Apogee Enterprises (NASDAQ: APOG) Q4 2020 Earnings Call Transcript

Apogee Enterprises Inc  (NASDAQ: APOG) Q4 2020 Earnings Conference Call
Apr. 02, 2020

Corporate Participants:

Jeff Huebschen — Vice President of Investor Relations & Communications

Joseph F. Puishys — Chief Executive Officer

James S. Porter — Executive Vice President and Chief Financial Officer

Analysts:

Chris Moore — CJS Securities — Analyst

Eric Stine — Craig-Hallum Capital Group — Analyst

Brent Thielman — D.A. Davidson & Co. — Analyst

Julio Romero — Sidoti & Company — Analyst

Barry G. Haimes — Sage Asset Management — Analyst

Bill Dezellem — Tieton Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Apogee’s Fiscal 2020 Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to introduce your host for this conference call, Mr. Jeff Huebschen, you may begin.

Jeff Huebschen — Vice President of Investor Relations & Communications

Thank you, Kevin. Good morning and welcome to Apogee Enterprises fiscal 2020 fourth quarter earnings call. With me today are Joe Puishys, Apogee’s Chief Executive Officer; and Jim Porter, Chief Financial Officer. I’d like to remind everyone that there are slides to accompany today’s remarks, which are available in the Investor Relations section of Apogee’s website.

During this call, we will reference certain non-GAAP financial measures. Definitions of these non-GAAP measures and a reconciliation to the nearest GAAP measures is provided in the earnings release we issued this morning, which is also available on our website. I’d like to remind everyone that our call will contain forward-looking statements reflecting management’s expectations, which are 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

And with that, I’ll turn the call over to you, Joe.

Joseph F. Puishys — Chief Executive Officer

All right. Thanks, Jeff, and thank you everyone for joining us this morning. I hope all of you, your families and your colleagues are safe and healthy during these challenging times. I’m going to make a few comments about our fourth quarter and how we closed fiscal 2020. Then, I’ll spend some time updating you about the events that have happened since the end of our fourth quarter and how Apogee is responding to the COVID-19 crisis and its potential impact on our business. Jim will provide some additional details around the results and our financial condition. And then I will take your questions.

Let me start with the fourth quarter results. We ended the fiscal year with a solid quarter, earnings above our guidance range, led by continued strong performance in Architectural Services segment, yet all of our businesses met or exceeded expectations. And we also benefited from some favorable discrete tax items in the quarter. We continue to win new business and expand our backlog. Architectural Services grew its backlog by over $50 million to a new record of $660 million to end the year. Backlog also increased 14% in Architectural Framing Systems, and order flow in our short lead time US Framing businesses remain strong as well.

Cash flow was particularly strong in the quarter. Jim will provide more details on our financial condition. Yet, I’d like to highlight the year-over-year increase in cash flow from operations and free cash flow where we delivered over $50 million of operating cash flow in the quarter. We use this cash to continue our balanced capital deployment approach, investing in our business, returning cash to shareholders and very importantly, reducing our debt. I’d also like to point out that we took action to provide further financial flexibility by extending the maturity of our term loan, which Jim will discuss.

In addition, we made good progress during the quarter on our key strategic initiatives. Our new automated glass — our Architectural Glass facility to serve the small projects market is fully operational. We made significant progress on our internal enterprise-wide procurement savings program, and we advance efforts to improve execution, drive synergies and reduce cost in Architectural Framing Systems. We maintain line of sight to achieve $30 million to $40 million in annual cost savings target when these initiatives are fully implemented and expect substantial benefit this fiscal year. Once again, Jim will provide additional details about these cost savings. So overall, it was a good quarter. We delivered on our commitments, above our guidance and closed the fiscal year in a strong position.

We entered fiscal ’21 with positive momentum in our business and the path to deliver significantly improved performance. We were executing a plan that would deliver mid-single-digit topline growth and more than 30% increase in operating income compared to fiscal 2020. In the week since our fourth quarter ended, the world has seen unprecedented events and is responding to the COVID-19 outbreak, which has become the primary focus for all of us. As a company, we are stepping up to this challenge. I want to acknowledge the tremendous efforts of everyone on Apogee’s team. Our employees have worked tirelessly over the past several weeks to adapt our operations, so we can take care of our people and customers in this rapidly changing environment. Thank you to all of Apogee’s employees for your contributions during this most challenging time.

Page 5 in our slide deck outlines some of the key actions in our COVID-19 Response Plan. We’ve assembled a cross-functional team to lead our response in everything we do. The health and safety of our employees is our top priority. We’ve implemented robust site prevention activities, including social distancing, massively increased hygiene standards, restrictions on travel, restrictions on visitors and meetings and remote work to the maximum extent possible. We’ve also established business continuity plans to maintain essential operations and to continue to serve our customers. We’ve stepped up our communications with customers, so we can understand and accommodate their requirements and we are working closely with our supply chain partners to ensure the flow of critical materials.

The situation is evolving very quickly, as you all know. Given this high uncertainty environment, we have decided not to provide financial guidance for fiscal ’21 at this time. However, I would like to share some observations about what we are seeing in our operations and end-markets and how we’re positioned to respond to the situation. First, almost every day, we are receiving new directors from federal, state and local governments in the locations where we operate. We’re working to assess these directors and ensure we comply to support health and safety requirements. In most cases, construction-related activities have been deemed essential according to federal CISA guidelines on critical infrastructure and are continuing to operate.

At this time. Apogee’s three Architectural segments continue to operate, ship products and serve our customers, while taking necessary precautions to ensure the health and safety of our amazing workforce. Overall demand for Architectural Products and Services has been very steady. We are responding to rapidly changing customer schedules and requirements, and some projects have slowed, a few have been put on temporary hold and this will impact results. However, most projects continue unabated. Again, I’d like to thank all of the Apogee’s employees for their efforts to keep our facilities operational at this difficult time. I’m very proud of how our Company is pulled together to support our nation and ensure critical infrastructure projects continue to move forward.

Our Large-Scale Optical segment, which is primarily a consumer products business, has seen more significant impact from the pandemic. At this time, the segment’s two primary manufacturing locations are closed to comply with state government directives and many of the retailers that sell our products are currently closed. We will work hard to resume operations as soon as possible. And I’m confident that the LSO’s segment will return to its normal high performance level.

I want to emphasize that we remain positive about the long-term prospects for all of our business segments. With our market-leading brands, strong customer relationships and significant backlog, we are well positioned once we emerge on the other side of this COVID-19 situation. Looking at our cost structure, we are fortunate that we entered this period of uncertainty with a robust set of cost out initiatives already underway. We expect these initiatives will deliver significant savings in fiscal 2021. We are also evaluating additional actions to manage cost and capacity as necessary. Finally, we finished fiscal 2020 with very strong cash flow and a healthy financial position. As I’ve noted, Jim will provide details on those actions that we are taking to maintain our financial position and liquidity.

So as we look at the current situation, I think of the key takeaways. Number one, we’re facing this period of uncertainty starting from a position of strength. We are continuing to operate servicing our customers, while taking necessary actions to protect our troops, and we are confident that we have the team and resources in place to navigate this situation. We entered the global COVID-19 pandemic from a position of strength will come out the other side in a terrific position, thanks to that.

With that, I’ll pass it over to Jim who will provide more details on the quarter and our financial position and then, I will return with a few brief comments and ready to take your questions. Jim?

James S. Porter — Executive Vice President and Chief Financial Officer

Thanks, Joe, and good morning everyone. To start, I’d like to echo Joe in extending my sincere gratitude to all of Apogee employees as we’ve come together to deal with the effects of the COVID-19 epidemic. All of you should be proud of what we have accomplished to keep our facilities safe and operational, so that we can continue to serve our customers and support critical construction projects.

Turning to the quarter, our consolidated results are on Page 7 of our earnings presentation. Total revenue came in at $337 million, down from last year’s fourth quarter as we had expected, primarily due to lower sales in Architectural Framing Systems and Architectural Glass, partially offset by increased revenue in Architectural Services. Operating margin was 4.6%, compared to negative 4.3% in last year’s fourth quarter. The prior-year quarter included project-related charges and an impairment charge. On an adjusted basis, fourth quarter operating margin was 5.2% compared to 9% in the prior year. Adjusted EBITDA was $29.8 million compared to $42.4 million in last year’s fourth quarter, primarily reflecting the lower revenue and lower margins in Architectural Framing Systems and Architectural Glass. Net interest and other expense decreased to $1.5 million with lower debt balances and a lower effective interest rate resulting from the debt refinancing we completed earlier in the fiscal year. The tax rate of 15.3% was down from last year’s level as we benefited from the reduction in state tax reserves and some discrete tax matters. Finally, our diluted share count came down to 26.7 million shares from 27.1 million last year, primarily due to our share repurchases over the past year. Putting this all together, earnings were $0.45 per diluted share in the quarter and $2.32 for the full year. On an adjusted basis, fourth quarter earnings were $0.51 per share and $2.38 for the full year, above our guidance range of $2.15 to $2.30 per share.

Now I’ll turn to the segment results, which are on Slide 8. Architectural Framing Systems results were in line with our previous guidance as we expected Framing Systems revenue was lower in the quarter at $153 million compared to $171 million last year as the segment revenue was impacted by some customer-driven scheduled delays that we had discussed last quarter. This primarily affected our longer lead time curtain wall and window businesses. This was partially offset by higher revenue in our short lead time US Framing businesses.

Framing Systems operating income was $2 million with an operating margin of 1.3% compared to adjusted operating margin of 5.6% in last year’s fourth quarter. Operating margins in the quarter were impacted by leverage on the lower volumes and the impact of the operational difficulties in a couple of businesses that we discussed last quarter. These operational issues have been addressed through several actions, and we have seen significantly improved execution today and continuing forward. Importantly, the segment saw momentum with new order activity winning several new projects during the quarter, which drove a 14% increase in backlog compared to last quarter.

Architectural Glass revenue was $98 million, down 5% from last year’s strong fourth quarter as we continue to see lower large project volumes resulting from increased competition from overseas suppliers. Operating margin was 3.9% compared to 7.1% last year. Fourth quarter Glass segment margins were negatively impacted by about 160 basis points from startup costs related to the new manufacturing facility for the small projects growth initiative as well as some higher insurance costs and reduced leverage from the lower volumes. These were partially offset by improved operational performance in our factories, which has seen strong productivity gains throughout the year. For the full year, we incurred $4.5 million of startup costs related to the new facility, in line with what we had been projecting throughout the year. This facility is now fully operational and is expected to contribute to segment revenue and income, as we move through the year ahead.

Architectural Services continued to have great success with several new project wins during the quarter increasing its backlog to a new record of $660 million. Services revenue grew 11% in the quarter on higher volumes driven by favorable project timing. Operating income was $8.5 million with operating margin of 11.6%. These were very strong results with very good project execution was lower than last year’s fourth quarter, which saw a record level of quarterly profitability that was driven by a favorable mix of several mature projects that came to completion during the prior-year quarter.

Finally, Large-Scale Optical revenue was $21.5 million, down from $24 million in last year’s fourth quarter. With lower sales to US retailers, we had a shorter holiday selling season compared to the prior year. Despite the lower revenue, LSO’s operating income was roughly flat to the prior year, reflecting strong cost management and increased factory productivity.

I’ll touch briefly on our cost savings initiatives. As Joe mentioned, we made significant progress on the cost savings initiatives that we had announced last quarter. First, with our procurement savings project, we have completed our work with our outside consulting firm on the initial phases and are beginning to see benefits flow into our results. In January, our new Chief Procurement Officer came on board. He is now actively leading this initiative as we transition into future phases of the project and continue our journey to build out a world-class purchasing organization.

Within the Framing Systems segment, we took actions to reduce salaried headcount and controllable costs and operations in SG&A. We’ve also developed plans for further optimization of our facility footprint, which we plan to implement during fiscal ’21, which drive further efficiencies and cost reductions. As we move through the year, we’ll continue to execute our roadmap to build a more integrated and efficient Framing Systems business.

Touching on the cash flow and balance sheet. Turning to Slide 10 in our presentation, we had strong cash flow with $54 million of cash from operations in the quarter. For the full year, we generated $107 million of cash from operations, up 11% over fiscal 2019. Full-year capital expenditures were $51 million, down from $61 million last year. The higher cash flow — the higher cash from operations and lower capex drove full-year free cash flow of $56 million, well above last year’s level of $36 million. During the quarter, we used our free cash flow to pay down $33 million of debt, which reduced our total debt to $218 million from $251 million at the end of the third quarter. We closed the fiscal year with a leverage ratio of 1.6 times debt-to-EBITDA, well below our covenants.

We continued our balanced approach to capital allocation, returning cash to shareholders, investing in organic growth and productivity initiatives and reducing debt. For the full year, we returned $44 million of cash to shareholders through dividends and share buybacks. As Joe mentioned, we are taking actions to maintain our financial position and liquidity during this time of increased uncertainty. We will continue to the aggressive cost savings plans that we already had underway and will consider additional cost savings actions as necessary and appropriate. For the time being, we are also restricting capital expenditures to essential maintenance and safety projects and have suspended share repurchases at this time in order to preserve cash.

Additionally, we work closely with our bank group, and we have received commitments to extend our $150 million term loan moving the maturity to April 2021. We expect this to close within the next two weeks potentially as early as next week. At the end of the fiscal year, we have close to $200 million of unused capacity on our total credit facility, which along with our cash flow, we believe provide significant liquidity to fund our operations.

To wrap up, we had a solid quarter and ended fiscal 2020 having made strong progress on our initiatives with a solid financial foundation to be well positioned for the future. We’re taking proactive steps to manage our resources and to ensure the long-term health of our business.

With that, I’ll turn the call back over to you, Joe.

Joseph F. Puishys — Chief Executive Officer

All right. Thanks, Jim. Even as the last several weeks have presented challenges that none of us anticipated, I’ve been encouraged by what I have seen both here at Apogee and across the markets where we operate in the US, Canada and Brazil. People are coming together to find our way through this COVID-19 crisis, and I am certainly proud that Apogee has been able to play a key role in supporting these efforts. Again, I want to emphasize that ensuring the health and safety of our employees is our top priority during this time, and I am grateful for everything our team is doing to serve our customers in that environment.

We’re certainly dealing with a period of unprecedented uncertainty, but there will be light ahead. And I am very confident that together we will emerge from this situation poised for great success. As soon as we have more clarity about how the COVID-19 pandemic will play out and how it will impact our business, we will look forward to providing updated guidance and financial targets for fiscal 2021 as rapidly as possible. Thank you again to our employees, customers, suppliers and other business partners for your contributions at this time.

With that, I’d like to open up for your questions. So, Kevin, if you could inform the audience how to ask questions. Thank you.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Chris Moore with CJS.

Chris Moore — CJS Securities — Analyst

Hey, good morning guys.

Joseph F. Puishys — Chief Executive Officer

Good morning, Chris.

James S. Porter — Executive Vice President and Chief Financial Officer

Good morning, Chris.

Chris Moore — CJS Securities — Analyst

Good morning. Maybe just start on Framing, you had talked about the short lead time Framing orders still look like they’re relatively strong. Can you just maybe remind us in terms of the breakdown of — on Framing from kind of short lead time to the more longer lead time curtainwall window stuff?

Joseph F. Puishys — Chief Executive Officer

Yeah, it’s about 50/50 Chris between book-and-bill in the quarter and orders that take longer than that. So about 50/50.

Chris Moore — CJS Securities — Analyst

Got you. Got you. And just kind of from where you’re sitting today, if you look at the three Architectural segments, which of those probably is the most — has the most uncertainty near term?

Joseph F. Puishys — Chief Executive Officer

Well, all of them have uncertainty like everyone, but we — I mentioned the CISA guidelines. You all know what ceases nowadays. I just give you one example, Viracon, our Glass business alone has orders in the current pipeline. Those orders — firm orders to be shipped over the next eight weeks for 56 hospitals in 20 different states. We have an equal number of healthcare projects in the future. And that’s just Viracon. Our other businesses support hospitals and healthcare as well. We are feeling really good about the Architectural businesses right now. But of course, as a nation, we all worry about what’s next, but so far so good.

Chris Moore — CJS Securities — Analyst

Got it. I appreciate that. In terms of the $30 million to $40 million annual cost savings, just trying to get a little better sense of timing, is the goal to be at that kind of run rate by the end of fiscal ’21 or trying to understand [Indecipherable]?

Joseph F. Puishys — Chief Executive Officer

Absolutely.

Chris Moore — CJS Securities — Analyst

Okay.

Joseph F. Puishys — Chief Executive Officer

Absolutely. And our team is working on contingency plan, how to even amp that up in the event that if volume does contract this year for our industry, how we can continue to drive additional savings, but we still feel very, very good about — the procurement savings are identified. Our outside partner has completed their work. As Jim highlighted, I hired a new Chief Procurement Officer who is fully owned the execution of the project and this is not blue sky. We have identified by part number across our Company where the savings are. So we feel very good about it, and that is the end of the year run rate, but again this year, there is substantial impact in the fiscal year as well.

Chris Moore — CJS Securities — Analyst

Got it. And last question from me. Just on LSO, so it sounds like only probably had 15 days’ worth of business so far in the quarter. Is or the LSO orders, they tend to be kind of back-half loaded in quarters or is there any pattern there?

Joseph F. Puishys — Chief Executive Officer

First quarter is always our low quarter because it follows the holiday buyout in Q4. So that’s the good news. The facilities are in states that have one facility still closures till the end of April. The other one, the closure is only till April 10. That one is in Minnesota. And the fact the one that’s possibly could open sooner, but the reality is it’s my expectation that the month of April will be both facilities will be closed. They add — we have inventory to ship for our customers. I expect that market to rebound nicely. In fact, many of the arts and crafts stores in that industry are seeing a booming business right now as people are looking for things to do and in their house realizing the things they could cover with our amazing product for our custom framing. So I’m confident of a strong rebound and as you know, that is an amazing marketing juggernaut, our LSO business and they know how to address. So they are working on substantial cost actions as we speak.

James S. Porter — Executive Vice President and Chief Financial Officer

And Chris, you’re asking a bit about order trend. In the last 10 days as many of our retail customers have had to close, we have seen a significant drop-off in the order activity.

Chris Moore — CJS Securities — Analyst

Got it. Makes sense. I appreciate it guys, jump back in line.

Joseph F. Puishys — Chief Executive Officer

Thanks, Chris. Talk to you later.

Operator

Our next question comes from Eric Stine with Craig-Hallum.

Eric Stine — Craig-Hallum Capital Group — Analyst

Hi, Joe. Hi, Jim.

Joseph F. Puishys — Chief Executive Officer

Hi, Eric.

Eric Stine — Craig-Hallum Capital Group — Analyst

Good morning. So just — would love your thoughts, you touched on this a little bit, but I mean in terms of nationwide in construction, it seems like it’s pretty hit or miss some areas instead, no construction can move forward, but the vast majority that it — I mean as much as it can be business as usual. So would love to just kind of get your thoughts on where your businesses, our strongest most exposed to and in those markets, what are you seeing in terms of projects being able to move forward or were there just putting a moratorium on any construction activity?

Joseph F. Puishys — Chief Executive Officer

Eric, thanks good question. Listen, in most states, construction and the related activities have been deemed essential. Overall, the situation is surprisingly normal. All of Apogee Architectural businesses are operating and shipping product and — under the prime directive of taking the precautions to ensure health and safety of our workforce. And a few markets, there are more limitations on construction activity. They frankly happened to be where we are not that strong. So there — and there has been some project slowing down or put on temporary hold, and we’re working closely with those customers. Sure, we’ll see some negative impact in the near future, but the word I would use is construction activity is surprisingly normal right now. In fact, at the end of the day, I’m hoping that this crisis will make folks realize that long logistics supply chains can be dangerous, and there is nothing like home cooking.

James S. Porter — Executive Vice President and Chief Financial Officer

And it is — as Joe said, I mean generally, things are moving forward. We don’t have any geographic concentration across our total Company. We will see individual businesses that maybe have some aspects, so — like the Boston market has been a little bit more significant in terms of its impact and San Francisco on a more spotty basis. But overall, we don’t have any geographic concentration in any areas.

Eric Stine — Craig-Hallum Capital Group — Analyst

Okay, got it. Maybe just turning to backlog, I mean it doesn’t sound like it, but just to confirm. So, no cancellations in backlog, I mean maybe some shifting in timing. I mean, is there kind of using — I mean it goes way back, but using the past as a guide, is this something that I mean you would expect it to have to go on for quite some time before you start to see cancellations or kind of what’s your thought process on that?

Joseph F. Puishys — Chief Executive Officer

Yeah. We have — we got a very small number of cancellations. I don’t think anything out of backlog. It was out of our awards. One was a Carnival Cruise Line project, if I’m not mistaken that region. No surprise there. Some delays, but the pipeline remains robust and our longest lead time business, our Services segment is having another strong quarter. I forecast and expect that backlog will increase again in Q1 in Services, which is our longest lead time.

Eric Stine — Craig-Hallum Capital Group — Analyst

Got it, okay. And then last one from me, you mentioned just capex that you are just doing whatever — only what is deemed absolutely necessary, could you just kind of frame that or remind us on maintenance capex?

Joseph F. Puishys — Chief Executive Officer

Capex is frozen except for safety and maintenance right at this time. Even good productivity projects, we’ll wait and see.

James S. Porter — Executive Vice President and Chief Financial Officer

Yeah, and that…

Eric Stine — Craig-Hallum Capital Group — Analyst

Okay.

James S. Porter — Executive Vice President and Chief Financial Officer

Kind of that level on maintenance capital is in the $15 million to $20 million range for the year.

Eric Stine — Craig-Hallum Capital Group — Analyst

Okay, very helpful. Thanks a lot.

Joseph F. Puishys — Chief Executive Officer

Thanks, Eric.

Operator

Our next question comes from Brent Thielman, D.A. Davidson.

Brent Thielman — D.A. Davidson & Co. — Analyst

Hey, thanks, good morning.

Joseph F. Puishys — Chief Executive Officer

Hey, Brent.

Brent Thielman — D.A. Davidson & Co. — Analyst

Hey, just wanted to come back to LSO. You mentioned, it sounds like you are shipping a little bit here from inventory. I understand the fact that facilities in retailers are set. Can you guys give us any sort of feel for the gravity of the decline in March. Just trying to kind of baked in the short-term sales impact here or some expectation around it?

Joseph F. Puishys — Chief Executive Officer

Yeah, I would expect — again, March, we had, I think, Eric or Chris mentioned, probably 15 days of traditional order volumes. It’s dropping off precipitously because most of the customers for that segment, retailers and independent custom framers are shut down at this time. So we are not going do March result on the phone, but that business is being hit pretty heavily. I expect April will be equally soft month. And we’re hoping to come back online for the month of May, but again, that’s — and I’m hoping and projecting that when we do come back and the stores open, they’ll see robust business.

Brent Thielman — D.A. Davidson & Co. — Analyst

Yeah.

Joseph F. Puishys — Chief Executive Officer

But it will definitely be the most impacted business in Q1.

Brent Thielman — D.A. Davidson & Co. — Analyst

Sure. I understood.

Joseph F. Puishys — Chief Executive Officer

Brent, I would also say that we’re obviously taking cost actions, not just in LSO, but across the Company. It’s surprising how much money you save when you’re not traveling, you’re not in hotels, you’re not having food at restaurants, etc. As a business, we can’t — someday when the world comes back to some sense of normalcy, I don’t want the business, we’re never visiting our customers, but the favorable cost implications of this situation is fairly substantial.

Brent Thielman — D.A. Davidson & Co. — Analyst

Joe, to that point, I mean, the margins were really high here in the February quarter even for that business. Was there some component of that to the quarter?

Joseph F. Puishys — Chief Executive Officer

Yes. Cost, yes.

Brent Thielman — D.A. Davidson & Co. — Analyst

Yeah, yeah. Okay. I heard a lot from kind of other contractors, costs are up to keep people safe in the field, which is obviously critical. I suspect that’s true for your services business, you’re kind of going forward, how do we think about that impact? I mean, the margins have been fantastic in that business, but maybe how we kind of think of that impact to margins here in the near term as I’m sure you are doing the same?

James S. Porter — Executive Vice President and Chief Financial Officer

Brent, it’s Jim. At this point, it’s still kind of evolving as we speak on the services side of the business, out in the field. I, there is a pretty fair degree of social distancing by its nature of that kind of R&D takes place on these job sites. There is a little bit of inefficiency in terms of kind of managing how many people can go up the construction elevator at a time, some different aspects like that, but at this point, we don’t see it to be a material impact, but it evolves day-by-day in terms of what specific job site or general contractor requirements are in terms of the workplace environment. So, not material at this time.

Joseph F. Puishys — Chief Executive Officer

Construction workers are just as worried about the health of themselves and their families as every other citizen, but there are pretty tough a lot. And if you’re hanging off the side of the building, 50 storeys up, you know how to handle fear and toughness. And so, we are making sure these folks are wearing proper face masks when they’re in an elevator if needed, but so far, again the workers have been pretty amazing.

Brent Thielman — D.A. Davidson & Co. — Analyst

Yeah, okay. And then Joe, just on that — the backlog, I mean for either segment, but I guess kind of thinking about the longer lead times to services, can you remind me or talk about how much of that gets awarded prior to a job starting construction altogether?

Joseph F. Puishys — Chief Executive Officer

Meaning, awarded to us before there is a hole in the ground?

Brent Thielman — D.A. Davidson & Co. — Analyst

That’s right, that’s right.

Joseph F. Puishys — Chief Executive Officer

Well, that would be more our Glass segment where we get specified before even the GC has been selected. Again, our orders in our Glass business and awards remained normal. Our Services segment, our installation business sees order. There is already hole in the ground and we’re not — as we said, we’re seeing those projects continue. I think inevitably if this crisis drags on, projects that haven’t started construction will probably see a 30 to 90-day delay, but that hasn’t impacted our business yet.

Brent Thielman — D.A. Davidson & Co. — Analyst

Okay, that’s helpful. And then maybe this is one for you, Jim. I saw you were able to push the maturity on $150 million in term debt outer year, you get $15 million in cash today. I’m sure you’ll generate some cash this year. But maybe just kind of discuss your options for addressing that? It’s a year away, but not the hard way.

Joseph F. Puishys — Chief Executive Officer

Yeah. Well, I mean just in terms of our capital structure, as you can imagine, actually, we were actively working with our bank group on the extension of the term loan. And we’re actually up until about three weeks ago working on a three-year extension to that term loan before the credit markets kind of really got disrupted. But that said, we really do believe — I mean, we generally — receivables is our key working capital component. Generally, even if things do slow down, we harvest a significant amount of cash. We have lean rights on all of our projects. So we feel good about our liquidity and our cash flow. But that said, as things come down in the credit markets, we will continue to evaluate capital structure options and looking at how we might want to structure things for the longer term.

Brent Thielman — D.A. Davidson & Co. — Analyst

Okay guys. Thanks for taking the questions.

Operator

Our next question comes from Julio Romero with Sidoti & Company.

Julio Romero — Sidoti & Company — Analyst

Hey, good morning everyone.

Joseph F. Puishys — Chief Executive Officer

Good morning, Julio.

Julio Romero — Sidoti & Company — Analyst

Just taking a step back, what are your thoughts on how this environment could potentially drive a structural chain to office construction demand in the long term given the acceleration and maybe folks working from home?

Joseph F. Puishys — Chief Executive Officer

Unknown. I feel, it’s too early to understand if there will be, as you say structural change in our end-markets. The, well, the office sector slowed down under work from home, I don’t think so. I think ultimately people need to do their jobs. I want my people back in the office as soon as possible. We’re more effective. Leaders are more effective. And so, I think that we’ll continue. We continue to evolve as a service economy and I think that bodes well for the office sector as well. And of course, health and education, I believe, will continue to boom. So I also hope that this situation leads to a little bit more resiliency or reliance on US-based partners in this country, and we’re able to respond faster than anyone else. And I’m hoping that turns the tied a little bit for us.

James S. Porter — Executive Vice President and Chief Financial Officer

We enter this period, Julio and where we’ve been really through the cycle is a very balanced environment in the office sector in terms of the balance between employment growth and new square footage coming online. And so, that’s really important and very little spec building even as of today, the professional and business services employment levels have pretty much maintained. And then, in terms of the longer-term trends, as Joe said, it’s really uncertain whether you’re going to see any structural change in terms of increased work from home. I don’t expect that the sector that has already been maybe under a little pressure is that co-working space, but I’d just remind that’s a very small like 2% of total kind of office utilization. So under the current environment, we don’t expect a significant structural change.

Julio Romero — Sidoti & Company — Analyst

Understood. I really appreciate the color you gave there. And in fiscal ’20, I know you had a step-up in corporate costs that you did call out around the time last year that would happen. I know there’s a lot of uncertainty, but is there any way to maybe think about what a fair estimate for that dollar amount in fiscal ’21 would be?

James S. Porter — Executive Vice President and Chief Financial Officer

In terms of the corporate costs?

Julio Romero — Sidoti & Company — Analyst

Correct.

James S. Porter — Executive Vice President and Chief Financial Officer

Yeah, we would expect that to come down a bit. We had a few million dollars of kind of higher legal and consulting fees in fiscal ’20 that we would expect to largely go away.

Julio Romero — Sidoti & Company — Analyst

Helpful. I appreciate the color and stay safe and healthy. Thank you.

Joseph F. Puishys — Chief Executive Officer

Thanks, Julio.

Operator

Our next question comes from Barry Haimes with Sage Asset Management.

Barry G. Haimes — Sage Asset Management — Analyst

Good morning. Thanks for taking my questions. I had — just a couple of questions around working capital, you mentioned — sorry, free cash flow, you mentioned the $15 million to $20 million number for maintenance capex. Just curious if — before this whole COVID situation hit, if you had a sort of what your normal capex budget would have been, just to get a flavor for what the normal year capex number for this year might have been? And then second question, working capital, I’m guessing, was a source. In the last fiscal year, if so, how much and again, ex the virus, if we were just looking at your normal budget, would working capital be a source use or a neutral for the new fiscal year? Thanks.

Joseph F. Puishys — Chief Executive Officer

I’ll answer the capex number. Jim will answer your source F20. We would have been guiding in the $55 million range, probably $50 million to $60 million range for capex in fiscal ’20. I’m trying to work towards the lower end of that range. We’ve been made some pretty big investments in Glass recently and other segments. So let’s just say in the $50 million to $55 million range would have been.

James S. Porter — Executive Vice President and Chief Financial Officer

And from a working capital perspective — excuse me, I guess the key answer, I mean for fiscal ’20 and fiscal ’19, we actually had favorable working capital environment, but it was somewhat offset by negative working capital required services, the acquired projects work that was happening. As we look to fiscal ’21, our expectations were to see favorable trend line in working capital. And then, as I mentioned, if we are in a situation where we would see a slowdown, traditionally, we would see a real contributor to cash from working capital as we would harvest receivables.

Barry G. Haimes — Sage Asset Management — Analyst

Thanks. One — maybe just one more, the $30 million to $40 million cost saves, you mentioned run rate by the end of the year, but any feel for the range of how much would actually hit in this fiscal year and then, therefore, by definition the balance would probably be in next fiscal year, just to get a feel for the split. Thanks.

James S. Porter — Executive Vice President and Chief Financial Officer

Yeah. So — excuse me, I mean we’re starting to see the savings on that right now and we will see — more of the material savings are going to be from procurement as they ramp up through this year and start on the procurement savings probably by the middle of fiscal ’21, we should ramp up to kind of the annualized level. And then, on our other cost out initiatives, that’s going to — we’ve got a number of steps throughout the year, some of which actually have some costs to execute and put in place in fiscal ’21 to deliver the savings from that. So, we’ll see some nice contributor. We haven’t given specific guidance and quantify the specific amount in fiscal ’21, but we’ll see some really solid contributions during the fiscal year.

Barry G. Haimes — Sage Asset Management — Analyst

Okay, thanks a lot. I appreciate the help.

Joseph F. Puishys — Chief Executive Officer

Thanks, Barry. Thank you, Barry.

Operator

[Operator Instructions] Our next question comes from Bill Dezellem with Tieton Capital.

Bill Dezellem — Tieton Capital — Analyst

Thank you. I have a group of questions. First of all, would you help us understand the hospital orders that you have. I think you mentioned you had something in the neighborhood of 56 of them. My perception would be that there are not 56 new hospitals being built, but talk to us about that, if you would place?

Joseph F. Puishys — Chief Executive Officer

Yeah, that’s just a snapshot in time. We have Glass orders, I mentioned, for over 50 hospitals in 20 states that are actually in our current backlog to ship and then our — beyond the backlog, we’ve got awards and throughout the health care sector, not every building as new construction, there is renovation and there is additions and expansions of facilities. I don’t — Bill, I’d have to do like work to find out how many are new buildings versus extensions, but it’s absolutely normal course or this is not new news. This is a typical profile of that business.

James S. Porter — Executive Vice President and Chief Financial Officer

Yeah, I was just going to add. As Joe said, it really is a mix new hospitals as well as expansions to hospitals and really kind of diverse geographically.

Bill Dezellem — Tieton Capital — Analyst

That is helpful. Thank you. And then you had mentioned that future orders at some point or activity may be pushed out 60, 90 days, when would you anticipate from your business perspective and a bookings or backlog, when would you see the impact from that order slippage or gap, however, we would want to determine.

Joseph F. Puishys — Chief Executive Officer

Don’t know yet. Again, this is a waiting game to right now as we speak, construction remains robust across most of the country. There are a couple of pockets that have put more restrictive guidelines in place at the state level. If that expands, then I would expect some delays. Right now, a month to three-month delay in the — and a couple of pockets across the US are logical. We’re not seeing that. Again, our current activity is robust, very normal. I’m just looking at the obvious trends across the US at the stay-at-home orders continue to expand. If states start to take a more aggressive approach to commercial construction, we’re not seeing that. The National Association of Manufacturers, which I’m a member of, is working very hard to make sure we keep the engine running and taking care of our employees and business partnerships we have a public-private partnerships as a heavy influence as well. So the answer is, Bill, we can’t predict that.

Bill Dezellem — Tieton Capital — Analyst

Great. Thanks, Joe. And then from a capex perspective, given that you said the full-year safety maintenance level will be $15 million to $20 million, would it be appropriate to think of the first quarter is somewhere in the $3 million to $5 million for capex or will it be different for some reason?

Joseph F. Puishys — Chief Executive Officer

It could be probably more or like $5 million to $7 million. Just we had a couple of projects that were in process as we came into the quarter.

Bill Dezellem — Tieton Capital — Analyst

Okay, thank you. And then go ahead, Joe.

Joseph F. Puishys — Chief Executive Officer

I was just saying [Phonetic], Bill, I’ll be managing capex with the tight fist and try to be on the low end of traditional maintenance level. Right now, my focus is safety; second, maintenance; and then, third, everything else that will keep the spigot turned off on for the time being.

Bill Dezellem — Tieton Capital — Analyst

Great, thank you. And then lastly, what update you have for us relative to the acquired ESCO project in any remediation or compensation coming back to you all?

Joseph F. Puishys — Chief Executive Officer

We continue to wrap up the — while most of the — all the projects we acquired have been closed. The big one we’ve talked about that we took a fairly substantial charge on a year ago is getting close to completion. I believe we are properly accrued for that project, and we continue to — our accounts and lawyers continue to work to resolve financial matters. But our quarter — if we are providing guidance, I mentioned where my guidance was going. Before this crisis included, all the assumptions on cost to complete and I really don’t bank on recoveries. But we continue to try to see recovery. It’s not substantial at this point. We’re almost done with the big project

Bill Dezellem — Tieton Capital — Analyst

Okay. Thank you both and good luck with everything that’s coming at you.

Joseph F. Puishys — Chief Executive Officer

Yeah. Thank you, Bill. Appreciate it.

Operator

Ladies and gentlemen, this concludes the Q&A portion of today’s call. I’d like to turn the call back to Joe Puishys for closing remarks.

James S. Porter — Executive Vice President and Chief Financial Officer

Okay. Thank you operator and everyone for attending. Many of you, we will talk to you over the coming days and weeks. And we’ll be doing it obviously remotely and safely as you are as well. I think we’re fighting a war on two fronts as individuals and as leaders, on a personal front and a business front. And as I’d like to tell people, while personal is far more important. Business is more imperative at the moment, if your family is safe. So we will operate under the condition that every decision we make during this time, when we look back, we will be proud of the decisions we made both for our customers, mostly, our employees and other constituents in the communities and of course, our shareholders as well. So we understand the balance. And I can assure you I plan to be proud of every decision I make when we come out the other end of this. And I do believe as I said, we enter in a very strong position and feel we have certainly right at our ship well and look forward to getting through this crisis. I thank you. We will look forward to talking to some of you offline. Have a great day. Thank you.

Operator

[Operator Closing Remarks]