Apogee Enterprises, Inc.

1949–1993

A leader in glass fabrication and installation, Apogee Enterprises, Inc. consists of four divisions--Commercial Construction, Window Fabrication, Glass Fabrication, and Installation and Distribution--that are run almost as autonomous businesses. This intrapreneurial, laissez-faire structure, which is further defined by 22 operating units and more than 200 individual profit centers, has been the shaping force for the company since its inception in 1949 as an auto glass replacement business. Through its 237 Harmon Glass stores spread over 35 states, Apogee's longstanding Installation division ranks as the nation's second largest retail chain of automotive glass service centers; the division, which posted $165 million in sales for fiscal 1993, is strengthened by a nationwide Harmon Glass Network that allows for further geographic expansion. However, Apogee is perhaps better known for its 20-year-old Commercial Construction Division, which garnered $248 million in 1993 revenues. Since 1987, this division, led by Harmon Contract, has ranked as the number one domestic designer and installer of skyscraper curtainwalls (the aluminum framing system that holds high-performance glass in place). Other important units of Apogee include Glass Fabrication's Viracon, the nation's largest manufacturer of architectural glass, and Window Fabrication's Wausau Metals, a key provider of custom windows to commercial and institutional markets.

Apogee traces its origins to July 1949, when a truck driver and part-time glass installer founded the Harmon Glass Company in Minneapolis by convincing another installer and a used car salesman to pool $3,000 and launch their own service business. The idea was the brainchild of Harold Burrows, who reasoned that if the businesses to which he delivered windshields were too busy to answer their phones, there must be room in the market for some competition. Burrows, was right. Harmon kept busy by day replacing windshields for used car dealers and, by night, installing protective screens, or implosion plates, for television sets using the same auto glass supplied by its wholesalers. First-year sales for the company totaled a modest, but respectable $50,000. The partners found they could increase profits for the television business after persuading one of their suppliers to omit the manufacturing logo on the perimeter of its shields, thus saving Harmon the time and waste involved in cutting and scrapping this otherwise good glass. The supplier's only counter request was that each new order be prepaid. Lacking the necessary cash, the three sought financing early in 1950 from the St. Paul lawyer who had incorporated the business and his partner, Russ Baumgardner.

Although he described himself as a young, struggling lawyer, Baumgardner nonetheless could afford the $10,000 required by the original partners. More importantly, Baumgardner possessed sound money management skills as well as an interest in fledgling enterprises, in part the result of post-law school employment with his father, the owner of a Washington, D.C.-based investment company. Baumgardner quickly became engrossed in Harmon Glass and was placed on the payroll for a token $20-a-week salary. His enjoyment was cut short, however, when he learned that one of the partners, the former car salesman, was embezzling from the company. Nearly $7,000 was missing; there was literally no equity left. The crisis was solved when Baumgardner and the other two partners supplied $5,000 in emergency cash and forced the salesman to relinquish his company stock.

Shortly thereafter, Burrows's sole remaining partner died. To salvage the company, Baumgardner purchased the stock of both departed partners and thereby obtained 70 percent ownership. He then decided that because Burrows performed 90 percent of the work for Harmon Glass, a 30 percent stake was unfair, and so sold Burrows, another 20 percent of the business for $100. The now legendary story was later analyzed in the company history, entitled Windows of Opportunity: "Perhaps he did it unwittingly, but in making the offer to Burrows, Baumgardner established the pattern for what would become one of the company's most enduring values: providing employees with a sense of ownership in their work, one of the most important underpinnings to the entrepreneurial verve that later became a company hallmark." Inevitably, Baumgardner was forced to choose between what he expected to be a mediocre law career and what he knew to be the difficult management of a promising, but nevertheless uncertain business. Initially, he chose the former, until Burrows, pleaded with him to remain a partner for at least another year. By 1953, Baumgardner's ultimate decision had already begun to prove a wise one. During that year, Detroit automakers converted to curved windshields that, among other things, created storage problems for traditional wholesalers but opened opportunities for quick-acting retailers prepared to branch into wholesaling. Through an exclusive shipping arrangement with Shatterproof Glass of Detroit, Harmon Glass soon had control of 40 percent of new windshield supply in Minnesota (the wholesaling venture eventually became a subsidiary named The Glass Depot). Ten years later, because of such coups and because of a strong customer service commitment, Baumgardner and Burrows, owned a thriving business.

First-year sales for the company totaled a modest, but respectable $50,000.

1955–1973

Reflecting on this early period, Baumgardner noted, "We became mavericks in the glass business. The industry was a little slow when it came to recognizing opportunity, so we started looking for niches in the market that nobody else wanted." In July 1955, the company launched Hiawatha Glass to perform commercial window glazing. The venture proved particularly successful when it began to focus on producing edged glass for display cases and store counters, eventually becoming the nation's largest manufacturer in this niche market. By the end of the decade, Harmon and its subsidiaries had blossomed into a million dollar growth company with 60 employees.

Following Burrows's surprise retirement in 1963, Baumgardner invited three valued executives--Don Goldfus, Larry Niederhofer, and Don Eichler&mdashø become principal shareholders with him, going so far as to arrange loans for each of them to purchase the company stock. The 1960s proved to be a period of rapid expansion for the company. In 1966, Harmon Glass branched beyond Minnesota for the first time, opening a store in Des Moines, Iowa. This move came upon the heels of the purchase of Gopher Glass Company, which raised Harmon's total Twin Cities outlets to nine.

Baumgardner's management of the company had always been in keeping with his overall business philosophy: invest employees with responsibility and trust, allow them room to grow and learn from their mistakes, refrain from interfering, and expect good results in the long run. Yet, by the mid-1960s, the rapid growth of the company had caused organizational problems that effectively thwarted the easy implementation of this philosophy. Realizing this, Baumgardner decided to remodel his company, which now performed a variety of services, after Minnesota's largest and arguably most dynamic public company, 3M. By October 1967 he instituted a divisional organization defined by distinct profit centers that truly placed decision-making in the hands of those most attuned to the customers and the markets. In the winter of 1968, Apogee (a name that originated with an investment club to which Baumgardner once belonged and a term suggestive of the space age) was formed as a holding company to coordinate operations. Later that year, Apogee learned that a Wausau, Wisconsin, manufacturer of custom windows was up for sale for $2 million. Cash-poor and with 1967 sales of just $2.7 million, Apogee was an unlikely buyer. Yet, the opportunity for growth was tempting, and Niederhofer and Baumgardner negotiated a deal that amounted to a leveraged buyout in an era when such creative financing was extremely rare. The company closed the decade on an ambitious note by launching Viracon, one of the first regional glass fabricators for architectural and automotive markets. Groundbreaking for the $1.2 million-facility was begun in April 1970 near Owatonna, Minnesota.

By 1971, with five-year average increases in revenues and earnings of 34 percent and 45 percent, respectively, Apogee represented a particularly hot prospect for an initial stock offering. The company, therefore, went public in June with 190,000 shares of over-the-counter (OTC) stock that netted better than $1.9 million for the company. Unfortunately for short-term investors, Apogee stock proceeded to drop by more than 75 percent; almost seven years transpired before the original selling price was surpassed. Generally falling OTC prices and a string of poor earnings reports reflective of price-cutting in the auto glass installation industry contributed to the stock's dismal performance. However, Baumgardner turned the severe downswing, which had little relation to Apogee's future prospects, into a benefit for his employees by establishing a stock purchasing incentive program in 1973.

1973–1986

Also that year an event even more important to the company's development took place. This was the hiring of contract glazing expert Gerald Anderson to redirect the company's stagnant contract unit, responsible for installing glass and window frames for new construction projects. Prior to Anderson's hiring, Apogee's largest contract project, handled through Harmon Glass, was a $40,000 job. A $350,000 project had been bid around the time of his arrival, but there was little hope of being awarded the contract, for Harmon's reputation was still limited largely to auto installation. Anderson succeeded in both landing and fulfilling the major project at a profit. Furthermore, he went on to win a $750,000 office center contract from Dayton Hudson Corporation in 1973 by offering a full-service bid for not only the glazing, but the curtainwall as well as certain design and engineering aspects. In so doing, he outshone his glazing competitors, who had theretofore restricted themselves to glass production and installation. The contract glazing unit grew rapidly under Anderson's direction&mdash′e-tax profits and sales doubled in 1974 and 1975--and soon distinguished itself from Harmon Glass with the name Harmon Contract. Its strong performance helped compensate for highly unusual employee theft, bad debt, and mafia related problems of some of Apogee's Florida auto outlets, problems that resulted in losses of at least $700,000. Later, a major turnaround of the Florida operations helped the unit become one of Apogee's most successful to date.

Other important developments of the 1970s included Wausau Metals' acquisition of Milco Specialties, a Michigan manufacturer of double-hung and sliding windows. Under Wausau's wing, Milco expanded its $35,000 backlog to $1 million in the first year by expanding its offering to eight separate window lines. Shortly thereafter, Wausau expanded one of its niche businesses, specialty windows for hospitals, by acquiring a bankrupt venetian blind-maker; this Wausau unit, named Nanik Venetian Blind, has blossomed into a four-company window coverings group that has consistently outperformed most of Apogee's other business units. In 1979, Wausau itself captured special attention by landing its largest contract ever, a window contract for AT&T's world headquarters in New York.

By the early 1980s, Apogee had completed a fundamental shift from a simple auto glass business, which at that time represented slightly over ten percent of revenue, to a well-rounded glass competitor in a number of lucrative markets. Window fabrication for a booming office construction industry was Apogee's most obvious source of momentum, for it then provided roughly half of all corporate earnings on just one-fourth of total sales. Closely related to this division's success was the steadily rising Commercial Construction division. Fueling both divisions&mdashide from the construction boom--was the 1980 acquisition of Interstate Glass of South Bend, Indiana, for $3.6 million. Interstate's $7 million in sales as a multiservice provider, as well as its proximity to Chicago, accelerated Harmon Contract's transformation from a regional to a national curtainwall concern. Within the decade, Harmon opened offices in 15 major U.S. cities. The core Harmon strategy was to penetrate markets where construction was strong while investing little in overhead; when these markets later fizzled, Harmon could then retreat and fortify elsewhere, with minimal adverse effect. Consequently, sales grew at rates regularly in excess of 30 percent.

The pursuit of sales volume, in fact, became the chief goal of several regional managers, leading to low-margin contracts and the dangerous sacrifice of profits. The results of this trend were reflected in uncharacteristically low division earnings in 1984 and 1985. A reorientation towards less volume and higher margins, along with an emphasis on expanded design and engineering services for its clientele, helped Harmon Contract's operating income rebound by 60 percent (on a 19 percent increase in sales) in fiscal 1986. Within the next two years, Harmon had not only become Apogee's largest and most thriving business, it had also succeeded in becoming the nation's largest curtainwall contractor, this despite only a four percent share of the curtainwall market. Apogee celebrated its fortieth anniversary on a high note, boasting sales and earnings growth rates, compounded since the beginning, of 26 percent and 28 percent, respectively.

1988–1994

After an illustrious career, Baumgardner retired in 1988, and Donald Goldfus, a veteran manager, was installed as the new chairperson and CEO. Goldfus soon focused on creating a greater international presence for Apogee; his opening of a Harmon Contract office in London, expected to be the reigning commercial construction market of the 1990s, augured well for the company's future, as did aggressive actions on other Apogee fronts, including the rapid widening, via acquisitions, of the auto glass business.

Although the early 1990s were less than satisfying for the company because of the economic recession (earnings were cut almost in half from 1991 to 1992, and were then halved again in 1993), Apogee has maintained strong positions in all of its markets. Furthermore, it has continued to seek out new opportunities to augment its commercial construction work through such recent market entries as detention and security systems for convenience stores, military bases, corporate offices, and prisons. After its July 1991 acquisition of Norment Industries--a leading contractor in the security industry, with 1990 revenues of $39 million--Apogee acquired two related businesses, Airteq and EMSS. With first-quarter earnings tripling and order backlogs up by 47 percent, fiscal 1994 promised to be a turnaround year for the company. Perhaps Goldfus and Anderson were fittingly optimistic, then, when in their 1993 report they chose to move beyond a dour analysis of the "raw numbers" to an inspiring roundtable discussion of Apogee's numerous accomplishments and strengths, practically all of which hearken back to Baumgardner's original vision: employee ownership and unparalleled service.