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CONFORMED COPY
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
 
FORM 10-Q
 
 
[x]
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended August 31, 2002
 
OR
 
[  ]
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                          to                         
 
Commission File Number 0-6365
 
 
APOGEE ENTERPRISES, INC.
(Exact Name of Registrant as Specified in Charter)
 
Minnesota
  
41-0919654
(State or other jurisdiction of
incorporation or organization)
  
(IRS Employer Identification Number)
7900 Xerxes Avenue South – Suite 1800
    
Minneapolis, Minnesota
  
55431
(Address of principal executive offices)
  
(Zip Code)
 
Registrant’s telephone number, including area code: (952) 835-1874
 
 
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         
 
APPLICABLE ONLY TO CORPORATE ISSUERS:
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the close of the latest practicable date.
 
Class
Common Stock, $.331/3 Par Value
   
Outstanding at September 30, 2002
27,658,405
      
 

Table of Contents
APOGEE ENTERPRISES, INC.
FORM 10-Q
TABLE OF CONTENTS
FOR THE QUARTER ENDED AUGUST 31, 2002
 
   
Description
  
Page
PART I
        
Item 1.
      
     
3
     
4
     
5
     
6-11
Item 2.
    
11-15
Item 3.
    
15
Item 4.
    
15
PART II
      
Item 4.
    
17
Item 6.
    
17
     
21

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Table of Contents
PART I
 
FINANCIAL INFORMATION
 
Item 1.    Financial Statements
 
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF AUGUST 31, 2002 AND MARCH 2, 2002
 
    
August 31,
         
    
2002
     
March 2,
  
(In thousands, except share and per share data)
   
(unaudited)
     
2002
  
Assets
                  
Current assets
                  
Cash and cash equivalents
   
$
8,557
 
   
$
15,361
 
Receivables, net of allowance for doubtful accounts
   
 
113,390
 
   
 
115,159
 
Inventories
   
 
34,647
 
   
 
36,022
 
Deferred tax assets
   
 
5,002
 
   
 
4,875
 
Other current assets
   
 
2,644
 
   
 
3,667
 
    
  
Total current assets
   
 
164,240
 
   
 
175,084
 
    
  
Property, plant and equipment, net
   
 
121,040
 
   
 
128,515
 
Marketable securities available for sale
   
 
16,231
 
   
 
22,825
 
Investments in affiliated companies
   
 
20,957
 
   
 
22,110
 
Goodwill
   
 
55,914
 
   
 
55,614
 
                   
Identifiable intangible assets, at cost less accumulated amortization of $4,602 and $5,820, respectively
   
 
1,636
 
   
 
1,024
 
Other assets
   
 
3,627
 
   
 
3,944
 
    
  
Total assets
   
$
383,645
 
   
$
409,116
 
    
  
Liabilities and Shareholders’ Equity
                  
Current liabilities
                  
Accounts payable
   
$
50,260
 
   
$
51,887
 
Accrued expenses
   
 
46,471
 
   
 
57,766
 
Current liabilities of discontinued operations, net
   
 
3,453
 
   
 
3,740
 
Billings in excess of costs and earnings on uncompleted contracts
   
 
6,093
 
   
 
6,127
 
Accrued income taxes
   
 
12,633
 
   
 
7,079
 
Current installments of long-term debt
   
 
540
 
   
 
640
 
    
  
Total current liabilities
   
 
119,450
 
   
 
127,239
 
    
  
Long-term debt, less current installments
   
 
51,736
 
   
 
69,098
 
Other long-term liabilities
   
 
26,347
 
   
 
25,867
 
Liabilities of discontinued operations, net
   
 
15,008
 
   
 
15,978
 
Commitments and contingent liabilities (Note 9)
   
 
—  
 
   
 
—  
 
Shareholders’ equity
                  
Common stock of $0.33-1/3 par value; authorized 50,000,000 shares; issued and outstanding, 27,748,000 and 28,334,000, respectively
   
 
9,249
 
   
 
9,445
 
Additional paid-in capital
   
 
53,336
 
   
 
50,521
 
Retained earnings
   
 
112,386
 
   
 
113,382
 
Unearned compensation
   
 
(2,674
)
   
 
(1,547
)
Accumulated other comprehensive loss
   
 
(1,193
)
   
 
(867
)
    
  
Total shareholders’ equity
   
 
171,104
 
   
 
170,934
 
    
  
Total liabilities and shareholders’ equity
   
$
383,645
 
   
$
409,116
 
    
  
 
See accompanying notes to consolidated financial statements.

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Table of Contents
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED RESULTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED
AUGUST 31, 2002 AND SEPTEMBER 1, 2001
(unaudited)
 
    
Three-months-ended
   
Six-months-ended
(In thousands, except share and per share data)
   
August 31,
2002
     
September 1, 2001
   
August 31,
2002
     
September 1, 2001
Net sales
   
$
200,282
 
   
$
210,233
   
$
384,991
 
   
$
413,839
Cost of sales
   
 
148,487
 
   
 
158,833
   
 
287,243
 
   
 
317,135
    
  
  
  
Gross profit
   
 
51,795
 
   
 
51,400
   
 
97,748
 
   
 
96,704
Selling, general and administrative expenses
   
 
38,431
 
   
 
35,476
   
 
74,682
 
   
 
72,807
    
  
  
  
Operating income
   
 
13,364
 
   
 
15,924
   
 
23,066
 
   
 
23,897
Interest expense, net
   
 
834
 
   
 
1,234
   
 
1,826
 
   
 
3,156
Equity in (loss) income of affiliated companies
   
 
(112
)
   
 
297
   
 
(1,230
)
   
 
2,365
    
  
  
  
Earnings from operations before income taxes
   
 
12,418
 
   
 
14,987
   
 
20,010
 
   
 
23,106
Income taxes
   
 
3,850
 
   
 
4,646
   
 
6,203
 
   
 
7,163
    
  
  
  
Net earnings
   
$
8,568
 
   
$
10,341
   
$
13,807
 
   
$
15,943
    
  
  
  
Earnings per share—basic
   
$
0.31
 
   
$
0.37
   
$
0.49
 
   
$
0.57
    
  
  
  
Earnings per share—diluted
   
$
0.30
 
   
$
0.36
   
$
0.48
 
   
$
0.56
    
  
  
  
Weighted average basic shares outstanding
   
 
27,740,000
 
   
 
27,956,000
   
 
27,900,000
 
   
 
27,815,000
Weighted average diluted shares outstanding
   
 
28,637,000
 
   
 
28,889,000
   
 
28,863,000
 
   
 
28,604,000
    
  
  
  
Dividends per common share
   
$
0.055
 
   
$
0.110
   
$
0.053
 
   
$
0.105
    
  
  
  
 
See accompanying notes to consolidated financial statements.

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Table of Contents
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
AUGUST 31, 2002 AND SEPTEMBER 1, 2001
(unaudited)
 
(In thousands)
   
August 31,
2002
     
September 1,
2001
  
Operating Activities
                  
Net earnings
   
$
13,807
 
   
$
15,943
 
Adjustments to reconcile net earnings to net cash provided by operating activities:
                  
Depreciation and amortization
   
 
12,056
 
   
 
13,482
 
Deferred income taxes
   
 
(119
)
   
 
(1,042
)
Results from equity investments
   
 
1,230
 
   
 
(2,365
)
(Investments in) dividends received from equity investments
   
 
(77
)
   
 
2,579
 
Gain on disposal of assets
   
 
(1,541
)
   
 
(477
)
Other, net
   
 
385
 
   
 
1,201
 
Changes in operating assets and liabilities, net of effect of acquisitions:
                  
Receivables
   
 
1,769
 
   
 
(2,653
)
Inventories
   
 
1,375
 
   
 
1,589
 
Accounts payable and accrued expenses
   
 
(12,247
)
   
 
(6,946
)
Billings in excess of costs and earnings on uncompleted contracts
   
 
(34
)
   
 
(2,291
)
Refundable and accrued income taxes
   
 
5,554
 
   
 
4,835
 
    
  
Net cash provided by operating activities
   
 
22,158
 
   
 
23,855
 
    
  
Investing Activities
                  
Capital expenditures
   
 
(6,031
)
   
 
(5,488
)
Proceeds from sale of property, plant and equipment
   
 
2,388
 
   
 
30
 
Acquisition of businesses, net of cash acquired
   
 
(300
)
   
 
(247
)
Purchases of marketable securities
   
 
(3,648
)
   
 
—  
 
Sales/maturities of marketable securities
   
 
10,367
 
   
 
4,399
 
    
  
Net cash provided by (used in) investing activities
   
 
2,776
 
   
 
(1,306
)
    
  
Financing Activities
                  
Change in net borrowings under revolving credit agreement
   
 
(18,100
)
   
 
(18,200
)
Proceeds from issuance of long-term debt
   
 
1,000
 
   
 
2,000
 
Payments on long-term debt
   
 
(362
)
   
 
(2,717
)
Increase in deferred debt expense
   
 
(835
)
   
 
(161
)
Proceeds from issuance of common stock
   
 
4,986
 
   
 
3,891
 
Repurchase and retirement of common stock
   
 
(14,071
)
   
 
(284
)
Dividends paid
   
 
(3,099
)
   
 
(2,965
)
    
  
Net cash used in financing activities
   
 
(30,481
)
   
 
(18,436
)
    
  
Cash (used in) provided by discontinued operations
   
 
(1,257
)
   
 
677
 
    
  
(Decrease) increase in cash and cash equivalents
   
 
(6,804
)
   
 
4,790
 
Cash and cash equivalents at beginning of period
   
 
15,361
 
   
 
4,689
 
    
  
Cash and cash equivalents at end of period
   
$
8,557
 
   
$
9,479
 
    
  
Supplemental schedule of non-cash investing activities:
                  
Net assets acquired through assumption of debt
   
 
—  
 
   
$
1,500
 
    
  
 
See accompanying notes to consolidated financial statements.

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Table of Contents
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 
1.
 
Summary of Significant Accounting Policies
 
In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of August 31, 2002 and September 1, 2001, the results of operations for the three months and six months ended August 31, 2002 and September 1, 2001, and cash flows for the six months ended August 31, 2002 and September 1, 2001. Certain prior-year amounts have been reclassified to conform to the current period presentation.
 
The financial statements and notes are presented as permitted by Form 10-Q and do not contain certain information included in the Company’s annual consolidated financial statements and notes. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis and financial statements and notes thereto included in the Company’s Form 10-K for the year ended March 2, 2002. The results of operations for the three months and six months ended August 31, 2002 and September 1, 2001 are not necessarily indicative of the results to be expected for the full year.
 
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.
 
2.
 
New Accounting Standards
 
In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. Under SFAS No. 142, amortization of goodwill and indefinite-lived intangible assets has ceased and instead the carrying value of these assets will be evaluated for impairment by applying a fair-value based test on at least an annual basis. This statement also requires a reassessment of the useful lives of identifiable intangible assets other than goodwill.
 
The Company has adopted SFAS No. 142 effective March 3, 2002 and has discontinued the amortization of goodwill and has determined that it does not have intangible assets with indefinite useful lives. The Company has performed the required impairment testing of goodwill as of March 3, 2002 and has concluded that none of its goodwill was impaired. Fair value was estimated using discounted cash flow methodologies. In addition, the Company reassessed the useful lives of its identifiable intangible assets and determined that the lives were appropriate. The Company will test goodwill of each of its reporting units for impairment annually in connection with its fourth quarter planning process or more frequently if impairment indicators exist.

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Table of Contents
 
If the Company had been accounting for its goodwill and intangible assets under SFAS No. 142 for all prior periods presented, the Company’s net income and earnings per common share would have been as follows:
 
    
Three-Months-Ended
   
Six-Months-Ended
(In thousands, except per share data)
   
Aug. 31, 2002
   
Sept. 1, 2001
   
Aug. 31, 2002
   
Sept. 1, 2001
Net income:
                            
Reported net earnings
   
$
8,568
   
$
10,341
   
$
13,807
   
$
15,943
Add back amortization expense, net of tax
   
 
—  
   
 
360
   
 
—  
   
 
680
    
  
  
  
Adjusted net income
   
$
8,568
   
$
10,701
   
$
13,807
   
$
16,623
    
  
  
  
Earnings per share—basic
                            
Reported net earnings
   
$
0.31
   
$
0.37
   
$
0.49
   
$
0.57
Impact of amortization expense, net of tax
   
 
—  
   
 
0.01
   
 
—  
   
 
0.02
    
  
  
  
Adjusted earnings per share—basic
   
$
0.31
   
$
0.38
   
$
0.49
   
$
0.59
    
  
  
  
Earnings per share—diluted
                            
Reported net earnings
   
$
0.30
   
$
0.36
   
$
0.48
   
$
0.56
Impact of amortization expense, net of tax
   
 
—  
   
 
0.01
   
 
—  
   
 
0.02
    
  
  
  
Adjusted earnings per share—diluted
   
$
0.30
   
$
0.37
   
$
0.48
   
$
0.58
    
  
  
  
 
In August 2001, FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This statement addresses financial accounting and reporting for the impairment and disposal of long-lived assets. The Company adopted this standard on March 3, 2002, with no impact to its consolidated financial statements.
 
In April 2002, the FASB issued SFAS No. 145, Rescission of SFAS Nos. 4, 44 and 64, Amendment of SFAS No. 13, and Technical Corrections. The significant items from SFAS 144 that are relevant to the Company are the statements regarding extinguishment of debt and the accounting for sale-leaseback transactions. The provisions of this statement are applicable for fiscal years beginning after, transactions entered into after and financial statements issued on or subsequent to May 15, 2002. Its adoption will not have a significant impact on the Company’s consolidated financial statements.
 
In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal. This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). The provisions of this statement are effective for exit or disposal activities initiated after December 31, 2002. The Company expects that adoption of this statement will not have a significant impact on the Company’s consolidated financial statements.

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Table of Contents
 
3.
 
Inventories
 
(In thousands)
     
August 31, 2002
   
March 2, 2002
Raw materials
     
$
14,926
   
$
16,235
Work in process
     
 
5,454
   
 
5,807
Finished goods
     
 
9,513
   
 
9,351
Cost and earnings in excess of billings on uncompleted contracts
     
 
4,754
   
 
4,629
      
  
Total inventories
     
$
34,647
   
$
36,022
      
  
 
4.
 
Equity Method Investments
 
In July 2000, the Company and PPG Industries, Inc. (PPG) combined their U.S. automotive replacement glass distribution businesses into a joint venture, PPG Auto Glass, LLC (PPG Auto Glass), of which the Company has a 34 percent interest. On August 31, 2002, the Company’s investment in PPG Auto Glass was $20.6 million. At August 31, 2002, 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 connection with the formation of PPG Auto Glass, the Company agreed to supply the joint venture, through PPG, with most of the Company’s windshield fabrication capacity on market-based terms and conditions. In addition, the Company’s automobile windshield repair and replacement business agreed to purchase at least 75% of its windshield needs from PPG Auto Glass on market-based terms and conditions. Purchases from PPG Auto Glass were $10.1 million and $12.6 million for the second quarter of fiscal 2003 and 2002, respectively. Year-to-date fiscal 2003 and 2002 purchases from PPG Auto Glass were $21.3 million and $25.6 million, respectively. Amounts owed to PPG Auto Glass were $7.4 million and $8.0 million at the end of the second quarter of fiscal 2003 and 2002, respectively.
 
During the second quarter of fiscal 2002, the Company, PPG and PPG Auto Glass amended the windshield supply agreements to adjust pricing for the windshields manufactured and sold to more accurately reflect market pricing. As a result of these amendments, a portion of earnings that would have previously been reported in equity in income from affiliated companies was reported in operating income in the Auto Glass segment for the current year.
 
In September 2001, the Company decided to discontinue funding TerraSun, LLC, its research and development joint venture of which the Company had a 50 percent interest. As a result, TerraSun discontinued its operations and sold its tangible assets.
 
The Company’s share of earnings for its affiliated companies is before income taxes and, in the second quarter of fiscal 2002, included $0.1 million of amortization of the excess cost over the value of the underlying net tangible assets and expenses retained by the Company.
 
5.
 
Goodwill and Other Identifiable Intangible Assets
 
The Company’s identifiable intangible assets with finite lives are being amortized over their estimated useful lives and are detailed below.
 
    
August 31, 2002
   
March 2, 2002
(In thousands)
   
Gross Carrying Amount
   
Accumulated Amortization
   
Gross Carrying Amount
   
Accumulated Amortization
Debt issue costs
   
$
1,804
   
$
245
   
$
2,410
   
$
1,487
Non-compete agreements
   
 
4,434
   
 
4,357
   
 
4,434
   
 
4,333
    
  
  
  
Total
   
$
6,238
   
$
4,602
   
$
6,844
   
$
5,820
    
  
  
  
 
Aggregate amortization expense for the six months ended August 31, 2002 and September 1, 2001 related to these identifiable intangible assets was $0.2 million and $0.8 million, respectively. At August 31, 2002, future amortization expense of identifiable intangible assets is $0.2 million for the remainder of fiscal 2003, for a total of $0.4 million for the year. Future amortization expense of

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Table of Contents
identifiable intangible assets for fiscal 2004 through fiscal 2006 is $0.4 million and $0.1 million for fiscal 2007.
 
The change in the carrying amount of goodwill, net of accumulated amortization, attributable to each business segment for the six months ended August 31, 2002 was as follows:
 
(In thousands)
   
Architectural
   
Large-Scale
Optical
   
Auto
Glass
   
Corporate
and
Other
   
Total
Balance, March 2, 2002
   
$
24,178
   
$
10,307
   
$
12,954
   
$
8,175
   
$
55,614
Contingent purchase price payment
   
 
—  
   
 
300
   
 
—  
   
 
—  
   
 
300
    
  
  
  
  
Balance, August 31, 2002
   
$
24,178
   
$
10,607
   
$
12,954
   
$
8,175
   
$
55,914
    
  
  
  
  
 
The Company has performed the required impairment testing of goodwill as of March 3, 2002 and has concluded that none of its goodwill was impaired. Fair value was estimated using discounted cash flow methodologies. In addition, the Company reassessed the useful lives of its identifiable intangible assets and determined that the lives were appropriate. The Company will test goodwill of each of its reporting units for impairment annually in connection with its fourth quarter planning process or more frequently if impairment indicators exist.
 
6.
 
Long-Term Debt
 
In April 2002, the Company entered into a four-year, unsecured, committed credit facility in the amount of $125.0 million. The credit facility requires the Company to maintain minimum levels of net worth and certain financial ratios. The majority of the borrowings under the credit facility are made at a rate equal to three-month LIBOR, London Interbank Offered Rate, (1.8125% at August 31, 2002) plus an applicable margin. The applicable margin is calculated based upon the Company’s financial ratios. At August 31, 2002, the applicable margin was 1.375%. At August 31, 2002, the Company was in compliance with all of the financial covenants of the credit facility.
 
7.
 
Discontinued Operations
 
In fiscal 2000, the Company completed the sale of 100% of the stock of its large-scale domestic curtainwall business, Harmon, Ltd. In fiscal 1999, the Company executed the sale of its detention/security business. Combined with the fiscal 1998 exit from international curtainwall operations, these transactions effectively removed the Company from the large-scale construction business. These businesses are presented as discontinued operations in the consolidated financial statements and notes.
 
At August 31, 2002, accruals totaling $18.5 million ($15.0 million classified as long-term accruals) represented the remaining estimated future cash outflows associated with the exit from discontinued operations. The majority of these cash expenditures are expected to be made within the next two to three years. The primary components of the accrual relate to the remaining exit costs from the international curtainwall operations of the large-scale construction business. These long-term accruals include settlement of the outstanding bonds, of which the precise degree of liability related to these matters will not be known until they are settled within the U.K. and French courts. Additionally, the accruals are established for product liability and legal costs that may be incurred relating to the Company’s warranties and possible rework issues on the international and domestic construction projects. The accruals related to these exposures are denominated predominantly in Euros, with approximately 10 percent of this amount hedged.

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Table of Contents
 
8.
 
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)
   
Aug. 31,
2002
   
Sept. 1, 2001
   
Aug. 31,
2002
   
Sept. 1, 2001
Basic earnings per share-weighted common shares outstanding
   
27,740
   
27,956
   
27,900
   
27,815
Weighted common shares assumed upon exercise of stock options
   
508
   
622
   
574
   
478
Unvested shares held in trust for deferred compensation plans
   
389
   
311
   
389
   
311
    
  
  
  
Diluted earnings per share-weighted common shares and common shares equivalent outstanding
   
28,637
   
28,889
   
28,863
   
28,604
    
  
  
  
 
9.
 
Commitments and Contingent Liabilities
 
At August 31, 2002, the Company had ongoing letters of credit related to its risk management programs, construction contracts and certain industrial development bonds. The total value of letters of credit under which the Company is obligated as of August 31, 2002 was approximately $18.4 million, of which $12.2 million is issued and has reduced our total availability of funds under our $125.0 million credit facility.
 
The Company has entered into a number of noncompete and consulting agreements, associated with former employees. As of August 31, 2002, future payments of $0.3 million were committed under such agreements.
 
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. Although it is impossible to 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, results of operations or cash flows of the Company.
 
10.
 
Comprehensive Earnings
 
    
Three-months-ended
     
Six-months-ended
  
(In thousands)
   
Aug. 31,
2002
     
Sept. 1, 2001
     
Aug. 31, 2002
     
Sept. 1, 2001
  
Net earnings
   
$
8,568
 
   
$
10,341
 
   
$
13,807
 
   
$
15,943
 
Transition adjustment related to change in accounting for derivative instruments and hedging activities, net of $672 tax benefit
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
(1,109
)
Unrealized loss on derivatives, net of $256, $156, $248 and $199, tax benefit, respectively
   
 
(422
)
   
 
(258
)
   
 
(407
)
   
 
(328
)
Unrealized gain on marketable securities, net of $104, $111, $44 and $133, tax expense, respectively
   
 
192
 
   
 
206
 
   
 
81
 
   
 
248
 
    
  
  
  
Comprehensive earnings
   
$
8,338
 
   
$
10,289
 
   
$
13,481
 
   
$
14,754
 
    
  
  
  

10

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11.
 
Segment Information
 
The following table presents sales and operating income data for our three segments, and consolidated, for three and six months compared to the corresponding periods a year ago.
 
    
Three-months-ended
     
Six-months-ended
  
(In thousands)
   
Aug. 31,
2002
     
Sept. 1, 2001
     
Aug. 31, 2002
     
Sept. 1, 2001
  
Net Sales
                                    
Architectural
   
$
115,739
 
   
$
120,059
 
   
$
223,732
 
   
$
236,285
 
Auto Glass
   
 
64,439
 
   
 
75,197
 
   
 
124,800
 
   
 
142,073
 
Large-Scale Optical
   
 
20,105
 
   
 
14,980
 
   
 
36,460
 
   
 
35,487
 
Intersegment eliminations
   
 
(1
)
   
 
(3
)
   
 
(1
)
   
 
(6
)
    
  
  
  
Net sales
   
$
200,282
 
   
$
210,233
 
   
$
384,991
 
   
$
413,839
 
    
  
  
  
Operating Income (Loss)
                                    
Architectural
   
$
8,409
 
   
$
9,000
 
   
$
14,835
 
   
$
16,021
 
Auto Glass
   
 
5,153
 
   
 
8,919
 
   
 
9,837
 
   
 
10,381
 
Large-Scale Optical
   
 
424
 
   
 
(1,475
)
   
 
(494
)
   
 
(1,491
)
Corporate and other
   
 
(622
)
   
 
(520
)
   
 
(1,112
)
   
 
(1,014
)
    
  
  
  
Operating income
   
$
3,364
 
   
$
15,924
 
   
$
23,066
 
   
$
23,897
 
    
  
  
  
 
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
The following selected financial data should be read in conjunction with the Company’s Form 10-K for the year ended March 2, 2002 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 months of the current and past fiscal year.
 
    
Three-months-ended
     
Six-months-ended
  
(Percent of Net Sales)
   
Aug. 31,
2002
     
Sept. 1, 2001
     
Aug. 31,
2002
     
Sept. 1, 2001
  
Net sales
   
100.0
%
   
100.0
%
   
100.0
%
   
100.0
%
Cost of sales
   
74.1
 
   
75.6
 
   
74.6
 
   
76.6
 
    
  
  
  
Gross profit
   
25.9
 
   
24.4
 
   
25.4
 
   
23.4
 
Selling, general and administrative expenses
   
19.2
 
   
16.8
 
   
19.4
 
   
17.6
 
    
  
  
  
Operating income
   
6.7
 
   
7.6
 
   
6.0
 
   
5.8
 
Interest expense, net
   
0.4
 
   
0.6
 
   
0.5
 
   
0.8
 
Equity in (loss) income of affiliated companies
   
(0.1
)
   
0.1
 
   
(0.3
)
   
0.6
 
    
  
  
  
Earnings from operations before income taxes
   
6.2
 
   
7.1
 
   
5.2
 
   
5.6
 
Income taxes
   
1.9
 
   
2.2
 
   
1.6
 
   
1.7
 
    
  
  
  
Net earnings
   
4.3
 
   
4.9
 
   
3.6
 
   
3.9
 
    
  
  
  
Effective tax rate
   
31.0
%
   
31.0
%
   
31.0
%
   
31.0
%
 
Second Quarter Fiscal 2003 Compared to Second Quarter Fiscal 2002
 
Consolidated net sales for the second quarter ended August 31, 2002 were $200.3 million, a 5% decrease from net sales of $210.2 million reported for the prior-year quarter. Fiscal 2003 net income was $8.6 million, a 17% decrease from the prior-year period’s net income of $10.3 million. Our operating margin fell to 6.7% in the second quarter from 7.6% in the prior-year period.
 
On a consolidated basis, cost of sales, as a percentage of net sales, fell to 74.1% for the quarter, improving from 75.6% last year. The primary factors underlying the resulting increase in gross profit percentage were

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increased efficiencies in our Architectural Products and Services (Architectural) and Large-Scale Optical (LSO) segments, which impacted margin by 1.4 percentage points and 1.1 percentage points, respectively, offset by decreased margins within the Automotive Replacement Glass and Services (Auto Glass) segment due to amendments to the windshield supply agreements made during the second quarter of fiscal 2002.
 
Selling, general and administrative (SG&A) expenses for the second quarter of fiscal 2003 increased $3.0 million, or 8% from fiscal 2002. The increase in SG&A expenses relates to increased investments in the glass installation business, primarily from geographic expansion, renovation initiatives to help building owners improve their properties, and hurricane product development, as well as severance and downsizing costs in the Auto Glass segment, offset by decreased bad debt expense.
 
Net interest expense decreased by 32% to $0.8 million for the second quarter of fiscal 2003 from $1.2 million in the prior-year quarter, reflecting significantly lower borrowing levels and a lower weighted average interest rate under the Company’s revolving credit agreement.
 
Our equity in loss from affiliated companies was $0.1 million in the second quarter of fiscal 2003 versus an equity in income of $0.3 million in the prior-year quarter. This decrease was due to a decline in the performance of the PPG Auto Glass wholesale distribution joint venture as a result of mild weather, competitive industry pricing and loss of market share. Last year’s results included $1.1 million, net of tax, in losses for the TerraSun joint venture, which was shut down during the third quarter of fiscal 2002.
 
The effective income tax rate of 31.0% remained constant from fiscal 2002. The annual effective tax rate of 31%, which is 4% below the federal statutory tax rate, is due to the reduction of tax reserves as a result of the expiration of certain statutes of limitations for other parties to bring actions against us.
 
In the second quarter of fiscal 2003, we made payments of $0.7 million related to discontinued operations, which caused a decrease in the designated reserves. We continue to believe that we have adequate reserves for the discontinued operations.
 
In the second quarter of fiscal 2003, we reported earnings of $8.6 million, or $0.30 diluted earnings per share, compared to earnings of $10.3 million, or $0.36 diluted earnings per share, in the second quarter of fiscal 2002. Fiscal 2003 results include one-time charges of $0.03 diluted earnings per share primarily from the Auto Glass segment, while the prior-year period includes a one-time gain of $0.04 diluted earnings per share in the Auto Glass segment due to changes in pricing amendments related to the PPG Auto Glass joint venture.
 
Segment Analysis
 
The following table presents sales and operating income data for our three segments and on a consolidated basis for the second quarter, when compared to the corresponding period a year ago.
 
    
Three-months-ended
       
Six-months-ended
  
(In thousands)
   
Aug. 31,
2002
     
Sept. 1,
2001
     
%
Chg
       
Aug. 31,
2002
     
Sept. 1,
2001
     
%
Chg
  
Net Sales
                                                    
Architectural
   
$
115,739
 
   
$
120,059
 
   
(4
)%
     
$
223,732
 
   
$
236,285
 
   
(5
)%
Auto Glass
   
 
64,439
 
   
 
75,197
 
   
(14
)
     
 
124,800
 
   
 
142,073
 
   
(12
)
Large-Scale Optical
   
 
20,105
 
   
 
14,980
 
   
34
 
     
 
36,460
 
   
 
35,487
 
   
3
 
Intersegment eliminations
   
 
(1
)
   
 
(3
)
   
67
 
     
 
(1
)
   
 
(6
)
   
83
 
    
  
  
    
  
  
Net sales
   
$
200,282
 
   
$
210,233
 
   
(5
)%
     
$
384,991
 
   
$
413,839
 
   
(7
)%
    
  
  
    
  
  
Operating Income (Loss)
                                                    
Architectural
   
$
8,409
 
   
$
9,000
 
   
(7
)%
     
$
14,835
 
   
$
16,021
 
   
(7
)%
Auto Glass
   
 
5,153
 
   
 
8,919
 
   
(42
)
     
 
9,837
 
   
 
10,381
 
   
(5
)
Large-Scale Optical
   
 
424
 
   
 
(1,475
)
   
N/M
 
     
 
(494
)
   
 
(1,491
)
   
67
 
Corporate and other
   
 
(622
)
   
 
(520
)
   
(20
)
     
 
(1,112
)
   
 
(1,014
)
   
(10
)
    
  
  
    
  
  
Operating income
   
$
13,364
 
   
$
15,924
 
   
(16
)%
     
$
23,066
 
   
$
23,897
 
   
(3
)%
    
  
  
    
  
  
N/M=Not meaningful
 

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Architectural Products and Services (Architectural)
 
Second quarter revenues for the Company’s largest segment, Architectural, declined due to further softening in the commercial construction industry, especially in the office building sector. Revenues decreased 4 percent to $115.7 million, compared to $120.1 million in the prior-year quarter. Operating income totaled $8.4 million and was only slightly below the $9.0 million reported a year ago; the modest decline was largely the result of a delay in timing of glass installation projects. The segment has maintained its operating margin on lower revenues (7.3 percent in the second quarter, versus 7.5 percent in the previous-year period) as a result of operational improvements and cost reduction initiatives, which include Six Sigma efforts.
 
The Architectural segment backlog, at August 31, 2002, was down slightly to $163.2 million, compared to $183.4 million at the end of the first quarter, which is consistent with the continuing economic uncertainty and related slowdown in commercial construction. Overall, the backlog continues to reflect the segment’s focus on complex, value-added projects which have longer lead times from project approval to production and less predictable schedules.
 
Automotive Replacement Glass and Services (Auto Glass)
 
Net sales at the Auto Glass segment declined to $64.4 million, compared to $75.2 million in the prior-year period. The unusually mild weather and weaker industry conditions led to lower unit volume in what is historically the strongest quarter for this segment. In addition, the retail windshield repair and replacement business suffered from continued market share erosion. The segment reported operating income of $5.2 million, compared to $8.9 million in the same period last year. The current-year quarter included one-time charges of $0.9 million, pretax, related to management changes and downsizing in the retail business of this segment, which are expected to deliver annual savings of $1.3 million, net of tax. Last year’s period included a one-time gain of $1.8 million from the amendments made to the supply agreement related to the PPG Auto Glass joint venture, owned 34 percent by Apogee.
 
Large-Scale Optical Technologies (LSO)
 
LSO net sales for the quarter of $20.1 million increased 34 percent from fiscal 2002 sales of $15.0 million, due to improvements in key consumer electronics and retail framing markets. The segment reported operating income of $0.4 million compared to an operating loss of $1.5 million in the same period last year. Operational improvements, successful new product introductions and continued conversion to value-added picture framing glass positively impacted segment earnings, offset by a one-time charge of $0.4 million, pretax, from consolidating pre-framed art facilities, which is expected to yield annual savings of more than $0.7 million.
 
Consolidated Backlog
 
At August 31, 2002, Apogee’s consolidated backlog was $170.4 million, down 13% from the $196.5 million reported at March 2, 2002. The backlogs of the Architectural segment represented 96% of the Company’s consolidated backlog. The decline in consolidated backlog is a direct reflection of the slowdown in domestic commercial construction, particularly of office buildings.
 
Liquidity and Capital Resources
 
(In thousands, except percentages)
   
Aug. 31, 2002
     
Sept. 1, 2001
  
Cash provided by operations
   
$
22,158
 
   
$
23,855
 
Capital expenditures
   
 
6,031
 
   
 
5,488
 
Proceeds from dispositions of property
   
 
2,388
 
   
 
30
 
Decrease in net borrowings
   
 
17,462
 
   
 
18,917
 
Debt to total capital
   
 
23
%
   
 
35
%
 
Operating Activities
 
Net operating activities provided cash of $22.2 million for the six months ended August 31, 2002 versus $23.9 million in the prior-year period. Cash from operating activities before changes in operating assets and liabilities was $25.7 million and $29.3 million for the second quarter fiscal 2003 and second quarter fiscal 2002, respectively. This reduction is attributable to lower earnings and a reduction in dividends from equity investments.

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Investing Activities
 
Second quarter fiscal 2003 investing activities provided cash of $2.8 million as compared to a use of cash of $1.3 million in the same period last year, primarily as a result of proceeds from the sale of property at the Auto Glass segment. The increase in sales/maturities of marketable securities, offset by purchases, also contributed to the increase in cash provided by investing activities. New capital investment through the second quarter of fiscal 2003 totaled $6.0 million, versus $5.5 million in the prior-year period. For fiscal 2003, we expect to incur capital expenditures as necessary to maintain existing facilities and for safety initiatives. Fiscal 2003 capital expenditures are expected to be approximately $20 million.
 
Financing Activities
 
Total borrowings stood at $52.3 million at August 31, 2002, down 25% from the $69.7 million outstanding at March 2, 2002 as we continued to focus on debt reduction. The majority of all of our long-term debt, $42.6 million, consisted of bank borrowings under a syndicated revolving credit facility. The average interest rate for the year was 3.3% through the second quarter fiscal 2003 and 5.9% through the second quarter fiscal 2002. Our debt-to-total-capital ratio continued to improve and was 23% at August 31, 2002, an improvement from 35% at the end of last year’s second quarter.
 
In April 2002, $1.0 million of variable rate industrial bonds were issued and the resulting proceeds were loaned to us to finance a portion of our capital projects in Wausau, WI.
 
Other Financing Activities
 
In April 2002, we entered into a new, four-year, unsecured, committed credit facility in the amount of $125.0 million. This credit facility requires us to maintain levels of net worth and certain financial ratios. These ratios include maintaining an interest coverage ratio (EBITDA divided by interest expense) of more than 3.0 and a debt-to-EBITDA ratio of less than 3.0. At August 31, 2002, these ratios were 11.6 and 0.9, respectively. If we are not in compliance with these ratios at the end of any quarter (with respect to interest coverage) or at the end of any day (with respect to debt-to-EBITDA ratio), the lender may terminate the commitment and/or declare any loan then outstanding to be due. This new credit facility replaced the Company’s previously existing $125.0 million secured credit facility.
 
    
Future Cash Payments Due by Period
(In thousands)
   
Remainder of Fiscal 2003
   
Fiscal 2004
   
After
Fiscal 2004
Borrowings under Credit Facility
   
$
—  
   
$
—  
   
$
42,600
Industrial Revenue Bonds
   
 
—  
   
 
—  
   
 
8,400
Other Long-Term Debt
   
 
278
   
 
540
   
 
458
Operating Leases (Undiscounted)
   
 
7,364
   
 
12,769
   
 
29,559
Other Obligations
   
 
121
   
 
183
   
 
25
    
  
  
Total Cash Obligations
   
$
7,763
   
$
13,492
   
$
81,042
 
The industrial revenue bonds in the total above are supported by letters of credit that reduce our availability of funds under the $125.0 million credit facility. These letters of credit are not reflected in the standby letters of credit below.
 
    
Amount of Commitment
Expiration Per Period
(In thousands)
   
Remainder of Fiscal 2003
     
Fiscal 2004
   
After
Fiscal 2004
Standby Letters of Credit
   
$
3,764
     
—  
   
$
5,974
 
In the ordinary course of business, predominantly in our installation business, we are required to commit to bonds that require payments to our customers for any non-performance. The outstanding face value of the bonds fluctuate with the value of installation projects that are in process and in our backlog. At August 31, 2002, these bonds totaled $116.7 million. We have never been required to pay on these performance-based bonds.
 

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We anticipate that outstanding borrowings will decline over the remainder of the fiscal year. We believe that current cash on hand, cash generated from operating activities, and available funds under our $125.0 million credit facility should be adequate to fund our working capital requirements, planned capital expenditures and other investing activities through fiscal 2003.
 
During the second quarter of fiscal 2003, the Board of Directors authorized a 500,000 share increase to the company’s share repurchase program. The share repurchase program now allows the company to repurchase up to 1,500,000 shares of the company’s common stock. During the quarter, we repurchased 820,100 shares under this repurchase program for a total of $10.7 million. As of the end of this quarter, there were a total of 572,900 shares remaining to be repurchased under the current program.
 
Outlook
 
We are expecting overall revenues for the fiscal year to be in the range of flat to a low single digit decline, with year-on-year growth occurring in the second half of the year.
 
 
—
 
We have revised our Architectural segment revenue outlook to flat to slightly below fiscal 2002, with the balance of the year flat to slightly above prior-year quarters. The delayed recovery of the United States new commercial construction market is impacting Apogee as evidenced by the segment’s backlog decline. The slow new commercial construction market is somewhat offset by increases in value-added energy-efficient, protective glazing, and renovation products and services.
 
—
 
We expect the Auto Glass segment revenue to be down 5% to 10% for the year.
 
—
 
We expect the LSO segment revenue to grow in excess of 25 percent in the second half compared to fiscal 2002, barring any unforeseen changes in the economy. We expect growth to result from market improvements, new product introductions and national account penetration.
 
Operating margins will likely remain at just over 6 percent of sales for the balance of the year, as cost savings and operating efficiencies continue to offset higher wages, insurance and health care costs.
 
We expect a loss from equity in affiliated companies for the year, as the wholesale auto glass market served by our auto glass distribution joint venture has been more severely impacted by the competitive pricing environment and soft industry trends.
 
We continue to expect that full-year earnings per share will grow compared to the prior year, with year-on-year growth anticipated to begin in the third quarter. The elimination of amortization under the new method of accounting for goodwill is expected to contribute approximately $0.05 of the anticipated full-year earnings improvement.
 
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 2, 2002.
 
Item 3:    Quantitative and Qualitative Disclosures About Market Risk
 
No material changes have occurred in the disclosure of qualitative and quantitative market risk set forth in our Annual Report on Form 10-K for the fiscal year ended March 2, 2002.
 
Item 4:    Evaluation of Disclosure Controls and Procedures
 
a)
 
Evaluation of disclosure controls and procedures.    Our chief executive officer and our chief financial officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15-d-14(c)) as of a date (the “Evaluation Date”) within 90 days before the filing date of this quarterly report, have concluded that, as of the Evaluation Date, our disclosure controls and procedures were adequate and designed to ensure that material information relating to us and our consolidated subsidiaries would be made known to them by others within those entities.

15

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b)
 
Changes in internal controls. There were no significant changes in our internal controls or, to our knowledge, in other factors that could significantly affect our disclosure controls and procedures subsequent to the Evaluation Date.
 
Cautionary Statement
 
This discussion contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect the Company’s 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 below.
 
The Company wishes 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 following factors. There can be no assurances given that Harmon AutoGlass will recapture market share and increase sales in the soft auto replacement glass market. There can be no assurances that PPG Auto Glass, Apogee’s automotive replacement glass distribution joint venture with PPG Industries, will achieve favorable long-term operating results. In addition, there can be no assurances that Apogee’s Architectural segment, which serves high-end markets with value-added products, will not be further impacted by the slowed economy and, more particularly, the slowdown in the U.S. commercial construction industry. Additionally, performance, reliability, or quality claims from our customers, with or without merit, could result in costly and time-consuming litigation that could require significant time and attention of management and involve significant monetary damages. There also can be no assurances that the LSO segment businesses will continue to increase revenues year over year.
 
A number of other factors should be considered in conjunction with this report’s forward-looking statements, any discussion of operations or results by the Company or its representatives and any forward-looking discussion, as well as comments contained in press releases, presentations to securities analysts or investors, or other communications by the Company. These other factors are set forth in the cautionary statement filed as Exhibit 99 to the Company’s Annual Report on Form 10-K, and include, without limitation, cautionary statements regarding changes in economic and market conditions, factors related to competitive pricing, quality, facility utilization, new product introductions, seasonal and cyclical conditions and customer dependency. Also included are other risks related to financial risk, self-insurance, environmental risk and discontinued operations. New factors emerge from time to time and 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.

16

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PART II
 
OTHER INFORMATION
 
ITEM 4.    Submission of Matters to a Vote of Security Holders
 
Apogee Enterprises, Inc. Annual Meeting of Shareholders was held on June 18, 2002. The number of outstanding shares on the record date for the Annual Meeting was 28,339,814. Eighty-nine percent of the outstanding shares were represented in person or by proxy at the meeting.
 
The three candidates for election as Class I Directors listed in the proxy statement were elected to serve three-year terms, expiring at the 2005 Annual Meeting of Shareholders. The proposal to approve the Apogee Enterprises, Inc. 2002 Omnibus Stock Incentive Plan was approved. The proposal to approve the Apogee Enterprises, Inc. Executive Management Incentive Plan was approved. The proposal to ratify the appointment of Deloitte & Touche LLP as independent auditors for the Company for the 2003 fiscal year was also approved. The results of these matters voted upon by the shareholders are listed below.
 
    
Number of Shares
    
In Favor
     
Withheld/Against
     
Abstained/Unvoted
Election of Class I Directors
                   
Barbara B. Grogan
   
24,873,187
     
264,184
       
J. Patrick Horner
   
24,910,856
     
226,515
       
Stephen C. Mitchell
   
24,906,865
     
230,506
       
Approve the Apogee Enterprises, Inc. 2002 Omnibus Stock Incentive Plan
   
19,157,593
     
2,088,582
     
3,891,196
Approve the Apogee Enterprises, Inc. Executive Management Incentive Plan
   
20,212,714
     
998,614
     
3,926,043
Ratification of the appointment of Deloitte & Touche LLP as independent auditors
   
24,612,865
     
426,246
     
98,260
 
ITEM 6.  Exhibits and Reports on Form 8-K
 
 
a)
 
Exhibits:
 
99.1—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.
 
99.2—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.
 
 
b)
 
Reports on Form 8-K:
 
None.

17

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CONFORMED COPY
 
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 9, 2002
  
/s/    RUSSELL HUFFER
Russell Huffer
Chairman, President and Chief Executive Officer
Date: October 9, 2002
  
/s/    MICHAEL B. CLAUER
Michael B. Clauer
Executive Vice President and Chief Financial Officer

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CERTIFICATIONS
 
I, Russell Huffer, Chairman, President and Chief Executive Officer of Apogee Enterprises, Inc., certify that:
 
1.      I have reviewed this quarterly report on Form 10-Q of Apogee Enterprises, Inc.;
2.      Based on my knowledge, this quarterly 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 quarterly report;
3.      Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;
4.      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-14 and 15d-14) for the registrant and we have:
a)      designed such disclosure controls and procedures 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 this period in which the quarterly report is being prepared;
b)      evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c)      presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.      The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
a)      all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)      any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6.      The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
 
 
Date:  October 9, 2002
/s/    Russell Huffer
Russell Huffer
Chairman, President and Chief Executive Officer

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CERTIFICATIONS
 
I, Michael B. Clauer, Executive Vice President and Chief Financial Officer of Apogee Enterprises, Inc., certify that:
 
1.      I have reviewed this quarterly report on Form 10-Q of Apogee Enterprises, Inc.;
2.      Based on my knowledge, this quarterly 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 quarterly report;
3.      Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;
4.      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-14 and 15d-14) for the registrant and we have:
a)      designed such disclosure controls and procedures 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 this period in which the quarterly report is being prepared;
b)      evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c)      presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.      The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
a)      all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)      any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6.      The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
 
 
Date:  October 9, 2002
/s/    Michael B. Clauer
Michael B. Clauer
Executive Vice President and Chief Financial Officer

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Table of Contents
Exhibit Index
 
Exhibit 99.1 – 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.
 
Exhibit 99.2 – 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.

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