SEC Filing | Apogee Enterprises, Inc.

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Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 1, 2007

Commission File Number: 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)

(I.R.S. Employer

Identification No.)


7900 Xerxes Ave S. – Suite 1800, Minneapolis, MN		55431
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (952) 835-1874

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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. Yes x No ¨

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

Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨

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

As of October 4, 2007, 29,108,985 shares of the registrant’s common stock, par value $0.33 1/3 per share, were outstanding.

APOGEE ENTERPRISES, INC. AND SUBSIDIARIES


		Page
PART I	Financial Information	3

Item 1.	Financial Statements (Unaudited):	3

	Consolidated Balance Sheets as of September 1, 2007 and March 3, 2007	3

	Consolidated Results of Operations for the three and six months ended September 1, 2007 and September 2, 2006	4

	Consolidated Statements of Cash Flows for the six months ended September 1, 2007 and September 2, 2006	5

	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19

Item 4.	Controls and Procedures	20

PART II	Other Information

Item 1.	Legal Proceedings	20

Item 1A.	Risk Factors	20

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20

Item 4.	Submission of Matters to a Vote of Security Holders	21

Item 5.	Other Information	21

Item 6.	Exhibits	21

Signatures		22

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

CONSOLIDATED BALANCE SHEETS

(unaudited)


*(In thousands, except per share data)*	September 1, 2007			March 3, 2007
Assets
Current assets
Cash and cash equivalents	$	10,311		$	6,187
Receivables, net of allowance for doubtful accounts		165,077			160,473
Inventories		42,308			40,762
Deferred tax assets		5,609			5,117
Current assets of discontinued operations		2,383			5,732
Other current assets		6,518			4,213

Total current assets		232,206			222,484

Property, plant and equipment, net		151,363			134,256
Marketable securities available for sale		20,873			19,106
Deferred tax assets		5,083			2,216
Investments in affiliated companies		22,237			20,760
Assets of discontinued operations		1,724			2,074
Goodwill		44,044			44,044
Intangible assets, net		3,348			3,904
Other assets		361			317

Total assets	$	481,239		$	449,161


Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	57,761		$	59,854
Accrued payroll and related benefits		22,530			25,589
Accrued self-insurance reserves		8,879			7,870
Other accrued expenses		16,404			20,487
Current liabilities of discontinued operations		8,147			3,310
Billings in excess of costs and earnings on uncompleted contracts		30,502			19,683
Accrued income taxes		8,184			9,066

Total current liabilities		152,407			145,859

Long-term debt		24,300			35,400
Uncertain tax positions		10,359			—
Long-term self-insurance reserves		12,690			12,014
Other long-term liabilities		12,493			11,864
Liabilities of discontinued operations		4,524			8,356

Commitments and contingent liabilities (Note 12)

Shareholders’ equity
Common stock of $0.33-1/3 par value; authorized 50,000,000 shares; issued and outstanding 29,091,591 and 28,549,751, respectively		9,697			9,517
Additional paid-in capital		91,830			81,031
Retained earnings		165,131			147,248
Common stock held in trust		(4,535	)		(4,473	)
Deferred compensation obligations		4,535			4,473
Accumulated other comprehensive loss		(2,192	)		(2,128	)

Total shareholders’ equity		264,466			235,668

Total liabilities and shareholders’ equity	$	481,239		$	449,161

See accompanying notes to consolidated financial statements.

CONSOLIDATED RESULTS OF OPERATIONS

(unaudited)


	Three months ended					Six months ended
*(In thousands, except per share data)*	Sept. 1, 2007 (13 weeks)			Sept. 2, 2006 (13 weeks)		Sept. 1, 2007 (26 weeks)			Sept. 2, 2006 (27 weeks)
Net sales	$	217,673		$	181,755	$	427,558		$	368,760
Cost of sales		170,810			147,068		337,807			301,229

Gross profit		46,863			34,687		89,751			67,531
Selling, general and administrative expenses		29,598			24,255		57,520			48,953

Operating income		17,265			10,432		32,231			18,578
Interest income		237			279		447			601
Interest expense		689			794		1,141			1,614
Other (expense) income, net		(32	)		30		(12	)		(29	)
Equity in earnings of affiliated companies		1,493			1,473		1,476			1,283

Earnings from continuing operations before income taxes		18,274			11,420		33,001			18,819
Income tax expense		6,487			4,099		11,489			6,637

Earnings from continuing operations		11,787			7,321		21,512			12,182
(Loss) earnings from discontinued operations, net of income taxes		(313	)		12		1,658			(107	)

Net earnings	$	11,474		$	7,333	$	23,170		$	12,075

Earnings per share – basic
Earnings from continuing operations	$	0.42		$	0.27	$	0.76		$	0.44
(Loss) earnings from discontinued operations		(0.02	)		—		0.06			—

Net earnings	$	0.40		$	0.27	$	0.82		$	0.44

Earnings per share – diluted
Earnings from continuing operations	$	0.40		$	0.26	$	0.74		$	0.43
(Loss) earnings from discontinued operations		(0.01	)		—		0.06			—

Net earnings	$	0.39		$	0.26	$	0.80		$	0.43

Weighted average basic shares outstanding		28,386			27,586		28,268			27,595
Weighted average diluted shares outstanding		29,198			27,994		29,041			28,008

Cash dividends declared per common share	$	0.0675		$	0.0650	$	0.1350		$	0.1300

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Six months ended
*(In thousands)*	September 1, 2007 (26 weeks)			September 2, 2006 (27 weeks)
Operating Activities
Net earnings	$	23,170		$	12,075
Adjustments to reconcile net earnings to net cash provided by operating activities:
Net (earnings) loss from discontinued operations		(1,658	)		107
Depreciation and amortization		11,414			9,824
Stock-based compensation		3,587			2,449
Deferred income taxes		(233	)		(118	)
Excess tax benefits from stock-based compensation		(2,107	)		(1,282	)
Equity in earnings of affiliated companies		(1,476	)		(1,283	)
Gain on disposal of assets		(150	)		(1,527	)
Other, net		3			559
Changes in operating assets and liabilities:
Receivables		(4,604	)		(11,721	)
Inventories		(1,546	)		(2,499	)
Accounts payable and accrued expenses		(9,029	)		(9,599	)
Billings in excess of costs and earnings on uncompleted contracts		10,819			178
Refundable and accrued income taxes		8,620			5,928
Other, net		(2,293	)		(2,669	)

Net cash provided by operating activities		34,517			422

Investing Activities
Capital expenditures		(26,030	)		(15,441	)
Proceeds from sales of property, plant and equipment		27			1,573
Proceeds on note from equity investments		—			5,000
Purchases of marketable securities		(13,929	)		(24,141	)
Sales/maturities of marketable securities		12,066			23,906

Net cash used in investing activities		(27,866	)		(9,103	)

Financing Activities
Net (payments on) proceeds from revolving credit agreement		(11,100	)		11,300
Proceeds from issuance of common stock, net of cancellations		3,066			2,050
Excess tax benefits from stock-based compensation		2,107			1,282
Dividends paid		(3,908	)		(5,474	)

Net cash (used in) provided by financing activities		(9,835	)		9,158

Cash Flows of Discontinued Operations
Net cash provided by operating activities		2,230			161
Net cash provided by (used in) investing activities		5,078			(625	)
Net cash provided by financing activities		—			—

Net cash provided by (used in) discontinued operations		7,308			(464	)

Increase in cash and cash equivalents		4,124			13
Cash and cash equivalents at beginning of year		6,187			4,676

Cash and cash equivalents at end of period	$	10,311		$	4,689

Noncash Activity
Capital expenditures in accounts payable	$	2,015		$	200

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1.	Basis of Presentation

The consolidated financial statements of Apogee Enterprises, Inc. (we, us, our or the Company) included herein have been prepared in accordance with accounting principles generally accepted in the United States. The consolidated financial statements and notes are presented as permitted by the regulations of the Securities and Exchange Commission (Form 10-Q) and do not contain certain information included in the Company’s annual financial statements and notes. The information included in this Form 10-Q should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations and financial statements and notes thereto included in the Company’s Form 10-K for the year ended March 3, 2007. The results of operations for the three and six-month periods ended September 1, 2007 are not necessarily indicative of the results to be expected for the full year.

In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position as of September 1, 2007 and March 3, 2007, and the results of operations for the three and six-month periods ended September 1, 2007 and September 2, 2006 and results of cash flows for the six-month periods ended September 1, 2007 and September 2, 2006.

The Company’s fiscal year ends on the Saturday closest to February 28. Each interim quarter ends on the Saturday closest to the end of the months of May, August and November. The three and six-month periods ended September 1, 2007 consisted of 13 weeks and 26 weeks, respectively, while the three and six-month periods ended September 2, 2006 consisted of 13 weeks and 27 weeks, respectively.

2.	New Accounting Standards

In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109 (FIN 48), to create a single model to address accounting for uncertainty in tax positions. FIN 48 clarifies the accounting for income tax by prescribing a recognition threshold that a tax position is required to meet before being recognized in the consolidated financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 was effective for fiscal years beginning after December 15, 2006. The Company adopted FIN 48 on March 4, 2007, the beginning of the Company’s fiscal year 2008. The adoption of FIN 48 increased total assets by $2.8 million, total liabilities by $2.0 million and total shareholders’ equity by $0.8 million. The adoption of FIN 48 had no impact on our consolidated results of operations.

In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements (SFAS No. 157). This statement clarifies the definition of fair value, establishes a framework for measuring fair value, and expands the disclosures on fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, the Company’s fiscal year 2009. The Company has not determined the impact, if any, the adoption of this statement will have on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115 (SFAS No. 159), which becomes effective for fiscal periods beginning after November 15, 2007, the Company’s fiscal year 2009. Under SFAS No. 159, companies may elect to measure specified financial instruments and warranty and insurance contracts at fair value on a contract-by-contract basis, with changes in fair value recognized in earnings each reporting period. The Company has not determined the impact, if any, the adoption of this statement will have on its consolidated financial statements.

3.	Stock-Based Compensation

Stock Incentive Plan

The 2002 Omnibus Stock Incentive Plan and the 1997 Omnibus Stock Incentive Plan (the Plans) provide for the issuance of 3,400,000 and 2,500,000 shares, respectively, for various forms of stock-based compensation. 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 are also included in these Plans. Outstanding options issued to employees generally vest over a four-year period, outstanding SARs vest over a three-year period, and outstanding options issued to directors vest at the end of six months. Outstanding options and SARs have a 10-year term. Nonvested share awards generally vest over a three or four-year period.

The 1997 Omnibus Stock Incentive Plan was terminated in January 2006; no new grants may be made under the plan, although vesting and exercises of options and vesting of nonvested share awards previously granted hereunder will still occur in accordance with the vesting periods of the various grants.

Total stock-based compensation expense included in the results of operations for the six months ended September 1, 2007 and September 2, 2006, was $3.6 million and $2.4 million, respectively. Cash proceeds from the exercise of stock options were $5.6 million and $2.4 million for the six months ended September 1, 2007 and September 2, 2006, respectively.

The weighted average fair value per option at the date of grant for options granted in fiscal 2008 and 2007 was $9.17 and $6.53, respectively. The aggregate intrinsic value of options (the amount by which the stock price on the date of exercise exceeded the exercise price of the option on the date of grant) exercised during the six months ended September 1, 2007 and September 2, 2006 was $7.0 million and $0.8 million, respectively.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants through the first six months of fiscal 2008 and 2007, respectively.


	Sept. 1, 2007		Sept. 2, 2006
Dividend yield	1.1	%	1.6	%
Expected volatility	41.3	%	49.6	%
Risk-free interest rate	4.3	%	4.9	%
Expected lives	4.5 years		4.6 years

The expected stock price volatility is based on historical experience. The risk-free interest rate is based on the U.S. Treasury Strip rate whose term is consistent with the expected life of the Company’s stock options. 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 stock option and SARs transactions under the Plans for the six months ended September 1, 2007:


	Options/SARs Outstanding
	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at March 3, 2007	1,687,378		$	12.39
SARs/options granted	317,140			24.90
SARs/options exercised	(509,339	)		12.14
Options and SARs canceled	(1,300	)		11.86

Outstanding at September 1, 2007	1,493,879		$	15.11	6.9 years	$	15,205,909

Vested or expected to vest at Sept. 1, 2007	1,448,884		$	14.97	6.9 years	$	14,779,626

Exercisable at September 1, 2007	904,714		$	11.95	6.0 years	$	11,956,257

Executive Compensation Plan

In fiscal 2006, the Company implemented an executive compensation program to provide for a greater portion of total compensation to be delivered to key employees selected by the Compensation Committee of the Board of Directors through long-term incentives using performance shares and SARs. Performance shares are issued at the beginning of each fiscal year in the form of nonvested share awards. The number of shares issued at grant is equal to the target number of performance shares and allows for a positive or negative adjustment in the number of shares earned based on whether the Company achieves pre-determined Company performance goals.

The following table summarizes the nonvested share award transactions, including performance shares, under the Plans for the six months ended September 1, 2007:


	Nonvested Shares
	Number of Shares		Weighted Average Grant Date Fair Value
Nonvested at March 3, 2007	583,835		$	13.48
Granted	159,453			24.28
Vested	(44,776	)		11.16
Canceled	(1,925	)		17.34

Nonvested at September 1, 2007	696,587		$	16.09

At September 1, 2007, there was $7.3 million of total unrecognized compensation cost related to nonvested share awards which is expected to be recognized over a weighted average period of approximately 30 months. The total fair value of shares vested during the current year-to-date period was $0.5 million.

4.	Earnings Per Share

The following table presents a reconciliation of the denominators used in the computation of basic and diluted earnings per share.


	Three months ended				Six months ended
*(In thousands, except per share data)*	Sept. 1, 2007		Sept. 2, 2006		Sept. 1, 2007		Sept. 2, 2006
Basic earnings per share – weighted common shares outstanding		28,386		27,586		28,268		27,595
Weighted common shares assumed upon exercise of stock options		513		240		501		264
Unvested shares for deferred compensation plans		299		168		272		149

Diluted earnings per share – weighted common shares and potential common shares outstanding		29,198		27,994		29,041		28,008

Earnings per share – basic	$	0.40	$	0.27	$	0.82	$	0.44
Earnings per share – diluted		0.39		0.26		0.80		0.43

There were approximately 58,000 and 535,000 stock options excluded in the second quarters of fiscal 2008 and 2007, respectively, and approximately 58,000 and 418,000 stock options excluded for the six-month periods of fiscal 2008 and 2007, respectively, from the computation of diluted earnings per share due to their anti-dilutive effect.

5.	Inventories


*(In thousands)*	Sept. 1, 2007		Mar. 3, 2007
Raw materials	$	16,704	$	14,179
Work-in-process		8,242		8,129
Finished goods		12,144		11,093
Costs and earnings in excess of billings on uncompleted contracts		5,218		7,361

Total inventories	$	42,308	$	40,762

6.	Equity Investments

In fiscal 2001, the Company and PPG Industries, Inc. (PPG) combined their U.S. automotive replacement glass (ARG) distribution businesses into a joint venture, PPG Auto Glass, LLC (PPG Auto Glass), of which the Company has a 34 percent interest. The Company’s investment in PPG Auto Glass was $22.2 million and $20.5 million at September 1, 2007 and March 3, 2007, respectively. At September 1, 2007 and March 3, 2007, the excess of the cost of the investment over the value of the underlying net tangible assets when the joint venture was formed was $7.3 million. This excess is reported as goodwill.

In addition to the above investment, the Company had another equity-method investment totaling $0.3 million at March 3, 2007. The investment was written-off during the first quarter of fiscal 2008.

7.	Goodwill and Other Identifiable Intangible Assets

The carrying amount of goodwill, net of accumulated amortization, attributable to each business segment for the six months ended September 1, 2007 is detailed below. “Corporate and Other” includes the excess of the cost of the investment over the value of the underlying net tangible assets related to the formation of the PPG Auto Glass joint venture.


*(In thousands)*	Architectural		Large-Scale Optical		Corporate & Other		Total
Balance at March 3, 2007	$	26,185	$	10,607	$	7,252	$	44,044
Adjustment		—		—		—		—

Balance at September 1, 2007	$	26,185	$	10,607	$	7,252	$	44,044

The Company’s identifiable intangible assets with finite lives are being amortized over their estimated useful lives and were as follows:


	September 1, 2007							March 3, 2007
*(In thousands)*	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Debt issue costs	$	2,055	$	(1,426	)	$	629	$	2,054	$	(1,367	)	$	687
Non-compete agreements		2,899		(1,833	)		1,066		2,899		(1,606	)		1,293
Customer relationships		2,700		(1,205	)		1,495		2,700		(1,028	)		1,672
Purchased intellectual property		555		(397	)		158		555		(303	)		252

Total	$	8,209	$	(4,861	)	$	3,348	$	8,208	$	(4,304	)	$	3,904

Amortization expense on these identifiable intangible assets was $0.5 million and $0.6 million for the six months ended September 1, 2007 and September 2, 2006, respectively. At September 1, 2007, the estimated future amortization expense for identifiable intangible assets for the remainder of fiscal 2008 and each of the following four fiscal years was as follows:

(In thousands)

Remainder
of 2008

Fiscal

2009

Fiscal

2010

Fiscal

2011

Fiscal

2012

Estimated amortization expense

549

909

642

333

267

8.	Long-Term Debt

The Company maintains a $100.0 million revolving credit facility. On November 14, 2006, the Company entered into Amendment No. 1 to the Credit Agreement. The amendment extended the expiration date of the agreement from May 2010 to November 2011, effectively decreased the interest rate paid on borrowings, and decreased the commitment fee. No other provisions of the agreement were affected by the amendment. The financing costs associated with the credit facility were added to debt issue costs and are being amortized over the term of the new credit agreement.

Borrowings of $15.9 million were outstanding as of September 1, 2007. 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 September 1, 2007 was $210.0 million, whereas the Company’s net worth as defined in the credit facility was $264.5 million. The credit facility also requires that the Company maintain a debt-to-cash flow ratio of no more than 2.75. This ratio is computed daily, with cash flow computed on a rolling 12-month basis. The Company’s ratio was 0.29 at September 1, 2007. If the Company is not in compliance with either of these covenants, the lender may terminate the commitment and/or declare any loan then outstanding to be immediately due and payable. At September 1, 2007, the Company was in compliance with all of the financial covenants of the credit facility.

Long-term debt also includes $8.4 million of industrial development bonds that mature in fiscal years 2021 through 2023.

Interest payments were $1.5 million and $1.8 million for the six months of fiscal 2008 and 2007, respectively. As interest payments relate to funds borrowed to purchase major buildings, information systems and equipment installations, the Company capitalizes the payments and depreciates them over the lives of the related assets; capitalized interest for the six months ended September 1, 2007 and September 2, 2006 was $0.2 million and $0.3 million, respectively.

9.	Employee Benefit Plans

Components of net periodic benefit cost for the Company’s Officer’s Supplemental Executive Retirement Plan (SERP) for the three and six-month periods of fiscal 2008 and 2007 are as follows:


	Three months ended				Six months ended
*(In thousands)*	Sept. 1, 2007		Sept. 2, 2006		Sept. 1, 2007		Sept. 2, 2006
Service cost	$	13	$	53	$	26	$	106
Interest cost		104		85		208		170
Amortization of prior-year service cost		59		59		118		118
Amortization of unrecognized net loss		18		3		36		6

Net periodic benefit cost	$	194	$	200	$	388	$	400

10.

Income Taxes

The Company adopted FIN 48 on March 4, 2007, the beginning of the Company’s fiscal year 2008. The adoption of FIN 48 increased total assets by $2.8 million, total liabilities by $2.0 million and total shareholders’ equity by $0.8 million. The adoption of FIN 48 had no impact on the consolidated results of operations.

The total liability for unrecognized tax benefits as of March 4, 2007, the date of adoption, was $10.4 million, of which $2.6 million, if recognized, would decrease the continuing operations effective tax rate. The total liability for unrecognized tax benefits at the date of adoption includes $4.9 million related to discontinued operations which, if recognized, would decrease the effective tax rate for discontinued operations. The remainder of the unrecognized tax benefits, if recognized, would decrease deferred income taxes.

Penalties and interest related to unrecognized tax benefits are recorded in income tax expense which is consistent with past practices. As of March 4, 2007, approximately $2.7 million for the possible payment of penalties and interest, including $1.8 million related to discontinued operations, was recorded and included in the total liability for unrecognized tax benefits.

The Company files income tax returns in the U.S. federal jurisdiction and various U.S. state jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal or state and local income tax examinations by tax authorities for years prior to fiscal 2003. The Internal Revenue Service (IRS) has audited the Company through fiscal 2002.

During the first six months of fiscal 2008, the total liability for unrecognized tax benefits did not materially increase or decrease. The total liability for unrecognized tax benefits is not expected to change materially during the next 12 months.

11.

Discontinued Operations

During fiscal 2007, the Company announced its intention to discontinue the manufacturing of automotive replacement glass (ARG) products and also announced its decision to sell the remaining portion of the Auto Glass segment that manufactures and sells OEM and aftermarket replacement windshields for the recreational vehicle and bus markets. The Company restated its consolidated financial statements to show the results of the Auto Glass segment in discontinued operations. The Company signed an asset purchase agreement in the first quarter of fiscal 2008 and expects to complete the sale of certain assets related to the business during the third quarter of fiscal 2008. The Company has received proceeds of $5.0 million in advance of completing the sale and has recorded the proceeds as current liabilities of discontinued operations. The Auto Glass segment’s manufacturing facility was not part of the purchase agreement; it is being converted to support the Architectural segment’s glass fabrication business.

In several transactions in fiscal years 1998 through 2000, the Company completed the sale of its large-scale domestic curtainwall business, the sale of the Company’s detention/security business and its exit from international curtainwall operations. The remaining estimated cash expenditures related to these discontinued operations are recorded as liabilities of discontinued operations, and a majority of the remaining cash expenditures related to discontinued operations is expected to be paid within the next three years. The majority of these liabilities relate to the international curtainwall operations, including bonds outstanding, of which the precise degree of liability related to these matters will not be known until they are settled within the U.K. courts. The reserve for discontinued operations also covers other liability issues, consisting of warranty issues relating to these and other international construction projects.

During the first quarter of fiscal 2008, these reserves were reduced by $3.5 million, primarily due to resolution of an outstanding legal matter related to a significant French curtainwall project, and were reported as income from discontinued operations. The remaining amount in results from discontinued operations in the year-to-date period reflects the operating loss of the Auto Glass segment that is in the process of being sold.


	Three Months Ended					Six Months Ended
*(In thousands)*	Sept. 1, 2007			Sept. 2, 2006		Sept. 1, 2007		Sept. 2, 2006
Condensed Statement of Operations from Discontinued Businesses
Net sales	$	3,602		$	7,021	$	8,574	$	15,084

(Loss) earnings before income taxes (prior to gain (loss) on disposal)		(488	)		20		2,606		(173	)
Income tax (benefit) expense		(175	)		8		948		(66	)

(Loss) earnings from operations, net of income taxes		(313	)		12		1,658		(107	)
Gain (loss) on disposal, net of income taxes		—			—		—		—

Net (loss) earnings	$	(313	)	$	12	$	1,658	$	(107	)


*(In thousands)*	Sept. 1, 2007		March 3, 2007
Summary Balance Sheets of Discontinued Businesses
Receivables, net of allowance for doubtful accounts	$	1,187	$	3,790
Other current assets		1,196		1,942
Property, plant and equipment, net		1,724		1,978
Other non-current assets		—		96
Accounts payable and accrued liabilities		8,147		3,310
Long-term liabilities		4,524		8,356

12.

Commitments and Contingent Liabilities

Operating lease commitments. As of September 1, 2007, 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)

Remainder
of 2008

Fiscal

2009

Fiscal

2010

Fiscal

2011

Fiscal

2012

Thereafter

Total

Total minimum payments

4,484

6,599

5,468

4,308

3,037

6,728

30,624

Bond commitments. In the ordinary course of business, predominantly in the Company’s installation business, the Company is required to commit to performance related bonds that require payments to its customers for certain non-performance. The outstanding face value of the performance related bonds fluctuates with the value of projects that are in process and in backlog. At September 1, 2007, these bonds totaled $371.0 million. With respect to the current portfolio of businesses, the Company has never been required to pay on these performance-based bonds.

Guarantees and warranties. The Company accrues for known warranty exposures and claim costs as a percentage of sales based on historical trends. Actual warranty and claim costs are deducted from the accrual when incurred. The Company’s warranty and claim accruals are detailed below:


	Six months ended
*(In thousands)*	Sept. 1, 2007			Sept. 2, 2006
Balance at beginning of period	$	4,324		$	3,912
Additional accruals		2,079			1,330
Claims paid		(2,354	)		(2,520	)

Balance at end of period	$	4,049		$	2,722

Letters of credit. At September 1, 2007, the Company had ongoing letters of credit related to construction contracts and certain industrial development bonds. The total value of letters of credit under which the Company was obligated as of September 1, 2007 was approximately $10.7 million. The Company’s total availability under its $100.0 million credit facility is reduced by borrowings under the facility and also by letters of credit issued under the facility. As of September 1, 2007, $9.1 million of letters of credit had been issued under the facility.

Purchase obligations. The Company has purchase obligations for raw material commitments, capital expenditures and a long-term freight commitment. As of September 1, 2007, these obligations totaled $10.1 million.

Non-compete agreements. The Company has entered into a number of non-compete and consulting agreements associated with current and former employees. As of September 1, 2007, future payments of $1.2 million were committed under such agreements.

Litigation. The Company is a party to various legal proceedings incidental to its normal operating activities. In particular, like others in the construction supply industry, the Company’s construction supply 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, architect’s and engineers’ errors and omissions 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 financial condition of the Company.

13.

Comprehensive Earnings


	Three months ended						Six months ended
*(In thousands)*	Sept. 1, 2007			Sept. 2, 2006			Sept. 1, 2007			Sept. 2, 2006
Net earnings	$	11,474		$	7,333		$	23,170		$	12,075
Unrealized (loss) gain on derivatives, net of $(16), $(6), $(-) and $23 tax (benefit) expense, respectively		(29	)		(11	)		(1	)		41
Unrealized gain (loss) on marketable securities, net of $22, $54, $(34) and $47 tax expense (benefit), respectively		42			99			(63	)		86

Comprehensive earnings	$	11,487		$	7,421		$	23,106		$	12,202

14.

Segment Information

The following table presents sales and operating income data for our two segments, and consolidated, for the three and six months ended September 1, 2007, when compared to the corresponding periods a year ago.


	Three months ended						Six months ended
*(In thousands)*	Sept. 1, 2007 (13 weeks)			Sept. 2, 2006 (13 weeks)			Sept. 1, 2007 (26 weeks)			Sept. 2, 2006 (27 weeks)
Net Sales
Architectural	$	198,084		$	163,242		$	386,311		$	328,505
Large-Scale Optical		19,594			18,513			41,249			40,278
Intersegment eliminations		(5	)		—			(2	)		(23	)

Net sales	$	217,673		$	181,755		$	427,558		$	368,760

Operating Income (Loss)
Architectural	$	14,392		$	9,193		$	25,977		$	14,760
Large-Scale Optical		3,605			1,892			7,532			5,025
Corporate and Other		(732	)		(653	)		(1,278	)		(1,207	)

Operating income	$	17,265		$	10,432		$	32,231		$	18,578

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.

Item 2.

Management’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’s current expectations or beliefs of the Company’s near-term results, based on current information available pertaining to the Company, including the risk factors noted under Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended March 3, 2007. From time to time, we may also provide oral and written forward-looking statements in other materials we 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 of the Company’s Annual Report on Form 10-K for the fiscal year ended March 3, 2007.

We wish to caution investors that other factors might in the future prove to be important in affecting the Company’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, services and systems. The Company is comprised of two segments: Architectural Products and Services (Architectural) and Large-Scale Optical (LSO). Our Architectural segment companies design, engineer, fabricate, install, maintain and renovate the walls of glass and windows primarily comprising the outside skin of commercial and institutional buildings. Businesses in this segment are: Viracon, a leading fabricator of coated, high-performance architectural glass for global markets; Harmon, Inc., one of the largest U.S. full-service building glass installation, maintenance and renovation companies; Wausau Window and Wall Systems, a manufacturer of custom aluminum window systems and curtainwall; and Linetec, a paint and anodizing finisher of architectural aluminum and PVC shutters. Our LSO segment consists of Tru Vue, a value-added glass and acrylic manufacturer for the custom picture framing market, and a producer of optical thin film coatings for consumer electronics displays.

The following selected financial data should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended March 3, 2007 and the consolidated financial statements, including the notes to consolidated financial statements, included therein.

Sales and Earnings

The relationship between various components of operations, stated as a percent of net sales, is illustrated below for the three and six-month periods of the current and past fiscal years.


	Three months ended				Six months ended
*(Percent of net sales)*	Sept. 1, 2007 (13 weeks)		Sept. 2, 2006 (13 weeks)		Sept. 1, 2007 (26 weeks)		Sept. 2, 2006 (27 weeks)
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	78.5		80.9		79.0		81.7

Gross profit	21.5		19.1		21.0		18.3
Selling, general and administrative expenses	13.6		13.4		13.5		13.3

Operating income	7.9		5.7		7.5		5.0
Interest income	0.1		0.2		0.1		0.2
Interest expense	0.3		0.4		0.3		0.4
Other income (expense), net	—		—		—		—
Equity in earnings of affiliated companies	0.7		0.8		0.4		0.3

Earnings from continuing operations before income taxes	8.4		6.3		7.7		5.1
Income tax expense	3.0		2.3		2.7		1.8

Earnings from continuing operations	5.4		4.0		5.0		3.3
(Loss) earnings from discontinued operations, net of income taxes	(0.1	)	—		0.4		—

Net earnings	5.3	%	4.0	%	5.4	%	3.3	%

Effective tax rate for continuing operations	35.5	%	35.9	%	34.8	%	35.3	%

Highlights of Second Quarter and First Six Months of Fiscal 2008, Compared to Second Quarter and First Six Months of Fiscal 2007

•

Consolidated net sales increased 19.8 percent, or $35.9 million, for the second quarter ended September 1, 2007 compared to the prior-year period, primarily due to increased Architectural segment volume across all businesses in the segment, improved pricing within our architectural glass business and increased job flow in our installation business. Additionally, the Architectural segment saw fewer project delays than historically in the quarter due to the strong commercial construction market. The LSO segment also contributed to the growth with increased sales of our best value-added picture framing glass products.

•

Consolidated net sales increased 15.9 percent, or $58.8 million, during the six months ended September 1, 2007 compared to the prior-year period primarily for the reasons mentioned above. The extra week in the prior-year period had a 3.8 percent impact on the year-over-year comparison.

•

Gross profit as a percent of sales for the quarter ended September 1, 2007, as compared to the prior-year period, increased to 21.5 percent from 19.1 percent due to increased pricing and a better mix of higher margin projects within our Architectural segment businesses. The LSO segment also benefited from a higher mix of our best value-added picture framing glass products. The second quarter and year-to-date gross margins also benefited from improved operational performance and higher capacity utilization. Last year included net settlement proceeds from a class action lawsuit settlement with a flat glass manufacturer, which had a positive impact of 1.0 percentage point on prior-year margins.

•

Gross profit as a percent of sales for the six months ended September 1, 2007, as compared to the prior-year period, increased to 21.0 percent from 18.3 percent, primarily as a result of increased pricing, a mix of projects with higher margins and higher capacity utilization in the Architectural segment businesses, as well as improved mix in the LSO segment. The startup of our new architectural glass facility in St. George, Utah during the first quarter of the current year offset these improvements by 0.5 percentage points. In addition, the prior-year margin included unusual health insurance costs that did not repeat in the current year, offset by the net settlement proceeds from the class action lawsuit referenced above.

•

Selling, general and administrative (SG&A) expenses for the second quarter increased as a percent of sales to 13.6 percent from 13.4 percent in the prior-year quarter. For the six-month period ended September 1, 2007, SG&A expenses as a percent of sales increased to 13.5 percent from 13.3 percent in the prior-year period. The increase in SG&A expenses for both the three and six-month periods relates primarily to the impact of higher salaries and wages and increased incentive compensation expense due to improved financial performance. SG&A is also up due to expenditures to update our computer systems and information technology infrastructure. Additionally, the prior-year six-month period included a net gain on asset dispositions of $0.4 million in the Architectural segment.

•

Equity in affiliated companies, which includes our 34 percent interest in PPG Auto Glass, LLC, an automotive replacement glass distribution business, reported income of $1.5 million in the second quarter of both fiscal 2008 and 2007. Higher pricing in fiscal 2008 within the automotive replacement glass market was offset by a mix of lower value product compared to fiscal 2007. For the six months ended September 1, 2007, income of $1.5 million was up slightly over $1.3 million in the prior-year period. The increase for the six-month period was due to the higher pricing in the automotive replacement glass market over the prior year.

Segment Analysis

The following table presents sales and operating income data for our two segments and on a consolidated basis for the three and six-month periods ended September 1, 2007, when compared to the corresponding periods a year ago.


	Three months ended								Six months ended
*(In thousands)*	Sept. 1, 2007 (13 weeks)			Sept. 2, 2006 (13 weeks)			% Change		Sept. 1, 2007 (26 weeks)			Sept. 2, 2006 (27 weeks)			% Change
Net Sales
Architectural	$	198,084		$	163,242		21.3	%	$	386,311		$	328,505		17.6	%
Large-Scale Optical		19,594			18,513		5.8			41,249			40,278		2.4
Intersegment eliminations		(5	)		—		NM			(2	)		(23	)	NM

Net sales	$	217,673		$	181,755		19.8	%	$	427,558		$	368,760		15.9	%

Operating Income (Loss)
Architectural	$	14,392		$	9,193		56.6	%	$	25,977		$	14,760		76.0	%
Large-Scale Optical		3,605			1,892		90.5			7,532			5,025		49.9
Corporate and other		(732	)		(653	)	NM			(1,278	)		(1,207	)	NM

Operating income	$	17,265		$	10,432		65.5	%	$	32,231		$	18,578		73.5	%

NM = Not Meaningful

Architectural Products and Services (Architectural)

•

Second quarter net sales of $198.1 million increased 21.3 percent in comparison with the prior-year period as a result of increased Architectural glass volume and pricing as well as job cost flow in our installation business. Additionally, with the strong commercial construction markets, there was a lower level of project delays during the quarter. For the six months, revenues of $386.3 million increased 17.6 percent over the prior-year period for the reasons previously stated. The six-month period of the prior year was positively impacted by the result of the extra week in that period.

•

Operating income for the second quarter of $14.4 million increased 56.6 percent over $9.2 million in the prior-year period. The increase reflects higher sales volume, improved pricing, manufacturing operations improvements and high capacity utilization. The prior-year period included $1.1 million of net proceeds from the class action lawsuit settlement. For the six-month period ended September 1, 2007, operating income was $26.0 million, which was a 76.0 percent increase over the prior year of $14.8 million for the reasons noted above. Operating margins for the second quarter of fiscal 2008 and 2007 were 7.3 percent and 5.6 percent, respectively and 6.7 percent and 4.5 percent for the six-month periods, respectively. The margin improvement for the current year was reduced 0.6 percentage points by the startup of the new architectural glass facility in St. George, Utah.

•

Architectural backlog, at September 1, 2007, increased to $405.4 million from $391.0 million in the prior-year period and was down from $423.8 million at fiscal 2007 year-end. We expect approximately $260 million of this backlog to flow during the remainder of fiscal 2008. Bidding activity was strong throughout the segment during the second quarter.

Large-Scale Optical Technologies (LSO)

•

Second quarter revenues were $19.6 million, up 5.8 percent over the prior-year period due to increased volume of our best value-added picture framing glass. This increase was somewhat offset by lower sales of our lower value-added products and consumer electronics products. For the six months ended September 1, 2007, LSO revenues were $41.2 million, up 2.4 percent in comparison with the prior-year period due to the strong growth of our best value-added picture framing products in the current-year. This increase was partially offset by strong prior-year picture framing volume, primarily in the first quarter. Additionally, the prior year was positively impacted by strong consumer electronics sales and the result of the extra week in the prior-year period.

•

Operating income for the second quarter of $3.6 million was up over the $1.9 million reported in the prior-year period, which included flat glass settlement net proceeds of $0.4 million. For the six months ended September 1, 2007, operating income was $7.5 million compared to $5.0 million. Operating margins for the second quarter of fiscal 2008 and 2007 were 18.4 percent and 10.2 percent, respectively, and 18.3 percent and 12.5 percent for the six-month periods, respectively. The increase in operating margins was due to the higher mix of our best value-added picture framing glass in the current year.

•

Subsequent to quarter-end, we completed the sale of our pre-framed art product line. This product line’s annual revenues were approximately $8.0 million in fiscal 2007 and were $3.0 million in fiscal 2008. There was not a material impact on net earnings associated with the sale in fiscal 2008.

Consolidated Backlog

•

At September 1, 2007, the Company’s consolidated backlog was $408.0 million, up 3.2 percent over the prior-year period and down 5.1 percent from the $429.7 million reported at March 3, 2007.

•

The backlog of the Architectural segment represented 99.4 percent of the Company’s consolidated backlog.

•

We view backlog as an important statistic in evaluating the level of sales activity and short-term sales trends in our business. We do not believe that sequential growth in backlog is necessary to grow revenues. Additionally, as backlog is only one indicator, and is not an effective indicator of the ultimate profitability of the Company’s sales, the Company does not believe that backlog should be used as the sole indicator of future earnings of the Company.

Discontinued Operations

During fiscal 2007, we announced our intention to discontinue the manufacturing of automotive replacement glass (ARG) products and also announced the decision to sell the remaining portion of the Auto Glass segment that manufactures and sells OEM and aftermarket replacement windshields for the recreational vehicle and bus markets. We restated the consolidated financial statements to show the results of the Auto Glass segment in discontinued operations. We signed an asset purchase agreement in the first quarter of fiscal 2008 and expect to complete the sale of certain assets related to the business during the third quarter of fiscal 2008. We have received proceeds of $5.0 million in advance of completing the sale and have recorded the proceeds as current liabilities of discontinued operations. The Auto Glass segment’s manufacturing facility was not part of the purchase agreement; it will be converted to support the Architectural segment’s glass fabrication business.

In several transactions in fiscal years 1998 through 2000, we completed the sale of our large-scale domestic curtainwall business, the sale of the 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 a majority of the remaining cash expenditures related to discontinued operations is expected to be paid within the next three years. The majority of these liabilities relate to the international curtainwall operations, including bonds outstanding, of which the precise degree of liability related to these matters will not be known until they are settled within the U.K courts. The reserve for discontinued operations also covers other liability issues, consisting of warranty issues relating to these and other international construction projects.

During the first quarter of fiscal 2008, these reserves were reduced by $3.5 million, primarily due to resolution of an outstanding legal matter related to a significant French curtainwall project, and were reported as income from discontinued operations. The remaining amount in results from discontinued operations in the current year reflects the operating loss of the Auto Glass segment that is in the process of being sold.

Liquidity and Capital Resources


	Six months ended
*(Cash effect, in thousands)*	Sept. 1, 2007			Sept. 2, 2006
Net cash provided by continuing operating activities	$	34,517		$	422
Capital expenditures		(26,030	)		(15,441	)
Net (decrease) increase in borrowings		(11,100	)		11,300
Dividends paid		(3,908	)		(5,474	)

Operating Activities. Cash provided by operating activities of continuing operations was $34.5 million for the first six months of fiscal 2008, compared to $0.4 million in the prior-year period. The current period source of cash was primarily driven by increased net earnings and effective working capital management. The prior year was impacted by higher levels of working capital, primarily increased accounts receivable. We continue to focus on lowering our working capital requirements. As such, our focus is to reduce our non-cash working capital as a percent of sales. Non-cash working capital (current assets, excluding cash, less current liabilities) was $69.5 million at September 1, 2007, or 8.3 percent of last-twelve-month sales. This compares to $70.4 million, or 9.0 percent of fiscal 2007 sales, at fiscal 2007 year-end.

Investing Activities. Through the first six months of fiscal 2008, investing activities used cash of $27.9 million, compared to $9.1 million in the same period last year. New capital investment through the first six months of fiscal 2008 totaled $26.0 million, including completion of our new architectural glass fabrication plant in St. George, Utah and other investments in architectural glass fabrication capacity expansions. This compared to $15.4 million in the prior-year period.

In fiscal 2008, we expect to incur capital expenditures for capacity expansions and productivity improvements in each of the Architectural and LSO segments, expenditures to upgrade existing information systems, as well as costs necessary to maintain existing facilities and safety. Fiscal 2008 capital expenditures are expected to be approximately $60 million.

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, further invest in, fully divest and/or sell parts of our current businesses. PPG Industries (PPG) announced that it has signed an agreement to divest its automotive replacement glass businesses, which includes its 64 percent share of the PPG Auto Glass joint venture. In the event PPG completes the sale, we would have the right to sell our minority interest in the PPG Auto Glass joint venture, which is reported in equity in affiliates. If we exercise this right, the agreement governing the joint venture dictates the sale price for our portion of the joint venture, computed as a factor of the joint venture’s net book value or other financial performance metrics, and, based on current estimates, may result in a non-cash loss on the sale.

Cash flows provided by investing activities from discontinued operations were largely related to cash received as an advance under the asset purchase agreement signed during the first quarter for the sale of our Auto Glass manufacturing business.

Financing Activities. Total outstanding borrowings decreased to $24.3 million at September 1, 2007 from $35.4 million outstanding at March 3, 2007, due to strong earnings and working capital management. The majority of our long-term debt, $15.9 million, consisted of bank borrowings under our $100.0 million syndicated revolving credit facility. Our debt-to-total-capital ratio was 8.4 percent at September 1, 2007, down from 13.1 percent at March 3, 2007.

We have paid $3.9 million in dividends during the current year, compared to $5.5 million in the prior-year six-month period. This was due to the timing of quarterly dividend payments; two payments were made in the current year while three were paid in the prior-year period.

During fiscal 2004, the Board of Directors authorized a share repurchase program of 1,500,000 shares of common stock in the open market at prevailing market prices. No share repurchases were made under this plan during fiscal

2007 or the first six months of fiscal 2008. We have purchased a total of 535,324 shares at a total cost of $7.2 million since the inception of this program. We have remaining authority to repurchase 964,676 shares under this program, although we do not expect to repurchase any shares during the remainder of fiscal 2008.

Other Financing Activities. The following summarizes significant contractual obligations that impact our liquidity:


	Future Cash Payments Due by Fiscal Period
*(In thousands)*	Remainder of 2008		2009		2010		2011		2012		Thereafter		Total
Borrowings under credit facility	$	—	$	—	$	—	$	—	$	15,900	$	—	$	15,900
Industrial revenue bonds		—		—		—		—		—		8,400		8,400
Operating leases (undiscounted)		4,484		6,599		5,468		4,308		3,037		6,728		30,624
Purchase obligations		7,423		2,712		—		—		—		—		10,135
Interest on fixed-rate debt		264		326		12		—		—		—		602
Uncertain tax positions		387		—		—		—		—		—		387
Other obligations		428		425		303		—		—		—		1,156

Total cash obligations	$	12,986	$	10,062	$	5,783	$	4,308	$	18,937	$	15,128	$	67,204

We maintain a $100.0 million revolving credit facility. On November 14, 2006, we entered into Amendment No. 1 to the Credit Agreement. The amendment extended the expiration date of the agreement from May 2010 to November 2011, effectively decreased the interest rate paid on borrowings and decreased the commitment fee. No other provisions of the agreement were affected by the amendment. The financing costs associated with the credit facility were added to debt issue costs and are being amortized over the term of the new credit agreement.

Borrowings of $15.9 million were outstanding as of September 1, 2007. 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 September 1, 2007 was $210.0 million, whereas our net worth as defined in the credit facility was $264.5 million. The credit facility also requires that we maintain a debt-to-cash flow ratio of no more than 2.75. This ratio is computed daily, with cash flow computed on a rolling 12-month basis. Our ratio was 0.29 at September 1, 2007. If we are not in compliance with either of these covenants, the lender may terminate the commitment and/or declare any loan then outstanding to be immediately due and payable. At September 1, 2007, we were in compliance with all of the financial covenants of the credit facility.

Long-term debt also includes $8.4 million of industrial development bonds that mature in fiscal years 2021 through 2023.

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.

We have purchase obligations for raw material commitments, capital expenditures and a long-term freight commitment. As of September 1, 2007, these obligations totaled $10.1 million.

Upon adoption of FIN 48, we had $10.1 million of long-term unrecognized tax benefits. We are not able to reasonably estimate in which future periods these amounts will ultimately be settled.

The other obligations in the table above relate to non-compete and consulting agreements with current and former employees.


	Amount of Commitment Expiration Per Period
*(In thousands)*	Remainder of 2008		2009		2010		2011		2012		Thereafter		Total
Standby letters of credit	$	463	$	1,591	$	—	$	—	$	—	$	8,653	$	10,707

In addition to the above standby letters of credit, which are predominantly issued for performance related bonds in our discontinued European curtainwall business, we are required, in the ordinary course of business, to commit to performance related bonds that require payments to our customers for certain non-performance. The outstanding face

value of the performance related bonds fluctuates with the value of projects that are in process and in our backlog. At September 1, 2007, these bonds totaled $371.0 million. With respect to our current portfolio of businesses, we have never been required to pay on these performance-based bonds.

We maintain two interest rate swaps that effectively convert $12.0 million of variable rate borrowings into fixed rate obligations. The notional value of the swaps varies declines from the current value of $12.0 million to $3.0 million through expiration on March 29, 2009. We receive payments at variable rates while making payments at fixed rates of 5.01 and 4.88 percent.

We experienced a material increase in our premiums and risk retention for our product liability coverages in fiscal 2003, and although we have been able to continue these coverages through fiscal 2008, the premiums and retention have remained high. A material construction project rework event would have a material adverse effect on our operating results.

For fiscal 2008, we believe that current cash on hand, cash generated from operating activities and available capacity under our committed revolving credit facility should be adequate to fund our working capital requirements, planned capital expenditures and expected dividend payments.

Outlook

The following statements are based on current expectations for full-year fiscal 2008 results. These statements are forward-looking, and actual results may differ materially.

•

Overall revenues for the year are expected to increase 11 to 13 percent compared to fiscal 2007.

^¡

Architectural segment revenues are expected to increase 13 to 15 percent during the year due to the strong commercial construction market.

^¡

LSO segment revenues are expected to be approximately flat.

•

Annual gross margins are expected to be approximately 20.5 percent, approximately 1 percentage point higher than in fiscal 2007, due to increased pricing, operational improvements and cost reductions. These factors are expected to more than offset increases in wages, health care, energy, materials and freight, as well as costs related to the startup of the new architectural glass facility and reallocating coating equipment between the architectural glass and picture framing businesses.

•

SG&A expenses as a percent of annual sales are projected to be approximately 13.0 percent.

•

Expected annual operating margins by segment are: Architectural, approximately 6.7 to 7.1 percent, including the negative full-year impact of approximately 0.3 percentage point for the one-time startup costs for the new architectural glass facility expensed in the first quarter; and LSO, approximately 16 percent.

•

Equity in affiliates, which reflects our portion of the results of the PPG Auto Glass joint venture, is expected to report earnings of approximately $2.0 million. This excludes the impact of any potential transaction related to the joint venture; PPG Industries has announced it has signed an agreement to divest its automotive replacement glass businesses, including its interest in the joint venture.

•

Full-year capital expenditures are projected to be approximately $60 million, including capital for capacity expansions and productivity improvements in the Architectural and LSO segments.

•

Depreciation and amortization are estimated at approximately $23 million for the year.

•

Debt is expected to be $25 to $35 million at fiscal year-end.

•

The effective tax rate for the full year is anticipated to be slightly higher than 34.5 percent. This does not include an initiative underway to analyze prior-year research and development credits; in the period this analysis is completed, we may be in a position to adjust our tax rate.

•

Earnings per share from continuing operations are expected to range from $1.43 to $1.53 for the full year.

Related Party Transactions

No material changes have occurred in the disclosure with respect to our related party transactions set forth in our Annual Report on Form 10-K for the fiscal year ended March 3, 2007.

Critical Accounting Policies

No material changes have occurred in the disclosure with respect to our critical accounting policies set forth in our Annual Report on Form 10-K for the fiscal year ended March 3, 2007.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

No material changes have occurred in the disclosure of quantitative and qualitative market risk set forth in our Annual Report on Form 10-K for the fiscal year ended March 3, 2007.

Item 4.

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 Securities Exchange Act of 1934, as amended (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.

Changes in internal controls: There was no change in the Company’s internal control over financial reporting that occurred during the fiscal quarter ended September 1, 2007, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

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 industry, the Company’s construction supply 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 compensation, general liability, architect’s and engineers’ errors and omissions and automobile claims. Although it is 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 financial condition of the Company.

Item 1A.

Risk Factors

There were no material changes in the risk factors discussed in our Annual Report on Form 10-K for the fiscal year ended March 3, 2007.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information with respect to purchases made by the Company of its own stock during the second quarter of fiscal 2008:


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)
June 3, 2007 through June 30, 2007	2,899	$	26.03	—	964,676
July 1, 2007 through July 28, 2007	15,253		28.47	—	964,676
July 29, 2007 through Sept. 1, 2007	—		—	—	964,676
Total	18,152			—	964,676

(a)	The purchases in this column consist entirely of those shares surrendered to us by plan participants in order to satisfy a stock-for-stock option exercise or withholding tax obligations related to stock-based compensation. These purchases are not part of a publicly announced plan or program.

(b)	In April 2003, the Board of Directors authorized the repurchase of 1,500,000 shares of Company stock in the open market at prevailing market prices. The Company announced the authorization of the repurchase program on April 10, 2003. This repurchase program does not have an expiration date.

Item 4.

Submission of Matters to a Vote of Security Holders

The Apogee Enterprises, Inc. Annual Meeting of Shareholders was held on June 27, 2007. The number of outstanding shares on the record date for the Annual Meeting was 28,790,762. Ninety percent of the outstanding shares were represented in person or by proxy at the meeting. The three candidates for election as Class III Directors listed in the proxy statement were elected to serve three-year terms, expiring at the 2010 Annual Meeting of Shareholders. The proposal to approve the Amended and Restated Apogee Enterprises, Inc. Executive Management Plan was approved. Additionally, the proposal to ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the Company for the 2008 fiscal year was approved. The results of these matters voted upon by the shareholders are listed below.


	Number of Shares
	In Favor	Withheld/ Against	Abstained/ Unvoted	Broker Non-vote
Election of three Class III Directors
Jerome L. Davis	24,135,644	1,707,067	—	—
James L. Martineau	24,138,376	1,704,335	—	—
Richard V. Reynolds	24,147,977	1,694,734	—	—
Approval of the Amended and Restated Apogee Enterprises, Inc. Executive Management Incentive Plan	22,092,826	1,235,422	695,663	1,818,800
Ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm	25,742,918	34,013	65,780	—

Item 5.

Other Information

On June 27, 2007, at the Apogee Enterprises, Inc. Annual Meeting of Shareholders, the Company’s shareholders approved the Amended and Restated Apogee Enterprises, Inc. Executive Management Incentive Plan (the Plan), an incentive compensation program in which the Company’s executive officers may participate at the discretion of the Compensation Committee. The Plan provides participating executive officers with annual incentive awards based on the attainment of one or more predetermined, objective performance goals related to an identifiable business unit or the Company as a whole, or any combination thereof, during a particular fiscal year. The goals may apply to the individual officers participating in the Plan, and must be based on one or more specific sets of business criteria set forth in the Plan. The Plan is effective as of March 4, 2007, the first day of the Company’s 2008 fiscal year. This summary of the Plan is qualified in its entirety by reference to the full text of the Plan, a copy of which is attached as Exhibit 10.1 and incorporated herein by reference. A more detailed summary of the Plan can be found in the Company’s Proxy Statement for the 2007 Annual Meeting filed with the Securities and Exchange Commission on May 18, 2007.

Item 6.

Exhibits


Exhibit No.
10.1		Apogee Enterprises, Inc. Amended and Restated Executive Management Incentive Plan.

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

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.

SIGNATURES

Pursuant to the requirements 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.


	APOGEE ENTERPRISES, INC.

Date: October 11, 2007	By:	/s/ Russell Huffer
		Russell Huffer
		Chairman, President and
		Chief Executive Officer
		(Principal Executive Officer)

Date: October 11, 2007	By:	/s/ James S. Porter
		James S. Porter
		Chief Financial Officer
		(Principal Financial and
		Accounting Officer)

Apogee Enterprises Inc. Amended and Restated Executive Management Incentive Plan

Exhibit 10.1

APOGEE ENTERPRISES, INC.

AMENDED AND RESTATED

EXECUTIVE MANAGEMENT INCENTIVE PLAN

Section 1. Establishment; Purpose

(a) Establishment and History. On April 11, 2002, the Board of Directors of Apogee Enterprises, Inc., a Minnesota corporation (the “Company”), upon recommendation by the Compensation Committee of the Company’s Board of Directors, approved an incentive plan for executive officers as described herein, which plan is known as the “Apogee Enterprises, Inc. Executive Management Incentive Plan” (the “Plan”). The Plan was approved by the shareholders of the Company at the Company’s 2002 Annual Meeting of Shareholders and became effective as of March 3, 2002. On April 14, 2005, the Board of Directors of the Company, upon recommendation by the Compensation Committee of the Company’s Board of Directors, approved the first amended and restated version of the Plan, which was approved by the shareholders of the Company at the Company’s 2005 Annual Meeting of Shareholders and became effective as of February 26, 2006. On May 2, 2007, the Board of Directors of the Company, upon recommendation by the Compensation Committee of the Company’s Board of Directors, approved the second amended and restated version of the Plan, which shall be submitted for approval by the shareholders of the Company at the Company’s 2007 Annual Meeting of Shareholders. The second amended and restated Plan shall be effective as of March 4, 2007 (the first day of the Company’s 2008 fiscal year), subject to its approval by the shareholders of the Company, and no payments shall be made pursuant to such Plan until after the Plan has been approved by the shareholders of the Company.

(b) Purpose. The purpose of the Plan is to provide a direct financial incentive for executive officers of the Company to make a significant contribution to the annual strategic and financial goals of the Company.

Section 2. Establishment of Bonus Pool.

The Committee (as defined in Section 3(a)) shall, not later than 90 days after the beginning of each fiscal year of the Company, establish a bonus pool (the “Bonus Pool”) equal to a percentage (not to exceed 100%) of one or more of the following business criteria (“Company Performance Factors”) for the fiscal year for which Annual Bonus Pool Awards are being paid under this Plan. The following shall constitute the sole Company Performance Factors upon which a Bonus Pool under this Plan shall be based: economic value added, sales or revenues, costs or expenses, net profit after tax, gross profit, operating profit, base earnings, earnings (whether before or after taxes), earnings before interest, taxes, depreciation and amortization (EBITDA) as a percent of net sales, return on actual or pro forma equity or net assets or capital, net capital employed, earnings per share (basic or diluted), earnings per share from continuing operations, operating income, pre-tax income, operating income margin, net income, total shareholder return or profitability, or both, as measured by one or more of the following accounting ratios: return on revenue, return on assets, return on equity, return on invested capital and return on investments, shareholder return including performance (total shareholder return) relative to the Standard & Poor’s Small Cap 600 Index or similar index or performance (total stockholder return) relative to the proxy comparator group, in both cases as determined pursuant to Rule 402(l) of Regulation S-K promulgated under the Securities and Exchange Act of 1934, as amended, cash generation, cash flow (including free cash flow and cash flow from operating, investing or financing activities or any combination thereof), unit volume and change in working capital.

The Bonus Pool shall be computed in accordance with generally accepted accounting principles as in effect from time to time and as applied by the Company in the preparation of its financial statements. For purposes of the foregoing computation, changes in generally accepted accounting principles which occur during a fiscal year shall not be taken into account, and extraordinary items, discontinued operations and restructuring costs, as computed in accordance with generally accepted accounting principles as in effect from time to time and as applied and reported

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by the Company in the preparation of its financial statements, shall also not be taken into account. The amount of any Bonus Pool may be decreased (but not increased) at any time during a fiscal year by the Committee.

Section 3. Administration

(a) Composition of the Committee. The Plan shall be administered by the Compensation Committee of the Company’s Board of Directors, or a sub-committee thereof (the “Committee”). To the extent required by Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), the Committee administering the Plan shall be composed solely of two or more “outside directors” within the meaning of Section 162(m) of the Code.

(b) Power and Authority of the Committee. The Committee shall have full power and authority, subject to all the applicable provisions of the Plan (including but not limited to the requirements of Section 3(d) of the Plan) and applicable law, to (i) establish, amend, suspend, terminate or waive such rules and regulations and appoint such agents as it deems necessary or advisable for the proper administration of the Plan, (ii) construe, interpret and administer the Plan and any instrument or agreement relating to, or any Annual Bonus Pool Award (as defined below in Section 4(b)) made under, the Plan, and (iii) make all other determinations and take all other actions necessary or advisable for the administration of the Plan. Unless otherwise expressly provided in the Plan, each determination made and each action taken by the Committee pursuant to the Plan or any instrument or agreement relating to, or Annual Bonus Pool Award made under, the Plan shall be within the sole discretion of the Committee, may be made at any time and shall be final, binding and conclusive for all purposes on all persons, including, but not limited to, holders of Annual Bonus Pool Awards, and their legal representatives and beneficiaries, and employees of the Company or of any “Affiliate” of the Company. For purposes of the Plan and any instrument or agreement relating to, or any Annual Bonus Pool Award made under, the Plan, the term “Affiliate” shall mean any entity that, directly or indirectly through one or more intermediaries, is controlled by the Company and any entity in which the Company has a significant equity interest, in each case as determined by the Committee in its sole discretion.

(c) Delegation. The Committee may delegate its powers and duties under the Plan to one or more executive officers of the Company or any Affiliate or a committee of such executive officers, subject to such terms, conditions and limitations as the Committee may establish in its sole discretion; provided, however, that the Committee shall not delegate its power to (a) amend the Plan as provided in Section 9 hereof; (b) establish a Bonus Pool under Section 2; and (c) make determinations regarding Performance-Based Awards (as defined below in Section 4(d)).

Section 4. Eligibility and Participation

(a) Eligibility. The Plan is maintained by the Company for its executive officers. In order to be eligible to participate in the Plan, an executive officer of the Company or any of its Affiliates must be selected by the Committee. In determining the executive officers who will participate in the Plan, the Committee may take into account the nature of the services rendered by such executive officers, their present and potential contributions to the success of the Company and such other factors as the Committee, in its sole discretion, shall deem relevant. A director of the Company or of an Affiliate who is not also an employee of the Company or an Affiliate, and all members of the Committee, shall not be eligible to participate in the Plan.

(b) Participation and Awards. For each fiscal year, the Committee shall:

(i) determine the employees eligible to be granted a percentage share of the Bonus Pool (an “Annual Bonus Pool Award”) for the fiscal year; and

(ii) determine the percentage share in the Bonus Pool to be reserved as an Annual Bonus Pool Award to any eligible employee. The sum of such individual percentages shall not exceed 100%.

The percentage share of the Bonus Pool need not be the same with respect to any recipient of an Annual Bonus Pool Award (the “Participant”) or with respect to different Participants. The Committee’s decision to approve an Annual Bonus Pool Award to an employee in any year shall not require the Committee to approve a similar Annual Bonus Pool Award or any Annual Bonus Pool Award at all to that employee or any other employee or person at any future date. The Company and the Committee shall not have any obligation for uniformity of treatment of any person, including, but not limited to, Participants and their legal representatives and beneficiaries and employees of

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the Company or of any Affiliate of the Company. The Committee retains sole discretion to reduce the amount of any bonus otherwise payable under this Plan. The Annual Bonus Pool Award in a subsequent fiscal year shall not be increased by any portion of the Bonus Pool of a prior fiscal year which has not been paid or credited to or for the benefit of Participants hereunder.

(c) Bonus Award Agreement. Any employee selected for participation by the Committee shall, as a condition of participation, execute and return to the Committee a written agreement setting forth the terms and conditions of the Annual Bonus Pool Award (the “Bonus Award Agreement”). A separate Bonus Award Agreement will be entered into between the Company and each Participant for each Annual Bonus Pool Award.

(d) Qualified Performance-Based Compensation. Notwithstanding any other provision of the Plan to the contrary, with respect to an Annual Bonus Pool Award that is intended to be “qualified performance-based compensation” within the meaning of Section 162(m) of the Code (hereinafter referred to as a “Performance-Based Award”), the following additional requirements shall apply to all Performance-Based Awards made to any Participant under the Plan:

(i) Any Performance-Based Award shall be null and void and have no effect whatsoever unless the Plan shall have been approved by the shareholders of the Company at the Company’s 2007 Annual Meeting of Shareholders.

(ii) For a Performance-Based Award, the Committee shall, not later than 90 days after the beginning of each fiscal year of the company:

(A) designate all Participants for such fiscal year; and

(B) determine the percentage share in the Bonus Pool to be reserved as an Annual Bonus Pool Award to any Participant.

(iii) Following the close of each fiscal year and prior to payment of any amount to any Participant under the Plan, the Committee must certify in writing as to the computation of the Annual Bonus Pool Award.

(iv) The maximum bonus which may be paid to any Participant pursuant to any Performance-Based Award with respect to any fiscal year shall not exceed $1,500,000.

(e) Employment. In the absence of any specific agreement to the contrary, no Annual Bonus Pool Award to a Participant under the Plan shall affect any right of the Company, or of any Affiliate of the Company, to terminate, with or without cause, the Participant’s employment with the Company or any Affiliate at any time. Neither the establishment of the Plan, nor the granting of any Annual Bonus Pool Award hereunder, shall give any Participant: (i) any rights to remain employed by the Company or any Affiliate; (ii) any benefits not specifically provided for herein or in any Annual Bonus Pool Award granted hereunder; or (iii) any rights to prevent the Company or any Affiliate from modifying, amending or terminating any of its other benefit plans of any nature whatsoever.

Section 5. Annual Bonus Pool Awards

(a) General. The Committee shall determine the amount of the bonus to be paid to a Participant pursuant to each Annual Bonus Pool Award, the time or times when Annual Bonus Pool Awards will be made, and all other terms and conditions of each Annual Bonus Pool Award. Each Annual Bonus Pool Award shall be subject to the terms and conditions of the Plan and the applicable Bonus Award Agreement. Annual Bonus Pool Awards may be granted singly or in combination, or in addition to, in tandem with or in substitution for any grants or rights under any other employee or compensation plan of the Company or of any Affiliate. Bonus Award Agreements may provide that more or less than 100% of the target Annual Bonus Pool Award granted thereunder may be earned upon satisfaction of the conditions provided for therein, subject to the terms and conditions of the Plan. All or part of an Annual Bonus Pool Award may be subject to conditions and forfeiture provisions established by the Committee and set forth in the Bonus Award Agreement, which may include, but are not limited to, continuous service with the Company or an Affiliate.

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(b) Payment of Annual Bonus Pool Awards. Any bonus paid pursuant to an Annual Bonus Pool Award shall be paid solely in the form of cash. Payment of any such bonuses may be made, subject to any deferred compensation election which may be permitted pursuant to any deferred compensation plan, at such times, with such restrictions and conditions as the Committee, in its sole discretion, may determine at the time of grant of the Annual Bonus Pool Awards.

(c) Discretionary Reduction. The Committee shall retain sole and full discretion to reduce, in whole or in part, the amount of any award otherwise payable to any Participant under this Plan.

Section 6. Termination of Employment

Each Bonus Award Agreement shall include provisions governing the disposition of an Annual Bonus Pool Award in the event of the retirement, disability, death or other termination of a Participant’s employment with the Company or an Affiliate.

Section 7. Nontransferability

Except as otherwise determined by the Committee or set forth in the applicable Bonus Award Agreement, no right under any Annual Bonus Pool Award shall be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of during the time in which the requirement of continued employment or attainment of performance objectives has not been achieved.

Section 8. Taxes

In order to comply with all applicable federal or state income, social security, payroll, withholding or other tax laws or regulations, the Company may take such action, and may require a Participant to take such action, as it deems appropriate to ensure that all applicable federal or state income, social security, payroll, withholding or other taxes, which are the sole and absolute responsibility of the Participant, are withheld or collected from such Participant.

Section 9. Amendment and Termination

(a) Term of Plan. Unless the Plan shall have been discontinued or terminated as provided in Section 9(b) hereof, no Annual Bonus Pool Awards shall be granted under the Plan after March 3, 2012, and no Annual Bonus Pool Awards shall be paid except with respect to the Company’s fiscal year ending not later than March 2, 2013. No Annual Bonus Pool Awards may be granted after such termination, but termination of the Plan shall not alter or impair any rights or obligations under any Annual Bonus Pool Award theretofore granted (including the payment of such Annual Bonus Pool Award within the time period permitted by the Code, as the same may be amended from time to time), without the consent of the Participant or holder or beneficiary thereof, except as otherwise provided in the Bonus Award Agreement.

(b) Amendments to and Termination of Plan. Except to the extent prohibited by applicable law and unless otherwise expressly provided in the Plan or a Bonus Award Agreement, the Committee may amend, alter, suspend, discontinue or terminate the Plan; provided, however, that notwithstanding any other provision of the Plan or any Bonus Award Agreement, without the approval of the shareholders of the Company, no such amendment, alteration, suspension, discontinuation or termination shall be made that, absent such approval, would cause any compensation paid pursuant to any Performance-Based Award granted pursuant to the Plan no longer to qualify as “qualified performance-based compensation” within the meaning of Section 162(m) of the Code.

(c) Correction of Defects, Omissions and Inconsistencies. Except to the extent prohibited by applicable law and unless otherwise expressly provided in the Plan or a Bonus Award Agreement, the Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan, any Annual Bonus Pool Award or any Bonus Award Agreement in the manner and to the extent it shall deem desirable to carry the Plan into effect.

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Section 10. Miscellaneous

(a) Governing Law. The Plan and any Bonus Award Agreement shall be governed by and construed in accordance with the internal laws, and not the laws of conflicts, of the State of Minnesota.

(b) Severability. If any provision of the Plan, any Annual Bonus Pool Award or any Bonus Award Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan, any Annual Bonus Pool Award or any Bonus Award Agreement under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan, the Annual Bonus Pool Award or the Bonus Award Agreement, such provision shall be stricken as to such jurisdiction, and the remainder of the Plan, any such Annual Bonus Pool Award or any such Bonus Award Agreement shall remain in full force and effect.

(c) No Trust or Fund Created. Neither the Plan nor any Annual Bonus Pool Award or Bonus Award Agreement shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company or any Affiliate pursuant to an Annual Bonus Pool Award, such right shall be no greater than the right of any unsecured general creditor of the Company or of any Affiliate.

(d) Nature of Payments. Any and all cash payments pursuant to any Annual Bonus Pool Award granted hereunder shall constitute special incentive payments to the Participant, and such payments shall not be taken into account in computing the amount of the Participant’s salary or compensation for purposes of determining any pension, retirement, death or other benefits under (i) any pension, retirement, profit sharing, bonus, life insurance or other employee benefit plan of the Company or any Affiliate or (ii) any agreement between the Company (or any Affiliate) and the Participant, except to the extent that such plan or agreement expressly provides to the contrary.

(e) Headings. Headings are given to the Sections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.

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Section 302 CEO Certification

Exhibit 31.1

CERTIFICATION

I, Russell Huffer, certify that:

I have reviewed this quarterly report on Form 10-Q of Apogee Enterprises, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: October 11, 2007

		/s/ Russell Huffer
		Russell Huffer
		Chairman, President and Chief Executive Officer

Section 302 CFO Certification

Exhibit 31.2

CERTIFICATION

I, James S. Porter, certify that:

I have reviewed this quarterly report on Form 10-Q of Apogee Enterprises, Inc.;

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: October 11, 2007

		/s/ James S. Porter
		James S. Porter
		Chief Financial Officer

Section 906 CEO Certification

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Apogee Enterprises, Inc. (the “Company”) on Form 10-Q for the period ended September 1, 2007 as filed with the Securities and Exchange Commission (the “Report”), I, Russell Huffer, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant § 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Russell Huffer

Russell Huffer

Chairman, President and Chief Executive Officer

October 11, 2007

Section 906 CFO Certification

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Apogee Enterprises, Inc. (the “Company”) on Form 10-Q for the period ended September 1, 2007 as filed with the Securities and Exchange Commission (the “Report”), I, James S. Porter, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant § 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ James S. Porter

James S. Porter

Chief Financial Officer

October 11, 2007

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