For a moment there, things were looking pretty good for the commercial building industry.

On Wednesday, first Herman Miller (NASDAQ:MLHR) and then Steelcase (NYSE:SCS) reported "earnings beats" that sent their shares soaring. Logically, when business is good in office furniture, business should be good for the commercial buildings in which the furniture sits. But then Apogee (NASDAQ:APOG) reported its earnings -- and the floor fell into the basement.

Yes, Fools, on the same day that the guys who furnish the insides of offices were busy booking better-than-expected profits, the guys who install glass on the outsides disappointed us badly. Here's how the quarter went:

  • Revenue rose modestly, up 3% year over year.
  • Operating margins tried to keep pace, rising 110 basis points to 8.7%, until ...
  • Whoopsie-daisy! They plummeted 200 basis points instead.

Huh?
Here's what happened, as related by Chairman and CEO Richard Huffer: Apogee started off with "excellent third-quarter performances in all our ... businesses." It produced "strong operating performance ... a higher than expected mix of our best value-added framing glass products" in large-scale optical, and "strong" backlog in architectural glass.

That's the good news. Now for the bad. Down in Florida, Apogee had to write off "$6.5 million on three architectural glass installation projects in one market." Out of the more than 100 projects Apogee is working, three problem projects may not seem like a lot, but they were enough to triple-handedly torpedo the quarter. These writedowns pounded the operating margin, dropping earnings for the quarter by $0.10 year over year.

Worse yet, if you listen to the conference call, it becomes clear that these problems were both avoidable, and entirely Apogee's fault. This wasn't a case of some customer going bankrupt and failing to pay its bills. Instead, Apogee had certain contractual obligations to meet; it delivered "poor execution," and as a result, it had to take certain (unspecified) measures costing the aforementioned $6.5 million to meet its obligations.

Foolish takeaway
Bear in mind, "the people involved in the projects with the write-down are no longer with the company," according to Huffer, and Apogee has "put processes in place to allow earlier identification and corrective actions in similar situations." Apogee is seeing both increasing backlog and "faster [margin] improvement in our architectural businesses." The company believes it can deliver "8% annual revenue growth and 20% average earnings growth through fiscal 2010" from this point onward.

In the bigger picture, Huffer basically told us not to worry about the commercial construction market. The well-publicized problems afflicting homebuilders like D.R. Horton (NYSE:DHI), Toll Brothers (NYSE:TOL), and Pulte (NYSE:PHM) aren't spreading into commercial buildings, he said.

So Merry Christmas to us all, I suppose.

What did we expect to see in Apogee's results last quarter, and what did we get? Find out in:

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Fool contributor Rich Smith does not own shares of any company named above. Steelcase is an Income Investor recommendation. The Motley Fool has a disclosure policy