Apogee Enterprises (NASDAQ:APOG) met consensus expectations for earnings, and also beat estimates, when it reported its fiscal Q1 2007 numbers last week. As usual, the financial press paid the company little mind -- MarketWatch gave the company's good news a single paragraph; Reuters, a few more. For my part, after previewing Apogee's news last week, I was called away on business and unable to follow up with a post-game show. Now that I'm back, though, I'd like to take a belated look at how the company performed.

On the surface, things are going just swimmingly at the Minneapolis-based glassmaker. Companywide, profits rose 20%, meeting analyst predictions of $0.17 per share. Meanwhile, sales surpassed all expectations, rising 19% in comparison with last year's fiscal first quarter and beating consensus expectations by nearly $20 million.

Credit Apogee's architectural glass segment for most of the outperformance. It showed the strongest revenue growth of the firm's three main segments (23%), despite already being by far Apogee's largest revenue driver. Moreover, it was the only one of the three to show margin improvement, with operating margins rising by 70 basis points to 3.4%. In contrast, the company's large-scale optical glass segment saw profitability decline, and Apogee's perennially underperforming business of replacing cracked windshields actually lost money in the quarter.

Members of Apogee's management are no (small-f) fools; they see where the real profits lie, and they're investing heavily in the company's superior architectural business. According to the press release, Apogee intends to lay out $40 million to $45 million in capital expenditures this year, with more than half of that amount going to build a new architectural glass fab.

The problem
I can't fault Apogee for its decision. If profits are to be had, then clearly (no pun intended), they're best sought in its most profitable segment. But the firm's mention of capital expenditures drew my attention to its cash flow statement, and that's where I see the real risk to investors. Under generally accepted accounting principles, Apogee looks like a compelling investment. Its trailing P/E of 16 compares favorably with analyst expectations of 20% long-term profits growth.

From the perspective of real cash profits, however, I have my doubts about Apogee. Over the past 12 months, the company generated $33.6 million in operating cash flow. But the capital-intensive nature of this business meant that capital expenditures sucked up the bulk of that cash flow, leaving owners with just $4 million worth of free cash flow in the end -- just a fraction of the $25 million the company booked in net earnings under GAAP for the period. In this respect, Apogee resembles another glass company -- Corning (NYSE:GLW). For better or worse, the capital-intensive nature of both of these businesses serves as the sole factor keeping this Fool from owning either one.

What does Corning have to say about the nature of capital spending in its business? Find out in my interview with CEO Wendell Weeks.

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Fool contributor Rich Smith does not own shares of either company named above.