DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant                              

Filed by a Party other than the Registrant  

Check the appropriate box:

 

 

Preliminary Proxy Statement

  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Pursuant to § 240.14a-12

Apogee Enterprises, Inc.

(Name of Registrant as Specified In Its Charter)

Not Applicable

(Name of Person(s) Filing Proxy Statement if other than the Registrant)

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LOGO       December 17, 2019

Dear Shareholder:

You are cordially invited to attend the 2019 Annual Meeting of Shareholders of Apogee Enterprises, Inc. to be held at Apogee’s headquarters, 4400 West 78th Street, Suite 520, Minneapolis, Minnesota, commencing at 7:30 a.m. Central Standard Time on Tuesday, January 14, 2020. The 2019 Annual Meeting was postponed pending discussions and entry into a Cooperation Agreement with our shareholder, Engaged Capital, LLC. We have summarized the terms of the Cooperation Agreement on pages 21 – 22. We expect that the 2020 Annual Meeting will take place at its regularly scheduled time in June 2020.

The Corporate Secretary’s formal notice of the meeting and the proxy statement appear on the following pages and describe the matters to come before the meeting. You may be required to present a valid government-issued picture identification and proof of stock ownership in order to attend the meeting. If you hold stock through a broker, bank, trust or other nominee, you may be required to present a copy of a statement reflecting your stock ownership as of the record date.

Even if you plan to attend the meeting, we urge you to vote your shares by marking your votes on the enclosed proxy card, signing and dating it, and mailing it in the enclosed postage-paid envelope as promptly as possible. You may also vote your shares via the Internet or by telephone as directed on the enclosed proxy card. Internet and telephone voting facilities for shareholders of record will be available 24 hours a day and will close at 11:59 p.m. Eastern Standard Time (10:59 p.m. Central Standard Time) on January 13, 2020. If you attend the meeting in person and you are a shareholder of record, you may at that time revoke any proxy previously given and vote in person, if desired.

Sincerely,

 

LOGO

  

LOGO

Joseph F. Puishys

  

Bernard P. Aldrich

Chief Executive Officer

  

Chair of the Board of Directors

 


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NOTICE OF 2019 ANNUAL MEETING OF SHAREHOLDERS

The 2019 Annual Meeting of Shareholders of Apogee Enterprises, Inc. (including any adjournments or postponements thereof) (the “Annual Meeting”) will be held as follows:

 

       

 

WHEN:    7:30 a.m. Central Standard Time

                           Tuesday, January 14, 2020

 

WHERE:  APOGEE ENTERPRISES, INC.

                  4400 West 78th Street

                          Suite 520

                          Minneapolis, Minnesota 55435

 

       

The purpose of the Annual Meeting is to consider and take action on the following:

 

  1.

Election of four Class III directors for terms expiring at our 2022 Annual Meeting of Shareholders;

 

  2.

Advisory vote on Apogee’s executive compensation;

 

  3.

Approval of the Apogee Enterprises, Inc. 2019 Stock Incentive Plan;

 

  4.

Approval of the Apogee Enterprises, Inc. 2019 Non-Employee Director Stock Plan;

 

  5.

Approval of an amendment to the Company’s Restated Articles of Incorporation (the “Articles”) to elect directors by majority vote;

 

  6.

Approval of an amendment to the Articles to reduce the required vote of the Company’s shareholders, from supermajority to majority, to remove directors;

 

  7.

Approval of an amendment to the Articles to reduce the required vote of the Company’s shareholders, from supermajority to majority, to amend the director removal provision contained therein;

 

  8.

Approval of an amendment to the Articles to eliminate the “anti-greenmail” provision contained therein;

 

  9.

If the foregoing amendment is not approved by the shareholders, approval of an amendment to the Articles to reduce the required vote of the Company’s shareholders, from supermajority to majority, to amend the “anti-greenmail” provision contained therein;

 

  10.

Ratification of the Exclusive Forum By-law, as defined in the proposal;

 

  11.

Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending February 29, 2020; and

 

  12.

Transaction of such other business as may properly be brought before the Annual Meeting.

The Board of Directors has fixed November 20, 2019, as the record date for the Annual Meeting. Only shareholders of record at the close of business on that date are entitled to receive notice of and to vote at the Annual Meeting. There were 26,552,935 shares of our common stock issued and outstanding as of the record date and, therefore, eligible to vote at the Annual Meeting.

 

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Your vote is important to ensure a quorum at the meeting. Even if you own only a few shares, and whether or not you expect to be present at the meeting, we urgently request that you mark, date, sign, and mail the enclosed proxy card in the postage-paid envelope provided or vote your shares via the Internet or by telephone as directed on the enclosed proxy card. Internet and telephone voting facilities for shareholders of record will be available 24 hours a day, and will close at 11:59 p.m. Eastern Standard Time (10:59 p.m. Central Standard Time) on January 13, 2020. You may revoke your proxy at any time prior to the meeting and delivery of your proxy will not affect your right to vote in person if you attend the meeting.

 

By Order of the Board of Directors,

LOGO

Patricia A. Beithon

General Counsel and Corporate Secretary

Minneapolis, Minnesota

December 17, 2019

 

 

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TABLE OF CONTENTS

 

PROXY STATEMENT SUMMARY

     1  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

     10  

SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT

     12  

PROPOSAL 1: ELECTION OF DIRECTORS

     14  

Required Vote and Recommendation

     14  

CORPORATE GOVERNANCE

     20  

Corporate Governance Resources

     20  

Code of Business Ethics and Conduct

     20  

Corporate Governance Guidelines

     20  

Director Independence

     20  

Board Leadership Structure

     21  

New Director Candidates

     21  

Criteria for Membership on Our Board of Directors

     22  

Procedure for Evaluating Director Nominees

     22  

Board Refreshment

     22  

Retirement Policy

     23  

Stock Ownership Guidelines for Non-Employee Directors

     23  

Board Meetings and 2018 Annual Meeting of Shareholders

     23  

Board Committee Responsibilities, Meetings and Membership

     24  

Risk Oversight by Our Board of Directors

     26  

Sustainability Focus

     26  

Certain Relationships and Related Transactions

     27  

NON-EMPLOYEE DIRECTOR COMPENSATION

     28  

Non-Employee Director Compensation Arrangements During Fiscal 2019

     28  

Restricted Stock Awards and Restricted Stock Unit Awards

     29  

Director Deferred Compensation Plan

     29  

Charitable Matching Contributions Program for Non-Employee Directors

     29  

Fiscal 2019 Non-Employee Director Compensation Table

     30  

EXECUTIVE COMPENSATION

     32  

Compensation Committee Report

     32  

Compensation Discussion and Analysis

     32  

Executive Summary

     33  

Overview of Primary Compensation Elements

     42  

Compensation Process

     43  

Consulting Assistance, Peer Group and Competitive Market

     43  

Fiscal 2019 Individual Compensation Actions

     45  

Executive Stock Ownership Guidelines

     54  

Hedging Policy

     54  

Clawback Policy

     54  

Tax Considerations

     54  

Compensation Risk Analysis

     55  

Summary Compensation Table

     56  

Grants of Plan-Based Awards

     59  

Outstanding Equity Awards at Fiscal Year-End

     61  

Option Exercises and Stock Vested

     62  

Retirement Plan Compensation

     62  

Legacy Officers’ Supplemental Executive Retirement Plan

     62  

Fiscal 2019 Pension Benefits Table

     63  

401(k) Retirement Plan

     63  

Non-Qualified Deferred Compensation

     64  

Deferred Compensation Plan

     64  

Legacy Deferred Compensation Plan

     64  

Deferred Compensation Table

     65  

 

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Potential Payments Upon Termination or Following a Change-in-Control

     66  

Payments Made Upon Termination

     66  

Payments Made Upon Disability

     66  

Payments Made Upon Death

     66  

Change-in-Control Severance Agreements

     66  

Executive Benefits and Payments Upon Termination and Change-in-Control

     68  

CEO Pay Ratio Disclosure

     70  

PROPOSAL 2: ADVISORY APPROVAL OF APOGEE’S EXECUTIVE COMPENSATION

     71  

PROPOSAL 3: APPROVAL OF THE APOGEE ENTERPRISES, INC. 2019 STOCK INCENTIVE PLAN

     73  

Background and Purpose

     73  

Key Features of the 2019 Stock Plan

     73  

Determination of Number of Shares for the 2019 Stock Plan

     74  

New Plan Benefits

     76  

Vote Required and Recommendation

     76  

Description of 2019 Stock Plan

     76  

Federal Income Tax Consequences

     80  

PROPOSAL 4: APPROVAL OF THE APOGEE ENTERPRISES, INC. 2019 NON-EMPLOYEE DIRECTOR STOCK PLAN

     82  

Background and Purpose

     82  

Key Features of the 2019 Director Stock Plan

     82  

Determination of Number of Shares for the 2019 Director Stock Plan

     83  

New Plan Benefits

     83  

Vote Required and Recommendation

     83  

Description of 2019 Director Stock Plan

     84  

Federal Income Tax Consequences

     86  

Equity Compensation Plan Information

     87  

PROPOSAL 5: APPROVAL OF AMENDMENT TO ARTICLES TO ELECT DIRECTORS BY A MAJORITY VOTE

     89  

Vote Required and Recommendation

     91  
PROPOSAL 6: APPROVAL OF AN AMENDMENT TO THE ARTICLES TO REDUCE THE REQUIRED VOTE OF THE COMPANY’S SHAREHOLDERS, FROM SUPERMAJORITY TO MAJORITY, TO REMOVE DIRECTORS      92  

Vote Required and Recommendation

     92  
PROPOSAL 7: APPROVAL OF AN AMENDMENT TO THE ARTICLES TO REDUCE THE REQUIRED VOTE OF THE COMPANY’S SHAREHOLDERS, FROM SUPERMAJORITY TO MAJORITY, TO AMEND THE DIRECTOR REMOVAL PROVISION      93  

Vote Required and Recommendation

     93  

PROPOSAL 8: APPROVAL OF AN AMENDMENT TO THE ARTICLES TO ELIMINATE THE ANTI-GREENMAIL PROVISION

     94  

Vote Required and Recommendation

     95  
PROPOSAL 9: APPROVAL OF AN AMENDMENT TO THE ARTICLES TO REDUCE THE REQUIRED VOTE OF THE COMPANY’S SHAREHOLDERS, FROM SUPERMAJORITY TO MAJORITY, TO AMEND THE ANTI-GREENMAIL PROVISION      96  

Vote Required and Recommendation

     96  

PROPOSAL 10: RATIFICATION OF EXCLUSIVE FORUM BY-LAW

     97  

Vote Required and Recommendation

     98  

AUDIT COMMITTEE REPORT AND PAYMENT OF FEES TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     99  

Audit Committee Report

     99  

Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees

     100  

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services Provided by Our Independent Registered Public Accounting Firm

     100  

PROPOSAL 11: RATIFICATION OF APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     101  

Vote Required and Recommendation

     101  

 

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FREQUENTLY ASKED QUESTIONS

     102  

What is the purpose of the meeting?

     102  

How does the Board recommend that I vote?

     102  

What vote is required for the election of directors or for a proposal to be approved?

     102  

Who is entitled to vote at the meeting?

     103  

What are my voting rights?

     103  

How many shares must be present to hold the meeting?

     103  

How do I vote my shares by proxy?

     103  

How do I vote if my shares are held in the 401(k) Retirement Plan, Employee Stock Purchase Plan or other plans of Apogee?

     104  

What does it mean if I receive more than one Notice of Internet Availability of Proxy Materials or proxy card?

     105  

Can I vote my shares in person at the meeting?

     105  

How are votes counted?

     105  

Who will count the vote?

     106  

What if I do not specify how I want my shares voted?

     106  

Can I change my vote after submitting my proxy or voting instructions?

     106  

How can I attend the meeting?

     107  

How can a shareholder get a copy of the Company’s 2019 Annual Report on Form 10-K?

     107  

How do I get electronic access to the proxy materials?

     107  

What is a proxy?

     107  

What is the difference between a shareholder of record and a “street name” holder?

     107  

Who pays for the cost of proxy preparation and solicitation?

     107  

How can a shareholder recommend or nominate a director candidate?

     108  

How can a shareholder present a proposal at the 2020 Annual Meeting of Shareholders?

     108  

How can I communicate with our Board of Directors?

     108  

What is “householding” of proxy materials?

     109  

APPENDIX A – AMENDED AND RESTATED ARTICLES OF INCORPORATION OF APOGEE ENTERPRISES, INC.

     A-1  

APPENDIX B – APOGEE ENTERPRISES, INC. 2019 STOCK INCENTIVE PLAN

     B-1  

APPENDIX C – APOGEE ENTERPRISES, INC. 2019 NON-EMPLOYEE DIRECTOR STOCK PLAN

     C-1  

APPENDIX D – ARTICLE VIII – PREVENTION OF GREENMAIL

     D-1  
APPENDIX E – APOGEE ENTERPRISES, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES ADJUSTED NET EARNINGS, ADJUSTED EARNINGS PER DILUTED COMMON SHARE, ADJUSTED OPERATING INCOME AND ADJUSTED OPERATION MARGIN      E-1  

 

 

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LOGO

PROXY STATEMENT

2019 ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD JANUARY 14, 2020

The Board of Directors of Apogee Enterprises, Inc. (“Apogee” or the “Company”) is soliciting proxies for use at our 2019 Annual Meeting of Shareholders (including any adjournments and postponements thereof) (the “Annual Meeting”) to be held on Tuesday, January 14, 2020. This proxy statement and the enclosed proxy card and are first being mailed or given to our shareholders on or about Monday, December 23, 2019.

PROXY STATEMENT SUMMARY

Below are highlights of some of the information contained in this proxy statement. These highlights are only a summary. Please review the complete proxy statement and our 2019 Annual Report to Shareholders for the fiscal year ended March 2, 2019 before you vote.

ANNUAL MEETING OF SHAREHOLDERS

 

Date and time:

  

Tuesday, January 14, 2020, at 7:30 a.m. Central Standard Time (CST)

Place:

  

Apogee’s headquarters at 4400 West 78th Street, Suite 520, Minneapolis, Minnesota

Record date:

  

Wednesday, November 20, 2019

Voting:

  

Shareholders of Record. If you are a shareholder of record, you can give a proxy to be voted at the meeting in one of the following ways:

  

   By Mail: by completing, signing and mailing the proxy card.

  

   By Internet: electronically via the Internet by following the “Vote by Internet” instructions on the proxy card. Internet voting facilities for shareholders of record will be available until 11:59 p.m. Eastern Standard Time (EST) (10:59 p.m. CST) on January 13, 2020.

  

   By Telephone: use any touch-tone telephone to transmit your voting instructions by following the “Vote by Telephone” instructions on the proxy card. Telephone voting facilities will be available until 11:59 p.m. Eastern Standard Time (EST) (10:59 p.m. CST) on January 13, 2020.

  

   In Person: you may attend the Annual Meeting and vote in person by completing a ballot. Attending the Annual Meeting without completing a ballot will not count as a vote. If you choose to vote in person, you must bring proof of identification and your proxy card showing your control number to the Annual Meeting. You are encouraged to complete your proxy prior to the Annual Meeting by Internet or mail regardless of whether you plan to attend the Annual Meeting.

  

Beneficial Owners. If you are the beneficial owner of your shares (that is, you hold your shares in “street name”), you must vote your shares in the manner prescribed by your broker or other nominee. Your broker or other nominee has enclosed or otherwise provided a voting instruction card for you to use in directing the broker or other nominee how to vote your shares. Alternatively, you may obtain a “legal proxy” from your bank, broker or other nominee and bring it with you to hand in with a ballot in order to be able to vote your shares at the Annual Meeting. If you chose to vote at

 

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the Annual Meeting, you must bring the following: (i) proof of identification, (ii) an account statement or letter from the bank, broker or other nominee indicating that you are the beneficial owner of the shares and (iii) a signed proxy from the shareholder of record giving you the right to vote the stock. The account statement or letter must show that you were the beneficial owner of the shares at the close of business on November 20, 2019, the record date for the Annual Meeting.

  

If you hold shares in our 401(k) Retirement Plan, Employee Stock Purchase Plan or our other plans, please refer to voting instructions on page 104.

PROPOSAL 1 – ELECTION OF DIRECTORS (See pages 14 – 19 for more information.)

You are being asked to elect four Class III directors to the Board at the Annual Meeting. Our Board of Directors is currently composed of ten directors and divided into three classes. At the Annual Meeting, four directors are standing for election as Class III directors. The term of office for the Class III directors will expire at the conclusion of our 2022 Annual Meeting of Shareholders and when their successors are duly elected and qualified, or upon their earlier resignation or removal.

We have presented the following information about our Class III director nominees:

 

Name

     Age     

Occupation

     Director  
Since
     Independent      Audit
  Committee  
Financial
Expert
   Term

Christina M. Alvord

   52    President, Central Division, of Vulcan Materials Company    N/A    Yes    Yes    Term
Expiring in

2022

Frank G. Heard

   61    Vice Chairman and Former President and Chief Executive Officer of Gibraltar Industries, Inc.    N/A    Yes    Yes    Term
Expiring in
2022

Elizabeth M. Lilly

   56    Chief Investment Officer and Executive Vice President of The Pohlad Companies    N/A    Yes    No    Term
Expiring in
2022

Mark A. Pompa

   55    Executive Vice President and Chief Financial Officer of EMCOR Group, Inc.    2018    Yes    Yes    Term
Expiring in
2022

Vote required: In accordance with Section 302A.215 of the Minnesota Business Corporation Act (the “MBCA”), directors are elected by a plurality of the shares present and entitled to vote on the election of directors at the Annual Meeting, which means that the nominees receiving the highest number of “for” votes by the shares entitled to vote, up to the number of directors positions subject to election or re-election, will be elected to the Board. However, in accordance with our Corporate Governance Guidelines, if a majority of our shares that are voted in a certain nominee’s election are “withheld” from such election, the nominee shall offer his or her resignation to our Nominating and Corporate Governance Committee for its consideration. The Nominating and Corporate Governance Committee shall evaluate the best interests of Apogee and its shareholders and shall recommend to the Board the action to be taken with respect to such offered resignation.

Our Board of Directors recommends that you vote FOR the four Class III director nominees. Unless authority for one or more of the nominees is withheld, proxies will be voted FOR the election of each of the four Class III director nominees.

 

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PROPOSAL 2 – ADVISORY VOTE ON EXECUTIVE COMPENSATION (See pages 71 – 72 for more information.)

The Company provides shareholders with the opportunity to cast an annual advisory (non-binding) vote on our executive compensation program (a “Say on Pay Proposal”).

Vote Required: The affirmative vote of a majority of the shares of our common stock present in person or by proxy and entitled to vote at the Annual Meeting is required for the approval of the Say on Pay Proposal.

Our Board of Directors recommends that you cast an advisory vote FOR the Say on Pay Proposal. Proxies will be voted FOR the proposal unless otherwise specified.

PROPOSAL 3 – APPROVAL OF THE APOGEE ENTERPRISES, INC. 2019 STOCK INCENTIVE PLAN (See pages 73 – 81 for more information.)

We are asking our shareholders to approve our Apogee Enterprises, Inc. 2019 Stock Incentive Plan (the “2019 Stock Plan”). The purpose of the 2019 Stock Plan is to promote the interests of the Company and its shareholders by aiding the Company in attracting and retaining employees, officers, consultants and independent contractors capable of contributing to the future success of the Company, to provide such persons with opportunities for stock ownership in the Company and to offer such persons incentives to put forth maximum effort for the success of our Company’s business. Subject to shareholder approval, the Board has reserved 1,150,000 shares of our common stock for issuance under the 2019 Stock Plan.

Vote Required: The affirmative vote of the majority of the shares of our common stock present in person or by proxy and entitled to vote at the Annual Meeting is required for the approval of the 2019 Stock Plan.

Our Board of Directors recommends that you vote FOR approval of the 2019 Stock Plan. Proxies will be voted FOR the proposal unless otherwise specified.

PROPOSAL 4 – APPROVAL OF THE APOGEE ENTERPRISES, INC. 2019 NON-EMPLOYEE DIRECTOR STOCK PLAN (See pages 82 – 88 for more information.)

We are asking our shareholders to approve our Apogee Enterprises, Inc. 2019 Non-Employee Director Stock Plan (the “2019 Director Stock Plan”). The purpose of the 2019 Director Stock Plan is to promote the interests of the Company and our shareholders by aiding us in attracting and retaining non-employee directors capable of providing strategic direction to, and assuring the future success of the Company and motivating such non-employee directors to put forth maximum efforts for the success of our business. The 2019 Director Stock Plan will allow us to provide our non-employee directors an opportunity to acquire a proprietary interest in our Company, thereby aligning the interests of our non-employee directors with our shareholders. Subject to shareholder approval, the Board has reserved 150,000 shares of common stock issuance under the 2019 Director Stock Plan.

Vote Required: The affirmative vote of the majority of the shares of our common stock present in person or by proxy and entitled to vote at the Annual Meeting is required for the approval of the 2019 Director Stock Plan.

Our Board of Directors recommends that you vote FOR approval of the 2019 Director Stock Plan. Proxies will be voted FOR the proposal unless otherwise specified.

In June 2018, the Board approved amendments to the Company’s Restated Articles of Incorporation (the “Articles”) in order to establish a majority voting standard for director elections, reduce certain supermajority voting requirements, and eliminate the “anti-greenmail” provisions in the Articles, subject to shareholder approval. The Board believes that these proposals are aligned with good corporate governance and are in the best interests of our shareholders. A marked version of the Articles, amended and restated to reflect all of the proposed changes, can be found in Appendix A.

 

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PROPOSAL 5 – APPROVAL OF AN AMENDMENT TO THE ARTICLES TO ELECT DIRECTORS BY MAJORITY VOTE (See pages 89 – 91 for more information.)

We are asking shareholders to approve an amendment to the Articles to adopt a majority voting standard for the election of directors. Our directors are currently elected by a plurality voting standard. Under the proposed majority voting standard, a director nominee running in an uncontested election must receive more “for” votes than “against” votes by the shareholders entitled to vote and present in person or represented by proxy at a meeting duly called and held for such purpose and at which a quorum is present.

Vote Required: The affirmative vote by holders of at least 80% of the outstanding shares of common stock is required for the approval of this amendment to the Articles.

Our Board of Directors recommends that you vote FOR the proposal to amend the Articles to elect directors by majority vote rather than by plurality vote. Proxies will be voted FOR the proposal unless otherwise specified.

PROPOSAL 6 – APPROVAL OF AN AMENDMENT TO THE ARTICLES TO REDUCE THE REQUIRED VOTE OF THE COMPANY’S SHAREHOLDERS, FROM SUPERMAJORITY TO MAJORITY, TO REMOVE DIRECTORS FOR CAUSE (See page 92 for more information.)

We are asking shareholders to approve an amendment to the Articles to reduce the vote required for shareholders to remove a director for cause from 80% of the outstanding shares of common stock to a majority of the outstanding shares of common stock present at a meeting of shareholders.

Vote Required: The affirmative vote by holders of at least 80% of the outstanding shares of common stock is required for the approval of this amendment to the Articles.

Our Board of Directors recommends that you vote FOR the proposal to amend the Articles to reduce the supermajority vote to a majority vote for shareholder removal of directors for cause. Proxies will be voted FOR the proposal unless otherwise specified.

PROPOSAL 7 – APPROVAL OF AN AMENDMENT TO THE ARTICLES TO REDUCE THE REQUIRED VOTE OF THE COMPANY’S SHAREHOLDERS, FROM SUPERMAJORITY TO MAJORITY, TO AMEND THE DIRECTOR REMOVAL PROVISION (See page 93 for more information.)

We are asking shareholders to approve an amendment to the Articles to reduce the vote required for shareholders to amend the director removal provision in Section 5.02 of the Articles (the “Director Removal Provision”) from 80% of the outstanding shares of common stock to a majority of the outstanding shares of common stock present at a meeting of shareholders.

Vote Required: The affirmative vote by holders of at least 80% of the outstanding shares of common stock is required for the approval of this amendment to the Articles.

Our Board of Directors recommends that you vote FOR the proposal to amend the Articles to reduce the supermajority vote to a majority vote for the amendment of the Director Removal Provision. Proxies will be voted FOR the proposal unless otherwise specified.

PROPOSAL 8 – APPROVAL OF AN AMENDMENT TO THE ARTICLES TO ELIMINATE THE ANTI-GREENMAIL PROVISION (See pages 94 - 95 for more information.)

We are asking shareholders to approve an amendment to the Articles to repeal Article VIII entitled, “Prevention of Greenmail” (the “Anti-Greenmail Provision”). The repeal would reduce the shareholder vote required to approve the Company’s purchase of shares from interested shareholders, including greater than 5% shareholders, under the specified circumstances, from 80% of all votes entitled to be cast to a majority of the voting power of all shares entitled to vote, which is the voting standard set forth in the MBCA. The Board believes that the anti-greenmail provision set forth in the MBCA provides Apogee with sufficient protection from the potential abuse of greenmail.

 

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Vote Required: The affirmative vote by holders of at least 80% of the outstanding shares of common stock is required for the approval of this amendment to the Articles.

Our Board of Directors recommends that you vote FOR the proposal to amend the Articles to repeal the Anti-Greenmail Provision. Proxies will be voted FOR the proposal unless otherwise specified.

PROPOSAL 9 – APPROVAL OF AN AMENDMENT TO THE ARTICLES TO REDUCE THE REQUIRED VOTE OF THE COMPANY’S SHAREHOLDERS, FROM SUPERMAJORITY TO MAJORITY, TO AMEND THE ANTI-GREENMAIL PROVISION (See page 96 for more information.)

We are asking shareholders to approve an amendment to the Articles to reduce the vote required for shareholders to amend the Anti-Greenmail Provision. If shareholders do not approve Proposal 8 to repeal the Anti-Greenmail Provision, but do approve this Proposal 9, the shareholder vote required to amend the Anti-Greenmail Provision would be reduced from 80% of the outstanding “Voting Stock” (as that term is defined in the proposal), voting together as a single class, to the affirmative vote of the holders of a majority of the outstanding Voting Stock present at a meeting of shareholders, voting together as a single class.

Vote Required: The affirmative vote by holders of at least 80% of the outstanding shares of common stock is required for the approval of this amendment to the Articles.

Our Board of Directors recommends that you vote FOR the proposal to amend the Articles to reduce the supermajority voting requirement to a majority vote to amend or repeal the Anti-Greenmail Provision. Proxies will be voted FOR the proposal unless otherwise specified.

PROPOSAL 10 – RATIFICATION OF THE EXCLUSIVE FORUM BY-LAW (See pages 97 - 98 for more information.)

We are asking shareholders to ratify an amendment to the Company’s By-laws which provides that the state and federal courts in Hennepin County, Minnesota will serve as the exclusive forum for the adjudication of certain legal actions involving Apogee (the “Exclusive Forum By-law”). The Board determined that the adoption of the Exclusive Forum By-Law is in the best interests of our Company and its shareholders because, among other reasons, it will limit the ability of plaintiffs in certain cases to forum shop and to litigate in multiple jurisdictions, which can result in conflicting decisions by different courts and significant expense to our Company.

The Board amended the By-laws, effective June 28, 2018, to add a new Article VIII, which contains this provision. This provision became effective at that time. While it is not required to do so, our Board of Directors determined at the time that it adopted the Exclusive Forum By-law that it would submit it to our shareholders for ratification. If the Exclusive Forum By-law is not ratified, the Board will reconsider whether it is in the best interests of Apogee and its shareholders to retain the Exclusive Forum By-law.

Vote Required: The affirmative vote of the majority of the shares of our common stock present in person or by proxy and entitled to vote at the Annual Meeting is required for the ratification of the adoption of the Exclusive Forum By-Law.

Our Board of Directors recommends that you vote FOR the ratification of the adoption of the Exclusive Forum By-law. Proxies will be voted FOR the proposal unless otherwise specified.

 

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PROPOSAL 11 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (See pages 99 – 101 for more information.)

Our Audit Committee has appointed Deloitte & Touche LLP, as our independent registered public accounting firm for the fiscal year ending February 29, 2020. Deloitte & Touche has acted as our independent registered public accounting firm since fiscal 2003.

Vote Required: The affirmative vote of a majority of the shares of our common stock present in person or by proxy and entitled to vote at the Annual Meeting is required for ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending February 29, 2020.

Our Board of Directors recommends that you vote FOR the ratification of the appointment of our independent registered public accounting firm. Proxies will be voted FOR the proposal unless otherwise specified.

FISCAL 2019 PERFORMANCE HIGHLIGHTS (See pages 34 – 36 for more information.)

 

   

We had net sales of $1.4 billion, an increase of 6% over fiscal 2018 and our eighth consecutive year of growth. Fiscal 2019 net sales were below the target level for the net sales metric for the fiscal 2019 annual cash incentive awards resulting in a payout of approximately 61% of target for such metric.

 

   

Operating income was $67.3 million, including $40.9 million of project-related charges on certain contracts acquired with the purchase of EFCO Corporation (“EFCO”), compared to $114.3 million in fiscal 2018.

 

   

Operating margin was 4.7% compared to operating margin of 8.6% in fiscal 2018.

 

   

We had operating cash flow of $96.4 million, a decrease of 24% over fiscal 2018.

 

   

We had earnings per diluted share of $1.63 compared to $2.76 in fiscal 2018.

 

   

We had adjusted operating income of $116.3 million, a decrease of 13% compared to the prior year, and adjusted earnings per diluted share of $2.96, a decrease of 8% compared to the prior year.

 

   

We repurchased 1,257,983 shares of our common stock at a total cost of $43.3 million.

 

   

We increased our quarterly cash dividend by 11.1%, our sixth consecutive year with a dividend increase.

 

   

We delivered annualized total shareholder returns (“TSR”) over the past five-years of 11.67%.

Adjusted diluted earnings per share and adjusted operating income are non-GAAP financial metrics that are reconciled with the most directly comparable GAAP financial metrics in Appendix E.

 

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FISCAL 2019 COMPENSATION ACTIONS (See page 41 and pages 45 - 53 for more information.)

 

   

Our Chief Executive Officer, Chief Financial Officer and General Counsel did not receive any base salary increases for fiscal 2019. The fiscal 2019 base salary increases for our Senior Vice President and Treasurer was 5.1%. Our Chief Executive Officer did not receive any base salary increase in fiscal 2020. The fiscal 2020 base salary increases for our other Named Executive Officers ranged from 3.0% to 3.9%.

 

   

Our annual cash incentive awards are designed to reward achievement of financial goals as they are established in our annual operating plan. The fiscal 2019 annual cash incentives for our Named Executive Officers paid out at an average of 35.20% of target performance, based on below-target performance on net sales (25% weighting), maximum performance on days working capital (“DWC”) (10% weighting) and below-threshold performance on earnings before taxes (“EBT”) (65% weighting).

 

   

Our long-term incentive awards are designed to align the interests of executives with shareholders and to encourage long-term sustained performance, entrepreneurial behavior, and the development of quality products and services for our customers. For our Named Executive Officers:

 

 

The Committee granted restricted stock awards that vest over three-years and have award values ranging from $102,631 – $727,420.

 

 

The Committee established the fiscal 2019 – 2020 cash-based performance awards that have award values ranging from $233,100 – $2,711,500 at target level performance. The weighted financial performance metrics for these awards are 33-1/3% cumulative net sales, 33-1/3% cumulative earnings per share (“EPS”) and 33-1/3% average return on invested capital (“ROIC”).

 

   

The fiscal 2019 CEO evaluation-based retention incentive paid out at $198,688, 85% of target performance and was mandatorily deferred pursuant to our Deferred Compensation Plan to provide incentive for our Chief Executive Office to remain with our Company.

EXECUTIVE COMPENSATION PROGRAM HIGHLIGHTS (See pages 32 – 69 for more information.)

 

   

We seek alignment of pay and performance each year. A significant portion of our compensation program is performance-based through the use of our short-term and long-term incentive plans that have multiple financial performance metrics.

 

   

We annually disclose Company performance against the established performance metrics for our annual cash incentive in our proxy statement.

 

   

Our long-term incentive compensation consists of restricted stock awards that vest over three years and cash-based performance awards that have a two-year performance period. Given the cyclical nature of the commercial construction industry, we believe a two-year performance period is better suited to our Company.

 

   

We deliver a significant portion of potential total compensation to our executive officers in the form of equity.

 

   

We have stock ownership guidelines for our executive officers, and each of our Named Executive Officers with two years or more of tenure with our Company exceeds their applicable guideline.

 

   

We have a “clawback” policy that applies to executive performance-based incentive compensation awards.

 

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We have a hedging policy that prohibits all employees and directors from engaging in hedging transactions in our Company’s securities. None of our executive officers have pledged any shares of our common stock as security or collateral on a personal loan.

 

   

We provide minimal perquisites to our executive officers.

 

   

Our “double trigger” change-in-control agreements do not provide for any excise tax “gross-ups,” and we do not provide any tax “gross-ups” on any benefits for our executive officers.

BOARD COMPOSITION

The composition of our Board of Directors facilitates independent oversight and a diversity of background and experiences that enrich Board deliberations. The following charts assume the election of the Class III nominees presented in this proxy statement.

 

LOGO

 

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BOARD SKILLS

Each of our Class I and Class II directors and Class III director nominees brings a diversity of skills and experiences to his or her service on our Board. Core qualifications and areas of expertise that will be represented on our Board assuming the election of the for Class III director nominees is shown below.

 

LOGO

SHAREHOLDER OUTREACH

We conduct regular outreach with our shareholders to discuss business and other matters. During fiscal 2019, senior management attended five investor conferences and engaged with investors during other non-deal roadshows, site visits and conference calls. In addition to these investor engagements, we initiated our first proactive outreach to corporate governance teams from several of our largest shareholders.    

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth information concerning beneficial ownership of our common stock outstanding as of November 20, 2019, by persons known to us to own more than 5% of our common stock. Unless otherwise indicated, the named holders have sole voting and investment power with respect to the shares beneficially owned by them.

 

Name of Beneficial Owner

  

Amount and Nature

of Beneficial

Ownership (#)

  

% of Common

Stock

Outstanding

BlackRock, Inc.
55 East 52nd Street
New York, NY 10055

   4,087,324(1)    15.4

The Vanguard Group, Inc.
100 Vanguard Boulevard
Malvern, PA 19355

   2,934,239(2)    11.1

Engaged Capital, LLC
610 Newport Center Drive
Suite 250
Newport Beach, CA 92660

   1,689,332(3)    6.4

Dimensional Fund Advisors LP
Building One
6300 Bee Cave Road
Austin, TX 78746

   1,540,199(4)    5.8
 

 

  (1)

We have relied upon the information provided by BlackRock, Inc. in a Schedule 13G/A reporting information as of December 31, 2018. The Schedule 13G/A was filed by BlackRock, Inc. in its capacity as a parent holding company or control person and indicates that BlackRock, Inc. has sole investment power over 4,087,324 shares and sole voting power over 4,022,997 shares. BlackRock Fund Advisors, a subsidiary of BlackRock, Inc., beneficially owns 5% or greater of the outstanding shares of the security class reported on the Schedule 13G/A.

 

  (2)

We have relied upon the information provided by The Vanguard Group, Inc., an investment advisor (“Vanguard”), in a Schedule 13G/A reporting information as of January 31, 2019. Of the shares reported, Vanguard has sole investment power over 2,874,420 shares, shared investment power over 59,819 shares, sole voting power over 54,052 shares and shared voting power over 9,540 shares. Vanguard Fiduciary Trust Company, a wholly owned subsidiary of Vanguard, serving as an investment manager of collective trust accounts, is the beneficial owner of 50,279 shares and Vanguard Investments Australia, Ltd., a wholly owned subsidiary of Vanguard, serving as investment manager of Australian investment offerings, is the beneficial owner of 13,313 shares.

 

  (3)

We have relied upon the information provided by Engaged Capital, LLC (including its affiliates, “Engaged Capital”) and affiliated entities in a joint amended Schedule 13D filing reporting information as of November 12, 2019. The amended joint Schedule 13D filing was filed by Engaged Capital Flagship Master Fund, LP (“EC Flagship Master”); Engaged Capital Co-Invest VIII, LP (“EC Co-Invest VIII”); Engaged Capital Flagship Fund, LP (“EC Fund”) as a feeder fund of EC Flagship Master; Engaged Capital Flagship Fund, Ltd. (“EC Offshore”) as a feeder fund of EC Flagship Master; Engaged Capital as a general partner and investment advisor of each EC Flagship Master and EC Co-Invest VIII and investment advisor of a certain managed account (the “EC Account”); Engaged Capital Holdings, LLC (“Engaged Holdings”) as managing member of Engaged Capital; and Glenn W. Welling, as Founder and Chief Investment Officer of Engaged Capital and sole member of Engaged Holdings. EC Co-Invest VIII beneficially owns and has sole voting and sole investment power over 720,608 shares. Each of EC Flagship Master, EC Fund and EC Offshore beneficially owns and has sole voting and sole investment power over 888,183 shares. EC Account beneficially owns and has sole voting and sole investment power over

 

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80,541 shares. Each of Engaged Capital, Engaged Holdings and Mr. Welling are deemed to beneficially own and have sole voting and investment power over 1,689,332 shares. Each of the Reporting Persons specifically disclaims beneficial ownership of the securities reported in the Schedule 13D filing that it or he does not directly own.

 

  (4)

We have relied upon the information provided by Dimensional Fund Advisors LP (“Dimensional Advisors”) in a Schedule 13G reporting information as of December 31, 2018. Dimensional Advisors furnishes investment advice to four investment companies and serves as investment manager to certain other commingled funds, group trusts and separate accounts (such investment companies, group trusts and accounts are collectively referred to as the “Funds”, subsidiaries of Dimensional Advisors may act as advisor or sub-advisor to certain Funds. All of the 1,540,199 shares listed are owned by the Funds. In its role as investment advisor, sub-advisor and/or manager, Dimensional Advisors or its subsidiaries (collectively “Dimensional”) may possess sole investment power over 1,540,199 shares and sole voting power over 1,451,194 shares held by the Funds. The Funds have the right to receive, or power to direct the receipt of dividends from, or the proceeds from the sale of the securities held in their respective accounts. In its role as investment advisor, sub-advisor and/or manager, Dimensional may be deemed to be a beneficial owner of the shares; however, Dimensional disclaims beneficial ownership of such shares. To the knowledge of Dimensional, the interest of any one such Fund does not exceed 5% of the class of securities.

 

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SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT

The following table sets forth the number of shares of our common stock beneficially owned as of November 20, 2019, by each of our directors, each of our executive officers named in the Summary Compensation Table (our “Named Executive Officers”) and by all of our directors and executive officers as a group.

 

Amount and Nature of Beneficial Ownership  

Name of Beneficial

          Owner                             

    Shares of 
Common
Stock

Held (#)(1)(2)
  Shares Underlying
Options
 Exercisable Within 
60 Days (#)(3)
   Total
Beneficial
 Ownership 
(#)
   Percentage
of
Common
Stock
Outstanding
     Phantom
Stock and
Restricted
 Stock Units 
(#)(4)
  Total
Stock-
Based
 Ownership 
(#)(5)

Non-Employee Directors

           

Bernard P. Aldrich

     27,521          27,521         *        49,709         77,230    

Jerome L. Davis

     17,251          17,251       *        27,431       44,682  

Sara L. Hays

     10,422 (6)         10,422       *        22,348       32,770  

Lloyd E. Johnson

     1,720          1,720       *        1,995       3,715  

Donald A. Nolan

     5,326          5,326       *        16,467       21,793  

Herbert K. Parker

     14,330          14,330       *        —         14,330  

Mark A. Pompa

                    *        4,302       4,302  

Richard V. Reynolds

     21,292          21,292       *        32,764       54,056  

Patricia K. Wagner

     6,696          6,696       *        —         6,696  

Named Executive Officers

           

Joseph F. Puishys

     265,722 (7)    100,341      366,063       1.4        —         366,063  

James S. Porter

     117,911          117,911       *        —         117,911  

Brent C. Jewell

     10,082          10,082       *        —         10,082  

Patricia A. Beithon

     138,846          138,846       *        —         138,846  

Gary R. Johnson

     38,865          38,865       *        —         38,865  

All directors and executive officers as a group (14 persons)

     675,984     100,341      776,325       2.9        155,016       931,341  

 

*

Indicates less than 1%.

 

(1)

Unless otherwise indicated, the individuals listed in the table have sole voting and investment power with respect to the shares owned by them, and such shares are not subject to any pledge.

 

(2)

For our non-employee directors, the number indicated includes the following shares of restricted stock issued to the named individual pursuant to our 2009 Non-Employee Director Stock Incentive Plan, as amended (2014) (the “2009 Director Stock Plan”): 1,874 shares for each of Mr. Aldrich, and Ms. Hays and Ms. Wagner; 573 shares for Mr. L. Johnson; 1,553 shares for Mr. Parker; and 7,748 shares for all directors and executive officers as a group. All shares of restricted stock held pursuant to our 2009 Director Stock Plan are subject to future vesting conditions, and holders of such shares have no investment power over such shares.

 

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For our executive officers, the number of shares indicated includes shares issued to the named individual pursuant to our 2009 Stock Incentive Plan, as amended and restated (2011) (the “2009 Stock Incentive Plan”), our Employee Stock Purchase Plan and our 401(k) Retirement Plan. The number of shares of restricted stock issued pursuant to our 2009 Stock Incentive Plan is set forth below.

 

Named Executive Officers

     Shares of Restricted Stock  

Joseph F. Puishys

     33,267        

James S. Porter

     11,233  

Patricia A. Beithon

     8,600  

Brent C. Jewell

     8,000  

Gary R. Johnson

     4,410  

All directors and executive officers as a group (14 persons)

     65,510  

All shares of restricted stock held pursuant to our 2009 Stock Incentive Plan are subject to future vesting conditions, and the holders of such shares have no investment power over such shares.

 

(3)

Includes shares underlying stock options exercisable currently or within 60 days after November 20, 2019.

 

(4)

Includes phantom stock units, each representing the value of one share of our common stock, that are attributable to accounts in our Director Deferred Compensation Plan, which is described under the heading “Director Deferred Compensation Plan”, and restricted stock units, each representing one share of our common stock that are issued pursuant to our 2009 Director Stock Plan, which is described under the heading “Restricted Stock Awards and Restricted Stock Unit Awards.”

 

(5)

The amounts in this column are derived by adding the amounts in the “Total Beneficial Ownership” and the “Phantom Stock and Restricted Stock Units” columns of the table.

 

(6)

Includes shares held by a revocable trust for which Ms. Hays serves as trustee.

 

(7)

Includes 139,175 shares held by the Puishys Family Trust for which Mr. Puishys serves as trustee.

 

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PROPOSAL 1: ELECTION OF DIRECTORS

Our Articles provide that our Board of Directors will be divided into three classes of directors of as nearly equal size as possible and the term of each class of directors is three years. Our Articles further provide that the total number of directors will be determined exclusively by our Board of Directors. The term of one class expires each year in rotation. At our Annual Meeting, the terms of our four Class III directors will expire. Currently, we have ten directors, with four directors serving in Class III and three directors serving in Classes I and II. Jerome L. Davis, Sara L. Hays and Richard V. Reynolds, all of whom serve as Class III directors, will retire at the conclusion of the Annual Meeting, after 15, 14 and 13 years, respectively, of service on our Board.

Mark A. Pompa has been nominated for re-election to our Board as a Class III director. Christina M. Alvord, Frank G. Heard, and Elizabeth M. Lilly (collectively, the “New Director Candidates”) have been nominated as new Class III directors in connection with our entry into a Cooperation Agreement with Engaged Capital. The New Director Candidates are not affiliated with Engaged Capital. Nor have they, or would they, receive any compensation or other payments from any third parties, including Engaged Capital, in exchange for their candidacy or service on the Board. For more information on their nominations, please refer to “New Director Candidates” on page 21.

Class III directors elected at the Annual Meeting will serve until our 2022 Annual Meeting of Shareholders and until their successors are duly elected and qualified or until their earlier resignation or removal. Each of the nominees has agreed to serve as a director, if elected.

Each of the nominees has consented to be named as a nominee to the Board in this proxy statement, and we have no reason to expect that any of the nominees will fail to be a candidate at the Annual Meeting. Therefore, we have not identified any substitute nominee or nominees at this time. If any of the nominees should be unable to serve as a director prior to the Annual Meeting, proxies will be voted for a substitute nominee or nominees in accordance with the best judgment of the person or persons named as proxies in the enclosed proxy card.

Information about the background and qualifications of the Board nominees for election at the Annual Meeting and the directors who are not subject to re-election at the Annual Meeting is provided below. All of our directors possess the minimum qualities and skills described under “Criteria for Membership on Our Board of Directors” on page 22.

Required Vote and Recommendation

In accordance with Section 302A.215 of the MBCA, directors are elected by a plurality of the shares present and entitled to vote on the election of directors at the Annual Meeting, which means that the nominees receiving the highest number of “for” votes by the shares entitled to vote, up to the number of directors positions subject to re-election, will be elected to the Board. However, in accordance with our Corporate Governance Guidelines, if a majority of our shares that are voted in a certain nominee’s election are “withheld” from such election, the nominee shall offer his or her resignation to our Nominating and Corporate Governance Committee for its consideration. The Nominating and Corporate Governance Committee shall evaluate the best interests of Apogee and its shareholders and shall recommend to the Board the action to be taken with respect to such offered resignation.

Our Board of Directors recommends that you vote FOR the four Class III director nominees. Unless authority for one or more of the nominees is withheld, proxies will be voted FOR the election of the four Class III nominees.

 

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Nominees As Class III Directors – Terms Expiring in 2022
 

LOGO

  

 

Christina M. Alvord

 

Age: 56

Director since: N/A

Independent

 

 

Audit Committee Financial Expert

  

Apogee Committees:

  N/A

  

Ms. Alvord serves as President, Central Division of Vulcan Materials Company, a producer of construction aggregates and aggregates-based construction materials and member of the S&P 500 Index. She joined Vulcan in 2016 and served as President of the Southern & Gulf Coast Division from 2017 to 2019 and Vice President, Performance Management from 2016 to 2017. Ms. Alvord held various executive management positions with GE Aviation, including General Manager of Engine Component Repair from 2012 to 2015 and General Manager of Turbine Airfoils Center of Excellence from 2010 to 2012, Government Relations Executive from 2009 to 2010, President of GE Aviation-Unison Industries from 2005 to 2009; President of GE Aviation-Middle River Aircraft Systems from 2003 to 2005. Earlier in her career, Ms. Alvord held management positions in the GE Corporation Initiatives Group and McKinsey Company, Inc.

  

Skills & Qualifications:

  Executive Leadership

  Financial Management

  Business Operations

  Construction Industry

  Strategy Development and Execution

  Manufacturing Operations

  Leadership Development

  Enterprise Risk Management

                
        

LOGO

  

 

Frank G. Heard

 

Age: 61

Director since: N/A

Independent

 

 

Audit Committee Financial Expert

  

Apogee Committees:

  N/A

  

Public Directorships:

  Gibraltar Industries, Inc.

Mr. Heard has served as Vice Chair of the Board and as a director of Gibraltar Industries, Inc., a leading manufacturer and distributor of building products for the renewable energy, conservation, residential, industrial and infrastructure markets, since 2019 and 2015, respectively. He served as Chief Executive Officer of Gibraltar Industries from 2015 to 2019. Prior to joining Gibraltar Industries in 2014 as President and Chief Operating Officer, he served as President of the Building Components Group, a division of Illinois Tool Works, Inc., from 2008 to 2013 and in various executive management roles for Illinois Tool Works from 1990 to 2008.

  

Skills & Qualifications:

  Executive Leadership

  Financial Management

  Business Operations

  Strategy Development and Execution

  Leadership Development

  Building Products Industry

  Portfolio Management

  Capital Allocation

  Global Operations

  Enterprise Risk Management

  Public Company Board Experience

 

                

 

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Nominees As Class III Directors – Terms Expiring in 2022 (continued)
 

LOGO

  

 

Elizabeth M. Lilly

 

Age: 56

Director since: N/A

Independent

  

Apogee Committees:

  N/A

  

Ms. Lilly has served as Chief Investment Officer and Executive Vice President for The Pohlad Companies, a privately-owned business based in Minneapolis, Minnesota that holds a diverse group of businesses and business interests, since 2018. She oversees the public and private investments for the Pohlad family and provides leadership and management of the investment team of The Pohlad Companies. Ms. Lilly has over 30 years in portfolio and investment management experience. She founded Crocus Hill Partners, a small capitalization portfolio firm, in 2017 and served as President from 2017 to 2018. She served as Senior Vice President and Portfolio Manager for Gabelli Asset Management from 2002 to 2017. She was a co-founder of Woodland Partners, LLC in 1997 and served as Managing Director from 1997 to 2002, when the firm was acquired by Gabelli Asset Management. Earlier in her career, Ms. Lilly served in various portfolio management and analyst positions for First Asset Management, Fund American Companies and Goldman, Sachs and Company.

 

  

Skills & Qualifications:

  Executive Leadership

  Financial Management

  Portfolio Management

  Asset Management

  Leadership Development

  Financial Markets

  Capital Allocations

     

LOGO

  

 

Mark A. Pompa

 

Age: 55

Director since: 2018

Independent

 

 

Audit Committee Financial Expert

  

Apogee Committees:

  Audit

  

Mr. Pompa has served as the Executive Vice President and Chief Financial Officer of EMCOR Group, Inc., a Fortune 500 leader in mechanical and electrical construction services, industrial and energy infrastructure and building services, since 2007. Previously, he was Senior Vice President and Chief Accounting Officer of EMCOR from 2003 to 2006 and Treasurer from 2003 to 2007. He joined EMCOR in 1994, serving as Vice President and Controller until 2003. Prior to joining EMCOR, Mr. Pompa was an Audit and Business Advisory Manager at Arthur Andersen LLP.

  

Skills & Qualifications:

  Executive Leadership

  Financial Management

  Accounting and Audit

  Commercial Construction Industry

  Business Operations

  Investor Relations

  Mergers and Acquisitions

  Strategy Development and Execution

  Enterprise Risk Management

  Leadership Development

  Executive Compensation

 

                

 

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Class I Directors – Term Expiring in 2020   

LOGO

  

 

Lloyd E. Johnson

 

Age: 65

Director since: 2017

Independent

 

 

Audit Committee Financial Expert

  

Apogee Committees:

  Audit

  

 

Mr. Johnson was the Global Managing Director, Finance and Internal Audit of Accenture Corporation, a global management consulting and professional services firm providing strategy, consulting, digital technology and operations services, from 2004 to 2015. Prior to joining Accenture Corporation, he served as Executive Director, M&A and General Auditor for Delphi Automotive PLC, a vehicle components manufacturer, from 1999 to 2004. From 1997 to 1999, he served as Corporate Vice President, Finance and Chief Audit Executive for Emerson Electric Corporation, a diversified global manufacturing company serving industrial, commercial and consumer markets. Earlier in his career, he held senior finance leadership roles at Sara Lee Knit Products, a division of Sara Lee Corporation; Shaw Food Industries, a privately-held food service supply company; and Harper, Wiggins & Johnson, CPA, a regional accounting firm. Mr. Johnson began his career with Coopers & Lybrand, a global accounting firm that became part of PricewaterhouseCoopers, a global accounting firm.

 

  

Skills & Qualifications:

  Executive Leadership

  Public Accounting and Audit

  Financial Management

  Business Operations

  Enterprise Risk Management

  Mergers and Acquisitions

  International Business

  Information Technology, including Cybersecurity

  Leadership Development

  Executive Compensation

  Corporate Governance

  Industrial Commercial and Consumer Markets

                
        

LOGO

  

 

Donald A. Nolan

 

Age: 58

Director since: 2013

Independent

 

 

Audit Committee Financial Expert

  

Apogee Committees:

  Audit

  Compensation

  

Public Directorships:

  Kennametal Inc.
(2014 – 2016)

 

Mr. Nolan served as President and Chief Executive Officer of Kennametal Inc., an industrial technology leader serving customers across the aerospace, earthworks, energy, industrial production, transportation and infrastructure industries, from 2014 to 2016. Prior to joining Kennametal Inc., he served as President of the Materials Group for Avery Dennison Corporation, a global leader in labeling and packaging materials and solutions, from 2008 to 2014. Mr. Nolan served in various executive capacities for Valspar Corporation, a global leader in the paint and coatings industry, from 1996 to 2008. Earlier in his career, Mr. Nolan served in marketing and sales positions with Loctite Corporation, Ashland Chemical Company, General Electric Company and the Timken Company.

  

Skills & Qualifications:

  Executive Leadership

  Business Operations

  Strategy Development and Execution

  Marketing and Sales

  Financial Management

  International Business

  Mergers and Acquisitions

  Enterprise Risk Management

  Leadership Development

  Corporate Governance

  Executive Compensation

  Public and Private Company Board Experience

 

                     

 

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Class I Directors – Term Expiring in 2020 (continued)

 

LOGO

  

 

Patricia K. Wagner

 

Age: 57

Director since: 2016

Independent

 

 

Audit Committee Financial Expert

  

 

Apogee Committees:

  Audit

  Compensation

  

Ms. Wagner retired from Sempra Energy, a Fortune 500 energy services holding company, in 2019, after 24 years of service with Sempra Energy Companies. She served as Group President of U.S. Utilities, overseeing San Diego Gas & Electric, Southern California Gas Company (“SoCalGas”) and Sempra Energy’s investment in Oncor Electric Delivery Company LLC, from 2018 to 2019. She has served in several leadership positions for the Sempra Energy family of companies, including Chief Executive Officer of SoCalGas from 2017 to 2018; Executive Vice President of Sempra Energy in 2016; President and Chief Executive Officer of Sempra U.S. Gas & Power from 2014 to 2016; and other leadership positions for the Sempra Energy family of companies from 1995 to 2014. Prior to joining Sempra Energy, Ms. Wagner held management positions at Fluor Daniel, an engineering, procurement, construction and maintenance services company. Earlier in her career, Ms. Wagner held positions at McGaw Laboratories and Allergan Pharmaceuticals.

 

  

Skills & Qualifications:

  Executive Leadership

  Business Operations

  Financial Management

  Accounting and Audit

  Strategy Development and Execution

  Energy Industry

  Enterprise Risk Management

  Information Technology

  Mergers and Acquisitions

  Regulatory Compliance

  Leadership Development

  Executive Compensation

 

Class II Directors – Terms Expiring 2021

 

LOGO

  

 

Bernard P. Aldrich

 

Age: 70

Director since: 1999

Independent

 

 

Non-Executive Chair since 2011

  

 

Apogee Committees:

  Ad hoc Member – all Board Committees

  

 

Public Directorships:

  Rimage Corporation
(1997 – 2009)

Mr. Aldrich retired as Chief Executive Officer and President, and a director of Rimage Corporation (now Qumu Corporation), a publicly-held designer and manufacturer of on-demand publishing and duplicating systems for CD and DVD-recordable media, in 2009, after 12 years of service in those capacities. Prior to joining Rimage Corporation in 1997, he served as President of several manufacturing companies controlled by Activar, Inc., an industrial plastics and construction supply company, from 1995 to 1996. Mr. Aldrich served as President of Colwell Industries, a company that designs, manufactures and distributes color merchandising tools, from 1992 to 1994; and as Chief Financial Officer of Advance Machine Co., a manufacturer and supplier of equipment for the commercial floor care industry, from 1973 to 1991.

  

Skills & Qualifications

  Executive Leadership

  Manufacturing Operations

  Business Operations

  Financial Management

  Enterprise Risk Management

  International

  Leadership Development

  Executive Compensation

  Corporate Governance

  Public and Private Company Board Experience

                

 

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Class II Directors – Terms Expiring 2021 (continued)

 

LOGO

  

 

Herbert K. Parker

 

Age: 61

Director since: 2018

Independent

 

 

Audit Committee Financial Expert

  

 

Apogee Committees:

  Audit

  

 

Public Directorships:

  TriMas Corporation
(2015 – Present)

  nVent Electric plc
(2018 – Present)

  TMS International Corporation
(2012 – 2014)

Mr. Parker is the retired Executive Vice President - Operation Excellence of Harman International Industries, Inc., a worldwide leader in the development, manufacture, and marketing of high quality, high-fidelity audio products, lighting solutions, and electronic systems. He joined Harman International in June 2008 as Executive Vice President and Chief Financial Officer and served in that capacity to 2015. He served as Executive Vice President - Operation Excellence from 2015 to 2017. Prior to joining Harman International Industries, Inc., Mr. Parker served in various senior financial positions with ABB Ltd. (known as ABB Group), a global power and technology company, from 1980 to 2006, including as the Chief Financial Officer of the Global Automation Division from 2002 to 2005 and the Americas Region from 2006 to 2008. Mr. Parker began his career as a staff accountant with C-E Systems.

 

  

Skills & Qualifications:

  Executive Leadership

  Accounting and Audit

  Financial Management

  Mergers and Acquisitions

  Property and Asset Acquisition and Management

  Investor Relations

  Operations

  Enterprise Risk Management

  Sarbanes-Oxley Compliance

  International Business

  Leadership Development

  Corporate Governance

  Public Company Board Experience

     

LOGO

  

 

Joseph F. Puishys

 

Age: 61

Director since: 2011

Not Independent

 

 

Chief Executive Officer and President

  

 

Apogee Committees:

  N/A

  

 

Public Directorships:

  Arctic Cat, Inc.
(2013 – 2017)

Mr. Puishys has served as our Chief Executive Officer and President since August 2011. Prior to joining our Company, he served in various leadership positions at Honeywell International, Inc., a Fortune 100 diversified technology and manufacturing company, for over 32 years. He served as President of Honeywell Environment & Combustion Controls from 2008 to 2011; President of Honeywell Building Solutions from 2005 to 2008; President of Honeywell Building Solutions, America from 2004 to 2005; President of Bendix Friction Materials from 2002 to 2004; Vice President and General Manager of Garrett Engine Boosting Systems from 2000 to 2002; Vice President and General Manager, Aftermarket, Allied Signal Turbocharging Systems from 1996 to 2000; Vice President, Logistics, Allied Signal Automotive Products Group from 1992 to 1996; and various accounting and financial positions from 1979 to 1992.

 

  

Skills & Qualifications:

  Executive Leadership

  Financial Management

  Commercial Building Industry

  Commercial Construction Industry

  Strategy Development and Execution

  Manufacturing Operations

  Sales

  Business Operations

  Leadership Development

  International Operations

  Corporate Governance

  Public Company Board Experience

           

 

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CORPORATE GOVERNANCE

Corporate Governance Resources

Information related to our corporate governance is available on our website at www.apog.com by clicking on “Investors”, selecting “Governance” and then selecting the applicable document or information. This information includes:

 

   

Board and Committee Composition

 

   

Board Committee Charters

 

   

Our Code of Business Ethics and Conduct

 

   

How to Contact the Board

 

   

Our Corporate Governance Guidelines

 

   

Our Restated Articles of Incorporation

 

   

Our Amended and Restated By-laws

Information relating to our management team is also available on our website at www.apog.com by clicking on “About Us” and then selecting “Leadership.”

We will provide copies of any of the foregoing information without charge upon written request to: Corporate Secretary, Apogee Enterprises, Inc., 4400 West 78th Street, Suite 520, Minneapolis, Minnesota 55435.

Certain sections of this Proxy Statement reference or refer you to materials posted on our website, www.apog.com. These materials and our website are not incorporated by reference in, and are not part of this Proxy Statement.

Code of Business Ethics and Conduct

Our Board of Directors has adopted our Code of Business Ethics and Conduct (our “Code of Conduct”), which is a statement of our high standards for ethical behavior and legal compliance. All of our employees and all members of our Board of Directors are required to comply with our Code of Conduct.

Corporate Governance Guidelines

Our Corporate Governance Guidelines outline the role, composition, qualifications, operation and other policies applicable to our Board of Directors and are revised as necessary to continue to reflect evolving corporate governance practices.

Director Independence

Under our Corporate Governance Guidelines, a substantial majority of the directors on our Board, and all members of our Audit, Compensation, and Nominating and Corporate Governance Committees must be independent. Each year, in accordance with NASDAQ rules, our Board of Directors affirmatively determines the independence of each director and nominee for election as a director in accordance with guidelines it has adopted, which include all elements of independence set forth in the NASDAQ listing standards.

 

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Our Nominating and Corporate Governance Committee reviewed the applicable legal standards for Board member and Board committee member independence and reported on its review to our Board of Directors. Based on this review, our Board of Directors has determined that the following non-employee directors are independent and have no material relationship with us except serving as a director and holding shares of our common stock: Bernard P. Aldrich, Lloyd E. Johnson, Donald A. Nolan, Herbert K. Parker, Mark A. Pompa and Patricia K. Wagner, as well as Jerome L. Davis, Sara L. Hays and Richard V. Reynolds, who are retiring from our Board of Directors at the conclusion of the Annual Meeting, and John T. Manning and Robert J. Marzec, both of whom retired from our Board effective as of our 2018 Annual Meeting of Shareholders. The Board has also determined that Christina M. Alvord, Frank G. Heard and Elizabeth M. Lilly, the New Director Candidates, are independent and have no material relationship with us. Our Board of Directors has determined that Joseph F. Puishys is not independent because he serves as our Chief Executive Officer and President.

Board Leadership Structure

Our Board of Directors separated the roles of Chair of the Board and Chief Executive Officer in 2011, and Mr. Aldrich has served as our Non-Executive Chair since 2011. In this capacity, Mr. Aldrich has chaired our annual meetings of shareholders, the meetings of our Board of Directors and executive sessions of our independent directors. The Non-Executive Chair of our Board, in consultation with our Chief Executive Officer, establishes the agenda for each meeting of our Board of Directors. The Non-Executive Chair also attends Committee meetings as an ad hoc member, and serves as the primary liaison between the senior management team and the Board. The Board determined that having a Non-Executive Chair would enable our Chief Executive Officer to focus his time and energy on development of strategy, operational improvements and leadership of the management and employee team. The Board and our Chief Executive Officer believe that this division of responsibilities has served the Board, the Company and our shareholders well.

New Director Candidates

On November 10, 2019, we signed a Cooperation Agreement with our shareholder Engaged Capital, after a series of discussions on the composition of the Board and other governance matters. Pursuant to the Cooperation Agreement, we agreed to the nomination of three new, independent directors to the Board at the Annual Meeting. The Board subsequently nominated Ms. Alvord, Mr. Heard and Ms. Lilly to the Board.

The New Director Candidates are not affiliated with Engaged Capital, and they have not, and would not, receive compensation or other payments from any third parties, including Engaged Capital, in exchange for their candidacy or their service on our Board. In addition, Engaged Capital has agreed that the New Director Candidates will not provide any non-public information regarding the Company to Engaged Capital and has further agreed not to seek any such information from the New Director Candidates during the term of the Cooperation Agreement.

We have agreed with Engaged Capital that the Board would appoint Ms. Alvord to the Nominating and Corporate Governance Committee, Mr. Heard to the Audit Committee and Ms. Lilly to the Compensation Committee upon their election to the Board. Furthermore, as long as Engaged Capital owns at least 3.5% of the Company’s then outstanding shares of common stock or the stock equivalent thereof (calculated as of the date of the Cooperation Agreement):

 

   

The size of the Board will not exceed ten directors, unless at least two-thirds of the directors (including two of the New Director Candidates) approve such increase.

 

   

If a New Director Candidate is no longer able to serve for any reason unforeseen by Engaged Capital, including prior to the Annual Meeting, then the Company and Engaged Capital would select a mutually-agreeable independent replacement director.

The Cooperation Agreement will expire on August 1, 2020, unless it is terminated earlier (the “Termination Date”). Until the Termination Date, Engaged Capital has committed to customary standstill restrictions relating to proxy contests and other activist campaigns, share purchases (up to 9.9%) and

 

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related matters. Until the Termination Date, Engaged Capital has agreed to vote all of its shares of the Company’s common stock at any annual or special meeting and any consent solicitation of the Company’s shareholders (1) in accordance with the Board’s recommendations for director elections and related matters; and (2) in accordance with the Board’s recommendations on all other proposals, provided, however, that in the event that Institutional Shareholder Services Inc. (“ISS”) recommends otherwise with respect to any proposals (other than the election or removal of directors), Engaged Capital is permitted to vote in accordance with ISS’s recommendation; provided, further, that Engaged Capital is permitted to vote in its sole discretion with respect to any proposals related to an extraordinary transaction such as a merger or sale of the Company.

The foregoing description of the Cooperation Agreement is not complete and is qualified in its entirety by reference to the Cooperation Agreement, a copy of which was filed as Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on November 12, 2019, which is incorporated herein by reference.

Criteria for Membership on Our Board of Directors

Director candidates should possess the highest personal and professional ethics, integrity and values; be committed to representing the long-term interests of our stakeholders; have an inquisitive and objective perspective, practical wisdom and mature judgment; and be willing to challenge management in a constructive manner. Our Board of Directors strives for membership that is diverse in gender, ethnicity, age, geographic location, and business skills and experience at policy-making levels. In addition, director candidates must be willing to devote sufficient time to carrying out their duties and responsibilities effectively, and should be committed to serving on our Board of Directors for an extended period of time.

Procedure for Evaluating Director Nominees

Our Nominating and Corporate Governance Committee’s procedure for reviewing the qualifications of all nominees for membership on our Board of Directors includes making a preliminary assessment of each proposed nominee, based upon resume and biographical information, willingness to serve and other background information, business experience and leadership skills. The Board believes that its membership should reflect a diversity of experience, skills, geography, gender and ethnicity. The Committee considers each of these factors when evaluating Board composition, and it considers these factors on an ongoing basis as it identifies and evaluates director candidates. All director candidates who continue in the process are then interviewed by members of our Nominating and Corporate Governance Committee and other current directors. Our Nominating and Corporate Governance Committee makes recommendations to our Board of Directors for inclusion in the slate of director nominees at a meeting of shareholders, or for appointment by our Board of Directors to fill a vacancy. Prior to recommending a director to stand for re-election for another term, our Nominating and Corporate Governance Committee applies its director candidate selection criteria, including a director’s past contributions to our Board of Directors, effectiveness as a director and desire to continue to serve as a director.

Board Refreshment

Our Company has had an active board refreshment program the past four years with planned retirements of long-termed directors.

From fiscal 2017 through fiscal 2019, we added four directors: Patricia K. Wagner, Lloyd E. Johnson, Herbert K. Parker and Mark A. Pompa. In addition, we are presenting three new director nominees for election to our Board at the 2019 Annual Meeting of Shareholders. If these director nominees are elected to our Board, seven of our ten directors will have less than five years of tenure on our Board.

 

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Retirement Policy

Our Board of Directors has established a policy that, unless otherwise approved by a majority of our directors, no individual may stand for election to our Board after his or her 72nd birthday.

Stock Ownership Guidelines for Non-Employee Directors

Our Board of Directors believes that non-employee directors should have a significant equity interest in Apogee and established voluntary stock ownership guidelines for directors in 2002. The guidelines encourage share ownership by our directors in an amount having a market value equal to three times the annual Board retainer to be achieved within five years of first being elected as a director. For fiscal 2019, the annual Board retainer was $60,000. In calculating share ownership of our non-employee directors, we include shares of restricted stock and restricted stock units issued pursuant to our Director Stock Plan, and phantom stock units issued pursuant to our Director Deferred Compensation Plan, but do not include unexercised stock options. Shares are valued based on the average closing price of our common stock for the most recently completed fiscal year. As of March 1, 2019, the last trading day of fiscal 2019, all of our non-employee directors exceeded our stock ownership guidelines, except for Mr. L. Johnson, who joined our Board on June 22, 2017, and Mr. Pompa, who joined our Board on October 2, 2018. Both Messrs. L. Johnson and Pompa are currently on pace to meet our guidelines within five years of election to our Board.

Board Meetings and 2018 Annual Meeting of Shareholders

During fiscal 2019, our Board of Directors met eleven times and our non-employee directors met in executive session without our Chief Executive Officer or any other members of management being present seven times. Each of our directors attended at least 75% of the regularly scheduled and special meetings of our Board of Directors and the Board committees on which he or she served that were held during the time he or she was a director during fiscal 2019.

All members of our Board of Directors are expected to attend our annual meeting of shareholders, and all the members of our Board of Directors who continued to serve on our Board after our 2018 Annual Meeting of Shareholders attended such meeting.

 

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Board Committee Responsibilities, Meetings and Membership

We currently have three standing Board Committees: Audit, Compensation, and Nominating and Corporate Governance. Each Committee operates under a written charter that is available on our website at www.apog.com by clicking on “Investors” and selecting “Governance” and then clicking on the applicable Board Committee.

 

Board Committee

  

Responsibilities

AUDIT COMMITTEE

 

All Members Independent

 

This Committee has oversight responsibilities for our independent registered public accounting firm.

 

Each member meets the independence and experience requirements of the NASDAQ listing standards and the SEC.

 

Each member is an “audit committee financial expert” under the rules of the SEC.

  

   Directly responsible for the appointment, compensation, retention and oversight of the work of the firm that serves as the independent accountants to audit our financial statements.

 

   Oversees our system of financial controls, internal audit procedures and internal audit function.

 

   Oversees our program to ensure compliance with legal and regulatory requirements and ethical business practices.

 

   Assesses and establishes policies and procedures to manage our financial reporting and internal control risk.

 

   Establishes policies and procedures for the pre-approval of all services by our independent registered public accounting firm.

 

   Establishes procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters.

 

   Considers the accounting firm’s independence.

 

COMPENSATION COMMITTEE

 

All Members Independent

 

This Committee administers our executive compensation program.

 

Each member is a “non-employee” director, as defined in the Exchange Act, and is an “outside director” as defined in Section 162(m).

 

  

   Establishes our executive compensation philosophy and compensation programs that comply with this philosophy.

 

   Determines the compensation of our executive officers and other members of senior management.

 

   Administers our stock incentive plans in which our employees participate.

 

   Administers our annual cash and long-term incentive plans for executive officers and other members of senior management.

 

   Reviews its decisions on compensation for our Chief Executive Officer with the full Board of Directors prior to communicating those decisions to our Chief Executive Officer.

 

   Directly responsible for the appointment, compensation, retention and oversight of the independent compensation consultant.

 

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE

 

All Members Independent

 

This Committee identifies and evaluates Board candidates and oversees our corporate governance practices.

  

   Develops a Board succession plan and establishes and implements procedures to review the qualifications for membership on our Board of Directors, including nominees recommended by shareholders.

 

   Assesses our compliance with our Corporate Governance Guidelines.

 

   Reviews our organizational structure and senior management succession plans.

 

   Makes recommendations to our Board of Directors regarding the composition and responsibilities of our Board committees and compensation for directors.

 

   Administers an annual performance review of our Board committees, Board of Directors as a whole and our directors whose terms are expiring.

 

   Administers an annual review of the performance of our Chief Executive Officer, which includes soliciting assessments from all non-employee directors.

 

   Administers our 2009 Director Stock Plan and Director Deferred Compensation Plan.

 

 

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The table below provides fiscal 2019 membership and meeting information for each of our standing Board committees.

 

Name

    Audit Committee     Compensation
        Committee        
   Nominating and
Corporate Governance
        Committee         

Bernard P. Aldrich(1)

      

Jerome L. Davis(2)

    C   

Sara L. Hays(2)

    M                      M

Lloyd E. Johnson

              C(3)(4)     

John T. Manning

              M(4)(5)                        M(5)

Robert J. Marzec

              C(4)(6)     

Donald A. Nolan

              M(4)(7)   M                      M(7)

Herbert K. Parker

              M(4)(8)                        M(8)

Mark A. Pompa

              M(4)(9)     

Joseph F. Puishys

      

Richard V. Reynolds(2)

                         C

Patricia K. Wagner

              M(4)   M   

Fiscal 2019 Meetings

              7   5                      4

C = Committee Chair M = Committee Member

 

(1)

Mr. Aldrich serves as Non-Executive Chair of our Board and attends Board Committee meetings as an ad hoc member.

 

(2)

Mr. Davis, Ms. Hayes and Mr. Reynolds will retire from our Board at the conclusion of our 2019 Annual Meeting of Shareholders.

 

(3)

Mr. L. Johnson has served as Chair since June 28, 2018 and as a member prior to June 28, 2018.

 

(4)

Audit committee financial expert under the rules of the SEC.

 

(5)

Mr. Manning served as a member of the Audit Committee and the Nominating and Corporate Governance Committee through our 2018 Annual Meeting of Shareholders, when he retired from our Board.

 

(6)

Mr. Marzec served as Chair of the Audit Committee through our 2018 Annual Meeting of Shareholders, when he retired from our Board.

 

(7)

Mr. Nolan served as a member of the Audit Committee through June 28, 2018 and as a member of the Nominating and Corporate Governance Committee since June 28, 2018.

 

(8)

Mr. Parker has served as a member of the Audit Committee since April 27, 2018 and as a member of the Nominating and Corporate Governance since October 3, 2018.

 

(9)

Mr. Pompa has served as a member of the Audit Committee since October 3, 2018.

 

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Risk Oversight by Our Board of Directors

Our Board of Directors oversees our enterprise risk management processes, focusing on our business, strategic, financial, operational, information technology and overall enterprise risk. Our Board determined that oversight of our Company’s strategy and overall enterprise risk management program is more effective when performed by the full Board, utilizing the skills and experiences of all Board members. In addition, our Board of Directors executes its overall responsibility for risk management through its Committees, as follows:

 

   

Our Audit Committee has primary responsibility for risk management relating to the reliability of our financial reporting processes, system of internal controls and corporate compliance program. Our Audit Committee receives quarterly reports from management, our independent registered public accounting firm and internal audit partner regarding our financial reporting processes, internal controls and public filings. It also receives quarterly updates from management regarding Code of Conduct issues, litigation and legal claims, and other compliance matters.

 

   

Our Compensation Committee, with assistance from its independent compensation consultant, oversees risk management associated with our compensation programs, policies and practices with respect to both executive compensation and compensation in general.

 

   

Our Nominating and Corporate Governance Committee oversees risk management associated with succession planning, non-employee director compensation, overall Board of Directors and Board Committee performance, and corporate governance practices.

Sustainability Focus

We have a company-wide commitment to sustainable business practices, focused on long-term profitable growth, while carefully stewarding the resources entrusted to us. Our commitment to sustainability is reflected in our Core Values which are the foundation of Apogee’s culture. Our Core Values are integrity, customer-focus, employee involvement and ownership, accountability, safe work environment, one team and respect for the individual.

Our commitment to sustainability begins with our people. We are continually focused on strengthening our team to ensure that we have the capabilities in place to consistently deliver for our customers. Apogee has an enterprise-wide talent management program in place to hire, train, and develop a diverse team of employees and leaders. We are also committed to our employees’ safety and wellness, with a robust workplace safety program, a comprehensive benefits package, and wellness initiatives to promote healthy lifestyles.

Our architectural products and services are key enablers to green building and sustainable design. We’ve long been at the forefront of developing innovative products and services that conserve resources and help architects and building owners achieve their sustainability goals. Our high-performance thermal framing systems, custom architectural glass coatings and other products help improve building energy efficiency, reduce greenhouse gas emissions, and increase security and comfort for building occupants.

Our commitment to sustainability also extends to our own operations as well. Through our company-wide Lean Enterprise initiative we are continually focused on eliminating waste and minimizing resource consumption. As a leader in our industry, we are committed to environmentally sustainable manufacturing practices and we have policies in place to comply with applicable environmental laws and regulations.

Finally, we strive to make a difference in the communities where we operate. Apogee and our business units have a long legacy of giving back to the communities where we do business through volunteerism, donations and financial support. We also work to strengthen the communities where we operate by investing in our business and creating good jobs.

Information related to our sustainability efforts is available on our website at www.apog.com by clicking “Sustainability.”

 

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Certain Relationships and Related Transactions

We have established written policies and procedures (the “Related Person Transaction Policy”) to assist us in reviewing transactions in excess of $120,000 involving our Company and our subsidiaries and Related Persons (“Related Persons Transactions”). A Related Person includes our Company’s directors, director nominees, executive officers and beneficial owners of 5% or more of our Company’s common stock and their respective Immediate Family Members (as defined in our Related Person Transaction Policy). Our Related Person Transaction Policy supplements our Code of Business Ethics and Conduct Conflict of Interest Policy, which applies to all of our employees and directors.

Our Related Person Transaction Policy requires any Related Person Transaction to be promptly reported to the Chair of our Nominating and Corporate Governance Committee. In approving, ratifying or rejecting a Related Person Transaction, our Nominating and Corporate Governance Committee will consider such information as it deems important to determine if the Related Person Transaction is fair to our Company. Our Conflict of Interest Policy requires our employees and directors to report to our General Counsel any potential conflict of interest situations involving any employee or director, or their Immediate Family Members. During fiscal 2019, there were no Related Party Transactions involving a Related Person, as defined in the policy.

 

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NON-EMPLOYEE DIRECTOR COMPENSATION

Non-Employee Director Compensation Arrangements During Fiscal 2019

We structure director compensation to attract and retain qualified non-employee directors and to further align the interests of directors with the interests of shareholders.

Our Board of Directors approves the compensation for members of our Board of Directors and Board committees based on the recommendations of our Nominating and Corporate Governance Committee. We target compensation for service on our Board of Directors and Board committees generally at the 50th percentile for board service at companies in our peer group of companies, using the same peer group used for executive compensation purposes and described under the heading “Peer Group” on page 48. Generally, our Nominating and Corporate Governance Committee reviews and discusses the compensation data and analysis provided by management with reference to a third-party compensation database. Our Chief Executive Officer participates in the discussions on compensation for members of our Board of Directors. Directors who are employees receive no additional compensation for serving on our Board of Directors.

The following table describes the compensation arrangements with our non-employee directors as of the end of fiscal 2019.

 

Compensation

   Fiscal 2019  

Annual Cash Retainers:

  

Non-Executive Chair of the Board

     $135,000(1)  

Board Member

     60,000  

Audit Committee Chair

     30,000  

Audit Committee Member

     15,000  

Compensation Committee Chair

     25,000  

Compensation Committee Member

     10,000  

Nominating and Corporate Governance Committee Chair

     25,000  

Nominating and Corporate Governance Committee Member

     10,000  

Equity Grant

     95,004(2)  

Charitable Matching Contributions Program

     $2,000 maximum aggregate annual match  

 

(1)

We pay an annual cash retainer to our Non-Executive Chair of the Board. The Non-Executive Chair also receives an annual equity award, similar to the other non-employee directors.

 

(2)

On June 28, 2018, we granted a restricted stock award of 1,952 shares, having a value of $95,004 on the date of grant that vests over three years in equal annual installments on the anniversaries of the award to each of our non-employee directors who was serving on our Board the date of the 2018 Annual Meeting of Shareholders and whose term continued after our 2018 Annual Meeting of Shareholders. In addition, Messrs. Parker and Pompa, who joined our Board during fiscal 2019, each received a restricted stock award on the day they joined our Board.

 

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Restricted Stock Awards and Restricted Stock Unit Awards

Restricted stock awards to non-employee directors are issued pursuant to our 2009 Director Stock Plan. Each non-employee director receives a restricted stock award on the date he or she is first elected to our Board and annually on the date of our annual meeting of shareholders if his or her term continues after such meeting. The dollar value of the restricted stock award is determined by our Board of Directors, after recommendation by our Nominating and Corporate Governance Committee and in consideration of various factors, including market data and trends. We target the equity-based compensation received by non-employee directors at approximately the 50th percentile of our peer group of companies. Generally, our Board of Directors determines the dollar value of the annual restricted stock awards in June of each year and prorates the dollar value of the restricted stock award for any director elected or appointed to our Board at a time other than an annual meeting of shareholders. Restricted stock awards vest in three equal annual installments over a three-year vesting period. Upon issuance of the restricted stock, each holder is entitled to the rights of a shareholder, including the right to vote the shares of restricted stock and receive any cash dividends and any other distributions.

Non-employee directors have the option to defer receipt of all or a portion of any restricted stock award and will receive a restricted stock unit award for that portion of the restricted stock award deferred. Restricted stock unit awards are also issued pursuant to our 2009 Director Stock Plan. Each non-employee director electing to receive a restricted stock unit award in lieu of a restricted stock award receives a credit of shares of our common stock in an amount equal to the number of shares he or she has elected to defer. The account is also credited, as of the crediting date, with an amount equal to the dividend paid on one share of our common stock multiplied by the number of shares credited to each account. Non-employee directors receiving restricted stock unit awards may elect to receive the amounts credited to their account at a fixed date, at age 70, or following death or retirement from our Board of Directors. The restricted stock unit awards and related accumulated dividends are paid out in the form of shares of our common stock (plus cash in lieu of fractional shares) either in a lump sum or in installments, at the participating director’s election. This is an unfunded book-entry, “phantom stock unit” plan, as no trust or other vehicle has been established to hold any shares of our common stock.

Director Deferred Compensation Plan

Our Director Deferred Compensation Plan was adopted by our Board of Directors to encourage our non-employee directors to increase their ownership of shares of our common stock, thereby aligning their interests in the long-term success of Apogee with that of our other shareholders. Under the plan, participants may elect to defer all or a portion of their annual cash retainer into deferred stock accounts. There is no Company match on amounts deferred by our non-employee directors under such plan. Each participating director receives a credit of shares of our common stock in an amount equal to the amount of annual cash retainer deferred divided by the fair market value of one share of our common stock as of the crediting date. These accounts also are credited, as of the crediting date, with an amount equal to the dividend paid on one share of our common stock multiplied by the number of shares credited to each account. Participating directors may elect to receive the amounts credited to their accounts at a fixed date, at age 70, or following death or retirement from our Board of Directors. The deferred amounts are paid out in the form of shares of our common stock (plus cash in lieu of fractional shares) either in a lump sum or in installments, at the participating director’s election. This plan is an unfunded, book-entry, “phantom stock unit” plan, as no trust or other vehicle has been established to hold any shares of our common stock.

Charitable Matching Contributions Program for Non-Employee Directors

Under our Charitable Matching Contributions Program for Non-Employee Directors, we match cash or publicly-traded stock contributions made by our non-employee directors to charitable organizations that are exempt from federal income tax up to a maximum aggregate amount of $2,000 per eligible non-employee director per calendar year.

 

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Fiscal 2019 Non-Employee Director Compensation Table

The following table shows the compensation paid to our non-employee directors for fiscal 2019.

 

Name

   Fees Earned or
  Paid in Cash ($)(1)  
   Stock
      Awards ($)(2)       
  All Other
  Compensation ($)(3)  
               Total ($)             

Bernard P. Aldrich

       135,000        95,004       35,955        265,959

Jerome L. Davis(4)

       85,000        95,004       17,505        197,509

Sara L. Hays(4)

       80,000        95,004              18,583        193,587

Lloyd E. Johnson

       85,000        95,004       3,794        183,798

John T. Manning(5)

       28,334               —       551        28,885

Robert J. Marzec(5)

       29,750               —       13,667        43,417

Donald A. Nolan

       81,667        95,004       11,617        188,288

Herbert K. Parker(6)

       66,667        110,838 (5)        3,201        180,706

Mark A. Pompa(7)

       31,250        71,233 (6)        492        102,975

Richard V. Reynolds(4)

       85,000        95,004       22,496        202,500

Patricia K. Wagner

       85,000        95,004       2,486        182,490

 

(1)

Includes cash retainers deferred by non-employee directors under our Director Deferred Compensation Plan, as further described under the heading “Director Deferred Compensation Plan” on page 29. During fiscal 2019, Messrs. Davis, Marzec, Nolan and Pompa were our only non-employee directors to make deferrals of all or a portion of their annual cash retainers pursuant to our Director Deferred Compensation Plan.

 

(2)

The amounts in this column are calculated based on the fair market value of our common stock on the date the award was made in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”). On June 28, 2018, each of our non-employee directors whose term continued after our 2018 Annual Meeting of Shareholders received a restricted stock award or, if a director elected to defer receipt of all or a portion of his or her restricted stock award, a restricted stock unit award, of 1,952 shares. The closing price of our common stock on the NASDAQ Global Select Market on June 28, 2018, the date of grant, was $48.67. The table below sets forth certain information with respect to the aggregate number of shares of unvested restricted stock and restricted stock units, including shares from dividends credited to the account held by our non-employee directors as of March 2, 2019, the end of fiscal 2019. Our non-employee directors did not hold any stock options as of March 2, 2019.

 

Name

         Aggregate Number of      
Shares of
Restricted Stock (#)
   Aggregate Number of
Shares of Deferred
    Restricted Stock Units (#)    

Bernard P. Aldrich

       3,761       

Jerome L. Davis

              7,198

Sara L. Hays

       3,761       

Lloyd E. Johnson

       1,147        1,969

John T. Manning

             

Robert J. Marzec

             

Donald A. Nolan

              7,198

Herbert K. Parker

       2,330       

Mark A. Pompa

              1,768

Richard V. Reynolds

              7,198

Patricia K. Wagner

       3,761       

 

(3)

This column includes dividends and dividend equivalents paid on shares of restricted stock and restricted stock unit awards, respectively, issued pursuant to our 2009 Director Stock Plan, dividend equivalents paid on phantom stock units pursuant to our Director Deferred Compensation Plan and matching contributions pursuant to our Charitable Matching Contributions Program for Non-Employee Directors. The table below sets forth the amounts contributed or paid by the Company for our non-employee directors pursuant to such plans with respect to fiscal 2019.

 

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Name

       Dividends    
Paid on
Shares of
Restricted
Stock ($)
   Dividend
Equivalents
Paid on Shares
of Deferred
  Restricted Stock  
Units ($)
   Dividend
Equivalents
Paid on
  Phantom Stock  
Units ($)
   Matching
   Contributions   

under our
Charitable
Matching
Contributions
Program for

Non-Employee
Directors ($)
   Total
    All Other    
Compen-
sation ($)

Bernard P. Aldrich

       2,394               31,561        2,000        35,955

Jerome L. Davis

              4,324        11,181        2,000        17,505

Sara L. Hays

       2,394               14,189        2,000        18,583

Lloyd E. Johnson

       833        961               2,000        3,794

John T. Manning

       551                             551

Robert J. Marzec

       551               11,116        2,000        13,667

Donald A. Nolan

              4,324        5,293        2,000        11,617

Herbert K. Parker

       1,201                      2,000        3,201

Mark A. Pompa

              309        183               492

Richard V. Reynolds

              4,324        16,172        2,000        22,496

Patricia K. Wagner

       2,486                             2,486

 

(4)

Mr. Davis, Ms. Hays and Mr. Reynolds will retire from our Board at the conclusion of our Annual Meeting.

 

(5)

Messrs. Manning and Marzec retired from our Board at the conclusion of our 2018 Annual Meeting of Shareholders.

 

(6)

Mr. Parker was elected to our Board on April 26, 2018. He received a restricted stock award for 378 shares on April 26, 2018. The closing price of our common stock on the NASDAQ Global Market on April 26, 2018, the date of grant, was $41.89. Mr. Parker also received a restricted stock award for 1,952 shares on June 28, 2018, the date of our 2018 Annual Meeting.

 

(7)

Mr. Pompa was elected to our Board on October 2, 2018. He received a restricted stock award for 1,768 shares on October 2, 2018. The closing price of our common stock on the NASDAQ Market on October 2, 2018, the date of grant, was $40.29.

 

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Table of Contents

EXECUTIVE COMPENSATION

Compensation Committee Report

Our Compensation Committee has reviewed and discussed the following Compensation Discussion and Analysis section with management and the Committee’s independent compensation consultant. Based on its review and discussions with management, our Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in the Company’s 2019 Proxy Statement and Annual Report on Form 10-K for the fiscal year ended March 2, 2019.

Compensation Committee of the

Board of Directors of Apogee

Jerome L. Davis, Chair

Sara L. Hays

Donald A. Nolan

Patricia K. Wagner

Compensation Discussion and Analysis

This Compensation Discussion and Analysis describes Apogee’s executive compensation program for fiscal 2019, and certain elements of the fiscal 2020 program. In particular, this section explains how our Compensation Committee (the “Committee”) made decisions related to compensation for our executives, including our Named Executive Officers, for fiscal 2019.

Our Named Executive Officers for fiscal 2019 were:

 

   

Joseph F. Puishys, Chief Executive Officer and President

 

   

James S. Porter, Executive Vice President and Chief Financial Officer

 

   

Brent C. Jewell, Senior Vice President, Business Development and Strategy(1)

 

   

Patricia A. Beithon, General Counsel and Corporate Secretary

 

   

Gary R. Johnson, Senior Vice President and Treasurer

Messrs. Porter, Jewell and G. Johnson and Ms. Beithon are collectively referred to as our “Other Named Executive Officers” in this Compensation Discussion and Analysis section.

 

  (1)

Mr. Jewell joined our Company on May 29, 2018 as Senior Vice President, Business Development and Strategy. On August 5, 2019, Mr. Jewell was promoted to President, Architectural Framing Systems segment.

 

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Executive Summary

About Apogee. Our Company is a world leader in the design and development of value-added glass solutions for enclosing commercial buildings and value-added glass and acrylic for picture framing and displays. We have four segments, with manufacturing and fabrication located in the U.S., Canada and Brazil. For fiscal 2019, we had net sales of approximately $1.4 billion.

 

LOGO

Our Strategy

Our strategies are to diversify net sales streams and structure the business to provide more stable net sales growth and profit generation over a commercial construction economic cycle. Our strategies are focused on diversification of end-sectors served through growth from new geographies, new products and new markets, while improving margins through productivity, project selection initiatives and rigorous cost management.

In an effort to reduce our exposure to the cyclical nature of the large-building segment of the commercial construction industry, we have expanded our focus to include mid-sized projects in the Architectural Glass segment and grow our geographic footprint through organic growth and acquisitions in our Architectural Framing Systems segment. We continue to focus on the retrofit and renovation of windows and curtainwall as we have seen increased interest from property owners in upgrading building facades and improving energy efficiency.

In the Architectural Services segment, our emphasis is on improving margins through focused commercial construction project selection, while continuing to deliver long-term organic growth through geographic expansion in line with the segment’s available project management capacity.

Within the Large-Scale Optical segment, our strategy is to grow in newer display markets that desire the value-added properties that our glass and acrylic products provide, while continuing to convert the domestic and international custom picture framing and fine art markets from clear uncoated glass and acrylic products to value-added products that protect art from ultra-violet damage and minimize reflection.

 

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Table of Contents

Our Fiscal 2019 Performance. Our Company achieved record net sales and generated significant operating cash flow. During fiscal 2019, we advanced our strategies to diversify net sales streams and position our Company to deliver shareholder value throughout the commercial construction economic cycle.

 

 

Fiscal 2019 Highlights

 

Net Sales

  

   We had net sales of $1.4 billion, or 6% over fiscal 2018. It was the eighth consecutive year of growth.

 

Earnings and Adjusted Earnings

  

   We had earnings per diluted share of $1.63 compared to $2.76 a share in fiscal 2018.

 

   We had adjusted earnings per diluted share of $2.96 per share compared to adjusted earnings per diluted share of $3.23 in fiscal 2018. See Appendix E for a reconciliation of adjusted earnings per diluted share to the most directly comparable GAAP financial measure.

 

Operational Performance

  

   We had operating margin of 4.7% compared to 8.6% in the prior year, and adjusted operating margin of 8.3% compared to adjusted operating margin of 10.0% in fiscal 2018.

 

   We had operating income of $67.3 million, including $40.9 million of project-related charges on certain contracts acquired with the purchase of EFCO, compared to operating income of $114.3 million in fiscal 2018. We had adjusted operating income of $116.3 million, compared to adjusted operating income of $133.0 million in fiscal 2018. See Appendix E for a reconciliation of adjusted operating margin and adjusted operating income to the most directly comparable GAAP financial measures.

 

   Our productivity program, which includes our Lean Enterprise initiative, contributed to operating margin from cost productivity savings through Lean Enterprise and continuous improvement projects.

 

   Cash flow generated from operations was $96.5 million, down from $127.5 million in fiscal 2018, due primarily to lower net earnings in fiscal 2019 and increased working capital needed to support an acquired curtainwall project experiencing construction delays.

 

   Continued effective management of our working capital requirements with days working capital of approximately 53 days as of the end of fiscal 2019.

 

Shareholder Return

  

   We repurchased 1,257,983 shares of our common stock during fiscal 2019 at a total cost of $43.3 million.

 

   We paid dividends totaling $18 million during fiscal 2019 and increased our quarterly cash dividend 11% to $0.1750 per share during the fourth quarter of fiscal 2019, our sixth consecutive year with a dividend increase.

 

   Although our annualized total shareholder return (“TSR”) was (16.8%) over the past one-year period, we had annualized TSR of 2.2% over the past five-year period and 14.3% over the past eight-year period under our current Chief Executive Officer’s tenure.

 

While our one-year annualized TSR was (16.8%), we believe that the significant accomplishments achieved during fiscal 2019 position our Company for future growth and improved profitability.

 

 

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During fiscal 2019, we made considerable progress on our strategies to better position our Company over the commercial construction cycle and took steps to improve our operations for future years.

 

 

Fiscal 2019 Operations Highlights

 

Entrance Into New or Expanded Geographies   

   We continued to integrate our acquisition of EFCO Corporation, a U.S. manufacturer of architectural aluminum, windows, curtainwall, storefront and entrance systems for commercial construction projects, acquired during fiscal 2018. Our EFCO acquisition expands the U.S. geographic penetration and product offerings of our Architectural Framing Systems segment.

 

   Our Architectural Framing Systems segment expanded its presence in the Western region of Canada.

 

   Our Architectural Services segment expanded its presence into the Northeast region of the United States.

 

Introduction of New Products   

   Our Architectural Glass and Architectural Framing Systems segments introduced new products during fiscal 2019, including new architectural glass coatings, high-performance thermal framing systems, and hurricane and blast protection products.

 

   We have new product introduction plans in place for each of our business units.

 

Expansion of Current Capabilities   

   We continued to make investments to increase product capabilities and manufacturing productivity.

 

   Our commercial building retrofit group won retrofit orders of over $50 million during fiscal 2019 and continued to grow the pipeline for retrofit opportunities for future years.

 

Operations Improvement Efforts   

   We continued our company-wide continuous improvement and productivity program, which includes our Lean Enterprises initiative and improvements in supply chain management. Our continuous improvement efforts included automation, labor productivity and yield improvements, manufacturing shift configurations, and numerous other continuous improvement efforts.

 

   We continued our senior and middle management leadership development programs to develop our future leaders.

 

   We continued our long-standing focus on workplace and job site safety.

 

 

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Table of Contents

Creating Shareholder Value. The chart below compares our Company’s cumulative TSR to our compensation peer group for fiscal 2019 and the Russell 2000 Index for the past one, three and five-year periods

 

LOGO

 

Fiscal Year

   FY14      FY15      FY16      FY17      FY18      FY19  

Apogee

     100.00        135.46        117.57        175.54        134.18        111.68  

Russell 2000

     100.00        105.63        90.09        122.98        136.89        143.84  

Peer Group

     100.00        98.61        95.15        132.12        124.75        128.16  

 

LOGO

(1) CAGR is defined as compound annual growth rate; based on adjusted EPS.

(2) Adjusted EPS, excluding amortization of short-lived acquired intangibles, acquisition-related costs and the income tax impact on such adjustments, totaling $0.06 per share in the aggregate; GAAP EPS was $2.97.

(3) Adjusted EPS, excluding amortization of short-lived acquired intangibles, acquisition-related costs, restructuring-related costs and the income tax impact on such adjustments totaling $0.48 per share in the aggregate; GAAP EPS was $2.76.

See Exhibit A for a reconciliation of GAAP EPS and adjusted EPS.

(4) Adjusted EPS, excluding amortization of short-lived acquired intangibles, project-related charges, impairment charge and the income tax impact on such adjustments totaling $1.33 per share in the aggregate; GAAP EPS was $1.63.

 

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Table of Contents

Executive Compensation Philosophy and Practices. Our compensation programs are designed to attract, motivate and retain executive talent to achieve success in both the short- and long-term for our Company; pay for sustainable performance in an ever-changing environment; and align the interests of our executive officers with our shareholders. We continue to refine our executive compensation program to reflect changes in our business strategy and evolving executive compensation practices.

 


Our Executive

Compensation Practices:

(What We Do)

   See
Page
  

Executive Compensation Practices

We Have Not Implemented

or Have Discontinued:

(What We Don’t Do)

   See
Page

We seek alignment of pay and performance each year. A significant portion of our compensation program is performance-based through the use of our short-term and long-term incentive plans.

 

  

38-40

  

We do not have employment contracts for our Named Executive Officers.

 

   66

We review “tally sheets” and realizable pay and performance for our Named Executive Officers and use that information as a factor in making compensation decisions.

 

   43   

We do not pay annual incentive compensation if our Company is not profitable for the year.

 

We do not provide automobile allowances or pay for club memberships for our Named Executive Officers.

 

   47

We mitigate undue compensation risk by utilizing caps on potential payments, multiple financial performance metrics, and different metrics for our annual cash incentives and long-term performance awards, as well as having robust Board and Board Committee processes to identify and manage risk.

 

   55    We do not believe any of our Company’s compensation programs create risks that are reasonably likely to have a material adverse effect on our Company.    55

We have change-in-control severance agreements with all of our Named Executive Officers that provide benefits only upon a “double trigger.”

 

  

66-67

   We do not provide for excise tax “gross-ups” or “single triggers” in our change-in-control severance agreements.   

66–67

Our equity award agreements for grants made pursuant to our 2009 Stock Incentive Plan have “double trigger” change-in-control provisions for all employees.

 

   67          
We provide minimal perquisites to our executives.    58   

We do not provide tax reimbursement or tax “gross-ups” on any perquisites.

 

   58

We have adopted stringent share ownership guidelines, and we review compliance annually.

 

   54    We do not reprice underwater stock options or stock appreciation rights.     

We evaluate share utilization by annually reviewing overhang and burn rates.

 

  

74-75

    

The Committee benefits from its utilization of a compensation consulting firm that fully meets the stringent independence requirements under the final rules of the Dodd-Frank Act.

 

   43    The Committee’s compensation consulting firm does not provide any other services to our Company other than those requested by our Compensation Committee for executive compensation.    43

We have a clawback policy that applies to our Named Executive Officers and certain other executives.

 

   54    The Committee’s independent compensation consulting firm does not provide any specific recommendations for compensation for our Named Executive Officers.     

We have a formal hedging policy that prohibits all employees and directors from engaging in hedging transactions in our Company’s securities.

 

   54     

 

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Table of Contents

The Role of Shareholder Vote on Say on Pay Proposal. Our Company provides our shareholders with the opportunity to cast an advisory vote on our Say on Pay Proposal annually. At our Company’s annual meeting of shareholders held on June 28, 2018, 95% of the votes cast on the Say on Pay Proposal were voted in favor of ratification of the proposal. The Committee did not make any changes to its programs in response to this vote. The Committee will continue to take into account the outcome of our Company’s Say on Pay Proposal when making future compensation decisions.

Our Executive Compensation Program. Total compensation includes a mix of short-term and long-term compensation and fixed and performance-based compensation.

 

   

Short-term compensation

 

 

Base salary

 

 

Annual performance-based cash incentive award

 

   

Long-term compensation

 

 

Restricted stock award – (40%)

 

 

The number of time-based restricted stock awards granted to an executive in any given year is based on market compensation data as well as individual performance in the prior year.

 

 

Cash-based performance award – (60%)

 

 

Two-year performance-based awards on end-to-end cycles that are only earned upon achievement of certain two-year financial performance measures with any earned amounts paid over two years. These awards are granted every other year and settled in cash.

 

 

We believe a two-year performance period is more appropriate for our Company due to the cyclical nature of the commercial construction industry, variability of project execution schedules as determined by our customers, and limited visibility to industry conditions and net sales more than two years out. In addition, we believe the end-to-end cycles of the awards compensate for having only two-year performance periods instead of the three-year performance periods used by many other public companies. Our Compensation Committee regularly reviews and considers the appropriate performance period for our long-term performance-based awards.

 

   

Our Chief Executive Officer also participates in a performance-based evaluation incentive program that encourages him to drive continued growth, operational improvement and successful implementation of our strategic plan and to remain with our Company. All cash awards earned by our Chief Executive Officer pursuant to this program are mandatorily deferred pursuant to our Deferred Compensation Plan until our Chief Executive Officer leaves our Company.

 

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Table of Contents

Target Compensation Mix. The charts below illustrate the target mix of short-term and long-term incentives, and fixed and performance-based compensation, for our Chief Executive Officer and Other Named Executive Officers. This information is used by the Committee as a guideline in making compensation awards for our Named Executive Officers.

 

LOGO

 

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Table of Contents

LOGO

 

(1)

Our two-year performance-based awards have end-to-end performance cycles, are granted every other year and are settled in cash. During fiscal 2019, we granted the opportunity to earn the fiscal 2019 – 2020 performance-based awards to all our Named Executive Officers. We will not make any two-year performance-based awards to our Named Executive Officers until fiscal 2021, after the completion of the current fiscal 2019 – 2020 award cycle. We have included the annualized (50%) value of such awards at target in the charts above. These awards are a component of long-term compensation for both years in the performance cycle.

 

(2)

During fiscal 2019, we granted the fiscal 2019 CEO evaluation incentive, which has a one-year performance period. All of the fiscal 2019 CEO evaluation incentive is included at target in the chart above.

 

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Highlights of Fiscal 2019 Compensation Actions. The following highlights the Committee’s key compensation decisions for fiscal 2019. These decisions were made after reviewing compensation data provided by the Committee’s independent compensation consultant.

 

   

Base Salaries. For fiscal 2019, the Committee did not award any base salary increases to our Chief Executive Officer, Chief Financial Officer or General Counsel but awarded a base salary increase of 5.1% to our Senior Vice President and Treasurer. Our Chief Executive Officer did not receive any base salary increase for fiscal 2020. The fiscal 2020 base salary increases for our Other Named Executive Officers ranged from 3.0% to 3.9%.

 

   

Annual Cash Incentive Payouts. Our annual cash incentive awards are designed to record achievement of financial goals as they are established in our annual operating plan. Our fiscal 2019 annual cash incentives paid out at an average of 35.2% of target performance, based on below-target performance on net sales (25% weighting), below-threshold performance on earnings before taxes (“EBT”) (65% weighting) and maximum performance on days working capital (“DWC”) (10% weighting). Our Chief Executive Officer earned an annual cash incentive equal to 37.0% of his fiscal 2019 base salary, and our Other Named Executive Officers earned fiscal 2019 annual cash incentives ranging from 14.1% to 26.4% of their fiscal 2019 base salaries.

 

 

Restricted Stock Awards. On April 26, 2018, the Committee awarded restricted stock awards to our Named Executive Officers that vest over three years. Our Chief Executive Officer received an award valued at $727,420 and our Other Named Executive Officers received awards with values ranging from $102,631 to $258,300.

 

 

Fiscal 2019 – 2020 Performance-Based Awards. On June 28, 2018, the Committee established the fiscal 2019 – 2020 cash-based performance awards to our Named Executive Officers. Our Chief Executive Officer received an award with a value of $2,711,500 at target and our Other Named Executive Officers received awards with values ranging from $233,100 to $783,000 at target. These awards are end-to-end awards and will only be granted every other year. Our Company will not award additional two-year cash-based performance awards until completion of the current fiscal 2019 – 2020 award cycle. The financial performance metrics for these awards are cumulative net sales (33-1/3% weighting), cumulative EPS (33-1/3% weighting) and average return on invested capital (“ROIC”) (33-1/3% weighting).

 

   

Chief Executive Officer Evaluation Incentive. Our Chief Executive Officer earned $198,688, 85% of target performance, under the fiscal 2019 CEO evaluation incentive award, which was mandatorily deferred pursuant to our Deferred Compensation Plan.

 

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Table of Contents

Overview of Primary Compensation Elements

The table below provides an overview of the three primary compensation elements used in our executive compensation program.

 

Compensation

Element

  

Objective

  

How Determined

  

Market Positioning(1)

  

How Impacted by
Performance

Base Salary and Benefits

  

Attract and retain executive officers through competitive pay and benefit programs.

 

  

Individual performance, experience, tenure, competitive market data and executive potential.

 

   Targeted to be around the 50th percentile relative to competitive market practices.    Based on individual performance.

Annual Cash

Incentive Compensation

   Create an incentive for achievement of pre-defined annual Company performance results.   

For target bonus award opportunity percentages – competitive market data and trends, and internal equity.

 

For actual bonus payouts – performance against pre-established criteria in our annual cash incentive plan.

  

Our overall performance results will yield total cash compensation levels as follows:

   Below target performance: total cash at or below the 25th percentile.

   Target performance: total cash slightly below the 50th percentile.

   Above target performance: total cash above the 50th percentile.

 

   Payout dependent on achievement of one-year Company financial performance goals.

Long-Term Incentive Compensation:

   Restricted Stock (40% awarded annually) and

   Two-Year Performance-Based Awards (60% awarded every other year)

  

Align the interests of executives with shareholders and to focus on long-term sustained performance, entrepreneurial style and quality products and services while creating appropriate retention incentives through the use of multi-year vesting schedules.

 

  

Individual performance, company performance, market data and trends, internal equity and executive potential.

 

New hire, promotion and special awards. Internal equity and market data and trends.

   Targeted generally to be at or slightly above the 50th percentile for target performance and up to the 75th percentile for maximum performance.   

Performance that increases our stock price increases the value of the restricted stock awards.

 

Cash payout of the two-year performance-based awards is dependent on achievement of two-year Company financial performance goals.

 

 

  (1)

Actual pay levels may be above or below the targeted level depending on all of the factors outlined in the “How Determined” column of the table.

 

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Table of Contents

Compensation Process

Our compensation program is evaluated annually taking into consideration changes to our business strategy, the economy and our competitive marketplace, as well as evolving executive compensation practices.

During the first quarter of each fiscal year, the performance of each of our Named Executive Officers is evaluated based on a subjective assessment of (i) his or her executive leadership; and (ii) achievement of agreed-upon individual business objectives for the just-completed fiscal year. The annual performance evaluation of our Chief Executive Officer is administered by our Nominating and Corporate Governance Committee, with all non-employee directors participating in the performance evaluation, and the results of the Chief Executive Officer’s annual performance evaluation are reviewed by the Committee and our full Board. Our Chief Executive Officer conducts or participates in the annual performance evaluation of our Other Named Executive Officers and reviews the results with members of the Committee.

In establishing the elements and levels of compensation for a fiscal year, the Committee considers the annual performance evaluations of our Named Executive Officers and reviews its compensation consultant’s independent analyses of compensation based on comparable positions, using both published survey sources and company peer group data to determine our competitive positioning relative to the market. Our Chief Executive Officer makes recommendations to the Committee on compensation for our Other Named Executive Officers, but does not participate in the determination of his own compensation.

The Committee continuously monitors our compensation programs and annually reviews a compensation “tally sheet,” which lists total direct compensation (base salary, annual cash incentive compensation, and long-term incentive awards) perquisites, other elements of executive compensation, broad-based employee benefits and wealth accumulation through Company equity and retirement plans for our Named Executive Officers; however, the compensation tally sheets are not used to make actual pay decisions. The Committee assesses historical pay and performance to ensure continued alignment of our compensation programs. However, the Committee generally does not consider compensation earned in prior years in establishing the elements and levels of compensation for a Named Executive Officer in the current fiscal year.

Consulting Assistance, Peer Group and Competitive Market

Compensation Consultant Independence. In fiscal 2019, the Committee retained the services of Pearl Meyer to assist with the review of overall compensation levels for our executive officers. Pearl Meyer reports directly to the Committee, and the Committee can replace Pearl Meyer or hire additional consultants at any time. During fiscal 2019, Pearl Meyer attended five Committee meetings in person or by telephone, including executive sessions, as requested, and consulted with the Chair of the Committee between meetings.

As required under the Dodd-Frank Act, the Committee has analyzed whether the work of Pearl Meyer as its compensation consultant raises any conflict of interest, taking into consideration the following factors under this act: (i) Pearl Meyer does not provide any other services to our Company; (ii) the amount of fees from our Company paid to Pearl Meyer is less than 1% of Pearl Meyer’s total revenue; (iii) Pearl Meyer’s policies and procedures were designed to ensure independence; (iv) Pearl Meyer does not have any business or personal relationship with any executive officer of our Company or any member of the Committee; and (v) neither Pearl Meyer, nor any member of its consulting team, owns any stock of our Company. The Committee has determined, based on its analysis of the above factors, that Pearl Meyer is independent of our Company and the work of Pearl Meyer (and the individual compensation advisors employed by Pearl Meyer) as compensation consultant to the Committee has not created any conflict of interest. The Committee will continue to monitor the independence of its compensation consultant on an annual basis.

 

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Peer Group. The selection criteria identified for determining and reviewing our Company’s peer group generally include:

 

 

Companies with revenue within a similar range (0.33 to 3.0 multiple).

 

 

Companies with market capitalization within a similar range (0.33 to 3.0 multiple).

 

 

Companies with market capitalization to revenue ratio of 0.5 or greater.

 

 

Companies in the same or similar industries.

 

 

Companies with business model similarity, which may include the following:

 

 

Coatings for special purposes (e.g., protective, UV, etc.);

 

 

Construction materials, primarily for commercial or industrial applications;

 

 

Specialized/customized product lines;

 

 

Heavy-duty manufacturing operations and project-directed manufacturing; and

 

 

Project-based businesses.

 

 

Companies in the same geographic location (to a lesser degree).

 

 

Companies included in the prior-year peer group, to help ensure year-over-year consistency (where appropriate).

Compensation actions taken during fiscal 2019, including the determination of fiscal 2019 base salaries, annual cash incentive targets, restricted stock awards and the fiscal 2019 – 2020 performance-based awards, were based on the 15-company peer group listed below.

 

   Aegion Corporation

  

   H.B. Fuller Company

   AZZ Inc.

  

   LCI Industries

   BMC Stock Holdings, Inc.

  

   Masonite International Corporation

   Eagle Materials Inc.

  

   NCI Building Systems, Inc. (now Cornerstone Building Materials, Inc.)(1)

   EnPro Industries, Inc.

  

   Quaker Chemical Corporation

   Gibraltar Industries, Inc.

  

   Quanex Building Products Corporation

   Graco Inc.

  

   Tennant Company

   Griffon Corporation

  
                      

  (1)

NCI Building Systems, Inc., merged with Ply Gem Holdings to form Cornerstone Building Materials, Inc.

 

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Competitive Market. The Committee relies on its independent compensation consultant to help define the appropriate competitive market using a combination of the peer group companies and compensation surveys that contain market compensation information for similarly-sized organizations. The information on the competitive market is used by the Committee:

 

   

As an input in designing our compensation plans and philosophy;

 

   

As an input in developing base salary adjustments, annual cash incentive targets and long-term incentive ranges;

 

   

To benchmark the form and mix of long-term incentive awards;

 

   

To assess the competitiveness of total direct compensation awarded to our Named Executive Officers and certain of our other executives; and

 

   

To benchmark dilution and overhang levels (dilutive impact on our shareholders of equity compensation) and annual burn rate (the aggregate shares awarded as a percentage of total outstanding shares).

Fiscal 2019 Individual Compensation Actions

Fiscal 2019 Annual Performance Accomplishments. The performance during fiscal 2019 of each of our Named Executive Officers was evaluated based on a subjective assessment of (i) his or her executive leadership; and (ii) achievement against his or her individual business objectives for fiscal 2019. Below is certain information regarding each Named Executive Officer’s individual business objectives for fiscal 2019 and accomplishments against those objectives.

 

   

Mr. Puishys. Mr. Puishys’ key accomplishments during fiscal 2019 included:

 

 

Achieved net sales of $1.4 billion, a 6% increase over the prior year.

 

Returned approximately $61 million directly to shareholders through a combination of dividends and share repurchases.

 

Led talent management and leadership transitions at four business units and three key functional positions at Apogee.

 

Made strategic growth investments in our Architectural Glass segment to expand the segment’s participation in new U.S. non-residential fabricated glass markets by positioning the segment for sales commencing during fiscal 2020.

 

Advanced synergies resulting in increased cross-selling of finished products and intercompany supply and positioning our Company for improved performance.

 

Made capital investments for facility improvements and equipment to position our Company for productivity and operating margin improvements.

 

Advanced the integration of EFCO Corporation, acquired during fiscal 2018, through new leadership in key roles and continued implementation of Apogee Lean Enterprises positioning EFCO for productivity and operating margin improvements.

 

   

Mr. Porter. Mr. Porter’s key accomplishments during fiscal 2019 included:

 

 

Achieved net sales of $1.4 billion, a 6% increase over the prior year.

 

Achieved operating margin of 4.3% and adjusted operating margin of 8.3%.

 

Achieved EPS of $1.63 and adjusted earnings per diluted share of $3.01.

 

Performed a capital structure analysis that led to $61 million being directly returned to shareholders through a combination of dividends and share repurchases.

 

Achieved $50 million in orders from our building retrofit program and expanded our building retrofit program with additional staffing and capabilities.

 

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Provided support for a growth strategy to expand the Architectural Glass segment’s participation in new U.S. non-residential fabricated glass markets positioning the segment for sales commencing during fiscal 2020.

 

   

Mr. Jewell. Mr. Jewell’s key accomplishments during fiscal 2019 included:

 

 

Led a robust three-year strategic planning process for our Company and its four segments.

 

Advanced synergies resulting in increased intercompany material supply, cross-selling of finished product, facility utilization and collaboration among the business units across segments.

 

Improved market and economic outlook analysis and reporting.

 

Conducted an analysis of optimal long-term segment strategies and requirements.

 

Evaluated various business development initiatives and opportunities.

 

Conducted a preliminary portfolio alignment analysis.

 

   

Ms. Beithon. Ms. Beithon’s key accomplishments during fiscal 2019 included:

 

 

Led corporate governance initiatives leading to certain amendments to our Company’s Articles, By-laws and corporate governance guidelines.

 

Managed and resolved various claims and litigation matters.

 

Provided legal support for growth strategies and business development activities.

 

Provided legal and environmental support for new real estate holdings and leases.

 

Provided legal support for the integration of EFCO Corporation and other post-acquisition matters.

 

Led Section 16 officer reporting compliance efforts, resulting in no late filings during fiscal 2019.

 

   

Mr. G. Johnson. Mr. G. Johnson’s key accomplishments during fiscal 2019 included:

 

 

Managed our real estate holdings and leases, including the sale of a former fabrication facility resulting in sale proceeds of $10 million.

 

Obtained government incentives related to facility capital improvements resulting in fiscal 2019 cash benefits of more than $8 million.

 

Led tax planning initiatives that resulted in an effective tax rate of 22.1% for fiscal 2019.

 

Managed the repurchase of shares of our common stock that resulted in the return of $43 million directly to our shareholders.

 

Negotiated appropriate levels of insurance coverage for fiscal 2019 at competitive rates and improved terms with quality carriers.

Adjusted diluted earnings per share and adjusted operating margin are non-GAAP financial metrics that are reconciled with the most directly comparable GAAP financial metrics in Appendix E.

 

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Base Salary. Base salary reflects a fixed portion of the overall compensation package and is the base amount from which certain other compensation elements are determined. In making salary adjustments, the Committee considers the executive’s base salary relative to the market, our compensation philosophy and other factors, such as individual performance against business plans, leadership, initiatives, experience, knowledge and job criticality. After discussing these items, the Committee decided it was appropriate to provide merit increases to all of our Named Executive Officers for fiscal 2020, except Mr. Puishys.

Below is information on the base salaries of our Named Executive Officers for fiscal 2019 and fiscal 2020.

 

Base Salary

Name

  

Fiscal 2019

Base Salary

($)

  

Percent

Increase in

Fiscal

2019 (%)

  

Fiscal 2020

Base

Salary ($)

  

Percent Increase in
Fiscal

2020 (%)

Joseph F. Puishys

   935,000    0.0    935,000    0.0

James S. Porter

   435,000    0.0    448,000    3.0

Brent C. Jewell

   350,000    N/A    361,000    3.1

Patricia A. Beithon

   360,000    0.0    371,000    3.1

Gary R. Johnson

   259,000    5.1    269,000    3.9

Annual Cash Incentive Compensation. Annual cash incentive awards are designed to reward short-term performance results. These results are based on achievement relative to objective financial goals set forth in the annual operating plan approved by our Board of Directors. For fiscal 2019, annual cash incentive awards to our Named Executive Officers were made pursuant to our shareholder-approved Apogee Enterprises, Inc. Executive Management Incentive Plan (the “Executive MIP”), as described below. The Executive MIP was approved by shareholders in fiscal 2016.

Executive MIP. Our Executive MIP was designed to be an annual bonus “pool” plan. Each fiscal year, the Committee establishes a bonus pool equal to a percentage of one or more performance factors from a list of approved factors set forth in our Executive MIP. If the bonus pool generated for any fiscal year is not sufficient to fund all potential payouts to participants under the plan, the awards earned by each participant will be reduced proportionately based on each participant’s percent of the pool.

Each fiscal year, the Committee selects the executives of our Company who will participate in our executive management incentive plan for that year and assigns a percentage of the bonus pool to each participating executive, with the total percentage not to exceed 100% of the bonus pool for any given fiscal year. The percentage of the bonus pool assigned to each participating executive establishes the maximum annual cash incentive award payout for that individual participant for the current fiscal year; however, no one individual payout under the Executive MIP can exceed $3,000,000 in any given fiscal year.

The actual annual cash incentive awards to be paid to participants after the annual bonus pool has been established may be adjusted downward based on the achievement of one or more additional predetermined, objective performance goals based on the annual operating plan approved by our Board of Directors. At least one of the additional predetermined, objective performance goals must be met at the threshold level in order for any annual cash incentive to be paid to an executive. In addition, if our Company is not profitable, no annual cash incentives will be paid even if the other goals are at or above threshold.

Generally, if the threshold performance level for all performance goals is achieved, 50% or less of the target award will be earned; if target performance level for all performance goals is achieved, 100% of the target award will be earned; and if maximum performance level for all performance goals is achieved, 200% of the target award will be earned. If the threshold performance level for only one performance goal is achieved and the threshold performance is not achieved for any of the other performance goals, less than 50% of the target award will be earned based on the weighting allocated to that specific

 

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performance goal. For any performance between these levels, awards will be interpolated. The Committee has the discretion to further reduce payouts under our Executive MIP, as appropriate.

Fiscal 2019 Annual Cash Incentive Payouts. The performance factor used to establish the fiscal 2019 bonus pool under our Executive MIP was 5% of Apogee’s operating income. In fiscal 2019, we had operating income of $67,284,000, generating a bonus pool of $3,364,200.

The tables below set forth certain information with respect to the fiscal 2019 annual cash incentive award payout ranges as a percentage of fiscal 2019 salary for our Named Executive Officers.

 

Fiscal 2019 Annual Cash Incentive Compensation Ranges

Name

  

Threshold Payout

as a Percentage

of Fiscal 2019

Salary (%)(1)

  

Target Payout

as a Percentage

of Fiscal 2019

Salary (%)(2)

  

Maximum Payout

as a Percentage

of Fiscal 2019

Salary (%)(3)

Joseph F. Puishys

   5.25    105.00    210.00

James S. Porter

   3.75      75.00    150.00

Brent C. Jewell

   2.25      45.00      90.00

Patricia A. Beithon

   3.00      60.00    120.00

Gary R. Johnson

   2.00      40.00      80.00
                      

  (1)

Assumes threshold performance level is achieved for only the performance goal with the lowest weighting and is not achieved for any other performance goals. If actual results are below threshold performance level for all performance goals, the payout will be zero.

 

  (2)

Assumes target performance level is achieved for all performance goals.

 

  (3)

Assumes maximum performance level is achieved or exceeded for all performance goals.

The following table outlines the performance metrics, weighting and performance levels and actual performance achievement for the fiscal 2019 performance cycle.

 

Fiscal 2019 Annual Cash Incentive Performance Levels and Actual Performance

Performance

Goal

  

Weighting

(%)

  

Threshold

  

Target

  

Maximum

  

Actual
Performance

  

Percentage
Performance
Achieved (%)

Net Sales

   25    $1,388,500,000    $1,453,991,000    $1,518,001,000    1,402,637,000    60.77

EBT

   65    $107,201,000    $123,056,000    $137,016,000    58,662,000   

DWC(1)

   10    57.2 days    54.9 days    52.9 days    52.8 days    200.00

 

  (1)

We define days working capital as average working capital (current assets less current liabilities) multiplied by the number of days in the period and then divided by net sales in the period. We consider this a useful metric in monitoring our performance in managing working capital.

 

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The following table sets forth certain information with respect to the fiscal 2019 annual cash incentive compensation payouts for each of our Named Executive Officers.

 

Fiscal 2019 Annual Cash Incentive Compensation Payouts

     Performance Goals    Potential Payout    Actual Payout

Name

       Metric              Weighting      
(%)
         Target Payout      
as a
Percent of
Fiscal 2019
Salary
(%)
   Target
    Payout    
Level
($)
         Percentage of      
Target
(%)
         Guideline      
Amount

($)
         Approved      
Payout
Amount
($)(1)
         Percent      
of
Fiscal
2019
Salary
(%)

Joseph

F.

Puishys

       Net Sales        25        26.25        245,437        60.77        149,226        149,226        15.96
       EBT        65        68.25        638,138        0.00        0.00        0.00        0.00
       DWC        10        10.50        98,175        200.00        196,350        196,350        21.00
         

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 
            100        105.00        981,750        35.20        345,576        345,576        36.96
         

 

 

      

 

 

      

 

 

           

 

 

      

 

 

      

 

 

 

James

S.

Porter

       Net Sales        25        18.75        81,562        60.77        49,590        49,590        11.40
       EBT        65        48.75        212,063        0.00        0.00        0.00        0.00
       DWC        10        7.50        32,625        200.00        65,250        65,250        15.00
         

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 
            100        75.00        326,250        35.20        114,840        114,840        26.40
         

 

 

      

 

 

      

 

 

           

 

 

      

 

 

      

 

 

 

Brent

C.

Jewell

       Net Sales        25        11.25        39,375        60.77        23,940        23,940        6.84
       EBT        65        29.25        102,375        0.00        0.00        0.00        0.00
       DWC        10        4.50        15,750        200.00        31,500        31,500        9.00
         

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 
            100        45.00        157,500        35.20        55,440        55,440        15.84
         

 

 

      

 

 

      

 

 

           

 

 

      

 

 

      

 

 

 

Patricia

A.

Beithon

       Net Sales        25        15.00        54,000        60.77        32,832        32,832        9.12
       EBT        65        39.00        140,400        0.00        0.00        0.00        0.00
       DWC        10        6.00        21,600        200.00        43,200        43,200        12.00
         

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 
            100        60.00        216,000        35.20        76,032        76,032        21.12
         

 

 

      

 

 

      

 

 

           

 

 

      

 

 

      

 

 

 

Gary

R.

Johnson

       Net Sales        25        10.00        25,900        60.77        15,747        15,747        6.08
       EBT        65        26.00        67,340        0.00        0.00        0.00        0.00
       DWC        10        4.00        10,360        200.00        20,720        20,720        8.00
         

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 
            100        40.00        103,600        35.20        36,467        36,467        14.08
         

 

 

      

 

 

      

 

 

           

 

 

      

 

 

      

 

 

 

 

(1)

The individual approved payout amount for each of Messrs. Puishys, Porter, Jewell and G. Johnson and Ms. Beithon is less than the maximum allocation of the bonus pool under our Executive MIP for such individual.

Long-Term Incentive Compensation. We utilize two instruments to deliver long-term incentive compensation. The mix of long-term incentive instruments is determined annually by the Committee, and for fiscal 2019 were restricted stock awards and two-year performance-based awards. We issue two-year performance-based awards only in the first year of the two-year performance cycle (granted every other year using an end-to-end performance cycle).

Restricted Stock Awards. Each year, the Committee approves a fixed dollar value of the restricted stock award for each executive for the just-completed fiscal year. For our Chief Executive Officer, the Committee begins its deliberations with a preliminary targeted fixed dollar value, as a percentage of base salary, which is compared to competitive levels of long-term incentives for comparable Chief Executive Officer positions in the market, based on data provided by the Committee’s independent compensation consultant, and increases or decreases the preliminary targeted fixed dollar value after considering the results of the Chief Executive Officer’s annual performance evaluation by our non-employee directors. For our Other Named Executive Officers, our Chief Executive Officer recommends to the Committee a preliminary targeted fixed dollar value, as a percentage of base salary, which is compared to competitive levels of long-term incentives for comparable positions in the market, based on data provided by the Committee’s independent compensation consultant and also recommends increases or decreases in the preliminary targeted fixed dollar value for each of our Other Named Executive Officers based on his or her contributions to the Company’s performance, future leadership potential, and subjective evaluation of his or her individual performance for the just completed fiscal year. Restricted stock awards generally vest in three equal annual installments commencing on April 30 of the year following the date of the award. Upon issuance of the restricted stock, each holder is entitled to the rights of a shareholder, including the right to vote the shares of restricted stock and receive any dividends and any other distributions.

 

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On April 26, 2018, the Committee determined that Messrs. Puishys, Porter and G. Johnson and Ms. Beithon had substantially met his or her individual business objectives for fiscal 2018; however, the Committee used negative discretion in determining the final fixed dollar value of such awards by reducing the preliminary targeted fixed dollar value of the awards based on the Company’s performance during fiscal 2018. Mr. Jewell joined our Company on May 29, 2018 and was awarded a restricted stock award for 6,000 shares, that vests in two equal annual installments commencing on May 29, 2019. Information regarding the restricted stock awards made to all Named Executive Officers during fiscal 2019 is set forth below.

 

Fiscal 2019 Restricted Stock Awards

Name

  

Restricted Stock

Awarded (#)

  

Value of

Award ($)(1)

  

Percentage of

Fiscal 2019

Salary (%)

  

Grant Price

($)(2)

Joseph F. Puishys

   17,365    727,420    78    41.89

James S. Porter

     5,250    219,923    51    41.89

Brent C. Jewell

     6,000    258,300    74    43.05

Patricia A. Beithon

     3,750    157,088    44    41.89

Gary R. Johnson

     2,450    102,631    40    41.89
                      

  (1)

The value of the award was calculated by multiplying the number of shares of restricted stock awarded by, the closing price of our common stock on the NASDAQ Stock Market on the date of grant. The awards to Messrs. Puishys, Porter and G. Johnson and Ms. Beithon were made on April 26, 2018. The award to Mr. Jewell was made on May 29, 2018, which was the date he joined our Company.

 

  (2)

The closing price of our common stock on the NASDAQ Global Select Market on the date of grant.

Two-Year Performance-Based Awards. Our Company has granted two-year performance-based awards as a component of long-term incentive compensation since fiscal 2013. The Committee believes that two-year performance-based awards provide incentive to focus executives on achievement of specific two-year financial performance goals that are aligned with business fundamentals. The Committee also believes that these awards, which are settled in cash, are better instruments for delivering long-term incentive compensation than equity-based awards, as they are not dilutive to our shareholders. The two-year performance-based awards are designed to reward sustainable, profitable growth consistent with our strategic plan. The Committee evaluates this program regularly and again determined that a two-year performance cycle provides the necessary line of sight to set realistic targets aligned with our Company’s objectives given the cyclicality of our business even though it is a performance cycle less than what proxy advisory firms prefer to see. For the fiscal 2019 – 2020 cash-based performance awards, the financial performance metrics are cumulative net sales (33-1/3%), cumulative EPS (33-1/3%) and average ROIC (33-1/3%).

The two-year performance-based awards are end-to-end awards, have two-year performance periods and pay out in two equal annual installments after completion of the performance period. Generally, two-year performance-based awards are made in the first quarter of the first fiscal year of the two-year performance period. The two-year performance periods do not overlap; therefore, a grant of this award is made every other year.

Non-overlapping cycles avoid the potential confusion associated with using different targets on the same metric or different metrics in the same year. The earned award is paid out in two equal installments, with 50% of the earned award paid in the first quarter of the year following completion of the performance cycle and the remaining 50% paid one-year later (approximately three-years after commencement of the performance cycle), with each payment contingent on the executive being employed by our Company on the date the payment is made. The Committee believes this payment approach for the earned award promotes retention. 17.2% of our Chief Executive Officer’s two-year performance-based award is mandatorily deferred pursuant to our Deferred Compensation Plan.

 

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Two-Year Performance-Based Awards and Payout Cycle

 

Award

  

Fiscal

2017

    

Fiscal

2018

    

Fiscal

2019

    

Fiscal

2020

    

Fiscal

2021

    

Fiscal

2022

Fiscal

2017 – 2018

Award

   Performance Period        50% Paid      50% Paid                

Fiscal

2019 – 2020

Award

          Performance Period        50% Paid      50% Paid  

 

   

Performance award cycles are measured on a fiscal year basis (March – February).

 

   

Award payouts are made 50% at the end of the two-year performance cycle (usually in May) and 50% in the following year (usually in March) promoting continued retention for plan participants.

The Committee determines the dollar value of two-year performance-based awards granted to each participating executive at the target performance level based on consideration of individual performance, our Company’s performance, market data and trends, internal equity, executive potential and input from our Chief Executive Officer with respect to our Other Named Executive Officers and other participating executives. The dollar value at the threshold performance level is determined as a percentage of base salary. Generally, if the threshold performance level for all performance goals is achieved, 50% or less of the target award will be earned; if target performance for all performance goals is achieved, 100% of the target award will be earned; and if maximum performance level for all performance goals is achieved, 200% of the target award will be earned. If threshold performance level for only one performance goal is achieved and the threshold performance is not achieved for any of the other performance goals, less than 50% of the target award will be earned based on the weighting allocated for that specific performance goal. For any performance between these levels, awards will be interpolated.

On April 26, 2018, after completion of the fiscal 2018 audit, the Committee determined the amount earned for the fiscal 2017 – 2018 cash-based performance awards, and the first and second installments of such awards were paid on May 11, 2018 and March 15, 2019, respectively. The payouts of the fiscal 2017 –2018 cash-based performance awards were reported in our 2018 proxy statement.

On June 27, 2018, the Committee established the fiscal 2019 – 2020 cash-based performance awards. The Committee determined the dollar value for the fiscal 2019 – 2020 cash-based performance awards as a percentage of fiscal 2019 base salary at the threshold, target and maximum award levels for each of our Named Executive Officers. The financial performance metrics for these awards are average ROIC, cumulative EPS and cumulative net sales.

 

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The table below sets forth certain information with respect to our fiscal 2019 – 2020 performance-based awards payout ranges as a percentage of salary at threshold, target and maximum performance.

 

Fiscal 2019 – 2020 Performance-Based Award Payout Ranges

         

Threshold Payment(1)

  

Target Payout(2)

  

Maximum Payout(3)

Name

  

Performance
Period

(Fiscal Years)

  

Award

Amount ($)

  

As a

Percentage of
Fiscal 2019
Salary (%)

  

Award

Amount ($)

  

As a

Percentage of
Fiscal 2019
Salary (%)

  

Award

Amount ($)

  

As a

Percentage of
Fiscal 2019

Salary (%)

Joseph F. Puishys

   2019 -2020    451,917    48    2,711,500    290    5,423,000    580

James S. Porter

   2019 -2020    130,500    30       783,000    180    1.566,000    360

Brent C. Jewell

   2019 -2020      84,000    24       504,000    144    1,008,000    288

Patricia A. Beithon

   2019 -2020      93,600    26       561,600    156    1,123,200    312

Gary R. Johnson

   2019 -2020      38,850    15       233,100      90       466,200    180

 

(1)

Assumes threshold performance level is achieved for only one of the performance goals and is not achieved for any other performance goals. If actual results are below threshold performance level for all performance goals, the payout will be zero.

 

(2)

Assumes target performance level is achieved for all performance goals.

 

(3)

Assumes maximum performance level is achieved for all performance goals.

Chief Executive Officer Evaluation Incentive Program. In order to encourage Mr. Puishys to continue to drive growth, operational improvement and successful implementation of our Company’s strategic plan and to remain with our Company, our Board of Directors established an evaluation incentive program for Mr. Puishys. This incentive is a one-year, evaluation-based, cash incentive award.

Any amounts earned pursuant to the CEO evaluation incentive program are mandatorily deferred into our Deferred Compensation Plan. In the case of death, disability or retirement, Mr. Puishys, or his estate, as applicable, will receive a pro-rata portion of the incentive. In the case of a change-in-control, as defined in the incentive agreement, the incentive will be adjusted by the Committee in its sole discretion. The incentive is subject to our Company’s clawback policy.

Fiscal 2019 CEO Evaluation Incentive. The amount of incentive earned, if any, is based upon the average rating Mr. Puishys receives on the annual performance evaluation conducted by our Board and his achievement of his fiscal 2019 individual business objectives. Our Chief Executive Officer’s performance criteria for fiscal 2019 were based upon integration of EFCO Corporation, bench strength/succession planning, new market growth and Architectural Framing Systems segment synergies.

If Mr. Puishys met or exceeded his individual business objectives, he had the potential to earn an evaluation incentive award between $233,750 at target and $467,500 at maximum, which will then be mandatorily deferred pursuant to our Deferred Compensation Plan. There is no threshold performance level for such an evaluation incentive award and the Compensation Committee may determine, in its sole discretion, to reduce the amount of incentive earned or to not award any incentive, depending upon actual performance achieved.

On April 25, 2019, our Board of Directors determined that Mr. Puishys had substantially met certain areas of his fiscal 2019 individual business objectives and awarded our Chief Executive Officer $198,688, approximately 85% of target, which was mandatorily deferred pursuant to our Deferred Compensation Plan, as required by the award agreement.

 

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Other Benefit Programs. Executive officers, including our Named Executive Officers, are eligible to participate in our 401(k) Retirement Plan, described under the heading “401(k) Retirement Plan” on page 63, and our Employee Stock Purchase Plan, which allows participants to purchase shares of our Company’s common stock by contributing up to $500 per week, with our Company contributing an amount equal to 15% of the participant’s weekly contributions, on substantially the same terms as all of our other employees. Our executive officers also receive the same health and welfare benefits as those offered to all other full-time employees, with the exception that we offer enhanced long-term disability benefits to our executive officers.

Additionally, our executive officers may participate in voluntary non-qualified deferred compensation plans, as described under the headings “Deferred Compensation Plan” on page 64 and “Legacy Deferred Compensation Plan” on page 64.

We have entered into change-in-control severance agreements with each of our Named Executive Officers. The Committee does not consider specific amounts payable under these arrangements when establishing annual compensation. See “Change-in-Control Severance Agreements” on pages 66 – 67 and “Executive Benefits and Payments Upon Termination and Change-in-Control” on pages 68 – 69 for more information on these arrangements.

Generally, we do not make perquisites available to our Named Executive Officers, other than the reimbursement of financial and estate planning fees of up to $2,000 annually, enhanced long-term disability benefits, payment of relocation expenses, reimbursement of annual executive health physical costs up to $3,000 annually and reimbursement of spousal/guest travel expenses for certain Company events. We do not provide tax reimbursement or tax “gross-ups” on any perquisites.

 

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Executive Stock Ownership Guidelines

Stock ownership guidelines for executives have been in place since 2001. The Committee monitors compliance with our stock ownership guidelines annually. Each executive has five years from the date he or she becomes subject to the stock ownership guidelines to meet his or her ownership guideline. If an executive is promoted and the target is increased, an additional three-year period is provided to meet the ownership guideline. For purposes of calculating stock ownership, we include unvested shares of restricted stock but do not include unexercised stock option or stock appreciation right (“SAR”) awards. Shares owned are valued based on the average closing price of our common stock for the just completed fiscal year.

The graph below shows the stock ownership guideline for each of our Named Executive Officers and summarizes the shares held as a multiple of base salary for our Named Executive Officers as of March 2, 2019, the last day of fiscal 2019. Currently, all of our Named Executive Officers exceed their ownership requirements, except for Mr. Jewell, who joined our Company on May 29, 2018 and is currently on pace to meet our guideline within five years of joining our Company. None of our Named Executive Officers has pledged shares of our common stock as collateral for personal loans or other obligations.

 

LOGO

Hedging Policy

Our Board of Directors believes that the interests of our executive officers, employees and members of our Board of Directors should be aligned with the interests of our shareholders. As a result, we have adopted a hedging policy that prohibits all employees and members of our Board of Directors from engaging in the purchase or sale of financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds) that are designed to hedge or offset any decrease in the market value of our Company’s securities.

Clawback Policy

Our Board of Directors adopted a policy regarding “clawbacks” for Named Executive Officers and other key executives for performance-based short-term and long-term incentive compensation plans as of March 3, 2014. The policy provides the Board the discretion to clawback incentive compensation awarded or paid during the three-year period preceding the date of a restatement of the Company’s financial statements due to material noncompliance with any financial reporting requirement under the U.S. federal securities laws.

Tax Considerations

Section 162(m) of the U.S. Internal Revenue Code (“Section 162(m)”) imposes a $1,000,000 annual deduction limit on compensation payable to certain current and former named executive officers. The Compensation Committee intends to pay competitive compensation consistent with our philosophy to attract, retain and motivate executive officers to manage our business in the best interests of the

 

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Company and our shareholders. The Compensation Committee, therefore, may choose to provide non-deductible compensation to our executive officers if it deems such compensation to be in the best interests of Apogee and our shareholders.

Prior to the Tax Cuts and Jobs Act (the “Act”), Section 162(m) permitted a deduction for compensation in excess of $1,000,000 paid to a covered executive if specified requirements related to our performance were met and shareholder approval was obtained. The Act eliminated the exception to the deduction limit for qualified performance-based compensation (and broadened the application of the deduction limit to certain current and former executive officers who previously were exempt from such limit). However, the Act also included a transition provision which exempts from the above changes performance-based compensation payable under a written binding agreement that was in effect on November 2, 2017, if such agreement is not subsequently materially amended. As a result of the transition rule, certain performance-based awards that were outstanding as of November 2, 2017 but which may vest and pay out in future tax years may be fully deductible if they qualify for transition relief.

Various programs, including our benefit plans that provide for deferrals of compensation are subject to Section 409A of the Internal Revenue Code. We have reviewed such plans for compliance with Section 409A and believe that they are in compliance.

Compensation Risk Analysis

During fiscal 2019, the Committee, with the assistance of its independent compensation consultant and management, assessed risk in our compensation plans, practices and policies. In performing this risk assessment, the Committee considered:

 

   

The mix of fixed and variable compensation;

 

   

The mix of short-term and long-term incentive compensation;

 

   

The extent to which performance metrics are directly reflected in our audited financial statements or other objective reports;

 

   

The relative weighting of the performance metrics;

 

   

The likelihood that achievement of performance metrics could have a material impact on our financial performance in succeeding fiscal periods;

 

   

The various compensation risk control mitigation features in our compensation plans, including balanced financial performance metrics that include net sales, earnings and operational metrics;

 

   

Multiple financial performance metrics for our annual cash incentive and long-term cash-based incentive plans;

 

   

Different financial performance metrics for our annual cash incentive and long-term cash-based incentive plans;

 

   

Appropriate maximum caps on our annual cash incentive and long-term performance-based incentive plans and annual equity awards;

 

   

Management stock ownership guidelines; and

 

   

Our clawback and hedging policies.

The Committee annually assesses the risk of our compensation programs, policies and practices. The Committee does not believe any of our Company’s compensation programs create risks that are reasonably likely to have a material adverse effect on our Company.

 

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Summary Compensation Table

The following table sets forth the total compensation in all capacities for fiscal 2019, 2018 and 2017 awarded to our Named Executive Officers.

Summary Compensation Table

 

Name and Principal

Position

         Fiscal      
Year
         Salary      
($)(1)
         Bonus      
($)
   Stock
      Awards      
($)(2)
         Non-Equity      
Incentive

Plan
Compen-
sation ($)(3)
         Change in      
Pension
Value and
Non-
Qualified
Deferred
Compen-
sation
Earnings
($)(4)
        All Other      
Compen-
sation

($)(5)
         Total      
($)

Joseph F. Puishys
Chief Executive Officer and President

       2019        935,000             727,420        544,264              43,852        2,250,536
      

2018

2017


      

928,077

901,058


           

935,002

1,018,429


      

2,013,116

2,045,000


            

43,387

52,739


      

3,919,582

4,017,226


James S. Porter
Executive Vice President and Chief Financial Officer

       2019        435,000             219,923        114,840              17,455        787,218
       2018        432,571             250,700        522,093              15,961        1,221,325
       2017        425,628             274,806        484,397              16,728        1,201,559

Brent C. Jewell(6)
Senior Vice President, Business Development and Strategy

       2019        267,885        44,560        258,300        55,440              13,557        639,742

Patricia A. Beithon
General Counsel and Corporate Secretary

       2019        360,000             157,088        76,032        (15,210 )       18,715        596,625
       2018        357,923             179,850        374,000        24,347       18,030        954,150
       2017        350,942             197,599        320,305        21,824       18,144        908,814

Gary R. Johnson
Vice President and Treasurer

       2019        257,058             102,631        36,467        13,590       11,249        420,995
      

2018

2017


      

245,272

242,562


           

77,935

87,284


      

148,952

147,419


      

17,641

13,068


     

8,992

13,435


      

498,792

503,768


 

  (1)

Our fiscal 2019 and 2018 years each had 52 weeks and our fiscal 2017 year had 53 weeks; the amounts shown in this column for fiscal 2017 include 53 weeks of salary.

 

  (2)

The amounts shown in this column represent the grant date fair value of the restricted stock awards made in fiscal 2019, 2018 and 2017. These amounts are calculated in accordance with FASB ASC Topic 718 based on the closing share price of our common stock on the date of grant. See Note 12, Share-Based Compensation, to our audited financial statements for the fiscal year ended March 2, 2019.

 

  (3)

The amounts in this column for fiscal 2019 for our Chief Executive Officer represents the annual cash incentive award of $345,576 and evaluation incentive of $198,688, which was deferred into our Deferred Compensation Plan, and for our Other Named Executive Officers represents only the annual cash incentive awards. The fiscal 2019 annual cash incentive awards were made pursuant to our Executive MIP.

Our Executive MIP is discussed under the heading “Executive MIP” on pages 47 – 48 and the fiscal 2019 annual cash incentive awards and fiscal 2019 CEO evaluation incentive made pursuant to such plan are discussed under the heading “Fiscal 2019 Annual Cash Incentive Payouts” on pages 48 – 49, “Fiscal 2019 CEO Annual Evaluation Incentive” on page 52, and “Grants of Plan-Based Awards” on pages 59 – 60.

The amount in this column for fiscal 2018 represents the full earned amount of the fiscal 2017 – 2018 performance-based awards for the two-year performance cycle made pursuant to our 2009 Stock Incentive Plan, reported in single year as required by applicable SEC rules. Actual payments of the earned fiscal 2017 – 2018 performance-based awards were made in two-equal installments following the performance period and are contingent on active employment on each

 

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applicable payment date. For our Chief Executive Officer, $307,896 of the $1,785,794 of the amount earned of the fiscal 2017 – 2018 performance-based award was mandatorily deferred pursuant to our Deferred Compensation Plan, and the balance of the award was paid out in two equal annual installments. The first payment of the fiscal 2017 – 2018 performance-based awards was made on May 11, 2018 and the second payment was made on March 15, 2019. The amount in this column for fiscal 2018 for our Chief Executive Officer also includes the fiscal 2018 CEO evaluation incentive award of $227,322 that was made pursuant to our Executive MIP, which was mandatorily deferred into our Deferred Compensation Plan.

The following table sets forth information with respect to fiscal 2018 non-equity incentive plan compensation for our Named Executive Officers.

 

Name

         Fiscal      
Year
   Annual
Cash
      Incentive      
Awards
Earned ($)
   Two-Year
Performance-

      Based Awards       
Earned ($)
         CEO Evaluation      
Incentive

Joseph F. Puishys

       2018        0        1,785,794        227,322

James S. Porter

       2018        0        522,093        N/A

Brent C. Jewell

       2018        N/A        N/A        N/A

Patricia A. Beithon

       2018        0        374,000        N/A

Gary R. Jonson

       2018        0        148,952        N/A

The amounts in this column for fiscal 2017 for our Chief Executive Officer represent the fiscal 2017 annual cash incentive award of $1,600,000 and fiscal 2017 CEO evaluation incentive award of $445,000, which was deferred into our Deferred Compensation Plan, and for our Other Named Executive Officers represents only the fiscal 2017 annual cash incentive awards. The fiscal 2017 annual cash incentive awards and fiscal 2017 CEO evaluation incentive award were both made pursuant to our Executive MIP.

 

  (4)

The following table shows each component of the “Change in Pension Value and Non-Qualified Deferred Compensation Earnings” column for each of our Named Executive Officers for fiscal 2019, 2018 and 2017.

 

Name

               Fiscal Year                 Change in
            Pension Value ($)            
   Above Market Earnings on
            Amounts Deferred  Pursuant            
to our Legacy Deferred
Compensation Plan ($)

Joseph F. Puishys

       2019              
       2018              
       2017              

James S. Porter

       2019              
       2018              
       2017              

Brent C. Jewell

       2019              

Patricia A. Beithon

       2019        (18,187)          2,977
       2018        20,482        3,865
       2017        18,961        2,863

Gary R. Johnson

       2019               13,590
       2018               17,641
       2017               13,068

 

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  (5)

The following table shows each component of the “All Other Compensation” column for each of our Named Executive Officers for fiscal 2019.

 

Name

         Perquisites      
($)
  Executive
    Health Physical      
Reimbursement ($)
   Company Matching
    Contributions to    
Defined
Contribution Plans
($)(a)
   Dividends
      or Earnings      
on Stock
Awards ($)(b)
   Total All
Other
    Compensation    
($)

Joseph F. Puishys

       9,623 (c)        650        9,625        23,954        43,852

James S. Porter

       1,365 (d)               9,345        6,745        17,455

Brent C. Jewell

       2,175 (e)               8,442        2,940        13,557

Patricia A. Beithon

       1,140 (f)               12,745        4,830        18,715

Gary R. Johnson

       2,937 (g)               5,677        2,635        11,249

 

                                                     

  (a)

This column reports the amounts we set aside or accrued during fiscal 2019 under our 401(k) Retirement Plan and Employee Stock Purchase Plan as matching contributions on our Named Executive Officers’ contributions to such plans. Such contribution amounts are set forth in the table below. Our Named Executive Officers are eligible to participate in our 401(k) Retirement Plan and Employee Stock Purchase Plan on the same basis as all eligible employees.

 

Name

           401(k) Retirement        
Plan Matching
Contributions ($)
           Employee Stock Purchase        
          Plan 15% Matching        
Contributions ($)

Joseph F. Puishys

       9,625       

James S. Porter

       7,785        1,560

Brent C. Jewell

       8,442       

Patricia A. Beithon

       9,625        3,120

Gary R. Johnson

       5,677       

 

  (b)

This column represents dividends paid on unvested restricted stock.

 

  (c)

Includes $2,000 for reimbursement of financial planning fees, $1,140 in premiums paid for enhanced long-term disability insurance, $3,000 for an enhanced access medical care program, and $3,483 for reimbursement of spousal travel.

 

  (d)

Consists of $1,140 in premiums paid for enhanced long-term disability insurance and $225 for reimbursement of spousal travel.

 

  (e)

Includes $2,000 for reimbursement of financial planning fees, $175 in premiums paid for enhanced long-term disability insurance.

 

  (f)

Consists of premiums paid for enhanced long-term disability insurance.

 

  (g)

Includes $1,960 for reimbursement of financial planning fees and $977 in premiums for enhanced long-term insurance.

 

  (6)

Mr. Jewell joined our Company on May 29, 2018.

 

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Grants of Plan-Based Awards

The following table sets forth information for our Named Executive Officers concerning the following plan-based awards made during fiscal 2019: (i) estimated possible payouts for fiscal 2019 annual cash incentive awards; (ii) the grant date value of the restricted stock awards; (iii) estimated possible payouts for the fiscal 2019 CEO evaluation incentive award; and (iv) estimated possible payouts for fiscal 2019 – 2020 cash-based performance awards.

 

Fiscal 2019 Grants of Plan-Based Awards
          Estimated Possible Payouts under
    Non-Equity Incentive Plan Awards(1)    
         All Other Stock      
Awards: Number
of Shares of
Stock or
Units (#)(2)
   Grant Date
      Fair Value of      
Stock and
Option
Awards ($)(3)

Name

           Grant        
Date
           Threshold        
($)
          Target        
($)
           Maximum        
($)

Joseph F. Puishys

                            

Fiscal 2019 annual cash incentive

       4/26/18        49,088       981,750        1,936,500              

Restricted stock

       4/26/18                            17,365        727,420

Fiscal 2019 CEO evaluation incentive

       4/26/18        (4)       233,750        467,500              

Fiscal 2019 – 2020 cash-based performance award

       6/28/18        451,917       2,711,500        5,423,000              

James S. Porter

                            

Fiscal 2019 annual cash incentive

       4/26/18        16,313       326,250        652,500              

Restricted stock

       4/26/18                            5,220        219,923

Fiscal 2019 – 2020 cash-based performance award

       6/27/18        130,500       783,000        1,566,000              

Brent C. Jewell

                            

Fiscal 2019 annual cash incentive

       5/29/18        7,875       157,500        315,000              

Restricted stock

       5/29/18                            6,000        258,300

Fiscal 2019 – 2020 cash-based performance award

       6/27/18        84,000       504,000        1,008,000              

Patricia A. Beithon

                            

Fiscal 2019 annual cash incentive

       4/26/18        10,800       216,000        432,000              

Restricted stock

       4/26/18                            3,750        157,088

Fiscal 2019 – 2020 cash-based performance award

       6/27/18        93,600       561,600        1,123,200              

Gary R. Johnson

                            

Fiscal 2019 annual cash incentive

       4/26/18        5,180       103,600        207,200              

Restricted stock

       4/26/18                            2,450        102,631

Fiscal 2019 – 2020 cash-based performance award

       6/27/18        38,850       233,100        466,200              

 

  (1)

These columns show the range of possible payouts under the fiscal 2019 annual cash incentive awards, fiscal 2019 – 2020 cash-based performance awards, and fiscal 2019 CEO evaluation incentive award.

All of the fiscal 2019 annual cash incentive awards and the fiscal 2019 CEO evaluation incentive award were made pursuant to our Executive MIP described under the heading “Executive MIP” on pages 47 – 48. Amounts to be earned pursuant to the fiscal 2019 annual cash incentive awards are based on results achieved against financial performance goals. The fiscal 2019 CEO evaluation incentive award is based on the assessment by our Board of Mr. Puishys’ achievement of his individual business objectives for fiscal 2019 as reflected in the CEO’s annual performance evaluation conducted by our Board.

 

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All of the fiscal 2019 – 2020 cash-based performance awards were made pursuant to our 2009 Stock Incentive Plan and are based on the results achieved against financial performance goals over the two-year performance period. Since the two-year performance periods for the two-year performance-based awards do not overlap, there will be no two-year cash-based performance awards made in fiscal 2020.

Amounts shown in the “Threshold” column assume threshold performance level is achieved for only the performance goal with the lowest weighting and is not achieved for any other performance goals. Amounts shown in the “Target” and “Maximum” columns assume target and maximum performance levels, respectively, are achieved for all performance goals.

The fiscal 2019 annual cash incentive award payouts and fiscal 2019 CEO evaluation incentive are included in the “Summary Compensation Table” on page 60 in the column titled “Non-Equity Incentive Plan Compensation” and described under the headings “Fiscal 2019 Annual Cash Incentive Payouts” on pages 48 – 49 and “Fiscal 2019 CEO Evaluation Incentive” on page 52, respectively.

 

  (2)

For our Named Executive Officers, except Mr. Jewell, these restricted stock awards were based on performance during fiscal 2018 and vest in three equal annual installments commencing on April 30, 2019. Mr. Jewell’s restricted stock award was made when he joined our Company on May 29, 2018 and vests in two equal annual installments commencing on May 29, 2019. Dividends or other distributions (whether cash, stock or otherwise) with respect to the shares of restricted stock will be paid during the vesting period. In the event of total disability or death prior to the end of the vesting period, the shares of restricted stock will be distributed at the end of the vesting period to the participant, in the event of disability, or to his or her estate, in the event of death. Our restricted stock program is described under “Restricted Stock Awards” on pages 49 – 50.

 

  (3)

The fair value of the restricted stock awards was calculated in accordance with FASB ASC Topic 781 by multiplying the number of shares of our common stock by the closing price of our common stock on the NASDAQ Global Select Market on the date of grant. The closing price of our common stock on the NASDAQ Global Select Market was $41.89 on April 26, 2018, the date of grant for Messrs. Puishys, Porter and G. Johnson and Ms. Beithon and $43.05 on May 29, 2018, the date of grant for Mr. Jewell.

 

  (4)

There is no threshold performance level for the fiscal 2019 CEO evaluation incentive award.

 

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Outstanding Equity Awards at Fiscal Year-End

The following table summarizes the equity awards held by our Named Executive Officers as of March 2, 2019, the last day of fiscal 2019.

 

Outstanding Equity Awards at 2019 Fiscal Year-End

     Option Awards    Stock Awards

Name

       Option    
Grant
Date
  Number of
Securities
Underlying
        Unexercised        
Options (#)
Exercisable
   Option
Exercise
        Price  ($)(1)        
   Option
        Expiration        

Date
   Number of
Shares or Units
of Stock That
            Have Not Vested            
(#)
  Market Value of
Shares or Units

of Stock That
            Have Not Vested            
($)(2)

Joseph

       8/22/2011 (3)        100,341        8.34        8/22/2021             

F.

                                  8,192 (4)        295,158

Puishys

                                  11,437 (5)        412,075
                                  17,365 (6)        625,661

James

                                  2,100 (4)        75,663

S.

                                  3,067 (5)        110,504

Porter

                                  5,250 (6)        189,158

Brent

C.

Jewell

                                  6,000 (7)        216,180

Patricia

                                  1,510 (4)        54,405

A.

                                  2,200 (5)        79,266

Beithon

                                  3,750 (6)        135,113

Gary

                                  667 (4)        24,032

R.

                                  953 (5)        34,337

Johnson

                                  2,450 (6)        88,274

 

  (1)

The exercise price for all stock options is 100% of the closing price of our common stock on the NASDAQ Global Select Market on the date of grant.

 

  (2)

The market value is calculated by multiplying the closing price of $36.03, the closing price of our common stock on the NASDAQ Global Select Market on March 1, 2019, the last trading day of fiscal 2019, by the number of shares of restricted stock that had not vested as of March 2, 2019, the last day of fiscal 2019.

 

  (3)

Represents a stock option award that vested in equal, annual installments on the first three anniversaries of the date of grant and has a 10-year term.

 

  (4)

Represents an unvested restricted stock award granted on April 30, 2016, which vests in three equal annual installments commencing on April 30, 2017.

 

  (5)

Represents an unvested restricted stock award granted on April 27, 2017, which vests in three equal annual installments commencing on April 30, 2018.

 

  (6)

Represents an unvested restricted stock award granted on April 26, 2018, which vests in three equal installments commencing on April 30, 2019.

 

  (7)

Represents an unvested restricted stock award granted on May 29, 2018, which vests in two equal annual installments commencing on May 29, 2019.

 

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Option Exercises and Stock Vested

The following table sets forth information on stock option and SAR award exercises and restricted stock awards vested during fiscal 2019 for each of our Named Executive Officers.

 

Fiscal 2019 Option Exercises and Stock Vested
     Option Awards    Stock Awards

Name

           Number of Shares        
Acquired on
Exercise (#)
           Value Realized on        
Exercise ($)(1)
           Number of Shares        
Acquired on

Vesting (#)(2)
           Value Realized on        
Vesting ($)(3)

Joseph F. Puishys

                     20,146        828,202

James S. Porter

                     5,180        212,950

Brent C. Jewell

                           

Patricia A. Beithon

       17,104        340,199        3,613        148,530

Gary R. Johnson

                     1,625        66,804

 

  (1)

The value realized is the difference between the exercise price per share and the closing price of our common stock on the NASDAQ Global Select Market on the date of exercise multiplied by the number of shares acquired on exercise of the option.

 

  (2)

Includes shares of restricted stocks that became vested and were distributed during fiscal 2019.

 

  (3)

The value realized is calculated by multiplying $41.11, the closing price of our common stock on the NASDAQ Global Select Market on April 30, 2018, by the shares of restricted stock that became vested on April 30, 2018.

Retirement Plan Compensation

Legacy Officers’ Supplemental Executive Retirement Plan

Our Legacy Officers’ Supplemental Executive Retirement Plan (“Legacy SERP”) is a non-qualified, defined benefit retirement plan in which only six current or former members of senior management participate, including Ms. Beithon, who is our only Named Executive Officer who is a participant in the plan. Our Legacy SERP was amended in October 2008 so that no benefits will accrue to participants after December 31, 2008.

Benefits under our Legacy SERP are based on a participant’s highest average compensation for the five highest consecutive, completed calendar years of annual compensation during the last 10 years of employment. For purposes of calculating Legacy SERP benefits, compensation is divided into two categories: base salary and bonus compensation. Bonus compensation is the participant’s annual cash incentive compensation but does not include equity or deferred compensation (when received).

Benefits under our Legacy SERP are calculated as an annuity equal to a participant’s years of service to our Company multiplied by the sum of 2% of his or her average monthly base salary and 4% of his or her average monthly bonus compensation, offset by benefits to be received under social security, our 401(k) Retirement Plan and our other defined contribution pension plans from contributions made by our Company. The maximum number of years of service that will be credited to any participant is 20 years. Benefits payable are generally a single life annuity unless the participant has made an election to receive a joint and survivor annuity or 10-year term certain and life annuity (both of which would be a reduced monthly benefit). A lump-sum payment is not available.

Under our Legacy SERP, the normal retirement age is 65 and a participant must be at least 55 years old to be eligible for benefits. If a participant retires from or terminates his or her employment with our Company on or after age 55 and elects to receive benefits prior to age 65, the participant’s monthly benefit will be reduced five-ninths of one percent for each of the first 60 months and five-eighteenths of one percent for each of the next 60 months by which the annuity starting date precedes the calendar month in which the participant would attain age 65.

 

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Fiscal 2019 Pension Benefits Table

The following table shows the present value of accumulated benefits under our Legacy SERP as of March 2, 2019, the measurement date used in preparing our fiscal 2019 audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended March 2, 2019, years of service credit and payments during fiscal 2019 for Ms. Beithon, our only Named Executive Officer who participates in our Legacy SERP. Our Chief Executive Officer is not a participant in our Legacy SERP.

 

Fiscal 2019 Pension Benefits

Name

           Plan Name            Number of Years
        Credited Service (#)        
   Present Value of
        Accumulated Benefit ($)(1)        
   Payments During
        Last Fiscal Year ($)         

Patricia A. Beithon

       Legacy SERP        9        589,590     

 

  (1)

The present value of accumulated benefits is based on the assumptions used in determining our Legacy SERP benefit obligations and net periodic benefit cost for financial reporting purposes, except that no pre-retirement mortality assumption is used for these calculations. A complete description of the accounting policies and assumptions we used to calculate the present value of accumulated benefits can be found in Note 9, Employee Benefit Plans – Officers’ Supplemental Executive Retirement Plan (SERP), Obligations and Funded Status of Defined-Benefit Pension Plans and Additional Information, to our audited financial statements included in this Annual Report on Form 10-K for the fiscal year ended March 2, 2019.

401(k) Retirement Plan

We provide our tax-qualified 401(k) Retirement Plan to substantially all of our U.S.-based, non-union employees and union employees at two of our manufacturing facilities, who are scheduled to work more than 1,000 hours in a plan year. A participating employee may elect to contribute up to 60% of eligible earnings on a pre-tax basis into his or her 401(k) Retirement Plan account. We make a matching contribution for all of our eligible U.S.-based, non-union employees equal to 100% of the first 1% and 50% of the next 5% of the eligible compensation that the employee contributes to the plan, and matching contributions are made by our Company for union employees according to the terms of union contracts. Our employees are fully vested in their own contributions and become fully vested in our matching contributions after two-years of vesting service.

 

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Non-Qualified Deferred Compensation

Deferred Compensation Plan

Our Deferred Compensation Plan is a non-qualified deferred compensation plan for a select group of management and other highly compensated employees of our Company and our subsidiaries, including our Named Executive Officers. For the 2018, 2017 and 2016 calendar years, approximately 212, 193 and 179 of our employees, respectively, were eligible to participate in our Deferred Compensation Plan and approximately 219 employees are eligible for the 2019 calendar year. Our Deferred Compensation Plan allows for deferrals by participants of up to 75% of base salary and sales commissions, and up to 100% of bonuses and other cash or equity-based compensation approved by the Committee, and also provides that we may establish rules permitting a participant to defer performance-based compensation up to six months prior to the end of a performance period. There is no maximum dollar limit on the amount that may be deferred by a participant each year. A participant in our Deferred Compensation Plan may elect to have the participant’s account credited with earnings and investment gains and losses by assuming that deferred amounts were invested in one or more of 17 hypothetical investment fund options selected by the participant, which had investment returns ranging from (18.02%) to 7.54% for calendar 2018. An Apogee common stock fund is not one of the investment options available under our Deferred Compensation Plan. Participants are permitted to change their investment elections at any time. We may also make discretionary contributions to a participant’s account under our Deferred Compensation Plan, and our Company will designate a vesting schedule for each such contribution. The participants are always 100% vested in the amount they defer and the earnings, gains and losses credited to their accounts. Participants are entitled to receive a distribution from their account upon: a separation from service, a specified date, death, disability, retirement (as defined in our Deferred Compensation Plan), or unforeseeable emergency that results in “severe financial hardship” that is consistent with the meaning of such term under Section 409A of the Internal Revenue Code. Distributions are in a lump sum, installments or a combination of lump sum with installments based upon the participant’s election as allowed under our Deferred Compensation Plan. Our Deferred Compensation Plan is an unfunded obligation of Apogee, and participants are unsecured creditors of Apogee.

Legacy Deferred Compensation Plan

Our Legacy Deferred Compensation Plan is a non-qualified deferred compensation plan for a select group of management or highly compensated employees of our Company and subsidiaries; however, in October 2010, the plan was amended to prohibit any future participant deferrals to the plan after our fiscal 2011. A participant in our Legacy Deferred Compensation Plan may choose to have his or her account credited with the applicable interest rate as set forth in the plan or credited with earnings and investment gains and losses by assuming the deferred amounts were invested in one or more of 17 hypothetical investment fund options selected by the participant, which had investment returns ranging from (18.02%) to 7.54% for calendar 2018. For amounts deferred for plan years beginning on or after January 1, 2010, the applicable interest rate, which is not considered to be an “above-market” interest rate, is the monthly average yield for the last calendar month of the prior fiscal year on U.S. Treasury securities adjusted to a constant maturity of 10 years. For amounts deferred for plan years beginning prior to January 1, 2010, the applicable interest rate, which may be considered to be an “above-market” interest rate, is the greater of the following rates: (i) the sum of one and one-half percent (1-1/2%) plus the monthly average yield for the last calendar month of the prior fiscal year on U.S. Treasury securities adjusted to a constant maturity of 10 years; or (ii) one-half of the rate of Apogee’s after-tax return on beginning shareholders’ equity for the prior fiscal year. Our Legacy Deferred Compensation Plan is an unfunded obligation of Apogee, and participants are unsecured creditors of Apogee. Distributions are in either a lump sum or installments.

 

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Deferred Compensation Table

The table below provides information on our Named Executive Officers’ compensation earned with respect to fiscal 2019 and deferred under our Deferred Compensation Plan and Legacy Deferred Compensation Plan.

 

Fiscal 2019 Deferred Compensation

Name

  

Name of Plan

   Executive
Contributions
in Last Fiscal
Year ($)
   Registrant
Contributions
in Last Fiscal
Year ($)
  Aggregate
Earnings

in Last Fiscal
Year ($)(1)
   Aggregate
Withdrawals/

Distributions
($)
   Aggregate
Balance

at Last Fiscal
Year End ($)

Joseph F. Puishys

   Deferred Comp.           198,688(2)                     2,382,759 (3) 
   Legacy Deferred Comp.                              

James S. Porter

   Deferred Comp.                              
   Legacy Deferred Comp.                              

Brent C. Jewell

   Deferred Comp.                              
   Legacy Deferred Comp.                              

Patricia A. Beithon

   Deferred Comp.                              
   Legacy Deferred Comp.                 2,977               60,418 (4) 

Gary R. Johnson

   Deferred Comp.                               71,970 (5) 
   Legacy Deferred Comp.                 13,590               275,782 (5) 

 

  (1)

Pursuant to SEC rules, all earnings on non-qualified deferred compensation during fiscal 2019 in excess of 3.46%, 120% of the applicable federal rate compounded annually, have been deemed “above-market earnings.” During fiscal 2019, the interest paid on amounts deferred for plan years beginning prior to January 1, 2010, pursuant to our Legacy Deferred Compensation Plan was 8.45%. These amounts are reported in the “Change in Pension Value and Non-Qualified Deferred Compensation Earnings” column of the “Summary Compensation Table” on page 56.

 

  (2)

The amount reported for Mr. Puishys is reported in the “Summary Compensation Table” on page 56 in the “Non-Equity Incentive Plan Compensation” column.

 

  (3)

A portion of the amount reported for Mr. Puishys is reported in the “Summary Compensation Table” on page 56 in the “Non-Equity Incentive Plan Compensation” column for fiscal 2019, 2018 and 2017; and a portion of this amount was earned prior to fiscal 2017; however, all of the amounts earned prior to fiscal 2017 were reported in the “Summary Compensation Table” in the year earned.

 

  (4)

The amount reported for Ms. Beithon is not reported in the “Summary Compensation Table” on page 56 because all of this amount was earned by her prior to fiscal 2017; however, all of this amount was reported in the “Summary Compensation Table” in the years earned.

 

  (5)

Portions of the amounts reported for Mr. G. Johnson for our Deferred Compensation Plan are reported in the “Summary Compensation Table” for fiscal 2017 and amounts earned by him prior to 2017 were included in the “Summary Compensation Table” in the years earned. The amount reported for Mr. G. Johnson for our Legacy Deferred Compensation Plan is not reported in the “Summary Compensation Table” on page 56, because all of this amount was earned by him prior to fiscal 2017; however, all of this amount would have been reported in the “Summary Compensation Table” in the years earned, provided Mr. G. Johnson was a Named Executive Officer in such years.

 

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Potential Payments Upon Termination or Following a Change-in-Control

Payments Made Upon Termination

We do not have any employment agreements, employment arrangements or general severance plans covering our Named Executive Officers. Except as discussed below, if the employment of any of our Named Executive Officers is voluntarily or involuntarily terminated, no additional payments or benefits will accrue or be owed to him or her, other than what the Named Executive Officer has accrued and is vested in under our benefit plans discussed above, including under the heading “Retirement Plan Compensation.” Any severance benefits payable to our Named Executive Officers not triggered by a change-in-control would be determined by the Compensation Committee at its discretion.

Except in connection with a change-in-control, a voluntary or involuntary termination will not trigger an acceleration of the vesting of any outstanding equity awards.

Payments Made Upon Disability

Under the terms of the Apogee Enterprises, Inc. Short-Term and Long-Term Disability Plans, each of our Named Executive Officers who participates in such plans is eligible for a disability benefit. All of our Named Executive Officers have elected to participate in our enhanced Long-Term Disability Plan and are eligible for a disability benefit that is equal to 100% of his or her monthly base salary during the first three months of disability and 60% of his or her monthly base salary up to a maximum of $15,000 per month thereafter.

If the employment of any of our Named Executive Officers is terminated due to disability, the terms of our stock option and restricted stock agreements provide for the immediate vesting of such awards.

Pursuant to the terms of the CEO evaluation incentive award and the portion of his two-year performance-based awards received by Mr. Puishys that must be mandatorily deferred, Mr. Puishys will receive the full-value of the deferred amounts if his employment is terminated due to disability.

Payments Made Upon Death

The terms of our stock option and restricted stock agreements provide for the immediate vesting of such awards in the event of the Named Executive Officer’s death.

Pursuant to the terms of the CEO evaluation incentive awards and the portion of his two-year performance-based awards received by Mr. Puishys that must be mandatorily deferred, Mr. Puishys’ estate will receive the full-value of the deferred amounts.

Change-in-Control Severance Agreements

The Committee believes that offering a change-in-control program provides executive officers a degree of security in the event of a corporate transaction and allows for better alignment of executive officer and shareholder interests. We have entered into a change-in-control severance agreement (the “CIC Severance Agreement”) with each of our Named Executive Officers. Our CIC Severance Agreement is designed to retain our executive officers and provide for continuity of management in the event of an actual or threatened “Change-in-Control of Apogee” (as defined in the CIC Severance Agreement).

Our CIC Severance Agreement contains a “double trigger” for benefits, which means that there must be both a “Change-in-Control of Apogee” and a termination of the executive’s employment for the provisions to apply. It provides that, in the event of a “Change-in-Control of Apogee,” each executive officer who is a party to an agreement will have specific rights and receive specified benefits if the executive officer is terminated without “Cause” (as defined in the CIC Severance Agreement) or the executive officer voluntarily terminates his or her employment for “Good Reason” (as defined in the CIC Severance Agreement) within two-years after the “Change-in-Control of Apogee.” In these circumstances, Messrs. Puishys, Porter and Jewell, and Ms. Beithon will each receive a severance payment equal to two times his or her annual base salary and annual cash incentive at target level performance for such fiscal year.

 

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Mr. G. Johnson will receive a severance payment equal to his annual base salary and annual cash incentive at target level performance for such fiscal year. In addition, all unvested restricted stock awards held by the executive officer that have not vested by the employment termination date will be immediately vested on such date. Our CIC Severance Agreement provides that, for a 12- or 24-month period following a “Change-in-Control of Apogee,” our Company will continue to provide medical and dental insurance coverage for the executive officer and the executive officer’s dependents or will reimburse the executive officer for the cost of obtaining substantially similar benefits. No benefits will be paid to the executive officer pursuant to the CIC Severance Agreement unless the executive officer executes and delivers to Apogee a release of claims.

We do not provide a tax gross-up payment for any excise tax liability under Internal Revenue Code Section 4999 related to Section 280G excess parachute payments.

Our CIC Severance Agreements contain a “best-net-benefit” provision which provides that, in the event that payments under the agreements trigger excise tax for the executive officer, the executive officer has the option of either reducing the severance payment, if the net benefit is greater than paying the excise tax, or paying the excise tax himself or herself.

To receive these severance benefits, the executive officer shall not: (1) solicit, directly or indirectly, any of our existing or prospective customers, vendors or suppliers for a purpose competitive to our business or to encourage such customers, vendors or suppliers to terminate business with us; (2) solicit, directly or indirectly, any of our employees to terminate his or her employment; or (3) engage in or carry on, directly or indirectly, in certain geographic markets a business competitive with our business, for a period of 12- or 24-months following termination of employment.

The CIC Severance Agreements continue through December 31 of each year and provide for automatic extension for one-year terms prior to a Change-in-Control unless we give prior notice of termination.

The terms of the agreements for two-year performance-based awards provide that in the event of a Change-in-Control prior to the end of a performance period, the performance period is deemed to end on the date of the Change-in-Control and our Named Executive Officers are entitled to retain performance-based awards, to the extent earned, as adjusted for the truncated performance period. The terms of the restricted stock agreements for awards made pursuant to our Stock Incentive Plan contain a “double trigger” for acceleration of vesting upon a Change-in-Control, which means that there must be both a Change-in-Control and the Named Executive Officer’s employment must be terminated by the Company without “Cause” (as defined in the restricted stock agreement) or by the Named Executive Officer for “Good Reason” (as defined in the restricted stock agreement) in order for all shares of restricted stock that have not vested by the Employment Termination Date to vest. In the event of a “Change-in-Control of Apogee,” Mr. Puishys will receive the full-value of the CEO evaluation incentive awards and the portion of the CEO’s two-year performance-based awards that were mandatorily deferred.

 

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Executive Benefits and Payments Upon Termination and Change-in-Control

The table below shows potential payments to our Named Executive Officers upon certain terminations pursuant to disability, death and a change-in-control of our Company. The table below assumes that disability, death or the termination of employment occurred or the change-in-control was effective as of March 1, 2019, the last trading day of fiscal 2019. The amounts shown are estimates of the amounts that would be paid to the executives upon termination of employment or the change-in-control, in addition to the base salary and bonus earned by our Named Executive Officers for fiscal 2019. We have not included payments or benefits that are fully vested and disclosed in the “Fiscal 2019 Pension Benefits” table or the “Fiscal 2019 Deferred Compensation” table. The actual amounts to be paid can only be determined at the actual time of a Named Executive Officer’s termination of employment.

 

Name

 

Type of Payment

  Payments
Upon
        Disability ($)        
          Payments        
Upon
Death ($)
  Payments After a
Change-in-Control
    without Termination    
($)
  Payments Upon
Involuntary

or Good Reason
    Termination After a    
Change-in-Control
Occurs ($)

Joseph

  Cash Severance Payment                         3,833,500 (1) 

F.

  Health Insurance Benefits                         26,454

Puishys

  Reimbursement of Legal Costs                         (2)
  Acceleration of Vesting                
 

Restricted Stock

      1,332,894 (3)        1,332,894 (3)              1,332,894 (3) 
 

Performance-Based Awards

      (4)       (4)       465,565 (5)        465,565 (5) 
 

CEO Evaluation Incentive

      233,750 (6)        233,750 (6)        233,750 (6)        233,750 (6) 
 

Deferred Compensation

      2,184,071 (7)        2,184,071 (7)        2,184,071 (7)        2,184,071 (7) 
  Disability Payments       368,751 (8)                   
     

 

 

     

 

 

     

 

 

     

 

 

 
 

Total

          4,119,466           3,750,715           2,883,386               8,076,234
     

 

 

     

 

 

     

 

 

     

 

 

 

James

  Cash Severance Payment                         1,522,500 (1) 

S.

  Health Insurance Benefits                         26,454

Porter

  Reimbursement of Legal Costs                         (2)
  Acceleration of Vesting                
 

Restricted Stock

      375,325 (3)        375,325 (3)              375,325 (3) 
 

Performance-Based Awards

      (4)       (4)       134,441 (5)        134,441 (5) 
  Disability Payments       243,750 (8)                   
     

 

 

     

 

 

     

 

 

     

 

 

 
 

Total

      619,075       375,325       134,441       2,058,720
     

 

 

     

 

 

     

 

 

     

 

 

 

Brent

  Cash Severance Payment                         1,120,000 (1) 

C.

  Health Insurance Benefits                         29,138

Jewell

  Reimbursement of Legal Costs                         (2)
  Acceleration of Vesting                
 

Restricted Stock

      216,180 (3)        216,180 (3)              216,180 (3) 
 

Performance-Based Awards

      (4)       (4)       86,537 (5)        86,537 (5) 
  Disability Payments       222,501 (8)                   
     

 

 

     

 

 

     

 

 

     

 

 

 
 

Total

      438,681       216,180       86,537       1,451,855
     

 

 

     

 

 

     

 

 

     

 

 

 

Patricia

  Cash Severance Payment                         1,152,000 (1) 

A.

  Health Insurance Benefits                         9,574

Beithon

  Reimbursement of Legal Costs                         (2)
  Acceleration of Vesting                
 

Restricted Stock

      268,784 (3)        268,784 (3)              268,784 (3) 
 

Performance-Based Awards

      (4)       (4)       96,427 (5)        96,427 (5) 
  Disability Payments       225,000 (8)                   
     

 

 

     

 

 

     

 

 

     

 

 

 
 

Total

      493,784       268,784       96,427       1,526,785
     

 

 

     

 

 

     

 

 

     

 

 

 

Gary

  Cash Severance Payment                         362,600 (9) 

R.

  Health Insurance Benefits                         10,826

Johnson

  Reimbursement of Legal Costs                         (2)
  Acceleration of Vesting                
 

Restricted Stock

      146,642 (3)        146,642 (3)              146,642 (3) 
 

Performance-Based Awards

      (4)       (4)       40,023 (5)        40,023 (5) 
  Disability Payments       181,299 (8)                   
     

 

 

     

 

 

     

 

 

     

 

 

 
 

Total

      327,941       146,642       40,023       560,091
     

 

 

     

 

 

     

 

 

     

 

 

 

 

  (1)

Equals the sum of (a) two times his or her annual base salary as of March 2, 2019, and (b) two times his or her fiscal 2019 annual cash incentive award at target level performance.

 

  (2)

We will pay legal fees and expenses incurred to obtain or enforce any right or benefit under his or her CIC Severance Agreement.

 

  (3)

Includes restricted stock awards, which would vest upon an assumed occurrence on March 1, 2019 of one of the following events: (a) disability; (b) death; or (c) termination following a Change-

 

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in-Control. The amount in this table represents such aggregate number of shares multiplied by $36.03, the closing price of our common stock on the NASDAQ Global Select Market on March 1, 2019, the last trading day of fiscal 2019.

 

  (4)

In the event employment is terminated due to disability or death prior to the end of the performance period for the fiscal 2019 – 2020 performance-based awards, our Named Executive Officer, or his or her estate, as applicable, will be entitled to retain and receive a prorated portion (based on the amount of time elapsed between the beginning of the performance period and the date of termination) of the fiscal 2019 – 2020 performance-based awards at the end of the performance period to the extent earned. In addition, with respect to the portion of Mr. Puishys’ fiscal 2019 – 2020 performance-based award that must be mandatorily deferred, in the event his employment is terminated due to disability or death prior to the end of the performance period, Mr. Puishys, or his estate, as applicable, will be entitled to retain and receive a prorated portion (based on the amount of time elapsed between the beginning of the performance period and the date of termination) to the extent earned.

 

  (5)

The amount represents the payout of fiscal 2019 – 2020 performance-based awards assuming the performance period ended upon the assumed occurrence on March 1, 2019 (one year and one day before the end of the two-year performance period) of one of the following events: (a) a Change-in-Control without termination; or (b) termination following a Change-in-Control. In addition, for Mr. Puishys, the amount includes the payout of the portion of his fiscal 2019 – 2020 performance-based award that must be mandatorily deferred assuming the performance period ended upon the assumed occurrence on March 1, 2019 (one year and one day before the end of the two-year performance period) of one of the following events: (a) Change-in-Control without termination; or (b) termination following a Change-in-Control.

 

  (6)

The amount represents the payout of the fiscal 2019 CEO evaluation incentive award at target assuming that the performance period and retention period ended upon the assumed occurrence on March 1, 2019 (one year and one day before the end of the one-year performance period) of one of the following events: (a) disability; (b) death; (c) a Change-in-Control without termination; or (d) termination following a Change-in-Control.

 

  (7)

The amount represents the payout of Mr. Puishys’ balance in the Deferred Compensation Plan, which is attributable to the fiscal 2015 – 2018 CEO evaluation incentives and the portion of his fiscal 2015 – 2016 and fiscal 2017 – 2018 performance-based award incentives that were mandatorily deferred, assuming the retention period ended upon the assumed occurrence on March 1, 2019 of one of the following events: (a) disability; (b) death; (c) a Change-in-Control without termination; or (d) termination following a Change-in-Control.

 

  (8)

This amount represents the annual disability payments during the first year of disability. Annual disability payments after the first year of disability would be $180,000 for each of Messrs. Puishys, Porter and Jewell and Ms. Beithon and $155,400 for Mr. G. Johnson.

 

  (9)

Equals the sum of Mr. G. Johnson’s (a) annual salary as of March 1, 2019 and (b) fiscal 2019 annual cash incentive award at target level performance.

 

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CEO Pay Ratio Disclosure

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Joseph F. Puishys, our Chief Executive Officer and President:

For the year ended March 2, 2019, our last completed fiscal year:

 

   

the median of the annual total compensation of all employees of our Company (other than our Chief Executive Officer) was $47,393; and

 

   

the annual total compensation of our Chief Executive Officer, as reported in the Summary Compensation Table included on page 56 of this proxy statement, was $2,250,536.

Based on this information for 2019, we reasonably estimate that the ratio of our CEO’s annual total compensation to the annual total compensation of our median employee was 47 times. Our pay ratio estimate has been calculated in a manner consistent with Item 402(u) of Regulation S-K.

To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee, the methodology and the material assumptions, adjustments, and estimates that we used were as follows:

We determined that, as of December 31, 2018, our employee population consisted of 7,043 individuals (including full-time and part-time employees, other than the Chief Executive Officer, who were employed on December 31, 2018) working at the Company together with our consolidated subsidiaries. Of these individuals, 6,042 were located in the U.S. and U.S. territories, and 1,001 were from our subsidiaries in Canada and Brazil. We chose to exclude all 192 of our employees from our Brazil subsidiary, which consists of 2.73% of our workforce, from the identification of “median employee,” as permitted by SEC rules.

Our employee population, after taking into consideration the permitted adjustments described above, consisted of 6,851 members. In making this determination, we annualized the compensation of all full- and part-time permanent employees included in the sample who were hired in calendar year 2018, but did not work for us or our included subsidiaries for the entire twelve month period described below. Our adjusted employee population consisted of 6,042 employees in the U.S. and 809 employees located in Canada.

We identified our median employee based on the total cash and stock-based compensation earned during the twelve month period ended December 31, 2018. For purposes of determining the total compensation actually earned, we included: the amount of base salary (or, in the case of hourly workers, base wages including overtime pay) the employee received during the twelve months ended December 31, 2018, the amount of any cash incentives paid or deferred in such period (which include sales commissions as well as cash incentives that are generally paid for performance during the prior quarter or year), and the amount of any income from stock-based compensation, as reflected in our payroll records. For purposes of identifying the median employee, we applied the average exchange rate for calendar year 2018, which was U.S. dollars to Canadian dollars - 1.2957 CAD.

Once we identified our median employee, we then determined that employee’s total compensation, including any perquisites and other benefits, in the same manner that we determine the total compensation of our named executive officers for purposes of the Summary Compensation Table disclosed above. The total compensation amount for our median employee for fiscal 2019 was determined to be $47,393. This total compensation amount was then compared to the total compensation of our CEO disclosed above in the Summary Compensation Table, of $2,250,536. The elements included in the CEO’s total compensation are fully discussed above in the footnotes to the Summary Compensation Table.

 

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PROPOSAL 2: ADVISORY APPROVAL OF APOGEE’S EXECUTIVE

COMPENSATION

Pursuant to Section 14A of the Exchange Act, we are providing shareholders with an advisory (non-binding) vote on the compensation of our Named Executive Officers as disclosed in this proxy statement in accordance with the rules of the SEC.

We are asking our shareholders to indicate their support for the compensation of our Named Executive Officers. We believe that our executive compensation program is structured in the best manner possible to support our Company and its business objectives. It has been designed to implement certain core compensation principles, which include:

 

   

Alignment of management’s interests with our shareholders’ interests to support long-term value creation through our equity compensation programs and share ownership guidelines;

 

   

Pay-for-performance, which is demonstrated by linking annual cash incentives and long-term incentives to key financial measures;

 

   

Providing a flexible compensation package that reflects the cyclical nature of our business and fairly compensates our executives over our business cycle; and

 

   

Linking compensation to market levels of compensation paid to executive officers in the competitive market so that we can attract, motivate and retain executives who are able to drive the long-term success of Apogee.

We believe our executive compensation program reflects a strong pay-for-performance philosophy and is well-aligned with our shareholders’ long-term interests. Our executive compensation program is designed to motivate our executives, drive desirable behaviors, be competitive, promote retention and reward successful performance. We ask for your support for the reasons listed below.

 

   

Our compensation programs are substantially tied to achievement of our key business objectives. A significant portion of each Named Executive Officer’s potential total annual cash compensation and long-term compensation is at-risk and linked to our operating performance.

 

   

Our compensation programs are designed to take into account the cyclical nature of our business and to fairly compensate our executives over the commercial construction cycle.

 

   

Our compensation programs for executive officers deliver a significant portion of potential total compensation in the form of equity. If the value we deliver to our shareholders declines, so does the compensation we deliver to our executive officers.

 

   

We have stock ownership guidelines for our executive officers.

 

   

We offer very limited perquisites to our executive officers and do not provide tax reimbursement or “gross-ups” on perquisites.

 

   

Each of our Named Executive Officers is expected to demonstrate exceptional individual performance in order to continue serving as a member of the executive team.

 

   

We continue to refine our executive compensation program to reflect evolving executive compensation practices.

 

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We believe that the information provided above and within the “Executive Compensation” section of this proxy statement demonstrates that our executive compensation program was designed appropriately and is working to ensure management’s interests are aligned with our shareholders’ interests to support long-term value creation. Accordingly, we are asking our shareholders to vote “FOR” the following resolution at the Annual Meeting:

“RESOLVED, that the shareholders approve, on an advisory basis, the compensation of Apogee’s Named Executive Officers, as disclosed in Apogee’s Proxy Statement for the 2019 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, compensation tables and other related narrative disclosures.”

This advisory vote on executive compensation is not binding on Apogee, our Compensation Committee or our Board of Directors. However, our Compensation Committee and Board of Directors will take into account the result of the vote when determining future executive compensation arrangements. We currently conduct annual advisory votes on executive compensation, and we expect to conduct our next advisory vote at our 2020 annual meeting of shareholders.

Required Vote and Recommendation

The affirmative vote of a majority of the shares of our common stock present in person or by proxy and entitled to vote at the Annual Meeting is required for the approval of the Say on Pay Proposal.

Our Board of Directors recommend that you vote FOR the Say on Pay Proposal. Proxies will be voted FOR the proposal unless otherwise specified.

 

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PROPOSAL 3: APPROVAL OF THE APOGEE ENTERPRISES, INC.

2019 STOCK INCENTIVE PLAN

Background and Purpose

On June 26, 2019, our Board adopted, subject to shareholder approval, the Apogee Enterprises, Inc. 2019 Stock Incentive Plan (the “2019 Stock Plan”). The purpose of the 2019 Stock Plan is to promote the interests of the Company and its shareholders by aiding the Company in attracting and retaining employees, officers, consultants and independent contractors capable of assuring the future success of the Company, by providing such persons with opportunities for stock ownership in the Company and to offer such persons incentives to put forth maximum effort for the success of the Company’s business. The 2019 Stock Plan, if approved by the shareholders, will replace the 2009 Stock Incentive Plan.

The Compensation Committee (for purposes of this summary, the “Committee”) will administer the 2019 Stock Plan. The following discussion and summary of the material terms of the 2019 Stock Plan is qualified in its entirety by reference to the full text of the 2019 Stock Plan which is set forth in Appendix B to this proxy statement.

Key Features of the 2019 Stock Plan

The following features of the 2019 Stock Plan reflect equity incentive plan “best practices” intended to protect the interests of our shareholders:

 

 

Limit on Shares Available for Awards. Under the 2019 Stock Plan, the aggregate number of shares of the Company’s common stock that may be issued is 1,150,000 shares. There were 327,353 shares remaining under the 2009 Stock Incentive Plan on June 23, 2019, the date of its termination. These shares will not be added to the shares available under the 2019 Stock Plan. All shares awarded, regardless of the type of award, will count against the 2019 Stock Plan’s reserve on 1:1 basis for each share subject to the award. On the record date, the closing price of our common stock on the NASDAQ Global Select Market was $37.40 per share.

 

 

Individual Limits on Shares Issued. The aggregate number of shares of the Company’s common stock that may be issued in a calendar year under the 2019 Stock Plan to an individual employee or officer is 200,000 shares and, in the case of a consultant, independent contractor or advisor is 30,000 shares.

 

 

No Evergreen Provision. The 2019 Stock Plan does not contain an “evergreen” provision.

 

 

No Liberal Share “Recycling.” The 2019 Stock Plan provides that any shares (i) surrendered to pay the exercise price of an option, (ii) withheld by the Company or tendered to satisfy tax withholding obligations with respect to any award, (iii) covered by a stock settled stock appreciation right not issued in connection with settlement upon exercise, or (iv) repurchased by the Company using option proceeds will not be added back (“recycled”) to the 2019 Stock Plan.

 

 

No Granting of Discounted Stock Options or Stock Appreciation Rights. Stock options and stock appreciation rights (“SARs”) must have an exercise price equal to or greater than the fair market value of our common stock on the date of grant (unless such award is granted in substitution for a stock option or SAR previously granted by an entity that is acquired by or merged with the Company).

 

 

No Repricing of Stock Options or SARs. The 2019 Stock Plan prohibits the repricing of stock options and SARs (including a prohibition on the repurchase of “underwater” stock options or stock appreciation rights for cash or other securities) without shareholder approval.

 

 

No Liberal Change-in-Control. The 2019 Stock Plan prohibits any award agreement from having a change-in-control provision that has the effect of accelerating the exercisability of any award or the lapse of restrictions relating to any award upon only the announcement or shareholder approval

 

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(rather than the consummation of) a change-in-control transaction.

 

 

No Dividends or Dividend Equivalents Paid on Unvested Awards. The 2019 Stock Plan prohibits the payment of dividends or dividend equivalents on awards until those awards are earned and vested. In addition, the 2019 Stock Plan prohibits the granting of dividend equivalents with respect to stock options, SARs or an award the value of which is based solely on an increase in the value of the Company’s shares after the grant of the award.

 

 

Awards Subject to Forfeiture or Clawback. Awards under the 2019 Stock Plan will be subject to any Company recovery or clawback policy, as well as any other forfeiture and penalty conditions determined by the Committee.

 

 

Minimum Vesting Period. A maximum of 5% of the aggregate number of shares available for issuance under the 2019 Stock Plan may be issued without a vesting period of at least one year following the date of grant. All other awards will have a minimum vesting period of at least one year.

 

 

Independent Committee Administration. The 2019 Stock Plan will be administered by a committee of the Board of Directors comprised entirely of independent directors.

The Committee expects that the number of shares available, if approved by our shareholders, will satisfy equity compensation needs for approximately four years based on historical grant practices.

Determination of Number of Shares for the 2019 Stock Plan

In setting the number of shares authorized under the 2019 Stock Plan for which shareholder approval is being sought, the Committee and the Board of Directors considered, among other factors, the historical amounts of equity awards granted by the Company and the potential future grants over the next several years. Below is information regarding the Company’s burn rates for all grants of equity under all shareholder-approved equity plans for the past three fiscal years and the Company’s total potential dilution.

Burn Rate. Burn rate, a measure of the level at which a company uses shares available for grant under its equity compensation plans and, is an important factor for investors concerned about shareholder dilution. Burn rate is defined as, in a given fiscal year, the number of shares subject to equity awards granted divided by the weighted average number of shares outstanding. In setting and recommending to our shareholders the number of share to be authorized under the 2019 Stock Plan and the 2019 Director Stock Plan, the Board considered the Company’s burn rate for each of the past three fiscal years The calculation of our burn rate for each year is shown in the table below:

 

     Fiscal Year
Ended

March 2, 2019
  Fiscal Year
Ended

March 3, 2018
  Fiscal Year
Ended

March 4, 2017

Full Value Awards Granted

     163,987       135,416       148,672  

Weighted Average Shares of Common Stock Outstanding (Basic)1

     27,802,000       28,534,000       28,781,000  

Burn Rate

     0.59     0.47     0.52

 

  (1)

As of March 2, 2019.

Based on the burn rates in fiscal years 2019, 2018 and 2017, our three-year average burn rate was 0.53%, which is well below our peers.

 

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Overhang. The potential dilution, or overhang, is a common measure to assess the dilutive impact of equity plans. Total potential dilution is equal to (i) the number of shares available to be granted as future equity awards plus the number of shares subject to outstanding equity awards, divided by (ii) such total number of shares plus the total number of shares outstanding. Total potential dilution, prior to and after shareholder approval of the 2019 Stock Plan and 2019 Director Stock Plan, is shown in the table below:

 

     Total
Potential
Dilution
Remaining Reserve under 2009 Stock Incentive Plan and 2009 Director Stock Plan(1)       
Remaining Reserve under Legacy Partnership Plan and Deferred Compensation Plan for Non-Employee Directors (“Other Stock Plans”)(1)      86,768  
Shares Subject to Outstanding Awards under 2009 Stock Incentive Plan, 2009 Director Stock Plan, Other Stock Plans, and Non-Shareholder Approved Plan (“Outstanding Awards”)(1)(2)      280,851  
Weighted Average Shares of Common Stock Outstanding (Basic) (“CSO”)(1)        26,412,845  
Total Current Dilution(3)      1.37
Shares Reserved under 2019 Stock Plan and 2019 Director Stock Plan          1,300,000  
Total Proposed Dilution(4)      5.94

 

  (1)

As of November 20, 2019, the record date for the Annual Meeting.

 

  (2) 

The shares subject to outstanding awards includes a stock option for 100,341 shares at an exercise price of $8.34

 

  (3)

Calculated as (2009 Stock Incentive Plan + 2009 Director Stock Plan + Other Stock Plans + Outstanding Awards), divided by (2009 Stock Incentive Plan + 2009 Director Stock Plan + Other Stock Plans + Outstanding Awards + CSO).

 

  (4)

Calculated as (Other Stock Plans + Outstanding Awards + 2019 Stock Plan + 2019 Director Stock Plan), divided by (Other Stock Plans + Outstanding Awards + 2019 Stock Plan + 2019 Director Stock Plan + CSO).

The 2019 Stock Plan does not set the number of shares subject to equity awards that will be granted in future years. In setting each year’s award amounts for plan participants, the Committee considers a variety of factors such as: the relative market position of the awards, the proportion of each executive’s total compensation to be delivered as a long-term incentive award, internal pay equity, executive performance, retention concerns, and the Company’s performance.

 

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New Plan Benefits

As of November 20, 2019, the record date for the Annual Meeting, other than an award of 10,000 shares of restricted stock made to Brent C. Jewell, in connection with his promotion to President of our Architectural Framing Supply segment in August 2019 and two other awards that totaled 15,000 shares of restricted stock to two other employees who are not Named Executive Officers, the Committee has not authorized specific grants of awards to be made under the 2019 Stock Plan. These awards are contingent upon our shareholders’ approval of the 2019 Stock Plan. Other than these awards, the number and types of awards that will be granted under the 2019 Stock Plan in the future are not determinable at this time, as the Committee will make these determinations in its discretion, subject to the terms of the 2019 Stock Plan.

 

Name and Position

   Dollar Value
($)(1)
  Number of
Shares

Joseph F. Puishys

     —               —      

Chief Executive Officer and President

     —               —      

James S. Porter

    

Executive Vice President and Chief Financial Officer

    

Brent C. Jewell

   $ 380,100       10,000  

Senior Vice President, Business Development and Strategy

    

Patricia A. Beithon

     —               —      

General Counsel and Secretary

    

Gary R. Johnson

     —               —      

Senior Vice President and Treasurer

    

Executive Group (5 persons)

   $ 380,100           10,000      

Non-Executive Director Group (9 persons)

     —               —      

Non-Executive Officer Employee Group (7,000 persons)

   $ 579,950       15,000  

 

  (1)

Represents the grant date fair value of the award calculated in accordance with FASB ASC 718, which is equal to the closing price of a share of our common stock on the grant date.

Vote Required and Recommendation

The affirmative vote of the majority of the shares of our common stock present in person or by proxy and entitled to vote at the Annual Meeting is required for the approval of the 2019 Stock Plan.

Our Board of Directors recommend that you vote “FOR” the adoption of the 2019 Stock Plan. Proxies will be voted FOR the proposal unless otherwise specified.

Description of 2019 Stock Plan

Administration. The Committee will administer the 2019 Stock Plan and will have full power and authority to determine when and to whom awards will be granted, and the type, amount and other terms and conditions of each award, consistent with the provisions of the 2019 Stock Plan. Subject to the provisions of the 2019 Stock Plan, the Committee may amend the terms of, or accelerate the exercisability of, an outstanding award. The Committee will have authority to interpret the 2019 Stock Plan and establish rules and regulations for the administration of the 2019 Stock Plan.

The Committee may delegate its powers under the 2019 Stock Plan to the Chief Executive Officer and/or one or more executive officers, subject to the requirements of applicable law and exchange requirements. However, such delegated officers will not be permitted to grant awards to any members of the Board or executive officers who are subject to Section 16 of the Exchange Act.

 

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Eligibility. Any employee, officer, consultant or independent contractor providing services to Apogee Enterprises, Inc. or an affiliate, or any person to whom an offer of employment or engagement has been made, and who is selected by the Committee to participate, is eligible to receive an award under the 2019 Stock Plan. The number of persons eligible to participate as of November 20, 2019 (the record date for the meeting), had the 2019 Stock Plan been in effect, is estimated to be approximately 7,000 employees, officers and consultants as a class; however, historically the Committee has not granted awards to more than approximately 130 employees in any single fiscal year.

Shares Available for Awards. The aggregate number of shares that may be issued under all stock-based awards made under the 2019 Stock Plan will be 1,150,000 shares. All shares subject to awards, regardless the type of award, will count against the 2019 Stock Plan’s reserve on a 1:1 basis for each share subject to the award. If awards issued under the 2019 Stock Plan expire or otherwise terminate without being exercised or settled, the shares of common stock not acquired pursuant to such awards again become available for issuance under the 2019 Stock Plan. However, under the share counting provisions of the 2019 Stock Plan, the following classifications of shares will not again be available for issuance: (i) shares unissued due to a “net exercise” of a stock option, (ii) any shares withheld or shares tendered to satisfy tax withholding obligations under any award, (iii) shares covered by a SAR that is not settled in shares upon exercise and (iv) shares repurchased using stock option exercise proceeds.

Awards under the 2019 Stock Plan are also subject to annual limitations. No individual employee or officer may be granted awards under the 2019 Stock Plan for more than 200,000 shares of our common stock in any calendar year. No consultant or independent contractor may be granted awards under the 2019 Stock Plan for more than 30,000 shares of our common stock in any calendar year.

The Committee can adjust the number of shares and share limits described above in the case of a stock dividend, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-off, repurchase or exchange of shares, or other similar corporate transaction where such an adjustment is necessary to prevent dilution or enlargement of the benefits available under the 2019 Stock Plan. Any adjustment determination made by the Committee shall be final, binding and conclusive.

Type of Awards and Terms and Conditions. The 2019 Stock Plan provides that the Committee may grant awards to eligible participants in any of the following forms, subject to such terms, conditions and provisions as the Committee may determine to be necessary or desirable:

 

 

stock options, including both incentive stock options (“ISOs”) and non-qualified stock options (together with ISOs, “options”);

 

stock appreciation rights (“SARs”);

 

restricted stock;

 

restricted stock units;

 

dividend equivalent rights; and

 

other stock-based awards.

The Committee will have the right to make the timing of the grant and/or the issuance, ability to retain, vesting, exercise and/or settlement of awards subject to completion of a minimum period of service, achievement of one or more performance goals or both as deemed appropriate by the Committee; provided, that a maximum of five percent of the aggregate number of shares available for issuance under the 2019 Stock Plan may be issued with the terms providing for a right of exercise or a lapse on any vesting condition earlier than a date that is at least one year following the date of grant (or, in the case of vesting based upon performance-based objectives, exercise and vesting restrictions cannot lapse earlier than the one-year anniversary, measured from the commencement of the period over which performance is evaluated).

 

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  1.

Options and SARs. The holder of an option is entitled to purchase a number of shares of our common stock at a specified exercise price during a specified time period, all as determined by the Committee. The holder of a SAR is entitled to receive the excess of the fair market value (calculated as of the exercise date) of a specified number of shares of our common stock over the grant price of the SAR. We would receive no consideration for options or SARs granted under the 2019 Stock Plan, other than the services rendered by the holder in his or her capacity as an employee, officer, consultant or independent contractor of the Company.

Exercise Price. The exercise price per share of an option or SAR will in no event be less than 100% of the fair market value per share of our common stock underlying the award on the date of grant, unless such award is granted in substitution for an option or SAR previously granted by a merged or acquired entity. Without the approval of shareholders, we will not amend or replace previously granted options or SARs in a transaction that constitutes a “repricing” as defined in the 2019 Stock Plan.

Vesting. The Committee has the discretion to determine when and under what circumstances an option or SAR will vest, subject to minimum vesting provisions described above.

Exercise. The Committee has the discretion to determine the method or methods by which an option or SAR may be exercised, which methods may include a net exercise. The Committee is not authorized under the 2019 Stock Plan to accept a promissory note as consideration.

Expiration. Options and SARs will expire at such time as the Committee determines; provided, however, that no option or SAR may be exercised more than ten years from the date of grant. Furthermore, notwithstanding the foregoing, in the case of an ISO granted to a 10% shareholder, the option may not be exercised more than five years from the date of grant.

Special Limitations on ISOs. In the case of a grant of an option intended to qualify as an ISO, no such option may be granted to a participant who owns, at the time of the grant, stock representing more than 10% of the total combined voting power of all classes of our stock or our subsidiaries unless the exercise price per share of our common stock subject to such ISO is at least 110% of the fair market value per share of our common stock on the date of grant, and such ISO award is not exercisable more than five years after its date of grant. In addition, options designated as ISOs shall not be eligible for treatment under the Internal Revenue Code as ISOs to the extent that either: (i) the aggregate fair market value of shares of common stock (determined as of the time of grant) with respect to which such ISOs are exercisable for the first time by the participant during any calendar year exceeds $100,000 or (ii) such ISOs otherwise remain exercisable but are not exercised within three months after termination of employment (or such other period of time provided in Section 422 of the Internal Revenue Code).

 

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  2.

Restricted Stock and Restricted Stock Units. The holder of restricted stock will own shares of our common stock subject to restrictions imposed by the Committee for a specified time period determined by the Committee. The holder of restricted stock units will have the right, subject to restrictions imposed by the Committee, to receive shares of our common stock at some future date determined by the Committee. The grant, issuance, retention, vesting and/or settlement of restricted stock and restricted stock units will occur at such times and in such installments as are determined by the Committee, subject to the minimum vesting provisions described above.

 

  3.

Dividend Equivalents. The holder of a dividend equivalent will be entitled to receive payments (in cash or shares of our common stock) equivalent to the amount of cash dividends paid by the Company to shareholders with respect to the number of shares determined by the Committee. Dividend equivalents will be subject to other terms and conditions determined by the Committee, but the Committee may not (i) grant dividend equivalents in connection with options or SARs or (ii) pay a dividend equivalent with respect to a share underlying an award prior to the date on which all conditions or restrictions on such share have been satisfied or lapsed.

 

  4.

Other Stock-Based Awards. The Committee is also authorized to grant other types of awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to shares of our common stock, subject to terms and conditions determined by the Committee and the limitations in the 2019 Stock Plan. No such stock-based awards will contain a purchase right or an option-like exercise feature.

Termination and Amendment. The 2019 Stock Plan has a term of ten years expiring on June 25, 2029, unless terminated earlier by the Board. The Board may from time to time amend, suspend or terminate the 2019 Stock Plan. No amendment or modification of the 2019 Stock Plan may be made that would adversely affect any outstanding award without the consent of the participant or the current holder of the award (except in the case of a corporate transaction as described below). Amendments to the 2019 Stock Plan must be approved by the shareholders, if required under the listing requirements of the Nasdaq Global Select Market or any other securities exchange applicable to the Company, or if the amendment would (i) increase the number of shares authorized under the 2019 Stock Plan, (ii) permit a repricing of options or SARs, (iii) permit the award of options or SARs with an exercise price less than 100% of the fair market value of a share on the date of grant, (iv) increase the maximum term of options or SARs, or (v) increase the annual per-person share limits under the 2019 Stock Plan.

 

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Effect of Corporate Transaction. Awards under the 2019 Stock Plan are generally subject to special provisions upon the occurrence of any reorganization, merger, consolidation, split-up, spin-off, combination, plan of arrangement, take-over bid or tender offer, repurchase or exchange of shares, or any other similar corporate transaction or event involving the Company. In the event of such a corporate transaction, the Committee or the Board may provide for any of the following to be effective upon the occurrence of the event (or effective immediately prior to the consummation of such event, provided the even