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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 November 30, 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
   
(IRS Employer Identification Number)
incorporation or organization)
     
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
   
Outstanding at December 31, 2002
Common Stock, $.33 1/3 Par Value
   
27,551,681

Table of Contents
APOGEE ENTERPRISES, INC.
FORM 10-Q
TABLE OF CONTENTS
FOR THE QUARTER ENDED NOVEMBER 30, 2002
 
      
Description
   
Page
PART I
            
Item 1.
     
Financial Statements
     
         
          3
         
4
         
5
         
6-11
Item 2.
        
11-16
Item 3.
        
16
Item 4.
        
16
PART II
     
Other Information
     
Item 6.
        
18
         
22

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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 NOVEMBER 30, 2002 AND MARCH 2, 2002
 
(In thousands, except share and per share data)
   
November 30, 2002
(unaudited)
     
March 2, 2002
  
Assets
                  
Current assets
                  
Cash and cash equivalents
   
$
17,977
 
   
$
15,361
 
Receivables, net of allowance for doubtful accounts
   
 
115,612
 
   
 
115,159
 
Inventories
   
 
34,237
 
   
 
36,022
 
Deferred tax assets
   
 
5,270
 
   
 
4,875
 
Other current assets
   
 
2,293
 
   
 
3,667
 
    
  
Total current assets
   
 
175,389
 
   
 
175,084
 
Property, plant and equipment, net
   
 
117,477
 
   
 
128,515
 
Marketable securities available for sale
   
 
6,206
 
   
 
22,825
 
Investments in affiliated companies
   
 
21,278
 
   
 
22,110
 
Goodwill
   
 
55,914
 
   
 
55,614
 
Identifiable intangible assets, at cost less accumulated
amortization of $758 and $5,820, respectively
   
 
2,021
 
   
 
1,024
 
Other assets
   
 
2,923
 
   
 
3,944
 
    
  
Total assets
   
$
381,208
 
   
$
409,116
 
    
  
Liabilities and Shareholders’ Equity
                  
Current liabilities
                  
Accounts payable
   
$
51,320
 
   
$
51,887
 
Accrued expenses
   
 
50,250
 
   
 
57,766
 
Current liabilities of discontinued operations, net
   
 
3,315
 
   
 
3,740
 
Billings in excess of costs and earnings on uncompleted contracts
   
 
4,348
 
   
 
6,127
 
Accrued income taxes
   
 
7,987
 
   
 
7,079
 
Current installments of long-term debt
   
 
540
 
   
 
640
 
    
  
Total current liabilities
   
 
117,760
 
   
 
127,239
 
    
  
Long-term debt, less current installments
   
 
48,508
 
   
 
69,098
 
Other long-term liabilities
   
 
25,936
 
   
 
25,867
 
Liabilities of discontinued operations, net
   
 
14,725
 
   
 
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,
27,552,000 and 28,334,000, respectively
   
 
9,184
 
   
 
9,445
 
Additional paid-in capital
   
 
53,066
 
   
 
50,521
 
Retained earnings
   
 
116,430
 
   
 
113,382
 
Unearned compensation
   
 
(2,591
)
   
 
(1,547
)
Accumulated other comprehensive loss
   
 
(1,810
)
   
 
(867
)
    
  
Total shareholders’ equity
   
 
174,279
 
   
 
170,934
 
    
  
Total liabilities and shareholders’ equity
   
$
381,208
 
   
$
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 NINE MONTHS ENDED
NOVEMBER 30, 2002 AND DECEMBER 1, 2001
(unaudited)
 
    
Three-months-ended
     
Nine-months-ended
(In thousands, except share and per share data)
   
November 30, 2002
   
December 1, 2001
     
November 30, 2002
     
December 1, 2001
Net sales
   
$
199,166
   
$
200,293
 
   
$
584,157
 
   
$
614,132
Cost of sales
   
 
153,905
   
 
154,482
 
   
 
441,148
 
   
 
471,617
    
  
  
  
Gross profit
   
 
45,261
   
 
45,811
 
   
 
143,009
 
   
 
142,515
Selling, general and administrative expenses
   
 
34,658
   
 
35,881
 
   
 
109,340
 
   
 
108,688
    
  
  
  
Operating income
   
 
10,603
   
 
9,930
 
   
 
33,669
 
   
 
33,827
Interest expense, net
   
 
865
   
 
985
 
   
 
2,733
 
   
 
4,094
Other income, net
   
 
950
   
 
129
 
   
 
992
 
   
 
82
Equity in income (loss) of affiliated companies
   
 
270
   
 
(605
)
   
 
(960
)
   
 
1,760
    
  
  
  
Earnings from operations before income taxes
   
 
10,958
   
 
8,469
 
   
 
30,968
 
   
 
31,575
Income taxes
   
 
3,397
   
 
2,625
 
   
 
9,600
 
   
 
9,788
    
  
  
  
Net earnings
   
$
7,561
   
$
5,844
 
   
$
21,368
 
   
$
21,787
    
  
  
  
Earnings per share—basic
   
$
0.28
   
$
0.21
 
   
$
0.77
 
   
$
0.78
    
  
  
  
Earnings per share—diluted
   
$
0.27
   
$
0.20
 
   
$
0.75
 
   
$
0.76
    
  
  
  
Weighted average basic shares outstanding
   
 
27,255,000
   
 
27,978,000
 
   
 
27,685,000
 
   
 
27,869,000
Weighted average diluted shares outstanding
   
 
28,002,000
   
 
28,960,000
 
   
 
28,576,000
 
   
 
28,723,000
    
  
  
  
Dividends per common share
   
$
0.058
   
$
0.055
 
   
$
0.168
 
   
$
0.160
    
  
  
  
 
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 NINE MONTHS ENDED
NOVEMBER 30, 2002 AND DECEMBER 1, 2001
(unaudited)
 
(In thousands)
   
November 30,
2002
     
December 1,
2001
  
Operating Activities
                  
Net earnings
   
$
21,368
 
   
$
21,787
 
Adjustments to reconcile net earnings to net cash provided by operating activities:
                  
Depreciation and amortization
   
 
17,826
 
   
 
20,221
 
Deferred income taxes
   
 
696
 
   
 
(278
)
Results from equity investments
   
 
960
 
   
 
(1,760
)
(Investments in) dividends received from equity investments
   
 
(128
)
   
 
2,413
 
Gain on disposal of assets
   
 
(2,607
)
   
 
(760
)
Other, net
   
 
958
 
   
 
1,217
 
Changes in operating assets and liabilities, net of effect of acquisitions:
                  
Receivables
   
 
(453
)
   
 
(3,653
)
Inventories
   
 
1,785
 
   
 
2,362
 
Accounts payable and accrued expenses
   
 
(7,385
)
   
 
(7,572
)
Billings in excess of costs and earnings on uncompleted contracts
   
 
(1,779
)
   
 
(3,836
)
Refundable and accrued income taxes
   
 
908
 
   
 
116
 
    
  
Net cash provided by operating activities
   
 
32,149
 
   
 
30,257
 
    
  
Investing Activities
                  
Capital expenditures
   
 
(8,805
)
   
 
(7,200
)
Proceeds from sale of property, plant and equipment
   
 
3,719
 
   
 
33
 
Acquisition of businesses, net of cash acquired
   
 
(300
)
   
 
(247
)
Purchases of marketable securities
   
 
(10,757
)
   
 
(6,628
)
Sales/maturities of marketable securities
   
 
26,349
 
   
 
8,593
 
    
  
Net cash provided by (used in) investing activities
   
 
10,206
 
   
 
(5,449
)
    
  
Financing Activities
                  
Change in net borrowings under revolving credit agreement
   
 
(21,200
)
   
 
(24,200
)
Proceeds from issuance of long-term debt
   
 
1,000
 
   
 
2,000
 
Payments on long-term debt
   
 
(490
)
   
 
(2,846
)
Payments on debt issue costs
   
 
(1,335
)
   
 
(232
)
Proceeds from issuance of common stock
   
 
5,140
 
   
 
4,051
 
Repurchase and retirement of common stock
   
 
(16,494
)
   
 
(284
)
Dividends paid
   
 
(4,682
)
   
 
(4,519
)
    
  
Net cash used in financing activities
   
 
(38,061
)
   
 
(26,030
)
    
  
Cash (used in) provided by discontinued operations
   
 
(1,678
)
   
 
891
 
    
  
Increase (decrease) in cash and cash equivalents
   
 
2,616
 
   
 
(331
)
Cash and cash equivalents at beginning of period
   
 
15,361
 
   
 
4,689
 
    
  
Cash and cash equivalents at end of period
   
$
17,977
 
   
$
4,358
 
    
  
Supplemental schedule of non-cash investing activities:
                  
Net assets acquired through assumption of debt
   
 
—  
 
   
$
1,500
 
    
  
 
See accompanying notes to consolidated financial statements.

5

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 November 30, 2002 and December 1, 2001, the results of operations for the three months and nine months ended November 30, 2002 and December 1, 2001, and cash flows for the nine months ended November 30, 2002 and December 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 the instructions for 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 nine months ended November 30, 2002 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
   
Nine-Months-Ended
(In thousands, except per share data)
   
Nov. 30, 2002
   
Dec. 1, 2001
   
Nov. 30, 2002
   
Dec. 1, 2001
Net income:
                            
Reported net earnings
   
$
7,561
   
$
5,844
   
$
21,368
   
$
21,787
Add back amortization expense, net of tax
   
 
—  
   
 
322
   
 
—  
   
 
1,002
    
  
  
  
Adjusted net income
   
$
7,561
   
$
6,166
   
$
21,368
   
$
22,789
    
  
  
  
Earnings per share—basic
                            
Reported net earnings
   
$
0.28
   
$
0.21
   
$
0.77
   
$
0.78
Impact of amortization expense, net of tax
   
 
—  
   
 
0.01
   
 
—  
   
 
0.03
    
  
  
  
Adjusted earnings per share—basic
   
$
0.28
   
$
0.22
   
$
0.77
   
$
0.81
    
  
  
  
Earnings per share—diluted
                            
Reported net earnings
   
$
0.27
   
$
0.20
   
$
0.75
   
$
0.76
Impact of amortization expense, net of tax
   
 
—  
   
 
0.01
   
 
—  
   
 
0.03
    
  
  
  
Adjusted earnings per share—diluted
   
$
0.27
   
$
0.21
   
$
0.75
   
$
0.79
    
  
  
  
 
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. The adoption of this statement has not had 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)
   
November 30,
2002
   
March 2,
2002
Raw materials
   
$
14,997
   
$
16,235
Work in process
   
 
5,423
   
 
5,807
Finished goods
   
 
8,840
   
 
9,351
Cost and earnings in excess of billings on uncompleted contracts
   
 
4,977
   
 
4,629
    
  
Total inventories
   
$
34,237
   
$
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 November 30, 2002, the Company’s investment in PPG Auto Glass was $20.9 million. At November 30, 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 $12.3 million and $11.7 million for the third quarter of fiscal 2003 and 2002, respectively. Year-to-date fiscal 2003 and 2002 purchases from PPG Auto Glass were $33.6 million and $37.3 million, respectively. Amounts owed to PPG Auto Glass were $6.6 million and $5.4 million at the end of the third 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 company is before income taxes and, in the third 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.
 
    
November 30, 2002
   
March 2, 2002
(In thousands)
   
Gross Carrying Amount
     
Accumulated Amortization
   
Gross Carrying Amount
   
Accumulated Amortization
Debt issue costs
   
$
1,798
     
$
332
   
$
2,410
   
$
1,487
Other
   
 
981
     
 
426
   
 
4,434
   
 
4,333
    
    
  
  
Total
   
$
2,779
     
$
758
   
$
6,844
   
$
5,820
    
    
  
  
 
Aggregate amortization expense for the nine months ended November 30, 2002 and December 1, 2001 related to these identifiable intangible assets was $0.3 million and $0.6 million, respectively. At November 30, 2002, future amortization expense of identifiable intangible assets is $0.2 million for the remainder of fiscal 2003, for a total of $0.5 million for the year. Future amortization expense of identifiable intangible assets for fiscal 2004 through fiscal 2006 is $0.5 million and $0.3 million

8

Table of Contents
for fiscal 2007. During the third quarter of fiscal 2003, the Company disposed of fully amortized non-compete agreements.
 
The change in the carrying amount of goodwill, net of accumulated amortization, attributable to each business segment for the nine months ended November 30, 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, November 30, 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), or 1.4375% at November 30, 2002, plus an applicable margin. The applicable margin is calculated based upon the Company’s financial ratios. At November 30, 2002, the applicable margin was 1.125%. At November 30, 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 November 30, 2002, accruals totaling $18.0 million ($14.7 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.

9

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
   
Nine-Months-Ended
(In thousands)
   
Nov. 30, 2002
   
Dec. 1, 2001
   
Nov. 30, 2002
   
Dec. 1, 2001
Basic earnings per share-weighted common shares outstanding
   
27,255
   
27,978
   
27,685
   
27,869
Weighted common shares assumed upon exercise of stock options
   
356
   
671
   
500
   
543
Unvested shares held in trust for deferred and other compensation plans
   
391
   
311
   
391
   
311
    
  
  
  
Diluted earnings per share-weighted common shares and common shares equivalent outstanding
   
28,002
   
28,960
   
28,576
   
28,723
    
  
  
  
 
9.
 
Commitments and Contingent Liabilities
 
At November 30, 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 November 30, 2002 was approximately $17.3 million, of which $11.4 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 November 30, 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
     
Nine-months-ended
  
(In thousands)
   
Nov. 30,
2002
     
Dec. 1, 2001
     
Nov. 30, 2002
     
Dec. 1, 2001
  
Net earnings
   
$
7,561
 
   
$
5,844
 
   
$
21,368
 
   
$
21,787
 
Transition adjustment related to change in accounting for derivative instruments and hedging activities, net of $672 tax benefit
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
(1,109
)
Unrealized gain (loss) on derivatives, net of $(80), $152, $167 and $351, tax (expense) benefit, respectively
   
 
131
 
   
 
(250
)
   
 
(276
)
   
 
(578
)
Unrealized (loss) gain on marketable securities, net of $403, ($31), $359 and $(164), tax benefit (expense), respectively
   
 
(749
)
   
 
60
 
   
 
(667
)
   
 
308
 
    
  
  
  
Comprehensive earnings
   
$
6,943
 
   
$
5,654
 
   
$
20,425
 
   
$
20,408
 
    
  
  
  
 

10

Table of Contents
 
11.
 
Segment Information
 
The following table presents sales and operating income data for our three segments, and consolidated, for three and nine months compared to the corresponding periods a year ago.
 
    
Three-months-ended
     
Nine-months-ended
  
(In thousands)
   
Nov. 30, 2002
     
Dec. 1, 2001
     
Nov. 30, 2002
     
Dec. 1, 2001
  
Net Sales
                                    
Architectural
   
$
121,901
 
   
$
124,619
 
   
$
345,633
 
   
$
360,904
 
Auto Glass
   
 
55,706
 
   
 
59,597
 
   
 
180,506
 
   
 
201,670
 
Large-Scale Optical
   
 
21,594
 
   
 
16,078
 
   
 
58,054
 
   
 
51,565
 
Intersegment eliminations
   
 
(35
)
   
 
(1
)
   
 
(36
)
   
 
(7
)
    
  
  
  
Net sales
   
$
199,166
 
   
$
200,293
 
   
$
584,157
 
   
$
614,132
 
    
  
  
  
Operating Income (Loss)
                                    
Architectural
   
$
10,845
 
   
$
9,056
 
   
$
25,680
 
   
$
25,076
 
Auto Glass
   
 
(1,410
)
   
 
2,616
 
   
 
8,427
 
   
 
12,998
 
Large-Scale Optical
   
 
1,819
 
   
 
(1,469
)
   
 
1,324
 
   
 
(2,961
)
Corporate and other
   
 
(651
)
   
 
(273
)
   
 
(1,762
)
   
 
(1,286
)
    
  
  
  
Operating income
   
$
10,603
 
   
$
9,930
 
   
$
33,669
 
   
$
33,827
 
    
  
  
  
 
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 nine months of the current and past fiscal year.
 
    
Three-months-ended
     
Nine-months-ended
  
(Percent of Net Sales)
   
Nov. 30, 2002
     
Dec. 1, 2001
     
Nov. 30, 2002
     
Dec. 1, 2001
  
Net sales
   
100.0
%
   
100.0
%
   
100.0
%
   
100.0
%
Cost of sales
   
77.3
 
   
77.1
 
   
75.5
 
   
76.8
 
    
  
  
  
Gross profit
   
22.7
 
   
22.9
 
   
24.5
 
   
23.2
 
Selling, general and administrative expenses
   
17.4
 
   
17.9
 
   
18.7
 
   
17.7
 
    
  
  
  
Operating income
   
5.3
 
   
5.0
 
   
5.8
 
   
5.5
 
Interest expense, net
   
0.4
 
   
0.5
 
   
0.5
 
   
0.7
 
Other income (expense), net
   
0.5
 
   
0.1
 
   
0.2
 
   
0.0
 
Equity in (loss) income of affiliated companies
   
0.1
 
   
(0.4
)
   
(0.2
)
   
0.3
 
    
  
  
  
Earnings from operations before income taxes
   
5.5
 
   
4.2
 
   
5.3
 
   
5.1
 
Income taxes
   
1.7
 
   
1.3
 
   
1.6
 
   
1.6
 
    
  
  
  
Net earnings
   
3.8
 
   
2.9
 
   
3.7
 
   
3.5
 
    
  
  
  
Effective tax rate
   
31.0
%
   
31.0
%
   
31.0
%
   
31.0
%

11

Table of Contents
 
Third Quarter Fiscal 2003 Compared to Third Quarter Fiscal 2002
 
Consolidated net sales for the third quarter ended November 30, 2002 were $199.2 million, compared to net sales of $200.3 million reported for the prior-year quarter. Net income for the third quarter of fiscal 2003 was $7.6 million, a 29% increase from the prior-year period’s net income of $5.8 million. Our operating margin rose to 5.3% in the third quarter from 5.0% in the prior-year period.
 
On a consolidated basis, cost of sales, as a percentage of net sales, rose to 77.3% for the third quarter of fiscal 2003 from 77.1% for the prior-year quarter. The primary factors underlying the resulting decrease in gross profit percentage were decreased margins due to pricing pressures, the ongoing slowdown in the construction industry and the challenging auto glass market. Fiscal 2003 third quarter results include a $1.5 million accrual for projected worker’s compensation exposure for our self-insurance program related to prior-period incidents. These were offset by increased efficiencies in our Architectural Products and Services and Large-Scale Optical segments, which favorably impacted margin by 1.5 percentage points and 1.3 percentage points, respectively.
 
Selling, general and administrative (SG&A) expenses for the third quarter of fiscal 2003 decreased $1.2 million, or 3% from fiscal 2002, or a .5% reduction as a percent of sales. The decrease in SG&A expenses relates to decreased incentive accruals, a net gain of $0.4 million recorded on sale of assets, as well as decreased data-line expenses. These decreases in SG&A expenses were partially offset by increased sales and marketing expenses in the glass installation business, primarily for geographic expansion, renovation initiatives to help building owners improve their properties, and hurricane product development, as well as increased bad debt expense based on current exposure levels.
 
Net interest expense decreased by 12% to $0.9 million for the third quarter of fiscal 2003 from $1.0 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.
 
Other income reflects the $1.0 million pretax benefit of realized gains on the sale of investments held for our self-insurance program as compared to $0.1 million in the prior year quarter. The increased gains in the current year quarter reflect a significant sale of marketable securities based on the lower interest rate environment resulting in the Company having appreciated marketable debt securities.
 
Our equity in income from affiliated companies was $0.3 million in the third quarter of fiscal 2003 versus an equity in loss of $0.6 million in the prior-year quarter. This improvement reflects improved operating performance by the PPG Auto Glass wholesale distribution joint venture, despite challenging market conditions.
 
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 primarily due to the reduction of tax reserves as a result of the expiration of certain statutes of limitations.
 
In the third quarter of fiscal 2003, we made payments of $0.4 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 third quarter of fiscal 2003, we reported earnings of $7.6 million, or $0.27 diluted earnings per share, compared to earnings of $5.8 million, or $0.20 diluted earnings per share, in the third quarter of fiscal 2002.

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Table of Contents
 
Segment Analysis
 
The following table presents sales and operating income data for our three segments and on a consolidated basis for the third quarter, when compared to the corresponding period a year ago.
 
    
Three-months-ended
     
Nine-months-ended
  
(In thousands)
   
Nov. 30,
2002
     
Dec. 1,
2001
     
%
Chg
     
Nov. 30,
2002
     
Dec. 1,
2001
     
%
Chg
  
Net Sales
                                                  
Architectural
   
$
121,901
 
   
$
124,619
 
   
(2
)%
   
$
345,633
 
   
$
360,904
 
   
(4
)%
Auto Glass
   
 
55,706
 
   
 
59,597
 
   
(7
)
   
 
180,506
 
   
 
201,670
 
   
(10
)
LSO
   
 
21,594
 
   
 
16,078
 
   
34
 
   
 
58,054
 
   
 
51,565
 
   
13
 
Intersegment eliminations
   
 
(35
)
   
 
(1
)
   
N/M
 
   
 
(36
)
   
 
(7
)
   
N/M
 
    
  
  
  
  
  
Net sales
   
$
199,166
 
   
$
200,293
 
   
(1
)%
   
$
584,157
 
   
$
614,132
 
   
(5
)%
    
  
  
  
  
  
Operating Income (Loss)
                                                  
Architectural
   
$
10,845
 
   
$
9,056
 
   
20
%
   
$
25,680
 
   
$
25,076
 
   
2
%
Auto Glass
   
 
(1,410
)
   
 
2,616
 
   
N/M
 
   
 
8,427
 
   
 
12,998
 
   
(35
)
LSO
   
 
1,819
 
   
 
(1,469
)
   
N/M
 
   
 
1,324
 
   
 
(2,961
)
   
N/M
 
Corporate and other
   
 
(651
)
   
 
(273
)
   
(138
)
   
 
(1,762
)
   
 
(1,286
)
   
(37
)
    
  
  
  
  
  
Operating income
   
$
10,603
 
   
$
9,930
 
   
7
%
   
$
33,669
 
   
$
33,827
 
   
0
%
    
  
  
  
  
  
 
N/M=Not meaningful
 
Architectural Products and Services (Architectural)
 
Fiscal 2003 third quarter revenues for the Company’s largest segment, Architectural, declined slightly as the Company continues to outperform the slowed commercial construction market. Revenues decreased 2 percent to $121.9 million, compared to $124.6 million in the prior-year quarter. Fiscal 2003 third quarter operating income, however, grew 20 percent to $10.8 million from $9.1 million a year ago. Operating margin improved to 8.9 percent, from 7.3 percent in last year’s third quarter, reflecting the focus on operational improvements and cost reduction initiatives, which include Six Sigma efforts.
 
The Architectural segment backlog, at November 30, 2002, dropped to $151.3 million, compared to $163.2 million at the end of the second quarter of fiscal 2003, and $191.5 million at the end of the third quarter of fiscal 2002. This is consistent with the continuing economic uncertainty and related slowdown in commercial construction, which are causing delays in project commitments and scheduling for the segment. Improved lead times in the Company’s Architectural businesses also contributed to the backlog drop.
 
Automotive Replacement Glass and Services (Auto Glass)
 
Auto Glass segment revenues for the third quarter were $55.7 million, down 7 percent from $59.6 million in the prior-year period. The segment reported an operating loss of $1.4 million for the third quarter of fiscal 2003, compared to operating income of $2.6 million in the same period last year as industry conditions continued to be challenging. Although the Company’s retail unit volume for the third quarter was slightly above the prior-year period, the business experienced margin erosion due to competitive pricing. The segment’s manufacturing business was also negatively impacted, as pricing continued to deteriorate as a result of slow retail demand and import pressures, and by lower than anticipated volume.
 
Large-Scale Optical Technologies (LSO)
 
In the third quarter of fiscal 2003, LSO revenues increased 34 percent to $21.6 million, from $16.1 million in the prior-year period, due to continued improvements in key consumer electronics and retail framing markets. The segment reported operating income of $1.8 million in the third quarter of fiscal 2003, versus an operating loss of $1.5 million in the same period last year. Segment earnings were positively impacted by operational improvements, successful new product introductions, continued conversion of value-added picture framing glass and a $0.4 million gain on the sale of equipment.
 
Consolidated Backlog
 
At November 30, 2002, Apogee’s consolidated backlog was $157.9 million, down 20% 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.
 

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Table of Contents
 
Liquidity and Capital Resources
 
(In thousands, except percentages)
   
Nov. 30,
2002
     
Dec. 1,
2001
  
Cash provided by operations
   
$
32,149
 
   
$
30,257
 
Capital expenditures
   
 
8,805
 
   
 
7,200
 
Proceeds from dispositions of property
   
 
3,719
 
   
 
33
 
Decrease in net borrowings
   
 
20,690
 
   
 
25,046
 
Debt to total capital
   
 
22
%
   
 
33
%
 
Operating Activities
 
Net operating activities provided cash of $32.1 million for the nine months ended November 30, 2002, versus $30.3 million in the prior-year period. Cash from operating activities before changes in operating assets and liabilities was $39.1 million and $42.8 million for the third quarter fiscal 2003 and third quarter fiscal 2002, respectively. This reduction is attributable to lower earnings, a reduction in dividends from equity investments and gains on disposal of assets.
 
Investing Activities
 
Year-to-date fiscal 2003 investing activities provided cash of $10.2 million as compared to a use of cash of $5.4 million in the same period last year, primarily as a result of sales/maturities of marketable securities and proceeds from the sale of property at the Auto Glass segment. New capital investment through the third quarter of fiscal 2003 totaled $8.8 million, versus $7.2 million in the prior-year period. For fiscal 2003, we have incurred capital expenditures as necessary to maintain existing facilities and for safety initiatives. Fiscal 2003 capital expenditures are expected to be less than $20 million.
 
Financing Activities
 
Total borrowings stood at $49.0 million at November 30, 2002, down 30% 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, $39.5 million, consisted of bank borrowings under a syndicated revolving credit facility. The average interest rate was 3.2% through the third quarter fiscal 2003 and 5.4% through the third quarter fiscal 2002. Our debt-to-total-capital ratio continued to improve and was 22% at November 30, 2002, an improvement from 33% at the end of last year’s third 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 November 30, 2002, these ratios were 12.9 and 0.8, 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
   
$
—  
   
$
—  
   
$
39,500
Industrial Revenue Bonds
   
 
—  
   
 
—  
   
 
8,400
Other Long-Term Debt
   
 
150
   
 
540
   
 
458
Operating Leases (Undiscounted)
   
 
3,596
   
 
12,870
   
 
29,820
Other Obligations
   
 
58
   
 
189
   
 
25
    
  
  
Total Cash Obligations
   
$
3,804
   
$
13,599
   
$
78,203
    
  
  
 

14

Table of Contents
The industrial revenue bonds in the total above are supported by $8.4 million of 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
   
$
3,734
   
$
—  
   
$
5,185
 
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 fluctuates with the value of installation projects that are in process and in our backlog. At November 30, 2002, these bonds totaled $124.7 million. We have never been required to pay on these performance-based bonds.
 
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 217,046 shares under this repurchase program for a total of $2.4 million. The total purchases have amounted to $14.6 million during fiscal 2003. As of the end of this quarter, there were a total of 355,854 shares remaining to be repurchased under the current program.
 
Outlook
 
We are expecting overall revenue growth in the mid-single digits for the fourth quarter of fiscal 2003.
 
 
—
 
Architectural segment revenues are expected to be flat to slightly above the fiscal 2002 fourth quarter, with growth coming from the glass installation business, offset by soft market conditions for the other businesses.
 
—
 
Auto Glass segment revenues for the fourth quarter of fiscal 2003 are expected to be flat due to volume increases offset by lower prices and competitive industry conditions.
 
—
 
Fiscal 2003 fourth quarter LSO segment revenues are expected to show strong double-digit growth over the prior year period from expanded distribution of value-added picture framing glass markets and continued growth of new products introduced for the projection television industry.
 
Operating margins are expected to be at 5 percent of sales for the fourth quarter of fiscal 2003, as cost savings and operating efficiencies offset higher wage, insurance and healthcare costs, and lower prices.
 
We expect a loss from equity in affiliated companies for the fourth quarter of fiscal 2003, which is normal for the seasonal wholesale auto glass market served by our auto glass distribution joint venture. The loss, though, is expected to be less than that experienced in the prior-year quarter due to improved performance.
 
We continue to expect that full-year earnings per share for fiscal 2003 will grow compared to fiscal 2002. 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.
 
For fiscal year 2004, we expect continued softness in the markets served by our Architectural segment businesses. External forecasts have indicated that the total non-residential construction market is expected to be down 6 percent for calendar 2002, and calendar 2003 will show no improvement from that level. The outlook for our largest market, office construction, shows a 3 percent decline for calendar 2003. These forecasted market declines will adversely impact our businesses in fiscal 2004, and as a result, we expect Architectural segment revenues to decline slightly in fiscal 2004. To offset these market declines, we are forecasting that Architectural segment businesses will gain market share and expand into other markets,

15

Table of Contents
both in terms of geography and movement into markets such as schools, government and quasi-government work.
 
Automotive replacement glass segment revenues are expected to grow in the low single digits in fiscal 2004 as we recapture retail market share in a continued competitive market. Large-scale optical segment revenues are expected to grow 8 to 10 percent in fiscal 2004, which is at a slower pace than in fiscal 2003, through expanded distribution and expanded penetration in consumer electronics industries with new products.
 
Due to the uncertainty in our Architectural and Auto Glass segments, we expect flat to slightly lower overall revenues for fiscal 2004. Operating margin percentages for fiscal 2004 are expected to decline slightly as productivity improvements and cost controls offset increases in material costs, insurance and wages. Earnings per share are expected to range from $0.85 to $0.93 for fiscal 2004.
 
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 have concluded, based on their evaluation within 90 days before the filing date of this quarterly report, that 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)) are effective to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
 
b)
 
Changes in internal controls.    There have been no significant changes in our internal controls or in other factors that could significantly affect our disclosure controls and procedures subsequent to the previously-mentioned evaluation.
 
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 Apogee’s Architectural segment, which serves high-end construction markets with value-added products, will not be further impacted by the slowed economy and the slowed construction industry. In addition there can be no assurances that Harmon AutoGlass will grow revenues and increase profitability 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. There also can be no assurances that the LSO segment businesses will continue to increase revenues year over year.
 

16

Table of Contents
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.

17

Table of Contents
PART II
 
OTHER INFORMATION
 
ITEM 6.    Exhibits and Reports on Form 8-K
 
 
a)
 
Exhibits:
 
Exhibit 10.1 – Employment Agreement between Registrant and Joseph T. Deckman effective as of July 16, 2002.
 
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.

18

Table of Contents
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: January 10, 2003
  
/s/    RUSSELL HUFFER
       
Russell Huffer
Chairman, President and Chief Executive Officer
Date: January 10, 2003
  
/s/    MICHAEL B. CLAUER
       
Michael B. Clauer
Executive Vice President and Chief Financial Officer

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Table of Contents
 
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 the period in which this 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: January 10, 2003
 
/s/    RUSSELL HUFFER
Russell Huffer
Chairman, President and Chief Executive Officer

20

Table of Contents
 
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 the period in which this 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: January 10, 2003
 
/s/    MICHAEL B. CLAUER
Michael B. Clauer
Executive Vice President and Chief Financial Officer

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Table of Contents
Exhibit Index
 
Exhibit 10.1 – Employment Agreement between Registrant and Joseph T. Deckman effective as of July 16, 2002.
 
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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