distinctive solutions by apogee for enclosing commercial buildings and framing art

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1 distinctive solutions by apogee for enclosing commercial buildings and framing art April 17, 2018

2 Forward-looking statements This presentation contains non-gaap financial measures when talking about Apogee s performance. Definitions for these non- GAAP financial measures are in our most recent press release. It also contains forward-looking statements reflecting management s expectations based on currently available information. Actual results may differ materially. More information about factors that could affect Apogee s business and financial results can be found in our SEC filings. 2

3 About apogee Apogee 1949 incorporated Minnesota 79 operating companies $1 ~$1.3 billion billion company, company, profitable profitable 1218 U.S. U.S. manufacturing, fabrication locations 79 int l int l locations manufacturing, (5 Canada, fabrication 1 Brazil, locations 1 Europe) (7 Canada, 1 Brazil, 1 Europe) APOG publically traded on NASDAQ APOG publically traded on NASDAQ ~4,800 ~6,700 employees employees Four Seasons Hotel Seoul, South Korea Yong Man Park, StudioView 3

4 Industry leader in architectural products, services ARCHITECTURAL FRAMING SYSTEMS Extensive line of quality aluminum framing systems delivered on time for small to midsize projects ARCHITECTURAL SERVICES National expertise in manufacturing, installing glass/ metal systems on mid-size buildings 51% % of FY18 revenues of $1.3 billion 16% Architectural businesses deliver custom aesthetic, energy-efficient solutions for office, institutional, multifamily, hotel/ entertainment sectors 7% 26% ARCHITECTURAL GLASS Custom-coated fabricated glass units to meet architects aesthetic visions, energy codes for large to mid-size projects LARGE-SCALE OPTICAL Anti-reflective, antifading coatings for glass, acrylic used in picture framing, engineered optics 4

5 Diversified revenue streams New geographies, products, markets Investment highlights Positioning Apogee for earnings stability in any economic conditions Framing systems segment is growth driverq 2 Solid organic growth, acquisitions, plus room to grow Visibility for sustained growth Top-line and income growth at least through FY20 Managing capacity for continued market growth Productivity increases enabled plant closure in FY18 Q4 Strong balance sheet Cash flow supports investments, dividends, share buybacks Proven management team *See reconciliation of non-gaap financial measures tables on slides **EPS includes $0.13 per share benefit from tax reform. ***Adjusted FY19 earnings guidance excludes after-tax impact of amortization of short-lived intangibles associated with acquired backlogs of Sotawall, EFCO of $3.8 million ($0.13/diluted share). FY18 Revenues +19% Op. margin 8.6%; 10.0% adjusted* EPS** $2.76; $3.23 adjusted* ROIC 9.3% FY19 OUTLOOK Revenues up ~10% EPS $3.30-$3.50; $3.43-$3.63 adjusted*** Op. margin %; % adjusted*** 5

6 Growth momentum continues Positioning Apogee for improved performance in any economic conditions GROWTH DRIVERS $934 $ % $1.1B $1.3B 11.2% * 10.0%* ~$1.5B %** Top line Increase penetration New geographies New products New market sectors Retrofit 6.8% FY15 FY16 FY17 FY18 FY19 FY20 *Adjusted; see reconciliation of non-gaap financial measures tables on slides **Adjusted FY19 earnings guidance excludes after-tax impact of amortization of short-lived intangibles associated with acquired backlogs of Sotawall, EFCO of $3.8 million ($0.13/diluted share). Bottom line Project selection Product mix, pricing Capacity utilization Flex manufacturing Productivity/automation Lower tax rate Revenue dollars in millions Operating margin (Prior peak of 8.4 percent in FY09) 6

7 Strategies for revenue growth Grow diversified, efficient business framing segment now driver New Geographies New Products New Markets Expanded existing business in U.S. & Europe - NE, SW U.S., W. Canada in architectural framing systems - Europe for picture framing Acquisitions - 2 in past 2 years - focus on integration synergies - Broader Canada and U.S. geographical reach - More extensive product offerings - Broader project size mix Selecting best projects across U.S. Execute organic investments to penetrate new geographies Vitality index strong - Hurricane resistant products - Historic retrofit windows - Thermal windows/doors - Glass coatings - Aluminum finishes - Engineered optics glass/acrylics Acquisitions brought new products to expand offerings Focused on less cyclical markets Retrofit - Doubling size of team - Continued growth from strong pipeline of incremental projects; ~$40 million in annual orders Architectural glass - Significant growth in mid-size projects - Initiatives to penetrate broader architectural glass markets Engineered optics glass/acrylic Education sector presence expanded with EFCO 7

8 Strategies for operational excellence Lean, productivity, automation - Driving operating margin improvement without volume leverage - Architectural glass investments increased capacity and productivity, lowered costs - Lower tax rate allows further investments Capacity - Flexing or shuttering manufacturing capacity, optimizing supply chain Project selectivity for better margins Strategic pricing for complexity, differentiation Shorter lead times Efficiencies Synergies among architectural businesses - Purchasing, operational improvements at acquired framing systems businesses 8

9 Deploying capital for long-term shareholder value Priorities Grow Apogee through internal investments, M&A Lower costs through productivity, automation investments Dividends, with annual increases Increases each of past 4 years, with 12.5% increase in FY18 Q4 Share buybacks Purchased ~700k shares in FY18 Recent increase in authorization 9

10 Not your father s Apogee Architectural framing systems now largest segment Positioning APOG to achieve earnings stability regardless of economic conditions Successfully executing strategies to diversify and grow through new geographies, new products and new markets Expect sustained, modest U.S. non-residential market growth through at least FY20 Focus on operational excellence/productivity and capacity management to drive continued operating margin improvement Strong free cash flow to support growth, dividends, buybacks 10

Architectural Framing Systems Segment Apogee growth

cycle Wausau Custom aluminum window systems and

storefront and entrance systems Sotawall Custom,

, Canadian markets Tubelite Aluminum storefront,

storefront, entrance, curtainwall, window systems for

11 Architectural Framing Systems Segment Apogee growth driver, positions company to operate better over a cycle Wausau Custom aluminum window systems and curtainwall EFCO Aluminum window, curtainwall, storefront and entrance systems Sotawall Custom, proprietary curtainwall systems for U.S., Canadian markets Tubelite Aluminum storefront, entrance and curtainwall systems Alumicor Aluminum storefront, entrance, curtainwall, window systems for Canadian markets Linetec Paint and anodizing finisher of architectural aluminum building components 11

12 $ millions $ millions % percent Architectural Framing Systems Segment Product, geographic, project size diversity = revenue stability in any economic conditions Revenues $386.0 $298.4 $308.6 $216.1 $ Operating margin 10.3% 12.0%* 10.3%* 6.9% 7.3% Segment backlog** $405.7 $245.4 $77.7 $123.0 FY15 FY16 FY17 FY18 Fragmented profile of sector allowing share gain Broad N. American coverage, yet further geographic opportunities Extensive product offerings for small to mid-size commercial buildings Known for quality products, delivered on time *Adjusted; see reconciliation of non-gaap financial measures tables on slides **Segment has a mix of book and bill activity and longer lead-time projects 12

Architectural Glass Segment Gained share in U.S. mid-size project sector $ millions % percent $ millions Viracon Leading North American fabricator of coated, high-performance architectural glass 500 300 100 15 10 5 0 $293.

13 Architectural Glass Segment Gained share in U.S. mid-size project sector $ millions % percent $ millions Viracon Leading North American fabricator of coated, high-performance architectural glass $293.8 Revenues Operating margin 1.3% $346.5 $377.7 $411.9 $ % 9.4% 10.8% 9.3%* Operating income $16.4 $35.5 $44.7 $35.8* Only N. American fabricator with custom coating capability for quality aesthetics, energy efficiency Revenues balanced between large/mid-size projects for improved revenue stability, with attractive margins Managing capacity for continued market growth *Adjusted; see reconciliation of non-gaap financial measures tables on slides $3.9 13

$ millions $ millions % percent Architectural Services Segment Project selectivity, volume leverage to improve margins Revenues Operating margin Harmon One of the largest U.S. fullservice building glass installation companies 300 200 100 0 500 300 100 $230.

14 $ millions $ millions % percent Architectural Services Segment Project selectivity, volume leverage to improve margins Revenues Operating margin Harmon One of the largest U.S. fullservice building glass installation companies $230.7 $245.9 $270.9 $203.4 $213.8 Segment backlog* $426.3 $287.5 $320.4 $255.1 FY15 FY16 FY17 FY % 3.2% 4.8% 6.8% 4.9% Complex installation capabilities for mid-size commercial buildings Optimizing project selection across U.S. markets to improve margins Backlog strength supports FY19 growth outlook * Segment has lumpy input of projects into backlog, as average project size is between $10 and $20 million, and projects enter backlog in total 14

Large-Scale Optical Segment Coated glass, acrylic for picture framing, fine art, display sectors $ millions % percent Tru Vue Leading U.S. valueadded picture framing glass & acrylic provider 90 60 30 0 Revenues $87.

9% Uses same coating technology as in architectural glass to create anti-reflective coatings North American leader in custom framing products, which

15 Large-Scale Optical Segment Coated glass, acrylic for picture framing, fine art, display sectors $ millions % percent Tru Vue Leading U.S. valueadded picture framing glass & acrylic provider Revenues $87.7 $88.5 $89.7 $88.3 $ % Operating margin 25.0% 25.9% 25.0% 24.9% Uses same coating technology as in architectural glass to create anti-reflective coatings North American leader in custom framing products, which are sold directly to retail chains, through distributors to independent framers Early success in taking existing products into new engineered optics markets 15

16 % percent % percent $ dollars $ millions $ millions Strong earnings growth Historical full-year results Revenues $1.3B $1.1B $933.9 $981.2 $ Operating income $124.5* $132.9* $97.4 $63.6 $40.3 Operating margin EPS %* 9.9% 10.0%* 6.8% 5.2% $3.03* $3.23* ** $2.22 $1.50*** $.95 ***FY15 excludes $0.22/share tax credit income benefit ROIC % 12.7% 8.8% 9.3% 6.0% *Adjusted; see reconciliation of non-gaap financial measures tables on slides **EPS includes $0.13 per share benefit from tax reform. 16

17 $ millions $ millions $ millions Strong free cash flow Investing in growth (including M&A), productivity, dividends, buybacks $ millions $ millions Operating cash flow Free cash flow $128.9 $124.0 $127.3 $71.8 $ $86.9 $74.1 $55.9 $44.6 $ $41.9 $27.2 Capex $42.0 $68.1 $53.2 Long-term debt $ Cash, short-term Cash, short-term investments investments $28.7 $52.5 $90.6 $20.0 $ $20.7 $20.6 $20.4 $

18 FY2018 Fourth Quarter Revenues Q4 FY18 Q4 FY17 CHANGE $353.5M $314.1M +13% Gross Margin 24.2% 26.2% (200 bps) Operating Income $27.9 M $29.7M (6%) *Adjusted Operating Income $34.1M $31.9M +7% Operating Margin 7.9% 9.4% (150 bps) *Adjusted Operating Margin 9.6% 10.2% (60 bps) **Diluted EPS $0.78 $0.80 (3%) * **Adjusted Diluted EPS $0.96 $ % *See reconciliation of non-gaap financial measures tables on slides **EPS includes $0.13 per share benefit from tax reform. 18

19 Segment results ARCHITECTURAL FRAMING SYSTEMS FULL YEAR FY18 % CHANGE * FULL YEAR FY17 FULL YEAR FY16 Revenues $ % $386.0 $308.6 Adjusted operating income Adjusted operating margin ARCHITECTURAL GLASS $69.6** +50% $46.5** $ %** -170 bps 12.0%** 10.3% FULL YEAR FY18 % CHANGE * FULL YEAR FY17 FULL YEAR FY16 Revenues $ % $411.9 $377.7 Adjusted operating income Adjusted operating margin $35.8** -20% $44.7 $ %** -150 bps 10.8% 9.4% (Dollars in millions, except per share amounts) *Compared to prior year **Adjusted; see reconciliation of non-gaap financial measures tables on slides FY18 Q4 ARCH. FRAMING SYSTEMS HIGHLIGHTS Operating margin grew in existing businesses Operating margin impacted by lower EFCO margins FY18 Q4 ARCH. GLASS HIGHLIGHTS Revenues down vs. strong comp Operating margin down on volume, price/mix, plant closure, offset by improved productivity, costs 19

20 Segment results continued ARCHITECTURAL SERVICES FULL YEAR FY18 % CHANGE * FULL YEAR FY17 FULL YEAR FY16 Revenues $ % $270.9 $245.9 Operating income $ % $18.5 $11.7 Operating margin 4.9% -190 bps 6.8% 4.8% FY18 Q4 ARCH. SERVICES HIGHLIGHTS Revenues up on project timing Operating income up on improved performance on higher volume LARGE-SCALE OPTICAL FULL YEAR FY18 % CHANGE * FULL YEAR FY17 FULL YEAR FY16 Revenues $88.3-2% $89.7 $88.5 Operating income $22.0-2% $22.5 $23.0 Operating margin 24.9% -10 bps 25.0% 25.9% FY18 Q4 LARGE-SCALE OPTICAL HIGHLIGHTS Revenues down on order timing Operating income up slightly on improved mix (Dollars in millions, except per share amounts) *Compared to prior year 20

21 Appendix: Leading architectural businesses custom products for commercial markets Architectural Framing Systems Brands Wausau EFCO Tubelite Sotawall Alumicor Linetec Products/Services Engineered aluminum window and curtainwall systems, standard windows; energy efficient Aluminum window, curtainwall, storefront, entrance systems Aluminum storefront, entrance, curtainwall systems Aluminum curtainwall systems Market Sectors Office, government, education, health care, hotel, condos Aluminum storefront, entrance, window, curtainwall systems Painted and anodized aluminum window frames; painted plastic interior shutters Target U.S. education, health care, government, tall office/condo projects Mid-size to smaller projects; target education, multi-family projects Smaller projects in U.S. Midwest, East, South Larger to mid-size North American projects Mid-size to smaller Canadian projects Toll-coating finishing in U.S. and Canada 5-15% share of demand in targeted sectors Segment Size Over a Construction Cycle, Share of Demand (Apogee estimates) $2.5-$4.5 billion U.S. segment 5-15% share of demand in targeted sectors 10-20% share of demand in targeted sectors 10-20% share of demand in targeted sectors Customers Architects, building owners influence decisions $0.3-$0.5 billion Canadian segment 15-25% share of demand in targeted sectors Glazing contractors Glazing contractors Glazing contractors Glazing contractors Glazing contractors Competitors $0.1-$0.4 billion U.S. segment; 15-25% share of demand in targeted sectors Window companies, aluminum extruders, glazing contractors National companies (Kawneer (Arconic), Oldcastle (CRH)), regionals National companies (Kawneer, YKK, Oldcastle, Trulite), regionals National companies (Kawneer, YKK, Oldcastle,Trulite), regionals Glazing contractors with their own systems, other building product suppliers Kawneer, Oldcastle Regional finishers/ fabricators 21

22 Summary Leading architectural businesses custom products for commercial markets (continued) Architectural Glass Viracon Architectural Services Harmon Coated high-performance architectural glass: energy efficient, digital printing, silk-screening; insulated and/or laminated for hurricane or security protection, sound control Products/Services Installation of glass/metal framing systems for new construction and renovation; engineer and fabricate aluminum framing systems for majority of installation projects Market Sectors Office, government, education, health care, hotel, condos Large and mid-size U.S. projects, some smaller U.S. projects and international projects, including in Brazil with facility there Mid-size to smaller complex U.S. projects; offices and satellite offices in 11 U.S. cities serving multiple markets Segment Size Over a Construction Cycle, Share of Demand (Apogee estimates) $1.5-$2.5 billion North American segment; >50% share of demand in targeted high-profile projects Glazing contractors, window companies $10-$20 billion U.S. segment; 3-10% share of demand in targeted sectors Customers Architects, building owners influence decisions Competitors General contractors, building owners, property managers U.S. regional fabricators (i.e. Oldcastle (CRH)); European, Asian fabricators on larger projects Local/regional glaziers primarily; occasionally national glaziers 22

23 Federal Office Building Miramar, FL Hedrich Blessing, Nick Merrick Our architectural work Our products are on buildings that are shaping the architectural industry from big name skyscrapers and net-zero energy offices to blast or cyber eavesdropping protection for government facilities 23

24 World Trade Towers One and Seven, Museum New York, NY Eighth Avenue Place, East and West Towers Alberta, Canada Qian Yue Residential New Taipei City, Taiwan JW Marriott L.A. Live Los Angeles, CA Infinity Tower Sao Paulo, Brazil University of Tennessee at Chattanooga Library Chattanooga, TN Youngstown State University Wellness Center Youngstown, OH Exploration Tower at Port Canaveral Canaveral Cove, FL Dewey Short Visitor Center Table Rock Lake Branson, MO Buchanan Center for the Performing Arts Laramie, WY 24

Industry-leading architectural products and services Apogee participation* in ~$200 million/~20-story office building Glass Architects value quality, technical advice Metal Framing Premium

silk-screen or digital designs Fabricates glass into insulating units and/or laminated products for hurricane or security protection, sound control Wausau, Sotawall and EFCO Design, engineer

and EFCO Fabricate aluminum storefront, entrance, curtainwall products Harmon Union glaziers install windows, curtainwall and related components on mid-size to smaller buildings Quality glazing

25 Industry-leading architectural products and services Apogee participation* in ~$200 million/~20-story office building Glass Architects value quality, technical advice Metal Framing Premium quality, performance, delivery levels Installation Services National expertise with local presence GLASS Viracon $2-3 million* Coats raw glass to provide colors, energy efficiency; offers silk-screen or digital designs Fabricates glass into insulating units and/or laminated products for hurricane or security protection, sound control Wausau, Sotawall and EFCO Design, engineer aluminum systems Cut, machine aluminum for assembly Build aluminum windows, curtainwall systems Install glass in frames $3-4 million* $20-25 million* (includes glass, metal) Tubelite, Alumicor and EFCO Fabricate aluminum storefront, entrance, curtainwall products Harmon Union glaziers install windows, curtainwall and related components on mid-size to smaller buildings Quality glazing (installation) contributes to buildings completed on time; ensures exterior glass system meets architectural look and is weather tight Linetec, Alumicor and EFCO Coat (paint or anodize) aluminum framing 25

26 Corporate social responsibility at Apogee Architectural segments deliver highly energy-efficient glass, framing products Use of our best glass products in insulated units, compared to a single, uncoated pane of glass, is estimated to generate annual energy savings of $30 million Architectural products also provide enhanced daylighting for building employees, improving comfort and productivity Sustainability in processes, facilities Waste glass, water recycled Recycled-content aluminum available for framing systems Liquid paint finishing process captures, destroys all harmful VOCs inherent in process New facilities LEED certified Upgraded lighting, HVAC in several facilities Diverse board of directors engaged in strategic direction Annual code of conduct certification for directors, employees Supports communities in which we operate 26

27 Reconciliation of Q4 FY18 Non-GAAP Financial Measures Adjusted Net Earnings and Adjusted Earnings per Diluted Common Share (Unaudited) Thirteen Fourteen Weeks Ended Weeks Ended In thousands March 3, 2018 March 4, 2017 % Change Net earnings $ 22,329 $ 23,119 (3.4)% Amortization of short-lived acquired intangibles 2,913 1,722 N/M Acquisition-related costs N/M Restructuring-related costs 3,026 N/M Income tax impact on above adjustments (1) (917) (493) N/M Adjusted net earnings $ 27,609 $ 24, % Thirteen Fourteen Weeks Ended Weeks Ended In thousands, except per share amounts March 3, 2018 March 4, 2017 % Change Earnings per diluted common share $ 0.78 $ 0.80 (2.5)% Amortization of short-lived acquired intangibles N/M Acquisition-related costs N/M Restructuring-related costs 0.11 N/M Income tax impact on above adjustments (1) (0.03) (0.02) N/M Adjusted earnings per diluted common share $ 0.96 $ % (1) Income tax impact on adjustments was calculated using the estimated quarterly effective income tax rate of 14.8% in the current year and 25.3% in the prior year

28 Reconciliation of FY18 Non-GAAP Financial Measures Adjusted Net Earnings and Adjusted Earnings per Diluted Common Share (Unaudited) Fifty-two Fifty-three Weeks Ended Weeks Ended In thousands March 3, 2018 March 4, 2017 % Change Net earnings $ 79,488 $ 85,790 (7.3)% Amortization of short-lived acquired intangibles 10,521 1,722 N/M Acquisition-related costs 5, N/M Restructuring-related costs 3,026 N/M Income tax impact on above adjustments (1) (5,157) (493) N/M Adjusted net earnings $ 92,976 $ 87, % Fifty-two Fifty-three Weeks Ended Weeks Ended In thousands, except per share amounts March 3, 2018 March 4, 2017 % Change Earnings per diluted common share $ 2.76 $ 2.97 (7.1)% Amortization of short-lived acquired intangibles N/M Acquisition-related costs N/M Restructuring-related costs 0.11 N/M Income tax impact on above adjustments (1) (0.18) (0.02) N/M Adjusted earnings per diluted common share $ 3.23 $ % (1) Income tax impact on adjustments was calculated using the estimated annual effective income tax rate of 27.7% in the current year and 30.1% in the prior year

29 In thousands Reconciliation of Q4 FY18 Non-GAAP Financial Measures Adjusted Operating Income and Adjusted Operating Margin (Unaudited) ( Thirteen Weeks Ended March 3, 2018 Framing Systems Segment Architectural Glass Segment Corporate Consolidated Operating Operating Operating Operating Operating Operating Operating income margin income margin income (loss) income margin Operating income (loss) $ 12, % $ 4, % $ (1,577) $ 27, % Amortization of shortlived acquired intangibles 2, % % 2, % Acquisition-related costs % % % Restructuring-related costs % 3, % 3, % Adjusted operating income (loss) $ 14, % $ 7, % $ (1,319) $ 34, % In thousands Fourteen Weeks Ended March 4, 2017 Framing Systems Segment Architectural Glass Segment Corporate Consolidated Operating Operating Operating Operating Operating Operating Operating income margin income margin income (loss) income margin Operating income (loss) $ 9, % $ 13, % $ (4,843) $ 29, % Amortization of shortlived acquired intangibles 1, % % 1, % Acquisition-related costs % % % Adjusted operating income (loss) $ 11, % $ 13, % $ (4,312) $ 31, % 29

30 In thousands Reconciliation of FY18 Non-GAAP Financial Measures Adjusted Operating Income and Adjusted Operating Margin (Unaudited) ( Fifty-Two Weeks Ended March 3, 2018 Framing Systems Segment Architectural Glass Segment Corporate Consolidated Operating Operating Operating Operating Operating Operating income margin income margin income (loss) income Operating margin $ 114, % Operating income (loss) $ 59, % $ 32, % $ (9,931) Amortization of shortlived acquired intangibles 10, % % 10, % Acquisition-related costs % % 5,098 5, % Restructuring-related costs % 3, % 3, % Adjusted operating income (loss) $ 69, % $ 35, % $ (4,833) $ 132, % In thousands Fifty-Three Weeks Ended March 4, 2017 Framing Systems Segment Architectural Glass Segment Corporate Consolidated Operating Operating Operating Operating Operating Operating income margin income margin income (loss) income Operating income (loss) $ 44, % $ 44, % $ (8,160) Operating margin $ 122, % Amortization of shortlived acquired intangibles 1, % % 1, % Acquisition-related costs % % % Adjusted operating income (loss) $ 46, % $ 44, % $ (7,629) $ 124, % 30

apogee enterprises, inc. Investor Presentation

apogee enterprises, inc. Investor Presentation November 2018 Forward-looking statements This presentation contains non-gaap financial measures when talking about Apogee s performance. Definitions for these