SEC Company Response from APOGEE ENTERPRISES, INC. (APOG) (CIK 0000006845) (APOG) — Jan 28, 2010
APOGEE ENTERPRISES, INC. (APOG) (CIK 0000006845)
Date: Jan. 28, 2010 · CIK: 0000006845 · Accession: 0001193125-10-015801
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 000-06365
Referenced dates: January 6, 2010
Letter
VIA EDGAR AND FACSIMILE United States Securities and Exchange Commission Attention: Division of Corporation Finance Re: Apogee Enterprises, Inc. Definitive Proxy Statement filed May 12, 2009 File No. 000-06365
Dear Mr. O’Brien:
This letter contains the response of Apogee Enterprises, Inc., a Minnesota corporation (the “Company”), to the comments of the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) contained in the Staff’s letter dated January 6, 2010 regarding the Company’s Definitive Proxy Statement filed on May 12, 2009 (the “2009 Proxy Statement”). For your ease of reference, we have reproduced the Staff’s comments below, prior to our response.
Staff Comment
1. Each of our comments on your proxy statement disclosures relates to executive compensation. You should provide responsive disclosure in your future filings. In addition, please show us supplementally what your disclosure in response to these comments would look like for the compensation you report in this proxy statement.
Company Response
Responses to the Staff’s comments Nos. 2-7 are addressed below. The Company will provide responsive disclosure to the Staff’s comments Nos. 2, 4, 5 and 7 in our future proxy statement filings and the Company’s responses below include proforma disclosure for the Company’s 2009 Proxy Statement.
United States Securities and Exchange Commission
January 28, 2010
Staff Comment
Compensation Elements and Determination Factors, page 27
2. We note disclosure on page 27 that base salary, actual short-term incentive plan payouts and long-term incentive plan annual awards are determined and adjusted due to the individual performance of named executive officers. We note disclosure on page 35 that salary increases for your named executive officers were determined after considering a number of factors including individual performance. We also note disclosure on page 34 of the factors of individual performance of your chief executive officer. In future filings, please disclose the elements of individual performance you consider when deciding to increase base salaries and to pay short-term and long-term incentive compensation to your named executive officers, other than your chief executive officer, pursuant to Item 402(b)(2)(vii) of Regulation S-K.
Company Response
On page 27 of the Company’s 2009 Proxy Statement, in the table included in the section titled “Compensation Elements and Determination Factors,” the references to “individual performance” as one of the determination factors for base salary, actual short-term incentive plan payouts and long-term incentive plan awards refers to each Named Executive Officer’s overall performance in his or her position for the fiscal year, which typically includes a subjective assessment of each Named Executive Officer’s executive leadership skills and performance against his or her individual business objectives for the fiscal year. The assessment of executive leadership skills for each Named Executive Officer typically includes an evaluation of his or her results achieved (compared to the relevant objectives set prior to the commencement of the fiscal year), strategic thinking, judgment and decisiveness, change leadership, development of critical skills within the organization, customer focus, diversity leadership and leading by personal example with integrity and in accordance with the Company’s Code of Conduct and core values.
In future proxy statement filings, we will replace the references to “individual performance” in the “Compensation Elements and Determination Factors” table with “annual subjective performance evaluation of executive leadership and achievement of individual business objectives” and disclose the individual business objectives for all named executive officers in the section titled “Fiscal 20 Executive Compensation Decisions – Annual Performance Evaluations” (page 34 of the Company’s 2009 Proxy Statement).
Below is proforma disclosure for the Company’s 2009 Proxy Statement which presents the proposed disclosure discussed above. The additional disclosure in the “Compensation Elements and Determination Factors” table is underlined.
United States Securities and Exchange Commission
January 28, 2010
Page 27 of the Company’s 2009 Proxy Statement
Compensation Elements and Determination Factors
The table below provides an overview of the elements, purpose and determination factors of the three core compensation elements used in our current compensation program.
Compensation Element
Purpose
Determinations and Adjustments
Deliverable
Base Salary and Benefits
Attract and retain executive officers through competitive pay and benefit programs
Annual subjective performance evaluation of executive’s leadership and achievement of individual business objectives, experience, tenure, competitive market data and trends, internal equity among positions within the Company with similar responsibilities, executive potential and the Company’s business outlook
Base salary—fixed bi-weekly cash payments
Benefits—annual health and welfare insurance, retirement savings programs and stock purchase programs
Short-Term Incentive Plan
Create an incentive for the achievement of pre-defined annual business objectives
For target bonus award opportunities percentages—competitive market data and trends and internal equity among positions within the Company with similar responsibilities
For actual bonus payouts—performance against pre-established criteria in the annual cash incentive plan and annual subjective performance evaluation of executive’s leadership and achievement of individual business objectives
Annual variable cash payout
Long-Term Incentive Plan
Align the interests of executive officers with shareholders and to focus on sustained performance, entrepreneurial style and high-quality products and services while creating appropriate retention incentives through the use of multi-year vesting schedules
Annual award—annual subjective performance evaluation of executive’s leadership and achievement of individual business objectives, company performance, market data and trends, internal equity among positions within the Company with similar responsibilities and executive potential
New hire, promotion and special awards—internal equity among positions within the Company with similar responsibilities and market data and trends
Annual award—delivered using approximately 60% performance share awards and approximately 40% stock-settled stock appreciation rights or time-based restricted stock awards
New hire, promotion and special awards—time-based restricted stock awards
United States Securities and Exchange Commission
January 28, 2010
Page 34 of the Company’s 2009 Proxy Statement
Fiscal 2009 Executive Compensation Decisions
Annual Performance Evaluations
Annually, the performance of each of our Named Executive Officers is evaluated against executive leadership and agreed-upon individual business objectives for the just-completed fiscal year. For fiscal 2009, in addition to the financial objectives for annual cash incentives and Performance Shares, the individual business objectives for our Named Executive Officers were based on the following:
Name
Fiscal 2009 Individual Business Objectives
Russell Huffer
Strategy vision and implementation, succession planning, leadership development, execution of our Company-wide ERP implementation, operational and process improvement at our Harmon, Inc. subsidiary, and integration of our Tubelite Inc. subsidiary, which we acquired in December 2007.
James S. Porter
Strategy development and implementation, succession planning, leadership development, execution of our Company-wide ERP implementation, and operational and process improvement at our Harmon, Inc. subsidiary.
Gregory A. Silvestri
Operational and financial performance, safety, succession planning, leadership development, and strategy development and implementation at our Viracon, Inc. subsidiary, and new product development in our Architectural segment.
Patricia A. Beithon
Strategy implementation, process improvement at our Harmon, Inc. subsidiary, litigation management, corporate governance, and integration of our Tubelite Inc. subsidiary, which we acquired in December 2007.
Gary R. Johnson
Enterprise risk management, safety, execution of our Company-wide ERP implementation, management of our real estate portfolio, management of income tax positions and matters, evaluation and management of hedging strategies in our Architectural segment, and integration of our Tubelite Inc. subsidiary, which we acquired in December 2007.
United States Securities and Exchange Commission
January 28, 2010
The annual performance evaluations of our Named Executive Officers are subjective assessments of their executive leadership and achievement against their individual business objectives. The annual performance evaluation of our Chief Executive Officer is conducted by our Nominating and Corporate Governance Committee. All non-employee directors complete a performance evaluation form evaluating the performance of our Chief Executive Officer. The Chair of our Nominating and Corporate Governance Committee reviews the results of the annual performance evaluation of our Chief Executive Officer with members of our Nominating and Corporate Governance and Compensation Committees and our full Board. Our Chief Executive Officer conducts the annual performance evaluations of our other Named Executive Officers and reviews the results with members of the Committee. The subjective annual performance evaluations of our Named Executive Officers’ achievement against their individual business objectives for the just-completed fiscal year are important factors used by the Committee in determining the appropriate pay levels for our Named Executive Officers for the upcoming fiscal year, and in deciding whether to reduce the annual cash incentive award for the just-completed fiscal year. In addition, the annual performance evaluations of our Named Executive Officers’ achievement against their respective individual business objectives for the just-completed fiscal year are the primary criteria used by the Committee in making the SAR awards.
Staff Comment
Short-Term Incentive Plan, page 31
3. In future filings, please elaborate on why you use two different plans to provide your executives with short-term cash incentive compensation. Explain more clearly how the benefits under each plan are different and why the Committee would chose to compensate executives under one plan or the other. We note that you already have disclosure that the annual cash incentive plan awards are based entirely on objective financial performance metrics, while Executive MIP awards are based on other factors.
Company Response
The Amended and Restated Executive Management Incentive Plan (the “Executive MIP”) was adopted to meet the requirements of Section 162(m) of the U. S. Internal Revenue Code (“Section 162(m)”), and initially only those executives whose annual compensation for the year was expected to exceed the $1,000,000 cap under Section 162(m) participated in the Executive MIP. Executives whose annual compensation for the year was not expected to exceed the $1,000,000 cap under Section 162(m) participated in the Company’s annual cash incentive plan. The Company has been transitioning the annual cash incentives for its Named Executive Officers to be under one incentive plan, the Executive MIP. During fiscal 2008, only Mr. Huffer, Chairman, Chief Executive Officer and President, participated in the Executive MIP. During fiscal 2009, the annual cash incentives for Mr. Huffer and James S. Porter, Chief Financial Officer, and Patricia A. Beithon, General Counsel and Secretary, were pursuant to the Executive MIP. For fiscal 2010, the annual cash incentives for all of the Company’s Named Executive Officers are pursuant to the Executive MIP.
United States Securities and Exchange Commission
January 28, 2010
Since the annual cash incentives for all of the Company’s Named Executive Officers for the current fiscal year are pursuant to the Executive MIP and there will be no need to discuss any short-term incentive plan other than the Executive MIP in the Company’s 2010 Proxy Statement, the Company has not provided proforma disclosure for the Company’s 2009 Proxy Statement with respect to this Comment.
Staff Comment
Long-Term Incentives, page 36
4. In future filings, for each of your named executive officers, please disclose the business objectives that form the basis of the number of SARs previously granted, to the extent that such SARs vest in the year for which compensation is being reported. We note that from fiscal 2006 through fiscal 2009 you granted SARs that vest over a three year period. Similarly, please disclose the individual business objectives that form the basis for the fixed dollar value of time-based restricted stock awards granted commencing with fiscal 2010.
Company Response
Commencing with fiscal 2006, the Company adopted an executive compensation program pursuant to which the long-term incentive compensation for our Named Executive Officers is delivered using approximately 60% performance share awards and approximately 40% stock-settled SARs or time-based restricted stock awards. In fiscal 2006 through fiscal 2009, stock-settled SARs were used and in fiscal 2010, time-based restricted stock awards were used. All previously granted stock-settled SAR and time-based restricted stock awards are subject to three-year vesting and are not subject to any performance criteria.
In future filings, the Company will disclose the business objectives against which each Named Executive Officer was evaluated in making the initial stock-settled SAR or time-based restricted stock awards, which are part of the annual long-term incentive award.
Below is proforma disclosure for the Company’s 2009 Proxy Statement which presents the proposed disclosure.
Page 36 of the Company’s 2009 Proxy Statement
The Committee’s intent is to deliver approximately 40% of long-term compensation for each of our Named Executive Officers in the form of SARs. The Committee begins its deliberations with a targeted fixed dollar value, as a percentage of salary, for SAR awards for each of our Named Executive Officers, which is based on competitive levels of total direct compensation for comparable positions at companies in our Comparator Group, based on data provided by Buck Consultants. The Committee determined a final fixed dollar value for each
United States Securities and Exchange Commission
January 28, 2010
Named Executive Officer after considering our Board’s subjective evaluation of the performance of our Chief Executive Officer against his individual business objectives for fiscal 2008 and our Chief Executive Officer’s subjective assessment of the performance of each of our other Named Executive Officers against his or her individual business objectives for fiscal 2008. The assessment of the performance of each of our Named Executive Officers against his or her individual business objectives was an important factor considered by the Committee in deciding to increase or decrease the fixed dollar value of the SAR award to each of our Named Executive Officers. The individual business objectives for fiscal 2008 of each of our Named Executive Officers were based on the following:
Name
Fiscal 2008 Individual Business Objectives
Russell Huffer
Strategy vision and implementation, succession planning, organizational development, shareholder value, investment community and Board relations, and leadership.
James S. Porter
Strategy development and imp
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CORRESP 1 filename1.htm Correspondence January 28, 2010 VIA EDGAR AND FACSIMILE United States Securities and Exchange Commission Mail Stop 3720 Washington, DC 20549 Attention: Terence O’Brien Accounting Branch Chief Division of Corporation Finance Re: Apogee Enterprises, Inc. Definitive Proxy Statement filed May 12, 2009 File No. 000-06365 Dear Mr. O’Brien: This letter contains the response of Apogee Enterprises, Inc., a Minnesota corporation (the “Company”), to the comments of the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) contained in the Staff’s letter dated January 6, 2010 regarding the Company’s Definitive Proxy Statement filed on May 12, 2009 (the “2009 Proxy Statement”). For your ease of reference, we have reproduced the Staff’s comments below, prior to our response. Staff Comment 1. Each of our comments on your proxy statement disclosures relates to executive compensation. You should provide responsive disclosure in your future filings. In addition, please show us supplementally what your disclosure in response to these comments would look like for the compensation you report in this proxy statement. Company Response Responses to the Staff’s comments Nos. 2-7 are addressed below. The Company will provide responsive disclosure to the Staff’s comments Nos. 2, 4, 5 and 7 in our future proxy statement filings and the Company’s responses below include proforma disclosure for the Company’s 2009 Proxy Statement. United States Securities and Exchange Commission January 28, 2010 Staff Comment Compensation Elements and Determination Factors, page 27 2. We note disclosure on page 27 that base salary, actual short-term incentive plan payouts and long-term incentive plan annual awards are determined and adjusted due to the individual performance of named executive officers. We note disclosure on page 35 that salary increases for your named executive officers were determined after considering a number of factors including individual performance. We also note disclosure on page 34 of the factors of individual performance of your chief executive officer. In future filings, please disclose the elements of individual performance you consider when deciding to increase base salaries and to pay short-term and long-term incentive compensation to your named executive officers, other than your chief executive officer, pursuant to Item 402(b)(2)(vii) of Regulation S-K. Company Response On page 27 of the Company’s 2009 Proxy Statement, in the table included in the section titled “Compensation Elements and Determination Factors,” the references to “individual performance” as one of the determination factors for base salary, actual short-term incentive plan payouts and long-term incentive plan awards refers to each Named Executive Officer’s overall performance in his or her position for the fiscal year, which typically includes a subjective assessment of each Named Executive Officer’s executive leadership skills and performance against his or her individual business objectives for the fiscal year. The assessment of executive leadership skills for each Named Executive Officer typically includes an evaluation of his or her results achieved (compared to the relevant objectives set prior to the commencement of the fiscal year), strategic thinking, judgment and decisiveness, change leadership, development of critical skills within the organization, customer focus, diversity leadership and leading by personal example with integrity and in accordance with the Company’s Code of Conduct and core values. In future proxy statement filings, we will replace the references to “individual performance” in the “Compensation Elements and Determination Factors” table with “annual subjective performance evaluation of executive leadership and achievement of individual business objectives” and disclose the individual business objectives for all named executive officers in the section titled “Fiscal 20 Executive Compensation Decisions – Annual Performance Evaluations” (page 34 of the Company’s 2009 Proxy Statement). Below is proforma disclosure for the Company’s 2009 Proxy Statement which presents the proposed disclosure discussed above. The additional disclosure in the “Compensation Elements and Determination Factors” table is underlined. 2 United States Securities and Exchange Commission January 28, 2010 Page 27 of the Company’s 2009 Proxy Statement Compensation Elements and Determination Factors The table below provides an overview of the elements, purpose and determination factors of the three core compensation elements used in our current compensation program. Compensation Element Purpose Determinations and Adjustments Deliverable Base Salary and Benefits Attract and retain executive officers through competitive pay and benefit programs Annual subjective performance evaluation of executive’s leadership and achievement of individual business objectives, experience, tenure, competitive market data and trends, internal equity among positions within the Company with similar responsibilities, executive potential and the Company’s business outlook Base salary—fixed bi-weekly cash payments Benefits—annual health and welfare insurance, retirement savings programs and stock purchase programs Short-Term Incentive Plan Create an incentive for the achievement of pre-defined annual business objectives For target bonus award opportunities percentages—competitive market data and trends and internal equity among positions within the Company with similar responsibilities For actual bonus payouts—performance against pre-established criteria in the annual cash incentive plan and annual subjective performance evaluation of executive’s leadership and achievement of individual business objectives Annual variable cash payout Long-Term Incentive Plan Align the interests of executive officers with shareholders and to focus on sustained performance, entrepreneurial style and high-quality products and services while creating appropriate retention incentives through the use of multi-year vesting schedules Annual award—annual subjective performance evaluation of executive’s leadership and achievement of individual business objectives, company performance, market data and trends, internal equity among positions within the Company with similar responsibilities and executive potential New hire, promotion and special awards—internal equity among positions within the Company with similar responsibilities and market data and trends Annual award—delivered using approximately 60% performance share awards and approximately 40% stock-settled stock appreciation rights or time-based restricted stock awards New hire, promotion and special awards—time-based restricted stock awards 3 United States Securities and Exchange Commission January 28, 2010 Page 34 of the Company’s 2009 Proxy Statement Fiscal 2009 Executive Compensation Decisions Annual Performance Evaluations Annually, the performance of each of our Named Executive Officers is evaluated against executive leadership and agreed-upon individual business objectives for the just-completed fiscal year. For fiscal 2009, in addition to the financial objectives for annual cash incentives and Performance Shares, the individual business objectives for our Named Executive Officers were based on the following: Name Fiscal 2009 Individual Business Objectives Russell Huffer Strategy vision and implementation, succession planning, leadership development, execution of our Company-wide ERP implementation, operational and process improvement at our Harmon, Inc. subsidiary, and integration of our Tubelite Inc. subsidiary, which we acquired in December 2007. James S. Porter Strategy development and implementation, succession planning, leadership development, execution of our Company-wide ERP implementation, and operational and process improvement at our Harmon, Inc. subsidiary. Gregory A. Silvestri Operational and financial performance, safety, succession planning, leadership development, and strategy development and implementation at our Viracon, Inc. subsidiary, and new product development in our Architectural segment. Patricia A. Beithon Strategy implementation, process improvement at our Harmon, Inc. subsidiary, litigation management, corporate governance, and integration of our Tubelite Inc. subsidiary, which we acquired in December 2007. Gary R. Johnson Enterprise risk management, safety, execution of our Company-wide ERP implementation, management of our real estate portfolio, management of income tax positions and matters, evaluation and management of hedging strategies in our Architectural segment, and integration of our Tubelite Inc. subsidiary, which we acquired in December 2007. 4 United States Securities and Exchange Commission January 28, 2010 The annual performance evaluations of our Named Executive Officers are subjective assessments of their executive leadership and achievement against their individual business objectives. The annual performance evaluation of our Chief Executive Officer is conducted by our Nominating and Corporate Governance Committee. All non-employee directors complete a performance evaluation form evaluating the performance of our Chief Executive Officer. The Chair of our Nominating and Corporate Governance Committee reviews the results of the annual performance evaluation of our Chief Executive Officer with members of our Nominating and Corporate Governance and Compensation Committees and our full Board. Our Chief Executive Officer conducts the annual performance evaluations of our other Named Executive Officers and reviews the results with members of the Committee. The subjective annual performance evaluations of our Named Executive Officers’ achievement against their individual business objectives for the just-completed fiscal year are important factors used by the Committee in determining the appropriate pay levels for our Named Executive Officers for the upcoming fiscal year, and in deciding whether to reduce the annual cash incentive award for the just-completed fiscal year. In addition, the annual performance evaluations of our Named Executive Officers’ achievement against their respective individual business objectives for the just-completed fiscal year are the primary criteria used by the Committee in making the SAR awards. Staff Comment Short-Term Incentive Plan, page 31 3. In future filings, please elaborate on why you use two different plans to provide your executives with short-term cash incentive compensation. Explain more clearly how the benefits under each plan are different and why the Committee would chose to compensate executives under one plan or the other. We note that you already have disclosure that the annual cash incentive plan awards are based entirely on objective financial performance metrics, while Executive MIP awards are based on other factors. Company Response The Amended and Restated Executive Management Incentive Plan (the “Executive MIP”) was adopted to meet the requirements of Section 162(m) of the U. S. Internal Revenue Code (“Section 162(m)”), and initially only those executives whose annual compensation for the year was expected to exceed the $1,000,000 cap under Section 162(m) participated in the Executive MIP. Executives whose annual compensation for the year was not expected to exceed the $1,000,000 cap under Section 162(m) participated in the Company’s annual cash incentive plan. The Company has been transitioning the annual cash incentives for its Named Executive Officers to be under one incentive plan, the Executive MIP. During fiscal 2008, only Mr. Huffer, Chairman, Chief Executive Officer and President, participated in the Executive MIP. During fiscal 2009, the annual cash incentives for Mr. Huffer and James S. Porter, Chief Financial Officer, and Patricia A. Beithon, General Counsel and Secretary, were pursuant to the Executive MIP. For fiscal 2010, the annual cash incentives for all of the Company’s Named Executive Officers are pursuant to the Executive MIP. 5 United States Securities and Exchange Commission January 28, 2010 Since the annual cash incentives for all of the Company’s Named Executive Officers for the current fiscal year are pursuant to the Executive MIP and there will be no need to discuss any short-term incentive plan other than the Executive MIP in the Company’s 2010 Proxy Statement, the Company has not provided proforma disclosure for the Company’s 2009 Proxy Statement with respect to this Comment. Staff Comment Long-Term Incentives, page 36 4. In future filings, for each of your named executive officers, please disclose the business objectives that form the basis of the number of SARs previously granted, to the extent that such SARs vest in the year for which compensation is being reported. We note that from fiscal 2006 through fiscal 2009 you granted SARs that vest over a three year period. Similarly, please disclose the individual business objectives that form the basis for the fixed dollar value of time-based restricted stock awards granted commencing with fiscal 2010. Company Response Commencing with fiscal 2006, the Company adopted an executive compensation program pursuant to which the long-term incentive compensation for our Named Executive Officers is delivered using approximately 60% performance share awards and approximately 40% stock-settled SARs or time-based restricted stock awards. In fiscal 2006 through fiscal 2009, stock-settled SARs were used and in fiscal 2010, time-based restricted stock awards were used. All previously granted stock-settled SAR and time-based restricted stock awards are subject to three-year vesting and are not subject to any performance criteria. In future filings, the Company will disclose the business objectives against which each Named Executive Officer was evaluated in making the initial stock-settled SAR or time-based restricted stock awards, which are part of the annual long-term incentive award. Below is proforma disclosure for the Company’s 2009 Proxy Statement which presents the proposed disclosure. Page 36 of the Company’s 2009 Proxy Statement The Committee’s intent is to deliver approximately 40% of long-term compensation for each of our Named Executive Officers in the form of SARs. The Committee begins its deliberations with a targeted fixed dollar value, as a percentage of salary, for SAR awards for each of our Named Executive Officers, which is based on competitive levels of total direct compensation for comparable positions at companies in our Comparator Group, based on data provided by Buck Consultants. The Committee determined a final fixed dollar value for each 6 United States Securities and Exchange Commission January 28, 2010 Named Executive Officer after considering our Board’s subjective evaluation of the performance of our Chief Executive Officer against his individual business objectives for fiscal 2008 and our Chief Executive Officer’s subjective assessment of the performance of each of our other Named Executive Officers against his or her individual business objectives for fiscal 2008. The assessment of the performance of each of our Named Executive Officers against his or her individual business objectives was an important factor considered by the Committee in deciding to increase or decrease the fixed dollar value of the SAR award to each of our Named Executive Officers. The individual business objectives for fiscal 2008 of each of our Named Executive Officers were based on the following: Name Fiscal 2008 Individual Business Objectives Russell Huffer Strategy vision and implementation, succession planning, organizational development, shareholder value, investment community and Board relations, and leadership. James S. Porter Strategy development and imp