Good day, ladies and gentlemen, and welcome to the Fiscal 2014 Apogee Enterprises Incorporated Earnings Conference Call. My name is Kim and I will be are operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Mary Ann Jackson. Please proceed.

Thank you, Kim. Good morning and welcome to the Apogee Enterprises' fiscal 2014 fourth quarter and full year conference call on Thursday, April 10th, 2014. With us on the line today are Joe Puishys, Chief Executive Officer; and Jim Porter, CFO. Their remarks will focus on our fiscal 2014 fourth quarter and full year, and our outlook for fiscal 2015. During the course of this conference call, we will make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and the current economic environment, and are of course, subject to risks and uncertainties, which are beyond the control of management. These statements are not guarantees of future performance and actual results may differ materially. Important risks and other important factors that could cause actual results to differ materially from those in the forward-looking statements and projections are described in the company's annual report and Form 10-K for the fiscal year ended March 2nd, 2013 and in our press release issued yesterday afternoon and filed on Form 8-K. Joe will now give you a brief overview of the results and then Jim will cover the financials. After they conclude, Joe and Jim will answer your questions. Joe?

Thank you, Mary Ann. Good morning everyone and welcome to Apogee's fiscal 2014 conference call. With fourth quarter revenues up 19%, operating income was also up 97%. Apogee delivered an outstanding finish to a year of significant growth, giving us momentum as we move into fiscal 2015. I'm extremely proud of the teams across the Apogee businesses who executed a fantastic year for us. Fiscal 2014 fourth quarter earnings per share of $0.27 were up 80% in the quarter. Our backlog was also up approximately 11% from the prior year period and from the third quarter, as we had anticipated signaling strengthening of our architectural markets and improved win rates. On top of the backlog, we continue to have a strong, growing pipeline of project commitments and awards as well as a very high level of bidding activity and I expect sequential backlog growth into Q1. In addition, we saw a 27% increase in cash and short-term investments from the third quarter. I am pleased that our conversion on incremental sales in the quarter was 27%, excluding the Alumicor acquisition. Our results for fiscal 2014 full year keep us on path to achieving our strategic goals of $1 billion in revenues and 10% operating margin by the end of fiscal 2016. We grew revenue 10% as all segments showed growth in the year. Operating income for the year increased 47%, again with all segments contributing to operating margin improvement of 130 basis points to 5.2%. About half of this improvement is attributed to productivity improvement and lean implementation across our factories, which is progressing well. And you'll hear that I plan a similar impact from operations in fiscal 2015. Earnings per share for the year were up 42% to $0.95, including the impact of over $0.06 of headwinds that Jim…

Thanks, Joe, and good morning. Our fourth quarter performance was quite strong and contributed to a year of significant growth. I'll cover some highlights of the full year before turning to fourth quarter results. Fiscal 2014 earnings per share was up 42% to $0.95 per share on revenues of $771.4 million, which grew 10%. We're really proud of this reported EPS growth for fiscal 2014, but I'd still like to point out that this strong improvement is achieved despite what we estimate as $0.05 to $0.06 of headwinds that we experienced in the year compared to fiscal 2013. In fiscal 2014, we had negative impact of approximately $0.02 from acquisitions. The negative impact from weather that we noted was roughly a $0.01 to $0.02 per share drag. And finally a higher tax rate as well as higher shares outstanding in fiscal 2014 were each worth about $0.01 per share for comparison purposes. Fiscal 2014 was a great year of improvement. The fiscal 2014 gross margin was 21.4%, up 60 basis points from 20.8% in the prior year. Our revenue growth came from the Architectural businesses rather than the high-margin Picture Framing business. Apogee's tax rate for fiscal 2014 was 29.6% versus 29% last year. Cash and short-term investments totaled $28.7 million compared to $85.6 million at the end of fiscal 2013. For the year, we had free cash flow of $11.1 million after capital expenditures of $41.9 million, which included investments in the new architectural glass coater for improved capabilities and new products, as well as for capacity additions in the Architectural Framing Systems segment. We've made significant progress on these strategic investments. The new coater is on track for startups at the end of the second quarter and increased capacity for extrusion and finishing is up and running now…

Jim thanks. Before I ask Kim to open the call for your questions, I'd like to remind you all that we have our second Investor Day -- Analyst Investor Day scheduled for the afternoon of Wednesday, May 7 in New York City to be held at the NASDAQ headquarters. Please contact Mary Ann Jackson if you'd like to join us for presentation on each of our segments as well as operational excellence, strategies, and of course, our financials. So, Kim, could you please instruct the team how to get into the question queue and we'd be happy to take questions now.

(Operator Instructions) Your first question comes from the line of Brent Thielman from D.A. Davidson. Please proceed. Brent Thielman - D.A. Davidson & Co.: Hi. Good morning, guys.

Good morning, Brent.

Good morning. Brent Thielman - D.A. Davidson & Co.: You didn't highlight weather it's causing issues in the Glass business, and why you're clearly showing some improved profitability year-over-year, was it bit lower versus prior quarters on higher sales? And I'm just wondering is this just another case of project mix? Were there any unusual items involved in that particular area?

Brent thanks. This is Joe. First off, yeah. The weather really did impact two businesses; our Large-Scale Optical retail business, as we mentioned, and it was brutal. I think that really does speak for itself. And the one business in Architectural was our Canadian business. The brutal -- it's one of the worst weathers in 100 years from Ontario East, a lot of construction sites were shutdown. No business was lost frankly to provide that business tailwinds in fiscal 2015, but it was a true impact to our new Alumicor business. The Glass business had a fantastic year. Their conversion rate exceeded my expectations. Their fourth quarter was little softer to your expectations on incremental revenue. There is nothing wrong with that business. I expect a very strong fiscal 2015 from the Architectural Glass business. And frankly, we're one month into the New Year; they're off to a terrific start.

Brent, its Jim. I mentioned in my comments that in the glass business we did have just a number of expenses that kind of all fell in the fourth quarter and each one is maybe 20 basis points if you calculate. But relative to weather, well, the other businesses, as Joe mentioned, they did have impact on revenue. Our Glass business had no revenue impact on weather. And they did have some higher cost from utility expenses and then we actually had some work interruptions where we had a handful of ships where actually crews couldn't get in and couldn't work which affected some productivity cost associated with it. But it's just a number of kind of relatively smaller items that added up to hold down that quarter's performance.

Brent I'll repeat. The Glass business is performing extremely well. Brent Thielman - D.A. Davidson & Co.: Sure. Okay, I appreciate that. And then, really strong numbers out of services here in Q4, how do we -- how should we think about the margins in that segment into the first half, just because when I look at that over the last few years there seems to be some kind of seasonal bumps in margins in Q4.

Yeah. As Jim mentioned, they had a terrific fourth quarter. I think you heard his comments and probably read between the lines that don't expect necessarily that conversion or that margin in every quarter. It is a lumpy business. It's extremely well-run, a lot of discipline around project execution. I think they are held in extremely high esteem in the construction world, and they deserve it. Depending on the mix of projects in any given quarter that number can move around more than the margin in any of our other businesses. But they improved their operating and their gross margins in the year by over 150 basis points. It's in line with the comments Jim and I have made that there is 200 basis points of margin improvement going into backlog. They're executing well, so that's falling to the bottom line. In the overall trend, I believe, we'll continue to show improvements, although not necessarily in a linier manner quarter-by-quarter. Brent Thielman - D.A. Davidson & Co.: Okay. And just last one, in terms of SG&A, Jim was there -- how much was sort of non-reoccurring integration related cost for Alumicor? And should we see any of that repeat in the next couple of quarters?

Excuse me. In Q4 there wasn't too much in terms of non-recurring. We probably had little bit in Q3. What you did see in terms of the increase in Q4 largely was just the inclusion of SG&A of the Alumicor business into it. But I think -- I'd say kind of roughly a 16% SG&A level for fiscal 2015 is a reasonable assumption. Brent Thielman - D.A. Davidson & Co.: Great. Thank you.

Down -- just down little bit from F 2014.

Thanks Brent.

Your next question comes from the line of Robert Kelly from Sidoti. Please proceed.

Good morning, Joe, Jim.

Hi Bob.

Good morning.

Thanks for taking my questions. And Jim, you had said a comment right before about SG&A, what was the goal for F 2015, I'm sorry, as a percent of sales?

Yeah. I think the planned assumption is roughly flat 16%.

That's something great.

F 2014 was a little over 16%.

Understood. Okay. Also, you had said during the prepared remarks half of the improvement -- and I missed what it was -- half of the improvement was coming from productivity and operational improvements, was that half of the EBIT margin improvement year-over-year in F 2014, is that what you're referring to?

No. I was just talking about operating margins. So we went from 3.9% to 5.2%. That 130 basis point improvement, as approximately half of that came from our lean efforts.

Okay.

And the other half from pricing mix, volume, etcetera.

Okay. Great.

I'd point out, Bob that we -- in my advertisement, we had an operating loss of 3.6% in fiscal 2011, we're at now 5.2%, so we're up in the three years nine points. And we're targeting and have been achieving anywhere from 50 basis points to 100 basis points, more like 70 basis points to 90 basis points coming from our lean efforts that kicked in really in the last 1.5 years, and we expect that to continue in the next year that kind of basis point improvement from lean alone.

Okay, understood. Thank you. Regarding F 2015 outlook and your operating income guidance, I know -- I understand the commentary around the new profit conversion goal with Architectural making up most of the growth. But at the midpoint for F 2015 on your revenue and operating income targets, the implied incremental margin, 15% is still well below that. Can you just help reconcile that given the strong operational performance in 4Q?

Well, let Jim do the numbers for you, but if you -- we've got Alumicor baked in for a full year. That's not true, year-over-year growth from margin conversion that will come in at normal Framing Systems operating margins. So you have to be careful and back the Alumicor out of the equation. As I said, the mix of very high growth in Architectural and much less growth coming from Large-Scale Optical, although it will grow. All four segments are growing. It is a substantial mix swing in the calculation. And I anticipate we will be inside of my range for conversion on a apples-to-apples comparison without the effect of an acquisition.

So…

Bob, its Jim. So greatly as echoing Joe's point is that if you adjust for the acquisition depending on where we fall on the range kind of roughly 20% conversion is what's implied.

For the business, has tax with it?

Yeah, for fiscal 2015.

Excluding the acquired revenue?

Right.

And what are the -- expectation for acquired revenue?

That's going to come in at kind of our normal Architectural Framing Systems segment margins, kind of…

No, I'm sorry, revenue. Is it like $60 million?

It'll probably be in roughly $55-ish million in revenue for full year.

$55 million in revenue from acquired, and that will come in at the Framing System -- and that will come in at Framing Systems margin?

Yes.

Okay. I'm coming in something slightly lower, but I see where you're going. If you could, could you help us at the segment level? The ebb and flow of each individual segment revenue and maybe operating income growth or EBIT margin expectations for the individual units for F 2015?

Yeah. We're not prepared to go into specific segment's outlooks at this time.

Okay. As far as the Services division, you saw a big bump in 4Q from -- it seems like we finally washed out the lower margin projects and we're getting into the plus 200 basis point to 300 basis point work that you've been talking to for the final -- for the past couple of quarters.

That's fair.

Is that a reasonable margin improvement expectation in fiscal 2015 for Services of 200 basis points to 300 basis points?

The margins will grow in that business. I don't want to provide guidance for the one segment. I do anticipate continued upward trend in operating margins on a year-over-year basis. As I said, timing by quarter can be lumpy, but the overall trend will continue to be positive. It's driven by better projects and excellent execution.

And Bob, as you pointed out, I mean we talk about that 200 basis points on a year-on-year comparison in terms of what's in our backlog. And so, every quarter there's kind of a little trend of improvement, and so you see that mix of business flowing through there. And so it's kind of just math on the average you see kind of happen that point through just based on project margin based on the mix of business, but it won't be the full 200.

Bob, I mentioned it a couple of year ago early in -- maybe it was fiscal 2013, that business has put a lot effort into rigor and discipline around defining what projects they want to go after, what they're good at and what they want to avoid. They've executed particularly well against that objective and that will continue.

Okay. Again, I mean, the projects held in backlog, the margins are up significantly. You're getting 75 basis points from productivity annually, project and pricing mix is improving across the business. But the guide for F 2015 at the midpoint is like 150-odd basis points in margin improvement. That's all acquired revenue depressing the incremental profit contribution? I mean I guess what I'm trying to get at, have you seen any change in the pricing or the competition level in your Architectural businesses over the past couple of months that would depress incremental profitability.

No.

Okay. Fair enough. One final one, last week or so energy efficient related legislation came out really trying to prop up. It seemed retrofit for energy efficiency, any positive take away from that? Is there optimism from your customers that that will be a needle-mover? I'm referring to the 179-D tax deduction those put through in a new bill?

Bob, its Jim. So definitely, if that bill goes through as it's been proposed it's got two things. One is, it takes the -- kind of the existing deduction benefit was and almost doubles it. But then also importantly in line with our retrofit initiative it starting -- its' introducing essentially a sliding scale of initiative for renovations of existing buildings, which is kind of a new element to this legislation. So we're hopeful that this goes through and think it's just one additional incentive to spur what we continue to believe is a great long-term opportunity for the company.

Very helpful. Thank you.

Bob, we're needing good momentum on that initiative and I think through F 2015 we'll be talking about some success in that initiative all year at each quarter.

Okay. Great. Thank you.

Good Bob.

Your next question comes from the line of Colin Rusch from Northland Capital Markets. Please proceed.

Thanks so much. So the incremental operating margins in your guidance looks like they're high-teens close to 20% here. Can you talk a little bit about the infrastructure that you have in place, and how much growth it really can support from an OpEx level?

Well, we've said it before and it's still applies, we are capacitized for growth over the next two years in almost every business. We have some pockets of capacity constraints that we addressed in fiscal 2014 in our extrusion business and our finishing business. And we feel our CapEx is now geared towards profits capability, productivity enhancement and new products. So we'll get that new order online in our large Glass business at the end of the second quarter. But if specifically you're asking if we're capacitized for the growth we've built into 2015, and to get to $1 billion in 2016 we have the capital in place, the capacity in place to do that.

No, I'm not talking about the capacity from manufacturing standpoint; I'm talking about your operating spending. At some point, are you going to have to -- are you making incremental investments in OpEx, or are you going to have to take a step function in terms of the growth in the overhead to the business?

Incremental expenses in certain functions like engineering and IT and OpEx, yes, but no step change that you're asking about. We're adding resources to our retrofit initiative; we're adding resources to our IT to enhance our capabilities for redundancy and backup, but all within normal levels of SG&A expectations as Jim indicated will be down slightly in the percentage of sales due to the high sales growth. The actual dollars will be going up, but nothing beyond incremental levels, no step function.

All right. So for the next couple of years we can kind of think about high-teens, 20% operating leverage, or incremental operating income on the model. That's very helpful.

Right. Absolutely.

Okay, great. And then, secondly on the retrofit opportunity, could you just give us an update in terms of how big the pipeline is here, when we can start seeing that really start to take off? And now it's -- it can be challenging to educate a market on how these things work. But if we could just get an update on how that's going and how we should think about the trajectory on that business?

You are right on. It is a very long selling cycle, Colin. We knew that. It is converting a market to think in a way hadn't thought before beyond HVAC and lighting. We have been very successful. We hit our goal for awards in fiscal 2014. It's pretty substantial number, over $10 million. We will do more than double that in awards this year. So it is starting to kick into higher gear. We're adding a recourse to that team to continue to drive that. And it will be a substantial growth driver for Apogee over the next five years. And Jim does have that initiative for us here and I'd ask him to comment a little bit more on some of the things these guys are doing out in the market.

Thanks Joe, happy to. As Joe said, we just continue to be very excited about this. We're -- excuse me -- having a lot of impact interfacing with the ASCOs developers, building owners, property managers, and it's both a number of things. We talked a minute ago about the potential expansion at 179-D tax deduction and enhancement in that. There is a number of local market initiatives in major markets like Chicago that are prompting building owners to really be thinking hard about the opportunities and requirements associated with retrofit. And then added to it is a number of building owners really looking at needing to upgrade their existing buildings both from a performance standpoint and from an aesthetic standpoint, and our products are fantastic for that because we can achieve both. So we're seeing some nice momentum and actually going to be adding to our team this year to help move that along into more.

And can you just help us understand what the projects IRRs are on those projects?

Are you talking about -- from the customers' perspective?

No, I'm talking from financing perspective and the availability of money for facilitating this business.

Well, first of all, Apogee does not get involved in that aspect of it. But on the ESCO side of things, where they are working with the municipal, state and federal sector, they are involved in bringing the financing to the table. And then on the developer side of things, it's really kind of normal financing attributes.

Okay, great. I'll take it offline. Thanks so much, guys.

Thanks, Colin.

Your next question comes from the line of Samuel Eisner from Goldman Sachs. Please proceed.

Good morning everyone.

Hey Sam.

Good morning.

Good morning. So, I think most of the questions on the incrementals have been asked, but if I can maybe extrapolate that and take it a step further. Looking out to fiscal 2016, again, assuming you get to 10% EBIT margins on $1 billion of revenue, I think you need about 40% incremental? So, they are -- I guess you are basically implying a step function in incremental, so just trying to get a better understanding of really how to look out past this year.

Yes, the -- Sam, what I would tell you is we, as I mentioned earlier in the call, we have gone from negative 3.6% to 5.2% in three fiscal years. I admit that while a significant amount of that came from improved disciplines and rigor, and fixing things that had been broken. But we clearly did not get much help from the end markets in that nine point movement -- very little. We're now seeing and projecting end market improvement. I think we're going to get from 5% to 10%, I wouldn't bet against us. The conversion rate for the next year is going to be lower than 30% we achieved in the prior year, purely based on the mix. I think Jim mentioned that, clearly, we have line-of-sight the upper end of the income range. But we'll have to do it again in fiscal 2016. And the reality of the matter is when we stated our forecast for 2016 at $1 billion and 10%; we were calling for, at minimum -- or 6% end market growth three years in a row. It was negative in the first year. We still grew 6%, 7%. So, we did our part. It was low-single-digits last year, not 6%. Now it's going to be hopefully above 6%, upper-single-digits, so now it's starting to turn in our favor. We delivered that margin improvement on lower sales numbers in the prior years with very insignificant help from the end market. I'm convinced we can get there. I do anticipate we have upside in things like our retrofit initiative that Colin just asked about. We've been clear from the beginning our goal did not include substantial success in the retrofit initiative, nor did it include acquisition. We'll continue to try to see if there are smart acquisitions out there. And the Alumicor acquisition will help us get to that objective, as will the retrofit initiative. But the conversion will be lower than we had experienced in the last couple of years, unless our consumer products business takes off with more growth.

Understood, that's helpful. And then if SG&A as a percentage of revenue is staying around 16%, obviously, you're getting the leverage on the gross line, what is your expectation for, I guess, utilization rates in 2015 and then also into 2016? Or is really the margin expansion coming from price and mix?

No, it's going to come also from capacity utilization. We expect to see some growth in capacity utilization in fiscal 2015, probably not material. I think we expect a bit more increase in the capacity utilization in fiscal 2016. We would expect to see it kind of in the -- I mean, I'd kind of estimate at this point mid-70% range.

Okay. And then just lastly, in terms of -- I guess it sounded like order commentary into the first quarter is actually pretty good. Can we maybe just -- Joe, can you maybe just talk about that a little bit? What specifically are you seeing? It sounds as though you're expecting backlog to again increase in the first quarter. So, just a little bit more color on that would be helpful.

Yeah, obviously, we have got -- we report on backlog. These are booked commitments contractually, $330 million. We also have contracts in-hand that are in the process of being executed and will enter backlog. And we have awards that we expect to see a contract within the next quarter. So, Jim and I have visibility to that and that's why I had confidence at the end of the third quarter to highlight -- I said double-digit growth in backlog and we had a $30 million increase. I do like the level of activity we're working on in our largest businesses; Glass and Services and expect that trend to continue certainly in the first quarter. And I certainly hope to be reporting on that in less than 90 days.

Great. Thanks so much.

Thanks, Sam.

Your next question comes from the line of Jon Braatz from Kansas City Capital. Please proceed.

Good morning everyone.

Hey John.

Good morning.

Joe, just turning the page a little bit to LSO, revenue growth has been very modest. I know you have instituted some initiatives I think over in Europe and elsewhere. Can you talk a little bit about maybe some of the things that may -- you may be looking at to drive the topline there? And then as you look towards your fiscal 2016 goals, what kind of numbers and assumptions are you baking in for the LSO division? Are you looking more at sort of a status quo or -- what's your thoughts on that area? Thanks.

Yeah, the business is a gem. Let me answer your question. I don't want to give my strategies away to our competitors, but I can tell you we've got -- we will continue to grow that business internationally. So, international and the fine art market have been nice growth drivers for us, offsetting a stagnant marketplace. Let's say consumer spend is still stagnant here in the U.S. Consumer confidence as it increases, we expect that to improve. We have some very -- I talked about new markets, new geographies and new products, when I talk about our growth agenda here at Apogee. This business has some exciting new products that we plan to launch this year. I'm not going to go into any details on that, but I believe you'll see some nice additions to the portfolio, both in the U.S. and international. And I do expect growth from that business. It will be -- it's planned to be modest in fiscal 2015, meaning certainly single-digits. But we do expect to see the growth rebound a little bit in that business this year from its core markets, as well as with some new market -- some new products we're going to be launching.

Joe, can you give me any sense as to what your international revenues are in that area and how rapidly they've been growing? I'm sure they're very modest, but any color on that, in that regard?

It's less than $10 million. It is growing nicely for us. It started with a very small base. We really only launched that initiative two years ago, two and a half years ago. And we now have feet on the street in Europe. We have product distribution in Europe. And we'll continue to see good growth in our international efforts over there. The number is between $5 million and $10 million today.

Are the international margins as strong as they are domestically?

Very similar.

Okay. Thank you.

You're welcome, Jon.

Your next question comes from the line of Brent Thielman from D.A. Davidson. Please proceed. Brent Thielman - D.A. Davidson & Co.: Hey, Joe, you touched on this but I just want to clarify. The 10% operating margin target for next year, is that something you think you can hit for the year or more likely that you hit it within a single quarter next fiscal year?

Well, I wasn't talking about a single quarter, so I understand your question. No, I wasn't trying to be sneaky about that. The goal is for the year. I admit the -- when I stated the goal, we've lost more than a year of end market growth, probably closer to a year and a half. Our efforts and our growth last year and the year before that -- meaning 2014 and fiscal 2013 were roughly six points better than the end market. So, I would say, at Apogee, we may be -- the end market that fell at least a year behind, maybe put us a half a year behind. I still think I can get there, we can get there. And I don't want to mislead you by making a comment, but if I missed by 30 basis points, I'll be -- I'll look forward to that phone call. Our goal is to get there. We have the path to get there. We don't need all green lights through town, but we need to get some market enhancement. And if we get the 9% end market growth this year and project it higher than that in F 2016, I'm feeling more bullish than risk on that number. Brent Thielman - D.A. Davidson & Co.: Okay, great.

This is Jim. Maybe I'll just add one general comment that hopefully will help out. As I mentioned that, when we look at the potential for flow of work and we really can't predict timing, that depending on the flow that actually comes in, we can have mix in business, mix in project, and mix of product and that really kind of flows through all aspects. And when we think about conversion, that's the same thing. I mean, in general, kind of in a more steady-state business, our Architectural Glass should have higher conversion rates than the Architectural Framing Systems segment. And in Architectural Services, we have always said we'd have lower conversion rates. And just again, depending on the mix of business in both fiscal 2015 and as we look out to fiscal 2016, as we see more growth in our Architectural Glass and our Picture Framing business, that's going to help drive the overall conversion rate up, relative to the other business. Brent Thielman - D.A. Davidson & Co.: Understood. Thanks, guys.

Yeah. Thanks, Brent.

Okay, so, we're out of questions, I believe, and we're out of time. So, Kim, I'm going to wrap-up the call here and just let everyone know, one, I appreciate you taking time to listen to our story today. I love this business at Apogee. I would just leave you with saying I think you have seen what we can do over the last three years, what our business leaders can do with weak end markets. And I look forward to reporting results for you over the next couple of years when we are dealing with some growth behind -- growth in our sales from our end markets. So, thank you for your attention today. I hope to see many of you at the Investor Day on May 7th in New York City. Have a terrific day. Thank you.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.