Share-Based Compensation

The 2009 Stock Incentive Plan, the 2009 Non-Employee Director Stock Incentive Plan, the 2002 Omnibus Stock Incentive Plan and the 1997 Omnibus Stock Incentive Plan (the Plans) provide for the issuance of 1,888,000, 250,000, 3,400,000, and 2,500,000 shares, respectively, for various forms of stock-based compensation to employees and non-employee directors. Awards under these Plans, either in the form of incentive stock options, nonstatutory options or stock-settled stock appreciation rights (SARs), are granted with an exercise price equal to the fair market value of the Company’s stock at the date of award. Nonvested share awards and nonvested share unit awards are also included in these Plans. Outstanding options issued to employees generally vest over a four-year period, outstanding SARs vested over a three-year period and outstanding options issued to non-employee directors vested at the end of six months. Outstanding options and SARs have a 10-year term. Nonvested share awards and nonvested share unit awards generally vest over a two, three or four-year period.

The 2002 Omnibus Stock Incentive Plan was terminated in June 2009 and the 1997 Omnibus Stock Incentive Plan was terminated in January 2006; no new grants may be made under either of these plans, although exercises of SARs and options previously granted thereunder will still occur in accordance with the terms of the various grants.

Total stock-based compensation expense under all Plans included in the results of operations was $4.4 million for each of fiscal 2013 and 2012, and was $5.2 million for fiscal 2011.

Stock Options and SARs

There were no options or SARs issued in fiscal 2013; in fiscal 2012, 450,512 stock options were issued with a weighted average fair value per option at the date of grant of $2.89. The fair value of each award grant is estimated on the date of grant using the Black-Scholes option-pricing model, with the following weighted-average assumptions used for grants in fiscal 2012.



	2012
Dividend yield	3.9%
Expected volatility	56.1%
Risk-free interest rate	0.8%
Expected lives	4.6 Years

The expected stock price volatility is based on historical experience. The risk-free rate for periods that coincide with the expected life of the options is based on the U.S. Treasury Department yield curve in effect at the time of grant. The expected life, the average time an option grant is outstanding, and forfeiture rates are estimated based on historical experience.

The following table summarizes the award transactions under the Plans for the year ended March 2, 2013:



	Options/SARs Outstanding
	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at March 3, 2012	1,815,293		$	15.71
Awards exercised	(380,797	)	14.02
Awards canceled	(72,123	)	21.33
Outstanding at March 2, 2013	1,362,373		$	15.89	5.3 Years	$	14,173,761
Vested or expected to vest at March 2, 2013	1,362,373		$	15.89	5.3 Years	$	14,173,761
Exercisable at March 2, 2013	1,062,032		$	18.02	4.4 Years	$	8,806,667

At March 2, 2013, there was $0.6 million of total unrecognized compensation cost related to stock option awards, which is expected to be recognized over a weighted average period of approximately 17 months. Cash proceeds from the exercise of stock options were $2.3 million, $1.1 million and $0.3 million for fiscal 2013, 2012 and 2011, respectively. The aggregate intrinsic value of securities (the amount by which the stock price on the date of exercise exceeded the stock price of the award on the date of grant) exercised was $2.5 million in fiscal 2013, and was $0.2 million in each of fiscal 2012 and 2011. The tax benefit realized for tax deductions from option exercises totaled $0.4 million for fiscal 2013. There were immaterial amounts of tax benefits realized for the tax deductions from option exercises in both fiscal 2012 and 2011.

Nonvested Shares and Share Units

Partnership Plan

The Amended and Restated 1987 Partnership Plan (the Partnership Plan), a plan designed to increase the ownership of Apogee stock by key employees, allowed participants selected by the Compensation Committee of the Board of Directors to defer earned incentive compensation through the purchase of Apogee common stock. The purchased stock was then matched by an equal award of nonvested shares, which vested over a predetermined period. The nonvested shares were recorded as unearned compensation in the equity section of the balance sheet. In accordance with accounting standards, the deferred compensation in the form of the Company's stock was recorded at historical cost and classified as common stock held in trust. Since the investments were all in Company stock, an offsetting amount was recorded as deferred compensation obligations in the equity section of the balance sheet. Common shares of 3,400,000 were authorized for issuance under the Partnership Plan. The plan was amended in fiscal 2009 to reduce the authorized shares to 3,345,000. As of March 2, 2013, 3,285,000 shares have been issued or committed under the Partnership Plan, and 60,000 shares remain available for issuance. During fiscal 2011, the Company accelerated vesting of 80,462 nonvested shares in connection with the Partnership Plan to eliminate the cost of administering this legacy compensation plan. Fiscal 2011 expense for the Partnership Plan was $0.6 million, including $0.3 million of additional compensation expense related to the accelerated vesting. Expense under the Partnership Plans was minimal in each of fiscal 2013 and 2012.

This program was eliminated for fiscal 2006 and beyond, although vesting of remaining nonvested shares will still occur according to the vesting period of the grants.

Executive Compensation Program

The Company's executive compensation program provides key employees selected by the Compensation Committee of the Board of Directors with long-term incentives using nonvested shares and nonvested share units. During fiscal 2013, nonvested shares were issued based on performance against objectives and generally vest over three years. From fiscal 2010 through fiscal 2012, nonvested share units were issued at the beginning of each fiscal year, which give the recipient the right to receive shares earned at the vesting date. The number of nonvested share units issued at grant was equal to the target number of nonvested share units and allows for the right to receive an additional number of, or fewer, shares based on meeting pre-determined Company three-year performance goals.

The following table summarizes the nonvested share award transactions, including nonvested share units, for fiscal 2011, 2012 and 2013:



	Nonvested Shares and Units
	Number of Shares and Units		Weighted Average Grant Date Fair Value
Nonvested at February 27, 2010	820,224		$	16.13
Granted⁽¹⁾	439,319		13.26
Vested	(328,223	)	16.69
Canceled	(9,755	)	17.97
Nonvested at February 26, 2011	921,565		$	14.54
Granted⁽²⁾	438,967		11.83
Vested	(208,426	)	15.91
Canceled⁽³⁾	(170,293	)	16.81
Nonvested at March 3, 2012	981,813		$	12.64
Granted	234,385		15.13
Vested	(305,123	)	12.88
Canceled⁽⁴⁾	(79,502	)	13.54
Nonvested at March 2, 2013⁽⁵⁾	831,573		$	13.17


(1)	Includes 193,519 nonvested share units granted for the fiscal 2011-2013 performance period at target.


(2)	Includes 117,765 nonvested share units granted for the fiscal 2012-2014 performance period at target.


(3)	Includes 63,682 nonvested share units canceled under the fiscal 2009-2011 performance period because Apogee performed below target level for that performance period. Nonvested shares of 126,429 (at target) were previously granted in fiscal 2009 for this performance period.


(4)	Includes 61,403 nonvested share units canceled under the fiscal 2010-2012 performance period because Apogee performed below target level for that performance period. Nonvested share units of 160,196 (at target) were previously granted in fiscal 2010 for this performance period.


(5)	Includes a total of 292,118 nonvested share units granted and outstanding at target level for fiscal 2011-2013 and 2012-2014.

At March 2, 2013, there was $5.0 million of total unrecognized compensation cost related to nonvested share and nonvested share unit awards, which is expected to be recognized over a weighted average period of approximately 18 months. The total fair value of shares vested during fiscal 2013 was $4.5 million.

In fiscal 2013, the executive compensation program was changed to issue cash-based performance awards in lieu of nonvested share unit awards; the cash-based awards are based on a two-year performance period and will be paid in two annual installments after completion of the performance period. Vesting of outstanding nonvested share unit awards will continue through fiscal 2015. The liability for the cash-based performance awards is included in other non-current liabilities in the consolidated balance sheet.