UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington,

WASHINGTON, D.C. 20549

_________________________________ 
FORM 10-K

(Mark One)

 _________________________________
xANNUAL REPORT PURSUANT TO SECTION 13 ORor 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended March 3, 2012

orFor the fiscal year ended

March 1, 2014
¨TRANSITION REPORT PURSUANT TO SECTION 13 ORor 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from                     to                     

For the transition period from             to             
Commission File NumberNumber: 0-6365

_________________________________ 
APOGEE ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

Minnesota 41-0919654

(State or other jurisdiction of

incorporation or organization)

 

(IRSI.R.S. Employer

Identification No.)
4400 West 78

th Street – Suite 520,
Minneapolis, MN
55435
(Address of principal executive offices)(Zip Code)

4400 West 78th Street—Suite 520,

Minneapolis, Minnesota 55435

(Address of principal executive offices, including zip code)

(952) 835-1874

(

Registrant’s telephone number, including area code)

code: (952) 835-1874


Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Name of each exchange on which registered

Common Stock, $0.33 1/3 Par Value The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

None

________________________________ 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
¨  Yes    x  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
¨  Yes    x  No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)  files).     x  Yes    ¨  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’sregistrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨x  Accelerated filer x¨
Non-accelerated filer 
¨  (Do not check if a smaller reporting company)
  Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

As of August 27, 2011,31, 2013, the last business day of the registrant’sregistrant's most recently completed second fiscal quarter, the approximate aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was $252,321,000$803,000,000 (based on the closing price of $8.91$27.90 per share as reported on the NASDAQ Stock Market LLC as of that date).

As of April 11, 2012, there were 28,078,79925, 2014, 28,958,958 shares of the registrant’s Common Stock,common stock, par value $0.33 1/3 par value per share, were outstanding.



DOCUMENTS INCORPORATED BY REFERENCE


Certain information required in Part III hereof is incorporated by reference to the Proxy Statement for the registrant’s 2012registrant's 2014 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Form 10-K.


Table of Contents

APOGEE ENTERPRISES, INC.

Annual Report on Form 10-K

For the fiscal year ended March 3, 2012

1, 2014


TABLE OF CONTENTS

   Page
 Page
PART I
 
Item 1.
Business
4
 PART I

Item 1.

Business3
Executive Officers of the Registrant
10
Item 1A.
Risk Factors
10
Item 1B.
Unresolved Staff Comments
12
Item 2.
Properties
13
Item 3.
Legal Proceedings
13
Item 4.
Mine Safety Disclosures
14
 9
PART II
 

Item 1A.

Risk Factors
10

Item 1B.

Unresolved Staff Comments12

Item 2.

Properties13

Item 3.

Legal Proceedings13

Item 4.

Mine Safety Disclosures13
PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
14

Item 6.

Selected Financial Data
16
17

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations
17

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk
26
28

Item 8.

Financial Statements and Supplementary Data
27
30

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
60
Item 9A.
Controls and Procedures
60
Item 9B.
Other Information
60
 56
PART III
 

Item 9A.

Controls and Procedures
56

Item 9B.

Other Information57
PART III

Item 10.

Directors, Executive Officers and Corporate Governance
57
60

Item 11.

Executive Compensation
57
60

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
57
61

Item 13.

Certain Relationships and Related Transactions, and Director Independence
57
61

Item 14.

Principal Accountant Fees and Services
61
 57
PART IV
 
PART IV

Item 15.

Exhibits and Financial Statement Schedules
61
 58
Signatures
62
65



3
Table of Contents

PART I

ITEM 1.BUSINESS

ITEM 1. BUSINESS


The Company

Apogee Enterprises, Inc. was incorporated under the laws of the State of Minnesota in 1949. The Company believes it is a world leader in certain technologies involving the design and development of value-added glass products, servicessolutions for enclosing commercial buildings and systems.framing art. Unless the context otherwise requires, the terms “Company,” “Apogee,” “we,” “us”"Company," "Apogee," "we," "us" and “our”"our" as used herein refer to Apogee Enterprises, Inc. and its subsidiaries.


The Company is comprised of twofour reporting segments to matchsegments:
The Architectural Glass segment fabricates glass used in customized window and curtainwall systems comprising the marketsoutside skin of commercial and institutional buildings. For fiscal 2014, our Architectural Glass segment accounted for approximately 35 percent of our net sales.
The Architectural Services segment primarily installs and renovates customized aluminum and glass window and curtainwall systems comprising the outside skin and entrances of commercial and institutional buildings. It also designs, engineers and fabricates a majority of the metal systems it serves:

installs. For fiscal 2014, our Architectural Services segment accounted for approximately 26 percent of our net sales.

TheArchitectural Products and ServicesFraming Systems segment designs, engineers and fabricates installs, maintainsthe aluminum frames used in customized aluminum and renovates the walls of glass window, curtainwall, storefront and windowsentrance systems comprising the outside skin and entrances of commercial and institutional buildings. For fiscal 2012,2014, our Architectural Products and ServicesFraming Systems segment accounted for approximately 8828 percent of our net sales.

TheLarge-Scale Optical Technologies segment manufactures value-added glass and acrylic products primarily for the custom picture framing market. For fiscal 2012,2014, our Large-Scale Optical Technologies segment accounted for approximately 1211 percent of our net sales.

On November 19, 2010, the Company acquired 100 percent of the stock of Glassec Vidros de Segurança Ltda. (Glassec). The business operates under the name GlassecViracon and its results of operations are included in our Architectural Products and Services segment and represent the only non-domestic business within Apogee. For further information, see “Acquisition of Glassec” below.


Financial information about the Company’sCompany's segments and geographic regions can be found in Item 8, Note 1615 to the Consolidated Financial Statements of the Company contained elsewhere in this report.


On November 5, 2013, the Company acquired all of the shares of Alumicor Limited (Alumicor). Alumicor's results of operations have been included in the consolidated financial statements and within the Architectural Framing Systems segment since the date of acquisition. For further information, see "Acquisition of Alumicor" below.

Products

and Services

Apogee provides distinctive value-added glass solutions for enclosing commercial buildings and framing art. We operate in two productfour segments as described in the following paragraphs.


Architectural ProductsGlass, Architectural Services and Services (Architectural) Segment.The Architectural segment primarily fabricates, installsFraming Systems Segments
All of these segments participate in various phases of the value chain to design, engineer, manufacture and renovatesinstall customized aluminum and glass window, curtainwall, and storefront and entrance systems for commercial buildings in the outside skin of commercial buildings.non-residential and high-end multi-family construction markets. Through complex processes, we add ultra-thin coatings to uncoated architectural glass to create colorsa variety of aesthetic characteristics and different levels of solar energy efficiency,management, especially important with the industry trend of “green”increasingly energy-efficient buildings. We also laminate layers of glass and vinyl to create glass that helps protect against hurricanes and bomb blasts. Glass can also be tempered to provide additional strength. WeIn addition, we have the ability to design build and installbuild windows, curtainwall, storefront and entrances using our coatedcustomized aluminum and glass, and metal products or thoseglass supplied by others. We also provide finishing services for the metal and plastic components used to frame architectural glass windows and walls and other products.

Our installation services allow our customers to meet the timing and cost requirements of their jobs by providing efficiently designed quality window and wall systems and effectively managing the installation of the façade on their building projects.


Our product choices allow architects to create distinctive looks for office towers, hotels, education facilities and dormitories, health care facilities, government buildings, retail centers and multi-family buildings. Our services allow our customers to meet the timing and costbuildings, while meeting functional requirements such as energy efficiency, impact resistance or sound control.


4
Table of their jobs.

Contents


The following table describes the products and services provided by the Architectural segment.

these segments.

Products and
Services

 

Product

Attributes

 

Description

Architectural Glass FabricationParticipating Segment Description
High-Performance Glass

Custom Manufactured-to-OrderArchitectural Glass We offer a wide range of glass colors and high-performance coatings that allow us to create unique designs, achieve specific light transmission levels and provide solar options.control options for energy efficiency. Additional value-added processes, such as digital printing, silk-screening and heat soaking, can be incorporated into the glass. High-performance glass is typically fabricated into custom insulating units and/or laminated units to allow for installation into window frames, curtainwall, storefront or entrance systems.
Aluminum Framing SystemsStandard, Custom and Engineered-to-OrderVarying degrees of customization of our window, curtainwall, storefront and entrance systems are available depending on the customer’s project requirements. In-house engineering capabilities allow us to meet the architect’s design requirements. Our window systems can be operable or non-operable. Our curtainwall systems may be unitized (shop fabricated) or field fabricated. Depending on the requirements, we apply paint to the aluminum components. Alternatively, we can use anodizing to create a strong, weather-resistant film of aluminum oxide, often colored, on the surface of the aluminum. Our capabilities also allow us to apply ultra-violet (UV) protection and durable paint to polyvinyl chloride parts, such as interior shutters.
Glass Installation New Construction and Renovation ServicesArchitectural Services We install curtainwall, window, storefront and entrance systems for non-monumental, new commercial and institutional buildings as well as for renovatingrenovation of existing buildings. By integrating technical capabilities, project management skills and shop and field installation services, we provide design, engineering, fabrication and installation expertise for the building envelope to owners, architects and general contractors.
Aluminum FramingStandard, Custom and Engineered-to-OrderArchitectural Framing Systems
and Architectural Services		Varying degrees of customization of our window, curtainwall, storefront and entrance systems are available depending on the customer's project requirements. In-house engineering capabilities allow us to meet the architect's design requirements. Our window systems can be operable or non-operable. Our curtainwall systems may be unitized (shop fabricated) or field fabricated. Depending on the requirements, we paint or anodize the aluminum components. Our capabilities also allow us to apply paint to polyvinyl chloride parts, such as interior shutters.


All of the businesses within the Architectural segmentGlass, Architectural Services and Architectural Framing Systems segments manufacture their products by fabricating glass and/or metals in a job-shop environment.to order. Products are shipped to the job site or other location where further assembly or installation may be required.

required by the respective segment's customers.


Large-Scale Optical Technologies (LSO) Segment.Segment
The LSO segment primarily provides coated glass and acrylic for use in custom picture framing and fine art applications. The variables in the glass and acrylic used for picture framing products are the size and coatings to give the glassproduct UV protection, anti-reflective properties and/or anti-reflective properties.security features. The following table describes the products provided by the LSO segment.

Products and
Services

 

Product
Attributes

 

Description

Value-Added Picture Framing Glass and Acrylic UV, Anti-Reflective and/ or Security Features Our coatings reduce the reflectivity of picture framing glass and protect pictures and art from the sun’ssun's damaging UV rays. Anti-reflective coatings on acrylic reduce glare and static charge on the surface.


Markets and Distribution Channels

Architectural Segment.Our customersGlass, Architectural Services and those that influence the projects include architects, building owners, general contractors and glazing subcontractors in the commercial construction market. Our high-performance architectural glass is marketed using a direct sales force and independent sales representatives. We market our custom and standard windows, curtainwall, storefront and entrance systems using a combination of a direct sales force, independent sales representatives and directly to distributors. Our installation and renovation services are marketed by a direct sales force, primarily in the major metropolitan areas we serve in the United States and also where we have the ability to work with our customers in other markets. Architectural Framing Systems Segments
The market for Architecturalarchitectural products and services is a subset of the construction industry and is differentiated by building type, geographic location, project size and level of customization required.required, customers, geographic location and project size. Published market data are not readily available for the market segments that we serve; however, we estimate market size by analyzing overall construction industry data.


Building type – - The construction industry is typically represented bysegmented into residential construction and non-residential construction, which includes commercial, industrial and institutional construction. Apogee is a leading supplier of architectural glass and metal framing products andas well as installation services to the non-residential construction industry. Our architectural glass products and services are primarily used in commercial buildings (office towers, hotels and retail centers) and institutional buildings (education facilities and dormitories, health care facilities and government buildings), as well as high-end multi-family buildings (a subset of residential construction).


Level of customization - Most projects have some degree of customization, as the end product or service is based on customer-specified requirements for aesthetics and performance, and designed to satisfy local building codes. All of our Architectural Glass, Architectural Services and Architectural Framing Systems businesses are involved in transforming glass, aluminum and other materials to create customized window, curtainwall, storefront and/or entrance systems that meet customer specifications. The only constant is the base materials of the products and the processes we utilize to fabricate, manufacture and/or install the products.

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Customers and distribution channels - Our customers and those that influence the projects include architects, building owners, general contractors and glazing subcontractors in the non-residential construction market. Our high-performance architectural glass is marketed using a direct sales force and independent sales representatives. Our installation and renovation services are marketed by a direct sales force, primarily in the metropolitan areas we serve in the United States and also where we have the ability to work with our customers in other U.S. markets. We market our custom and standard windows, curtainwall, storefront and entrance systems using a combination of a direct sales force, independent sales representatives and directly to distributors.

Geographic location – - From our domestic glass fabrication locations, we supply products primarily to the U.S. market, with some international distribution of our high-performance architectural glass. We estimate the U.S. market for architectural glass fabrication in commercialnon-residential buildings is approximately $1.5$1.1 billion in annual sales. From our Brazilian glass fabrication facility, we primarily supply architectural glass to the Brazilian market. Wemarket, which we estimate this market to be approximately $0.4 billion in annual sales. Our aluminum framing systems, including custom and standard windows, curtainwall, storefront and entrances, are marketed in North America, where we estimate the market size is approximately $2.0$2.5 billion in annual sales.

We estimate the U.S. market for installation services is approximately $7.5 billion in annual sales. Within the installation services market, Apogee is one of only a few companies to have a national presence, with 11 offices in eight locationsand satellite offices serving multiple U.S. markets, and will be expanding into two locations in the Texas market.markets. We estimate that these areas representwe are able to serve, from our existing locations and our ability to travel to other markets where we do not have a local presence, approximately 2060 percent of the total installation market. Although installation of building glass in new commercial and institutional construction projects is the primary focus of our business, we also offer installation retrofits or renovations for the outside skin of older commercial and institutional buildings.


Project size – - The projects on which our Architectural segment businessesGlass, Architectural Services and Architectural Framing Systems segments bid and work vary in size. Our aluminum framing systems, storefront and entrance systems, and glass installation products and services, are targeted toward mid-size projects, while our high-performance architectural glass fabrication products range fromserve mid-size to monumental high-profile projects. Our Architectural Services and Architectural Framing Systems segments target mid-size projects.

Level of customization – Most projects have some degree of customization, as the end product or service is based on customer specifications.


LSO Segment
The only constant is the substrates of the products and the processes we utilize to fabricate, manufacture or install the products. However, within our aluminum framing systems businesses, we also produce glass windows and storefront and entrance products in standard, modified standard and custom configurations.

LSO Segment.The Company’sCompany's Tru Vue brand is the largest domestically manufactured brand for value-added glass and acrylic for the custom picture framing market. Under this brand, products are distributed primarily in North America through independent distributors, which supply national and regional chains and local picture framing shops, as well as through national retailers. The Company has also been successful in supplying products directly to museums and public and private galleries. We also have limited distribution in globalEurope and selected other international markets through independent distributors, anddistributors; we view this as a focus area for future growth of this segment.


Through the Company’sCompany's leadership, the custom picture framing industry continues to convert from clear glass to value-added picture framing glass and acrylic, a trend that is expected to continue and has helped the Company offset market softness over the past several years. We believe that ourwe have a majority share of demand for the U.S. market forvalue-added custom picture framing glass is approximately 70 percent, and that we have the majority of the market share for the valued-added glass market, which is our target sector.

segment.


Warranties

We offer product and service warranties which we believe are competitive for the markets in which thoseour products and services are sold. The nature and extent of these warranties depend upon the product or service, the market and, in some cases, the customer being served. Our standard warranties are generally from two to 10 years for our architectural glass, curtainwall and window system products, while we generally offer warranties of two years or less on our other products and installation services. In the event of a claim against a product for which we have received a warranty from the supplier, we pass the claim back to our supplier. Although we carry liability insurance with very high deductibles for product failures, we reserve for warranty exposures, as our insurance does not cover warranty claims. There can be no assurance that our insurance will be sufficient to cover all product failure claims in the future; that the costs of this insurance and the related deductibles will not increase materially; or that liability insurance for product failures will be available on terms acceptable to the Company in the future.


Sources and Availability of Raw Materials

Materials used within the Architectural segmentGlass and Architectural Framing Systems segments include raw glass, aluminum billet and extrusions, vinyl, metal targets, insulated glass spacer frames, silicone, plastic extrusions, desiccant, chemicals, paints, lumber and urethane. AllWithin the Architectural Services segment, materials used include fabricated glass, aluminum extrusions, silicone, plastic extrusions and fabricated metal panels. The LSO segment uses glass, hard-coated acrylic, acrylic substrates, coating materials and chemicals.

Glass manufacturers have applied surcharges to the cost of theseglass over the past several years to help offset increases in energy and fuel costs, which we are generally able to pass on to our customers through surcharges. We have also seen recent volatility in the

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Table of Contents

cost and supply of aluminum that is used in our window, storefront, entrance and curtainwall systems. Where applicable, we have passed the changes in cost of materials on to our customers in the form of pricing adjustments and/or surcharges.

A majority of our raw materials are readily available from a numbervariety of domestic and international sources, and no supplier delays or shortages are anticipated. While certain glass products may only be available at certain times of the year, all standard glass types and colors are available throughout the year in reasonable quantities from multiple suppliers. Glass manufacturers have applied surcharges to the cost of glass over the past several years to help offset increases in energy and fuel costs, which we try to pass on to our customers through surcharges. We have also seen recent volatility in the cost and supply of aluminum that is used in our window, storefront, entrance and curtainwall systems. Where applicable, we have passed the changes in cost of materials on to our customers in the form of pricing adjustments and/or surcharges. Chemicals purchased range from commodity to specifically formulated chemistries.

Materials used within the LSO segment include glass, hard-coated acrylic, acrylic substrates, coating materials and chemicals. This segment has also incurred energy surcharges from glass manufacturers over the past several years. Historically, we have passed on these costs to our customers in the form of price increases where possible.

A majority of our raw materials are available from a variety of domestic and international sources.


Trademarks and Patents

The Company has several trademarks and trade names which it believesthat we believe have significant value in the marketing of itsour products, including APOGEE®. Trademark registrations in the United States are generally for a term of 10 years, renewable every 10 years as long as the trademark is used in the regular course of trade.

Within the Architectural Glass segment, VIRACON®, LINETECVIRACON VUE-50® and STORMGUARD® are registered trademarks. DIGITALDISTINCTIONS™, ROOMSIDE™, EXTREMEDGE™, GLASS IS EVERYTHING™, BUILDING DESIGN™, VIRASPAN™, CLEAR POINT™ and CYBERSHIELD™ are unregistered trademarks. In addition, GLASSEC®, INSULATTO® and BLINDATTO® are registered trademarks in Brazil.

Within the Architectural Services segment, HARMON GLASS®, HI - 5000® and HI - 7000® are registered trademarks. HARMON™ and INNOVATIVE FACADES SOLUTIONS™ are unregistered trademarks.

Within the Architectural Framing Systems segment, LINETEC®, WAUSAU WINDOW AND WALL SYSTEMS®, TUBELITE®, HARMON GLASSADVANTAGE BY WAUSAU®, FINISHER OF CHOICE®, VIRAGUARDTHERML=BLOCK®, ADVANTAGE BY WAUSAUMAXBLOCK®, VIRACON VUE-50DFG®, 300ESECOLUMINUM®, GUARDVUEALUMINATE®, STORMGUARDGET THE POINT!®, DFG and FORCEFRONT®, ECOLUMINUM®, HI—5000®, HI—7000®, THE LEADER IN GLASS FABRICATION®, ALUMINATE®, FORCEFRONT®, and VIRACONSULTING® are registered trademarks of the Company. In addition, GLASSECtrademarks. ALUMICOR™ and BUILDING EXCELLENCE®TM, INSULATTO® and BLINDATTO® are registered trademarks in Brazil. 500LS™, THERML=BLOCK™, CLEAR POINT™, CYBERSHIELD™, MAXBLOCK™ and INvent™ are unregistered trademarks of the Company.in Canada.


Within the LSO segment, TRU VUE®, CONSERVATION CLEAR®, CONSERVATION MASTERPIECE ACRYLIC®, CONSERVATION REFLECTION CONTROL®, SCRATCH GUARDULTRAVUE®, MUSEUM GLASS®, OPTIUM®, PREMIUM CLEAN®, REFLECTION CONTROL®, AR REFLECTION –- FREE®, TRU VUE AR®, OPTIUM ACRYLIC®, OPTIUM MUSEUM ACRYLIC®, and CONSERVATION MASTERPIECE® are registered trademarks. ULTRAVUE™STATICSHIELD™ is an unregistered trademark of the Company.trademark.


The Company has several patents pertaining to our glass coating methods and products, including our UV coating and etch processes for anti-reflective glass for the picture framing industry. Despite being a point of differentiation from its competitors, no single patent is considered to be material to the Company.


Seasonality

Within the

The North American businesses in our Architectural segment, our domestic businessesGlass, Architectural Services and Architectural Framing Systems segments experience a slight seasonal effect following the domestic commercial construction industry, with higher demand from May through December. Our non-domesticBrazilian Architectural Glass segment business does not have a significant seasonal trend. A bigger impact to net sales is the fact that the construction industry is highly cyclical in nature and can be influenced differently by the effects of the localized economy in geographic markets.


Within the LSO segment, picture framing glass sales tend to increase in the September to December timeframe. However, the timing of customer promotional activities may offset some of this seasonal impact.


Working Capital Requirements

Within

Trade accounts receivable is the Architectural segment,largest component of working capital for the Company, including receivables relating to contractual retention amounts that can be outstanding throughout the project duration.duration within the Architectural Services segment. Payment terms offered to our customers are similar to those offered by others in the industry. InventoryFor the Architectural Glass and Architectural Framing Systems segments, inventory requirements are not significant to thesince these businesses within this segment since we make-to-order rather than build-to-stock for the majority of ourtheir products. As a result, inventory levels follow customer demand for the products produced.


Since the LSO segment builds-to-stock for the majority of its products, it requires greater inventory levels to meet the demands of its customers.


Dependence on a Single Customer

We do not have any one customer that exceeds 10 percent of the Company’sCompany's consolidated net sales. However, there are important customers within each of our segments; the loss of one or more customers could have an adverse effect on the Company.


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Backlog
Backlog

At March 3, 2012, represents the Company’s total backlogdollar amount of orders consideredrevenues we expect to be firm was $243.9 million, compared with $238.4 million at February 26, 2011. Of these amounts, approximately $242.0 million and $237.2 million of the orders wererecognize in the Architecturalfuture from firm contracts or orders received, as well as those that are in progress. Backlog is not a term defined under generally accepted accounting principles and is not a measure of contract profitability. We include a project within our backlog at the time a signed contract or a firm purchase order is received, generally as a result of a competitive bidding process. Backlog by reporting segment at March 3, 20121, 2014 and February 26, 2011, respectively. March 2, 2013 was as follows:

 March 1, 2014 March 2, 2013
Architectural Glass$73,206
 $68,618
Architectural Services187,471
 191,386
Architectural Framing Systems72,634
 39,758
Large-Scale Optical870
 1,272
Intersegment eliminations(4,546) (2,742)
Total Backlog$329,635
 $298,292

We expect to produce and ship $183.4approximately $314.5 million, or 7695 percent, of the Company’sour March 3, 20121, 2014 backlog to be recognized in fiscal 2013 compared to $199.9 million, or 84 percent, of2015, with the February 26, 2011 backlog that was expectedbalance to be produced and shippedrecognized in fiscal 2012.

The Company views2016 and beyond. We view backlog as an important statistic in evaluating the level of sales activity and short-term sales trends in itsour business. However, as backlog is only one indicator, and is not an effective indicator of theour ultimate profitability, of the Company, we do not believe that backlog should be used as the sole indicator of future earnings of the Company.


Competitive Conditions

Architectural Segment. Glass, Architectural Services and Architectural Framing Systems segments
The markets served by the businesses within the Architectural segmentGlass, Architectural Services and Architectural Framing Systems segments are very competitive, are price and lead-time sensitive, and are primarily affected by changes in the North American commercial construction industry as well as changes in general economic conditions. Specifically, interestAdditionally, due to the Architectural Glass segment's operations in Brazil, it is impacted by the commercial construction industry and general economic conditions found in Brazil and the immediate region.

Interest rates, credit availability for commercial construction projects, material costs, employment rates, office vacancy rates, building construction starts and office absorption rates are key indicators to the commercial construction market conditions. As each of these economic indicators moves favorably, our businesses typically experience sales growth, and vice-versa. The U.S. and world economies over the past three years have had a significant adverse impact on the commercial construction industry as a whole. As a result, the competitive environment in which the Architectural segment operates has become more competitive, increasing the number of re-bid construction projects and length of time between bidding and award of a project, reducing selling prices and causing competitors to expand the geographic scope and type of projects on which they bid. The companies within the Architectural segment

These segments primarily serve the custom portion of the commercial construction market, which is generally highly fragmented. The primary competitive factors are price, product quality, reliable service, on-time delivery, warranty and the ability to provide technical engineering and design services. The competitive environment in BrazilThere is similar to that of the United States; however, the Brazilian commercial construction market appears to be relatively strong as the Brazilian economy has recovered from the recent worldwide economic downturn. Additionally, we believe we are in the midst of an increasing worldwide trend in commercial construction – building with energy efficient or “green” products. This has the potential to increase demand foroffset some of our segment’s products and services due to their premium energy-efficiency properties combined with custom aesthetics. The potential forcompetitive pressures through increased renovation of the exteriors of commercial and institutional buildings using some of our segments' products and services due to their premium energy-efficiency properties.

We believe that our competition does not provide the same level of custom coatings to the market as our Architectural Glass segment, but regional glass fabricators can provide somewhat similar products with similar attributes. Regional glass fabricators incorporate high performance, post-temperable glass products, procured from primary glass suppliers, into their insulated glass products. The availability of these products has enabled regional glass fabricators in some cases to bid on more complex projects than in the past. Since we typically target the more complex projects, we have encountered increased competition from these regional glass fabricators. In certain regions of the U.S., we encounter competition from international competitors on complex projects.

When providing glass installation and services, our Architectural Services segment largely competes against regional and local construction companies and installation contractors, and periodically against other larger national companies.

The commercial window and storefront manufacturing market is highly fragmented and our Architectural Framing Systems segment competes against several major aluminum window and storefront manufacturers in various market niches. With window products at the high-end of the performance scale and one of the industry's best standard window warranties for improved energy efficiency may also offset some competitive pressures.

Throughoutrepair or replacement of defective product, we effectively leverage a construction project,reputation for engineering quality and delivery dependability into a position as a preferred provider for high-performance products. Within the architectural finishing market, we compete against regional paint and anodizing companies.



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Our businesses in the Architectural segment mustGlass, Architectural Services and Architectural Framing Systems segments maintain significant relationships with general contractors, who are normally each business’ direct or indirect customers, and architects, who influence the selection of products and services on a project. Additionally, throughout a construction project, the Architectural Services segment must maintain significant relationships with general contractors, who are the segment's direct customers. This is due to the high degree of dependence on general contractors and architects for project initiation and development of specifications. Additionally, the timing of a project depends on the schedule established by the general contractors and their ability to maintain this schedule. If a general contractor fails to keep a construction project on its established timeline, the timing and profitability of the project for our Architectural segment could be negatively impacted.

We believe that our domestic competition does not provide the same level of custom coatings to the market, but regional glass fabricators can provide somewhat similar products with similar attributes. Regional fabricators incorporate high performance, post-temperable glass products, procured from primary glass suppliers, into their insulated glass products. The availability of these products has enabled regional fabricators in some cases to bid on more complex projects than in the past. Since we typically target the more complex projects, of which there are currently fewer in the market because of the recent economic downturn, we have encountered significant competition from these glass suppliers. Conversely, since the commercial construction cycle has slowed and demand for high-end products is lower, our architectural glass fabrication business increasingly competes for business at the lower end of the high-performance spectrum, where these regional fabricators vigorously compete and pricing is generally lower.

The commercial window manufacturing market is highly fragmented, and we compete against several major aluminum window and storefront manufacturers in various market niches. With window products at the high-end of the performance scale and one of the industry’s best standard window warranties for repair or replacement of defective product, we effectively leverage a reputation for engineering quality and delivery dependability into a position as a preferred provider for high-performance products. Our custom and standard windows business and storefront and entrance business typically compete on quality and service levels, price, lead-time and delivery services. Within the architectural finishing market, we compete against regional paint and anodizing companies, typically on price and delivery. With the slowdown in the commercial construction markets, there is a higher level of competition for these products.

When providing glass installation and services, we largely compete against local and regional construction companies and installation contractors, and more recently against other larger national companies. The primary competitive factors are quality, engineering, price and service.


LSO Segment.Segment
Product attributes, pricing, quality, marketing, and marketing services and support are the primary competitive factors in the markets within the LSO segment. The Company’sCompany's competitive strengths include our excellent relationships with our customers and the product performance affordedprovided by our proprietary and/or patented processes.unique value-added products. While there is significant price sensitivity in regard to sales of clear glass to picture framers, there is somewhat less price sensitivity on certain of our value-added glass products since theredue to their unique attributes. There is less competition for these products.

Although there has been recent activityin North America with respect to new entrants in the North AmericanEuropean imports of certain valued-added products market for picture framing, this segment competes against many suppliers of clear glass. Our customers’ selection of value-added products is driven by product attributes, price, quality and service.

framing.


Research and Development

The amount spent on research and development activities was $7.2$7.8 million $6.3, $6.8 million and $6.8$7.2 million in fiscal 2012, 20112014, 2013 and 2010,2012, respectively. Of this amount, $0.8$2.1 million $1.8, $1.6 million and $3.2$0.8 million, respectively, was focused primarily upon design of custom window and curtainwall systems in accordance with customer specifications and is included in cost of sales in the accompanying consolidated financial statements.


Environment
Environment

We use hazardous materials in our manufacturing operations, and have air and water emissions that require controls. As a result, we are subject to stringent federal, state and local regulations governing the storage, use and disposal of wastes. We contract with outside vendors to collect and dispose of waste at our production facilities in compliance with applicable environmental laws. In addition, we have procedures in place that we believe enable us to properly manage the regulated materials used in our manufacturing processes and wastes created by the production processes, and we have implemented a program to monitor our compliance with environmental laws and regulations. Although we believe we are currently in material compliance with such laws and regulations, current or future laws and regulations could require us to make substantial expenditures for compliance with chemical exposure, waste treatment or disposal regulations. During fiscal 2012, weWe spent approximately $0.2$0.5 million, $0.1 million and $0.2 millionin each of fiscal 20112014, 2013 and 2010, we spent $0.3 million,2012, respectively, to reduce wastewater solids and hazardous air emissions at our facilities. We expect to incur costs to continue to comply with laws and regulations in the future for our ongoing manufacturing operations but do not expect these to be material to our financial statements.


As part of the acquisition of Tubelite Inc. (Tubelite) on December 21, 2007, we acquired a manufacturing facility which has historical environmental conditions. We believe that Tubelite is a “responsible party” for certain of these historical environmental conditions, and the Company intends to remediate those conditions. The Company believes the remediation activities can be conducted without significant disruption to manufacturing operations at this facility. As of March 3, 2012,1, 2014, the environmental reserve balance was $2.0 million.

$1.5 million.


Employees

The Company employed 3,6364,266 and 3,5553,871 persons on March 3, 20121, 2014 and February 26, 2011,March 2, 2013, respectively. At March 3, 2012, 4491, 2014, 432 of these employees were represented by U.S. labor unions and 274336 of these employees were represented by labor unions in Brazil.

The Company is a party to approximately 50 collective bargaining agreements in the United States with several different unions. The number of collective bargaining agreements to which the Company is a party varies with the number of cities in which our glass installation and services business has active construction contracts. The Company considers its employee relations to be very good, and has not experienced any loss of workdays due to strike. We are highly dependent upon the continued employment of certain technical and management personnel.


Acquisition of Glassec

Alumicor

On November 19, 2010,5, 2013, the Company acquired 100 percentall of the stockshares of Glassec Vidros de Segurança Ltda.,Alumicor Limited, a privately held business, for $20.6$52.9 million, net ofincluding cash acquired of $1.1$1.6 million. GlassecAlumicor is a leading architectural glass fabricator in Brazil. The business operates underwindow, storefront, entrance and curtainwall company primarily serving the name GlassecViracon as partCanadian commercial construction market. Alumicor's results of the Company’s architectural glass business.

GlassecViracon’s fiscal year ends December 31 and is reportedoperations have been included in the consolidated financial statements and within ourthe Architectural Framing Systems segment on a two-month lag. The purchase is partsince the date of our strategy to increase our architectural glass penetration in international markets.acquisition. Item 8, Note 6 of the Notes to the Consolidated Financial Statements contains further information regarding this acquisition.


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Foreign Operations and Export Sales

During the years ended March 1, 2014, March 2, 2013 and March 3, 2012 February 26, 2011 and February 27, 2010,, the Company’sCompany's export sales from domestic operations, principally from the salesales of architectural glass, amounted to approximately $75.7$52.5 million $79.4, $63.5 million and $68.3$75.7 million, respectively, or 117 percent of net sales in fiscal 2012, 142014, 9 percent of net sales in fiscal 2011,2013, and 1011 percent of net sales in fiscal 2010. Fiscal 2012 and 2011 consolidated. Consolidated net sales includedfor fiscal 2014, 2013 and 2012 include GlassecViracon sales of $34.1$36.7 million, $32.0 million and $3.7$34.1 million, respectively, or five percent of net sales in each of fiscal 2014, 2013 and 2012, all of which were non-U.S. sales. Consolidated net sales for fiscal 2014 included Alumicor sales of $15.9 million or 2 percent of net sales in fiscal 2012 and approximately one percent of net sales in fiscal 2011,2014, all of which were non-U.S. sales.


Available Information

The Company maintains a website atwww.apog.com. Through a link to a third-party content provider, this corporate website provides free access to the Company’sCompany's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), as soon as reasonably practicable after electronic filing such material with, or furnishing it to, the Securities and Exchange Commission. Also available on our website are various corporate governance documents, including our Code of Business Ethics and Conduct, Corporate Governance Guidelines, and charters for the Audit, Compensation Strategy and Enterprise Risk, and Nominating and Corporate Governance Committees of the Board of Directors.


EXECUTIVE OFFICERS OF THE REGISTRANT

Name

 Age 

Positions with Apogee Enterprises and Five-Year Employment History

Joseph F. Puishys 5355
 Chief Executive Officer and President of the Company since August 2011. President of Honeywell’sHoneywell's Environmental and Combustion Controls division from 2008 through 2011, President of Honeywell’sHoneywell's Building Solutions from 2005 through 2008 and President of Honeywell Building Solutions, America from 2004 to 2005.
James S. Porter 5153
 Chief Financial Officer since October 2005. Vice President of Strategy and Planning from 2002 through 2005. Various management positions within the Company since 1997.
Patricia A. Beithon 5860
 General Counsel and Secretary since September 1999.
Gary R. Johnson 5052
 Vice President, Treasurer since January 2001. Various management positions within the Company since 1995.
MarkJohn A. AugdahlKlein 4658
 Senior Vice President, FinanceOperations and Corporate ControllerSupply Chain Management of the Company since May 2011. Corporate ControllerApril 2012. Director of Operations at Cooper Industries' Power Systems Division from 20042008 through 2011 and Assistant Corporate Controller2012, Vice President of Operations at Rexnord Industries' Bearing Division from 20002005 through 2004.2007.


Executive officers are elected annually by the Board of Directors and serve for a one-year period. There are no family relationships between any of the executive officers or directors of the Company.


ITEM 1A.RISK FACTORS

ITEM 1A. RISK FACTORS

Our business faces many risks. Any of the risks discussed below, or elsewhere in the Form 10-K or our other filings with the Securities and Exchange Commission, could have a material adverse impact on our business, financial condition or results of operations.


Operational Risks

General global economic and business conditions could negatively affect our results.
Our Architectural Segment

GlobalGlass, Architectural Services and Architectural Framing Systems segments are dependent on global economic conditions and the cyclical nature of the commercial construction industry have had and could continue to have an adverse impact on the profitability of this segment. There has traditionally been a lag between the general domestic economy and the North American commercial construction industry,industry. The commercial construction market is impacted negatively by volatility in global financial markets, including, among other things, volatility in securities prices, availability of credit, unemployment rates, consumer confidence, interest rates and an additional lag of approximately eight months to whencommodity prices. To the products and services of our domestic-based Architectural segment businesses record net sales. Accordingly, these domestic Architectural segment businesses, which represented approximately 94 percent of the segment’s net sales during fiscal 2012, are primarily impacted byextent changes in the North American commercial construction industry, including unforeseen delays in project timing, work flow and lower prices. These and other economic conditions couldthese factors negatively impact the overall commercial construction industrymarket, our revenue and may adversely impact the markets we serve or the timing of the lag, resultingprofits could be significantly reduced.


Our Architectural Glass segment's operation located in lower net sales and earnings.

Our Brazilian operationBrazil is subject to the economic, political and tax conditions prevalent in the region. The economic conditions in this region are subject to different growth expectations, market weaknesses and business practices.practices than seen in the U.S. market. We cannot predict how changing market conditions in this region will impact our financial results.

The Architectural segment’s



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Our LSO segment depends on the strength of the retail picture framing market. This market is highly dependent on consumer confidence and the conditions of the U.S. economy. If consumer confidence declines, whether as a result of an economic slowdown, uncertainty regarding the future or other factors, our use of these strategies may not be as successful in the future, resulting in a potential decrease in net sales and operating income.

New market entrants or specific actions of our competitors could adversely impact our market position and future results.
All of our operating segments operate in competitive markets are very competitive andwhere the actions of competitors or new market entrants as well as product or service preferences could result in a loss of customers or share of that customer’s purchases that would negatively impact our net sales and earnings.The markets that the Architectural segment serves are product-attribute, price and lead-time sensitive. The segment competes with several large, integrated glass manufacturers; numerous specialty architectural glass and window fabricators; and major contractors and subcontractors. Some of our competitors may have greater financial or other resources than the Company. Changescustomers' purchases. Additionally, changes in our competitor’scompetitors' products, prices or services could negatively impact our market share, net sales or margins. We

Our Architectural Glass and Architectural Framing Systems segments have seen an increase in imports of ourcompetitive products from lower-cost, international suppliers that, if this were to continue, could impact our net sales or margins. Architectural trends or building code changes that reduce window-to-wall ratios could also negatively impact our net sales orand margins.

The Architectural Our LSO segment results could be adversely impacted by product quality and performance reliability problems. We manufacture and/or install a significant portioncompetes with several international specialty glass manufacturers that have traditionally not penetrated the domestic core markets served. Although these LSO competitors have not been able to meet the specification level of our products, basedupgrades to our competitor's products could have a negative impact on specific requirements of each of our customers. We believe that future orders of our productsnet sales or services will depend on ourmargins.


Our ability to maintain the performance, reliability and quality standards required byeffectively utilize our customers. If our products or services have performance, reliability or quality problems, we may experience additional warranty and service expense; reduced, cancelled or discontinued orders; higher manufacturing or installation costs; or delays in the collection of accounts receivable. Additionally, performance, reliability or quality claims from our customers, with or without merit,capacity could result in costly and time-consuming litigation that could require significant time and attention of management and involve significant monetary damages that could negativelyadversely impact our financialfuture results.

The Architectural results could be adversely impacted by capacity utilization and changes in technology impacting capacity utilization.The Architectural segment’s near-term

Near-term performance depends, to a significant degree, on itsour ability to utilize capacity at itsavailable production facilities.capacity. The failure to successfully utilize or manage capacity, and the impact of closing a facility in the future, or re-opening a currently closed facility, could adversely affect our operating results. Additionally, advances in product or process technologies on the part of existing or prospective competitors could have a significant impact on our ability to utilize our capacity and, therefore, have an adverse impact on our net sales and operating results.


Product quality issues could negatively impact demand for our products and future profitability.
We manufacture and/or install a significant portion of our products based on specific requirements of each customer. We believe that future orders of our products or services will depend on our ability to maintain the performance, reliability and quality standards required by our customers. If our products or services have performance, reliability or quality problems, or products are installed using incompatible glazing materials or installed improperly, we may experience additional warranty and service expense; reduced or canceled orders; diminished pricing power; higher manufacturing or installation costs; or delays in the collection of accounts receivable. Additionally, performance, reliability or quality claims from our customers, with or without merit, could result in costly and time-consuming litigation that could require significant time and attention of management and involve significant monetary damages that could negatively impact our financial results.

Project management and installation issues could negatively impact future results.
The Architectural results could be adversely impacted byServices segment is typically awarded fixed-price contracts for installation issues. The Company’s installation business typically is awarded as a fixed-price contract.services. Often, bids are required before all aspects of a construction project are known. An underestimate in the amount of labor required and/or cost of materials for a project; a change in the timing of the delivery of product; difficulties or errors in execution; use of incompatible glazing materials; or significant project delays, caused by us or other trades, could result in failure to achieve the expected results. Any such issues could result in losses on individual contracts that could impact our operating results.


Our future profitability and cash flow are dependent on realizing expected government incentives.
We have made commitments to expand certain manufacturing facilities and make investments in new manufacturing capabilities. Contributing to the decision to make such investments was the availability of federal, state and local incentives including tax credits, tax increment financing and grants. If the Company is not able to realize the benefits of planned incentive packages, future operating results could be negatively impacted.

A shift in consumer preferences could negatively impact the demand for our products.
Any change in customer preference, architectural trends or building codes that reduces window-to-wall ratios in non-residential construction would negatively impact net sales and operating income in our Architectural Glass, Architectural Services and Architectural Framing Systems segments. The LSO Segment

segment depends on U.S. consumers framing art and other decorative items. Any shift in customer preference away from framed art to other forms of decorative media could negatively impact future net sales and operating income in the LSO segment.


The loss of a significant customer in the LSO segment could adversely affect our results.
The LSO segment is highly dependent on a relatively small number of customers for its sales.We continue to expect to derivecontinue deriving a significant portion of our net sales from a small number of customers. Accordingly, loss of a significant customer or a significant reduction in pricing, or a shift to a less favorable mix of value-added picture framing glass or acrylic products for one of those customers could materially reduce LSO net sales and operating results in any one year.

results.



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The LSO segment is highly dependent on U.S. consumer confidence and the U.S. economy.Our business in this segment depends on the strength of the retail picture framing market. This market is highly dependent on consumer confidence and the conditions of the U.S. economy. We have been able to partially offset the impact of economic slowdowns in the recent past with an increase in the mix of higher value-added picture framing products. If consumer confidence further declines, whether as a result of an economic slowdown, uncertainty regarding the future or other factors, our use of these strategies may not be as successful in the future, resulting in a potentially significant decrease in net sales and operating income.

The LSO segmentArchitectural Framing Systems results could be adversely impacted by capacity utilization.integration and other uncertainties associated with the acquisition of an operation outside of the United States.

The LSOArchitectural Framing Systems segment’s near-term performance depends, to a significant degree, onis influenced by its ability to utilize its production capacity to manufacture our highest value-added picture framing glass and acrylic products. The failuresuccessfully integrate the recently acquired business in Canada. If we are unable to successfully manage this capacity could adversely impact operating results.

The LSO segment’s markets are becoming more competitiveintegrate the business into our current business model, or do not realize projected efficiencies and actions of competitors, or new market entrants, could negatively impact our net sales and earnings.The markets thatcost-savings from the LSO segment serves are product-attribute and price sensitive. The segment competes with several small international specialty glass manufacturers that have traditionally not penetrated the domestic markets. Although these competitors tend tobusiness we acquired, we may be low price providers and have not been ableunable to meet our growth or profit objectives. Additionally, our increased presence outside the specification levelU.S. makes our revenues and net income subject to the volatility of our products, upgrades to our competitor’s products could drive prices down which could have a negative impact on our market share, net sales or margins.

Other Operational Risks

The Company’s results may be adversely impacted by implementation of an Enterprise Resource Planning (ERP) system. Since fiscal 2008,exchange rates and the Company has been implementing an ERP system to modernize its information system technologieseconomic, political and business processes at its business units. The complexities of an ERP implementation and large-scale process changes that are required could result in costs that exceed the project budget, business interruptions or reduced financial performance, adversely impacting operating results. To date we have completed a considerable portion of the project but still have significant modules at some of our larger business units to implement.

Financial Risks

Volatilitytax conditions prevalent in the global economy could adversely affectregion.


Our results of operationscan be volatile and differ significantly from our financial condition.Global financial markets have been experiencing disruption over the past several years, including, among other things, volatility in securities prices; diminished liquidity and credit availability; rating downgrades of certain investments; and changes in valuation of foreign currency against the U.S. dollar. These conditions have negatively impacted the markets we serve and as a result have had an adverse impact on our recent results of operations. Further volatility could lead to challenges in our business and negatively impact our financial condition or results of operations or lead to impairment of long-lived assets, including goodwill. The tightening of credit in financial markets could adversely affect our ability, as well as the ability of our customers and suppliers, to obtain and maintain financing. In addition, lack of financing for commercial construction projects could further result in a decrease in orders and spending for our products and services. We also maintain a significant amount of assets in the form of investments, primarily municipal bonds. The value of these investmentsexpectations and the timingexpectations of our need for cash could have a significant negative impact on our operating results.

Our quarterly and annual net sales and operating results are volatile and difficult to predict.analysts.

Our net sales and operating results may fall belowdiffer from Company-provided guidance and the expectations of securities analysts or investors and Company-provided guidance in future periods. Our annual net sales and operating results may vary depending on a number of factors, including, but not limited to, fluctuating customer demand, delay or timing of shipments, construction delays or cancellations due to lack of financing for construction projects, changes in product and project mix or market acceptance of new products. Manufacturing or operational difficulties that may arise due to quality control, capacity utilization of our production equipment or staffing requirements may also adversely impact our annual net sales and operating results. In addition, competition, including new entrants into our markets, the introduction of new products by competitors, adoption of competitive technologies by our customers, andor competitive pressures on prices of our products and services, could adversely impact our annual net sales and operating results. Finally, our annual net sales and operating results may vary depending on raw material pricing and the potential for disruption of supply, andor changes in legislation that could have an adverse impact on our labor or other costs. Our failure to meet net sales and operating result expectations would likely adversely affect the market price of our common stock.

Self-Insurance and Product Liability Risk

We retain a high level of uninsured risk; a material claim could impact our financial results.significant risk through self-insurance programs.
We obtain substantial amounts of commercialthird-party insurance for potential losses forfrom general liability, employment practices, workers’workers' compensation and automobile liability risk. However, a high amount of risk is retained on a self-insured basis through a wholly-owned insurance subsidiary. Therefore, a material product liability event, such as a material rework event, could have a material adverse effect on our operating results.

Environmental Regulation Risks


We use hazardous chemicals in the production of our products and are subjectthus subjected to potentialchanges in environmental remediation regulation and compliance risks that could adversely affect our financial results.legislation.
We use hazardous chemicals in producing products at threeour products. One of our facilities (two in our Architectural segment and one in our LSO segment). One facility in our Architectural segment has certain historical environmental conditions whichthat we believe require remediation. Our inability to remediate the historical environmental conditions at the Architectural segment facility at or below the amounts estimated as part of the purchase price allocationreserved, therefore, could have a material adverse impact on future financial results. Additionally, we are subject to a variety of local, state and federal governmental regulations relating to storage, discharge, handling, emission, generation and disposal of toxic or other hazardous substances used to manufacture our products, compliance with which is expensive. Our failure to comply with current or future environmental regulations could result in the imposition of substantial fines on us, suspension of production, alteration of our manufacturing processes or increased costs. Our financial results could also be adversely impacted by rising energy and material costs associated with environmental regulations.


A loss of key personnel could negatively impact near-term results.
Our success depends on the skills, experience and efforts of our executive management and other key personnel. If, for any reason, one or more senior executives or key personnel were not to remain active in our Company, our financial results could be adversely affected.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None

12


ITEM 1B.		UNRESOLVED STAFF COMMENTS

None

ITEM 2. PROPERTIES

ITEM 2.
PROPERTIES

The following table lists, by segment, the Company’sCompany's major facilities as of March 3, 2012,1, 2014, the general use of the facility and whether it is owned or leased by the Company.

Facility

 

Location

 

Owned/
Leased

 

Size (sq. ft.)

Function
Architectural Glass Segment  

Function

Architectural Segment

   

Viracon

 Owatonna, MN Owned 868,500765,500
 Mfg/Admin

Viracon

 Owatonna, MN Owned 136,050
 Mfg/Admin

Viracon

 Owatonna, MN Leased 160,000
 Warehouse

Viracon

Owatonna, MNLeased6,400 ��Maintenance

Viracon

 Statesboro, GA Owned 397,200
 Mfg/Warehouse

Viracon

 St. George, UT 
Owned
(1) 236,000
 Mfg/Warehouse

GlassecViracon

 Nazaré Pulista, Brazil 
Owned(1)(2)
100,000
Mfg/Admin
  100,000  Mfg/Admin

Architectural Services Segment

Harmon, Inc. Headquarters

 Minneapolis, MN Leased 12,954
 Admin

Harmon, Inc.

West Chester, OHLeased156,000
Mfg
Harmon, Inc.Garland, TXLeased66,554
Mfg
Architectural Framing Systems Segment
Wausau Window and Wall Systems

 Wausau, WI Owned 370,400
 Mfg/Admin

Wausau Window and Wall Systems

Englewood, COLeased122,981
Mfg/Admin
Wausau Window and Wall Systems Stratford, WI Owned 67,000
 Mfg

Linetec

 Wausau, WI Owned 430,000
 Mfg/Admin

Tubelite

 Reed City, MI Owned 245,000
 Mfg

Tubelite

 Walker, MI Leased 123,125
 Mfg/Admin

LSO Segment

Tubelite		 Dallas, TX Leased 47,500
 Mfg

Alumicor

Ontario, CanadaLeased180,329
Mfg/Warehouse/Admin
AlumicorOntario, CanadaOwned55,000
Mfg
LSO Segment
Tru Vue

 McCook, IL Owned 300,000
 Mfg/Admin

Tru Vue

 Faribault, MN Owned 274,600
 Mfg/Admin

Other

    

Other

Apogee Headquarters

 Minneapolis, MN Leased 16,87313,492
 Admin

(1)As previously announced, this facility was closed in fiscal 2014 and is anticipated to remain closed for approximately two years.
(2)This is an owned facility; however, the land is leased from the city.


In addition to the locations indicatedlisted above, the Architectural segment’s Harmon, Inc.Services segment business operates eight11 leased locations, serving multiple markets.


One of the Viracon facilities, a portion of the Wausau Window and Wall Systems facility, a portion of the Linetec facility and the Tru Vue facilities were constructed with the use of proceeds from industrial revenue bonds issued by their applicable cities. These properties are considered owned since, at the end of the bond term, title reverts to the Company.


ITEM 3.LEGAL PROCEEDINGS

ITEM 3. LEGAL PROCEEDINGS

The Company has been a party to various legal proceedings incidental to its normal operating activities. In particular, like others in the construction supply and services industry, the Company’sCompany's construction supply and services businesses are routinely involved in various disputes and claims arising out of construction projects, sometimes involving significant monetary damages or product replacement. The Company has also been subject to litigation arising out of employment practices, workers’workers' compensation, general liability and automobile claims. Although it is very difficult to accurately predict the outcome of such proceedings, facts currently

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available indicate that no such claims will result in losses that would have a material adverse effect on the results of operations, cash flows or financial condition of the Company.


ITEM 4.MINE SAFETY DISCLOSURES

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable


PART II



ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Apogee common stock is traded on the NASDAQ Stock Market LLC (Nasdaq) under the ticker symbol APOG.


As of April 11, 2012,9, 2014, there were approximately 1,5111,339 shareholders of record and 7,6527,018 shareholders for whom securities firms acted as nominees.


The following chart shows the quarterly range and year-end closing prices for one share of the Company’sCompany's common stock over the past five fiscal years.

   Quarter     
   First   Second   Third   Fourth   Year-end 
   Low       High   Low       High   Low       High   Low       High   Close 

2012

  $12.42     —      $14.82    $8.21     —      $13.45    $7.79     —      $11.54    $9.42     —      $15.05    $12.60  

2011

   12.57     —       16.89     9.05     —       13.89     8.76     —       12.05     10.79     —       14.72     13.92  

2010

   8.12     —       14.61     11.17     —       15.14     12.50     —       16.48     12.91     —       16.35     14.29  

2009

   14.08     —       24.22     15.07     —       25.99     5.32     —       21.46     6.08     —       12.77     9.47  

2008

   18.41     —       25.75     24.23     —       30.30     20.04     —       28.96     14.30     —       23.25     15.39  

  First Second Third Fourth Year-end
  LowHigh LowHigh LowHigh LowHigh Close
2014 $23.06
$30.26
 $22.20
$29.41
 $27.25
$36.09
 $30.97
$37.73
 $34.23
2013 12.17
16.44
 14.14
17.20
 15.80
23.31
 22.20
26.62
 26.21
2012 12.42
14.82
 8.21
13.45
 7.79
11.54
 9.42
15.05
 12.60
2011 12.57
16.89
 9.05
13.89
 8.76
12.05
 10.79
14.72
 13.92
2010 8.12
14.61
 11.17
15.14
 12.50
16.48
 12.91
16.35
 14.29

Dividends

The Board of Directors quarterly evaluates declaring dividends based on operating results, available funds and the Company’sCompany's financial condition. Cash dividends have been paid each quarter since 1974. The chart below shows quarterly and annual cumulative cash dividends per share for the past five fiscal years.

   First   Second   Third   Fourth   Total 

2012

  $ 0.0815    $ 0.0815    $ 0.0815    $ 0.0815    $ 0.3260  

2011

   0.0815     0.0815     0.0815     0.0815     0.3260  

2010

   0.0815     0.0815     0.0815     0.0815     0.3260  

2009

   0.0740     0.0740     0.0815     0.0815     0.3110  

2008

   0.0675     0.0675     0.0740     0.0740     0.2830  

  First Second Third Fourth Total
2014 $0.0900
 $0.0900
 $0.0900
 $0.1000
 $0.3700
2013 0.0900
 0.0900
 0.0900
 0.0900
 0.3600
2012 0.0815
 0.0815
 0.0815
 0.0815
 0.3260
2011 0.0815
 0.0815
 0.0815
 0.0815
 0.3260
2010 0.0815
 0.0815
 0.0815
 0.0815
 0.3260

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Purchases of Equity Securities by the Company

The following table provides information with respect to purchases made by the Company of its own stock during the fourth quarter of fiscal 2012:

Period

  Total Number of
Shares
Purchased (a)		   Average Price
Paid per Share		   Total Number of
Shares Purchased
as Part of
Publicly
Announced Plans
or Programs (b)		   Maximum
Number of
Shares that May
Yet Be
Purchased
under the Plans
or Programs (b)		 

Nov. 27, 2011 through Dec. 31, 2011

   89    $10.41     —       970,877  

Jan. 1, 2012 through Jan. 28, 2012

   —       —       —       970,877  

Jan. 29, 2012 through Mar. 3, 2012

   25,392     13.43     —       970,877  

Total

   25,481    $12.67     —       970,877  

(a)The shares in this column represent shares that were surrendered to us by plan participants in order to satisfy stock-for-stock option exercises or withholding tax obligations related to stock-based compensation.
(b)In April 2003, the Board of Directors authorized the repurchase of 1,500,000 shares of Company stock, which was announced on April 10, 2003. In January 2008, the Board of Directors increased the authorization by 750,000 shares, which was announced on January 24, 2008. In October 2008, the Board of Directors increased the authorization by 1,000,000 shares, which was announced on October 8, 2008. The Company’s repurchase program does not have an expiration date.

2014:

PeriodTotal Number of Shares Purchased (a) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b) Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs (b)
December 1, 2013 through December 28, 20139,923
 $36.40
 —
 970,877
December 29, 2013 through January 25, 20144,397
 35.71
 —
 970,877
January 26, 2014 through March 1, 2014433
 34.23
 —
 970,877
   Total14,753
 $35.78
 —
 970,877
(a)The shares in this column represent shares that were surrendered to us by plan participants in order to satisfy stock-for-stock option exercises or withholding tax obligations related to stock-based compensation.
(b) In April 2003, the Board of Directors authorized the repurchase of 1,500,000 shares of Company stock, which was announced on April 10, 2003. In January 2008, the Board of Directors increased the authorization by 750,000 shares, which was announced on January 24, 2008. In October 2008, the Board of Directors increased the authorization by 1,000,000 shares, which was announced on October 8, 2008. The Company's repurchase program does not have an expiration date.

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Comparative Stock Performance

The line graph below compares the cumulative total shareholder return on our common stock for the last five fiscal years with cumulative total return on the Standard & Poor’sPoor's Small Cap 600 Growth Index and the Russell 2000 Index. This graph assumes a $100 investment in each of Apogee, the Standard & Poor’sPoor's Small Cap 600 Growth Index and the Russell 2000 Index at the close of trading on March 3, 2007,February 28, 2009, and also assumes the reinvestment of all dividends.

   Fiscal 2007   Fiscal 2008   Fiscal 2009   Fiscal 2010   Fiscal 2011   Fiscal 2012 

Apogee

  $100.00    $80.38    $50.71    $78.52    $76.48    $69.23  

S&P Small Cap 600 Index

   100.00     91.60     51.87     84.29     109.18     112.38  

Russell 2000 Index

   100.00     88.49     50.17     81.06     106.00     103.48  

 Fiscal 2009Fiscal 2010Fiscal 2011Fiscal 2012Fiscal 2013Fiscal 2014
Apogee$100.00
$154.82
$150.81
$136.51
$283.97
$370.86
S&P Small Cap 600 Growth Index100.00
161.14
215.73
226.20
258.30
338.92
Russell 2000 Index100.00
161.58
211.29
206.27
235.14
304.11

For the fiscal year ended March 3, 2012,1, 2014, our primary business activities included architectural glass products and(approximately 35 percent of net sales), architectural services (approximately 8826 percent of net sales), architectural framing systems (approximately 28 percent of net sales) and large-scale optical technologies (approximately 1211 percent of net sales). We are not aware of any competitors, public or private, that are similar to us in size and scope of business activities. Most of our direct competitors are either privately owned or divisions of larger, publicly owned companies.



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ITEM 6.SELECTED FINANCIAL DATA

ITEM 6. SELECTED FINANCIAL DATA

The following information should be read in conjunction with Item 7—Management’s7 - Management's Discussion and Analysis of Financial Condition and Results of Operations and Item 8—8 - Financial Statements and Supplementary Data.

(In thousands, except per share data and percentages)

  2012(1)  2011(2)  2010   2009   2008   2007(1) 

Results from Operations Data

          

Net sales

  $662,463   $582,777   $696,703    $925,502    $881,809    $778,847  

Gross profit

   117,120    83,120    162,095     200,748     185,150     148,414  

Operating income (loss)

   3,816    (20,972)   45,430     77,655     66,459     47,725  

Earnings (loss) from continuing operations

   4,697    (14,157)   31,217     51,195     43,170     31,652  

Net earnings (loss)

   4,645    (10,332)   31,742     51,035     48,551     31,653  

Earnings (loss) per share – basic

          

Continuing operations

   0.17    (0.51)   1.14     1.85     1.52     1.14  

Net earnings (loss)

   0.17    (0.37)   1.16     1.84     1.71     1.14  

Earnings (loss) per share – diluted

          

Continuing operations

   0.17    (0.51)   1.13     1.82     1.49     1.12  

Net earnings (loss)

   0.17    (0.37)   1.15     1.81     1.67     1.12  

Balance Sheet Data

          

Current assets

  $229,439   $213,923   $246,586    $228,688    $259,229    $222,484  

Total assets(3)

   493,104    511,098    526,854     527,684     563,508     449,161  

Current liabilities

   105,771    113,946    128,887     157,292     177,315     145,859  

Long–term debt

   20,916    21,442    8,400     8,400     58,200     35,400  

Shareholders’ equity

   321,198    327,677    343,590     316,624     284,582     235,668  

Cash Flow Data

          

Depreciation and amortization

  $27,246   $28,218   $29,601    $29,307    $22,776    $18,536  

Net cash provided by (used in) continuing operating activities

   27,981    (7,985)   97,234     116,298     86,235     48,071  

Capital expenditures

   9,650    9,126    9,765     55,184     55,208     39,893  

Dividends*

   9,153    9,161    9,112     8,800     8,192     9,312  

Other Data

          

Gross margin – % of sales

   17.7    14.3    23.3     21.7     21.0     19.1  

Operating margin – % of sales

   0.6    (3.6)   6.5     8.4     7.5     6.1  

Effective tax rate – %

   (28.8)   32.0    32.1     35.0     30.7     35.1  

Non–cash working capital

  $44,374   $39,426   $15,064    $44,336    $69,650    $70,438  

Debt as a % of total capital

   6.1    6.4    2.4     2.6     17.0     13.1  

Return on:

          

Average shareholders’ equity – %

   1.4    (3.1)   9.6     17.0     18.7     14.6  

Average invested capital**– %

   0.6    (3.4)   7.5     12.6     11.4     10.0  

Dividend yield at year–end – %

   2.6    2.3    2.3     3.3     1.8     1.4  

Book value per share

   11.45    11.66    12.29     11.40     9.90     8.25  

Price/earnings ratio at year–end

   76:1    NM    12:1     5:1     9:1     17:1  

Average monthly trading volume

   2,830    4,790    5,900     8,400     7,740     3,500  
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

   

 

 

 

(In thousands, except per share data and percentages)
2014(1)
2013
2012(2)
2011(3)
20102009
Results from Operations Data      
Net sales$771,445
$700,224
$662,463
$582,777
$696,703
$925,502
Gross profit165,252
145,733
117,120
83,120
162,095
200,748
Operating income (loss)40,285
27,419
3,816
(20,972)45,430
77,655
Net earnings (loss)27,986
19,111
4,645
(10,332)31,742
51,035
Earnings (loss) per share - basic0.98
0.68
0.17
(0.37)1.16
1.84
Earnings (loss) per share - diluted0.95
0.67
0.17
(0.37)1.15
1.81
       
Balance Sheet Data      
Current assets$242,792
$251,841
$229,439
$213,923
$246,586
$228,688
Total assets565,357
520,141
493,104
511,098
526,854
527,684
Current liabilities136,834
122,167
105,771
113,946
128,887
157,292
Long-term debt20,659
20,756
20,916
21,442
8,400
8,400
Shareholders' equity352,630
333,318
321,198
327,677
343,590
316,624
       
Cash Flow Data      
Depreciation and amortization$26,550
$26,529
$27,246
$28,218
$29,601
$29,307
Net cash provided by (used in) operating activities52,921
40,716
27,981
(7,985)97,234
116,298
Net cash used in investing activities(43,974)(57,132)(18,498)(14,391)(53,245)(40,239)
Net cash (used in) provided by financing activities(17,576)232
(13,116)209
(9,832)(74,758)
Capital expenditures41,852
34,664
9,650
9,126
9,765
55,184
Dividends(4)
10,764
10,316
9,153
9,161
9,112
8,800
       
Other Data      
Gross margin - % of sales21.4%20.8%17.7 %14.3 %23.3%21.7%
Operating margin - % of sales5.2%3.9%0.6 %(3.6)%6.5%8.4%
Effective tax rate - %29.6%29.0%(29.2)%39.3 %31.7%35.0%
Non-cash working capital$77,338
$54,153
$44,374
$39,426
$15,064
$44,336
Debt as a % of total capital5.5%5.9%6.1 %6.4 %2.4%2.6%
Return on:      
Average shareholders' equity - %8.2%5.8%1.4 %(3.1)%9.6%17.0%
Average invested capital(5)- %
6.1%4.3%0.6 %(3.4)%7.5%12.6%
Dividend yield at year-end - %1.1%1.4%2.6 %2.3 %2.3%3.3%
Book value per share12.18
11.69
11.45
11.66
12.29
11.4
Price/earnings ratio at year-end36:1
39:1
76:1
NM
12:1
5:1
Average monthly trading volume5,098
3,381
2,830
4,790
5,900
8,400
*
(1)Includes the acquisition of Alumicor in November 2013.
(2)Fiscal 2012 included 53 weeks compared to 52 weeks in each of the other periods presented.
(3)Includes the acquisition of Glassec in November 2010.
(4)See Item 5 for dividend per share data.
**
(5)[(Operating income + equity in earnings of affiliated companies) x (.65)]/average invested capital

NM=Not meaningful

(1)Fiscal 2012 and 2007 each included 53 weeks compared to 52 weeks in each of the other periods presented.
(2)See Item 8, Note 6 to the Consolidated Financial Statements for additional information related to the acquisition of Glassec in November 2010.
(3)Fiscal 2011 includes a retrospective adjustment of $4.2 million as described in Item 8, Note 6 to the Consolidated Financial Statements.


ITEM 7. MANAGEMENT’SMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Forward-Looking Statements

This discussion contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect our current views with respect to future events and financial performance. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “should” and similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All forecasts and projections in this document are “forward-looking statements,” and are based on management’smanagement's current expectations or beliefs of the Company’sCompany's near-term results, based on current information available pertaining to the Company, including the risk factors noted under Item 1A in this Form 10-K. From time to time, we also may provide oral and written forward-looking statements in other materials we

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release to the public such as press releases, presentations to securities analysts or investors, or other communications by the Company. Any or all of our forward-looking statements in this report and in any public statements we make could be materially different from actual results.


Accordingly, we wish to caution investors that any forward-looking statements made by or on behalf of the Company are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. These uncertainties and other risk factors include, but are not limited to, the risks and uncertainties set forth under Item 1A in this Form 10-K.


We wish to caution investors that other factors might in the future prove to be important in affecting the Company’sCompany's results of operations. New factors emerge from time to time; it is not possible for management to predict all such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or a combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


Overview

We are a leader in certain technologies involving the design and development of value-added glass products, servicesdistinctive solutions for enclosing commercial buildings and systems.framing art. The Company is comprised of two segments:Company's four reportable segments are: Architectural Products andGlass, Architectural Services, (Architectural)Architectural Framing Systems and Large-Scale Optical Technologies (LSO). Our Architectural Glass segment companies design, engineer, fabricate, install, maintain and renovate the wallsconsists of glass, windows, storefront and entrances comprising the outside skin of commercial and institutional buildings. Businesses in this segment are: Viracon, Inc., including GlassecViracon,a fabricator of coated, high-performance architectural glass for global markets;markets. The Architectural Services segment consists of Harmon, Inc., one of the largest U.S. full-service building glass installation and renovation companies;companies, which designs, engineers, fabricates and installs the walls of glass, windows and other curtainwall products making up the outside skin of commercial and institutional buildings. The Architectural Framing Systems segment companies design, engineer, fabricate and finish the aluminum frames used in customized aluminum and glass window, curtainwall, storefront and entrance systems comprising the outside skin and entrances of commercial and institutional buildings. We have aggregated four operating segments into the Architectural Framing Systems reporting segment based upon their similar products, customers, distribution methods, production processes and economic characteristics: Wausau Window and Wall Systems, a manufacturer of standard and custom aluminum window systems and curtainwall for the North American commercial construction market; Linetec, a paint and anodizing finisher of architectural aluminum and PVC shutters for U.S.historical renovation markets; and Tubelite, Inc. (Tubelite), a fabricator of aluminum storefront, entrance and curtainwall products for the U.S. commercial construction industry.industry; Alumicor, a fabricator of aluminum storefront, entrance, curtainwall and window products for the Canadian commercial construction industry; and Linetec, a paint and anodize finisher of architectural aluminum and PVC shutters for U.S. markets. Our LSO segment consists of Tru Vue, Inc., a manufacturer of value-added glass and acrylic for the custom picture framing market.

and fine art markets.


The following arehighlights the key items that impactedresults for fiscal 2012:

2014:

The Architectural segment’s net sales were up 15.1Consolidated revenues increased 10 percent over fiscal 2013, or 9.18 percent excluding the impact of GlassecViracon, whichAlumicor, and operating income was acquired lateup 47 percent over last year. All four segments grew at the top and bottom lines.

Architectural Glass segment revenues improved by 10 percentage points over fiscal 2013 and operating results improved $8.3 million.
The Architectural Services segment revenues increased 9 percent over fiscal 2013 and operating income improved by $5.5 million.
The Architectural Framing Systems segment saw a 13 percent improvement in net sales compared to fiscal 2011, over the prior year even as we continued to be impacted by difficult U.S. commercial construction market conditions. Growth was driven by initiatives to improve market share in our metal fabrication businesses and improved pricing in our architectural glass fabrication business. Operating results were also favorable to last year largely due to2013, or 5 percent organic growth when adjusting out the impact of the items above, partially offset by project margin declines at our installation business.

Alumicor, and operating results were up 2 percent.

Despite soft market conditions, ourThe LSO segment was able to increase net sales 4.1 percent, whilesaw revenues and operating income was downgrow slightly due to spending on growth initiatives duringover fiscal 2012.

2013 levels.

Our

Consolidated backlog was $243.9$329.6 million at March 3, 2012, compared1, 2014, up 11 percent over fiscal 2013 levels.
We acquired Alumicor Limited (Alumicor) for $52.9 million on November 5, 2013. Alumicor's results of operations have been included in the consolidated financial statements and within the Architectural Framing Systems segment since the date of acquisition. Alumicor contributed $15.9 million of sales to $238.4 million at February 26, 2011.

Theour Architectural Framing Systems segment backlog represents more than 99 percentfor the period subsequent to acquisition.


Strategy

Architectural Glass, Architectural Services and Architectural Framing Systems Segments
All of the backlog. Bidding activity has remained solid; however, bid-to-award and contract timing continues to be slow.

Strategy. The following describes our business strategy for each of our segments.

Architectural segment.Our Architectural segment servesthese segments serve the commercial construction market, which is highly cyclical. We have five business units within this segment thatThey participate atin various stagesphases of the value chain to design, engineer, manufacture and install customized aluminum and glass fabrication, window, curtainwall, and curtainwall supply chain –storefront and entrance systems for commercial buildings - each with nationally recognized brands and leading positions in their target market segments.


The window, curtainwall and storefront systems manufactured by our Architectural Framing Systems segment, as well as the glass and window and curtainwall systemsproducts fabricated by our Architectural Glass segment, are sold to installers who enclose commercial buildings, such as offices, hospitals, educational facilities, government facilities, high-end multi-family buildings and retail centers. We believe building general

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contractors and architects value our ability to reliably deliver quality, customized window and curtainwall solutions to projects on time and on budget, helping to minimize costly job-site labor overruns.solutions. Their customers –- building owners and developers –- value the distinctive look, energy efficiency, and hurricane and blast protection features of our glasswindow and curtainwall systems. These benefitsattributes can contribute to higher lease rates, lower operating costs due to the energy efficiency of our value-added glass, a more comfortable environment for building occupants, and protection for buildings and occupants from hurricanes and blasts.


Our Architectural Services segment provides services to fabricate and install glass window and curtainwall systems on newly constructed commercial buildings as well as providing large-scale retrofit services for the window and curtainwall systems on existing commercial buildings. We collaborate closely with our customers, the general contractors, to complete installation projects on time and on budget in order to minimize costly job-site labor overruns.

We look at several market indicators, such as office space vacancy rates, architectural billing statistics, employment and other economicmacroeconomic indicators, to gain insight into the commercial construction market. One of our primary indicators is U.S. non-residential construction market activity as documented by McGraw-Hill Construction (McGraw-Hill), a leading independent provider of construction industry analysis, forecasts and trends. We utilize the information for the building types that we typically supplyserve (office towers, hotels, retail centers, education facilities and dormitories, health care facilities, government buildings and high-end multi-family buildings) and adjust this information (which is based on construction starts) to align with our fiscal year and the lag that is required to account for when our products and services typically are initiated in a construction project –- approximately eight months after project start. From the McGraw-Hill data, we believe that our U.S. markets had ana compound annual compounded growth rate of negative 144 percent over our past three fiscal years, consistent withwhile our segment’scombined architectural segments' domestic compoundedcompound annual growth rate was 11 percent over that same period.


Our overall strategy in this segmentthese segments is to defenddeliver organic growth faster than our commercial construction markets. This organic growth is accomplished through geographic expansion and grow market share over a cycle by extending our presenceentry into adjacent markets, while remaining focused on distinctive solutions for enclosing commercial buildings. We draw upon our leading brands, energy-efficient products and reputation for high quality and service in pursuit of our strategy. Each of our existing businesses has the ability to grow through geographic or product line expansion, and we regularly evaluate acquisition opportunities in adjacent segments. Finally, westrategies. We also aspire to lead our markets in the development of practical, energy-efficient products for “green” buildingsnew construction and the ability to deliver them in a sustainable manner. Our architectural businessesrenovation. We have introduced products and services designed to meet the growing demand for greenenergy-efficient building materials. These products have included new energy-efficient glass coatings, thermally enhanced aluminum framing systems, and systems with a high percentage of recycled content.


While each of our lag-adjustedoperating segments has the ability to grow through geographic expansion and product line extension, we regularly evaluate business development opportunities in complementary markets. This strategy can take the form of acquisition or strategic alliances. Through our acquisitions completed in fiscal 2014, we have entered the Canadian market for storefront and entrance systems and expanded our product offerings for the historically accurate window renovation market.

In recent years, we have increased our focus on the window and curtainwall retrofit and renovation market. We have seen increased interest from all sectors of the non-residential and high-end multi-family building markets in upgrading the façades and improving the energy efficiency of their buildings. We consider this to be a significant opportunity for Apogee in the coming years.

Additionally, we are projectedconstantly working to improve the efficiency and productivity of our manufacturing and installation operations. During fiscal 2014, we completed the initial roll-out of lean manufacturing principles to all of our operating units and expect to continue to contract slightly into fiscal 2013,see gross margin expansion due to improved manufacturing productivity.

Lastly, we are pursuing the same basic strategy with some adjustment for market conditions. In fiscal 2011 we raised the pricing of our U.S. architectural glass productsconsistently evaluate capital investments to better reflect the value our products deliverimprove productivity and product development capabilities, as well as to the marketplace, and expect to see the full benefits of the price increases in fiscal 2013. In addition, we have been and continue to take measures to keep our cost structure in line with revenue, including continuing to focus on productivity while maintaining and upgrading ourprovide appropriate manufacturing capacity to gain market share when our markets recover. We acquired Glassec, a leading architectural glass fabricator in Brazil, in November 2010, establishing an architectural glass footprint in a developing and fast-growing market where we can provide technical and operational excellence. We have been successful in winning and profitably executing installation work in new metropolitan markets to offset declines in core markets. We are focusing on renovation of window and curtainwall systems where all sectors are increasing their interest in upgrading their facades. We have tightened our capital spending criteria, although we continue to have cash available, and will be spending during fiscal 2013 for strategic investments for both international and domestic initiatives to drive growth and improve productivity. We expect to emerge from the current downturn poised to win market share from competitors who were not as well positioned or do not have funds available to weather the current down cycle.

support growth.


LSO segment.segment
Our basic strategy in this segment is to convert the custom picture framing market from clear uncoated glass and acrylic products to value-added glassproducts that protectsprotect art from UV damage while minimizing reflection from the glass, so that viewers see the art rather than the glass. We estimate that over 5060 percent of the retailU.S. picture framing market has converted to value-added glass, and althoughglass. Although we are finding it more difficult to convert the ultimate potential is significantly higher.remaining U.S. market, we continue to see conversion in the market. We offer a variety of products with varying levels of reflection control and promote the benefits to consumers with point-of-purchase displays and other promotional materials.

We also work to educateparticipate in the fragmented custom picture framing market regarding the opportunity to improve the profitability of their framing business by selling value-added glass.

Over the past two years, we have been extending our strategy to theglobal fine art market, which includes demand from museums and private art collections. We also made capital investments to supportThis market appreciates the conversion to value-added picture framingconservation and anti-reflective properties of our products, as well as to grow the fine art market. As part of that extension, we developed value-addedprimarily our acrylic products in addition to glass.products. Acrylic is a preferred material in the fine art marketsmarket because the product is light weight, which allows its use with art can bethat is much larger and for which weight is an important consideration. In fiscal 2010,We will continue to expand our presence in this market through international expansion and product line extensions.


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Additionally, we expandedhave continued to execute our strategies to include otherstrategy of expanding into custom picture framing markets that can be served with anti-reflective acrylic products.

In fiscal 2011,outside the U.S. Over the past three years, we established an initiative to begin selling our products in Europe, and inhave focused on the European markets. In fiscal 2012, we opened up a warehouse in the Netherlands and began executing against this initiative. Historically,selling our custom picture framing glass and acrylic in Europe where, historically, we have had very little presencepresence. We developed new products and marketing materials for this market and have distributors in Europe.over10 countries. We believe our products and distribution networks will enable us to grow at a faster pace in Europeinternationally than in the United States.


Results of Operations

Net Sales

(Dollars in thousands)

  2012   2011   2010   2012 vs. 2011  2011 vs. 2010 

Net sales

  $662,463    $582,777    $696,703     13.7%   (16.4)% 

(Dollars in thousands)2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Net sales$771,445
 $700,224
 $662,463
 10.2% 5.7%

Fiscal 20122014 Compared to Fiscal 2011

2013

Sales grew 10.2 percent in fiscal 2014 to $771.4 million compared to $700.2 million in fiscal 2013. The inclusion of Alumicor sales since the date of acquisition accounted for 2 percentage points of this increase. Improved product mix and pricing in the Architectural Glass segment drove approximately 4 percentage points of the increase. Volume growth in the Architectural Services segment favorably impacted the year by about 2 percentage points and the remainder of the increase resulted from improved volume in our Architectural Framing segment's U.S. storefront and finishing businesses.

Fiscal 2013 Compared to Fiscal 2012
Sales increased 13.75.7 percent during fiscal 2012 despite flat market conditions2013 largely due to market share gains through domestic geographic expansion and increased penetration in target markets in the windowArchitectural Services and storefront businesses and improved architectural glass pricing. The GlassecViracon business that was acquiredArchitectural Framing Systems segments, representing approximately 4 percentage points of the increase. Improved pricing in the third quarter ofArchitectural Glass segment also had a favorable impact on fiscal 2011 accounted for 5.22013 revenues, representing another approximately 4 percentage points of the increase inover fiscal 2012. In addition, fiscal 2012Fiscal 2013 included 5352 weeks compared to the prior-year 52-week period,53-weeks in fiscal 2012, which had a negative impact of approximately 2 percent impactpercentage points on current yearfiscal 2013 sales.

Fiscal 2011 Compared to Fiscal 2010

Sales decreased 16.4 percent due to challenging commercial construction market conditions during fiscal 2011. This resulted in lower demand, driving lower volume across all Architectural segment business lines, and lower pricing, largely in our architectural glass business. GlassecViracon contributed $3.7 million of sales to our Architectural segment in fiscal 2011 for the period subsequent to acquisition.


Performance

The relationship between various components of operations, as a percentage of net sales, is illustrated below for the past three fiscal years.

(Percentage of net sales)

  2012  2011  2010 

Net sales

   100.0%   100.0%   100.0% 

Cost of sales

   82.3    85.7    76.7  
  

 

 

  

 

 

  

 

 

 

Gross profit

   17.7    14.3    23.3  

Selling, general and administrative expenses

   17.1    17.9    16.8  
  

 

 

  

 

 

  

 

 

 

Operating income (loss)

   0.6    (3.6)   6.5  

Interest income

   0.2    0.1    0.1  

Interest expense

   0.2    0.1    0.1  

Other income (expense), net

   —      —      0.1  
  

 

 

  

 

 

  

 

 

 

Earnings (loss) from continuing operations before income taxes

   0.6    (3.6)   6.6  

Income tax (benefit) expense

   (0.1)   (1.2)   2.1  
  

 

 

  

 

 

  

 

 

 

Earnings (loss) from continuing operations

   0.7    (2.4)   4.5  

Earnings from discontinued operations, net of income taxes

   —      0.6    0.1  
  

 

 

  

 

 

  

 

 

 

Net earnings (loss)

   0.7%   (1.8)%   4.6% 
  

 

 

  

 

 

  

 

 

 

Effective income tax rate for continuing operations

   (28.8)%   32.0%   32.1% 

(Percentage of net sales)2014 2013 2012
Net sales100.0% 100.0% 100.0 %
Cost of sales78.6
 79.2
 82.3
Gross profit21.4
 20.8
 17.7
Selling, general and administrative expenses16.2
 16.9
 17.1
Operating income5.2
 3.9
 0.6
Interest income0.1
 0.1
 0.1
Interest expense0.1
 0.2
 0.2
Other (expense) income, net—
 —
 —
Earnings before income taxes5.2
 3.8
 0.5
Income tax expense (benefit)1.6
 1.1
 (0.2)
Net earnings3.6% 2.7% 0.7 %
Effective income tax rate29.6% 29.0% (29.2)%

Fiscal 20122014 Compared to Fiscal 2011

Consolidated2013

Gross profit improved as a percent of sales to 21.4 percent in fiscal 2014 from 20.8 percent in fiscal 2013. The improvement in gross margins was due to the margin impact of improved mix and pricing in the Architectural Glass segment, improved project margins in the Architectural Services segment and overall productivity improvements. These favorable items were partially offset by lower capacity utilization in the Architectural Framing System's window business related to an anticipated gap in the schedule for more complex projects.

Selling, general and administrative (SG&A) spending increased by $6.7 million in fiscal 2014 over fiscal 2013, while SG&A as a percent of sales decreased to 16.2 percent in fiscal 2014 from 16.9 percent in fiscal 2013. The increase in spending was primarily due to increased salaries and related benefits to support sales growth and geographic expansion, as well as other costs related to geographic expansion and acquisitions.

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Fiscal 2013 Compared to Fiscal 2012
Gross profit was up 3.43.1 percentage points in fiscal 2013 as compared to fiscal 2012 due to improved pricing in the higher architectural glass pricingArchitectural Glass segment, productivity improvements across all segments, and the margin impact from the revenue growth in the windowArchitectural Services and storefront businesses, partially offset by lowerArchitectural Framing Systems segments. In addition, fiscal 2013 benefited from completing higher margin work and positive project execution in the installation business. During fiscal 2011, we incurred unusually high costs to resolve architectural glass product quality issues from a vendor-supplied material, as well as other quality issues, which negatively impacted gross profit by approximately $3.4 million, or 0.6 percentage points.

Architectural Services segment.


Selling, general and administrative (SG&A) expenses decreased as a percent of sales to 16.9 percent in fiscal 2013 from 17.1 percent in fiscal 2012, from 17.9 percent in fiscal 2011, while spending was up $9.2$5.0 million. Approximately half of theThe increase in spending relateswas primarily due to the impact of the addition of the GlassecViracon business. Transitionincreased expense for incentive compensation programs, as Company operating performance improved. This was partially offset by a decrease in costs related to our retiring CEO and hiring our new CEO, increased commissions as a result of increased sales, and increased promotional coststhe Chief Executive Officer transition that were included in our LSO segment also contributed to the increase in spending.

In the current year,fiscal 2012 SG&A expenses.


Fiscal 2013 income tax expense on pre-tax income was more than offset byreturned to normal levels as compared to fiscal 2012, which included tax benefits from credits and deductions on a low base of earnings and the impact of statute of limitation expirations for prior fiscal years.


Segment Analysis
Architectural Glass
(In thousands)2014 2013 2012
Net sales$293,810
 $266,456
 $278,087
Operating income (loss)3,861
 (4,391) (19,595)
Operating income (loss) as a percent of sales1.3% (1.6)% (7.0)%

Fiscal 20112014 Compared to Fiscal 20102013.

Consolidated gross profit was down 9.0Fiscal 2014 net sales increased $27.4 million to $293.8 million, or 10.3 percent over fiscal 2013. Improved mix and pricing in our U.S. and Brazilian businesses accounted for approximately 8 percentage points of the increase. The remainder was due to lower pricing, primarilyvolume growth in both our U.S. and Brazilian businesses, partially offset by a decline in our architectural glass business, as well as lower projectexport volume.


Operating income of $3.9 million in fiscal 2014 was an $8.3 million improvement over the fiscal 2013 loss of $4.4 million. Operating margins andimproved to 1.3 percent in fiscal 2014 compared to negative 1.6 percent in fiscal 2013. The improvement in operating results was largely due to the impact of low capacity utilization from lowera better mix of higher value-added projects and improved pricing. The impact of volume growth and productivity improvements also contributed to the year-on-year increase in our Architectural segment. During fiscal 2011, we incurred unusually high costsoperating results.

Fiscal 2013 Compared to resolve architectural glass product quality issues from a vendor-supplied material, as well as other quality issues, which negatively impacted gross profit by approximately $3.4Fiscal 2012. Fiscal 2013 net sales decreased $11.6 million or 0.64.2 percent from fiscal 2012. Revenues were down 13 percentage points. Our LSO segment had favorable results for fiscal 2011 comparedpoints attributable to fiscal 2010volume decreases, partially offset by a 9 percentage point increase in net sales from improved pricing. The volume declines were largely due to the ongoing strong mix of value-added picture framing product and positive operating performance, partially offsetting the items above.

SG&A expenses increased as a percent ofplanned decline in export sales to 17.9 percent in fiscal 2011 from 16.8 percent in fiscal 2010, while spending decreased by $12.6 million. The decrease in spending relates to reduced accruals for incentive and long-term executive compensation expenses; lower spending on discretionary items as we focused on cost management;more profitable domestic projects, as well as the impact of exchange rates on our Brazilian business.


For fiscal 2013, the segment incurred an operating loss of $4.4 million, with an operating margin of negative 1.6 percent, compared to an operating loss of $19.6 million and reduced salariesa negative operating margin of 7.0 percent in fiscal 2012. The fiscal 2013 improvement was primarily due to improved pricing, a better mix of business, and employee-related expenses asimproved operating performance and management of fixed costs.

Architectural Services
(In thousands)2014 2013 2012
Net sales$203,351
 $186,570
 $149,779
Operating income (loss)4,479
 (1,008) (2,879)
Operating income (loss) as a percent of sales2.2% (0.5)% (1.9)%

Fiscal 2014 Compared to Fiscal 2013. Fiscal 2014 net sales increased $16.8 million over fiscal 2013, a 9.0 percent increase. Volume growth in existing and expanded geographies was the driver of this growth. Fiscal 2014 operating income increased $5.5 million to $4.5 million compared to a loss of $1.0 million in fiscal 2013. Operating margin of 2.2 percent in fiscal 2014 was an improvement of 2.7 percentage points over fiscal 2013. The improved operating results were a result of headcount reductions. The increasebetter project margins, as awe have worked through lower margin projects that were bid in the bottom of the market cycle, as well as strong execution on projects flowing through revenue.


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Fiscal 2013 Compared to Fiscal 2012. Fiscal 2013 net sales increased $36.8 million, or 24.6 percent, of sales was largelyover fiscal 2012. Revenue growth due to expansion of our inabilitydomestic footprint accounted for the majority of the increase, or approximately 15 percentage points. The remaining 9 percentage points of the increase were due to leverage expenses overincreased volume serviced from our remaining domestic regions.

For fiscal 2013, the segment incurred an operating loss of $1.0 million, with an operating margin of negative 0.5 percent, compared to an operating loss of $2.9 million and a lower levelnegative operating margin of sales dollars.

Fiscal 2011 earnings from discontinued operations of $3.8 million reflect favorable resolution of an outstanding tax exposure related to a foreign operation discontinued1.9 percent in 1998.fiscal 2012. The resolution of this exposure provided non-cash income from discontinued operations of $4.9 million in the second quarter. Fiscal 2011 also included a pre-tax charge of $1.6 million in the fourth quarter for expected settlement of an exposure related to a foreign operation discontinued in 1998. This settlementfiscal 2013 improvement was finalized in March 2011, and we paid $3.0 million in the first half of fiscal 2012 for final resolution of this matter. The settlements of these two items represent the last significant remaining items with respect to our international curtainwall business. Fiscal 2010 income of $0.5 million wasprimarily due to the favorable resolution of an outstanding lease claimleverage on the net sales growth discussed above and a reductionpositive project execution. These items were partially offset by costs incurred in reserves relatedfiscal 2013 to start domestic geographic expansion. In fiscal 2013, the expiration of warranty periods.

Segment Analysis

segment was still working off projects that were bid at lower margins, but began to see higher-margin projects positively impact its results.


Architectural Products and Services (Architectural)

(In thousands)

  2012  2011  2010 

Net sales

  $583,933   $507,392   $626,007  

Operating (loss) income

   (12,072)   (37,668)   31,591  

Operating (loss) income as a percent of sales

   (2.1)%   (7.4)%   5.0% 
  

 

 

  

 

 

  

 

 

 

Framing Systems

(In thousands)2014 2013 2012
Net sales$216,059
 $191,137
 $174,930
Operating income14,930
 14,584
 10,402
Operating income as a percent of sales6.9% 7.6% 5.9%

Fiscal 20122014 Compared to Fiscal 2011.2013. Fiscal 20122014 net sales increased $76.5$24.9 million, or 15.113.0 percent, fromover fiscal 2011, compared to growth of approximately 1 percent in our markets served, according to McGraw-Hill data. The2013.The addition of GlassecViraconAlumicor accounted for 6.0approximately 8 percentage points of the increase for the year. Volume growthThe remainder of the increase was due to improved volumes in the U.S. storefront and finishing businesses, partially offset by volume declines caused by an anticipated gap in the schedule for the window business.

Fiscal 2014 operating income of $14.9 million was up slightly over the $14.6 million reported in fiscal 2013, while operating margins decreased to 6.9 percent in fiscal 2014 from 7.6 percent in fiscal 2013. The favorable impact of increased market sharevolumes in ourthe U.S. storefront and finishing businesses was partially offset by lower sales in the window and storefront businesses and improved architectural glass pricing contributedbusiness related to the year-on-year improvement. In addition,anticipated gap in the extra weekschedule for more complex projects, resulting in fiscal 2012 had an impact of 2 percent on currentlower capacity utilization. Additionally, the Canadian storefront business that was acquired late in the year sales.

For fiscal 2012, the segment incurreddelivered an operating loss of $12.1due to acquisition costs.


Fiscal 2013 Compared to Fiscal 2012. Fiscal 2013 net sales increased $16.2 million, or 9.3 percent, over fiscal 2012. Volume growth was driven by the storefront and window businesses, including share gains in target markets and domestic geographic expansion. Fiscal 2013 operating income was $14.6 million, with an operating margin of negative 2.17.6 percent, compared to an operating loss of $37.7$10.4 million in fiscal 2011, with a negative operating margin of 7.4 percent. The improvement was due to the improved architectural glass pricing and the impact of the increased revenue in our window and storefront businesses. These items were partially offset by lower margin work in the installation business as this business was working off projects that were bid at lower margins. In fiscal 2011, we incurred costs to resolve architectural glass product quality issues from a vendor-supplied material, as well as other quality issues, which negatively impacted segment gross profit by approximately $3.4 million, or 0.7 percentage points. Fiscal 2011 was also impacted by costs to implement architectural glass productivity improvements. GlassecViracon was minimally accretive to segment results in fiscal 2012.

Fiscal 2011 Compared to Fiscal 2010.Fiscal 2011 net sales decreased $118.6 million or 18.9 percent from fiscal 2010, a decline that was in line with the 18 percent decline in our markets served, according to McGraw-Hill data. We continued to be impacted by difficult U.S. commercial construction market conditions during fiscal 2011, with low employment levels and high vacancy rates for commercial buildings. Volume and pricing decreased across all of our architectural businesses, with our architectural glass business significantly impacted by lower pricing. GlassecViracon contributed $3.7 million of sales to our Architectural segment in fiscal 2011 for the period subsequent to acquisition.

For fiscal 2011, the segment incurred an operating loss of $37.7 million, with an operating margin of negative 7.45.9 percent in fiscal 2012. The fiscal 2013 improvement was primarily due to leverage on net sales growth in the segment, as well as better operating performance throughout the segment.


Large-Scale Optical Technologies (LSO)
(In thousands)2014 2013 2012
Net sales$81,127
 $79,947
 $78,532
Operating income21,252
 20,993
 19,605
Operating income as a percent of sales26.2% 26.3% 25.0%

Fiscal 2014 Compared to Fiscal 2013. LSO revenues in fiscal 2014 increased slightly over fiscal 2013 to $81.1 million from $79.9 million. The improvement compared to operating income of $31.6 million in fiscal 2010, with an operating margin of 5.0 percent. The decrease in operating margin2013 was due to lower pricing in our architectural glass business, lower projecta positive mix of higher value-added products. Operating income of $21.3 million was relatively flat to fiscal 2013 levels and operating margins thewere consistent. The impact of low

capacity utilization from lower volume, expenses related to architectural glass quality issuesthe strong mix of higher value-added products was largely offset by increased promotional activities and costs to implement architectural glass productivity improvements. During fiscal 2011, we incurred costs to resolve architectural glass product quality issues from a vendor-supplied material, as well as other quality issues, which negatively impacted gross profit by approximately $3.4 million, or 0.7 percentage points. GlassecViracon’s contribution to the operating loss was minimal.

investments for growth in new geographies and markets.


Large-Scale Optical Technologies (LSO)

(In thousands)

  2012  2011  2010 

Net sales

  $78,532   $75,426   $70,707  

Operating income

   19,605    20,540    16,870  

Operating income as a percent of sales

   25.0%   27.2%   23.9% 
  

 

 

  

 

 

  

 

 

 

Fiscal 20122013 Compared to Fiscal 2011.2012. LSO revenues increased $3.1 million, or 4.1were relatively flat to fiscal 2012, increasing 1.8 percent in fiscal 2012 to $78.5 million from $75.4 million in fiscal 2011 with an increase in sales to independent framers. The extra week in fiscal 2012 had an impact of 2 percent on current year sales. LSO segment operating2013. Operating income as a percent of sales decreasedincreased to 26.3 percent in fiscal 2013 from 25.0 percent in fiscal 2012, from 27.2 percentwith an increase of $1.4 million in fiscal 2011 and operating income was down $0.9 million. Although we maintained aincome. A strong mix of value-added picture framing product sales in fiscal 2012,2013 was somewhat offset by lower volume partially due to one less week in fiscal 2013. The segment also experienced strong operating performance in fiscal 2013, which contributed to the improved margins were negatively impactedin the year.


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Consolidated Backlog
Backlog represents the dollar amount of revenues we expect to recognize in the future from firm contracts or orders received, as well as those that are in progress. Backlog is not a term defined under generally accepted accounting principles and is not a measure of contract profitability. We include a project within our backlog at the time a signed contract or a firm purchase order is received, generally as a result of a competitive bidding process. Backlog by spending on sales, marketingreporting segment at March 1, 2014 and new market development initiatives, including international expansion.

Fiscal 2011 Compared to Fiscal 2010.LSO revenues increased $4.7March 2, 2013 was as follows:

 March 1, 2014 March 2, 2013
Architectural Glass$73,206
 $68,618
Architectural Services187,471
 191,386
Architectural Framing Systems72,634
 39,758
Large-Scale Optical870
 1,272
Intersegment eliminations(4,546) (2,742)
Total Backlog$329,635
 $298,292

We expect approximately $314.5 million, or 6.7 percent, in fiscal 2011 to $75.4 million from $70.7 million in fiscal 2010 on volume growth of 5.0 percent. LSO segment operating income as a percent of sales improved to 27.2 percent in fiscal 2011 from 23.9 percent in fiscal 2010 with a $3.7 million increase in operating income. Throughout fiscal 2011, we continued to see new and ongoing value-added product customers convert to our best picture framing products. Operating income benefited from increased volume, a stronger mix of value-added products and improved productivity. Fiscal 2010 results included the write-off of certain production equipment which negatively impacted fiscal 2010 margins by 1.2 percentage points.

Consolidated Backlog

At March 3, 2012, our consolidated backlog was $243.9 million, up 2 percent over the $238.4 million reported at February 26, 2011. The backlog of the Architectural segment represented more than 99 percent of consolidated backlog. We expect 7695 percent, of our total March 3, 20121, 2014 backlog to be recognized in fiscal 2013 revenue, compared to 84 percent of2015, with the February 26, 2011 backlog that was expectedbalance to be produced and shippedrecognized in fiscal 2012.2016 and beyond. We view backlog as an important statistic in evaluating the level of sales activity and short-term sales trends in our business. However, as backlog is only one indicator, and is not an effective indicator of our ultimate profitability, we do not believe that backlog should be used as the sole indicator of future earnings of the Company.


Acquisitions

On November 19, 2010, we5, 2013, the Company acquired 100 percentall of the stockshares of Glassec Vidros de Segurança Ltda.,Alumicor Limited, a privately held business, for $20.6$52.9 million, net ofincluding cash acquired of $1.1$1.6 million. GlassecAlumicor is a leading architectural glass fabricator in Brazil. The business operates underwindow, storefront, entrance and curtainwall company primarily serving the name GlassecViracon as partCanadian commercial construction market. Alumicor's results of the Company’s architectural glass business. GlassecViracon’s fiscal year ends December 31 and is reportedoperations have been included in the consolidated financial statements and within ourthe Architectural Framing Systems segment on a two-month lag.since the date of acquisition, including $15.9 million of sales and an operating loss after incurring approximately $0.5 million of acquisition-related expenses, which are included in selling, general and administrative expenses in the Company's consolidated results of operations.

The assets and liabilities of Alumicor were recorded in the consolidated balance sheet within the Architectural Framing Systems segment as of the acquisition date, at their respective fair values. The purchase isprice allocation was based on the fair value of assets acquired and liabilities assumed and included total assets of $61.8 million, including goodwill and intangibles of $34.9 million, and total liabilities of $10.5 million.

In the second quarter, we acquired certain assets and liabilities of a window fabrication business as part of our strategy to increasegrow through new products and new geographies. The acquisition is included in the results of our architectural glass penetrationwindow business reported in international markets. Goodwill recorded as part of the purchase price allocation was $3.3 millionArchitectural Framing Systems segment and is not tax deductible. Identifiable intangible assets acquired as part ofadds to our historic window renovation product line and extends our presence in the Western United States. Results from the acquisition were $7.3 million and include customer relationships, trademarks, patents and non-compete agreements with a weighted average useful lifeimmaterial to fiscal 2014 results.


23
Table of 18 years.

Discontinued Operations

In several transactions in fiscal years 1998 through 2000, we completed the sale of our large-scale domestic curtainwall business, the sale of our detention/security business and the exit from international curtainwall operations. The remaining estimated cash expenditures related to these discontinued operations are recorded as liabilities of discontinued operations and cover warranty issues relating to domestic and international construction projects that we expect to be resolved over the next five years.

In the fourth quarter of fiscal 2011, settlement of an outstanding legal claim related to a foreign discontinued operation resulted in a $1.6 million increase in reserves and a pre-tax loss from discontinued operations, which was finalized and paid in March 2011. In the second quarter of fiscal 2011, the favorable resolution of an outstanding tax exposure related to a foreign operation discontinued in 1998 resulted in the release of $4.9 million of uncertain tax positions and non-cash income from discontinued operations. The settlements of these two items represent the last significant remaining items with respect to our international curtainwall business. During fiscal 2010, a favorable resolution of an outstanding lease claim and a reduction in reserves related to the expiration of warranty periods resulted in pre-tax income from discontinued operations of $0.8 million.

Contents



Liquidity and Capital Resources

(Cash effect, in thousands)

  2012  2011  2010 

Operating Activities

    

Net cash provided by (used in) continuing operating activities

  $27,981   $(7,985)  $97,234  

Investing Activities

    

Capital expenditures

   (9,650)   (9,126)   (9,765) 

Proceeds from sales of property, plant and equipment

   10,320    190    276  

Acquisition of businesses, net of cash acquired

   —      (20,629)   —    

Change in restricted investments, net

   12,726    (35,794)   —    

Net sales (purchases) of marketable securities

   6,605    50,978    (43,506) 

Financing Activities

    

(Repayment) borrowing activities, net

   (1,316)   11,707    —    

Purchases and retirement of Company common stock

   (2,392)   —      —    

Dividends paid

   (9,153)   (9,161)   (9,112) 
  

 

 

  

 

 

  

 

 

 

(Cash effect, in thousands)2014 2013 2012
Operating Activities     
Net cash provided by operating activities$52,921
 $40,523
 $24,554
Investing Activities     
Capital expenditures(41,852) (34,664) (9,650)
Proceeds from sales of property, plant and equipment806
 1,078
 10,320
Acquisition of businesses and intangibles, net of cash acquired(53,301) (15) (68)
Change in restricted investments, net23,915
 (4,528) 12,726
Net sales (purchases) of marketable securities26,458
 (17,552) 6,605
Financing Activities     
Proceeds from issuance of debt—
 10,000
 121
Payments on debt(10,082) (164) (1,437)
Repurchase and retirement of common stock—
 —
 (2,392)
Dividends paid(10,764) (10,316) (9,153)

Operating activities.Cash provided by operating activities was $28.0$52.9 million in fiscal 2012, while cash used by operating activities was $8.02014, $40.5 million in fiscal 20112013 and cash provided by operating activities was $97.2$24.6 million in fiscal 2010.2012. Fiscal 20122014 and 2013 operating cash flows were each positively impacted by the increased income reported for the yearthose fiscal years as compared to the respective prior-year and were impacted less by the seasonally high cash outflowperiods. Additionally, fiscal 2014 benefited from operations in the first half of the year than inimproved working capital management as compared to fiscal 2011. Fiscal 2011 operating cash flows were negatively impacted by the loss from operations and seasonally high cash outflow from operations in the first half of the year as a result of payments made to fund annual incentive compensation, retirement plan contributions and annual insurance premiums. The cash provided by operating activities in fiscal 2010 was the result of higher earnings.2013.


Non-cash working capital (current assets, excluding cash and short-term marketable securities available for sale securities and short-term restricted investments, less current liabilities)liabilities, excluding current portion of long-term debt) was $77.3 million at March 1, 2014, or 10.0 percent of fiscal 2014 net sales, a metric for measuring working capital efficiency. This compares to $54.1 million at March 2, 2013, or 7.7 percent of fiscal 2013 net sales, and $44.4 million at March 3, 2012, or 6.7 percent of fiscal 2012 sales. This compares to $39.4 million at February 26, 2011 or 6.8 percent of fiscal 2011 sales and $15.1 million at February 27, 2010 or 2.2 percent of fiscal 2010net sales. The dollar change comparedin fiscal 2014 comes from including partial year results of Alumicor, growth in the base business and extending our geographic footprint in certain businesses. We believe that we have continued to manage working capital effectively while growing the business.

Investing Activities. Investing activities used cash of $44.0 million in fiscal 20112014 and $57.1 million in fiscal 2013, while cash provided was due$18.5 million in fiscal 2012. In fiscal 2014, we made capital investments of $41.9 million as we made investments for growth, productivity and product development capabilities, including a new state-of-the-art coater in our Architectural Glass segment. We reduced our restricted investments by $23.9 million, as we released $10.0 million of cash held in escrow for the recovery zone facility bonds that was used to redeem the bonds and also released $12.0 million of cash outflowscollateral to unrestricted cash related to the letter of credit supporting these bonds. We decreased our investments in marketable securities by $26.5 million in fiscal 2014 to fund the acquisition of Alumicor.

In the current year, we completed two acquisitions as part of our strategy to grow through new products and new geographies. In the second quarter, we acquired certain assets and liabilities of a window fabrication business, which is included in the results of our window business within the Architectural Framing Systems segment. During the third quarter, we acquired the outstanding shares of Alumicor Limited; the results of operations have been included in the consolidated financial statements and within the Architectural Framing Systems segment since the date of acquisition.

In fiscal 2013, we made capital investments of $34.7 million for growth and productivity improvements, as well as equipment to support new product introductions, and maintenance capital. The net position of our investments for fiscal 2013 resulted in $17.6 million in net purchases as a result of generating excess cash through operating activities noted above. Net purchases of $4.5 million for restricted investments during fiscal 2013 were the result of $10.0 million of industrial development bonds (reflected in financing activities) that were made available for current and future growth. We expect non-cash working capital as a percent of sales to increase during fiscal 2013 as we anticipate thatinvestment in our Architectural businesses will require more working capital to support increasingstorefront and entrance business activities.

Investing activities.Investingin Michigan.


Fiscal 2012 investing activities provided net cash of $18.5 million in fiscal 2012, and used cash of $14.4 million in fiscal 2011 and $53.2 million in fiscal 2010. The current year included $10.3 million in proceeds from the sale and leaseback of equipment. Net proceeds of $12.7 million from restricted investments impacted the current year as some of theduring fiscal 2012 resulted from releasing money market funds that were required to cover exposures under letters of credit that were beingpreviously held outside of our credit facility were moved under the facility, releasing the money market funds we had been required to maintain to cover those exposures.facility. The net position of our investments

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for fiscal 2012 resulted in $6.6 million in net salessale proceeds, in fiscal 2012, as we sold investments to fund current operating activities. New capital investments were $9.7 million forin fiscal 2012 primarily for safety and maintenance projects, and productivity improvements. In the first quarter of fiscal 2012, we invested in corporate-owned life insurance policies of $1.4 million with the intention of utilizing them as a long-term funding source for our deferred compensation plan obligations.

The prior-year period included $20.6 million for the acquisition of the GlassecViracon business. Prior-year investing activities also included net purchases of restricted investments of $35.8 million related to the funds received as a result of the recovery zone facility bonds that were made available for future investment in our architectural glass fabrication facility in Utah. The net position of our investments resulted in $51.0 million in net sales proceeds on marketable securities as we converted those investments to cash equivalents to support higher working capital. New capital investments for fiscal 2011 were $9.1totaled $9.7 million, primarily for safety and maintenance projects.

Fiscal 2010 investing activities included $43.5 million of net purchases of investments as we invested in liquid securities at that time


We expect fiscal 2015 capital expenditures to be used during the market downturnapproximately $40 million for investments for growth, productivity and for strategic investment. Fiscal 2010 capital expenditures were $9.8 million, focused on safety and maintenance projects,product development capabilities, as well as quick payback productivity improvements.

We anticipate that our fiscal 2013 capital expenditures will be approximately $25 million for investments in new products, capacity, productivity improvements and international, as well as for maintenance requirements.

capital.


We continue to review our portfolio of businesses and their assets in comparison to our internal strategic and performance objectives. As part of this review, we may acquire other businesses, pursue geographic expansion, take actions to manage capacity, and/or further invest in, fully divest and/or sell parts of our current businesses.

In the first quarter of fiscal 2014, we completed the temporary shutdown of our Architectural Glass segment business in Utah to align overall capacity with the demand we are expecting over the next two years.


At March 3, 2012,1, 2014, we had twoone sale and leaseback agreements, one for a building that provides an option to purchase the building at projected future fair market value upon expiration of the lease in 2014 and oneagreement for equipment that provides an option to purchase the equipment at projected future fair market value upon expiration of the lease in 2018. The leases arelease is classified as an operating leases.lease. We had a deferred gain of $5.9$3.6 million under the sale and leaseback transactions,transaction, which is included in the balance sheet as accrued expensesother current and other long-termnon-current liabilities. The average annual lease paymentspayment over the life of the remaining leases are $2.0 million.

lease is $1.6 million.


Financing activities.Activities.Total outstanding borrowings at March 3, 20121, 2014 were $21.0$20.7 million, compared to $22.4$30.8 million as of March 2, 2013 and $21.0 million at February 26, 2011 and $8.4 million at February 27, 2010. Long-term debt consistsMarch 3, 2012. During the first quarter of $12.0fiscal 2014, $10.0 million of recovery zone facility bonds $8.4that had previously been issued for future investment in the Company's Architectural Glass fabrication facility in Utah were redeemed at par. Our debt consists of $20.4 million of industrial developmentrevenue bonds and $0.3 million of other debt. The industrial revenue bonds mature in fiscal years 2021 through 2043 and the other debt incurred by GlassecViracon.matures in fiscal years 2015 through 2021. There were small amounts of current debt at March 1, 2014 and March 3, 2012. At March 2, 2013, $10.0 million of the recovery zone facility bonds were classified as current as we repaid these bonds related to our Utah facility in early fiscal 2014. Our debt-to-total-capital ratio was 6.15.5 percent at March 1, 2014 and 8.5 percent at March 3, 2012, compared2, 2013.

During the third quarter of fiscal 2014, the Company entered into an amendment to 6.4 percent at February 26, 2011.

We maintain an $80.0its existing $100.0 million revolving credit facility. The expiration date was extended by one year to November 2018 and the letter of credit facility was reduced by $10.0 million to $50.0 million, the outstanding amounts of which expires in January 2014, with borrowings secured by a pledge of certain assetsdecrease the available commitment. No other provisions of the Company.original agreement were materially amended by the amended credit agreement. No borrowings were outstanding under the facility as of March 3, 20121, 2014 or February 26, 2011. March 2, 2013. Letters of credit issued under the facility decrease the amount of available commitment; $76.5 million was available under the facility at March 1, 2014 and $76.6 million was available at March 2, 2013.


The credit facility requires that we maintain a minimum level of net worth as defined in the credit facility based on certain quarterly financial calculations. The minimum required net worth computed in accordance with the credit agreement at March 3, 20121, 2014 was $274.2$287.5 million, whereas our net worth as defined in the credit facility was $321.2 million.$352.6 million. The credit facility also requires that we maintain an adjusted debt-to-EBITDA ratio of not more than 2.75.3.00. This ratio is computed quarterly, with EBITDA computed on a rolling four-quarter basis. For purposes of calculating the adjusted debt in the adjusted debt-to-EBITDA ratio, we reduce non-credit facility debt for up to $25$25 million to the extent of unrestricted cash balances, cash equivalents and short-term marketable securities available for sale in excess of $15 million.$15 million. Our ratio was 0.000.25 at March 3, 2012.1, 2014. If we are not in compliance with either of these covenants, the lenders may terminate the commitment and/or declare any loan then outstanding to be immediately due and payable. At March 3, 2012,1, 2014, we were in compliance with the financial covenants of the credit facility.

We assumed debt of $2.3 million as part of the Glassec acquisition, of which $0.6 million was outstanding at March 3, 2012 and $0.1 million of which was recorded as current maturities of long-term debt. The acquired debt matures in fiscal years 2013 through 2021 and has a weighted average interest rate of 8.6 percent.


During fiscal 2004, the Board of Directors authorized a share repurchase program of 1,500,000 shares of common stock. The Board of Directors increased this authorization by 750,000 shares in January 2008 and by 1,000,000 shares in October 2008. We purchased 275,000 shares under the program during fiscal 2012. There were no share repurchases induring either fiscal 2011.2014 or 2013. We have purchased a total of 2,279,123 shares, at a total cost of $29.7 million, since the inception of this program. We have remaining authority to repurchase 970,877 shares under this program, which has no expiration date.


In addition to the shares repurchased under the repurchase plan, during fiscal 2014 and 2013we also reacquired $1.3acquired $3.6 million and $1.7$1.5 million, respectively, of Company stock from employees in order to satisfy stock-for-stock option exercises or withholding tax obligations related to stock-based compensation, pursuant to terms of Board and shareholder-approved compensation plans during fiscal 2012 and 2011, respectively.

plans.


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Other financing activities.Financing Activities.The following summarizes our significant contractual obligations that impact our liquidity:liquidity as of

   Future Cash Payments Due by Period 

(In thousands)

  2013   2014   2015   2016   2017   Thereafter   Total 

Industrial revenue bonds

  $—      $—      $—      $—      $—      $8,400    $8,400  

Recovery zone facility bonds

   —     —     —     —     —     12,000     12,000  

Other debt obligations

   108     62     62     62     62     268     624  

Operating leases (undiscounted)

   6,737     5,650     4,848     4,735     3,041     3,309     28,320  

Purchase obligations

   46,502     —       —       —       —       —       46,502  

Other obligations

   1,225     —       —       —       —       —       1,225  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cash obligations

  $54,572    $5,712    $4,910    $4,797    $3,103    $23,977    $97,071  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

March 1, 2014:

 Future Cash Payments Due by Fiscal Period
(In thousands)2015 2016 2017 2018 2019 Thereafter Total
Continuing operations             
Industrial revenue bonds$—
 $—
 $—
 $—
 $—
 $20,400
 $20,400
Other debt obligations49
 49
 49
 49
 49
 63
 308
Operating leases (undiscounted)8,953
 8,543
 6,765
 5,299
 6,729
 2,823
 39,112
Purchase obligations93,189
 3,017
 —
 —
 —
 —
 96,206
Total cash obligations$102,191
 $11,609
 $6,814
 $5,348
 $6,778
 $23,286
 $156,026

From time to time, we acquire the use of certain assets, such as warehouses, automobiles, forklifts, vehicles, office equipment, hardware, software and some manufacturing equipment through operating leases. Many of these operating leases have termination penalties. However, because the assets are used in the conduct of our business operations, it is unlikely that any significant portion of these operating leases would be terminated prior to the normal expiration of their lease terms. Therefore, we consider the risk related to termination penalties to be minimal.

As of March 3, 2012, we


We have purchase obligations totaling $46.5 million, the majority of which are for raw material commitments.

The othercommitments and capital expenditures. As of March 1, 2014, these obligations totaled $96.2 million.


We have a foreign exchange forward contract with a U.S. dollar notional value of $3.0 million with the objective of reducing the exposure to fluctuations in the table above relateEuro related to non-competea planned capital equipment purchase. The fair value of this contract was immaterial at March 1, 2014. We report the effective portion of the gain or loss on a cash flow hedge as a component of other comprehensive income, and consulting agreements with currentany gain or loss is included in the value of the capital asset and former employees.

will be recognized in earnings over the life of the asset.


We expect to make contributions of $0.9$0.8 million to our defined-benefit pension plans in fiscal 2013,2015, which will equal or exceed our minimum funding requirements.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   ��                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
As of March 3, 2012,1, 2014, we had $8.9$5.2 million and $2.0$1.5 million of unrecognized tax benefits and environmental liabilities, respectively. We expect $1.8approximately $0.4 million of the unrecognized tax benefits to lapse in fiscal 2013.during the next 12 months. We are unable to reasonably estimate in which future periods the remaining unrecognized tax benefits and environmental liabilities will ultimately be settled.


At March 3, 2012,1, 2014, we had ongoing letters of credit related to construction contracts and certain industrial developmentrevenue bonds. The Company’s $8.4$20.4 million of industrial revenue bonds are supported by $8.7$21.0 million of letters of credit that reduce availability of funds under our $80.0$100.0 million credit facility. The $12.0 million of recovery zone facility bonds are supported by $12.3 million of letters of credit. The letters of credit by expiration period were as follows at March 3, 2012:

   Amount of Commitment Expiration Per Period 

(In thousands)

  2013   2014   2015   2016   2017   Thereafter   Total 

Standby letters of credit

  $ 20,982    $ 2,000    $ —    $ —    $ —    $ 2,500    $ 25,482  

1, 2014:

 Amount of Commitment Expiration Per Fiscal Period
(In thousands)2015 2016 2017 2018 2019 Thereafter Total
Standby letters of credit$8,653
 $12,329
 $—
 $—
 $—
 $2,500
 $23,482

In addition to the above standby letters of credit, which were predominantly issued for our industrial developmentrevenue bonds, we are required, in the ordinary course of business, to obtainprovide surety or performance bonds that commit payments to our customers for any non-performance by us. At March 3, 2012, $100.51, 2014, $98.4 million of our backlog was bonded by performance bonds with a face value of $309.9 million.$275.7 million. Performance bonds do not have stated expiration dates, as we are released from the bonds upon completion of the contract. We have never been required to pay onmake any payments related to these performance-basedperformance bonds with respect to any of our current portfolio of businesses.

We self-insure our third-party product liability coverages. As a result, a material construction project rework event would have a material adverse effect on our operating results.


We believe that current cash on hand and available capacity under our committed revolving credit facility, as well as the expected cash to be generated from future operating activities, will be adequate to fund our working capital requirements, planned capital expenditures and dividend payments.payments over the next 12 months. We hadhave total cash and short-term marketable securities available for sale securities of

26
Table of $65.7Contents

$28.7 million, at March 3, 2012 and $66.8$76.5 million of available capacity under our revolving credit facility.facility at March 1, 2014. We believe that this will provide us with the financial strength to work through the ongoing weak market conditions and to continue our growth strategy through the recovery.

as our end markets continue to improve.


Off-balance sheet arrangements.With the exception of operating leases, we had no off-balance sheet financing arrangements at March 3, 20121, 2014 or February 26, 2011.March 2, 2013.


Outlook

The following statements are based on our current expectations for fiscal 2013.2015 results. These statements are forward-looking, and actual results may differ materially.

Overall revenues for the year are expectedRevenue growth of 15 to grow by mid-single digits20 percent over fiscal 2012.

2014.

We anticipate earnings per share of $0.40$1.35 to $0.50.

$1.50.

Capital expenditures are projected to be approximately $25$40 million.


Recently Issued Accounting Pronouncements

See New Accounting Standards set forth in Note 1 of the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K for information pertaining to recently adopted accounting standards or accounting standards to be adopted in the future, which is incorporated by reference herein.


Critical Accounting Policies

Management has evaluated the accounting policies and estimates used in the preparation of the accompanying financial statements and related notes, and believes those policies and estimates to be reasonable and appropriate. We believe that the most critical accounting policies and estimates applied in the presentation of our financial statements relate to accounting for future events. Future events and their effects cannot be determined with absolute certainty. Therefore, management is required to exercise judgment both in assessing the likelihood that a liability has been incurred as well as in estimating the amount of potential loss. We have identified the following accounting policies as critical to our business and in the understanding of our results of operations and financial position:


Revenue recognition – - Our standard product sales terms are “free on board” (FOB) shipping point or FOB destination, and revenue is recognized when title has transferred. However, our Architectural Services segment business enters into fixed-price contracts for full-service commercial building glass installation business recordsand renovation services, which are accounted for as construction-type contracts. These contracts are typically performed over a 12- to 18-month timeframe, and we record revenue for these contracts on a percentage-of-completion basis as it relateswe are able to revenues earned from construction contracts.reasonably estimate total contract revenue and total contract costs. The contracts entered into clearly specify the enforceable rights of the parties, the consideration and the terms of settlement, and both parties can be expected to satisfy all obligations under the contract. During fiscal 2012,2014, approximately 2326 percent of our consolidated sales and 26 percent of our Architectural segment sales were recorded on a percentage-of-completion basis. Under this methodology, we compare the total costs incurred to date to the total estimated costs for the contract, and record that proportion of the total contract revenue in the period. Contract costs include materials, labor and other direct costs related to contract performance. Given our ability to make reasonable estimates of our total contract revenues and total contract costs, we believe utilizing the cost-to-cost method for revenue recognition provides the greatest degree of precision in measuring progress toward completion of the installation contracts. Provisions are established for estimated losses, if any, on uncompleted contracts in the period in which such losses are determined. Amounts representing contract change orders, claims or other items are included in contract revenue only when customers have approved them. A significant number of estimates are used in these computations.


Goodwill impairment–- To determine if there has been any impairment in accordance with accounting standards, we evaluate the goodwill on our balance sheet annually or more frequently if impairment indicators exist through a two-step process. In step one, we value each of our reporting units and compare these values to the reporting units’units' net book value, including goodwill. If the fair value is less than the net book value, we perform step two, which determines the amount of goodwill to impair. Each of our seven business units represents a reporting unit under applicable accounting standards. We were not required to perform step two for fiscal 2012.2014; the estimated fair value of each of the reporting units significantly exceeded their book value utilizing the discounted cash flow methodology at March 1, 2014.


Although we consider public information for transactions made on businesses similar businesses to ours, since there were no market comparables identified, we base our determination of fair value using a discounted cash flow methodology that involves significant judgments based upon projections of future performance. In developing our discounted cash flow analysis, assumptions about future revenues and expenses, capital expenditures and changes in working capital are based on our annual operating plan and long-term business plan for each of our reporting units. These plans take into consideration numerous factors including historical experience, anticipated future economic conditions and growth expectations for the industries and end markets in which we

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participate. These assumptions are determined over a five-year, long-term planning period. The five-year growth rates for revenues and operating profits vary for each reporting unit being evaluated. Revenues and operating profit beyond the five-year period are projected to grow at a nominal perpetual growth rate for all reporting units. The discount rate calculations are determined by assuming a company beta, market premium risk, size premium, the cost of debt and debt-to-capital ratio of a market participant. The amount by which the estimated fair value of the reporting units exceeded their book value utilizing the discounted cash flow methodology was more than 25 percent at March 3, 2012.


A significant change in the factors noted above could cause us to reduce the estimated fair value of some or all of our reporting units and recognize a corresponding impairment of our goodwill in connection with a future goodwill impairment test. There can be no assurances that these forecasts will be attained. Adverse changes in strategy, market conditions or assumed market capitalization may result in an impairment of goodwill.


Reserves for disputes and claims regarding product liability and warranties – - From time to time, we are subject to claims associated with our products and services, principally as a result of disputes with our customers involving the performance or aesthetics of our Architectural products.architectural products and services. The time period from when a claim is asserted to when it is resolved, either by dismissal, negotiation, settlement or litigation, can be several years. While we maintain product liability insurance, the insurance policies include significant self-retention of risk in the form of policy deductibles. In addition, certain claims could be determined to be uninsured. We reserve based on our estimates of known claims, as well as on anticipated claims for possible product warranty and rework costs based on historical product liability claims as a ratio of sales.


Self-insurance reserves – - We obtain substantial amounts of commercial insurance for potential losses for general liability, workers’workers' compensation, automobile liability, employment practices, architect’sarchitect's and engineer’sengineer's errors and omissions risk, product re-work and other miscellaneous coverages. However, an amount of risk is retained on a self-insured basis through a wholly-owned insurance subsidiary.subsidiary; as a result, a material construction project rework event could have a material adverse effect on our operating results. Reserve requirements are established based on actuarial projections of ultimate losses.


Income taxes – - We record a tax provision for the anticipated tax consequences of the reported results of operations. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those deferred tax assets and liabilities are expected to be realized or settled. In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with management’smanagement's expectations could have a material impact on the Company’sCompany's financial condition and operating results.


As part of our ongoing financial reporting process, a collaborative effort is undertaken involving our management with responsibility for financial reporting, product and project management, quality, legal and tax, and outside advisors such as consultants, engineers, lawyers and actuaries. The results of this effort provide management with the necessary information on which to base its judgments on these future events and develop the estimates used to prepare the financial statements. We believe that the amounts recorded in the accompanying financial statements related to these events are based on the best estimates and judgments of Apogee management. However, outcomes could differ from our estimates and could materially adversely affect our future operating results, financial position and cash flows.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our investment portfolio consists of municipal bonds. At March 3, 2012,1, 2014, we had total investments of $19.6$11.5 million, which are considered available-for-sale securities. Although these investments are subject to the credit risk of the issuer and/or letter of credit issuer, we manage our investment portfolio to limit our exposure to any one issuer.


We do not use derivative financial instruments to manage interest rate risk or to speculate on future changes in interest rates. Accordingly, a rise in interest rates could negatively affect the fair value of our municipal bond portfolio. To manage our direct risk from changes in market interest rates, management actively monitors the interest-sensitive components of our balance sheet, primarily debt obligations and fixed income securities, as well as market interest rates, to minimize the impact of changes in interest rates on net earnings and cash flow.


The primary measure of interest rate risk is the simulation of net income under different interest rate environments. The approach used to quantify interest rate risk is a sensitivity analysis. This approach calculates the impact on net earnings, relative to a base case scenario, of rates increasing or decreasing gradually over the next 12 months by 200 basis points. This change in interest rates affecting our financial instruments at March 3, 20121, 2014 would result in an approximately $0.4$0.1 million impact to net earnings. The Company’sCompany's investments exceeded its debt at March 3, 2012,1, 2014, so as interest rates increase, net earnings increase; as interest rates decrease, net earnings decrease.



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In addition to the market risk related to interest rate changes, the commercial construction markets in which our businesses operate are highly affected by changes in interest rates and, therefore, significant interest rate fluctuations could materially impact our operating results.

Through


Due to our acquisition of Glassec in fiscal 2011,Canadian storefront and Brazilian glass businesses, we conduct business in a locationlocations outside of the United States, and are subject to market risk due to changes in the value of foreign currencies in relation to our reporting currency, the U.S. dollar. We generally do not use derivative financial instruments to manage these risks. The functional currencycurrencies of GlassecViraconour foreign operations is the local currency in the country of domicile, the Brazilian real.domicile. We manage these operating activities at the local level and revenues, costs, assets and liabilities are generally denominated in local currencies, thereby mitigating the risk associated with changes in foreign exchange. However, our results of operations and assets and liabilities are reported in U.S. dollars, and thus will fluctuate with changes in exchange rates between Canadian dollar, Brazilian real and the U.S. dollar.


From time to time, we may enter into short duration foreign currency contracts to hedge foreign currency risks. As these foreign currency contracts generally have an original maturity date of less than one year, there is no material foreign currency risk. We report the effective portion of the gain or loss on a cash flow hedge as a component of other comprehensive income, and any gain or loss is reclassified into earnings in the period in which the hedged transaction affects net earnings.

Our domestic businesses generally sell within the United States, with sales made outside of the United States generally denominated in U.S. dollars.


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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Management’s


Management's Report on Internal Control over Financial Reporting

Management of Apogee Enterprises, Inc. and its subsidiaries (the Company) is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) of the Securities Exchange Act of 1934. The Company’sCompany's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’sCompany's internal control over financial reporting includes those policies and procedures that (1) pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’sCompany's assets that could have a material effect on the financial statements.


Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


The Company’sCompany's management assessed the effectiveness of the Company’sCompany's internal control over financial reporting as of March 3, 2012,1, 2014, using criteria set forth inInternal Control—IntegratedControl-Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, the Company’sCompany's management believes that, as of March 3, 2012,1, 2014, the Company’sCompany's internal control over financial reporting was effective based on those criteria.


Management has excluded from its assessment the internal control over financial reporting at Alumicor, which was acquired on November 5, 2013, and whose financial statements constitute 10 percent of total assets, two percent of revenues and a negative one percent of operating income on the consolidated financial statement amounts as of and for the year ended March 1, 2014.

The Company’sCompany's independent registered public accounting firm, Deloitte & Touche LLP, has issued a report on the effectiveness of the Company’sCompany's internal control over financial reporting as of March 3, 2012.1, 2014. That report is set forth immediately following the report of Deloitte & Touche LLP on the consolidated financial statements included herein.


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Shareholders of

Apogee Enterprises, Inc.:

Minneapolis, MN

We have audited the accompanying consolidated balance sheets of Apogee Enterprises, Inc. and subsidiaries (the “Company”) as of March 3, 20121, 2014 and February 26, 2011,March 2, 2013, and the related consolidated results of operations, statements of comprehensive earnings, statements of cash flows,flow, and statements of shareholders’ equity for each of the three years in the period ended March 3, 2012.1, 2014. Our audits also included the financial statement schedule listed in the Table of Contents at Item 15. These consolidated financial statements and financial statement schedule are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on the consolidated financial statements and financial statement schedule based on our audits.


We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.


In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Apogee Enterprises, Inc. and subsidiaries at March 3, 20121, 2014 and February 26, 2011,March 2, 2013, and the results of their operations and their cash flows for each of the three years in the period ended March 3, 2012,1, 2014, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.


We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’sCompany's internal control over financial reporting as of March 3, 2012,1, 2014, based on the criteria established inInternal Control —- Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 30, 2012,2014, expressed an unqualified opinion on the Company’sCompany's internal control over financial reporting.


/s/ Deloitte & Touche LLP


Minneapolis, Minnesota

April 30, 2012

2014


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Shareholders of

Apogee Enterprises, Inc.:

Minneapolis, MN

We have audited the internal control over financial reporting of Apogee Enterprises, Inc. and subsidiaries (the “Company”) as of March 3, 2012,1, 2014, based on criteria established inInternal Control —- Integrated Framework (1992)issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Alumicor Limited (Alumicor), which was acquired on November 5, 2013 and whose financial statements constitute 10% of total assets, 2% of revenues, and (1%) of net income of the consolidated financial statement amounts as of and for the year ended March 1, 2014. Accordingly, our audit did not include the internal control over financial reporting at Alumicor. The Company’sCompany's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’sCompany's internal control over financial reporting based on our audit.


We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.


A company’scompany's internal control over financial reporting is a process designed by, or under the supervision of, the company’scompany's principal executive and principal financial officers, or persons performing similar functions, and effected by the company’scompany's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’scompany's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’scompany's assets that could have a material effect on the financial statements.


Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 3, 2012,1, 2014, based on the criteria established inInternal Control —- Integrated Framework (1992)issued by the Committee of Sponsoring Organizations of the Treadway Commission.


We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule listed in the Table of Contents at Item 15 as of and for the year ended March 3, 2012,1, 2014, of the Company and our report dated April 30, 2012,2014 expressed an unqualified opinion on those consolidated financial statements and financial statement schedule.


/s/ Deloitte & Touche LLP


Minneapolis, Minnesota

April 30, 2012

2014


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CONSOLIDATED BALANCE SHEETS

   March 3,  February 26, 

(In thousands, except per share data)

  2012  2011 

Assets

   

Current assets

   

Cash and cash equivalents

  $54,027   $24,302  

Short-term marketable securities available for sale

   11,664    11,163  

Restricted short-term investments

   13,603    25,086  

Receivables, net of allowance for doubtful accounts

   108,424    100,967  

Inventories

   34,045    32,608  

Refundable income taxes

   —      11,567  

Deferred tax assets

   4,294    5,180  

Other current assets

   3,382    3,050  
  

 

 

  

 

 

 

Total current assets

   229,439    213,923  
  

 

 

  

 

 

 

Property, plant and equipment, net

   159,547    179,201  

Marketable securities available for sale

   7,936    15,709  

Restricted investments

   9,533    10,717  

Goodwill

   61,617    62,004  

Intangible assets

   16,092    19,655  

Other assets

   8,940    9,889  
  

 

 

  

 

 

 

Total assets

  $493,104   $511,098  
  

 

 

  

 

 

 

Liabilities and Shareholders’ Equity

   

Current liabilities

   

Accounts payable

  $34,025   $34,943  

Accrued payroll and related benefits

   23,699    20,140  

Accrued self-insurance reserves

   4,668    6,330  

Other accrued expenses

   19,017    24,117  

Current liabilities of discontinued operations

   799    4,023  

Billings in excess of costs and earnings on uncompleted contracts

   22,550    23,406  

Current portion long-term debt

   108    987  

Accrued income taxes

   905    —    
  

 

 

  

 

 

 

Total current liabilities

   105,771    113,946  
  

 

 

  

 

 

 

Long-term debt

   20,916    21,442  

Unrecognized tax benefits

   8,918    13,848  

Long-term self-insurance reserves

   9,605    9,270  

Deferred tax liabilities

   2,247    4,863  

Other long-term liabilities

   23,929    19,410  

Liabilities of discontinued operations

   520    642  

Commitments and contingent liabilities (Note 17)

   

Shareholders’ equity

   

Common stock of $0.33-1/3 par value; authorized 50,000,000 shares; issued and outstanding, 28,062,049 and 28,104,627, respectively

   9,354    9,368  

Additional paid-in capital

   113,046    108,991  

Retained earnings

   203,558    210,203  

Common stock held in trust

   (745)   (751) 

Deferred compensation obligations

   745    751  

Accumulated other comprehensive loss

   (4,760)   (885) 
  

 

 

  

 

 

 

Total shareholders’ equity

   321,198    327,677  
  

 

 

  

 

 

 

Total liabilities and shareholders’ equity

  $493,104   $511,098  
  

 

 

  

 

 

 

(In thousands, except per share data) March 1,
2014		 March 2,
2013
Assets    
Current assets    
Cash and cash equivalents $28,465
 $37,767
Short-term available for sale securities 204
 26,007
Restricted short-term investments —
 21,804
Receivables, net of allowance for doubtful accounts 154,914
 121,170
Inventories 47,982
 36,052
Refundable income taxes 973
 1,371
Deferred tax assets 3,529
 2,218
Other current assets 6,725
 5,452
Total current assets 242,792
 251,841
Property, plant and equipment, net 193,946
 168,948
Available for sale securities 11,273
 12,807
Restricted investments 2,540
 4,639
Goodwill 78,021
 61,342
Intangible assets 27,198
 13,675
Other non-current assets 9,587
 6,889
Total assets $565,357
 $520,141
Liabilities and Shareholders’ Equity    
Current liabilities    
Accounts payable $47,241
 $34,235
Accrued payroll and related benefits 25,216
 26,732
Accrued self-insurance reserves 6,683
 6,145
Other current liabilities 35,088
 23,643
Billings in excess of costs and earnings on uncompleted contracts 22,557
 21,355
Current portion long-term debt 49
 10,057
Total current liabilities 136,834
 122,167
Long-term debt 20,659
 20,756
Unrecognized tax benefits 5,234
 6,765
Long-term self-insurance reserves 7,977
 8,030
Deferred tax liabilities 7,403
 3,480
Other non-current liabilities 34,620
 25,625
Commitments and contingent liabilities (Note 16)    
Shareholders’ equity    
Common stock of $0.33-1/3 par value; authorized 50,000,000 shares; issued and outstanding 28,958,119 and 28,513,536, respectively 9,653
 9,505
Additional paid-in capital 130,570
 119,759
Retained earnings 225,367
 211,135
Common stock held in trust (791) (761)
Deferred compensation obligations 791
 761
Accumulated other comprehensive loss (12,960) (7,081)
Total shareholders’ equity 352,630
 333,318
Total liabilities and shareholders’ equity $565,357
 $520,141

See accompanying notes to consolidated financial statements.

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Table of Contents

CONSOLIDATED RESULTS OF OPERATIONS

   Year-Ended  Year-Ended  Year-Ended 

(In thousands, except per share data)

  Mar. 3, 2012
(53 weeks)		  Feb. 26, 2011
(52 weeks)		  Feb. 27, 2010
(52 weeks)		 

Net sales

  $662,463   $582,777   $696,703  

Cost of sales

   545,343    499,657    534,608  
  

 

 

  

 

 

  

 

 

 

Gross profit

   117,120    83,120    162,095  

Selling, general and administrative expenses

   113,304    104,092    116,665  
  

 

 

  

 

 

  

 

 

 

Operating income (loss)

   3,816    (20,972)   45,430  

Interest income

   1,066    912    853  

Interest expense

   1,427    719    606  

Other income (expense), net

   193    (54)   285  
  

 

 

  

 

 

  

 

 

 

Earnings (loss) from continuing operations before income taxes

   3,648    (20,833)   45,962  

Income tax (benefit) expense

   (1,049)   (6,676)   14,745  
  

 

 

  

 

 

  

 

 

 

Earnings (loss) from continuing operations

   4,697    (14,157)   31,217  

(Loss) earnings from discontinued operations, net of income taxes

   (52)   3,825    525  
  

 

 

  

 

 

  

 

 

 

Net earnings (loss)

  $4,645   $(10,332)  $31,742  
  

 

 

  

 

 

  

 

 

 

Earnings per share – basic

    

Earnings (loss) from continuing operations

  $0.17   $(0.51)  $1.14  

Earnings from discontinued operations

   —      0.14    0.02  
  

 

 

  

 

 

  

 

 

 

Net earnings (loss)

  $0.17   $(0.37)  $1.16  
  

 

 

  

 

 

  

 

 

 

Earnings per share – diluted

    

Earnings (loss) from continuing operations

  $0.17   $(0.51)  $1.13  

Earnings from discontinued operations

   —      0.14    0.02  
  

 

 

  

 

 

  

 

 

 

Net earnings (loss)

  $0.17   $(0.37)  $1.15  
  

 

 

  

 

 

  

 

 

 

Weighted average basic shares outstanding

   27,741    27,637    27,381  

Weighted average diluted shares outstanding

   28,048    27,637    27,716  
  

 

 

  

 

 

  

 

 

 

Cash dividends declared per common share

  $0.326   $0.326   $0.326  
  

 

 

  

 

 

  

 

 

 

  Year-Ended
  March 1,
2014		 March 2,
2013		 March 3,
2012
(In thousands, except per share data) (52 weeks) (52 weeks) (53 weeks)
Net sales $771,445
 $700,224
 $662,463
Cost of sales 606,193
 554,491
 545,343
Gross profit 165,252
 145,733
 117,120
Selling, general and administrative expenses 124,967
 118,314
 113,304
Operating income 40,285
 27,419
 3,816
Interest income 827
 758
 1,066
Interest expense 1,259
 1,494
 1,427
Other (expense) income, net (87) 224
 141
Earnings before income taxes 39,766
 26,907
 3,596
Income tax expense (benefit) 11,780
 7,796
 (1,049)
Net earnings $27,986
 $19,111
 $4,645
Earnings per share – basic $0.98
 $0.68
 $0.17
Earnings per share – diluted $0.95
 $0.67
 $0.17
Weighted average basic shares outstanding 28,483
 27,954
 27,741
Weighted average diluted shares outstanding 29,374
 28,641
 28,048

See accompanying notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

   Year-Ended  Year-Ended  Year-Ended 

(In thousands)

  Mar. 3, 2012
(53 weeks)		  Feb. 26, 2011
(52 weeks)		  Feb. 27, 2010
(52 weeks)		 

Operating Activities

    

Net earnings (loss)

  $4,645   $(10,332)  $31,742  

Adjustments to reconcile net earnings to net cash provided by

operating activities:

    

Net loss (earnings) from discontinued operations

   52    (3,825)   (525) 

Depreciation and amortization

   27,246    28,218    29,601  

Stock-based compensation

   4,412    5,215    6,055  

Deferred income taxes

   (1,115)   (207)   763  

Excess tax benefits from stock-based compensation

   (92)   —      (162) 

(Gain) loss on disposal of assets

   (916)   (246)   770  

Other, net

   516    280    92  

Changes in operating assets and liabilities:

    

Receivables

   (7,931)   7,580    44,209  

Inventories

   (1,635)   (320)   8,953  

Accounts payable and accrued expenses

   (3,905)   (10,033)   (12,844) 

Billings in excess of costs and earnings on uncompleted contracts

   (856)   (15,330)   (16,109) 

Refundable and accrued income taxes

   7,887    (9,677)   3,980  

Other, net

   (327)   692    709  
  

 

 

  

 

 

  

 

 

 

Net cash provided by (used in) continuing operating activities

   27,981    (7,985)   97,234  
  

 

 

  

 

 

  

 

 

 

Investing Activities

    

Capital expenditures

   (9,650)   (9,126)   (9,765) 

Proceeds from sales of property, plant and equipment

   10,320    190    276  

Acquisition of intangibles

   (68)   (10)   (250) 

Acquisition of businesses, net of cash acquired

   —      (20,629)   —    

Purchases of restricted investments

   (12,628)   (37,087)   —    

Sales/maturities of restricted investments

   25,354    1,293    —    

Purchases of marketable securities

   (28,966)   (29,030)   (71,214) 

Sales/maturities of marketable securities

   35,571    80,008    27,708  

Investments in corporate-owned life insurance policies

   (1,435)   —      —    
  

 

 

  

 

 

  

 

 

 

Net cash provided by (used in) continuing investing activities

   18,498    (14,391)   (53,245) 
  

 

 

  

 

 

  

 

 

 

Financing Activities

    

Proceeds from issuance of debt

   121    12,000    —    

Payments on debt

   (1,437)   (293)   —    

Payments of debt issue costs

   (159)   (1,039)   (6) 

Shares withheld for taxes, net of stock issued to employees

   (188)   (1,298)   (876) 

Excess tax benefits from stock-based compensation

   92    —      162  

Repurchase and retirement of common stock

   (2,392)   —      —    

Dividends paid

   (9,153)   (9,161)   (9,112) 
  

 

 

  

 

 

  

 

 

 

Net cash (used in) provided by continuing financing activities

   (13,116)   209    (9,832) 
  

 

 

  

 

 

  

 

 

 

Cash Flows of Discontinued Operations

    

Net cash used in operating activities

   (3,427)   (466)   (222) 
  

 

 

  

 

 

  

 

 

 

Net cash used in discontinued operations

   (3,427)   (466)   (222) 
  

 

 

  

 

 

  

 

 

 

Increase (decrease) in cash and cash equivalents

   29,936    (22,633)   33,935  

Effect of exchange rates on cash

   (211)   6    —    

Cash and cash equivalents at beginning of year

   24,302    46,929    12,994  
  

 

 

  

 

 

  

 

 

 

Cash and cash equivalents at end of year

  $54,027   $24,302   $46,929  
  

 

 

  

 

 

  

 

 

 

Noncash Activity

    

Capital expenditures in accounts payable

  $546   $354   $311  
  

 

 

  

 

 

  

 

 

 

COMPREHENSIVE EARNINGS

  Year-Ended
  March 1,
2014		 March 2,
2013		 March 3,
2012
(In thousands) (52 weeks) (52 weeks) (53 weeks)
Net earnings $27,986
 $19,111
 $4,645
Other comprehensive earnings:      
Unrealized loss on marketable securities, net of $46, $15 and $8 tax benefit, respectively (83) (28) (15)
Unrealized gain (loss) on foreign currency hedge, net of $183 and $(147) tax expense (benefit), respectively 320
 (258) —
Unrealized gain (loss) on pension obligation, net of $10, $(95) and $(759) tax expense (benefit), respectively 19
 (168) (1,331)
Foreign currency translation adjustments (6,135) (1,867) (2,529)
Other comprehensive loss (5,879) (2,321) (3,875)
Total comprehensive earnings $22,107
 $16,790
 $770


See accompanying notes to consolidated financial statements.

35


Table of Contents

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITYCASH FLOWS

(In thousands, except per share data)

  Common
Shares
Outstanding		  Common
Stock		  Additional
Paid-In
Capital		  Retained
Earnings		  Common
Stock Held in
Trust		  Deferred
Compensation
Obligation		  Accumulated
Other
Comprehensive
(Loss) Income		  Comprehensive
Earnings (Loss)		 

Bal. at Feb. 28, 2009

   27,781   $9,260   $97,852   $209,537   $(1,046)  $1,046   $(25)  

Net earnings

   —      —      —      31,742    —      —      —     $31,742  

Unrealized gain on marketable securities, net of $129 tax expense

   —      —      —      —      —      —      240    240  

Unrealized loss on pension obligation, net of $573 tax benefit

   —      —      —      —      —      —      (1,005)   (1,005) 

Issuance of stock, net of cancellations

   230    77    170    7    246    (246)   —      —    

Stock-based comp.

   —      —      6,055    —      —      —      —      —    

Tax deficit associated with stock plans

   —      —      (78)   —      —      —      —      —    

Exercise of stock options

   86    29    694    —      —      —      —      —    

Other share retirements

   (138)   (46)   (489)   (1,318)   —      —      —      —    

Cash dividends ($0.326 per share)

   —      —      —      (9,112)   —      —      —      —    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Bal. at Feb. 27, 2010

   27,959   $9,320   $104,204   $230,856   $(800)  $800   $(790)  $30,977  
         

 

 

 

Net loss

   —      —      —      (10,332)   —      —      —     $(10,332) 

Unrealized loss marketable securities, net of $88 tax benefit

   —      —      —      —      —      —      (165)   (165) 

Unrealized loss on pension obligation, net of $288 tax benefit

   —      —      —      —      —      —      (506)   (506) 

Foreign currency translation adjustments

   —      —      —      —      —      —      576    576  

Issuance of stock, net of cancellations

   246    82    40    55    49    (49)   —      —    

Stock-based comp.

   —      —      5,215    —      —      —      —      —    

Tax deficit associated with stock plans

   —      —      (242)   —      —      —      —      —    

Exercise of stock options

   28    9    241    —      —      —      —      —    

Other share retirements

   (128)   (43)   (467)   (1,215)   —      —      —      —    

Cash dividends ($0.326 per share)

   —      —      —      (9,161)   —      —      —      —    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Bal. at Feb. 26, 2011

   28,105   $9,368   $108,991   $210,203   $(751)  $751   $(885)  $(10,427) 
         

 

 

 

Net earnings

   —      —      —      4,645    —      —      —     $4,645  

Unrealized loss on marketable securities, net of $8 tax benefit

   —      —      —      —      —      —      (15)   (15) 

Unrealized loss on pension obligation, net of $759 tax benefit

   —      —      —      —      —      —      (1,331)   (1,331) 

Foreign currency translation adjustments

   —      —      —      —      —      —      (2,529)   (2,529) 

Issuance of stock, net of cancellations

   249    83    35    7    6    (6)   —      —    

Stock-based comp.

   —      —      4,412    —      —      —      —      —    

Tax benefit associated with stock plans

   —      —      72    —      —      —      —      —    

Exercise of stock options

   89    30    1,027    —      —      —      —      —    

Share repurchases

   (275)   (92)   (1,077)   (1,223)   —      —      —      —    

Other share retirements

   (106)   (35)   (414)   (921)   —      —      —      —    

Cash dividends ($0.326 per share)

   —      —      —      (9,153)   —      —      —      —    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Bal. at Mar. 3, 2012

   28,062   $9,354   $113,046   $203,558   $(745)  $745   $(4,760)  $770  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

  Year Ended
  March 1,
2014		 March 2,
2013		 March 3,
2012
(In thousands) (52 Weeks) (52 Weeks) (53 Weeks)
Operating Activities      
Net earnings $27,986
 $19,111
 $4,645
Adjustments to reconcile net earnings to net cash provided by operating activities:  
Depreciation and amortization 26,550
 26,529
 27,246
Stock-based compensation 4,661
 4,395
 4,412
Deferred income taxes (5,280) 3,557
 (1,115)
Excess tax benefits from stock-based compensation (2,725) (483) (92)
Gain on disposal of assets (1,629) (1,954) (916)
Proceeds from new markets tax credit transaction, net of deferred costs 7,471
 —
 —
Other, net 51
 1,156
 516
Changes in operating assets and liabilities:      
Receivables (19,229) (13,364) (7,931)
Inventories (6,130) (2,209) (1,635)
Accounts payable and accrued expenses 18,282
 11,158
 (7,280)
Billings in excess of costs and earnings on uncompleted contracts 1,202
 (1,195) (856)
Refundable and accrued income taxes 3,449
 (4,086) 7,887
Other, net (1,738) (2,092) (327)
Net cash provided by operating activities 52,921
 40,523
 24,554
Investing Activities      
Capital expenditures (41,852) (34,664) (9,650)
Proceeds from sales of property, plant and equipment 806
 1,078
 10,320
Acquisition of businesses and intangibles, net of cash acquired (53,301) (15) (68)
Purchases of restricted investments (36,200) (10,000) (12,628)
Sales/maturities of restricted investments 60,115
 5,472
 25,354
Purchases of marketable securities (14,562) (58,847) (28,966)
Sales/maturities of marketable securities 41,020
 41,295
 35,571
Investments in corporate-owned life insurance policies —
 (1,451) (1,435)
Net cash (used in) provided by investing activities (43,974) (57,132) 18,498
Financing Activities      
Proceeds from issuance of debt —
 10,000
 121
Payments on debt (10,082) (164) (1,437)
Payments on debt issue costs (165) (633) (159)
Stock issued to employees, net of shares withheld 710
 862
 (188)
Excess tax benefits from stock-based compensation 2,725
 483
 92
Repurchase and retirement of common stock —
 —
 (2,392)
Dividends paid (10,764) (10,316) (9,153)
Net cash (used in) provided by financing activities (17,576) 232
 (13,116)
(Decrease) increase in cash and cash equivalents (8,629) (16,377) 29,936
Effect of exchange rates on cash (673) 117
 (211)
Cash and cash equivalents at beginning of year 37,767
 54,027
 24,302
Cash and cash equivalents at end of period $28,465
 $37,767
 $54,027
Noncash Activity      
Capital expenditures in accounts payable $761
 $553
 $546

See accompanying notes to consolidated financial statements.

36


Table of Contents

Consolidated Statements of Shareholders' Equity
(In thousands, except per share data) Common Shares Outstanding Common Stock Additional Paid-In Capital Retained Earnings Common Stock Held in Trust Deferred Compensation Obligation Accumulated Other Comprehensive (Loss) Income
Balance at February 26, 2011 28,105
 $9,368
 $108,991
 $210,203
 $(751) $751
 $(885)
Net earnings —
 —
 —
 4,645
 —
 —
 —
Unrealized loss on marketable securities, net of $8 tax benefit —
 —
 —
 —
 —
 —
 (15)
Unrealized loss on pension obligation, net of $759 tax benefit —
 —
 —
 —
 —
 —
 (1,331)
Foreign currency translation adjustments —
 —
 —
 —
 —
 —
 (2,529)
Issuance of stock, net of cancellations 249
 83
 35
 7
 6
 (6) —
Stock-based compensation —
 —
 4,412
 —
 —
 —
 —
Tax benefit associated with stock plans —
 —
 72
 —
 —
 —
 —
Exercise of stock options 89
 30
 1,027
 —
 —
 —
 —
Share repurchases (275) (92) (1,077) (1,223) —
 —
 —
Other share retirements (106) (35) (414) (921) —
 —
 —
Cash dividends ($0.326 per share) —
 —
 —
 (9,153) —
 —
 —
Balance at March 3, 2012 28,062
 $9,354
 $113,046
 $203,558
 $(745) $745
 $(4,760)
Net earnings —
 —
 —
 19,111
 —
 —
 —
Unrealized loss on marketable securities, net of $15 tax benefit —
 —
 —
 —
 —
 —
 (28)
Unrealized loss on foreign currency hedge, net of $147 tax benefit —
 —
 —
 —
 —
 —
 (258)
Unrealized loss on pension obligation, net of $95 tax benefit —
 —
 —
 —
 —
 —
 (168)
Foreign currency translation adjustments —
 —
 —
 —
 —
 —
 (1,867)
Issuance of stock, net of cancellations 316
 105
 (59) 14
 (16) 16
 —
Stock-based compensation —
 —
 4,395
 —
 —
 —
 —
Tax benefit associated with stock plans —
 —
 388
 —
 —
 —
 —
Exercise of stock options 243
 81
 2,422
 —
 —
 —
 —
Other share retirements (107) (35) (433) (1,232) —
 —
 —
Cash dividends ($0.360 per share) —
 —
 —
 (10,316) —
 —
 —
Balance at March 2, 2013 28,514
 $9,505
 $119,759
 $211,135
 $(761) $761
 $(7,081)
Net earnings —
 —
 —
 27,986
 —
 —
 —
Unrealized loss on marketable securities, net of $46 tax benefit —
 —
 —
 —
 —
 —
 (83)
Unrealized gain on foreign currency hedge, net of $183 tax expense —
 —
 —
 —
 —
 —
 320
Unrealized gain on pension obligation, net of $10 tax expense —
 —
 —
 —
 —
 —
 19
Foreign currency translation adjustments —
 —
 —
 —
 —
 —
 (6,135)
Issuance of stock, net of cancellations 245
 82
 (54) 17
 (30) 30
 —
Stock-based compensation —
 —
 4,661
 —
 —
 —
 —
Tax benefit associated with stock plans —
 —
 2,598
 —
 —
 —
 —
Exercise of stock options 328
 109
 4,150
 —
 —
 —
 —
Other share retirements (129) (43) (544) (3,007) —
 —
 —
Cash dividends ($0.370 per share) —
 —
 —
 (10,764) —
 —
 —
Balance at March 1, 2014 28,958
 $9,653
 $130,570
 $225,367
 $(791) $791
 $(12,960)
See accompanying notes to consolidated financial statements.

37
Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.Summary of Significant Accounting Policies and Related Data

1 Summary of Significant Accounting Policies and Related Data

Basis of Consolidation.The accompanying consolidated financial statements include the accounts of Apogee Enterprises, Inc., a Minnesota corporation, and all majority-owned subsidiaries (the Company). Transactions between Apogee and its subsidiaries have been eliminated in consolidation.


The results of Alumicor Limited (Alumicor), which the Company acquired 100 percent of the stock of Glassec Vidros de Segurança Ltda. (Glassec), a privately held business, on November 19, 2010. Glassec’s5, 2013, have been included in the consolidated financial statements since the date of acquisition. Refer to Note 6 for further information regarding the acquisition of Alumicor and its treatment in the consolidated financial statements.

GlassecViracon's fiscal year ends December 31 and its results are incorporated into the consolidated financial statements on a two-monthtwo-month lag. There were no significant intervening events whichthat would have materially affected our consolidated financial statements had they been recorded during the year ended March 3, 2012. Refer1, 2014.

Reclassifications. Certain reclassifications of prior-year amounts have been made to Note 6 for further information regardingconform to the acquisition of Glassec.

current-year presentation. The reclassifications did not impact historical net income or shareholders' equity.


Fiscal Year.Apogee’sApogee's fiscal year ends on the Saturday closest to the last day of February. Fiscal 20122014 and 2013 each consisted of 5352 weeks while fiscal 2011 and 2010 each2012 consisted of 5253 weeks.


Financial Instruments.Unless otherwise noted, the carrying amount of the Company’sCompany's financial instruments approximates fair value.


Cash and Cash Equivalents. Investments with an original maturity of three months or less are included in cash and cash equivalents. Cash equivalents are stated at cost, which approximates fair value, and consist primarily of money market funds.


Investments. The Company has marketable securities consisting of high-quality municipal bonds. The securities are classified as “available for sale” and are carried at fair value based on prices from recent trades of similar securities. The Company tests for other than temporary losses on a quarterly basis and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If a decline in the fair value of a security is deemed by management to be other-than-temporary, the investment is written down to fair value, and the amount of the write-down is included in net earnings.


The Company has investments in money market funds that are considered restricted investments. The short-term restricted investments were required to be made available to cover exposures for letters of credit issued outside of the revolving credit facility and credit-card programs. TheAt March 1, 2014, long-term restricted investments are restricted for future investmentuse in the Company’s architectural glass fabrication facilitystorefront and entrance business in Utah.Michigan and the Company's planned capital investments in the Architectural Glass segment business in Minnesota. The restricted investments are held at fair value based on quoted market prices.


The Company also has investments in mutual funds as a long-term funding source for the deferred compensation plan. The mutual fund investments are recorded at estimated fair value, based on quoted market prices, and are included in other non-current assets in the consolidated balance sheet

sheet.


Inventories. Inventories, which consist primarily of purchased glass and aluminum, are valued at the lower of cost or market. Approximately 4653 percent of the inventories are valued by use of the last-in, first-out (LIFO) method, which does not exceed market. If the first-in, first-out method had been used, inventories would have been $5.5$5.6 million and $6.6$5.3 million higher than reported at March 3, 2012,1, 2014, and February 26, 2011,March 2, 2013, respectively. During fiscal 2012, 20112013 and 2010,2012, inventory quantities were reduced, resulting in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared with the cost of current purchases. The effect of inventory liquidations was to increase net income by approximately $0.1$0.2 million in fiscal 2012, $0.32013 and $0.1 million in fiscal 2011 and $1.1 million in2012. In fiscal 2010.2014, inventory quantities increased so there was no impact from inventory liquidations.


Property, Plant and Equipment. Property, plant and equipment are recorded at cost. Significant improvements and renewals that extend the useful life of the asset are capitalized. Repairs and maintenance are charged to expense as incurred. When property is retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any related gains or losses are included in income as a reduction toof or increase in selling, general and administrative expenses. Depreciation is computed on a straight-line basis, based on the following estimated useful lives:


38
Table of Contents

 Years

Buildings and improvements

15 to 25

Machinery and equipment

3 to 15

Office equipment and furniture

3 to 10


Goodwill and Other Intangible Assets.Goodwill represents the excess of the cost over the net tangible and identified intangible assets of acquired businesses. The Company accounts for goodwill and intangible assets in accordance with applicable accounting standards, and has determined that it does not have any intangible assets with indefinite useful lives other than goodwill. Goodwill and other intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually or more frequently if events warrant. Intangible assets with discrete useful lives are amortized over their estimated useful lives.standards.


The Company tests goodwill of each of its reporting units for impairment annually in connection with its fourth quarterfourth-quarter planning process or more frequently if impairment indicators exist. The Company has determined that each of its business units represents a reporting unit in accordance with applicable accounting standards. During the fourth quarter of fiscal 2012,2014, the Company completed its annual impairment test using discounted cash flow methodologies for valuing its reporting units as no market comparables were identified. There have not been any material changes in the impairment loss assessment methodology made during the past three fiscal years. The estimates of fair value for the reporting units were found to be in excess of their carrying value, and, therefore, no impairment charge was recorded.

Intangible assets with discrete useful lives are amortized over their estimated useful lives. The amount by which the estimated fair value of the reporting units exceeded their book value utilizing the discounted cash flow methodology was more than 25 percent at March 3, 2012.

In addition, the Company has reassessed the useful lives of its identifiable intangible assets and determined that the remaining lives were appropriate.

Long-Lived Assets.The carrying value of long-lived assets, such as property, plant and equipment, and definite-lived intangible assets is reviewed when impairment indicators exist as required under generally accepted accounting principles. We consider many factors, including short- and long-term projections of future performance associated with these assets. If this review indicates that the long-lived assets will not be recoverable, the carrying value of such assets will be reduced to estimated fair value.


Self-Insurance.The Company obtains commercial insurance for potential losses for general liability, workers’workers' compensation, automobile liability, employment practices, architect’sarchitect's and engineer’sengineer's errors and omissions risk, and other miscellaneous coverages. However, a reasonable amount of risk is retained on a self-insured basis primarily through a wholly-owned insurance subsidiary, Prism Assurance, Ltd. (Prism). Reserve requirements are established based on actuarial projections of ultimate losses. Losses estimated to be paid within 12 months are classified as accrued self-insurance reserves, while losses expected to be payable in later periods are included in long-term self-insurance liabilities.reserves. Additionally, we maintain a self-insurance reserve for our health insurance programs maintained for the benefit of our eligible employees. We estimate a reserve based on historical levels of amounts incurred but not reported, which is included in accrued self-insurance reserves.


Environmental Liability. In accordance with accounting standards, we recognize environmental clean-up liabilities on an undiscounted basis when loss is probable and can be reasonably estimated. The cost of the clean-up is estimated by engineering, financial and legal specialists based on current law. Such estimates are based primarily upon the estimated cost of investigation and remediation required, and the likelihood that, where applicable, other potentially responsible parties will not be able to fulfill their commitments at the sites where the Company may be jointly and severally liable. As part of the acquisition of Tubelite Inc. (Tubelite) in fiscal 2008, the Company acquired property which contains historical environmental conditions that the Company intends to remediate. At March 3, 2012,1, 2014, the reserve was $2.0 million.$1.5 million. The reserve for environmental liabilities is included in other accrued expensescurrent and other long-termnon-current liabilities in the consolidated balance sheets.


Foreign Currency.For foreign operations, the functional currency is the local currency. Assets and liabilities of these operations are translated at the period-end exchange rates and income statement accounts are translated using the average exchange rates prevailing during the year. Translation adjustments are reflected in accumulated other comprehensive loss in the consolidated balance sheets.


From time to time, the Company may enter into short duration foreign currency contracts to hedge foreign currency risks. There is no material foreign currency risk related to these contracts as they generally have an original maturity date of less than one year.

Revenue Recognition. Generally, our sales terms are “free on board” (FOB) shipping point or FOB destination for our product-type sales, and revenue is recognized when title has transferred. Revenue excludes sales taxesHowever, the Company's Architectural Services segment business enters into fixed-price contracts for full-service commercial building glass installation and renovation services, which are accounted for as the Company considers itselfconstruction-type contracts. These contracts are typically performed over a pass-through conduit12- to 18-month timeframe, and we record revenue for collecting and remitting sales taxes. The Company recognizes revenue from constructionthese contracts on a percentage-of-completion basis measured byas we are able to reasonably estimate total contract revenue and total contract costs. The contracts entered into clearly specify the percentageenforceable rights of the parties, the consideration and the terms of settlement, and both parties can be expected to satisfy all obligations under the contract. Approximately 26 percent, 27 percent

39
Table of Contents

and 23 percent of our consolidated net sales in fiscal 2014, 2013 and 2012, respectively, were recorded on a percentage-of-completion basis. Under the methodology, the Company compares the total costs incurred to date to the total estimated total costs for each contract, and records that proportion of the total contract revenue in thatthe period. Contract costs include materials, labor and other direct costs related to contract performance. Given our ability to make reasonable estimates of our total contract revenues and total contract costs, we believe utilizing the cost-to-cost method for revenue recognition provides the greatest degree of precision in measuring progress toward completion of the installation contracts. Provisions are established for estimated losses, if any, on uncompleted contracts in the period in which such losses are determined. Amounts representing contract change orders, claims or other items are included in contract revenue only when they have been approved by customers. Approximately 23 percent, 26 percentRevenue excludes sales taxes as the Company considers itself a pass-through conduit for collecting and 30 percent of our consolidated netremitting sales in fiscal 2012, 2011 and 2010, respectively, were recorded on a percentage-of-completion basis.taxes.


Pricing and Sales Incentives.The Company records estimated reductions to revenue for customer programs and incentive offerings including pricing arrangements, promotions and other volume-based incentives at the later of the date revenue is recognized or the incentive is offered. Sales incentives given to customers are recorded as a reduction to net sales unless (1) the Company receives an identifiable benefit for goods or services in exchange for the consideration and (2) the Company can reasonably estimate the fair value of the benefit received.


Shipping and Handling.All amounts billed to a customer in a sales transaction related to shipping and handling represent revenues earned and are reported as revenues. The costs incurred by the Company for shipping and handling are reported as cost of sales.


Research and Development. Research and development expenses are charged to operations as incurred and were $7.2$7.8 million $6.3, $6.8 million and $6.8$7.2 million for fiscal 2012, 20112014, 2013 and 2010,2012, respectively. Of these amounts, $0.8$2.1 million $1.8, $1.6 million and $3.2$0.8 million, respectively, were focused primarily upon design of custom window and curtainwall systems in accordance with customer specifications and are included in cost of sales.


Advertising.Advertising expenses are charged to operations as incurred and were $1.2 million in fiscal 2014 and $1.4 million $1.0 millionin each of fiscal 2013 and $0.9 million in fiscal 2012 2011 and 2010, respectively.. They are included in selling, general and administrative expenses in the consolidated results of operations.


Stock-Based Compensation.The Company accounts for share-based compensation by estimating the fair value of each share-based payment award on the date of grant and, in the case of performance-based awards, updating those values throughout the year and life of the award. For these performance-based awards, the future performance of the Company is estimated as an input into the determination of expense. See Note 11 for additional information regarding share-based compensation.

Income Taxes. The Company accounts for income taxes as prescribed by applicable accounting standards, which requires use of the asset and liability method. This method recognizes deferred tax assets and liabilities based upon the future tax consequences of temporary differences between financial and tax reporting. See Note 12 for additional information regarding income taxes.


Accounting Estimates. The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the consolidated financial statements and the reported amounts of net sales and expenses during the reporting period. Amounts subject to significant estimates and assumptions include, but are not limited to, assessment of recoverability of long-lived assets, including goodwill, insurance reserves, warranty reserves, reserves related to discontinued operations, net sales recognition for construction contracts, income tax provisions and liabilities, and the status of outstanding disputes and claims. Actual results could differ from those estimates.


New Accounting Standards.Standards.In January 2010, the Financial Accounting Standards Board (FASB) amended U.S. GAAP with respect to disclosures about fair value measurements. The amendments add new requirements for disclosures about transfers into and out of Levels 1 and 2, and separate disclosures about purchases, sales, issuances and settlements relating to Level 3 measurements. The amendments were effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010. The adoption of the additional disclosures required for Level 3 fair value measurements in the first quarter of fiscal 2012 had no impact on the Company’s fair value disclosures (see Note 5).

In June 2011,February 2013, the FASB amended itsissued authoritative guidance onsurrounding the presentation of comprehensive income in financial statements to improve the comparability, consistency and transparency of financial reporting and to increase the prominence of items that are recorded in other comprehensive income. The new guidance allows an entity to present components of net income andreclassified from other comprehensive income to net income. This guidance requires entities to disclose, either in one continuous statement, referredthe notes to asthe consolidated financial statements or parenthetically on the face of the statement ofthat reports comprehensive income, or in two separate, but consecutive statements. The new guidance eliminates the current option to reportitems reclassified out of accumulated other comprehensive income and its components in the statement of changes in equity. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized ininto net income or other comprehensivein their entirety and the effect of the reclassification on each affected net income under current accounting guidance.line item. This new guidance is effective for fiscal years and interim periods beginning after December 15, 2011, Apogee’s2012, Apogee's fiscal year 2013. The FASB subsequently deferred the effective date of certain provisions of this standard pertaining to the reclassification of items out of accumulated other comprehensive income, pending the issuance of further guidance on that matter. The adoption of the new guidance in the first quarter of fiscal 2013 will not have an impact on Apogee’s consolidated financial position, results of operations or cash flows.

In September 2011, the FASB amended U.S. GAAP on testing goodwill for impairment. Under this new guidance, entities testing goodwill for impairment now have an option of performing a qualitative assessment before having to calculate the fair value of a reporting unit. If an entity determines, on the basis of qualitative factors, that the fair value of the reporting unit is more-likely-than-not less than the carrying amount, the existing quantitative impairment test is required. Otherwise, no further impairment testing is required. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, Apogee’s fiscal year 2013, with early adoption permitted.2014. The adoption of this new standard in the first quarter of fiscal 2013 will2014 did not have an impact on Apogee’sApogee's consolidated financial position,condition, results of operations or cash flows.

The reclassifications out of accumulated other comprehensive income and into net income were not material for the year ended March 1, 2014.


No other new accounting pronouncements issued or effective during fiscal 20122014 have had or are expected to have a material impact on the consolidated financial statements.


Subsequent Events.In connection with preparing the audited consolidated financial statements for the year ended March 3, 2012,1, 2014, we have evaluated subsequent events for potential recognition and disclosure through the date of this filing. Subsequent to year-end, $10.0 million of industrial development bondsfiling and determined that there were issued and made available for future investmentno subsequent events that required recognition or disclosure in the Company’s storefront and entrance business in Michigan. The interest rate on the bonds resets weekly and is equal to the market rateconsolidated financial statements.

40
Table of interest earned for similar revenue bonds or other tax-free securities. The bonds will mature in April, 2042.

2 Working Capital

Contents



2.Working Capital

Receivables

(In thousands)

  2012  2011 

Trade accounts

  $78,234   $69,976  

Construction contracts

   19,693    21,723  

Contract retainage

   11,348    9,550  

Other receivables

   2,258    2,452  
  

 

 

  

 

 

 

Total receivables

   111,533    103,701  

Less allowance for doubtful accounts

   (3,109)   (2,734) 
  

 

 

  

 

 

 

Net receivables

  $108,424   $100,967  
  

 

 

  

 

 

 

(In thousands)2014 2013
Trade accounts$98,246
 $73,801
Construction contracts39,257
 31,313
Contract retainage19,040
 15,711
Other receivables1,305
 2,838
Total receivables157,848
 123,663
Less allowance for doubtful accounts(2,934) (2,493)
Net receivables$154,914
 $121,170

Inventories

(In thousands)

  2012   2011 

Raw materials

  $12,772    $12,244  

Work-in-process

   7,956     7,807  

Finished goods

   10,386     11,182  

Costs and earnings in excess of billings on uncompleted contracts

   2,931     1,375  
  

 

 

   

 

 

 

Total inventories

  $34,045    $32,608  
  

 

 

   

 

 

 

(In thousands)2014 2013
Raw materials$17,975
 $11,834
Work-in-process9,700
 7,754
Finished goods15,206
 13,397
Costs and earnings in excess of billings on uncompleted contracts5,101
 3,067
Total inventories$47,982
 $36,052
Other Accrued Expenses

(In thousands)

  2012   2011 

Retirement savings plan

  $7    $4,494  

Interest

   74     59  

Volume and pricing discounts

   1,004     856  

Deferred gain on sale leaseback transactions – current portion

   1,125     111  

Unearned revenue

   1,984     1,681  

Taxes, other than income taxes

   3,362     3,488  

Warranties

   7,210     9,887  

Other

   4,251     3,541  
  

 

 

   

 

 

 

Total other accrued expenses

  $19,017    $24,117  
  

 

 

   

 

 

 

Current Liabilities

 (In thousands)2014 2013
Deferred gain on sale leaseback transactions - current portion$1,015
 $1,125
Volume discounts1,724
 909
Current portion of long-term compensation plans3,538
 1,156
Taxes, other than income taxes4,698
 4,013
Unearned revenue7,924
 4,999
Warranties10,769
 7,164
Other5,420
 4,277
Total other current liabilities$35,088
 $23,643

3.Property, Plant and Equipment

(In thousands)2014 2013
Land$9,461
 $6,851
Buildings and improvements140,316
 128,341
Machinery and equipment233,687
 224,825
Office equipment and furniture47,304
 47,495
Construction in progress38,886
 18,823
Total property, plant and equipment469,654
 426,335
Less accumulated depreciation(275,708) (257,387)
Net property, plant and equipment$193,946
 $168,948

3 Property, Plant and Equipment

(In thousands)

  2012  2011 

Land

  $6,954   $7,100  

Buildings and improvements

   129,282    131,929  

Machinery and equipment

   215,892    232,718  

Office equipment and furniture

   43,550    42,032  

Construction in progress

   7,308    5,022  
  

 

 

  

 

 

 

Total property, plant and equipment

   402,986    418,801  

Less accumulated depreciation

   (243,439)   (239,600) 
  

 

 

  

 

 

 

Net property, plant and equipment

  $159,547   $179,201  
  

 

 

  

 

 

 

Depreciation expense was $24.6$24.8 million $25.9, $24.3 million and $26.8$24.6 million in fiscal 2012, 20112014, 2013 and 2010,2012, respectively.


41
Table of Contents


4.Marketable Securities

4 Marketable SecuritiesAt

TheMarch 1, 2014, the Company has investments in municipal bonds of $19.6 million; $11.7$11.5 million; $0.2 million is current and $7.9$11.3 million is non-current. The Company’s wholly owned insurance subsidiary, Prism Assurance, Ltd., holds $7.9all of the municipal bonds at the end of fiscal 2014 and held $12.9 million of the municipal bonds.bonds at the end of fiscal 2013. Prism insures a portion of the Company’s workers’ compensation, general liability and automobile liability risks using reinsurance agreements to meet statutory requirements. The reinsurance carrier requires Prism to maintain fixed-maturity investments, which are generally high-quality municipal bonds, for the purpose of providing collateral for Prism’s obligations under the reinsurance agreement. All of the Company’s fixed maturity investments are classified as “available-for-sale,” are carried at fair value and are reported as short-term marketable securities available for sale andor marketable securities available for sale in the consolidated balance sheet.


The amortized cost, gross unrealized gains and losses, and estimated fair values of investments available for sale at March 3, 20121, 2014 and February 26, 2011March 2, 2013, are as follows:

       Gross   Gross  Estimated 
   Amortized   Unrealized   Unrealized  Fair 

(In thousands)

  Cost   Gains   Losses  Value 

March 3, 2012

       

Municipal bonds

  $19,670    $188    $(258)  $19,600  
  

 

 

   

 

 

   

 

 

  

 

 

 

Total investments

  $19,670    $188    $(258)  $19,600  
  

 

 

   

 

 

   

 

 

  

 

 

 

       Gross   Gross  Estimated 
   Amortized   Unrealized   Unrealized  Fair 

(In thousands)

  Cost   Gains   Losses  Value 

February 26, 2011

       

Variable rate demand notes

  $7,300    $—      $—     $7,300  

Municipal bonds

   19,619     313     (360)   19,572  
  

 

 

   

 

 

   

 

 

  

 

 

 

Total investments

  $26,919    $313    $(360)  $26,872  
  

 

 

   

 

 

   

 

 

  

 

 

 

(In thousands)Amortized Cost Gross Unrealized Gains Gross Unrealized Losses 
Estimated
Fair
Value
March 1, 2014       
Municipal bonds$11,719
 $94
 $(336) $11,477
Total investments$11,719
 $94
 $(336) $11,477
March 2, 2013       
Municipal bonds$38,927
 $127
 $(240) $38,814
Total investments$38,927
 $127
 $(240) $38,814

The Company tests for other than temporary losses on a quarterly basis and has consideredconsiders the unrealized losses indicated above to be temporary in nature. The Company intends to hold the investments until it can recover the full principal amount and has the ability to do so based on other sources of liquidity. The Company expects such recoveries to occur prior to the contractual maturities.


The following table presents the length of time that available for saleavailable-for-sale securities were in continuous unrealized loss positions, but were not deemed to be other than temporarily impaired, as of March 3, 2012:

   Less Than 12 Months  Greater Than or Equal to
12 Months		  Total 
   Fair   Unrealized  Fair   Unrealized  Fair   Unrealized 

(In thousands)

  Value   Losses  Value   Losses  Value   Losses 

Municipal bonds

  $3,753    $(5)  $996    $(253)  $4,749    $(258) 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total investments

  $3,753    $(5)  $996    $(253)  $4,749    $(258) 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

1, 2014:

 Less Than 12 Months 
Greater Than or Equal  to
12 Months
 Total
(In thousands)Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
Municipal bonds$3,171
 $(63) $1,999
 $(273) $5,170
 $(336)
Total investments$3,171
 $(63) $1,999
 $(273) $5,170
 $(336)

The amortized cost and estimated fair values of investments at March 3, 20121, 2014, by contractual maturity are shown below. Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

   Amortized   Estimated 

(In thousands)

  Cost   Market Value 

Due within one year

  $11,647    $11,664  

Due after one year through five years

   2,153     2,206  

Due after five years through 10 years

   2,711     2,793  

Due after 10 years through 15 years

   1,592     1,603  

Due beyond 15 years

   1,567     1,334  
  

 

 

   

 

 

 

Total

  $19,670    $19,600  
  

 

 

   

 

 

 

(In thousands)Amortized Cost Estimated Market Value
Due within one year$204
 $204
Due after one year through five years2,686
 2,719
Due after five years through 10 years7,564
 7,515
Due after 10 years through 15 years1,250
 1,024
Due beyond 15 years15
 15
Total$11,719
 $11,477

Gross realized gains of $0.8 million, $0.4 million and $0.3 millionwere not material in fiscal 2012, 20112014, and 2010, respectively,were $0.3 million and$0.8 million in fiscal 2013 and 2012, respectively. Gross realized losses were not material during fiscal 2014, 2013 or 2012. The gross realized losses of $0.1 million in each of fiscal 2011gains and 2010 were recognized andlosses are included in other (expense) income, (expense), net in the accompanying consolidated results of operations. There were immaterial amounts

42
Table of gross realized losses in fiscal 2012.

5 Fair Value Measurements

Contents



5.Fair Value Measurements

The Company accounts for financial assets and liabilities in accordance with accounting standards that define fair value and establish a framework for measuring fair value. The hierarchy prioritizes the inputs into three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value. A financial assetasset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.


Financial assets and liabilities measured at fair value as of March 3, 2012,1, 2014 and February 26, 2011,March 2, 2013, are summarized below:

(In thousands)

  Quoted Prices in
Active Markets
(Level 1)		   Other
Observable
Inputs
(Level 2)		   Unobservable
Inputs
(Level 3)		   Total Fair
Value		 

March 3, 2012

        

Cash equivalents

        

Money market funds

  $46,141    $—      $—      $46,141  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cash equivalents

   46,141     —       —       46,141  

Short-term marketable securities available for sale

        

Municipal bonds

  $—      $11,664    $—      $11,664  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total short-term marketable securities available for sale

   —       11,664     —       11,664  

Marketable securities available for sale

        

Municipal bonds

  $—      $7,936    $—      $7,936  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total marketable securities available for sale

   —       7,936     —       7,936  

Restricted investments

        

Money market funds

  $23,136    $—      $—      $23,136  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total restricted investments

   23,136     —       —       23,136  

Mutual fund investments

        

Mutual funds

  $1,150    $—      $—      $1,150  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total mutual fund investments

   1,150     —       —       1,150  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets and liabilities at fair value

  $70,427    $19,600    $—      $90,027  
  

 

 

   

 

 

   

 

 

   

 

 

 

(In thousands)

  Quoted Prices in
Active Markets
(Level 1)		   Other
Observable
Inputs
(Level 2)		   Unobservable
Inputs
(Level 3)		   Total Fair
Value		 

February 26, 2011

        

Cash equivalents

        

Money market funds

  $13,787    $—      $—      $13,787  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cash equivalents

   13,787     —       —       13,787  

Short-term marketable securities available for sale

        

Variable rate demand notes

  $—      $7,300    $—      $7,300  

Municipal bonds

   —       3,863     —       3,863  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total short-term marketable securities available for sale

   —       11,163     —       11,163  

Marketable securities available for sale

        

Municipal bonds

  $—      $15,709    $—      $15,709  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total marketable securities available for sale

   —       15,709     —       15,709  

Restricted investments

        

Money market funds

  $35,803    $—      $—      $35,803  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total restricted investments

   35,803     —       —       35,803  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets and liabilities at fair value

  $49,590    $26,872    $—      $76,462  
  

 

 

   

 

 

   

 

 

   

 

 

 

(In thousands)
Quoted Prices in
Active Markets
(Level 1)
 
Other
Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
 
Total Fair
Value
March 1, 2014       
Cash equivalents       
Money market funds$12,788
 $—
 $—
 $12,788
Total cash equivalents12,788
 —
 —
 12,788
Available for sale securities       
Municipal bonds—
 11,477
 —
 11,477
Total available for sale securities—
 11,477
 —
 11,477
Restricted investments       
Money market funds2,540
 —
 —
 2,540
Total restricted investments2,540
 —
 —
 2,540
Mutual fund investments       
Mutual funds409
 —
 —
 409
Total mutual fund investments409
 —
 —
 409
Foreign currency instruments       
Foreign currency instruments—
 98
 —
 98
Total foreign currency instruments—
 98
 —
 98
Total assets at fair value$15,737
 $11,575
 $—
 $27,312


43
Table of Contents

(In thousands)
Quoted Prices in
Active Markets
(Level 1)
 
Other
Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
 
Total Fair
Value
March 2, 2013       
Cash equivalents       
Money market funds$17,639
 $—
 $—
 $17,639
Total cash equivalents17,639
 —
 —
 17,639
Available for sale securities       
Municipal bonds—
 38,814
 —
 38,814
Total available for sale securities—
 38,814
 —
 38,814
Restricted investments       
Money market funds26,443
 —
 —
 26,443
Total restricted investments26,443
 —
 —
 26,443
Mutual fund investments       
Mutual funds251
 —
 —
 251
Total mutual fund investments251
 —
 —
 251
Total assets at fair value$44,333
 $38,814
 $—
 $83,147
Foreign currency instruments       
Foreign currency instruments$—
 $405
 $—
 $405
Total liabilities at fair value$—
 $405
 $—
 $405

Cash equivalents

Cash equivalents include highly liquid investments with an original maturity of three months or less, and consist primarily of money market funds. The cash equivalents are held at fair value based on quoted market prices, which approximates stated cost.


Available for sale securities
Short-term investments

The Company has short-term marketable securities available for sale securities of $11.7$0.2 million and long-term available-for-sale securities of $11.3 million as of March 3, 2012, consisting of municipal bonds. The Company classifies these short-term marketable securities as “available-for-sale,” and they are carried at fair market value based on market prices from recent trades of similar securities.

1, 2014Marketable securities available for sale

The Company has $7.9 million of marketable securities available for sale,, consisting of municipal bonds. All of the Company’s fixed maturity investments are classified as “available-for-sale,” and are carried at fair value and are reported as marketable securities available for sale in the consolidated balance sheet. These investments are held at fairmarket value based on prices from recent trades of similar securities.


Restricted investments

The Company has $13.6$2.5 million of current restricted investments consisting of money market funds that were required to be made available to cover exposures for letters of credit outside of the revolving credit facility and credit-card programs. The Company has $9.5 million of long-term restricted investments consisting of money market funds, which are short-term in nature but are restricted for future investment in the Company’s architectural glass fabrication facilitystorefront and entrance business in Utah,Michigan and the Company's planned capital investments in the Architectural Glass segment business in Minnesota, and are, therefore, classified as long-term.long term. The restricted investments are held at fair value based on quoted market prices, which approximatesapproximate stated cost.


Mutual fund investments

The Company has $1.2$0.4 million of mutual fund investments as a long-term funding source for the deferred compensation plan. The mutual fund investments are recorded at estimated fair value, based on quoted market prices, and are included in other non-current assets in the consolidated balance sheet.

6 Acquisitions


Foreign Currency Instruments
The Company has a foreign exchange forward contract in place to hedge against the effect of exchange rate fluctuations on certain forecasted purchases. The forward contract is measured at fair value using readily observable market inputs, such as quotations on forward foreign exchange points and foreign interest rates.

6.Acquisitions

On November 19, 2010,5, 2013, the Company acquired 100 percentall of the stockshares of Glassec Vidros de Segurança Ltda.,Alumicor Limited, a privately held business, for $20.6$52.9 million, net ofincluding cash acquired of $1.1$1.6 million. GlassecAlumicor is a leading architectural glass fabricator in Brazil. The business operates underwindow, storefront, entrance and curtainwall company primarily serving the name GlassecViracon as partCanadian commercial construction market. Alumicor's results of the Company’s architectural glass business. GlassecViracon’s fiscal year ends December 31 and is reportedoperations have been included in the consolidated financial statements and within the Architectural Framing Systems segment on a two-month lag.

Insince the third quarterdate of fiscal 2012, the Company recorded a measurement period adjustmentacquisition, including $15.9 million of $4.2sales and an operating loss after incurring approximately $0.5 million reducing the fair values of goodwillacquisition-related expenses, which are included in selling, general and long-term deferred tax liabilities assumedadministrative expenses in the acquisition asCompany's consolidated results of the acquisition date. The Company has retrospectively adjusted the previously reported acquisition-date fair valuesoperations.


44
Table of goodwill and long-term deferred tax liabilities to reflect these amounts.

Contents



The assets and liabilities of GlassecAlumicor were recorded in the consolidated balance sheet within the Architectural Framing Systems segment as of the acquisition date, at their respective fair values. The purchase price allocation as adjusted for the item described above, wasis based on the estimated fair value of assets acquired and liabilities assumed and werehave been allocated as follows:

(In thousands)

  Nov. 19,
2010		 

Current assets

  $6,276  

Property, plant and equipment

   10,203  

Deferred tax assets(1)

   112  

Intangible assets

   7,265  

Goodwill(1)

   3,284  

Other long-term assets

   9,612  
  

 

 

 

Total assets

   36,752  

Current liabilities

  $5,605  

Long-term debt

   1,113  

Unrecognized tax benefits

   2,393  

Other long-term liabilities

   7,012  
  

 

 

 

Total liabilities

   16,123  
  

 

 

 

Net assets acquired

  $20,629  
  

 

 

 

(1)Includes a retrospective adjustment of $4.2 million described above.

(In thousands)November 5, 2013
Current assets$17,168
Property, plant and equipment9,773
Intangible assets16,611
Goodwill18,254
Current liabilities(10,505)
Net assets acquired$51,301

Identifiable intangible assets are definite-lived assets. These assets include customer relationships, which are definite-lived assets, and trademarks, patents and non-compete agreements, andwhich are indefinite-lived assets. The customer relationships have a weighted averagean amortization period of 1819 years, which matches the weighted average useful life of the assets.asset. Goodwill recorded as part of the purchase price allocation is not tax deductible. 

The sellers have agreed to indemnifyfollowing unaudited pro forma consolidated condensed financial results of operations for the Company for certain contingent liabilities. For contingent liabilities determined to be probable, a liabilityyear ended March 1, 2014 and an indemnification assetMarch 2, 2013 are presented as if the acquisition had been completed at the beginning of fiscal year 2013:
 Pro Forma
(In thousands, except per share data)2014 2013
Net sales$825,596
 $756,497
Net income30,487
 21,064
Earnings per share   
   Basic$1.07
 $0.75
   Diluted1.04
 0.74

These unaudited pro forma consolidated condensed financial results have been recorded. Totalprepared for comparative purposes only and include certain adjustments, such as elimination of such liabilitiesinterest expense on pre-acquisition debt of the acquiree. The adjustments do not reflect the effect of synergies and indemnification assets, primarily related to various tax matters,integration costs that would result from integration of $9.4 million were recorded.

this acquisition.



7.Goodwill and Other Identifiable Intangible Assets

7 Goodwill and Other Identifiable Intangible Assets

The changes in the carrying amount of goodwill attributable to each businessreporting segment for the year ended March 3, 20121, 2014 and February 26, 2011March 2, 2013 is detailed below.

(In thousands)

  Architectural  Large-Scale
Optical		   Total 

Balance at February 27, 2010

  $47,961   $10,557    $58,518  

Goodwill acquired(1)

   3,284    —       3,284  

Foreign currency translation

   202    —       202  
  

 

 

  

 

 

   

 

 

 

Balance at February 26, 2011

  $51,447   $10,557    $62,004  

Foreign currency translation

   (387)   —       (387) 
  

 

 

  

 

 

   

 

 

 

Balance at March 3, 2012

  $51,060   $10,557    $61,617  
  

 

 

  

 

 

   

 

 

 

(1)Includes a retrospective adjustment of $4.2 million within the Architectural segment as described above in Note 6.

below, including goodwill for the Alumicor acquisition.

(In thousands)Architectural Glass Architectural Services Architectural Framing Systems 
Large-Scale
Optical
 Total
Balance at March 3, 2012$27,277
 $1,120
 $22,663
 $10,557
 $61,617
Foreign currency translation(275) —
 —
 —
 (275)
Balance at March 2, 201327,002
 1,120
 22,663
 10,557
 61,342
Goodwill acquired—
 —
 18,254
 —
 18,254
Foreign currency translation(374) —
 (1,201) —
 (1,575)
Balance at March 1, 2014$26,628
 $1,120
 $39,716
 $10,557
 $78,021

The Company’s identifiableCompany has had no historical impairments of goodwill.

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Table of Contents


The following table provides the gross carrying amount of other intangible assets with finite lives areand related accumulated amortization:
 March 1, 2014
(In thousands)
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Foreign
Currency
Translation
 Net
Definite-lived intangible assets:       
Debt issue costs$3,453
 $(2,370) $—
 $1,083
Non-compete agreements6,767
 (6,266) (35) 466
Customer relationships26,862
 (10,673) (1,077) 15,112
Trademarks and other intangibles8,566
 (2,546) (251) 5,769
Total definite-lived intangible assets$45,648
 $(21,855) $(1,363) $22,430
Indefinite-lived intangible assets:       
Trademarks$5,104
   $(336) $4,768
Total intangible assets$50,752
 $(21,855) $(1,699) $27,198
 March 2, 2013
(In thousands)
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Foreign
Currency
Translation
 Net
Definite-lived intangible assets:       
Debt issue costs$3,556
 $(2,209) $—
 $1,347
Non-compete agreements6,824
 (6,124) (38) 662
Customer relationships15,628
 (9,541) (266) 5,821
Trademarks and other intangibles8,210
 (2,169) (196) 5,845
Total$34,218
 $(20,043) $(500) $13,675

Amortization expense on the definite-lived intangible assets was $1.9 million, $2.6 million, and $3.0 million in fiscal 2014, 2013 and 2012, respectively. In addition to the amortization expense noted above, in the first quarter of fiscal 2014, the Company expensed $0.2 million of debt issue costs that had previously been deferred and were being amortized over their estimated useful lives and were as follows:

   March 3, 2012 

(In thousands)

  Gross
Carrying
Amount		   Accumulated
Amortization		  Foreign
Currency
Translation		  Net 

Debt issue costs

  $2,923    $(1,897)  $—     $1,026  

Non-compete agreements

   6,889     (5,488)   (64)   1,337  

Customer relationships

   16,069     (8,376)   (396)   7,297  

Purchased intellectual property

   8,517     (1,794)   (291)   6,432  
  

 

 

   

 

 

  

 

 

  

 

 

 

Total

  $34,398    $(17,555)  $(751)  $16,092  
  

 

 

   

 

 

  

 

 

  

 

 

 
   February 26, 2011 

(In thousands)

  Gross
Carrying
Amount		   Accumulated
Amortization		  Foreign
Currency
Translation		  Net 

Debt issue costs

  $2,763    $(1,534)  $—     $1,229  

Non-compete agreements

   6,803     (4,712)   19    2,110  

Customer relationships

   15,966     (6,906)   103    9,163  

Purchased intellectual property

   8,487     (1,406)   72    7,153  
  

 

 

   

 

 

  

 

 

  

 

 

 

Total

  $34,019    $(14,558)  $194   $19,655  
  

 

 

   

 

 

  

 

 

  

 

 

 

Amortization expense on these identifiable intangible assets was $3.0 million, $2.5 million and $2.9 millionthe term of the debt previously issued for future investment in fiscal 2012, 2011 and 2010, respectively.the Company's Architectural Glass fabrication facility in Utah. The amortization expense associated with the debt issue costs is included in interest expense while the remainder is in selling, general and administrative expenses in the consolidated results of operations. The estimated future amortization expense for identifiabledefinite-lived intangible assets during the next five fiscal years is as follows:

(In thousands)

  2013   2014   2015   2016   2017 

Estimated amortization expense

  $2,680    $1,975    $1,481    $1,149    $980  

(In thousands)2015 2016 2017 2018 2019
Estimated amortization expense$2,306
 $1,951
 $1,808
 $1,763
 $1,676

8.Debt

8 Debt

TheDuring fiscal 2014, the Company maintainsentered into an $80.0amendment to its existing $100.0 million revolving credit facility. The expiration date was extended by one year to November 2018 and the letter of credit facility was reduced to $50.0 million from $60.0 million, the outstanding amounts of which expires in January 2014, with borrowings secured by a pledge of certain assetsdecrease the available commitment. No other provisions of the Company. original agreement were materially amended by the amended credit agreement. No borrowings were outstanding under the facility as of March 3, 20121, 2014 or February 26, 2011. March 2, 2013. Letters of credit issued under the facility decrease the amount of available commitment; $76.5 million was available under the facility at March 1, 2014 and $76.6 million was available at March 2, 2013.


The credit facility requires the Company to maintain a minimum level of net worth as defined in the credit facility based on certain quarterly financial calculations. The minimum required net worth computed in accordance with the credit agreement at March 3, 20121, 2014 was $274.2$287.5 million, whereas the Company’s net worth as defined in the credit facility was $321.2 million.$352.6 million. The credit facility also requires that the Company maintain an

adjusted debt-to-EBITDA ratio of not more than 2.75.3.00. This ratio is computed quarterly, with EBITDA computed on a rolling four-quarter basis. For purposes of calculating the adjusted debt in the adjusted debt-to-EBITDA ratio, the Company reduces non-credit facility debt for up to $25$25 million to the extent of unrestricted cash balances, cash equivalents and short-term marketable securities available for sale in excess of $15 million.$15 million. The Company’s ratio was 0.000.25 at March 3, 2012.1, 2014. If the Company is not in compliance with either of these covenants, the lenders may terminate the commitment


46
Table of Contents

and/or declare any loan then outstanding to be immediately due and payable. At March 3, 2012,1, 2014, the Company was in compliance with the financial covenants of the credit facility.

(In thousands)

  2012  2011 

Borrowings under revolving credit agreement

  $—   $—  

Other, interest at 0.6% and 1.4% for 2012 and 2011, respectively

   21,024    22,429  
  

 

 

  

 

 

 

Total long-term debt

   21,024    22,429  

Less current installments

   (108)   (987) 
  

 

 

  

 

 

 

Net long-term debt

  $20,916   $21,442  
  

 

 

  

 

 

 


During the first quarter of fiscal 2014, $10.0 million of recovery zone facility bonds that had previously been issued for future investment in the Company's Architectural Glass fabrication facility in Utah were redeemed at par. In connection with redeeming this debt in the first quarter of fiscal 2014, the Company expensed $0.2 million of debt issue costs that had previously been deferred and were being amortized over the term of the debt.
(In thousands)2014 2013
Borrowings under revolving credit agreement$—
 $—
Other, interest at 0.3% for each of fiscal 2014 and 201320,708
 30,813
Total long-term debt20,708
 30,813
Less current installments(49) (10,057)
Net long-term debt$20,659
 $20,756

Included in the totals above are $8.4$20.4 million of industrial revenue bonds, $12.0and $0.3 million of recovery zone facility bonds and other debt held by GlassecViracon.debt. The industrial development and recovery zone facilityrevenue bonds mature in fiscal years 2021 through 2036,2043, and the other debt matures in fiscal years 20132015 through 2021. The $8.4 million of industrial revenue bonds are supported by $8.7 million of letters of credit, and the $12.0 million of recovery zone facility bonds are supported by a $12.3 million letter of credit. The fair value of debtthe industrial revenue bonds approximates carrying value at March 3, 2012.

1, 2014, due to the variable interest rates on these instruments. The bonds are classified as level 2 within the fair value hierarchy.


Debt maturities are as follows:

(In thousands)

  2013   2014   2015   2016   2017   Thereafter   Total 

Maturities

  $108    $62    $62    $62    $62    $20,668    $21,024  

(In thousands)2015 2016 2017 2018 2019 Thereafter Total
Maturities$49 $49 $49 $49 $49 $20,463 $20,708

Selected information related to long-term debt is as follows:

(In thousands, except percentages)

  2012  2011 

Average daily borrowings during the year

  $21,414   $9,156  

Maximum borrowings outstanding during the year

   22,268    23,524  

Weighted average interest rate during the year

   0.95%   1.7% 
  

 

 

  

 

 

 

(In thousands, except percentages)2014 2013
Average daily borrowings during the year$21,800
 $29,951
Maximum borrowings outstanding during the year30,820
 31,054
Weighted average interest rate during the year0.30% 0.40%

Interest expense was as follows for fiscal 2012, 20112014, 2013 and 2010:

(In thousands)

  2012   2011   2010 

Interest on debt

  $942    $421    $54  

Other interest expense

   485     298     552  
  

 

 

   

 

 

   

 

 

 

Net interest expense

  $1,427    $719    $606  
  

 

 

   

 

 

   

 

 

 

2012:

(In thousands)2014 2013 2012
Interest on debt$895
 $895
 $942
Other interest expense364
 599
 485
Interest expense$1,259
 $1,494
 $1,427

Interest payments were $1.0$0.7 million $0.6 million and $0.9 million in fiscal 2012, 20112014 and 2010, respectively.

were 9 Employee Benefit Plans$1.0 million

in each of fiscal 2013 and 2012.


9.Employee Benefit Plans

401(k) Retirement Plan

The Company sponsors a single 401(k) retirement plan covering substantially all full-time non-union employees, as well as union employees at two of its manufacturing facilities. TheUnder the plan, historically included a discretionary annual Company contribution based on a percentage of employees’ base earnings and years of service with the Company for all eligible non-union employees and for eligible union employees according to the terms of union contracts. The discretionary annual contribution was discontinued effective January 1, 2011. As a result, the fiscal 2011 contribution was only for the 10 months ending December 31, 2010. The contribution was $3.7 million and $4.5 million in fiscal 2011 and 2010, respectively.

In addition to the contribution above, employees are also allowed to contribute up to 60 percent of their eligible earnings to this plan, up to statutory limits. Effective March 1, 2011, theThe Company contributes a match of 100 percent of the first one percent contributed and 50 percent of the next five percent contributed on eligible compensation that non-union employees contribute and according to contract terms for union employees. Prior to that date, the Company contribution was 30 percent of the first six percent of eligible compensation that non-union employees contributed and according to contract terms for union employees. The Company match was $3.6$4.2 million for 2012in fiscal 2014 and was $1.7$3.6 million in each of fiscal 20112013 and 2010.

2012.


Deferred Compensation Plan

The Company maintains a deferred compensation plan that allows participants to defer compensation and assist in savingsave for retirement and certainother short-term needs. The deferred compensation liability was $2.5$3.2 million at March 3, 20121, 2014 and is included in other long-termcurrent and non-current liabilities in the consolidated balance sheet. The deferred compensation planCompany has historically been unfunded. In fiscal 2012, the Company investedinvestments in corporate-owned life insurance policies (COLI) of $3.1 millionand mutual funds of $0.4 million with the intention of utilizing them as a long-term funding source

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for the deferred compensation plan. The COLI assets of $1.5 million at March 3, 2012, are recorded at their net cash surrender values and are included in other non-current assets in the consolidated balance sheet. MutualThe mutual fund investments of $1.2 million at March 3, 2012, are recorded at estimated fair value, based on quoted market prices, and are included in other non-current assets in the consolidated balance sheet.


Plans under Collective Bargaining Agreements

The Company contributes to various multi-employer union retirement plans, which provide retirement benefits to the majority of its union employees; none of the plans are considered significant. The total contribution to these plans in fiscal 2012, 20112014, 2013 and 20102012 was $3.9$3.7 million $4.2, $4.8 million and $5.8$3.9 million, respectively.


Pension Plan

As part of the acquisition of Tubelite in fiscal 2008, the

The Company assumed the assets and liabilities ofsponsors the Tubelite, Inc. Hourly Employees’Employees' Pension Plan (Tubelite plan). This plan is a defined-benefit pension plan that was frozen to new entrants and additional years of service credit for participating employees as of January 1, 2004.

Officers’


Officers' Supplemental Executive Retirement Plan (SERP)

The Company sponsors an unfunded SERP for the benefit of certain executives. The plan is considered a defined-benefit pension plan which is based principally on an employee’semployee's years of service and compensation levels near retirement.

On October 8, 2008, the Company’s Board of Directors adopted an amendment The SERP is frozen to the Apogee Enterprises, Inc. Officers’ Supplemental Executive Retirement Plan providing thatnew entrants and no moreadditional benefits will accrue tofor plan participants as of December 31, 2008. Plan participants continue to earn service for the purpose of becoming vested in the benefits they had accrued as of December 31, 2008.

participants.


Obligations and Funded Status of Defined-Benefit Pensions Plans

The following tables present reconciliations of the benefit obligation of the defined-benefit pension plans and the funded status of the defined-benefit pension plans. Both the Tubelite plan and the SERP use a fiscal year-end measurement date.

(In thousands)

  2012  2011 

Change in benefit obligation

   

Benefit obligation beginning of period

  $12,778   $11,911  

Interest cost

   654    665  

Actuarial loss

   2,221    836  

Benefits paid

   (879)   (634) 
  

 

 

  

 

 

 

Benefit obligation at measurement date

  $14,774   $12,778  
  

 

 

  

 

 

 

Change in plan assets

   

Fair value of plan assets beginning of period

  $4,549   $4,688  

Actual return on plan assets

   224    142  

Company contributions

   678    353  

Benefits paid

   (879)   (634) 
  

 

 

  

 

 

 

Fair value of plan assets at measurement date

  $4,572   $4,549  
  

 

 

  

 

 

 

Funded status— net amount recognized

  $(10,202)  $(8,229) 
  

 

 

  

 

 

 

(In thousands)2014 2013
Change in benefit obligation   
Benefit obligation beginning of period$14,869
 $14,774
Interest cost538
 570
Actuarial loss(113) 539
Benefits paid(1,020) (1,014)
Benefit obligation at measurement date$14,274
 $14,869
    
Change in plan assets   
Fair value of plan assets beginning of period$4,709
 $4,572
Actual return on plan assets(66) 242
Company contributions807
 909
Benefits paid(1,020) (1,014)
Fair value of plan assets at measurement date$4,430
 $4,709
    
Funded status - net amount recognized$(9,844) $(10,160)

Amounts recognized in the consolidated balance sheets consist of:

(In thousands)

  2012  2011 

Current liabilities

  $(1,001)  $(644) 

Other long-term liabilities

   (9,201)   (7,585) 
  

 

 

  

 

 

 

Total

  $(10,202)  $(8,229) 
  

 

 

  

 

 

 

(In thousands)2014 2013
Current liabilities$(638) $(640)
Other non-current liabilities(9,206) (9,520)
Total$(9,844) $(10,160)

Amounts included in accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit cost consist of:

(In thousands)

  2012   2011 

Net actuarial loss

  $4,335    $2,244  
  

 

 

   

 

 

 

Accumulated other comprehensive loss

  $4,335    $2,244  
  

 

 

   

 

 

 

(In thousands)2014 2013
Net actuarial loss$4,569
 $4,598
Accumulated other comprehensive loss$4,569
 $4,598


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The amount recognized in comprehensive earnings for fiscal 20122014 and 2011,2013, net of tax expense, is as follows:

(In thousands)

  2012   2011 

Net actuarial loss

  $1,331    $506  
  

 

 

   

 

 

 

Total

  $1,331    $506  
  

 

 

   

 

 

 

(In thousands)2014 2013
Net actuarial (gain) loss$(19) $168
Total$(19) $168

Components of the defined-benefit pension plansplans' net periodic benefit cost are as follows:

(In thousands)

  2012  2011  2010 

Interest cost

  $654   $665   $681  

Expected return on assets

   (214)   (225)   (177) 

Amortization of unrecognized transition amount

   —      —      (5) 

Amortization of unrecognized net loss

   120    126    57  
  

 

 

  

 

 

  

 

 

 

Net periodic benefit cost

  $560   $566   $556  
  

 

 

  

 

 

  

 

 

 

(In thousands) 2014 2013 2012
Interest cost $538
 $570
 $654
Expected return on assets (183) (177) (214)
Amortization of unrecognized net loss 163
 211
 120
Net periodic benefit cost $518
 $604
 $560

The estimated net actuarial loss for the defined-benefit pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost for fiscal 20132015 is $0.2$0.2 million, net of tax benefit.


Additional Information


Assumptions

Weighted-average assumptions used at the measurement date to determine the defined-benefit plans’plans' benefit obligation for the following fiscal years are as follows:

(Percentages)

  2012   2011   2009 

Discount rate

   4.00     5.25     5.75  

(Percentages)2014 2013 2012
Discount rate4.00% 3.75% 4.00%

Weighted-average assumptions used at the measurement date to determine the defined-benefit plans’plans' net periodic benefit cost for the following fiscal years are as follows:

(Percentages)

  2012   2011   2010 

Discount rate

   5.25     5.75     6.75  

Expected return on assets

   5.50     5.50     3.75  

(Percentages)2014 2013 2012
Discount rate3.75% 4.00% 5.25%
Expected return on assets4.50% 4.50% 5.50%

Discount rate.The discount rate reflects the current rate at which the defined-benefit plans’plans' pension liabilities could be effectively settled at the end of the year based on the measurement date. The discount rate was determined by matching the expected benefit payments to payments from the Principal Discount Yield Curve. This produced a discount rate of 4.00 percent.percent. There are no known or anticipated changes in the discount rate assumption that will impact the pension expense in fiscal year 2013.

2015.


Expected return on assets. To develop the expected long-term rate of return on asset assumption, the Company considered historical long-term rates of return for broad asset classes, actual past rates of return achieved by the plan, the general mix of assets held by the plan and the stated investment policy for the plan. This resulted in the selection of the 5.504.50 percent long-term rate of return on assets assumption.


Net periodic benefit cost.Total net periodic pension benefit cost was $0.5 million in fiscal 2014, and was $0.6 million in each of fiscal 2012, 20112013 and 2010.2012. Total net periodic pension benefit cost is expected to be approximately $0.6$0.6 million in fiscal 2013.2015. The net periodic pension benefit cost for fiscal 20132015 has been estimated assuming a discount rate of 4.0 percent.

4.00 percent.


Contributions

Pension contributions to the plans for fiscal 20122014 and 20112013 totaled $0.7$0.8 million and $0.4$0.9 million, respectively. SinceBecause the SERP is unfunded, contributions to that plan represent benefit payments made. The pension contributions in fiscal 20122014 and 20112013 equaled or exceeded the minimum funding requirement. Fiscal 20132015 pension contributions are expected to total $0.9 million.

$0.8 million.


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Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid by the plans as follows:

(In thousands)

  

 

 

Fiscal 2013

  $1,001  

Fiscal 2014

   989  

Fiscal 2015

   975  

Fiscal 2016

   971  

Fiscal 2017

   966  

Fiscal 2018-2022

   4,677  
  

 

 

 

(In thousands) 
Fiscal 2015$1,018
Fiscal 20161,003
Fiscal 2017997
Fiscal 2018970
Fiscal 2019981
Fiscal 2020-20244,625

Plan Assets

The Company does not maintain assets intended for the future use of the SERP. In accordance with its policy, the assets of the Tubelite plan have been invested in fixed-income securities with maturities intended to match benefit payments. The fixed-income securitiesa bond fund, the assets are carried at fair value based on prices from recent trades of similar securities, and are classified as Level 2 in the valuation hierarchy.


Employee Stock Purchase Plan

The Company also sponsors an employee stock purchase plan into which its employees may contribute up to $500$500 per week on an after-tax basis. The Company contributes a match of 15 percent of the employee contribution. Contributions and Company match funds are used to purchase shares of Company stock on the open market. The Company match to this plan was $0.1$0.1 million in each of fiscal 2012, 20112014, 2013 and 2010.

10 Shareholders’ Equity2012

.


10.Shareholders' Equity
A class of 200,000 shares of junior preferred stock with a par value of $1.00$1.00 is authorized, but unissued.


Share Repurchases

During fiscal 2004, the Board of Directors authorized a share repurchase program of 1,500,000 shares of common stock. The Board of Directors increased this authorization by 750,000 shares in January 2008 and by 1,000,000 in October 2008. The Company did not repurchase any shares under the plan during fiscal 2014 or 2013. In fiscal 2012, the Company repurchased 275,000 shares in the open market during fiscal 2012 for $2.4 million. No share repurchases were made under the plan during fiscal 2011 or 2010. The Company has purchased a total of 2,279,123 shares, at a total cost of $29.7$29.7 million, since the inception of this program and has remaining authority to repurchase 970,877 shares under this program, which has no expiration date.


In addition to the shares repurchased according to this repurchase plan, during fiscal 2014, 2013 and 2012the Company also purchased $1.3$3.6 million $1.7, $1.5 million and $1.5$1.3 million, respectively, of Company stock from employees in order to satisfy stock-for-stock option exercises or withholding tax obligations related to stock-based compensation, pursuant to terms of board and shareholder approved compensation plans during fiscal 2012, 2011 and 2010, respectively.

plans.


Accumulated Other Comprehensive Loss

The following table summarizes the accumulated other comprehensive loss, net of tax at March 3, 20121, 2014 and February 26, 2011.

(In thousands)

  2012  2011 

Net unrealized loss on marketable securities

  $(46)  $(31) 

Pension liability adjustments

   (2,761)   (1,430) 

Foreign currency translation adjustments

   (1,953)   576  
  

 

 

  

 

 

 

Total accumulated other comprehensive loss

  $(4,760)  $(885) 
  

 

 

  

 

 

 

11 Share-Based CompensationMarch 2, 2013

Stock Incentive Plan.

(In thousands) 2014 2013
Net unrealized loss on marketable securities $(157) $(74)
Foreign currency hedge 62
 (258)
Pension liability adjustments (2,910) (2,929)
Foreign currency translation adjustments (9,955) (3,820)
Total accumulated other comprehensive loss $(12,960) $(7,081)

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11.Share-Based Compensation

The 2009 Stock Incentive Plan, the 2009 Non-Employee Director Stock Incentive Plan, the 2002 Omnibus Stock Incentive Plan and the 1997 Omnibus Stock Incentive Plan (the Plans) provide for the issuance of 1,888,000; 250,000; 3,400,000;1,888,000, 250,000, 3,400,000 and 2,500,000 shares, respectively, for various forms of stock-based compensation to employees and non-employee directors. Awards under these Plans, either in the form of incentive stock options, nonstatutory options or stock-settled stock appreciation rights (SARs), are granted with an exercise price equal to the fair market value of the Company’s stock at the date of award. Nonvested share awards and nonvested share unit awards are also included in these Plans. Outstanding options issued to employees generally vest over a four-yearfour-year period, outstanding SARs vested over a three-yearthree-year period and outstanding options issued to non-employee directors vested at the end of six months. Outstanding options and SARs have a 10-year10-year term. Nonvested share awards and nonvested share unit awards generally vest over a two, three or four-yearfour-year period.


The 2002 Omnibus Stock Incentive Plan was terminated in June 2009 and the 1997 Omnibus Stock Incentive Plan was terminated in January 2006; no new grants may be made under either of these plans, although exercises of SARs and options and vesting of nonvested share awards previously granted thereunder will still occur in accordance with the terms of the various grants.

In August 2011, the Company granted 450,512 stock options and 155,875 nonvested share awards to its new President and Chief Executive Officer, resulting in an increase in the number of shares issued under stock option and nonvested share awards outstanding. In August 2011, the Company also granted 59,952 vested shares to its new President and Chief Executive Officer that were fully expensed during the second quarter, and are included in stock-based compensation expense noted below. These awards were granted as an “inducement grant” under applicable NASDAQ Stock Market Listing Rules and were made outside of the Company’s existing equity plans.


Total stock-based compensation expense under all Plans and the inducement grant included in the results of operations was $4.7 millionfor fiscal 2012, 20112014 and 2010 was $4.4 million $5.2 millionfor each of fiscal 2013 and $6.1 million, respectively. At March 3,2012.

Stock Options and SARs
There were no options or SARs issued in fiscal 2014 or 2013; in fiscal 2012, there was $1.1 million of total unrecognized compensation cost related to stock option awards, which is expected to be recognized over a weighted average period of approximately 30 months.

Cash proceeds from the exercise of450,512 stock options were $1.1 million, $0.3 million and $0.7 million for fiscal 2012, 2011 and 2010, respectively. There were immaterial amounts of tax benefits realized for the tax deductions from option exercises in both fiscal 2012 and 2011. The tax benefit realized for the tax deductions from option exercises totaled $0.1 million for fiscal 2010.

Theissued with a weighted average fair value per option at the date of grant for options granted in fiscal 2012 was $2.89, which was for the stock option issued under the inducement grant noted above. There were no options or SARs issued in fiscal 2011 or 2010. The aggregate intrinsic value of these securities (the amount by which the stock price on the date of exercise exceeded the stock price of the award on the date of grant) exercised was $0.2 million in each of fiscal 2012 and 2011 and was $0.5 million in fiscal 2010.

$2.89. The fair value of each award grant is estimated on the date of grant using the Black-Scholes option-pricing model, with the following weighted-average assumptions used for grants in fiscal 2012.

 2012

Dividend yield

3.9% 3.9%

Expected stock price volatility

56.1% 56.1%

Risk-free interest rate

0.8% 0.8%

Expected lives

4.6 years

Years


The expected stock price volatility is based on historical experience. The risk-free rate for periods that coincide with the expected life of the options is based on the U.S. Treasury Department yield curve in effect at the time of grant. The expected life, the average time an option grant is outstanding, and forfeiture rates are estimated based on historical experience.


The following table summarizes the award transactions under the Plans for the year ended March 3, 2012:

   Options/SARs Outstanding 
   Number of
Shares		  Weighted
Average
Exercise  Price		   Weighted
Average
Remaining
Contractual
Life		   Aggregate
Intrinsic Value		 

Outstanding at Feb. 26, 2011

   1,477,324   $17.81      

Award granted

   450,512    8.34      

Awards exercised

   (86,942)   11.94      

Awards canceled

   (25,601)   19.74      
  

 

 

  

 

 

     

Outstanding at Mar. 3, 2012

   1,815,293   $15.71     5.3 years    $2,241,378  
  

 

 

  

 

 

   

 

 

   

 

 

 

Vested or expected to vest at Mar. 3, 2012

   1,815,293   $15.71     5.3 years    $2,241,378  
  

 

 

  

 

 

   

 

 

   

 

 

 

Exercisable at Mar. 3, 2012

   1,364,781   $18.15     3.9 years    $322,197  
  

 

 

  

 

 

   

 

 

   

 

 

 

1, 2014Partnership Plan:

 Options/SARs Outstanding
 
Number of
Shares
 
Weighted
Average
Exercise  Price
 
Weighted
Average
Remaining
Contractual
Life
 
Aggregate
Intrinsic
Value
Outstanding at March 2, 20131,362,373
 $15.89
    
Awards exercised(506,145) 19.22
    
Awards canceled(8,376) 19.40
    
Outstanding at March 1, 2014847,852
 $13.88
 5.4 Years $17,253,002
Vested or expected to vest at March 1, 2014847,852
 $13.88
 5.4 Years $17,253,002
Exercisable at March 1, 2014697,681
 $15.07
 5.0 Years $13,365,075

At March 1, 2014, there was $0.2 million of total unrecognized compensation cost related to stock option awards, which is expected to be recognized over a weighted average period of approximately six months. Cash proceeds from the exercise of stock options were $4.2 million, $2.3 million and $1.1 million for fiscal 2014, 2013 and 2012, respectively. The Amended and Restated 1987 Partnership Planaggregate intrinsic value of securities (the Partnership Plan), a plan designed to increaseamount by which the ownershipstock price on the date of Apogeeexercise exceeded the stock by key employees, allowed participants selected by the Compensation Committeeprice of the Boardaward on the date of Directors to defer earned incentive compensation through the purchase of Apogee common stock. The purchased stockgrant) exercised was then matched by an equal award of nonvested shares, which vested over a predetermined period. The nonvested shares were recorded as unearned compensation in the equity section of the balance sheet. In accordance with accounting standards, the deferred compensation in the form of the Company’s stock was recorded at historical cost and classified as common stock held in trust. Since the investments were all in Company stock, an offsetting amount was recorded as deferred compensation obligations in the equity section of the balance sheet. Common shares of 3,400,000 were authorized for issuance under the Partnership Plan. The plan was amended$6.2 million in fiscal 2009 to reduce the authorized shares to 3,345,000. As of March 3, 2012, 3,283,000 shares have been issued or committed under the Partnership Plan. The Company expensed a minimal amount2014, $2.5 million in fiscal 2012, $0.62013, and $0.2 million in fiscal 2011,2012. The tax benefit realized for tax deductions from option exercises totaled $2.6 million for fiscal 2014 and $0.3$0.4 million for fiscal 2013. There were immaterial amounts of tax benefits realized for the tax deductions from option exercises in fiscal 2010 in conjunction with the Partnership Plan. During fiscal 2011, the Company accelerated vesting2012.


51
Table of 80,462 nonvested shares in connection with the Partnership Plan to eliminate the cost of administering this legacy compensation plan. Included in the $0.6 million of expense recognized in fiscal 2011 was $0.3 million of additional compensation expense related to the accelerated vesting. There are 62,000 shares available for issuance under the Partnership Plan as of March 3, 2012.

This program was eliminated for fiscal 2006Contents


Nonvested Shares and beyond, although vesting of remaining nonvested shares will still occur according to the vesting period of the grants.

Share Units

Executive Compensation Program

In fiscal 2006, the Company implemented anThe Company's executive compensation program to provide for a greater portion of total compensation to be delivered toprovides key employees selected by the Compensation Committee of the Board of Directors throughwith long-term incentives using nonvested shares and nonvested share units. During fiscal 2014 and 2013, nonvested shares were issued based on performance shares, performanceagainst objectives and generally vest over three years. From fiscal 2010 through fiscal 2012, nonvested share units SARs and nonvested shares. From fiscal 2006 through fiscal 2009, performance shares were issued at the beginning of each fiscal year, in the form of nonvested share awards. Starting in fiscal 2010, the Company issued performance shares in the form of nonvested share unit awards, which give the recipient the right to receive shares earned at the vesting date. The number of shares ornonvested share units issued at grant iswas equal to the target number of performance sharesnonvested share units and allows for the right to receive an additional number of, or fewer, shares based on meeting pre-determined Company three-year performance goals.


The following table summarizes the nonvested share award transactions, including performance shares and performancenonvested share units, for fiscal 2010, 20112012, 2013 and 2012:

   Nonvested Share Awards 
   Number of
Shares		  Weighted
Average
Grant  Date
Fair Value		 

Nonvested at February 28, 2009

   694,702   $17.45  

Granted(1)

   457,894    13.61  

Vested

   (282,948)   15.16  

Canceled

   (49,424)   16.91  
  

 

 

  

 

 

 

Nonvested at February 27, 2010

   820,224   $16.13  

Granted(2)

   439,319    13.26  

Vested

   (328,223)   16.69  

Canceled

   (9,755)   17.97  
  

 

 

  

 

 

 

Nonvested at February 26, 2011

   921,565   $14.54  

Granted(3)

   438,967    11.83  

Vested

   (208,426)   15.91  

Canceled(4)

   (170,293)   16.81  
  

 

 

  

 

 

 

Nonvested at March 3, 2012(5)

   981,813   $12.64  
  

 

 

  

 

 

 
2014:
 Nonvested Shares and Units
 
Number of
Shares and
Units
 
Weighted
Average
Grant Date
Fair Value
Nonvested at February 26, 2011921,565
 $14.54
Granted(1)
438,967
 11.83
Vested(208,426) 15.91
Canceled(2)
(170,293) 16.81
Nonvested at March 3, 2012981,813
 $12.64
Granted234,385
 15.13
Vested(305,123) 12.88
Canceled(3)
(79,502) 13.54
Nonvested at March 2, 2013831,573
 $13.17
Granted159,221
 26.62
Vested(336,933) 13.04
Canceled(4)
(78,797) 13.80
Nonvested at March 1, 2014(5)
575,064
 $16.89
(1)
Includes 196,957 performance share units granted at target for the fiscal 2010-2012 performance period. Also includes 36,200 performance shares which were granted and immediately vested for achievement above target for the fiscal 2007-2009 performance period. Performance shares of 146,679 (at target) were previously granted in fiscal 2007 for this performance period.
(2)Includes 193,519 performance share units granted for the fiscal 2011-2013 performance period at target.
(3)Includes 117,765 performance nonvested share units granted for the fiscal 2012-2014 performance period at target.
(4)
(2)
Includes 63,682 performance shares nonvested share units canceled under the fiscal 2009-2011 performance period because Apogee performed below target level for that performance period. PerformanceNonvested shares of 126,429 (at target) were previously granted in fiscal 2009 for this performance period.
(3)
Includes 61,403 nonvested share units canceled under the fiscal 2010-2012 performance period because Apogee performed below target level for that performance period. Nonvested share units of 160,196 (at target) were previously granted in fiscal 2010 for this performance period.
(4)
Includes 75,547 of nonvested share units canceled under the fiscal 2011-2013 performance period because Apogee performed below target level for the performance period. Nonvested share units of 174,353 (at target) were previously granted in fiscal 2011 for this performance period.
(5)Includes a total of 452,314 of performance117,765 nonvested share units granted and outstanding at target level for the fiscal 2010-2012, 2011-2013 and 2012-2014.2012-2014 performance period.


At March 3, 2012,1, 2014, there was $5.4$4.9 million of total unrecognized compensation cost related to nonvested share and nonvested share unit awards, which is expected to be recognized over a weighted average period of approximately 21 months. The total fair value of shares vested during fiscal 20122014 was $2.9 million.

12 Income Taxes$8.5 million

Income from continuing operations.


In fiscal 2013, the executive compensation program was changed to issue cash-based performance awards in lieu of nonvested share unit awards; the cash-based awards are based on a two-year performance period and will be paid in two annual installments after completion of the performance period. Vesting of outstanding nonvested share unit awards will continue through fiscal 2015. The liability for the cash-based performance awards is included in other current and non-current liabilities in the consolidated balance sheet.


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12.Income Taxes

Earnings before income taxes consisted of the following:

(In thousands)

  2012   2011  2010 

U.S.

  $3,458    $(19,997)  $45,962  

International

   190     (836)   —    
  

 

 

   

 

 

  

 

 

 

Earnings (loss) from continuing operations before income taxes

  $3,648    $(20,833)  $45,962  
  

 

 

   

 

 

  

 

 

 

(In thousands)2014 2013 2012
U.S.$36,700
 $26,699
 $3,406
International3,066
 208
 190
Earnings before income taxes$39,766
 $26,907
 $3,596

The components of income tax (benefit) expense for continuing operations(benefit) for each of the last three fiscal years are as follows:

(In thousands)

  2012  2011  2010 

Current:

    

Federal

  $2,208   $(7,760)  $12,580  

State and local

   554    183    987  

International

   615    (172)   —    
  

 

 

  

 

 

  

 

 

 

Total current for continuing operations

  $3,377   $(7,749)  $13,567  
  

 

 

  

 

 

  

 

 

 

Deferred:

    

Federal

  $(600)  $790   $736  

State and local

   (401)   (1,015)   27  

International

   (114)   18    —    
  

 

 

  

 

 

  

 

 

 

Total deferred for continuing operations

  $(1,115)  $(207)  $763  
  

 

 

  

 

 

  

 

 

 

Total non-current tax expense

  $(3,311)  $1,280   $415  
  

 

 

  

 

 

  

 

 

 

Total income tax (benefit) expense

  $(1,049)  $(6,676)  $14,745  
  

 

 

  

 

 

  

 

 

 

(In thousands)2014 2013 2012
Current:     
Federal$15,711
 $5,036
 $2,208
State and local1,440
 169
 554
International1,437
 409
 615
Total current$18,588
 $5,614
 $3,377
Deferred:     
Federal$(4,549) $2,680
 $(600)
State and local(378) 1,015
 (401)
International(353) (138) (114)
Total deferred$(5,280) $3,557
 $(1,115)
Total non-current tax benefit$(1,528) $(1,375) $(3,311)
Total income tax expense (benefit)$11,780
 $7,796
 $(1,049)

Income tax payments, net of refunds were $12.9 million in fiscal 2014 and were $7.7 million in fiscal 2013. Income tax refunds, net of payments were $7.5$7.5 million in fiscal 2012 and income tax payments, net of refunds, were $1.7 million and $10.0 million in fiscal 2011 and 2010, respectively.

.


The differences between the statutory federal income tax rates and consolidated effective tax rates are as follows:

   2012  2011  2010 

Federal income tax expense (benefit) at statutory rates

   35.0%   (35.0)%   35.0% 

State and local income taxes, net of federal tax benefit

   (5.2)   (2.7)   2.2  

Tax credits – research & development

   (19.2)   (4.0)   (1.6) 

Tax credits – other

   (3.0)   (0.3)   (0.3) 

Manufacturing deduction

   (10.7)   1.7    (1.9) 

Meals and entertainment

   5.0    0.6    0.3  

Permanent tax adjustment for officers compensation

   3.0    0.5    —  

Nondeductible acquisition costs

   —    1.0    —  

Tax-exempt interest

   (3.0)   (0.9)   (0.4) 

Tax reserve adjustments – statute expirations and benefits recognized

   (42.2)   5.6    1.0  

Deferred tax adjustment

   —    —    (2.1) 

Change in valuation allowance

   10.4    0.5    (0.7) 

Other, net

   1.1    1.0    0.6  
  

 

 

  

 

 

  

 

 

 

Income tax (benefit) expense, continuing operations

   (28.8)%   (32.0)%   32.1% 
  

 

 

  

 

 

  

 

 

 

 2014 2013 2012
Federal income tax expense at statutory rates35.0% 35.0% 35.0%
State and local income taxes, net of federal tax benefit0.9 0.9 (5.2)
Tax credits - research & development(1.6) (2.5) (19.2)
Tax credits - other(0.2) (0.4) (3.0)
Manufacturing deduction(3.5) (2.0) (10.7)
Meals and entertainment0.6 0.9 5.0
Permanent tax adjustment for officers compensation0.1 — 3.0
Nondeductible acquisition costs0.3 — —
Tax-exempt interest(0.2) (0.4) (3.0)
Tax reserve adjustments - statute expirations and benefits recognized(2.2) (3.0) (42.2)
Change in valuation allowance0.4 0.8 10.4
Other, net— — 1.1
Income tax expense (benefit)29.6% 29.3% (28.8)%

In fiscal 2012, 20112014 and 2010,2013, there were tax benefits associated with stock-based incentive plans of $2.6 million and $0.4 million, respectively. In fiscal 2012, there were tax deficiencies of $0.3$0.3 million $0.2 million and $0.1 million, respectively, associated with the stock-based incentive plans. These benefits and deficiencies were subtracted directly fromimpacted additional paid-in capital directly and were not reflected in the determination of income tax expense or benefit.



53
Table of Contents

Deferred tax assets and deferred tax liabilities for continuing operations at March 3, 20121, 2014 and February 26, 2011March 2, 2013 are as follows:

   2012  2011 

(In thousands)

  Current  Noncurrent  Current  Noncurrent 

Accounts receivable

  $994   $—     $823   $—    

Accrued insurance

   114    787    483    711  

Other accruals

   2,346    1,133    2,286    1,693  

Deferred compensation

   242    9,601    22    9,221  

Restructuring reserve

   290    189    1,460    233  

Goodwill and other intangibles(1)

   53    (3,523)   —      (3,940) 

Inventory

   1,023    —      1,002    —    

Depreciation

   —      (16,441)   —      (20,248) 

Liability for unrecognized tax benefits

   —      3,774    —      5,308  

Prepaid expenses

   (442)   516    (543)   252  

Net operating losses

   —      3,019    —      2,573  

Valuation allowance on net operating losses

   (404)   (1,365)   (329)   (1,053) 

Other

   78    63    (24)   387  
  

 

 

  

 

 

  

 

 

  

 

 

 

Deferred tax assets (liabilities)

  $4,294   $(2,247)  $5,180   $(4,863) 
  

 

 

  

 

 

  

 

 

  

 

 

 

(1)Fiscal 2011 includes a retrospective adjustment of $4.2 million as described above in Note 6.

 2014 2013
(In thousands)Current Noncurrent Current Noncurrent
Accounts receivable$900
 $—
 $762
 $—
Accrued insurance113
 574
 193
 614
Other accruals2,680
 792
 2,581
 979
Deferred compensation(1) 9,323
 37
 8,481
Goodwill and other intangibles23
 (8,624) —
 (4,710)
Inventory1,535
 —
 1,166
 —
Depreciation(853) (14,413) —
 (15,912)
Liability for unrecognized tax benefits—
 2,781
 —
 3,415
Prepaid expenses(634) 595
 (494) 534
Net operating losses—
 3,566
 —
 3,433
Valuation allowance on net operating losses(459) (2,312) (2,117) (567)
Other225
 315
 90
 253
Deferred tax assets (liabilities)$3,529
 $(7,403) $2,218
 $(3,480)

The Company has state net operating loss carryforwards with a tax effect of $3.0 million.$3.6 million. A valuation allowance of $1.8$2.8 million has been established for these net operating loss carryforwards due to the uncertainty of the use of the tax benefits in future periods.


The Company files income tax returns in the U.S. federal jurisdiction, Brazil and various U.S. state jurisdictions, Canada, Brazil and other international jurisdictions. The Company is no longer subject to U.S. federal tax examinations for years prior to fiscal 20092011, or state and local income tax examinations for years prior to fiscal 2005. During the first quarter of fiscal 2012, the Company entered into an administrative appeals agreement with the IRS to conclude the federal audit for fiscal years 2004 through 2007. The federal statute of limitations has expired for fiscal year 2008. The Company is not currently under U.S. federal examination for years subsequent to fiscal year 2008,2010, and there is very limited audit activity of the Company’s income tax returns in U.S. state jurisdictions or Brazil.

international jurisdictions.


The Company considers the earnings of its non-U.S. subsidiaries to be indefinitely invested outside of the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and specific plans for reinvestment of those subsidiary earnings. Should the Company decide to repatriate the foreign earnings, it would need to adjust the income tax provision in the period it was determined that the earnings will no longer be indefinitely invested outside the United States.

The total liability for unrecognized tax benefits for fiscal 2012, 20112014, 2013 and 2010,2012, respectively, is $8.9$5.2 million $13.8, $6.8 million and $16.1 million.$8.9 million. Included in this total liability at fiscal 2012, 20112014, 2013 and 2010,2012, respectively, are $5.1$2.6 million $7.6, $3.3 million and $6.5$5.1 million of tax benefits that, if recognized, would decrease the effective tax rate for continuing operations.rate. Also included in the balance of unrecognized tax benefits for fiscal 2014, 2013 and 2012 are $2.0$1.8 million of tax benefits,, $2.2 million and for each of fiscal 2011 and 2010 are $3.1$2.0 million of tax benefits that, if recognized, would result in adjustments to deferred taxes. The total liability for unrecognized tax benefits at fiscal 2010 included $4.9 million related to discontinued operations, which included $1.8 million for interest and penalties. In the second quarter of fiscal 2011, this reserve was decreased primarily due to the favorable resolution of an outstanding tax exposure related to a foreign operation discontinued in 1998. The resolution of this item eliminated the total liability for unrecognized tax benefits of $4.9 million related to discontinued operations.


Penalties and interest related to unrecognized tax benefits are recorded in income tax expense, which is consistent with past practices. Related to the unrecognized tax benefits noted above, the Company reduced the accrual for penalties and interest by $1.4$0.5 million during fiscal 2012,2014, resulting in a reserve for interest and penalties of $0.8 million at the end of fiscal 2014. During fiscal 2013, the Company reduced the accrual for penalties and interest by $0.5 million, resulting in a reserve for interest and penalties at the end of fiscal 20122013 of $1.8 million.$1.3 million. During fiscal 2011,2012, the Company reduced the accrual for penalties and interest by $0.2$1.4 million, resulting in a reserve for interest and penalties at the end of fiscal 20112012 of $3.2 million. During fiscal 2010, the Company reduced the accrual for penalties and interest by $0.6$1.8 million resulting in a reserve for interest and penalties at the end.

54
Table of fiscal 2010 of $3.4 million.

Contents



A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:

(In thousands)

  2012  2011  2010 

Gross unrecognized tax benefits at beginning of year

  $10,676   $12,666   $11,559  

Gross increases in tax positions for prior years

   136    1,084    270  

Gross decreases in tax positions for prior years

   (462)   (3,197)   (235) 

Gross increases based on tax positions related to the current year

   623    663    1,091  

Gross decreases based on tax positions related to the current year

   (78)   (92)   (19) 

Settlements

   (1,200)   (1,382)   —    

Statute of limitations expiration

   (2,570)   (127)   —    

Unrecognized tax benefits acquired in connection with Glassec

   —      1,061    —    
  

 

 

  

 

 

  

 

 

 

Gross unrecognized tax benefits at end of year

  $7,125   $10,676   $12,666  
  

 

 

  

 

 

  

 

 

 

(In thousands)2014 2013 2012
Gross unrecognized tax benefits at beginning of year$5,516
 $7,125
 $10,676
Gross increases in tax positions for prior years44
 236
 136
Gross decreases in tax positions for prior years(616) (1,480) (462)
Gross increases based on tax positions related to the current year326
 621
 623
Gross decreases based on tax positions related to the current year(40) (56) (78)
Settlements(84) (682) (1,200)
Statute of limitations expiration(809) (248) (2,570)
Unrecognized tax benefits acquired in connection with Alumicor94
 —
 —
Gross unrecognized tax benefits at end of year$4,431
 $5,516
 $7,125

The total liability for unrecognized tax benefits is expected to decrease by approximately $1.8$0.4 million during fiscal 20132015 due to audit settlements and lapsing of statutes.

13 Discontinued Operations


In several transactions in fiscal years 1998 through 2000,September 2013, the Company completed the sale of its large-scale domestic curtainwall business, the saleU.S. Department of the Company’s detention/security business and its exit from international curtainwall operations. The remaining estimated cash expenditures related to discontinued operations are recorded as liabilities of discontinued operations and cover warranty issues relating to domestic and international construction projects that the Company expects will be resolved over the next five years.

In the fourth quarter of fiscal 2011, the settlement of an outstanding legal claim related to a foreign discontinued operation resulted in a $1.6 million increase in reserves and a pre-tax loss from discontinued operations. This settlement was finalized in March 2011,Treasury and the IRS issued final regulations addressing the acquisition , production and improvement of tangible property, and also proposed regulations addressing the disposition of property. These regulations replace previously issued temporary regulations and are effective for tax years beginning January 1, 2014, with optional adoption permitted in 2013. The Company paid $3.0 million for final resolution of this matter, which was fully reserved at the end of fiscal 2011. In the second quarter of fiscal 2011, the favorable resolution of an outstanding tax exposure related to a foreign operation discontinued in 1998 resultedis in the releaseprocess of $4.9 million of uncertain tax positions and non-cash income from discontinued operations. The settlementsanalyzing the impact of these two items representnew regulations but does not believe they will have a material impact on the last significant remaining items with respect to our international curtainwall business. In fiscal 2010, a favorable resolutionCompany’s consolidated financial statements.


13.Quarterly Data (Unaudited)

 Quarter  
(In thousands, except per share data)First Second Third Fourth Total
Fiscal 2014         
Net sales$179,311
 $178,287
 $199,430
 $214,417
 $771,445
Gross profit36,386
 38,535
 43,388
 46,943
 165,252
Net earnings4,159
 6,121
 9,668
 8,038
 27,986
Earnings per share - basic0.15
 0.21
 0.34
 0.28
 0.98
Earnings per share - diluted0.14
 0.21
 0.33
 0.27
 0.95
Fiscal 2013         
Net sales$154,134
 $175,940
 $190,416
 $179,734
 $700,224
Gross profit31,075
 36,137
 42,240
 36,281
 145,733
Net earnings1,606
 5,057
 8,052
 4,396
 19,111
Earnings per share - basic0.06
 0.18
 0.29
 0.15
 0.68
Earnings per share - diluted0.06
 0.18
 0.28
 0.15
 0.67


55
Table of an outstanding lease claim and a reduction in reserves related to the expiration of warranty periods resulted in pre-tax income from discontinued operations of $0.8 million.

(In thousands)

  2012  2011   2010 

Condensed Statement of Operations from Discontinued Businesses

     

Net sales

  $—     $—      $—    
  

 

 

  

 

 

   

 

 

 

Loss before income taxes (prior to gain on disposal)

   —      —       —    

Income tax benefit

   —      —       —    
  

 

 

  

 

 

   

 

 

 

Loss from operations, net of income taxes

   —      —       —    

(Loss) gain on disposal, net of income taxes

   (52)   3,825     525  
  

 

 

  

 

 

   

 

 

 

Net (loss) earnings

  $(52)  $3,825    $525  
  

 

 

  

 

 

   

 

 

 

(In thousands)

  2012   2011 

Summary Balance Sheets of Discontinued Businesses

    

Accounts payable and accrued liabilities

  $799    $4,023  

Long-term liabilities

   520     642  
  

 

 

   

 

 

 

14 Quarterly Data (Unaudited)

   Quarter 

(In thousands, except per share data)

  First  Second  Third  Fourth  Total 

Fiscal 2012

      

Net sales

  $153,338   $165,557   $174,853   $168,715   $662,463  

Gross profit

   23,686    25,952    34,728    32,754    117,120  

(Loss) earnings from continuing operations

   (2,177)   (1,677)   5,536    3,015    4,697  

Loss from discontinued operations

   —      —      —      (52)   (52) 

Net (loss) earnings

   (2,177)   (1,677)   5,536    2,963    4,645  

Earnings per share – basic

      

(Loss) earnings from continuing operations

   (0.08)   (0.06)   0.20    0.11    0.17  

Loss from discontinued operations

   —      —      —      —      —    

Net (loss) earnings

   (0.08)   (0.06)   0.20    0.11    0.17  

Earnings per share – diluted

      

(Loss) earnings from continuing operations

   (0.08)   (0.06)   0.20    0.11    0.17  

Loss from discontinued operations

   —      —      —      —      —    

Net (loss) earnings

   (0.08)   (0.06)   0.20    0.11    0.17  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Fiscal 2011

      

Net sales

  $143,028   $144,651   $147,200   $147,898   $582,777  

Gross profit

   18,836    18,002    23,060    23,222    83,120  

Loss from continuing operations

   (3,479)   (4,991)   (2,322)   (3,365)   (14,157) 

Earnings (loss) from discontinued operations

   —      4,869    —      (1,044)   3,825  

Net loss

   (3,479)   (122)   (2,322)   (4,409)   (10,332) 

Earnings per share – basic

      

Loss from continuing operations

   (0.13)   (0.18)   (0.08)   (0.12)   (0.51) 

Earnings (loss) from discontinued operations

   —      0.18    —      (0.04)   0.14  

Net loss

   (0.13)   —      (0.08)   (0.16)   (0.37) 

Earnings per share – diluted

      

Loss from continuing operations

   (0.13)   (0.18)   (0.08)   (0.12)   (0.51) 

Earnings (loss) from discontinued operations

   —      0.18    —      (0.04)   0.14  

Net loss

   (0.13)   —      (0.08)   (0.16)   (0.37) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

15 Earnings Per Share

Contents


14.Earnings per Share

Basic earnings per share is computed by dividing net income or loss by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing net income or loss by the weighted average common shares outstanding, including the dilutive effects of stock options, SARs and nonvested shares. However, when the Company has a loss from continuing operations, diluted earnings per share computations are computed using basic shares. The following table presents a reconciliation of the share amounts used in the computation of basic and diluted earnings per share:

(In thousands)

  2012   2011   2010 

Basic earnings per share – weighted common shares outstanding

   27,741     27,637     27,381  

Weighted common shares assumed upon exercise of stock options

   33     —       66  

Unvested shares for deferred compensation plans

   274     —       269  
  

 

 

   

 

 

   

 

 

 

Diluted earnings per share – weighted common shares and potential

common shares outstanding

   28,048     27,637     27,716  
  

 

 

   

 

 

   

 

 

 

Stock options excluded from the calculation of diluted earnings per share because the exercise price was greater than the average market price of common shares

   1,174     —       1,160  
  

 

 

   

 

 

   

 

 

 

Due to the net loss in fiscal 2011, there was no dilutive impact from unvested shares.

(In thousands)2014 2013 2012
Basic earnings per share – weighted common shares outstanding28,483
 27,954
 27,741
Weighted average effect of nonvested share grants and assumed exercise of stock options891
 687
 307
Diluted earnings per share – weighted common shares and potential common shares outstanding29,374
 28,641
 28,048
Stock options excluded from the calculation of earnings per share because the exercise price was greater than the average market price of the common shares—
 538
 1,174

16 15.Business SegmentsSegment Data


The Company’s segments are aligned to match the markets they serve. They areCompany has four reporting segments: Architectural Products andGlass, Architectural Services, (Architectural)Architectural Framing Systems and Large-Scale Optical Technologies (LSO). The Architectural Glass segment designs, engineers, fabricates installs, maintainsglass used in customized window and renovates the walls of glass and windowswall systems comprising the outside skin of commercial and institutional buildings. The Architectural Services segment designs, engineers, fabricates and installs the walls of glass, and windows and other curtainwall products making up the outside skin of commercial and institutional buildings for new construction and renovation. The Architectural Framing Systems segment designs, engineers, fabricates and finishes the aluminum frames used in customized aluminum and glass window, curtainwall, storefront and entrance systems comprising the outside skin and entrances of commercial and institutional buildings. The Company has aggregated four operating segments into the Architectural Framing Systems reporting segment based upon their similar products, customers, distribution methods, production processes and economic characteristics. The LSO segment manufactures value-added glass and acrylic products for the custom picture framing market.


56
Table of Contents


The following table presents certain data for our twothe Company's four reporting segments, and consolidated data, for fiscal 2012, 20112014, 2013 and 2010.

(In thousands)

  2012  2011  2010 

Net Sales from continuing operations

    

Architectural

  $583,933   $507,392   $626,007  

Large-scale optical

   78,532    75,426    70,707  

Intersegment elimination

   (2)   (41)   (11) 
  

 

 

  

 

 

  

 

 

 

Total

  $662,463   $582,777   $696,703  
  

 

 

  

 

 

  

 

 

 

Operating Income (loss) from continuing operations

    

Architectural

  $(12,072)  $(37,668)  $31,591  

Large-scale optical

   19,605    20,540    16,870  

Corporate and other

   (3,717)   (3,844)   (3,031) 
  

 

 

  

 

 

  

 

 

 

Total

  $3,816   $(20,972)  $45,430  
  

 

 

  

 

 

  

 

 

 

Depreciation and Amortization from continuing operations

    

Architectural

  $20,978   $21,791   $22,541  

Large-scale optical

   4,607    4,694    4,792  

Corporate and other

   1,661    1,733    2,268  
  

 

 

  

 

 

  

 

 

 

Total

  $27,246   $28,218   $29,601  
  

 

 

  

 

 

  

 

 

 

Capital Expenditures from continuing operations

    

Architectural

  $6,925   $5,819   $5,238  

Large-scale optical

   1,244    652    2,528  

Corporate and other

   1,481    2,655    1,999  
  

 

 

  

 

 

  

 

 

 

Total

  $9,650   $9,126   $9,765  
  

 

 

  

 

 

  

 

 

 

Identifiable Assets

    

Architectural(1)

  $321,417   $335,776   $321,594  

Large-scale optical

   59,824    65,291    67,314  

Corporate and other

   111,863    110,031    137,946  
  

 

 

  

 

 

  

 

 

 

Total

  $493,104   $511,098   $526,854  
  

 

 

  

 

 

  

 

 

 

(1)Fiscal 2011 includes a retrospective adjustment of $4.2 million within the Architectural segment as described above in Note 6.

2012.

(In thousands)2014 2013 2012
Net Sales     
Architectural glass$293,810
 $266,456
 $278,087
Architectural services203,351
 186,570
 149,779
Architectural framing systems216,059
 191,137
 174,930
Large-scale optical81,127
 79,947
 78,532
Intersegment elimination(22,902) (23,886) (18,865)
Total$771,445
 $700,224
 $662,463
Operating Income (Loss)     
Architectural glass$3,861
 $(4,391) $(19,595)
Architectural services4,479
 (1,008) (2,879)
Architectural framing systems14,930
 14,584
 10,402
Large-scale optical21,252
 20,993
 19,605
Corporate and other(4,237) (2,759) (3,717)
        Total$40,285
 $27,419
 $3,816
Depreciation and Amortization     
Architectural glass$11,624
 $12,230
 $13,585
Architectural services1,421
 844
 509
Architectural framing systems6,436
 6,477
 6,884
Large-scale optical4,861
 4,634
 4,607
Corporate and other2,208
 2,344
 1,661
       Total$26,550
 $26,529
 $27,246
Capital Expenditures     
Architectural glass$31,568
 $17,373
 $4,335
Architectural services1,195
 3,939
 358
Architectural framing systems7,008
 8,151
 2,232
Large-scale optical546
 2,792
 1,244
Corporate and other1,535
 2,409
 1,481
       Total$41,852
 $34,664
 $9,650
Identifiable Assets     
Architectural glass$205,606
 $180,662
 $172,265
Architectural services66,567
 54,696
 42,433
Architectural framing systems184,382
 111,782
 108,277
Large-scale optical58,102
 59,348
 59,824
Corporate and other50,700
 113,653
 110,305
       Total$565,357
 $520,141
 $493,104

Due to the varying combinations and integration of individual window, storefront and curtainwall systems, the Company has determined that it is impractical to report product revenues generated by class of product, beyond the segment revenues currently reported.

57
Table of Contents


The following table presents net sales, based on the location in which the sale originated, and long-lived assets, representing property, plant and equipment, net of related depreciation, by geographic region.

(In thousands)

  2012   2011   2010 

Net Sales from continuing operations

      

United States

  $628,362    $579,127    $696,703  

Brazil

   34,101     3,650     —    
  

 

 

   

 

 

   

 

 

 

Total

  $662,463    $582,777    $696,703  
  

 

 

   

 

 

   

 

 

 

Long-Lived Assets

      

United States

  $150,875    $168,791    $185,519  

Brazil

   8,672     10,410     —    
  

 

 

   

 

 

   

 

 

 

Total

  $159,547    $179,201    $185,519  
  

 

 

   

 

 

   

 

 

 

Due to the varying combinations of individual window systems and curtainwall, the Company has determined that it is impractical to report product and service revenues generated by the Architectural segment by class of product, beyond the segment revenues currently reported.

Apogee’s

(In thousands)2014 2013 2012
Net Sales     
United States$718,881
 $668,243
 $628,362
Canada15,850
 —
 —
Brazil36,714
 31,981
 34,101
Total$771,445
 $700,224
 $662,463
Long-Lived Assets     
United States$177,378
 $160,337
 $150,875
Canada9,031
 —
 —
Brazil7,537
 8,611
 8,672
       Total$193,946
 $168,948
 $159,547

Apogee's export net sales from domestic operations of $75.7$52.5 million for fiscal 20122014 were approximately 117 percent of consolidated net sales, export net sales of $79.4$63.5 million for fiscal 20112013 were approximately 149 percent of consolidated net sales, and export sales of $68.3$75.7 million for fiscal 20102012 were approximately 1011 percent of consolidated net sales. All sales from Canada and Brazil were to customers outside the United States. States, and are subject to changes in the value of foreign currencies in relation to our reporting currency, the U.S. dollar. No single customer, including government agencies, accounts for 10 percent or more of consolidated net sales.


Segment operating income is equal to net sales less cost of sales and operating expenses. Operating income does not include provision for interest expense or income taxes. Corporate and other includes miscellaneous corporate activity not allocable to business segments.


Included in the identifiable assets for Corporate and other are the short and long-term marketable securities available for sale securities at corporate and Prism of $19.6$11.5 million in fiscal 2012, $26.92014 and $38.8 million in fiscal 2011 and $78.1 million in fiscal 2010.2013. Also included are short and long-term restricted investments at corporate of $23.1$2.5 million in fiscal 20122014 and $35.8$26.4 million in fiscal 2011.

17 Commitments and Contingent Liabilities2013

.


16.Commitments and Contingent Liabilities

Operating lease commitments.As of March 3, 2012,1, 2014, the Company was obligated under noncancelable operating leases for buildings and equipment. Certain leases provide for increased rentals based upon increases in real estate taxes or operating costs. Future minimum rental payments under noncancelable operating leases are:

(In thousands)

  2013   2014   2015   2016   2017   Thereafter   Total 

Total minimum payments

  $6,737    $5,650    $4,848    $4,735    $3,041    $3,309    $28,320  

(In thousands)
Fiscal
2015
 
Fiscal
2016
 
Fiscal
2017
 
Fiscal
2018
 
Fiscal
2019
 Thereafter Total
Total minimum payments$8,953
 $8,543
 $6,765
 $5,299
 $6,729
 $2,823
 $39,112

Total rental expense, including operating leases and short-term equipment rentals, was $11.9$15.4 million $10.1, $13.0 million and $14.9$11.9 million in fiscal 2012, 20112014, 2013 and 2010,2012, respectively.


At March 3, 2012,1, 2014, the Company had twoone sale and leaseback agreements, one for a building that provides an option to purchase the building at projected future fair market value upon expiration of the lease in 2014 and oneagreement for equipment that provides an option to purchase the equipment at projected future fair market value upon expiration of the lease in 2018.2018. The leases arelease is classified as an operating leaseslease in accordance with applicable financial accounting standards. The Company has a deferred gain of $5.9$3.6 million under the sale and leaseback transactions,transaction, which is included in the balance sheet caption as accrued expensesother current and other long-termnon-current liabilities. The average annual lease payment over the life of the remaining leaseslease is $2.0 million.

$1.6 million.


Bond commitments. In the ordinary course of business, predominantly in the Company’s installationArchitectural Services business, the Company is required to provide surety or performance bonds that commit payments to its customers for any non-performance by the Company. At March 3, 2012, $100.51, 2014, $98.4 million of the Company’s backlog was bonded by performance bonds with a face value of $309.9 million.$275.7 million. Performance bonds do not have stated expiration dates, as the Company is released from the bonds upon

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completion of the contract. The Company has never been required to pay onmake any payments related to these performance-based bonds with respect to any of the current portfolio of businesses.


Guarantees and warranties.The Company accrues for warranty and claim costs as a percentage of sales based on historical trends and for specific sales credits as they become known and estimable. Actual warranty and claim costs are deducted from the accrual when incurred.paid. Factors that could have an impact on the warranty accrual in any given period include the following: changes in manufacturing quality, shifts in product mix and any significant changes in sales volume. The Company’s warranty and claim accruals are detailed below.

(In thousands)

  2012  2011 

Beginning warranty accrual

  $9,887   $4,996  

Additional accruals

   2,766    11,583  

Claims paid

   (5,443)   (6,692) 
  

 

 

  

 

 

 

Ending warranty accrual

  $7,210   $9,887  
  

 

 

  

 

 

 

During fiscal 2011, the Company experienced a high level of architectural glass product quality issues, including quality issues resulting from a vendor-supplied material. This higher level of activity impacted fiscal 2011 warranty expenses and year-end accruals, for items identified but not yet resolved. The impact of this activity was largely reported in fiscal 2011 cost of sales.

(In thousands)2014 2013
Balance at beginning of period$8,323
 $7,210
Additional accruals6,680
 4,061
Claims paid(3,025) (2,948)
Balance at end of period$11,978
 $8,323

Letters of credit.At March 3, 2012,1, 2014, the Company had ongoing letters of credit related to its construction contracts and certain industrial developmentrevenue bonds. The total value of letters of credit under which the Company was obligated as of March 3, 20121, 2014 was approximately $25.5 million.$23.5 million, all of which have been issued under the credit facility. The Company’s total availability under its $80.0$100.0 million credit facility is reduced by borrowings under the facility and also by letters of credit issued under the facility. As of March 3, 2012, letters of credit in the amount of $13.2 million had been issued under the facility.


Purchase obligations.The Company has purchase obligations for raw material commitments and capital expenditures. At As of March 3, 2012,1, 2014, these obligations totaled $46.5 million.

Non-compete agreements.$96.2 million.


Foreign Currency Instruments. The Company hasis party to a foreign exchange forward contract with a U.S. dollar notional value of $3.0 million with the objective of reducing the exposure to fluctuations in the Euro related to a planned capital equipment purchase. The fair value of this contract was not material at March 1, 2014. The Company reports the effective portion of the gain or loss on a cash flow hedge as a component of other comprehensive income, and any gain or loss is included in the value of the capital asset and will be recognized in earnings over the life of the asset.

New markets tax credit transaction. On November 7, 2013, the Company entered into a numbertransaction with JP Morgan Chase (JPM) related to an investment in plant and equipment within the Company’s Architectural Glass segment (the Project) whereby the Company received $7.8 million of non-competecash from a qualified New Markets Tax Credit program (NMTC). The NMTC was provided for in the Community Renewal Tax Relief Act of 2000 and consulting agreements associated with currentis intended to induce investment in underserved and former employees.impoverished areas of the United States. The Act permits taxpayers, whether companies or individuals, to claim credits against their federal income taxes for up to 39 percent of investments in qualified, active low-income businesses or ventures.

In exchange for substantially all of the benefits derived from the tax credits, JPM contributed $10.7 million into the Project. JPM does not have a material interest in the underlying economics of the Project. As a result of March 3, 2012, future paymentsthe transaction structure, the Company has concluded that the entities created in relation to the NMTC transaction are consolidated as variable-interest entities.

Based on the contractual arrangements that obligate the Company to deliver tax benefits to JPM, the Company has included the value of $1.2JPM’s contribution in other non-current liabilities within the consolidated balance sheets. The NMTC is subject to 100 percent recapture for a period of seven years. Proceeds received in exchange for the transfer of the tax credits are expected to be recognized as earnings in fiscal 2021, if the expected tax benefits are delivered without risk of recapture to JPM and our performance obligation is relieved.

Direct and incremental costs incurred in structuring the arrangement have been deferred and will be recognized in proportion to the recognition of the related profits. These costs amounted to $3.3 million were committed under such agreements.and are included in other non-current assets on the Company’s consolidated balance sheet.

Litigation.

Litigation. The Company is a party to various legal proceedings incidental to its normal operating activities. In particular, like others in the construction supply and services industry, the Company’s construction supply and services businesses are routinely involved in various disputes and claims arising out of construction projects, sometimes involving significant monetary damages or product replacement. The Company is subject to litigation arising out of employment practices, workers compensation, general liability and automobile claims. Although it is very difficult to accurately predict the outcome of such proceedings, facts currently available indicate that no such claims will result in losses that would have a material adverse effect on the results of operations, cash flows or financial condition of the Company.


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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9.		CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A.CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report (the Evaluation Date), we carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in applicable rules and forms, and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.


Management’sManagement's Annual Report on Internal Control Over Financial Reporting. The report of management required under this Item 9A is contained on page 30 in Item 8 of this Annual Report on Form 10-K under the caption “Management’s“Management's Report on Internal Control Over Financial Reporting.”


Attestation Report of Independent Registered Public Accounting Firm. The attestation report required under this Item 9A is contained on page 2932 in Item 8 of this Annual Report on Form 10-K under the caption “Report of Independent Registered Public Accounting Firm.”


Changes in Internal Control over Financial Reporting.  There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter covered by this report that would have materially affected, or are reasonably likely to materially affect, the Company’sCompany's internal control over financial reporting.


ITEM 9B.OTHER INFORMATION

ITEM 9B.OTHER INFORMATION

None


PART III


ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE


We have adopted a Code of Business Ethics and Conduct which applies to all of our employees and directors. The Code of Business Ethics and Conduct is published on our website at www.apog.com.www.apog.com. Any amendments to the Code of Business Ethics and Conduct and waivers of the Code of Business Ethics and Conduct for our Chief Executive Officer and Chief Financial Officer will be published on our website.


The other information required by this item, other than the information set forth in Part I above under the heading “Executive Officers of the Registrant,” is set forth under the headings “Proposal 1: Election of Directors,” “Corporate Governance –- Procedures for Shareholder Recommendations or Nominations of Director Candidates,” “Corporate Governance –- Board Meetings and 2013 Annual Meeting of Shareholders,” “Corporate Governance - Board Committee Membership, Meetings and Meetings”Responsibilities” and “Section 16(a) Beneficial Ownership Reporting Compliance”Compliance" in the Proxy Statement for the Company’sCompany's Annual Meeting of Shareholders to be held on June 21, 2012,25, 2014, which will be filed with the Securities and Exchange Commission within 120 days after our fiscal year-end (our 20122014 Proxy Statement). This information is incorporated herein by reference.


ITEM 11.EXECUTIVE COMPENSATION


The information required by this item is set forth under the headings “Executive Compensation” and “Non-Employee Director Compensation” in our 20122014 Proxy Statement. This information is incorporated herein by reference.



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ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is set forth under the headings “Proposal 3: Approval of the 2014 Restatement of the Apogee Enterprises, Inc. 2012 Executive Management2009 Non-Employee Director Stock Incentive Plan, – Equity Compensation Plan Information,” “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Directors and Management” in our 20122014 Proxy Statement. This information is incorporated herein by reference.


ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is set forth under the headings “Certain Relationships and Related Transactions” and “Corporate Governance –- Board Independence” in our 20122014 Proxy Statement. This information is incorporated herein by reference.


ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is set forth under the headings “Audit Committee Report and Payment of Fees to Independent Registered Public Accounting Firm –- Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees” and “– Policy“Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services Provided by Our Independent Registered Public Accounting Firm” in our 20122014 Proxy Statement. This information is incorporated herein by reference.


PART IV


ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


a)List of documents filed as a part of this report:


1.Financial Statements –- The consolidated financial statements listed below are set forth in Item 8 of Part II of this report.


Consolidated Balance Sheets as of March 3, 20121, 2014 and February 26, 2011

March 2, 2013


Consolidated Results of Operations for the Years Ended March 1, 2014, March 2, 2013 and March 3, 2012 February 26, 2011

Consolidated Statements of Comprehensive Earnings for the Years Ended March 1, 2014, March 2, 2013 and February 27, 2010

March 3, 2012


Consolidated Statements of Cash Flows for the Years Ended March 1, 2014, March 2, 2013 and March 3, 2012 February 26, 2011 and February 27, 2010


Consolidated Statements of Shareholders’Shareholders' Equity for the Years Ended March 1, 2014, March 2, 2013 and March 3, 2012 February 26, 2011 and February 27, 2010

Notes to Consolidated Financial Statements


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2.Financial Statement Schedules –- Valuation and Qualifying Accounts

(In thousands)

  Balance at
Beginning
of Period		   Charged to
Costs and
Expenses		   Deductions
from
Reserves (1)		   Other
changes
add
(deduct) (2)		  Balance
at End  of
Period		 

Allowances for doubtful receivables

  

       

For the year ended Mar. 3, 2012

  $2,734    $841    $414    $(52)  $3,109  

For the year ended Feb. 26, 2011

   1,585     900     107     356    2,734  

For the year ended Feb. 27, 2010

   2,074     446     935     —      1,585  

(1)Net of recoveries
(2)Result of acquisitions and foreign currency effects

(In thousands) Balance at Beginning of PeriodAcquisitionsCharged to Costs and Expenses
Deductions from Reserves(1)
Other changes add (deduct)(2)
Balance at End of
 Period
Allowances for doubtful receivables       
For the year ended March 1, 2014 $2,493
$832
$408
$721
$(78)$2,934
For the year ended March 2, 2013 3,109
—
(194)383
(39)2,493
For the year ended March 3, 2012 2,734
—
841
414
(52)3,109
(1) Net of recoveries
(2) Result of foreign currency effects

All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.


3.
Exhibits –- See Item (b) below.below.


b)
a)
Exhibits marked with an asterisk (*) identify each management contract or compensatory plan or arrangement. Exhibits marked with a pound sign (#) are filed herewith. The remainder of the exhibits have heretofore been filed with the Securities and Exchange Commission and are incorporated herein by reference.

Exhibit
No.

  
3.1 Restated Articles of Incorporation. Incorporated by reference to Exhibit 3.1 to Registrant’sRegistrant's Annual Report on Form 10-K for the year-ended February 28, 2004.
3.2 Amended and Restated Bylaws of Apogee Enterprises, Inc., as amended through January 24, 2006. Incorporated by reference to Exhibit 3.1 to Registrant’sRegistrant's Current Report on Form 8-K filed on January 30, 2006.
4.1#4.1 Specimen certificate for shares of common stock of Apogee Enterprises, Inc.
Incorporated by reference to Exhibit 4.1 to Registrant's Annual Report on Form 10-K for the year ended March 3, 2012.
10.1* 1997 Omnibus Stock Incentive Plan. Incorporated by reference to Exhibit A of Registrant’sRegistrant's proxy statement for the 1997 Annual Meeting of Shareholders filed on May 16, 1997.

Exhibit
No.

10.2* Apogee Enterprises, Inc. Officers’Officers' Supplemental Executive Retirement Plan (2005 Restatement), First Amendment of Apogee Enterprises, Inc. Officers’Officers' Supplemental Executive Retirement Plan (2005 Restatement) and Second Amendment of Apogee Enterprises, Inc. Officers’Officers' Supplemental Executive Retirement Plan (2005 Restatement). Incorporated by reference to Exhibit 10.1 to Registrant’sRegistrant's Current Report on Form 8-K filed on January 29, 2008.
10.3* Third Amendment of Apogee Enterprises, Inc. Officers’Officers' Supplemental Executive Retirement Plan (2005 Restatement). Incorporated by reference to Exhibit 10.2 to Registrant’sRegistrant's Current Report on Form 8-K filed on October 15, 2008.
10.4* Apogee Enterprises, Inc. Deferred Compensation Plan for Non-Employee Directors (2005 Restatement). Incorporated by reference to Exhibit 10.4 to Registrant’sRegistrant's Current Report on Form 8-K filed on October 17, 2006.
10.5* First Amendment of Apogee Enterprises, Inc. Deferred Compensation Plan for Non-Employee Directors (2005 Restatement). Incorporated by reference to Exhibit 10.10 to Registrant’sRegistrant's Current Report on Form 8-K filed on March 4, 2009.
10.6* Second Amendment of Apogee Enterprises, Inc. Deferred Compensation Plan for Non-Employee Directors (2005 Restatement). Incorporated by reference to Exhibit 10.6 to Registrant’sRegistrant's Current Report on Form 8-K filed on May 4, 2009.
10.7* Apogee Enterprises, Inc. Amended and Restated 2002 Omnibus Stock Incentive Plan. Incorporated by reference to Exhibit 10.1 to the Registrant’sRegistrant's Current Report on Form 8-K filed on June 30, 2006.
10.8*Apogee Enterprises, Inc. Amended and Restated Executive Management Incentive Plan. Incorporated by reference to Exhibit 10.1 of Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 1, 2007.
10.9* Apogee Enterprises, Inc. 2000 Employee Stock Purchase Plan (Amended and Restated Effective as of May 1, 2003). Incorporated by reference to Exhibit 10.23 to Registrant’sRegistrant's Annual Report on Form 10-K for the year-ended February 28, 2004.
10.10*10.9* First Amendment of Apogee Enterprises, Inc. 2000 Employee Stock Purchase Plan (Amended and Restated Effective as of May 1, 2003). Incorporated by reference to Exhibit 10.5 to Registrant’sRegistrant's Current Report on Form 8-K filed on March 4, 2009.


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10.11*10.10* Form of Stock Appreciation Rights Agreement under the Apogee Enterprises, Inc. 2002 Omnibus Stock Incentive Plan. Incorporated by reference to Exhibit 10.2 to Registrant’sRegistrant's Current Report on Form 8-K filed on April 19, 2005.
10.12*10.11* Apogee Enterprises, Inc. Non-Employee Director Charitable Matching Contribution Program. Incorporated by reference to Exhibit 10.25 to Registrant’sRegistrant's Annual Report on Form 10-K for the year-ended February 26, 2005.
10.13*10.12* Form of Non-Employee Director Stock Option Agreement under the Apogee Enterprises, Inc. 2002 Omnibus Stock Incentive Plan. Incorporated by reference to Exhibit 10.1 to Registrant’sRegistrant's Current Report on Form 8-K filed on June 16, 2005.
10.14*10.13* Apogee Enterprises, Inc. Deferred Incentive Compensation Plan (2005 Restatement). Incorporated by reference to Exhibit 10.3 to Registrant’sRegistrant's Current Report on Form 8-K filed on October 17, 2006.
10.15*10.14* First Amendment of Apogee Enterprises, Inc. Deferred Incentive Compensation Plan (2005 Restatement). Incorporated by reference to Exhibit 10.4 to Registrant’sRegistrant's Current Report on Form 8-K filed on October 15, 2008.
10.16*10.15* Second Amendment of Apogee Enterprises, Inc. Deferred Incentive Compensation Plan (2005 Restatement). Incorporated by reference to Exhibit 10.3 to Registrant’sRegistrant's Current Report on Form 8-K filed on March 4, 2009.
10.17*10.16* Third Amendment of Apogee Enterprises, Inc. Deferred Incentive Compensation Plan (2005 Restatement). Incorporated by reference to Exhibit 10.5 to Registrant’sRegistrant's Current Report on Form 8-K filed on October 12, 2010.
10.18*10.17* Fourth Amendment of Apogee Enterprises, Inc. Deferred Incentive Compensation Plan (2005 Restatement). Incorporated by reference to Exhibit 10.3 to Registrant’sRegistrant's Quarterly Report on Form 10-Q filed on January 6, 2011.
10.19*10.18* Apogee Enterprises, Inc. Partnership Plan (2005 Restatement). Incorporated by reference to Exhibit 10.5 to Registrant’sRegistrant's Current Report on Form 8-K filed on October 17, 2006.
10.20*10.19* First Amendment of Apogee Enterprises, Inc. Partnership Plan (2005 Restatement). Incorporated by reference to Exhibit 10.6 to Registrant’sRegistrant's Current Report on Form 8-K filed on October 15, 2008.

Exhibit
No.

10.21*10.20* Second Amendment of Apogee Enterprises, Inc. Partnership Plan (2005 Restatement). Incorporated by reference to Exhibit 10.8 to Registrant’sRegistrant's Current Report on Form 8-K filed on March 4, 2009.
10.22*10.21* Third Amendment of Apogee Enterprises, Inc. Partnership Plan (2005 Restatement). Incorporated by reference to Exhibit 10.4 to Registrant’sRegistrant's Quarterly Report on Form 10-Q filed on January 6, 2011.
10.23*10.22* Apogee Enterprises, Inc. 2009 Stock Incentive Plan, as amended and restated (2011). Incorporated by reference to Exhibit 10.1 to Apogee’sApogee's Current Report on Form 8-K filed on June 28, 2011.
10.24*10.23* Apogee Enterprises, Inc. 2009 Non-Employee Director Stock Incentive Plan, as amended and restated (2011). Incorporated by reference to Exhibit 10.2 to Apogee’sApogee's Current Report on Form 8-K filed on June 28, 2011.
10.25*10.24* Form of Restricted Stock Agreement under the Apogee Enterprises, Inc. 2009 Non-Employee Director Stock Incentive Plan. Incorporated by reference to Exhibit 10.3 to Registrant’sRegistrant's Current Report on Form 8-K filed on June 30, 2009.
10.26*Form of Bonus Pool Award Agreement under the Apogee Enterprises, Inc. Executive Management Incentive Plan. Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on May 4, 2009.
10.27*Form of Restricted Stock Agreement under the Apogee Enterprises, Inc. 2009 Stock Incentive Plan. Incorporated by reference to Exhibit 10.36 to Registrant’s Annual Report on Form 10-K filed on April 28, 2010.
10.28*10.25* Form of Restricted Stock Agreement under the Apogee Enterprises, Inc. 2009 Stock Incentive Plan for awards made on or after April 26, 2011. Incorporated by reference to Exhibit 10.3 to Registrant’sRegistrant's Current Report on Form 8-K filed on May 2, 2011.
10.29*Form of Performance Share Unit Agreement under the Apogee Enterprises, Inc. 2009 Stock Incentive Plan. Incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed on May 3, 2010.
10.30*10.26* Form of Performance Share Unit Agreement under the Apogee Enterprises, Inc. 2009 Stock Incentive Plan for awards made on or after April 26, 2011. Incorporated by reference to Exhibit 10.2 to Registrant’sRegistrant's Current Report on Form 8-K filed on May 2, 2011.
10.31*10.27* Apogee Enterprises, Inc. 2011 Deferred Compensation Plan, effective January 1, 2011. Incorporated by reference to Exhibit 10.1 to Registrant’sRegistrant's Current Report on Form 8-K filed on October 12, 2010.
10.28*Form of Change in Control Severance Agreement between Apogee Enterprises, Inc. and certain senior executive officers of the Registrant. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed on March 3, 2011.
10.29*Employment Agreement between Apogee Enterprises, Inc. and Joseph F. Puishys, made and entered into as of August 5, 2011, to be effective as of August 22, 2011. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed on August 8, 2011.
10.30*Form of Restricted Stock Agreement to be entered into by Apogee Enterprises, Inc. and Joseph F. Puishys on August 22, 2011. Incorporated by reference to Exhibit 10.2 to Registrant's Current Report on Form 8-K filed on August 8, 2011.
10.31*Form of Option Agreement to be entered into by Apogee Enterprises, Inc. and Joseph F. Puishys on August 22, 2011. Incorporated by reference to Exhibit 10.3 to Registrant's Current Report on Form 8-K filed on August 8, 2011.


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10.3210.32* Form of Bonus Pool Award Agreement under the Apogee Enterprises, Inc. 2012 Executive Management Incentive Plan. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed on May 6, 2013.
10.33*Form of Performance Award Agreement under the Apogee Enterprises, Inc. 2009 Stock Incentive Plan, as amended and restated (2011). Incorporated by reference to Exhibit 10.2 to Registrant's Current Report on Form 8-K filed on May 2, 2012.
10.34*Apogee Enterprises, Inc. 2012 Executive Management Incentive Plan. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed on June 27, 2012.
10.35Amended and Restated Credit Agreement, dated as of January 27, 2011,October 19, 2012, by and among Apogee Enterprises, Inc., as the Borrower, the Lenders referred to herein, Wells Fargo Bank, National Association, as Administrative Agent, Swingline Lender and Issuing Lender, and Comerica Bank, as Documentation Agent and Issuing Lender. Incorporated by reference to Exhibit 10.1 to Registrant’sRegistrant's Current Report on Form 8-K filed on February 2, 2011.October 25, 2012.
10.33*10.36 FormAmendment No. 1 to Amended and Restated Credit Agreement, dated as of Change in Control Severance Agreement betweenNovember 20, 2013, by and among Apogee Enterprises, Inc., as the Borrower, the Lenders (as defined therein), and certain senior executive officers of the Registrant.Wells Fargo Bank, National Association, as Administrative Agent. Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on March 3, 2011.November 25, 2013.
10.34*10.37 SeparationShare Purchase Agreement, and Release of All Claimsdated November 5, 2013, between 2393514 Ontario Inc., Apogee Enterprises, Inc., PEF 2005 Alumicor Investment Limited Partnership, on behalf of itself and Gregory A. Silvestri dated March 11, 2011.as sellers’ agent, Andre Belanger, Ken Rowson, John Castelhano, Anthony Kerwin, Lawrence Maker, Paul Antoniadis, and Alumicor Limited. Incorporated by reference to Exhibit 10.12.1 to Registrant’s Current Report on Form 8-K filed on March 17, 2011.
10.35*Transition Agreement between Apogee Enterprises, Inc. and Russell Huffer dated as of April 27, 2011. Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K/A filed on May 6, 2011.
10.36*Employment Agreement between Apogee Enterprises, Inc. and Joseph F. Puishys, made and entered into as of AugustNovember 5, 2011, to be effective as of August 22, 2011. Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on August 8, 2011.
10.37*

Form of Restricted Stock Agreement to be entered into by Apogee Enterprises, Inc. and Joseph F. Puishys on August 22, 2011. Incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed on August 8, 2011.

10.38*Form of Option Agreement to be entered into by Apogee Enterprises, Inc. and Joseph F. Puishys on August 22, 2011. Incorporated by reference to Exhibit 10.3 to Registrant’s Current Report on Form 8-K filed on August 8, 2011.
2013.
21# Subsidiaries of the Registrant.
23# Consent of Deloitte & Touche LLP.
31.1# Certification of Chief Executive Officer pursuant to rule 13a-14(a) under the Securities Exchange Act of 1934.

Exhibit
No.

31.2# Certification of Chief Financial Officer pursuant to rule 13a-14(a) under the Securities Exchange Act of 1934.
32.1# Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2# Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 The following materials from Apogee Enterprises, Inc.’s's Annual Report on Form 10-K for the year ended March 3, 20121, 2014 are furnished herewith, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets as of March 3, 20121, 2014 and February 26, 2011,March 2, 2013, (ii) the Consolidated Results of Operations for the three years ended March 1, 2014, March 2, 2013 and March 3, 2012, February 26, 2011(iii) the Consolidated Statements of Comprehensive Earnings for the three years ended March 1, 2014, March 2, 2013 and February 27, 2010, (iii)March 3, 2012, (iv) the Consolidated Statements of Cash Flows for the three years ended March 1, 2014, March 2, 2103 and March 3, 2012, February 26, 2011 and February 27, 2010, (iv)(v) the Consolidated Statements of Shareholders’Shareholders' Equity for the years ended March 1, 2014, March 2, 2013 and March 3, 2012 February 26, 2011 and February 27, 2010 and (v)(vi) the Notes to Consolidated Financial Statements.



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SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on April 30, 2012.

2014.
APOGEE ENTERPRISES, INC.
By:

/s/ Joseph F. Puishys

Joseph F. Puishys
President and Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on April 30, 2012.

2014.

Signature

 

Title

 

Signature

 

Title

/s/ Joseph F. Puishys

 President, 

/s/ James S. Porter

 CFO (Principal
Joseph F. Puishys 

CEO and Director

(Principal Executive
Officer)

 James S. Porter 
Financial and
Accounting Officer)

/s/ Bernard P. Aldrich

 Chairman 

/s/ Robert J. Marzec

Stephen C. Mitchell		 Director
Bernard P. Aldrich  Robert J. MarzecStephen C. Mitchell 

/s/ Jerome L. Davis

 Director 

/s/ Stephen C. Mitchell

Donald A. Nolan		 Director
Jerome L. Davis  Stephen C. MitchellDonald A. Nolan 

/s/ Sara L. Hays

 Director 

/s/ Richard V. Reynolds

 Director
Sara L. Hays  Richard V. Reynolds 

/s/ John T. Manning

 Director 

/s/ David E. Weiss

 Director
John T. Manning  David E. Weiss 
/s/ Robert J. MarzecDirector
Robert J. Marzec

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