sale of Harmon, Ltd. and the
Company's detention/security business combined with the fiscal 1998 exit from
international curtainwall operations effectively removed the Company from the
large-scale construction
9
<PAGE>
business. Accordingly, these businesses are presented as discontinued operations
in the accompanying financial statements and notes. Prior periods have been
restated.
Backlog
-------
At June 3, 2000, Apogee's consolidated backlog was $188 million, up 7% from the
$175 million reported at February 26, 2000. The backlogs of GT's operations
represented over 65% of Apogee's consolidated backlog.
Liquidity and Capital Resources
-------------------------------
Financial Condition
-------------------
Net cash provided by operating activities
Cash provided by continuing operating activities in the first quarter was $14.9
million for the quarter versus $7.2 million in the first quarter of fiscal 2000.
The $14.9 million figure represents mainly the combination of net earnings and
noncash charges such as depreciation and amortization as well as a $3.4 million
decrease in working capital, excluding cash, which resulted from decreased
inventories and increased accounts payable and accruals, offset by decreased
income taxes.
Net cash used in investing activities
Additions to property, plant and equipment during the quarter totaled
approximately $3.6 million, down significantly from the $24.9 million from the
prior year quarter.
For fiscal 2001, the Company expects to incur capital expenditures as necessary
to maintain existing facilities and information systems. Fiscal 2001 capital
expenditures are expected to be significantly less than those for fiscal 2000.
Net cash provided by financing activities
Total borrowings stood at $152.2 million at June 3, 2000, down from the $164.6
million outstanding at February 26, 2000. The majority of all of the Company's
long-term debt consisted of bank borrowings. The borrowings, along with cash
provided by operating activities, were sufficient to finance the period's
investing activities and cash dividend requirements. At June 3, 2000, long-term
debt stood at 52% of total capitalization, compared to 54% at fiscal year-end
2000.
Effective June 1, 2000, the Company amended its revolving credit agreement in
conjunction with a pending joint venture with PPG Industries of Pittsburgh to
combine their U.S. automotive replacement glass distribution businesses. The
amendment resulted in a decrease in borrowing capacity from $253 million to $200
million.
The Company anticipates outstanding borrowings to decline over the course of the
year. The Company believes that cash from operating activities and the
available credit facility provide adequate liquidity for the remainder of the
fiscal year.
Shareholders' Equity
--------------------
At June 3, 2000, Apogee's shareholders' equity stood at $138.8 million. Book
value per share was $5.00, up from $4.97 per share at February 26, 2000, with
outstanding common shares increasing nominally during the period. Net earnings
and proceeds from common stock issued in connection with our stock-based
compensation plans accounted for the increase, slightly offset by dividends
paid.
New Accounting Standards
------------------------
In June 1998, Statement of Financial Accounting Standards (SFAS) No. 133,
Accounting for Derivative Instruments and Hedging Activities, was issued and, as
amended by SFAS No. 137, is effective for fiscal years beginning after June 15,
2000, although earlier application is permitted. SFAS No. 133 requires all
derivatives to be measured at fair value and recognized as assets or liabilities
on the balance sheet. Changes in the fair value of derivatives should be
recognized in either net earnings or other comprehensive earnings, depending on
the designated purpose of the derivative. The Company expects to adopt SFAS 133
in fiscal 2002. SFAS No. 133 is not expected to have a material impact on the
Company's financial position or results of operations.
10
<PAGE>
Cautionary Statement
--------------------
This report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements may include
forward-looking statements, which reflect the Company's current views with
respect to future events and financial performance. The words "believe,"
"expect," "anticipate," "intends," "estimate," "forecast," "project," "should"
and similar expressions are intended to identify "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. All
forecasts and projections in this document are "forward-looking statements," and
are based on management's current expectations of the Company's near-term
results, based on current information available pertaining to the Company,
including the risk factors noted below.
The Company wishes to caution investors that any forward-looking statements made
by or on behalf of the Company are subject to uncertainties and other factors
that could cause actual results to differ materially from such statements.
These uncertainties and other risk factors include, but are not limited to:
whether the cost savings programs implemented at the auto glass businesses will
lead to improved operating results, the continuation of unfavorable industry
conditions in the auto glass businesses, whether the Company's proposed
automotive replacement glass distribution joint venture with PPG Industries will
successfully combine the merged businesses or, that once combined the venture
will achieve favorable short-term or long-term operating results, whether other
strategic alternatives being considered for the auto glass businesses will be
available on terms favorable to the Company, whether the production ramp-ups of
new or expanded plant capacity in the Glass Technologies (GT) segment will
proceed as anticipated and will lead to successful operating results for those
companies now or in the future, whether demand for GT products and services will
continue at present rates and whether generally favorable economic conditions
will continue.
A number of other factors should be considered in conjunction with this report's
forward-looking statements, any discussion of operations or results by the
Company or its representatives and any forward-looking discussion, as well as
comments contained in press releases, presentations to securities analysts or
investors, or other communications by the Company. These other factors are set
forth in the cautionary statement filed as Exhibit 99 to the Company's Annual
Report on Form 10-K, and include, without limitation, cautionary statements
regarding changes in economic and market conditions, factors related to
competitive pricing, commercial building market conditions, management of growth
of business units, greater than expected costs or difficulties related to the
operation of the businesses, the impact of foreign currency markets, the
integration of acquisitions, the realization of expected economies gained
through expansion and information systems technology updates. New factors
emerge from time to time and it is not possible for management to predict all
such factors, nor can it assess the impact of each such factor on the business
or the extent to which any factor, or a combination of factors, may cause actual
results to differ materially from those contained in any forward-looking
statements.
Item 3: Quantitative and Qualitative Disclosures About Market Risk
-------------------------------------------------------------------
The Company's principal market risk is sensitivity to interest rates, which is
the risk that changes in interest rates will reduce net earnings of the Company.
To manage the Company's direct risk from changes in market interest rates,
management actively monitors the interest sensitive components of the Company's
balance sheet, primarily debt obligations, as well as market interest rates in
order to minimize the impact of changes in interest rates on net earnings and
cash flow.
The primary measure of interest rate risk is the simulation of net income under
different interest rate environments. The approach used to quantify interest
rate risk is a sensitivity analysis. This approach calculates the impact on net
earnings, relative to a base case scenario, of rates increasing or decreasing
gradually over the next 12 months by 200 basis points. The aforementioned
changes in interest rates affecting the Company's financial instruments would
result in approximately a $1.1 million impact to net earnings. As interest
rates increase, net earnings decrease; as interest rates decrease, net earnings
increase.
The Company uses interest swaps to fix a portion of its variable rate borrowings
from fluctuations in interest rates. As of June 3, 2000, the Company has
interest swaps covering $35 million of variable rate debt.
11
<PAGE>
The Company has a policy of using forward exchange contracts to hedge its net
exposures, by currency, related to the foreign currency-denominated monetary
assets and liabilities, and future firm commitments of its operations. Forward
exchange contracts are also used from time to time to manage near-term foreign
currency cash requirements. The primary objective of these hedging activities
is to maintain an approximately balanced position in foreign currencies so that
exchange gains and losses resulting from exchange rate changes, net of related
tax effects, are minimized.
Given the Company's balanced foreign exchange position described above, a 10%
adverse change in foreign exchange rates upon which these contracts are based
would result in exchange losses from these contracts that would, in all material
respects, be fully offset by exchange gains on the underlying net monetary
exposures for which the contracts are designated as hedges. As of June 3, 2000,
the Company did not have any forward contracts outstanding as the Company had no
material foreign exchange exposure.
12
<PAGE>
PART II
OTHER INFORMATION
ITEM 5. Other Information
--------------------------
On June 13, 2000, the Company and PPG Industries of Pittsburgh announced
that they have agreed to combine their U.S. automotive replacement glass
distribution businesses in a new entity, PPG Auto Glass, LLC. PPG will hold
a 66 percent interest and the Company a 34% interest in the new company.
The Company operates about 75 wholesale distribution branches and PPG
operates more than 110. The new venture will not include PPG's auto
replacement glass production and truckload sales business, or the Company's
manufacturing and retail installation operations. The new venture is
expected to employ more than 1,200 people from PPG's and the Company's
existing auto replacement glass distribution units.
On June 26, 2000, the Company and PPG were notified by the Federal Trade
Commission that they had received early termination of the waiting period
for their filings under the Hart-Scott-Rodino Improvement Act regarding the
proposed joint venture. This was the last significant condition to closing
the venture. The venture is anticipated to close and begin operations later
this summer.
ITEM 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits:
--------
Exhibit (10.1). Conditional Waiver and Amendment No. 4 to Credit Agreement
Exhibit (27). Financial Data Schedule (EDGAR filing only)
Exhibit (27.1). Restated Financial Data Schedule (EDGAR filing only)
(b) Reports on Form 8-K:
-------------------
None
13
<PAGE>
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 10, 2000 /s/ Russell Huffer
--------------
Russell Huffer
Chairman, President and Chief Executive
Officer
Date: July 10, 2000 /s/ Robert G. Barbieri
------------------
Robert G. Barbieri
Vice President-Finance and
Chief Financial Officer
14
<PAGE>
EXHIBITS INDEX
Exhibit
-------
Exhibit 10.1 Conditional Waiver and Amendment No. 4 to Credit Agreement
Exhibit 27 Financial Data Schedule (EDGAR filing only)
Exhibit 27.1 Restated Financial Data Schedule (EDGAR filing only)
15
