Apogee makes and installs the glass, metal and surfaces on commercial buildings. Its profit margins slid for two years, and it is now borrowing to buy growth, so the question is whether the deals rebuild earnings.
Look up at the glass front of an office tower or another commercial building, and you may be looking at Apogee's work. The company makes metal building parts, glass and specialty surfaces for such buildings, and one of its four units also installs them on site. Nearly all its sales come from the United States, with a small slice from Canada.
Customers pay Apogee for products made for a specific building. Architectural Metals, the metal products unit, is the group's main profit engine. At Architectural Services, customers also pay for putting those products in place. Revenue on this contract work is recorded as the job advances, not when cash arrives. What Apogee keeps depends on pricing each job well, then delivering on cost and on schedule. The installation unit keeps far less of each sale, but its order book of signed, undelivered projects shows the work that is coming. Aluminum is a big input for both units, so a price jump on work already priced comes out of margin. After production costs, the running costs of offices, sales and administration absorb most of what is left. Unless those running costs are cut, each point gained or lost on flows almost directly to operating profit.
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