SecProbe.io

CORRESP
1
filename1.htm

Correspondence Letter

 February 22, 2013

 Mr. John Cash

 Accounting Branch Chief

Division of Corporation Finance

 U.S. Securities
and Exchange Commission

 100 F. Street, N.E.

 Washington, D.C. 20549

Re:
Apogee Enterprises, Inc.

 Form
10-K for Fiscal Year Ended March 3, 2012

 Filed April 30, 2012

File No. 000-06365

 Dear
Mr. Cash:

 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 24, 2013 regarding the Company’s Form 10-K for the year ended
March 3, 2012. We received this letter on January 28, 2013 and filed a request on February 6, 2013 for an extension of an additional 10 business days in which to respond. For your ease of reference, we have reproduced the Staff
comments below, prior to our response.

 Staff Comment

 Item 6. Selected Financial Data

1.
If you present net cash provided by (used in) continuing operating activities, please revise future filings to also present net cash provided by (used in) investing and
financing activities.

 Company Response

 We will comply with the Staff’s request in future filings. Below is a portion of the table from Item 6. Selected Financial Data of the Company’s FY 2012 Form 10-K, which presents the
proposed disclosures discussed above marked for changes.

 (In thousands, except per share data and percentages)

2012

2011

2010

2009

2008

2007

 Cash Flow Data

 Net cash provided by (used in) continuing operating activities

$
27,981

$
(7,985
)

$
97,234

$
116,298

$
86,235

$
48,071

 Net cash provided by (used in) continuing investing activities

18,498

(14,391
)

(53,245
)

(40,239
)

(103,584
)

(34,757
)

 Net cash (used in) provided by continuing financing activities

(13,116
)

209

(9,832
)

(74,758
)

14,843

(10,652
)

 Staff Comment

 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations

2.
We note you cite various factors that impact your results such as volume growth, changes in market share and changes in pricing. Please revise future annual and
quarterly filings to quantify the impact of each factor you identify, where practicable.

 Company Response

Where practicable we will comply with the Staff’s request in future filings. As an example of what we are proposing, below is the first full
paragraph in the results of operations section from the Company’s FY 2012 Form 10-K with updated information regarding the impact of various factors discussed.

 Sales increased 13.7 percent during fiscal 2012 despite flat market conditions due to increased market share gains in the window and storefront businesses, representing approximately 7 percentage points
of the increase. Improved architectural glass pricing contributed approximately 4 percentage points of the increase. The GlassecViracon business that was acquired in the third quarter of fiscal 2011 accounted for 5 percentage points of the increase
in fiscal 2012. In addition, fiscal 2012 included 53 weeks compared to the prior-year 52-week period, which had a 2 percent impact on current year sales. These items were partially offset by volume declines in the architectural glass business of
approximately 4 percentage points.

 2

 Staff Comment

 Critical Accounting Policies – Revenue Recognition

3.
With a view toward future disclosures, please help us better understand the underlying nature of your installation business. Please clarify if your installation
business enters into contracts or arrangements that are separate from the other products and services you provide. To the extent your installation services are offered with your other products and services; please further explain to us how you
determined each individual product or service has standalone value and how you allocate the total consideration in multiple element arrangements to each individual component for revenue recognition purposes.

4.
With a view toward future disclosure, please explain to us how the specific terms of your contracts support revenue recognition for your installation business on a
percentage-of-completion basis and tell us the timeframes over which these contracts are performed. In addition, please explain to us how and why you determined it was appropriate to measure your progress to completion in terms of costs. Please tell
us, on average, what portion of contract costs are comprised of materials and explain to us when these costs and the related revenues are generally recognized.

 Company Response

 In future filings, we will expand the disclosures in our Critical
Accounting Policies regarding our installation business and use of the percentage-of-completion method. We present below our revised critical accounting policy on revenue recognition which represents the proposed disclosure, marked for changes.

 Revenue recognition – Our standard product sales terms are “free on board” (FOB) shipping point or FOB
destination, and revenue is recognized when title has transferred. However, our installation business enters into fixed-price contracts for full-service commercial building glass installation and renovation services, which are accounted for as
construction-type contracts. These contracts are typically performed over a 12 to 18 month timeframe and we record revenue for these contracts on a percentage-of-completion basis as we are able to reasonably estimate total contract revenue and total
contract costs. The contracts entered into clearly specify the enforceable rights of the parties, the consideration and the terms of settlement, and both parties can be expected to satisfy all obligations under the contract. During fiscal 2012,
approximately 23 percent of our consolidated sales and 26 percent of our Architectural segment sales were recorded on a percentage-of-completion basis. 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. Given our ability to make reasonable estimates of our total
contract revenues and total contract costs, we believe utilizing the cost-to cost method for revenue recognition provides the greatest degree of precision in measuring progress towards completion of the installation contracts. 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 contract revenue only when customers have
approved them. A significant number of estimates are used in these computations.

 The following discussion is intended to assist the Staff in
better understanding this business and the products and services it offers.

 The Company’s installation business, Harmon, Inc., provides
full-service commercial building glass installation and renovation services. Harmon’s business model is to project manage and execute the design, manufacture and installation of a building’s window and wall system. Historically, Harmon,
Inc. has completed approximately 80 projects during a year with an

 3

average project size of $3 million; fixed-price contracts are typically performed over a 12 to 18 month timeframe. The business focuses on new construction building projects with general
contractors (GC’s) being the primary customer but also can be involved with building owners who are improving the energy efficiency and/or aesthetic characteristics of their building.

 The installation contracts of Harmon, Inc. are within the scope of ASC 605-35, Construction-Type and Production-Type Contracts. ASC 605-35-15-2 provides the scope of this guidance, which applies
to:

a.
The performance of contracts for which specifications are provided by the customer for the construction of facilities or the production of goods or the provision of
related services. However, it applies to separate contracts to provide services essential to the construction or production of tangible property, such as design, engineering, procurement, and construction management. Contracts covered by this
subtopic are binding agreements between buyers and sellers in which the seller agrees, for compensation, to perform a service to the buyer’s specifications. Specifications imposed on the buyer by a third party (for example, a government or
regulatory agency or a financial institution) or by conditions in the marketplace are deemed to be buyer’s specifications.

Building owners or developers typically rely on architects to design the overall building’s look and energy characteristics, many times narrowly
stipulating specific vendors. Accordingly, Harmon develops project bids for its potential customers working with a variety of potential suppliers. To provide a window and wall system, Harmon project managers work with either internal engineers or
external engineering firms to design the system. In some instances, other Apogee businesses (Wausau Window and Wall, Tubelite and/or Linetec) provide the metal and painting services; in other contracts, such supplies are procured from external
providers. Similarly, in some instances the customers select Viracon to supply the glass, which is then used by Harmon for the installation, or, in other cases, external glass suppliers are identified. Harmon determines how and where to assemble and
glaze the system, either internally or at a one of its competitive resources; and finally works solely with Harmon employees who install the systems on the customer’s building. Harmon’s scope of work is to provide the whole building
façade, which includes the labor and raw materials to complete the contract. Harmon’s bid and contract include the total cost of all labor and materials, whether those materials are provided by our other businesses or by outside
suppliers.

 We do not believe that the installation contracts entered into by Harmon, Inc. include multiple elements. By definition, a
construction contract to perform installation includes a number of services including engineering, procurement, fabrication, and installation; however all of these services are within the scope of ASC 605-35 for construction-type contracts. We do
not believe that our installation services contracts include multiple elements, and accordingly, the determination of standalone value and allocation of the arrangement consideration is not relevant. ASC 605-35 provides the separation guidance for
long-term construction-type contracts, and we have not historically had contracts that met the criteria for segmenting.

 ASC 605-35-05-7
states:

 The principal advantages of the percentage-of-completion method are periodic recognition of income currently rather
than irregularly as contracts are completed, and the reflection of the status of the uncompleted contracts provided through the current estimates of costs to complete or of progress toward completion.

 4

 In order to use the percentage-of-completion method, a company must be able to reasonably estimate total
contract revenue and total contract costs. Harmon measures progress to completion based on cost incurred to date as a percentage of the current estimate of total cost of the project as we are able to reasonably estimate each cost component of the
project, including engineering, metal, glass, fabrication, assembly and glaze, and installation labor.

 ASC 605-35-25-57 states:

The percentage-of-completion method is considered preferable as an accounting policy in circumstances in which reasonably dependable
estimates can be made and in which all the following conditions exist:

a.
Contracts executed by the parties normally include provisions that clearly specify the enforceable rights regarding goods or services to be provided and received by the
parties, the consideration to be exchanged, and the manner and terms of settlement.

b.
The buyer can be expected to satisfy all obligations under the contract.

c.
The contractor can be expected to perform all contractual obligations.

 Harmon’s contracts meet each of the conditions cited above. The contracts specify enforceable rights regarding the services to be provided and received by the parties, the contract price to be
exchanged, and the manner and terms of settlement. Based on the fact that owners typically arrange financing prior to execution of a contract with a GC and that liens are placed on our work if we don’t receive payment from the GC, our interests
are maintained, and we believe the buyer can be expected to satisfy all obligations under the contract. We have the ability to execute ourselves, or subcontract portions of the scope of a contract where we are not experts, such that we are expected
to perform all contractual obligations.

 As discussed above, Harmon’s contracts are typically performed over a 12 to 18 month timeframe.
We considered the guidance in ASC 605-35-25-79, which identifies the cost-to-cost method as an acceptable input measure of the progress towards completion. We selected the cost-to-cost method for our contracts, as we are able to make reasonably
dependable estimates of our total contract revenues and total contract costs, and we believe that this input method provides the greatest degree of precision of any input measure and best measures Harmon’s progress towards completion of the
installation contracts. Materials generally constitute approximately 48 percent of total project costs and are generally recognized during the first 60-65 percent of the job timeframe, or during the first seven to 11 months of the project.

 ASC 605-35-25-76 states:

 The cost of uninstalled materials specifically produced, fabricated, or constructed for a project shall be included in the costs used to measure extent of progress. Such materials consist of items unique
to a project that a manufacturer or supplier does not carry in inventory and that must be produced or altered to meet the specifications of the project.

 The materials to be used on a project are highly-specialized, normally created from job-specific designs or drawings created by or with input from the owner, GC, and/or architect. Thus, such materials
(e.g. window frames, anchoring systems, support beams, paneling, ductwork louvers, sun shades, etc), which are not generally carried in inventory, would not be useable on a separate project.

 5

 Staff Comment

 Goodwill impairment

5.
With a view towards future disclosure, please help us understand how you identified your reporting units. Please also help us understand how you considered recent
revenue declines and losses in your Architectural segment in determining that the fair values of your reporting units exceeded their book values.

 Company Response

 The Company considers each of its business units to constitute a
reporting unit. Per Accounting Standards Codification 350, Intangibles and Goodwill, (ASC 350) a component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is
available and segment management regularly reviews the operating results of that component.

 ASC 350 describes how to identify reporting units
as follows:

a)
Identify the operating segments in accordance with ASC 280, Segment Reporting. See the discussion in the response to comment 7 with respect to how we define our
reporting segments in accordance with ASC 280.

b)
Identify the components of each operating segment and determine whether each component meets the definition of a reporting unit.

a.
Determine whether the component constitutes a business

b.
Determine whether discrete financial information is available for the component

c.
Determine whether segment management regular