Apogee Enterprises Inc (APOG) 2020 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Apogee Fiscal 2020 Fourth Quarter Earnings Conference Call. (Operator Instructions)

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

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.

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. And 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, with 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 U.S. Framing businesses remained 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 enterprise-wide procurement savings program. And we advanced efforts to improve execution, drive synergies and reduce costs 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 a path to deliver significantly improved performance. We were executing a plan that would deliver mid-single-digit top line growth and more than 30% increase in operating income compared to fiscal 2020.

In the weeks 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. And 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 the 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're receiving new directives from federal, state and local governments in locations where we operate. We're working to assess these directives and ensure we comply to support health and safety requirements. In most cases, construction-related activities had been deemed essential according to federal CISA guidelines on critical infrastructure and are continuing to operate. At this time, Apogee's 3 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 Apogee's employees for their efforts to keep our facilities operational at this difficult time. I'm very proud of how our company has 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 2 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 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're also evaluating additional actions to manage costs 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?

Thanks, Joe, and good morning, everyone.

To start, I'd like to echo Joe in extending my sincere gratitude to all of Apogee's employees as we 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 schedule delays that we had discussed last quarter. This primarily affected our longer lead time curtainwall and window businesses. This was partially offset by higher revenue in our short lead time U.S. 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 continued 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 start-up 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 start-up 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 continue 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 just 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 U.S. retailers who 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 head count and controllable costs in operations and SG&A. We've also developed plans for further optimization of our facility footprint which we plan to implement during fiscal '21, which will drive further efficiencies and cost reductions. As we move through the year, we'll continue to execute our road map 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 a 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 1.6x 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 the aggressive cost savings plans that we already had underway and we'll 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 2 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, provides 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.

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 U.S., 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 all 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.

(Operator Instructions) Our first question comes from Chris Moore with CJS.

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?

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

Got you. Got you. And just kind of from where you're sitting today, if you look at the 3 architectural segments, which of those probably is the most -- has the most uncertainty near term?

Well, all of them have uncertainty like everyone. But we -- I mentioned the CISA guidelines. You all know what CISA is nowadays. I'll just give you one example. Viracon, our Glass business, alone has orders in the current pipeline, orders -- firm orders to be shipped over the next 8 weeks for 56 hospitals in 20 different states. We have an equal number of health care projects in the future. And that's just Viracon. Our other businesses support hospitals and health care 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.

Got it. 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 that the...

Absolutely. Absolutely. And our team is working on contingency plan, how to even amp that up in an 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's -- fully owns 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's substantial impact in the fiscal year as well.

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

It -- first quarter is always our -- a 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 closure till the end of April. The other one, the closure is only till April 10. That one is in Minnesota. And the one that 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 have -- 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 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 costs. So they are working on substantial cost actions as we speak.

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.

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

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 that have said no construction can move forward. But the vast majority -- 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 are strongest, most exposed to. And in those markets, what are you seeing in terms of projects being able to move forward or where they're just putting a moratorium on any construction activity?

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's architectural businesses are operating and shipping products 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, happen to be where we're not that strong. So there -- and there's been some projects 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 logistic supply chains can be dangerous. And there's nothing like home cooking.

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'll 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 in San Francisco on a more spotty basis. But overall, we don't have any geographic concentration in any of those areas.

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 used in 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?

Yes, we've had 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. Is that right Jim? 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.

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?

Yes. CapEx is frozen, except for safety and maintenance, right? At this time, even good productivity projects, we'll wait and can see.

Yes. And that kind of that level of maintenance capital is in the $15 million to $20 million range for the year.

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

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

Yes, 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're not going to do March results 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. But it will definitely be the most impacted business in Q1.

Sure. Now understood.

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, et cetera. As a business, we can't -- someday when the world comes back to some sense of normalcy, I don't want a business where we're never visiting our customers, but the favorable cost implications of this situation is fairly substantial.

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?

Yes. Costs, yes.

Yes. Yes. Okay. Joe, we 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 here 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're doing the same.

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 mean there's a pretty fair degree of social distancing by its nature that kind of already takes place on these job sites. There's 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.

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

Yes. 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 of Services. Can you remind me or talk about how much of that gets awarded prior to a job starting construction altogether? All of it?

Meaning awarded to us before there's a hole in the ground?

That's right. That's right.

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 remain normal. Our Services segment, our installation business, sees an order. There's already a hole in the ground. And we're -- as we said, we're seeing those projects continue. I think inevitably, as this crisis drags on, projects that haven't started construction, we'll probably see a 30- to 90-day delay, but that hasn't impacted our business yet.

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

Yes. Well, I mean just in terms of our capital structure, as you can imagine, actually, we were actively working with our bank group on an extension of the term loan, and we're actually, up until about 3 weeks ago, working on a 3-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 calm down in the credit markets, we'll continue to evaluate capital structure options and looking at how we might want to structure things for the longer term.

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

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

Unknown. I feel it's too early to understand if there will be a, as you say, structural change in our end markets. The -- will the office sector slow 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 will 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 care 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 U.S.-based partners in this country, and we're able to respond faster than anyone else. And I'm hoping that turns the tide a little bit for us.

We entered this period, Julio, and where we've been really through this 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 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 just a reminder, that's a very small, like 2% of total kind of office utilization. So in the current environment, we don't expect a significant structural change.

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. 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?

In terms of the corporate cost?

Correct.

Yes. 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.

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

I had just a couple of questions around working capital. You mentioned -- or 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 a 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?

I'll answer the CapEx number. Jim will answer your source of F '20. We would have been guiding in the $55 million range or probably $50 million to $60 million range for CapEx in fiscal '20. 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 it would have been.

And from a working capital perspective, I guess the key answer, I mean for fiscal '20 and fiscal '19, we actually had a favorable working capital environment, but it was somewhat offset by negative working capital required to service the acquired projects work that was happening. As we look to fiscal '21, our expectations were to see a favorable trend line in working capital. And then as I mentioned, if we're 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.

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.

Yes. So I mean we're starting to see the savings on that right now. We will see more of the material savings are going to be from procurement as a 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 that 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 cost to execute and put in place in fiscal '21 to deliver the savings from that. So we'll see some nice contributors. We haven't given specific guidance and quantified this specific amount in fiscal '21, but we'll see some really solid contributions during the fiscal year.

(Operator Instructions) Our next question comes from Bill Dezellem with Tieton Capital.

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. But my perception would be that there are not 56 new hospitals being built. But talk to us about that, if you would, please.

Yes, that's just a snapshot in time. We had 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 in -- throughout the health care sector. Not every building is new construction. There is renovation and there's additions and expansions of facilities.

I don't -- Bill, I'd have to do legwork to find out how many are new buildings versus extensions. But it's normal -- it's absolutely normal course for us. This is not new news. This is a typical profile of that business.

Yes. And I'm just going to add, as Joe said, it really is a mix of new hospitals as well as expansions to hospitals and really kind of differs geographically.

That is helpful. And then you'd 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 bookings or backlog, when would you see the impact from that order slippage or gap, however we would want to term it?

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. I -- right now, a month to 3-month delay in the -- in a couple of pockets across the U.S. 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 U.S. If 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 the business partnerships we have with public-private partnerships has a heavy influence as well. So the answer is, Bill, we can't predict that.

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

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

Okay. And then last -- go ahead, Joe.

Yes. Sorry, Bill, do you have another? No, I was just going to say I'll be managing CapEx with a 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 this picket turned off on for the time being.

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

We continue to wrap up the -- well, most of the -- all the projects we acquired have been closed. The big one we talked about that we took a fairly substantial charge on a year ago is -- it's getting close to completion. I believe we are properly accrued for that project, and we continue to -- our accountants and lawyers continue to work to resolve financial matters. But our quarter, if we were 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.

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.

Okay. Thank you, operator, and everyone, for attending. Many of you we will talk to over the coming days and weeks. We'll be doing it obviously remotely and safely, as you are as well. We're fighting a war on 2 fronts as individuals and as leaders, a personal front and a business front. And as I 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 entered in a very strong position and feel we have certainly righted our ship well and look forward to getting through this crisis.

I thank you. We look forward to talking to some of you off-line. Have a great day. Be safe. Thank you.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.