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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended February 26, 2005

or

For the transition period from              to             

Commission File Number 0-6365

APOGEE ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

7900 Xerxes Avenue South - Suite 1800, Minneapolis, Minnesota 55431

(Address of principal executive offices, including zip code)

(952) 835-1874

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock $0.33 1/3 Par Value

                  (Title of each class )

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

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act.)    Yes  x    No  ¨

As of August 28, 2004, the last business day of the registrant’s most recently completed second fiscal quarter, the approximate aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was $308,683,584 (based on the closing price of $11.33 per share as reported by Nasdaq as of that date.)

As of April 19, 2005, there were approximately 27,369,000 shares of the registrant’s Common Stock, $0.33 1/3 par value per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information required in Part III hereof is incorporated by reference to the Proxy Statement for the registrant’s 2005 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Form 10-K.

Table of Contents

APOGEE ENTERPRISES, INC.

Annual Report on Form 10-K

For the fiscal year ended February 26, 2005

TABLE OF CONTENTS

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PART I

ITEM 1. BUSINESS

The Company

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

The Company is comprised of three reporting segments to match the markets they serve:

Financial information about the Company’s segments can be found in Note 16 to the Consolidated Financial Statements of the Company contained elsewhere in this report.

Products

The following tables describe our markets served, products and services within these markets and a description of the product or service attributes.

Architectural Products and Services (Architectural) Segment

The Architectural segment primarily provides products that make up the outside skin of commercial buildings. The products of this segment can be broken down into two product types: operable window systems and curtainwall systems. The segment also provides installation, maintenance and renovation services for window and curtainwall systems as well as paint and anodizing coating services for metal and plastic components used in window and curtainwall systems and other products.

Operable window systems include projected windows, which are windows that project out or in from the plane of the wall and are side hinged or pivoted at the jambs; rolling windows, which consist of an operable sash that slides horizontally along a master frame; and hung windows which are vertically operated windows in which the weight of the sash is offset by a balance mounted in the window frame. Curtainwall is a highly engineered wall system consisting primarily of a series of glass panels set in aluminum window frame designs that are primarily inoperable and metal panels or spandrel (non-vision glass).

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

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Large-Scale Optical Technologies (LSO) Segment

The LSO segment provides, primarily, coated glass and acrylic for use in picture framing applications. The primary variables in the glass used for picture framing products are the size, thickness and coating to give the glass UV protection and/or anti-reflective properties. This segment also produces optical thin coatings for consumer electronic displays such as projection televisions (PTVs) and computer screens.

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Automotive Replacement Glass and Services (Auto Glass) Segment

The Auto Glass segment fabricates aftermarket foreign and domestic car windshields and original equipment and replacement windshields for recreational vehicles and buses. Products in this segment meet size and technical specifications determined by vehicle type.

Markets and Distribution Channels

Architectural Segment. Within the architectural commercial glass markets, Apogee is well positioned as the leader in North America in the supply of a wide range of high-performance architectural glass products to the commercial and institutional building industry. Within this market, we serve the two largest sectors: the core market, which requires custom coated, fabricated products for large, complex commercial or institutional building projects with lead times of four weeks or longer, and the broader market, which demands both coated and uncoated glass that can be installed in basic insulating units or laminated and delivered in four weeks or less.

Within the architectural services market, which is more regionalized, Apogee is one of only a few companies to have a national presence with operations in 13 metropolitan areas across the United States. While the installation of building glass in new construction projects is the primary focus of our installation business, we are broadening our offerings for glass services and retrofitting or renovating the outside skin of older commercial and institutional buildings. Our in-house engineering capabilities allow us to duplicate the design of the original window or curtainwall system or create a completely new appearance for renovated buildings. Whether building new or renovating an existing building, the Architectural segment provides aluminum windows or curtainwall systems to enhance the aesthetics and energy efficiency of the building. This segment engineers and manufactures custom window and wall systems for many of America’s most prestigious and complex commercial and institutional building projects, as well as cost-effective standard and modified-standard windows for budget-conscious schools, hospitals and condominiums. In some markets, we also offer 24-hour replacement glass service for storm or vandalism damage.

We continue to develop a variety of hurricane systems incorporating laminated glass in response to building code requirements in Florida and along the East and Gulf Coasts. Although enforcement of new hurricane and energy codes is inconsistent, demand for these products is expected to increase significantly in coming years. Our businesses are also capturing major government projects requiring blast-resistant glass.

Our Architectural segment also includes finishing services for the architectural, industrial and commercial metal fabricator markets, as well as for building product manufacturers and residential and commercial interior window covering businesses in the Unites States and Canada.

Our Architectural segment products are marketed primarily in North America through a nationwide network of independent distributors and direct sales staff with less than 10 percent of our revenues shipped to locations outside North America. Our services are marketed primarily in major metropolitan areas of the United States. Our customers are a combination of general contractors, building owners, architects and glazing subcontractors in the non-residential commercial construction market. All

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of the businesses within the Architectural segment manufacture their products by fabricating glass and/or metals in a job shop environment. Products are shipped to the job site or location where further glazing may be required.

LSO Segment. The Company’s Tru Vue brand is one of the largest domestically manufactured brands for the value-added picture-framing glazing market. Under this brand, products are distributed primarily in North America, largely through independent distributors, which, in turn, supply local picture-framing markets. The Company also has limited distribution in Europe, Australia and New Zealand. We continue to convert the custom picture framing industry from clear glass to our proprietary value-added glass and acrylic, which preserves pictures and art. Through the Company’s leadership, the custom picture framing industry continues to convert to value-added picture framing glass and acrylic, a trend that is expected to continue and has helped us boost our sales of value-added products approximately 20 percent annually for several years.

This segment has historically also produced optical coatings for glass and acrylic for display and imaging applications for the consumer electronics market. These products are used in projection televisions, as well as imaging devices such as scanners and copiers marketed to both domestic and foreign manufacturers of consumer electronics products and accessories. Based on growth projections for value-added glass, we have been transitioning away from the majority of consumer electronics coatings to focus on the production of value-added picture framing glass products and anticipate continuing this transition in fiscal 2006.

Auto Glass Segment. The Company’s manufacturing business serves primarily two windshield markets, the domestic market of foreign and domestic automotive replacement glass (ARG) and original equipment manufacturers’ (OEM) windshields for recreational vehicles and buses.

Since fiscal 2001, under a multi-year agreement with PPG Industries, Inc. (PPG), expiring in July 2005, our automotive replacement glass production has been primarily dedicated to supplying windshields to PPG. In March 2004, we received the required advance notice from PPG indicating that the windshield supply agreement we operate under will be terminated on the expiration date in July 2005, which is during our fiscal 2006. We are transitioning our capacity to directly sell to ARG wholesalers, including PPG, and large independent autoglass retailers.

In an effort to enhance efficiency, geographic coverage and customer service in the distribution of auto replacement glass, the Company and PPG combined their U.S. automotive replacement glass distribution businesses in July 2000 to create a new entity, PPG Auto Glass, LLC (PPG Auto Glass), of which the Company has a 34 percent interest. The results of PPG Auto Glass are recorded in earnings from equity in affiliated companies.

During fiscal 2004, the Company sold its subsidiary, Harmon AutoGlass. Further information regarding the transaction is provided under “Discontinued Operations” in Item 7 and Item 8, Note 13 of the Notes to Consolidated Financial Statements.

Warranties

We offer warranties on our products which we believe are competitive for the markets in which those products are sold. The nature and extent of these warranties depend upon the product, the market and in some cases the customer being served. Our architectural glass, curtainwall and window system products generally offer warranties of up to 10 years, while our other products offer warranties of 2 years or less. In the event of a claim against a product in which we have received a warranty from the supplier, we will pass the claim back to our supplier. We carry liability insurance with very high deductibles for product failures and reserve for warranty exposures, as our insurance does not cover warranty claims. There can be no assurance that our insurance will be sufficient to cover all liability claims in the future or that the costs of this insurance and the related deductibles will not increase materially or that liability insurance for product failures will be available on terms acceptable to the Company in the future.

Sources and Availability of Raw Materials

Materials used within the Architectural segment include raw glass, vinyl, insulated glass spacer frames, silicone, desiccant, metal targets, aluminum extrusions, chemicals, paints, lumber, urethane and plastic extrusions. All of these materials are readily available from a number of sources, and no supplier delays or shortages are anticipated. While certain glass products may only be available at certain times of the year, all standard glass colors are available throughout the year in abundant quantities. Chemicals purchased range from commodity to specifically formulated types of chemistries.

Materials used within the LSO segment include glass, hard-coated acrylic, acrylic substrates, coating materials and chemicals. Currently, the chemicals used for our UV-resistant coating are readily available from only one supplier that meets the Company’s specifications for this proprietary technology.

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Within the Auto Glass segment, raw materials consist primarily of flat glass and polyvinyl butyral, which are available from a number of sources.

The Company believes a majority of its raw materials are available from a variety of domestic sources.

Trademarks and Patents

The Company has several trademarks and trade names which it believes have significant value in the marketing of its products. Despite being a point of differentiation from its competitors, no single patent is considered to be material to the Company. Within the Architectural segment, Linetec^® and Finisher of Choice^® are registered trademarks of the Company. Harmon^™ and AdVantage^™ are listed trademarks of the Company.

Within the LSO segment, Viratec^®, Tru Vue^®, TruGuard^®, Conservation Clear^®, Conservation Reflection Control^®, Museum Glass^®, Optium^®, Pricing for Profit^®, AR Glass^®, Reflection Control^®, UltraClear^® and PerfectView^® are registered trademarks. Reflection Free Acrylic^™ and Museum Security Glass^™ are trademarks of the Company. The Company has several patents pertaining to our glass coating methods as well as several patents on our proprietary products, including our UV coating and etch processes for anti-reflective glass.

PPG Auto Glass^™ is a trademark of PPG.

Seasonality

Within the Architectural segment, there is a slight seasonal effect following the commercial construction industry, with demand in late spring to late autumn (our second and third quarters) that is slightly higher than during the balance of the year. The construction industry is highly cyclical in nature and can be influenced differently by the effects of the localized economy in various geographic markets.

Within the LSO segment, picture framing glass sales tend to have an increase in the pre-holiday late fall, early winter timeframe (our third quarter.) The LSO segment depends, in part, on sales by manufacturers of products such as rear projection televisions and computer displays and scanners. In particular, the rear projection television market is highly cyclical and can be seasonal, with a significant increase in sales occurring between Thanksgiving and late January (our third quarter).

The markets that are served by the businesses in the Auto Glass segment tend to be seasonal in nature. However, as a part of our supply agreement with PPG, effective as of July 2000, we have been allowed to spread the production and sales of our after-market automotive replacement windshield products over the year, resulting in a reduced impact of the seasonality factors since fiscal 2001. When this supply agreement ends in July 2005, we should experience more seasonality in this segment and we expect to see the highest level of demand for our products during the late spring and summer months (our second quarter).

Working Capital Requirements

Within the Architectural segment, receivables relating to contractual retention amounts can be outstanding through the project durations. Payment terms offered our customers are similar to those offered by others in the industry. Inventory requirements are not significant to the businesses within this segment since we make-to-order rather than build-to-stock for the majority of our products. As a result, inventory levels follow the customer demand for the products produced.

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

Due to the five-year PPG supply agreement, which expires in July 2005, the Company’s Auto Glass manufacturing unit maintained level volumes throughout the year for PPG, which purchases and stores the product at a PPG warehouse. This enables the Company to maintain limited finished goods inventory within the segment, which causes a limited demand on working capital. When this agreement ends in July 2005, we anticipate a small increase in finished goods inventory to allow for fluctuations in demand from our ARG wholesale and large independent autoglass retail customers.

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Dependence on a Single Customer

We do not have any one customer that exceeds 10 percent of the Company’s consolidated revenues; however, there are important customers within each of our segments whose loss could have an adverse effect on the Company.

Backlog

At February 26, 2005, the Company’s total backlog of orders considered to be firm was $230.4 million compared with $230.6 million at February 28, 2004. Of this amount, approximately $220.1 million and $224.5 million of the orders were in the Architectural segment at February 26, 2005 and February 28, 2004, respectively. $225.7 million, or 98 percent, of the Company’s backlog is expected to be produced and shipped in fiscal 2006.

The Company views backlog as an important statistic in evaluating the level of sales activity and short-term sales trends in its business. However, as backlog is only one indicator, and is not an effective indicator of the ultimate profitability of the Company’s sales, the Company does not believe that backlog should be used as the sole indicator of future earnings of the Company.

Competitive Conditions

Architectural Segment. The markets served by the businesses within the Architectural segment are very competitive, price and lead-time sensitive, and are affected by changes in the North American commercial construction industry as well as changes in general economic conditions, including interest rates, material costs, office vacancy rates, building construction start-ups and office absorption rates. As each of these economic indicators moves favorably, each of our businesses typically experience proportionate levels of sales growth, and vice versa. The companies within the Architectural segment primarily serve the custom portion of the construction market which is generally highly fragmented and where the primary competitive factors are price, product quality, reliable service, warranty and the ability to provide technical engineering and design services.

The Architectural segment must maintain significant relationships with general contractors, who are normally each business’s direct or indirect customers, and architects throughout a construction project. This is due to the high degree of dependence on the general contractors and architects for project initiation and development of specifications. Additionally, the timing of a project is dependent on the general contractor’s schedule and ability to maintain this schedule. If a general contractor fails to meet its established timeline, the profitability of a project could be negatively impacted. Additionally, we are held to the standard of the general contractor for the acceptance of their bid.

In recent times, there has been a shift in competition within the Architectural segment’s largest market served, architectural commercial glass. Along with the glass fabricators in the high-end performance market, competition has expanded to include additional competition in the broader market from regional glass fabricators with shorter lead times incorporating high performance, post-temperable glass products, procured from primary glass suppliers, into their insulated glass products. The availability of these products has enabled the regional fabricators in some cases to bid on more complex projects than in the past. Additionally, when demand for high-end products is low, our segment businesses tend to vie for business at the lower end of the performance spectrum. During the second quarter of fiscal 2005, a glass fabricator of complex coated architectural glass within our core market exited the North American market, causing a slight increase in backlogs and lead-times. As a result, we have less capacity to service the broader architectural market.

When providing glazing and glass services, we largely compete against local and regional construction companies and glazing contractors where the primary competitive factors are quality engineering, service and price. We compete against several major aluminum window manufacturers in various market niches. With products at the high-end of the performance scale, and one of the industry’s best standard warranties for repair or replacement of defective product, this sector effectively leverages a well-earned reputation for engineering quality and delivery dependability into a position as a preferred provider for high-performance products. Within the architectural finishing market, we compete against regional paint and anodizing companies. The PVC shutters market competes with national window covering companies.

LSO Segment. Product attributes, pricing, service and quality are the primary competitive factors in the markets within the LSO segment. The Company’s competitive strength includes our excellent relationships with our customers. We compete in the value-added glass markets in North America based on the product performance afforded by our proprietary and/or patented processes. While there is significant price sensitivity in regard to sales of clear glass to picture framers, there is less pricing pressure on our value-added glass products.

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This segment also competes with a few significant coating manufacturers and fabricators and numerous smaller specialty coaters and fabricators in North America and abroad in the consumer electronics part of its business. Competitors in the consumer electronic market include companies developing new coatings, such as wet coatings for flat panel displays, as well as competitors who supply sputter coated films similar to those produced by us. Customers’ selection of anti-reflective products is driven by quality, price, service and capacity.

Auto Glass Segment. The Auto Glass segment competes with recreational vehicle/bus and after-market automotive replacement glass fabrication facilities worldwide on the basis of pricing and customer service. Pricing through the entire domestic supply chain has been affected by overcapacity in the market, the influx of imported products, reduced reimbursements by insurance companies and the increase in repair services.

Research and Development

The amount spent on research and development activities over the past three fiscal years was $3.9 million, $3.5 million and $3.9 million in fiscal 2005, 2004 and 2003, respectively. Our research and development has been focused primarily upon development of new proprietary products and system enhancements in our Architectural and LSO segments.

Environment

We use hazardous materials in our manufacturing operations and have air and water emissions that require controls. As a result, we are subject to stringent federal, state and local regulations governing the storage, use and disposal of wastes. We contract with outside vendors to collect and dispose of waste at our production facilities in compliance with applicable environmental laws. In addition, we have procedures in place that we believe enable us to deal properly with the regulated materials used in our manufacturing processes and wastes created by the production processes, and we have implemented a program to monitor our compliance with environmental laws and regulations. Although we believe we are currently in material compliance with such laws and regulations, current or future laws and regulations could require us to make substantial expenditures for compliance with chemical exposure, waste treatment or disposal regulations. During fiscal 2005, 2004 and 2003, we spent approximately $0.5 million, $0 and $1.4 million, respectively, at facilities to reduce wastewater solids and further reduce hazardous air emissions. We expect to incur costs to continue to comply with laws and regulations in the future, but do not expect these to be material to our financial statements.

Employees

The Company employed 4,384 persons on February 26, 2005, of whom approximately 762 were represented by labor unions. The Company is a party to 65 collective bargaining agreements with several different unions. None of the collective bargaining agreements were set to expire during fiscal 2006. The number of collective bargaining agreements to which the Company is a party will vary with the number of cities in which our Harmon, Inc. subsidiary has active nonresidential construction contracts. The Company considers its employee relations to be very good and has not recently experienced any significant loss of workdays due to strike. We are highly dependent upon the continuing services of certain technical and management personnel.

Acquisition of Architectural Wall Solutions, Inc. (AWallS)

In fiscal 2005, the Architectural segment expanded its glass installation business by purchasing the assets of a commercial glass installation business in the United States. Further information regarding this transaction is provided under “Acquisitions” in Item 7 and Item 8, Note 6 of the Notes to Consolidated Financial Statements.

Sale of Harmon AutoGlass

During fiscal 2004, the Company sold its subsidiary, Harmon AutoGlass. Further information regarding the transaction is provided under “Discontinued Operations” in Item 7 and Item 8, Note 13 of the Notes to Consolidated Financial Statements.

Foreign Operations and Export Sales

During the years ended February 26, 2005, February 28, 2004 and March 1, 2003, the Company’s export sales, principally from Architectural operations, amounted to approximately $36.9 million, $30.3 million and $37.2 million, respectively.

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Available Information

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

ITEM 2. PROPERTIES

The following table lists, by segment, the Company’s major facilities as of February 26, 2005, the general use of the facility and whether it is owned or leased by the Company.

We are currently in the process of expanding our Viracon facility in Statesboro, GA to add approximately 60,000 square feet of manufacturing space. This is expected to be completed in the second quarter of fiscal 2006 with full production to begin in the third quarter of fiscal 2006.

In addition to the locations indicated above, Architectural’s Harmon, Inc. unit operates from 15 leased locations, serving 13 metropolitan areas. We continue to own three locations that did not transfer with the sale of Harmon AutoGlass. These properties are recorded as assets of discontinued operations.

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

ITEM 3. LEGAL PROCEEDINGS

The Company has been a party to various legal proceedings incidental to its normal operating activities. In particular, like others in the construction supply industry, the Company’s construction supply businesses are routinely involved in various disputes and claims arising out of construction projects, sometimes involving significant monetary damages or product replacement. The Company has also been subject to litigation arising out of employment practice, workers compensation, general liability and automobile claims. Additionally, as noted in Note 13, the Company’s international glazing discontinued operations continue to be party to various legal proceedings. Although it is very difficult to accurately predict the outcome of such proceedings, facts

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currently available indicate that no such claims will result in losses that would have a material adverse effect on the financial condition of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter ended February 26, 2005.

EXECUTIVE OFFICERS OF THE REGISTRANT

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

PART II

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

Market Information

Apogee common stock is traded on the Nasdaq National Market (Nasdaq), under the ticker symbol APOG. During the fiscal year ended February 26, 2005, the average trading volume of Apogee common stock was 2,230,000 shares per month, according to Nasdaq.

As of April 19, 2005, there were 27,369,000 shares of common stock outstanding, of which about 5.9 percent were owned by directors and executive officers of Apogee. At that date, there were approximately 2,149 shareholders of record and 4,400 shareholders for whom securities firms acted as nominees.

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

Dividends

It is Apogee’s policy, subject to Board review and approval, to pay quarterly cash dividends in May, August, November and February. Cash dividends have been paid each quarter since 1974. The chart below shows quarterly and annual cumulative, cash dividends per share for the past five fiscal years. Subject to future operating results, available funds and the Company’s future financial condition, the Company intends to continue paying cash dividends, when and if declared by its Board of Directors.

Issuer Purchases of Equity Securities

In April 2003, the Board of Directors authorized the repurchase of 1,500,000 shares of Company stock in the open market at prevailing market prices. The Company announced the authorization of the repurchase program on April 10, 2003. This repurchase program does not have an expiration date. In addition, we acquired 2,686 shares during the fourth quarter of fiscal 2005 resulting from employee stock-for-stock option exercises.

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ITEM 6. SELECTED FINANCIAL DATA

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

NM=Not meaningful

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

Forward-Looking Statements

This discussion contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect our current views with respect to future events and financial performance. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “should” and similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All forecasts and projections in this document are “forward-looking statements,” and are based on management’s current expectations or beliefs of the Company’s near-term results, based on current information available pertaining to the Company, including the risk factors noted below. From time to time, we also may provide oral and written forward-looking statements in other materials we release to the public such as press releases, presentations to securities analysts or investors, or other communications by the Company. Any or all of our forward-looking statements in this report and in any public statements we make could be materially different from actual results.

Accordingly, we wish to caution investors that any forward-looking statements made by or on behalf of the Company are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. These uncertainties and other risk factors include, but are not limited to, the following: Operational risks within (A) the Architectural segment: i) competitive, price-sensitive and changing market conditions, including unforeseen delays in project timing and work flow; ii) economic conditions and the cyclical nature of the North American commercial construction industry; iii) product performance, reliability or quality problems that could delay payments, increase costs, impact orders or lead to litigation; iv) the segment’s ability to fully utilize production capacity; v) integration of the AWallS acquisition in a timely and cost-efficient manner; and vi) completion and production ramp-up of the Viracon capacity expansion in a timely and cost-efficient manner; (B) the Large-Scale Optical segment: i) markets that are impacted by consumer confidence; ii) dependence on a relatively small number of customers; and iii) ability to utilize manufacturing facilities; and (C) the Auto Glass segment: i) transition of markets served, as the long-term supply agreement with PPG Industries for auto replacement windshields expires in the second quarter of fiscal 2006 and product is then marketed to independent distributors; ii) changes in market dynamics; iii) market seasonality; iv) highly competitive, fairly mature industry; and v) performance of the PPG Auto Glass, LLC joint venture. Additional factors include: i) revenue and operating results that are volatile; ii) the possibility of a material product liability event; iii) the costs of compliance with governmental regulations relating to hazardous substances; iv) management of discontinued operations exiting activities; and v) foreign currency risk related to discontinued operations. The Company cautions readers that actual future results could differ materially from those described in the forward-looking statements. For a more detailed explanation of the foregoing and other risks and uncertainties, see Exhibit 99 to this Form 10-K.

The Company wishes to caution investors that other factors might in the future prove to be important in affecting the Company’s results of operations. New factors emerge from time to time; 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. The Company undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

We are a leader in technologies involving the design and development of value-added glass products, services and systems. The Company is organized in three segments: Architectural Products and Services (Architectural), Large-Scale Optical (LSO) and Automotive Replacement Glass and Services (Auto Glass). Our Architectural segment companies design, engineer, fabricate, install, maintain and renovate the walls of glass and windows comprising the outside skin of commercial and institutional buildings. Businesses in this segment are: Viracon, a leading fabricator of coated, high-performance architectural glass for global markets; Harmon, Inc., one of the largest U.S. full-service building glass installation, maintenance and renovation companies; Wausau Window and Wall Systems, a manufacturer of custom aluminum window systems and curtainwall; and Linetec, a paint and anodizing finisher of architectural aluminum and PVC shutters. Our LSO segment consists of Tru Vue, a value-added glass and acrylic manufacturer for the custom framing and pre-framed art markets, and a producer of optical thin film coatings for consumer electronics displays. Our Auto Glass segment consists of Viracon/Curvlite, a U.S. fabricator of aftermarket foreign and domestic car windshields and recreational and bus windshields.

Architectural segment. Our Architectural segment is the largest and most cyclical segment in our portfolio. The segment services the commercial construction markets, which we have seen turn around in our most recent fiscal year as compared to the prior two years. Although we outperformed the non-residential construction market based on reports by F.W. Dodge, a

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leading independent provider of construction industry analysis, forecasts and trends, we have experienced pricing compression and some isolated job margin deterioration in our window and wall manufacturing and installation businesses, both of which caused lower margins than historical trends. We are anticipating market conditions to continue to improve somewhat through fiscal 2006 based on market forecasts provided by external sources. Our continued efforts to reduce costs and improve efficiencies leaves us optimistic about improved results for this segment in fiscal 2006.

We are successfully implementing an important strategic initiative to grow architectural commercial glass market share with energy-efficient, hurricane and blast products for the office/high-rise condominium, health care, education and institutional markets. As a result of progress on our initiatives and the strengthening marketplace, we identified the need for more architectural glass capacity. At mid-year, we committed to investing approximately $12 million to expand our architectural glass fabrication capacity for the potential to achieve an additional $20 million in annual revenue. We will be better positioned to grow our share and service our core, higher-end markets and a portion of the broader market for smaller, shorter lead-time projects within 500 miles of our two facilities. Our new capacity is expected to begin full production during the third quarter of fiscal 2006. We will consider further geographic expansion to fuel additional growth to grow our share in the core and broader markets.

Our second strategy within Architectural is to continue to strengthen our businesses that manufacture windows and curtainwall, install glass on new buildings, and renovate and service window and curtainwall systems on older buildings. Much of the focus during fiscal 2005 was on our glass installation business which began to streamline part of its operations through centralized manufacturing centers. We also acquired a leading competitor to strengthen this organization and increase market penetration in the Midwest and Northwest regions of the United States. The acquisition, completed in the fourth quarter of fiscal 2005, is expected to add about $25 million in annual revenues in the Architectural segment. During fiscal 2006, growing the smaller but more profitable renovation and service sectors of the glass installation business will be a priority.

The Six Sigma/Lean business improvement process has been an important part of improvements made in the glass installation business this past year and is key to efforts now underway to make our window and curtainwall business more cost competitive and better able to compete in its fragmented commercial marketplace.

LSO segment. Our picture framing strategy of converting the custom framing market to our value-added products continues to thrive. During fiscal 2005, sales of products that protect pictures from fading and/or reduce the reflection of glass on artwork again grew by more than 20 percent year-over-year. The consolidation of our two large-scale optical businesses to focus on the more profitable picture framing business a year ago reduced our costs. In addition, as the majority of our revenues from consumer electronics were replaced, as planned, this year with higher margin value-added picture framing glass sales, our operating earnings increased significantly.

We continue to strengthen our partnerships with the nation’s largest art and craft retailer, which is a major Apogee customer, and key independent distributors. We work closely with some key customers to promote the benefits of value-added framing products to their customers. A priority is to develop these types of mutually beneficial relationships with other leaders in the custom framing industry. At the same time, we continue to identify partners to help us grow our international framing business.

Auto Glass segment. Although our remaining auto glass manufacturing business and our distribution joint venture with PPG face difficult market conditions that have lowered volume and pricing, we expect they will generate cash for Apogee during fiscal 2006. In July 2005, with the expiration of our supply agreement, our manufacturing business will be transitioning from its multi-year supply agreement with PPG back to the independent distributor marketplace, which values our short-lead times for aftermarket auto windshields; we do not expect to be entering into a new long-term supply agreement with PPG when the current contract expires in July 2005.

Company-wide, our businesses used Six Sigma/Lean, one of our strategies to reduce overhead, to save more than $6 million in fiscal 2005 to help offset cost increases. Other elements of the strategy to achieve significant cost savings moving forward include purchasing and information technology initiatives.

Results of Operations

Net Sales

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Fiscal 2005 Compared to Fiscal 2004

Consolidated net sales increased 17.5 percent in fiscal 2005 to $628.8 million from $535.3 million in fiscal 2004. The net increase was primarily attributable to market share gains, some improvements in the commercial construction markets which resulted in higher volume, a higher value mix and reduced job delays within the Architectural segment.

Fiscal 2004 Compared to Fiscal 2003

Consolidated net sales decreased 8.5 percent in fiscal 2004 to $535.3 million from $584.9 million in fiscal 2003. The net decrease was primarily attributable to volume reductions and lower pricing due to competitive pressures in the Architectural segment, and the continued slowdown in the commercial construction industry. Weak conditions in the commercial construction market caused projects to delay throughout the year, resulting in a continual delay in the activity and, accordingly, adversely impacting revenues recognized in fiscal 2004.

Performance

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

NM – not meaningful

Fiscal 2005 Compared to Fiscal 2004

On a consolidated basis, cost of sales, as a percentage of net sales, decreased to 81.6 percent for fiscal 2005, from 82.4 percent in fiscal 2004. The primary factor for the resulting increase in margins is due to the higher level of activity in the Architectural segment which allowed for increased capacity utilization. The stronger commercial construction market also resulted in more consistent project flow. Additionally, the Large-Scale Optical segment had a much higher mix of value-added glass. Also, the net proceeds of $2.2 million from a class action lawsuit settlement with certain flat glass manufacturers with respect to glass purchases from 1991 to 1995, increased the fiscal 2005 gross profit as a percent of sales by 0.4 percentage points. Offsetting these increases were the effects of the termination in the fourth quarter of fiscal 2004 of the pricing amendments to the Company’s supply agreements related to the PPG Auto Glass joint venture, which negatively impacted the Auto Glass segment’s results and the Company’s gross profit percentage by 1.1 percentage points, while positively offsetting equity in income of affiliated companies.

Selling, general and administrative expenses, as a percentage of net sales, decreased to 14.2 percent from 16.2 percent despite increased spending to $89.4 million, from $86.7 million in fiscal 2004. The primary drivers for the increased costs were a result of incentive compensation expenses and impairment charges related to disposition of certain fixed assets, offset by lower consulting, salary and wages due to cost-saving efforts.

The increase in interest income is the result of a federal income tax refund received during fiscal 2005.

Despite an increased, weighted-average interest rate under our revolving credit agreement, interest expense decreased to $3.2 million for fiscal 2005 from $3.7 million in fiscal 2004 as a result of lower borrowing levels. Other income in fiscal 2005 was $0.2 million versus $0.1 million in the prior year, which reflected the pretax benefit of realized gains on the sale of investments held for our self-insurance program.

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Equity in affiliated companies reflects our 34 percent interest in an automotive replacement glass distribution business, PPG Auto Glass, LLC, and includes a loss of $1.3 million in fiscal 2005, versus a loss of $3.2 million in fiscal 2004. The results for fiscal 2005 reflect a $6.1 million positive effect of the termination of the pricing amendments for the year, which was more than offset by unfavorable market conditions resulting in reduced volume and lower pricing.

Income tax expense was $7.4 million in fiscal 2005 versus our income tax benefit of $3.1 million in fiscal 2004. Both fiscal year statutory tax rates of 37.7 percent were offset by tax credits and other deductions realized for tax that did not require book expense. For fiscal 2004, the most significant offsets related to research and development tax credits and a higher valuation of a charitable donation of a patent donated in fiscal 2003.

Our fiscal 2005 earnings from continuing operations increased to $16.6 million or $0.60 diluted earnings per share. This compared to earnings from continuing operations of $4.6 million, or $0.17 diluted earnings per share, in fiscal 2004. The significant increase in earnings was the result of improved economic conditions and performance against the identified strategic initiatives in the architectural and picture framing businesses.

Fiscal 2005 results from discontinued operations were $0.1 million, compared to a loss of $10.2 million or $0.37 diluted earnings per share in fiscal 2004. Fiscal 2004 results include a loss on the sale of Harmon Auto Glass and costs associated with the exit of the business totaling $7.6 million, or $0.27 per diluted share. The remaining loss of $2.6 million, or $0.10 per share, represented Harmon AutoGlass’s operating results for the period in which we owned Harmon AutoGlass.

Our fiscal 2005 net earnings were $16.6 million, or $0.60 diluted earnings per share. This compared to a net loss of $5.6 million, or $0.20 diluted earnings per share, in fiscal 2004.

Fiscal 2004 Compared to Fiscal 2003

On a consolidated basis, cost of sales, as a percentage of net sales, increased to 82.4 percent for fiscal 2004, from 75.2 percent in fiscal 2003. The primary factors for the 7.2 percentage point decrease in margins were the effects of the slowed commercial construction market affecting the Architectural segment, resulting in reduced volume pricing pressures, as well as project management issues encountered at our glass installation business. Additionally, the LSO segment recognized integration costs and a charge associated with the sale of its matboard product line that, collectively, resulted in a 0.2 percentage point impact. These costs were offset by increased sales of higher value-added products in the LSO segment.

Selling, general and administrative (SG&A) expenses, as a percentage of net sales, decreased to 16.2 percent from 17.0 percent as expenses declined year-over-year from $99.7 million to $86.7 million in fiscal 2004. Nearly all of the decreases occurred in the Architectural segment as a result of lower performance-based incentive expenses, and lower salary and wage-related expenses from reduced headcount. These were offset by increases in outside consulting fees and lower gains from sales of non-strategic assets in the current year versus the prior period.

Net interest expense decreased to $3.1 million for fiscal 2004 from $3.4 million in fiscal 2003, reflecting lower borrowing levels and a lower weighted-average interest rate under our revolving credit agreement. Other income in fiscal 2004 was only $0.1 million versus $1.0 million in the prior year, which reflected the pretax benefit of realized gains on the sale of investments held for our self-insurance program in fiscal 2003. As part of normal investment portfolio management, our wholly owned insurance subsidiary sold appreciated marketable debt securities, creating this gain in the prior period.

Our equity in loss from affiliated companies was $3.2 million in fiscal 2004, versus equity in loss of $2.5 million in the prior year. The additional loss is related to a decline in the performance of the PPG Auto Glass joint venture as a result of a very competitive auto glass replacement industry, which has experienced reduced volume and lower pricing.

Our income tax benefit of $3.1 million in the current year represents a statutory tax rate of 37.7 percent offset by tax credits and other deductions realized for tax that did not require book expense, the most significant of which related to research and development tax credits and a higher valuation of a charitable donation of a patent donated in fiscal 2003.

Our fiscal 2004 earnings from continuing operations decreased to $4.6 million or $0.17 diluted earnings per share. This compared to earnings from continuing operations of $28.9 million, or $1.02 diluted earnings per share, a year earlier. The decrease in earnings is largely attributable to the revenue decline and operational issues in our Architectural segment.

Current year loss from discontinued operations was $10.2 million or $0.37 diluted earnings per share, compared to $1.0 million in earnings or $0.04 diluted earnings per share in fiscal 2003. During the second quarter of fiscal 2004, we announced plans to sell Harmon AutoGlass. During the third quarter, we signed a definitive agreement to sell the business to Synergistic International, Inc., a subsidiary of The Dwyer Group of Waco, Texas, and the sale was finalized during the fourth quarter. All

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prior period results have been restated to reflect Harmon AutoGlass as a discontinued operation. The current year results include a loss on the sale of Harmon Auto Glass and costs associated with the exit of the business totaling $7.6 million, or $0.27 per diluted share. The remaining loss of $2.6 million, or $0.10 per share, represents Harmon AutoGlass’s operating results for the period in which we owned Harmon AutoGlass. The prior year total includes a loss from operations of Harmon AutoGlass of $2.6 million, or $0.09 per share, offset by income of $3.6 million, or $0.13 per diluted share, related to a reduction in our estimates of the ultimate liabilities for the discontinued European curtainwall operation described under “Discontinued Operations” below.

Our fiscal 2004 net loss was $5.6 million, or $0.20 diluted earnings per share. This compared to $29.9 million of net earnings, or $1.06 diluted earnings per share, a year ago.

Segment Analysis

Architectural Products and Services (Architectural)

Fiscal 2005 Compared to Fiscal 2004. Architectural net sales for fiscal 2005 increased 25.6 percent to $516.9 million from $411.4 million in fiscal 2004. The increase is due to increased market share in our core markets, increased market penetration in the broader markets and fewer project delays than in the prior year. Additionally, we experienced market improvements, especially in the high-end condominium, government and institutional work, along with some improvement in the office market. These projects also are using more value-added hurricane, blast and energy-efficient products that helped improve our product mix. Also contributing to increased revenues for the segment was the acquisition of AWallS, which was completed during the fourth quarter of fiscal 2005. This acquisition added approximately $4.0 million to segment revenues in the fourth quarter of fiscal 2005. See Item 8, Note 6 of the Notes to Consolidated Financial Statements for information pertaining to our acquisitions, which is incorporated by reference herein.

The segment earned operating income in fiscal 2005 of $15.6 million compared to an operating loss of $0.6 million in fiscal 2004. Operating margin increased to 3.0 percent for fiscal 2005 from a negative 0.1 percent in fiscal 2004. Increased operating income and margins were a direct result of increased revenues and production levels, and improved efficiency and project execution within the segment. Additionally, although average pricing declined, volume and product mix improved compared to fiscal 2004 as a result of continued market recovery. Fiscal 2004 was also impacted by extraordinary project delays in our glass installation, window and architectural glass businesses which, in turn, flowed through in fiscal 2005. These delays, along with pricing pressures and isolated project management issues in the installation group, negatively impacted margins and earnings in fiscal 2004.

Fiscal 2004 Compared to Fiscal 2003. Architectural net sales for fiscal 2004 decreased 10.3 percent to $411.4 million from $458.8 million in fiscal 2003. The decrease is due to the effects of the slowed economy on the North American commercial construction industry as the number of projects to bid and work on, and the pricing on those projects, declined. The number and amount of delays in construction project timing also increased during the year. The impact of these items resulted in lower sales for all of our Architectural business units, but primarily affected revenues in our installation and window manufacturing businesses.

The segment experienced an operating loss for the year of $0.5 million compared to operating income in fiscal 2003 of $32.1 million. Operating margin decreased to (0.1) percent for fiscal 2004 from 7.0 percent in fiscal 2003. The reduced revenues had a significant impact on operating income and margin. Hardest hit by project delays in fiscal 2004 were our glass installation, window and architectural glass businesses. The delays, along with pricing pressures and isolated project management issues in the installation group, impacted margins and earnings. Also impacting the segment was the fact that the mix of work included more institutional work, which generally provides lower margins than the office sector projects.

Large-Scale Optical Technologies (LSO)

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Fiscal 2005 Compared to Fiscal 2004. Revenue growth of more than 20 percent in sales of value-added framing glass products in fiscal 2005 was offset by the planned continuing transition away from certain consumer electronics products and the sale of the matboard product line in the first quarter of fiscal 2005, leaving fiscal 2005 net revenues of $78.4 million flat compared to fiscal 2004. Operating income increased to $9.9 million in fiscal 2005 from $2.8 million in fiscal 2004 due to the transition away from lower-margin consumer electronics products to higher-margin value-added picture framing glass. Increased operating results reflected higher-margin product mix, as well as efficiencies and cost reductions gained from consolidating the two businesses within the segment in the fourth quarter of fiscal 2004 to better serve picture framing markets.

Fiscal 2004 Compared to Fiscal 2003. LSO net sales of $79.4 million were flat compared to fiscal 2003. Picture-framing revenues grew approximately 2 percent with an increase in value-added picture framing glass offset by reduced sales in our clear glass, matboard and consumer electronics business sales. Operating income declined to $2.8 million in fiscal 2004 from $3.7 million in fiscal 2003. The current year results included a $0.6 million charge related to restructuring the segment by merging the two business units in order to focus on picture-framing glass and reduce operating costs and a $1.1 million non-cash charge for the write-down of matboard product line inventory that we disposed of in the first quarter of fiscal 2005.

Automotive Replacement Glass and Services (Auto Glass)

Fiscal 2005 Compared to Fiscal 2004. Auto Glass net sales, which includes only our manufacturing business, decreased 24.7 percent to $33.6 million in fiscal 2005. Operating income of $3.2 million in fiscal 2005 decreased from $7.8 million in fiscal 2004. The effect of the termination of the pricing amendments to the existing PPG Auto Glass, LLC joint venture supply agreements during the fourth quarter of fiscal 2004, decreased revenues and operating income for fiscal year 2005 by $6.1 million. Additionally, the segment experienced lower revenues and operating income as a result of very soft market conditions resulting in lower demand and prices.

Fiscal 2004 Compared to Fiscal 2003. Auto Glass net sales, which includes only our manufacturing business, decreased 4.0 percent to $44.6 million in fiscal 2004. During the fourth quarter of fiscal 2004, pricing under the Company’s supply agreement with PPG, to which a significant percentage of our manufacturing capacity is sold, was changed to better reflect market pricing. This decreased the segment’s revenues by approximately 3.0 percent, or $1.4 million. Manufacturing unit volume increased over the prior year, offsetting some of the pricing declines. Additionally, average manufacturing pricing declined by 13.0 percent in the current year in comparison to fiscal 2003.

Auto Glass operating income decreased to $7.8 million in fiscal 2004 from operating income of $11.8 million in fiscal 2003 due to a combination of overall pricing declines and changes in the pricing terms of the supply agreement with PPG. These items were partially offset by volume increases and operational improvements within our manufacturing business. The net of the above caused the operating margin to decline to 17.4 percent from 25.4 percent.

This segment’s operating income includes results from manufacturing and the market-based pricing amendments to the supply agreements related to the PPG Auto Glass joint venture that were effective in fiscal 2002. We agreed to amend the existing pricing amendments during the fourth quarter of fiscal 2004 in order to reflect declines in market pricing. Beginning with fiscal 2005, this will negatively impact the segment’s results, with an offsetting benefit to equity in earnings of affiliates.

Discontinued Operations

On January 2, 2004, the Company completed the cash sale of Harmon AutoGlass, with the selling price subject to a final working capital adjustment. The working capital adjustment was finalized during the second quarter of fiscal 2005, with no effect to the operating results of the Company. During fiscal 2004, the Company recorded after-tax charges of $7.6 million, representing a reduction in the carrying value of this business unit to its estimated fair value, less cost to sell. During fiscal 2005, 14 of the 17 properties that had not been sold with Harmon AutoGlass and which remained as assets held for sale were sold for net proceeds of $3.4 million, which approximated their carrying amount. Estimated reserves have been established for committed future cash flows related to the remaining exit costs and are recorded as liabilities of discontinued operations.

In several transactions in fiscal years 1998 through 2000, the Company completed the sale of its large-scale domestic curtainwall business, the sale of the Company’s detention/security business and its exit from international curtainwall operations. The remaining cash expenditures related to these discontinued operations are recorded as liabilities of discontinued operations and a majority of the remaining cash expenditures related to discontinued operations are expected to

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be paid within the next three years. The majority of these liabilities relate to the international curtainwall operations, including bonds outstanding, of which the precise degree of liability related to these matters, will not be known until they are settled within the U.K. and French courts. The reserve for discontinued operations also covers other liability issues, consisting of warranty and other costs relating to these and other international construction projects.

Related Party Transactions

As a result of our 34 percent interest in PPG Auto Glass, in which PPG holds the remaining interest, various transactions the Company enters into with PPG and PPG Auto Glass are deemed to be “related party” transactions. Under the terms of a multi-year agreement expiring in July 2005, our auto glass manufacturing business is committed to selling a significant portion of its windshield capacity to PPG. In March 2004, we received the required advance notice from PPG indicating that the windshield supply agreement will be terminated on the expiration date in July 2005, which is during fiscal 2006. We are transitioning our capacity to directly sell to ARG wholesalers, including PPG, and large independent autoglass retailers.

Our investment in PPG Auto Glass totals $22.4 million, which includes $7.3 million in goodwill. We assess the fair market value to this investment on a regular basis, as required under generally accepted accounting principles. We consider many factors, including short- and long-term projections of future performance associated with these assets. If this review indicates that the investment will not be recoverable based on the estimated undiscounted cash flows, the carrying value of such assets will be reduced to estimated fair value. The forecast reflected in the valuation of the investment in the joint venture assumes that the management team of PPG Autoglass successfully improves operating performance against recent trends of the auto glass replacement market. There can be no assurances that these forecasts can be attained. The ability to attain these forecasts or changes in strategy and/or market conditions may result in adjustments to the recorded investment.

As a result of its acquisition of AWallS, the Company has a lease for a facility located in Bolingbrook, IL with the former owners, two of who remain employees of the Company.

Liquidity and Capital Resources

Operating activities. Cash provided by operating activities of continuing operations was $33.5 million for fiscal 2005 compared to $18.6 million in fiscal 2004. The most significant items that affected the increase from the past year are the increase of earnings from continuing operations of $11.9 million and a reduction in working capital uses year-over-year. Non-cash working capital (current assets less current liabilities less cash) decreased slightly after removing the effect of the acquisition of AWallS during the fourth quarter. Management of working capital resources is a continuing focus for us, and we expect to reduce non-cash working capital in fiscal 2006.

Investing activities. Capital expenditures, including acquisitions, in fiscal 2005, 2004 and 2003 were $26.4 million, $11.5 million and $11.5 million, respectively. The fiscal 2005 expenditures include the acquisition of AWallS and the expansion of our Statesboro, GA plant, announced mid-year, which is on schedule for a fiscal 2006 second quarter start-up. The $12 million investment, of which $8.2 million was spent in fiscal 2005, is expected to expand annual capacity by approximately $20 million in revenue to serve growth in both our core, higher-end markets as well as in a portion of the broader market, where sales increased significantly in fiscal 2005.

To further improve our installation business operations and provide geographic growth, AWallS, a leading U.S. glass installation company, was acquired in the fourth quarter. We gained management depth for our new construction business and entered the Northwest region of the United States through the acquisition of AWallS. The acquisition cost was $8.2 million, including future payments for non-compete agreements. The acquisition of the assets of the business in December 2004 added about $30 million to the segment backlog and is expected to contribute about $25 million in annual revenues in fiscal 2006.

In fiscal 2006, the Company expects to incur capital expenditures for the completion of the expansion of our Statesboro, GA plant and other architectural glass upgrades, costs as necessary to maintain existing facilities, safety and information systems, as well as some capacity improvements within the LSO segment. We are also upgrading three tempering lines at our Owatonna, MN facility, which we expect will improve quality, productivity and energy-efficiency at this facility. Fiscal 2006

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expenditures are expected to be approximately $25.0 million. This amount does not include any acquisitions or regional expansions or other new strategic initiatives.

During fiscal 2004, the Company entered into an agreement for the sale and leaseback of a warehouse/administrative building. The sale price of the item was $4.0 million. Under this and its other sale and leaseback agreements, the Company has an option to purchase the building and equipment at projected future fair market value upon expiration of the leases, which occur in fiscal 2007, 2008, 2009 and 2014. The leases are classified as operating leases in accordance with SFAS No. 13, Accounting for Leases. There were no such transactions in fiscal 2005, and we do not expect any in fiscal 2006.

Under the Company’s sale and leaseback transactions, total gains of $10.8 million have been deferred and are being recognized over the terms of the respective leases. The February 26, 2005 and February 28, 2004 unamortized portion of the deferred gain of $4.9 million and $6.2 million, respectively, is included in the balance sheet captions “other accrued expenses” and “other long-term liabilities.” The average annual lease payments over the life of these leases total $5.2 million.

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

Financing activities. Net payments on all of our borrowings for fiscal 2005, 2004 and 2003 were $4.7 million, $7.8 million and $21.9 million, respectively. We continued to focus on debt reduction during fiscal 2005, evidenced by the reduction in our debt-to-total capital ratio, which improved to 16.5 percent at the end of fiscal 2005, compared to 19.1 percent at the end of fiscal 2004. The majority of our long-term debt at the end of the year, $26.8 million, consisted of bank borrowings under a syndicated revolving credit facility. We expect to reduce debt further during fiscal 2006.

During fiscal 2004, the Board of Directors authorized a share repurchase program of 1,500,000 shares of Common Stock in the open market at prevailing market prices. The Company has repurchased 172,325 and 112,999 shares under this program, for a total of $1.9 million and $1.3 million in fiscal 2005 and 2004, respectively. We have remaining authority to repurchase 1,214,676 shares under this program. It is our present intention to use the program primarily to offset the dilutive impact of employee stock option exercises and to fund our equity-based compensation plans.

During fiscal 2003, the Board of Directors authorized a share repurchase program for a total of 1,500,000 shares. The Company repurchased all of the 1,500,000 shares authorized under the fiscal 2003 program for a total of $18.0 million.

In addition to the shares repurchased under these two repurchase plans, the Company also purchased $0.9 million and $1.2 million of Company stock from employees pursuant to terms of board and shareholder-approved compensation plans during fiscal 2005 and 2004, respectively.

Other financing activities. The following summarizes significant contractual obligations that impact our liquidity:

During fiscal 2005 and 2004, there were no significant changes to our overall debt structure. During fiscal 2003, the Company entered into a four-year, unsecured, revolving credit facility in the amount of $125.0 million, which expires in April 2006. This credit facility requires us to maintain levels of net worth and certain financial ratios. These ratios include maintaining an interest coverage ratio of more than 3.0 and a debt-to-cash flow ratio of less than 2.5. At February 26, 2005, these ratios were 13.18 and 0.77, respectively. If the Company is 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-cash flow ratio), the lender may terminate the commitment and/or declare any loan then outstanding to be immediately due and payable. This credit facility replaced the Company’s previously existing $125.0 million secured credit facility. The industrial revenue bonds in the total above are supported by $8.4 million of letters of credit. Amounts available under the $125.0 million credit facility are reduced by the aggregate

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outstanding principal amount of loans and letter of credit obligations issued under the credit facility. At February 26, 2005, the Company’s available commitment under the facility was $89.7 million. At February 26, 2005, we were in compliance with all of the financial covenants of the credit facility.

The interest on fixed rate debt amounts in the above schedule represent the Company’s fixed rate obligations. These amounts will be reduced by the variable rate in effect during the applicable calendar quarter. In addition to fixed rate interest payments above, we have approximately $10.2 million of debt, as of February 26, 2005, for which payments are variable.

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

The other contractual obligations relate to non-compete and consulting agreements with current and former employees.

In addition to the above standby letters of credit, which were predominantly issued for performance related bonds in our discontinued European curtainwall business, we are required, in the ordinary course of business, 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 projects that are in process and in our backlog. At February 26, 2005, these bonds totaled $102.0 million. With respect to our current portfolio of businesses, we have never been required to pay on these performance-based bonds.

The Company has entered into an interest rate swap agreement that effectively converts $25.0 million of variable rate borrowings into a fixed-rate obligation. The agreement, which was set to expire in fiscal 2006, was extended to March 2008. The notional value of the swap decreases from $25.0 million at February 26, 2005, to $4.5 million at the expiration date of March 29, 2008. The Company receives payments at variable rates while making payments at a fixed rate of 5.01 percent. Prior to the extension, the fixed rate was 5.8 percent. The interest rate swap for $10.0 million, into which the Company was entered, expired in fiscal 2005. The net present liability associated with these swaps was $0.6 million and $2.3 million at the end of fiscal 2005 and fiscal 2004, respectively.

We experienced a material increase in our insurance premiums and risk retention for our third-party product liability coverages in fiscal 2003, and although we were able to continue these coverages through fiscal 2006, the premiums and retention have remained high. As a result, a material construction project rework event would have a material adverse effect on our operating results.

For fiscal 2006, we believe that current cash on hand and cash generated from operating activities should be adequate to fund our working capital requirements and planned capital expenditures. If we are unable to generate enough cash through operations to satisfy our working capital requirements and planned capital expenditures, we have available funds from our committed revolving credit facility.

Off-balance sheet arrangements. With the exception of routine operating leases, we had no off-balance sheet financing arrangements at February 26, 2005 or February 28, 2004.

Outlook

The following statements are based on current expectations for fiscal 2006. These statements are forward-looking, and actual results may differ materially.

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Recently Issued Accounting Pronouncements

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

Critical Accounting Policies

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

Revenue recognition – Normally our sales terms are “free on board” (FOB) shipping point or FOB destination for our product sales, and revenue is recognized when title has transferred. However, during fiscal 2005, approximately 31 percent of our consolidated sales and 37 percent of our Architectural segment sales were recorded on a percentage-of-completion basis, as they relate to revenue earned from construction contracts. Under this methodology, we compare the total costs incurred to date to the total estimated costs for the contract, and record that proportion of the total contract revenue in the period. Contract costs include materials, labor and other direct costs related to contract performance. Provisions are established for estimated losses, if any, on uncompleted contracts in the period in which such losses are determined. Amounts representing contract change orders, claims or other items are included in sales only when customers have approved them. A significant number of estimates are used in these computations.

Goodwill impairment – To determine if there has been any impairment in accordance with Statement of Financial Accounting Standards (SFAS) No. 142, we evaluate the goodwill on our balance sheet annually or more frequently if impairment indicators exist. We base our determination of value using a discounted cash flow methodology that involves significant judgments based upon projections of future performance. There can be no assurances that these forecasts will be attained. Changes in strategy and/or market conditions may result in adjustments to recorded asset balances.

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

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Reserves for discontinued operations – We reserve for the remaining estimated future cash outflows associated with our exit from discontinued operations. The majority of these cash expenditures are expected to be made within the next three years. The primary components of the accruals relate to the remaining exit costs from the international curtainwall operations of our large-scale construction business. These long-term accruals include settlement of outstanding performance 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. We also reserve for product liability issues and the related legal costs for specific projects completed both domestically and internationally. We reserve based on known claims, estimating their expected losses, as well as on anticipated claims for possible product warranty and rework costs for these discontinued operations projects.

Self-insurance reserves – We obtain substantial amounts of commercial insurance for potential losses for general liability, workers’ compensation, automobile liability, employment practices, and architectural errors and omissions risk. However, an amount of risk is retained on a self-insured basis through a wholly owned insurance subsidiary. Reserve requirements are established based on actuarial projections of ultimate losses. Additionally, we maintain a self-insurance reserve for our health insurance programs maintained for the benefit of our eligible employees. We estimate a reserve based on historical levels of amounts incurred but not reported.

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our principal market risk is sensitivity to interest rates, which is the risk that changes in interest rates will reduce net earnings of the Company. To manage our direct risk from changes in market interest rates, management actively monitors the interest sensitive components of our balance sheet, primarily debt obligations, as well as market interest rates in order to minimize the impact of changes in interest rates on net earnings and cash flow.

We use interest rate swaps to fix a portion of our variable rate borrowings from fluctuations in interest rates. As of February 26, 2005, we had interest swaps covering $25.0 million of variable rate debt. The net present liability associated with these swaps was $0.6 million at the end of fiscal 2005.

The primary measure of interest rate risk is the simulation of net income under different interest rate environments. The approach used to quantify interest rate risk is a sensitivity analysis. This approach calculates the impact on net earnings, relative to a base case scenario, of rates increasing or decreasing gradually over the next 12 months by 200 basis points. This change in interest rates affecting our financial instruments would result in approximately a $0.08 million impact to net earnings. As interest rates increase, net earnings decrease; as interest rates decrease, net earnings increase. Besides the market risk related to interest rate changes, the commercial construction markets in which our businesses operate are highly affected by changes in interest rates and, therefore, significant interest rate fluctuations could materially impact our operating results.

We generally do not have exposure to foreign exchange risk as the majority of our sales are within the United States and those outside the United States are generally denominated in U.S. dollars.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Management’s Report on Internal Control over Financial Reporting

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

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

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of February 26, 2005, using criteria set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, the Company’s management believes that, as of February 26, 2005, the Company’s internal control over financial reporting was effective based on those criteria. Management has excluded from its assessment the internal control over financial reporting at Architectural Wall Solutions, Inc., which was acquired on December 10, 2004, and whose financial statements reflect total assets and total revenues constituting 3.4 and 0.7 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended February 26, 2005.

The Company’s independent registered public accounting firm, Deloitte & Touche LLP, has issued an attestation report on management’s assessment of the Company’s internal control over financial reporting for February 26, 2005. That attestation report is set forth immediately following the report of Deloitte & Touche LLP on the financial statements included herein.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Apogee Enterprises, Inc.

We have audited the accompanying consolidated balance sheets of Apogee Enterprises, Inc. and subsidiaries (the “Company”) as of February 26, 2005 and February 28, 2004, and the related consolidated results of operations, statements of cash flows, and statements of shareholders’ equity for each of the three years in the period ended February 26, 2005. Our audits also included the financial statement schedule listed in the Table of Contents at Item 15. These consolidated financial statements and the financial statements schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Apogee Enterprises, Inc. and subsidiaries at February 26, 2005 and February 28, 2004, and the results of their operations and their cash flows for each of the three years in the period ended February 26, 2005, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of February 26, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 27, 2005 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

DELOITTE & TOUCHE LLP

Minneapolis, Minnesota

April 27, 2005

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Apogee Enterprises, Inc.

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that Apogee Enterprises, Inc. and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of February 26, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in Management’s Report on Internal Controls Over Financial Reporting, management excluded from their assessment the internal control over financial reporting at Architectural Wall Solutions, Inc. (AWallS, Inc.) which was acquired on December 10, 2004 and whose financial statements reflect total assets and revenues constituting 3.4 and 0.7 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended February 26, 2005. Accordingly, our audit did not include the internal control over financial reporting at AWallS, Inc. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

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

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

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

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of February 26, 2005, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 26, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended February 26, 2005 of the Company and our report dated April 27, 2005 expressed an unqualified opinion on those financial statements and financial statement schedule.

DELOITTE & TOUCHE LLP

Minneapolis, Minnesota

April 27, 2005

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CONSOLIDATED BALANCE SHEETS