Zacks_Analysts' Blog : Apogee Misses Zacks Estimates - Analyst Blog

Apogee reported a 21% decline in revenues to $143 million. The company attributed the decline to a lower demand from the commercial construction market. Gross profit dipped $22 million to $19 million for the quarter. The company witnessed an operating loss of $6 million, compared with an operating income of $12 million in the prior year comparable quarter.

Segment Results

Architectural: Revenues of $26 million were down 24% due to lower pricing in architectural glass and delays in the installation and window businesses. We believe that the decline in revenues was also the result of a tight commercial real estate credit policy.

The segment reported an operating loss of $7 million, compared with an income of $11 million in the same period of the previous year. Backlog for the quarter was $215 million, compared with $310 million in the prior-year period.

Large-Scale Optical Technologies: Revenues of $17 million in the segment were up 18%.

Operating income was $3 million, up 69% year over year due to an increased demand for its value-added products in the segment.

Revenues and operating income grew as volume and mix of picture framing products increased, compared with a feeble prior-year quarter.

Financial Condition

Cash and short-term investments decreased to $70 million, compared with $102.6 million at the end of fiscal 2010 due to annual payments for incentive compensations, retirement plans and taxes paid during the quarter. Long-term debt increased considerably to $20 million from $8 million at the end of fiscal 2010.

Guidance

Management expects its Architectural segment to remain challenging for the entire fiscal 2011. The company is likely to record a further 10% to 15% decline in top line during the year. During the economic downturn, Apogee has implemented a number of cost-cutting initiatives and is evaluating further reductions in headcount and discretionary spending.

Management believes earnings in its Optical segment will be unable to make up for Architectural losses. However, it expects the second half of fiscal 2011 for both segments to be stronger than the first half of the year.

We expect demand for the company's products to remain sluggish as there is limited visibility. Therefore, we do not look forward to a significant market recovery in the current year. If its long-term strategies to expand its energy-efficient architectural glass offerings both domestically and internationally is implemented and there is an improvement in credit markets, we expect to see positive movement in the business.

Minneapolis, Minnesota-based Apogee engages in the design and development of glass products, services and systems.