FY10 FIRST-QUARTER VS. PRIOR-YEAR PERIOD

Revenues of $180.9 million were down 24 percent.

Operating income was $11.7 million, down 30 percent.

Operating margin was 6.5 percent, compared to 7.0 percent.

Earnings were $0.27 per share versus $0.36 per share.

Architectural segment revenues declined 24 percent, and operating income decreased 28 percent.

Backlog remained relatively flat at $310.0 million, compared to $316.2 million at the end of fiscal 2009.

Large-scale optical segment revenues declined 20 percent, and operating income decreased 39 percent.

Cash and short-term investments totaled $30.8 million, compared to $27.1 million at the end of fiscal 2009 and $4.6 million in the prior-year period.

Commentary "Apogee's first-quarter revenues and earnings per share declined as domestic market conditions worsened with continued tight commercial real estate credit, decreasing employment levels and soft retail markets," said Russell Huffer, Apogee chairman and chief executive officer. "We are managing costs and productivity to achieve solid gross margins, and are generating cash in this tough environment. However, the inability to fully leverage fixed costs over lower volume impacted our architectural and large-scale optical segment operating margins.

"It is positive that we experienced a relatively flat architectural segment backlog compared to the previous quarter and minimal cancellations," said Huffer. "In addition, we continue to convert customers to our value-added custom picture framing products.

"We have reduced costs more than $40 million on an annual basis since October and headcount continues to decrease," he said. "Although future periods will be impacted by the domestic commercial construction slowdown, we entered the downturn with a very strong balance sheet and are generating positive cash flow. Apogee remains in a strong financial position."

FY10 FIRST-QUARTER SEGMENT AND OPERATING HIGHLIGHTS VS. PRIOR-YEAR PERIOD

Architectural Products and Services

Revenues of $166.7 million were down 24 percent.

The revenue decline came primarily from the architectural glass and installation businesses due to project delays, the timing of project flow and cancellations experienced in the second half of last year.

Operating income was $10.8 million, down 28 percent.

Operating margin was 6.5 percent, compared to 6.7 percent.

Solid execution by the installation and window businesses of projects bid in stronger markets, along with productivity improvements and ongoing cost cutting efforts were more than offset by the impact of lower volume.

Backlog remained relatively flat at $310.0 million, compared to $316.2 million at the end of fiscal 2009; it was down from $491.0 million in the prior-year period.

As work on existing backlog is completed, slower bid-to-award timing is impacting backlog levels, despite steady bidding activity.

The institutional sector continues to be the largest portion of the backlog, followed by office projects, with condo and hotel/entertainment projects a much smaller portion of future work.

Approximately $254 million, or 82 percent, of the backlog is expected to be delivered in fiscal 2010, and approximately $56 million, or 18 percent, in fiscal 2011.

Large-Scale Optical Technologies

Revenues of $14.2 million declined 20 percent due to weak custom framing market conditions.

Operating income was $2.0 million, down 39 percent.

Operating margin was 14.0 percent, compared to 18.4 percent as a strong mix of our best value-added products was more than offset by the impact of lower volume.

Financial Condition

Long-term debt was $8.4 million, equal to the fiscal 2009 year-end level and down from $73.4 million in the prior-year period.

$8.4 million in low-interest industrial revenue bonds is reflected in each of these debt levels.

Non-cash working capital (current assets, excluding cash and short-term investments, less current liabilities) was $53.1million, compared to $44.3million at the end of fiscal 2009 and $83.5million in the prior-year period.

Capital expenditures were $2.3 million, down 90 percent from the prior-year period.

Depreciation and amortization were $7.3 million, up 10 percent from the prior-year period.

OUTLOOK "We are facing an unprecedented level of uncertainty in fiscal 2010, with commercial real estate markets still largely frozen and declining domestic employment levels," Huffer said. "We expect continued profitability on revenues that will be down at least 15 percent -- we are seeing early success in pursuing work in underserved, shorter-lead time architectural glass markets, including smaller and international projects, and our architectural segment bidding activity remains strong although already slow bid-to-award timing extended in the quarter.

"We are estimating operating margins in the mid-single digits as lower capacity utilization and competitive pricing are slightly offset by productivity improvements and lower energy costs." He noted, though, that the large-scale optical segment is expected to continue converting customers to value-added products.

"To manage through the downturn, we have significantly cut costs and continue to evaluate further reductions in headcount and discretionary spending, combined with ongoing productivity improvements," he said. "Our balance sheet remains strong, and we expect to have positive cash flow in fiscal 2010 as working capital declines and capital expenditures are less than $20 million. Our architectural segment businesses are well positioned with the bonding capacity required by some contractors to assure completion of projects, a competitive strength in today's markets.

"We still expect to benefit from the addition of stimulus projects to upgrade government and school buildings that would incorporate our energy-efficient, green products and services, although it may not be until fiscal 2011," Huffer said. "Introducing additional energy-efficient products for new and renovation commercial construction markets continues to be a focus for Apogee during the economic slowdown.

"We have good architectural businesses with strong brands and operations that are positioned to serve the growing interest in green, energy-efficient commercial buildings," he said. "We anticipate that with our focus on quality, service and productivity improvements, Apogee will be well positioned when the economy improves."

The discussion above contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect Apogee management's expectations or beliefs as of the date of this release.