Russ Huffer - Chairman and CEO Jim Porter - CFO Mary Ann Jackson - Director of Investor Relations

Michael Cox - Piper Jaffray Robert Kelly - Sidoti Steve Denault - Northland Securities Tyson Bauer - Wealth Monitors Richard Nelson - Jay Cullen Securities Stan Westhoff - Walt Hausen & Co Brian Levison - Private Fund Management Joseph Rial - Breaker Book Capital

Good day, ladies and gentlemen, and welcome to the Q3 2008,Apogee Enterprises second-quarter Earnings Call. My name is Lisa and I will beyour coordinator for today. At this time all participants are in listen-only mode. Wewill be conducting a question-and-answer session towards the end of today'sconference. (Operator Instructions). I would now like to turn the call over to Mary Ann Jackson.Please proceed, ma'am.

Thanks, Lisa. Good morning and welcome to the ApogeeEnterprises fiscal 2008 third -quarter conference call on Thursday, December20, 2007. With us on the line today are Russ Huffer, Chairman and CEO, and JimPorter, CFO. Their remarks will focus on our third -quarter results and theoutlook for fiscal 2008. During the course of this conference call we will makeforward-looking statements within the meaning of the Private SecuritiesLitigation Reform Act of 1995. These statements are based on currentexpectations and the current economic environment and are of course subject torisks and uncertainties, which are beyond the control of management. Thesestatements are not guarantees of future performance and actual results maydiffer materially. Important risks and other important factors that could causeactual results to differ materially from those in the forward-lookingstatements and projections are described in the Company's annual report on Form10-K for the fiscal year ended March 3, 2007 and in our earnings release,issued last night and filed this morning on Form 8-K. The information in this conference call related toprojections or other forward-looking statements may be relied upon subject tothe previous Safe Harbor statement as of the date of this call and may continueto be used while this call remains on the Apogee website. Russ will now giveyou a brief overview of the results and Jim will cover the financials. Andafter they conclude Russ and Jim will answer your questions. Russ?

Good morning and welcome to our conference call. We had mixedresults in the third quarter. Apogee is a great company, delivering top linegrowth, process improvement and strong cash flow. In the third quarter, though,isolated poor execution within our architectural installation business massedand otherwise strong performance in our other businesses. I'm excited that we are seeing faster productivityimprovements and mixed changes than expected in our other architecturalbusinesses and in picture framing glass. These high levels of performanceshould allow us to offset the Harmon installation job write-downs for the fullyear. I'd like to emphasis that we have great businesses with strong markets,brands, quality and service. Our backlog is robust, we also have positive cash flow thatwill continue and you'll see us invest in ongoing expansions and newopportunities to expand our architectural business. At the same time, we remainsoundly focus on strategies to grow our core architectural and picture framingbusinesses. For the quarter, our earnings from continuing operationswere $0.26 per share versus $0.36 per share a year earlier. Three significantitems impacted our continuing operations earnings, the write-down of thesethree isolated installation projects reduced earnings by $0.14 per share. Net tax benefits added $0.08 per share from current andprior year research and development tax credits. We also have agreed to sellour 34% interest in the non-strategic PPG Auto Glass LLC joint venture to PPGIndustries resulting an impairment charge of $0.11 per share. This is an important strategic step and we expect cashproceeds of approximately $25.5 million when the sale closes. The sale isexpected to be completed in our fourth quarter, subject to PPG Industriespending sale of its automotive original equipment manufacturing and automotivereplacement glass businesses. Before I turn to the third quarter operations, I want tofinish my discussion of our exit from the non-strategic auto replacement glassindustry. In the third quarter, we completed the sale of our recreationalvehicle and bus windshield business that we had announced earlier in the year.The gain on the sale is reflected in discontinued operations earnings of $0.12per share. Net earnings, including discontinued operations were $0.38per share versus $0.35 per share in the prior year period. Architectural segment revenues grew 4%, and operating income,including the impact of the installation write-downs, decreased 43% versus theprior year period. Slower growth of third quarter revenues had been expected,due to a strong prior year period. In addition, customer timing of job flow in the installationbusiness impacted growth in the quarter. I can't overstate our disappointmentin the significant installation job write-downs. Poor execution early in theseisolated projects has resulted in material cost increases required to completethe projects within customer requirements and deadlines. We have takenmanagement actions to better execute on all projects moving forward. This is apeople and process business and we've addressed these areas by makingmanagement changes and strengthening operational controls. Specifically, the people involved in the projects with thewrite-down are no longer with the company. We have also put processes in placeto allow earlier identification and corrective actions in similar situations. It is important to understand that we have more that 100active projects being executed properly. I believe this is a good businesswhere we have a strong underlying competitive position and the ability toachieve excellent return on invested capital. In our Harmon installationbusiness, our focus is on consistent, profitable execution. Third quarter architectural segment backlog grew to $456.7million from $389.5 million, in the prior year period and $405.4 million at theend of the second quarter. We are pleased to see the increase that I stressedfor sometime that sequential improvement is not necessary to meet our growthgoals. What is important is maintaining a high level of backlog and that's whatwe have done. Backlog grew nicely in all businesses including our premierViracon architectural glass business. We continue to be sold out in thisbusiness as we ramp up capacity expansions. We have visibility into fiscal 2010and expect this strong demand to continue for our products. Key drivers are energy efficiency in particular,architectural aesthetics and the move towards more use of glass, larger sizesof glass and more value-added properties, all strengths for Viracon. In additionto our large backlog, we also have high levels of commitments, especially inour Viracon business and bidding activity continues strong. Turning to our large-scale optical segment, revenues wereflat, but operating income grew 69%. Earnings again benefited from a higherthan expected mix of our best value-added framing glass products. In fact, themix of these highest value-added products exceeded 50% of the product revenuefor the first time, a milestone for Apogee's picture framing business. Next, I'll cover our outlook. I want to underscore that wecontinue to feel very good about our business and its outlook. The strength ofour businesses and markets served, allow us to remain optimistic that we arepositioned to meet our longer term objectives of 8% annual revenue growth and20% average earnings growth through fiscal 2010. Strong operating performance, primarily in our pictureframing, architectural glass and window business, is expected to offset theimpact of write-downs on the installation projects for the full year. The outlook for fiscal year 2008 earnings from continuingoperations is now a $1.40 to a $1.50 per share, reflecting the $0.03 per sharedifference between the PPG Auto Glass impairment charge and the research anddevelopment net tax benefit. Prior guidance was a $1.43 to a $1.53 per share. I'd like to repeat that we are seeing faster improvement inour architectural businesses than expected with the obvious exception of theone Harmon market. Viracon and our Wausau Window business have seen marginimprovement. Viracon is running on all cylinders and I'm pleased to report thatthe new St. George factory is ramping up smoothly, slightly ahead of schedule. Outsourcing of commodity coatings also is progressing welland we're introducing new aesthetic choices in energy efficient coatedproducts. Green is a key driver in today's markets and these new products giveour customers more choices to meet their energy efficiency goals for theirbuildings. Our architectural businesses, with the exception of the oneinstallation market, have been performing well this year. Despite the executionset back in the third quarter, we expect to have an architectural segmentoperating margin ranging from 6.4% to 6.8%, slightly below our prior range of 6.7%to 7.1%. At the same time, our picture framing business continuesstrong, as demand for its best value added products grows in a slightlydeclining overall picture framing market. We've raised our operating marginguidance for the current year to approximately 18% from guidance of 16%. The better product mix this year will be some what offset byhigher fourth quarter investments in sales and marketing as well as capacityexpansions. We expect this will bring the full year operating margin below theyear-to-date level. I'd like to talk about the commercial construction marketfor a moment. We received many questions on the state of our markets, given thepotential of credit crisis and slowing economy. We are not seeing signs ofslowdown in non-residential construction and a number of market metrics supportthis view. The latest McGraw-Hill Construction non-residential marketforecast showed dollar growth for our current fiscal year and fiscal 2009, witha slight decline for fiscal 2010, down 2% from our high level. Then growthcontinues for the next four years. Based on this forecast, non-residentialconstruction activity should remain at high levels for several years, which ispositive for Apogee's business. This week's American Institute of Architects, ArchitecturalBilling Index report shows that activity increased again in November, followinga rebound in October. The AIA's economist noted that credit market anxiety hasdecline for the time being, and that healthy demand for commercial constructionis expected well into calendar 2008. Other market fundamentals remain strong, including officevacancy and lease rates, hotel occupancy levels and funding and demographicsfor the institutional markets of education, healthcare, and government. Thegrowing importance of green building and demand for energy efficient productsremains an important driver for the increase in value added building materialsand continues to bode well for Apogee. Apogee remains a leader in value added products with themost energy efficient glass. We continued to experience strong backlog incommitments as well as bidding and request to bid activity. Our solid marketsand strong internal indicators give us confidence in our ability to growrevenues and earnings. We have great businesses, strong markets and backlogs andwith the exception of the one installation market our businesses are executingwell. I am confident about the future prospects and potential for Apogee andits businesses. Jim will now comment on the financials. Jim?

Thanks, Russ. Good morning and welcome to our conferencecall. Our third quarter has many positives for both performance and strategy,with great operations in most businesses, backlog growth and our continuingstrategic alignment with our pending exit of the auto replacement glassindustry. We clearly are disappointed that poor execution in oneHarmon installation market can potentially overshadow our ongoing overallprogress. We expect to be able to make up the $0.14 per share impact of thepoor execution of the Harmon projects culled out through better than expectedperformance in our other businesses for the full year. We are also glad to have nearly completed all three pendingitems that we noted in our second quarter earnings outlook. Filings for theresearch and development tax credit and sale of our recreational and buswindshield business were completed in the quarter and we recognize theimpairment related to the pending sale of our interest in PPG Auto Glass, whichwe expect to close in our fourth quarter. We had indicated in the second quarter that our guidance didnot include the potential impact of these anticipated significant events, whichhad a combined impact on continuing operations of $0.03 per share. The third quarter earnings per share reconciliation betweenthe current earnings of $0.26 per share from continuing operations and the$0.36 per share earned in the prior year period is the architectural segmentcore operations were up $0.01 per share a very high performance last year. The installation business write-down negatively impacted thequarter $0.14. The large scale optical segment added $0.04 per share. The jointventure impairment charge negatively impacted the quarter, $0.11. Lower taxrate added $0.09 including $0.08 from the research and development net taxbenefit. And finally, lower interest expense from lower average debt improvedthe earnings by a $0.01. Discontinued operations had earnings of $0.12 per shareversus a loss of $0.01 per share in the prior year period. This brings thirdquarter's net earnings to $0.38 per share versus $0.35 per share in the prioryear period. Conclusion of the sale of the non-strategic recreationalvehicle and bus windshield business resulted in a pre-tax gain of $6 million.With the sale done, we can now complete the final phase of converting the AutoGlass facility to support the architectural glass business to help meet ourstrong demand for architectural glass products. I'd also like to comment on the plant sale over a 34%interest in the PPG Auto Glass joint venture to PPG Industries. Of all theseresults in a charge to earnings, it represents the Apogee's best option tocomplete our exit from this business. This is the final step in our strategic repositioning of thecompany out of Auto Glass to focus on opportunities in a more profitablearchitectural and picture framing businesses. The sale will be a significantpositive cash event when it closes, which is expected to be in our fourthquarter. Cash proceeds from the sale are expected to be approximately $25million. Moving to the architectural segment performance for thequarter on 4% revenue growth, operating income was $7.7 million down 43% from ayear ago, including the impact of installation project write-downs of $6.5million. The reported operating margin was 4.1% compared to 7.4% in the prioryear period. When you exclude the installation charges, operating marginfor the quarter would have been 7.5% largely consistent with expectations.We're experiencing good productivity and margin improvement in ourarchitectural glass and window businesses. Regarding Harmon in the poor execution on a small number ofisolated projects, we continue to feel that Harmon is a good business with thepotential of strong returns on invested capital. This business is currentlyholding down our architectural operating margin but we're confident that astrong focus on consistent execution will allow us to achieve attractiveearnings and returns. Our Large-Scale Optical segment and picture framing businesshad another very strong quarter with operating margins of 20.8%. The popularityof our best value added framing glass products continues to grow with productmix to passing our expectations. Long-term debt declined to $20.6 million from $24.3 millionat the end of the second quarter and $35.4 million at year end. Earnings alongwith payments received from the sale of the RV and bus business contributed tothe decline in long-term debt. As we stated, the current quarter earnings from continuingoperations also includes an $0.08 per share of net tax benefit, following theconclusion of analysis occurring and prior year research and development taxcredit included in Apogee's tax filings. We filed amended federal returns inNovember. I'll turn to our outlook for fiscal 2008. We remainoptimistic about fiscal 2008 and confident in the longer term growth potentialof our businesses. With our strong backlog, it was high commitment in biddingactivity, combined with ongoing momentum in the non-residential constructionmarket benefiting from the growing green energy efficiency trend. We remainconfident in our ability to achieve our longer-term objectives of 8% annualrevenue growth and 20% average earnings growth through fiscal 2010. For fiscal 2008, we are now expecting earnings fromcontinued operations to range from a $1.40 to $1.50 per share on revenue growthof 11% to 13%. Previous earnings per share guidance range were $1.43 to $1.53per share. Our guidance has been adjusted to reflect the $0.03 pershare in net difference between the PPG Auto Glass impairment charge and theresearch and development net tax benefits. For the full-year, the strength of our businesses andmarkets should allow us to offset the installation write-downs recognized inthe third quarter. Turning to the segment outlook, our full-year architecturalsegment operating margin guidance has been reduced slightly to 6.4% to 6.8% dueto the installation job write-downs somewhat offset by better performance inthe rest of the segment. Our outlook for the current year includes the negativefull-year impact of approximately 0.8 percentage point for the installationproject write-downs and 0.3 percentage point for the first quarter one-timestartup cost for the new architectural glass facility. Adjusted for these impacts, our operating margin for thefull-year would exceed the prior peak operating margin of 7%. Adjusted forwrite-downs, we entered the fourth quarter positioned to deliver this. We ended the quarter with a very strong architecturalsegment backlog of $456.7 million, up from $389.5 million from prior the yearperiod and $405.4 million at the end of the second quarter. Maintaining our backlog at high levels will allow us to meetour long-term growth goals, where sequential quarterly growth is not required. Approximately a $160 million or 35% of backlog is expectedto be delivered in fiscal 2008. $228 million or 50% in fiscal 2009 and $69million or 15% is scheduled for fiscal 2010 providing good visibility intoupcoming fiscal years. It's a positive that backlog remains nicely balanced acrossthe nonresidential segments. 35% to 40% of our backlog is in the office market,which had the most growth in the quarter. Approximately 35% of backlog is inthe institutional sector, which includes education, healthcare and governmentbuilding, 15% to 20% of condominiums and 5% to 10% of entertainment and thehotel projects. Regarding our backlog and some of the recent uncertaintiesin the financial markets, only three modest projects in our backlog have beencancelled over the last two quarters and not all directly tied to these marketuncertainties, two of which we've had visibility for several months ofuncertainties. Turning to our picture framing business, we've raised ouroperating margin outlook for the large scale optical segment to approximately18% and flat revenues due to stronger product mix. Our prior outlook is forfull year operating margin of 16%. Fourth quarter margin will be impacted byinvestments and expenses to increase capacity in sales and marketing to supportand drive continued growth. I'm going to briefly cover cash flow for the full yearfiscal 2008. We're estimating the EBITDA earnings before interest, taxes,depreciation and amortization from continuing operations of $84 million to $88million. We estimate net cash provided by continuing operations of $65 millionto $75 million for the year. Capital expenditures are projected to be approximately $60million. Fiscal 2008 strategic investments include completing a number ofarchitectural glass expansions currently underway, adding picture framing glasscoating capacity and spending on productivity improvements and expansions inour window business. Excluding the anticipated cash proceeds from the sale ofApogee's interest in PPG Auto Glass, we project year debt will range from $15million to $25 million. The effective tax rate for the full year is anticipatedto be slightly higher than 30.0%, down from prior guidance of 34.5%. Thisreflects the net tax benefit in the third quarter. We've tried to highlight that getting beyond the number ofsignificant items reported in this quarter, we have a very strong business.We're excited that our prospects and potentials to deliver a strong performancefor fiscal 2008 and are well-positioned for fiscal '09 and fiscal 2010 as well,will grow the business. Thanks, Russ?

Thanks, Jim. I'd like to go ahead and open up the call forquestions at this time.

(Operator Instructions) Our first question comes fromMichael Cox from Piper Jaffray. Please proceed. Michael Cox - PiperJaffray: Good morning.

Good morning, Mike. Michael Cox - PiperJaffray: My first question is, just looking for a little bit ofadditional color around the installation write-downs. I know you discussed itin your prepared comments, but I was wondering if you could comment on whetherthis has occurred before or if there is a risk of a similar occurrence as youlook across the other Harmon businesses. I know it's a sort of a regionalbusiness for you in each different market. So, if you can just comment on that,I'd appreciate it.

Yeah, we feel that these were isolated to a Project Managerand a General Manager in that area, it was tied, I think it's important tounderstand, it's not tied to a geographic event, it's tied to the people thatwere involved and we do feel that it’s very much isolated and we have workedvery hard to make sure that we've looked at the balance of projects that werein this region, we'd look at the balance of projects through out the company,so we do not expect this to be a repeat. Michael Cox - PiperJaffray: Okay, that's very helpful. Turning to the backlog, if mynumbers are correct that the mix of the backlog has changed somewhat since thebeginning of the year, your office has moved from about 25% up to about 40% oras condo and hotel entertainment segments have dropped. I was wondering ifthat's a function of faster growth within the office segment or if it's somedeterioration you're seeing in some of the condo's type of markets?

Well, I think the condo markets, the condo markets arefunction of a lot for us, there are few large projects, so that does come andgo, so right now it’s down, I think, it’s probably reflecting some of themarket but it could be more of just the number of projects that are showing upin our backlog right now. So, I wouldn't, we've always been careful to advisepeople that condominium work for us is not the same as the sort of the boom andbust work that was going on in the marketplace. The office side, simply I think what we've seen simplyreflects a very positive marketplace, where our absorption is still continuingto exceed certain place, new square footage put in place and the demand for thespace is fundamentally there. It's a positive reason for this space being putin place. So that's it, Jim, if you want to add.

You know, Mike, I will just add a little bit of color to thatand just, I mean, compared to where we started the year in terms from a yearend perspective on a dollar basis, we basically are pretty much where we werein the high end condo factor. So, I think, we've seen that sustain itself. Wehave seen faster growth in terms of dollar level in the office sectorassociated with it. But I also point out that while it is important to that wesee the balance because some of our businesses and markets are at capacity.It's really just picking the best project in that market that's available andsometimes it's kind of not important with segmented and it's really the bestproject and has the best market. But in general, we have seen more growth inthe office sector relative to the others and the others really kind of maintainingit. Michael Cox - PiperJaffray: Okay. That's very helpful. And actually leads me to my nextquestion. I know that the margin profile of the backlog has been a big piece ofthe margin expansion story within the architectural segment. As one of youcould comment on what the margin profile looks like of the current backlog thatyou have, perhaps relative to what looked like earlier this year or a year andhalf ago?

Yeah, I mean, I think the margin profile that's in ourbacklog supports the continued margin expansion that's reflected in our outlookfor our fourth quarter as well as fiscal '09. Our ability to grow earnings 20%is really largely driven by our ability to continue to expand the operatingmargins in our architectural segment and that's consistent with what we seen inour backlog. Michael Cox - PiperJaffray: Okay. That's great. And my last question here, you did, youhave provided a glimpse into your 2009 growth expectations, I would just liketo understand what baseline you are working from, as you are talking about 20%earnings growth next year. Would that be of the $1.40 to $1.50 guidance thatyou have set forth or would it be some sort of pro forma number that wouldexclude the onetime items that occurred to you in the third quarter?

Yeah. It would, kind of be somewhere in the range of ourreported numbers and some adjusted factors to that. Michael Cox - PiperJaffray: Okay, great thank you very much.

Our next question comes from Robert Kelly from Sidoti.Please proceed. Robert Kelly - Sidoti: Good afternoon. Thanks for taking my call.

Thank you, Bob. Robert Kelly - Sidoti: Just maybe a follow-up on the write-down, is it completelywritten down, is there chance for further write-down or on the foresightfurther, some sort of recovery for Q4?

Well basically this reflects, I mean these three projectsreally the write-down is associated with having to capture our completeestimated cost to complete these projects. So really our view and our analysis,the detail analysis of these projects are that, our estimate is that thewrite-down that we have taken captured the full costs associated with them. There is always the opportunity that we have some greatsuccess executing them and how it could be done for less than we've estimated,with just belief the visibility that we have in terms of what is just requiredto complete these projects. Robert Kelly - Sidoti: And then, just as far as what you've changed, people andprocess lines to kind of prevent from happening again. I get the people part.What are you doing as far as process, could you give us a little moreinformation on that?

Certainly, we had process and the people failed to executein this specific instance, so what we are looking at and have done is to bemore active in our reviews and ensure those reviews at higher levels within theorganization. So it has been reinforced. Robert Kelly - Sidoti: Okay. And then on the backlog growth, you guys have talkedabout constrained capacity pretty much throughout the year here. Did somethingopen up or this is a function of the joint venture getting sold that allows youto grow the backlog, just a little help there?

Yeah. I think that majority of the backlog is reallygrowing, kind of, in terms of timeframe. So there is -- probably a third, Ithink we may have the growth in the backlog actually relates to fiscal '10. Soit's really, the growth in that future look of business. We have seen, I think, Russ mentioned that our St. Georgefacility is operating a little bit ahead of schedule. So we've opened up someslight capacity in this fiscal year, but we haven't changed our outlook ofrevenue for this fiscal year. And the growth has really come and filling in more,fiscals '09s and '10s.

Yeah. And the outsourcing we talked about before is off to agood start and we look at that as a way to continue to leverage investments, inminor new investments to support growth as well in existing facilities. Robert Kelly - Sidoti: Okay. And then, just finally, you know the way I understoodit, once something hits your backlog, cancellation rate is usually typically,pretty low.

Very low. Robert Kelly - Sidoti: Is there any historical number you can give us?

It's less than five. It's what we've seen before.

Yeah. I mean in the last talk when we really saw the marketdrop rapidly in a short time period, as Russ said, we had less than a handfulof cancellations.

Right.

I recall that we've seen about three over the last twoquarter and a couple of those were projects that had uncertainty for severalmonths that's as due to the…

And they probably -- they would have gone by the wayside nomatter what, I mean, we kind of anticipated that in any kind of market peoplewere just trying to do too much without the backing. Robert Kelly - Sidoti: Okay, thank you. Have a good day.

Our next question comes from Steve Denault from NorthlandSecurities. Please proceed. Steve Denault -Northland Securities: Good morning, everybody.

Good morning.

Good morning, Steve. Steve Denault -Northland Securities: I'm hoping you can elaborate a little bit more in terms of whatdoes the outsourcing mean in terms of filling up internal capacity? What doesselling the windshield business mean in terms of incremental capacity or doesit relate to Viracon and being in a sold though nature?

Right. We have completed the sale of the RV and buswindshield business that has now opened up that facility completely. We hadpartially converted it before, I think, as we previously discussed, it is nowbeing a 100% converted that process would be complete shortly up to the startof the new calendar year and we'll see it continue to ramp up. So that is a very, that is going to help us leverage thebalance, what we've done and so we've added capacities where we had constraintsthat leverages the balance of the non-constrained equipment in our Utahfacility to grow that business significantly, that combined with St. George andother process improvement and now outsourcing. We've previously stated we thought we could, those threethings would give us up to a $100 million in new capacity we think we can nowexceed that, so that's what we are focused on it at Viracon.

And Steve, so, of the primary things are rust kind ofquantify to $100 million of incremental revenue from the activities that wealready have underway. As you know that's a ramp to get to that. We'll probablysee in the ballpark of $20 million of revenue recognized in this year from theramp up of those capacity expansions and they will be reaching their fulloperating potential by the middle of next year. Steve Denault -Northland Securities: Okay. There is the phenomenon in terms of inherently energyefficient architectural glass capturing share over that of flat glass has beenongoing with growing awareness of our green initiatives and energy price is wherethey are at. Has there been any acceleration in that adoption?

We can only address that from sort of conversationsanecdotally and just doing the activity in the inquiries. There is no questionin our mind that its happening, the last firm number, getting firm numbers onthat there it takes some time. There is quite a lag on that specifically. But we know, I mean, we know from activity from what we see,our competitors, what's going on throughout the industry that this conversionis continuing to accelerate and we are also seeing green and certified greenbuildings starting to permeate the whole marketplace that, and when thathappens that drives, that's going to be the bigger driver of the use of theseproducts. So I think the opportunity, we said before, the opportunityis to double the use of these products over the next few years, three to fiveyears, and I think that the marketplace is showing that, we just don't havehard numbers to give you to support that. But every indication is that's takingplace. And in terms of, in terms of metrics I mean, really the onlyexternal metric that there would be --there are some data out there in terms ofbuildings that are either applying for these certification or actuallyreceiving the certification, which than ties it back to green buildings and weare continuing to see explosive growth in the rate of that happening and youwill see some activity with American Institute of Architecture. They havereferenced this to surveys they've done in terms of how energy efficiency isinfluencing the designs that are coming out of the architect. And so those are the external things and then from aninternal perspective, as we've talked -- I mean we just continue to see energyefficiency as something that's an upfront discussion that really worked to ourfavor.

I think in your question, I did not -- the last comment wason how does the outsourcing affect us. And basically, the outsourcing is givingus protective capacity as well as additional capacity and to leverage andenables us to make other minor investments to leverage that capability. We arevery pleased with the start. It is just in start-up phase, but we are verypleased with it and we do expect it to be material in the future. Steve Denault -Northland Securities: Did you Utahcontribute positively or negatively in the quarter?

I think in the quarter it was pretty much neutral. Steve Denault -Northland Securities: Okay. Should it be a positive contributor next quarter?

Yes. Steve Denault -Northland Securities: Where does that end in terms of capacity?

It's probably still about 40% to 50% of its potential. Steve Denault -Northland Securities: Okay, thank you.

Our next question comes from Tyson Bauer from Wealth Monitors. Please proceed. Tyson Bauer - Wealth Monitors: Good morning, gentlemen. And coupleof quick questions for you. Going back to the three projects in the Florida area, can yougive us a little more granular description? You keep referring toexecution. Was that execution on the bidding of it, procurement of materials,labor? And also, what kind of projects were these, when did they start, whendid you recognize the problem, and when do these projects get completed?

We started -- the completion will be in the next -- we thinkthe completions will all be in the next 60 to 90 days. These projects startedless than a year ago. We started seeing things at that the end of our firstquarter that gave us -- showed up as some adjustments and some slight expansionof timelines to complete, not abnormal but we're concerned. At the end of thesecond quarter, we saw that again. And then that's when we begin to make the --manage the reporting and changes and investigations. And where we are with the projects? What makes them soexpensive? It's not that it was bad bidding or project selection. It is allabout execution. And where we're at today, the cost to meet the needs and theexpectations of the customer is very high to do it in a constrained timeframe. So we're working very had to make sure that we maintain ourreputation of delivering quality to our customers in a timely manner and we'reexecuting to do that. And that's driving the cost. So these clearly were issuesassociated with the, sort of, the details that go into making a qualitybuilding. And so today, we're taking care of those details and it's not carteblanche replacement of materials. It is taking care of those, but it's verycostly to do so.

Right. And two of the projects were office buildings and oneis the healthcare facility. Tyson Bauer - WealthMonitors: Was it the function that you didn't have the correctmaterials on site or that you got a compressed time line that you were not ableto operate efficiently in?

No, it was the scheduling of the project in terms ofmaterial flow and labor. So, it had, it was poor, there were some planningissues associated with that, there were some quality issues in materials but itwas all about early identification and mitigation. Some of these things arethings that do happen but in this case we had a Project Manager and GeneralManager who simply did not act as they reasonable, as a reasonable person wouldin this cases and we had of course we've taken actions. Tyson Bauer - WealthMonitors: Did any of those regions act autonomously or what is thatchain of command for protocols for checks and balances.

Sure and we have clearly addressed that as well and we'llcontinue to do so. Right now, our emphasis is on correcting this situation andwe've taken immediate actions in these specific individuals, we will continueto evaluate what we need to do broadly. Tyson Bauer - WealthMonitors: Okay, couple of other quick type or topics. One, Presidentsigned the energy bill here recently, there was some great language on energyefficient building materials and government and commercial buildings, anyspecific provisions that you've been able to glean that would directly benefitto your business?

We did not see anything more than what we've, today, thereare incentives out there and we didn't see any specific enhancement. But whatthose do more than anything else is bring awareness of it. It is our future; itis all about the conversion of non-energy efficient materials, glass to energyefficiency. That we have been all energy efficiency to 20 years, thatconversion and that demand, but this does and these keep pushing that forward,keeps accelerating that conversion, that's the major benefit we will see fromit. Tyson Bauer - WealthMonitors: And the last topic, have you been able to participate in thecurrent boom building cycle of hospitals or other medical institutions, andwhere do we see that as far as your backlog or what, how do you categorizethat?

Yeah. It is in our institutional sector and we havebenefited from that substantially. We continued to be a leading provider ofglass, metal and installation services to that institutional sector, which isin some instances and some regions led by hospitals. Hospitals in Florida are generally hospitals that are hurricane andthey are great projects, we are seeing several projects in the Baltimore, Washington,D.C. area. Clearly the government has some major work it's going on and others.And then, throughout the United States, so, it's not unique, but clearly arobust market. And being driven again by economics, the economics that a newerhospital is simply more cost effective in the delivery of healthcare and withthe demographic changes, the baby boomers, the demand for these services justappears to be a sustainable market.

And I would say that the growth in our, what we call as theinstitutional backlog this year, it has been driven by growth in the healthcareportion of that. Tyson Bauer - WealthMonitors: That sounds wonderful. Thanks a lot, gentlemen.

Thank you.

(Operator instruction) Our next question comes from RichardNelson from [Jay Cullen Securities]. Please proceed. Richard Nelson - JayCullen Securities: Good morning, gents. Most of my questions have beenanswered, but I just had a quick one for Jim, you mentioned projections -- youwere shooting for 8% annual revenue growth, does that include the additional revenuesthat will be generated from the facility expansions?

Yeah, it really does and it's a kind of amassed in that isreally driven. We are going to see a continued growth of our architecturalglass business, and basically we are not anticipating growing our installationbusiness, window business or it'd be pretty nominal, pretty low levels ofgrowth in our picture framing business. Richard Nelson - JayCullen Securities: Okay, thanks a lot.

Our next question comes from Stan Westhoff from [Walt Hausen& Co]. Please proceed. Stan Westhoff - WaltHausen & Co: Good morning, gentlemen. I just had a couple of quickquestions to drill down on the backlog a little bit, I am not sure if I missedit or not, but how much of the backlog was from the new orders and bookings?

We'll give that in just a second, maybe if you have anyother questions and then we'll come back to it. Stan Westhoff - WaltHausen & Co: Okay, it's still related to the backlog as well. I know youmentioned the revenue was down, you mentioned it was going to be down thisquarter a little bit, compared to last years level, but you said that there wassome timing of job flow in installation business impacted the growth in thequarter, How much of that was -- contributed to the growth and the backlog aswell I guess?

Well, no effect on the backlog. I mean the timing of theproject would have been in the backlog last quarter as well. I think the keypoint there is that one of the key uncertainties we have in this business isjust the timing of activity on a construction project are determined by ourcustomer. And so, we try to really point out there overtime on anygiven quarter, it's not uncommon for us to see a range of $5 million to $15million of revenue that just kind of moves from quarter-to-quarter based ontiming of projects. And so, we actually did have in the range of $4 million to$10 million of revenue in our installation business that is unrelated to theprojects we talked about, but it has to do with just kind of normal movement ofschedule per customer requirements. Stan Westhoff - WaltHausen & Co: Okay. And then did you spend that number on the new orderspossibly?

Yeah. I think it's about little over $260 million of new ordersin the quarter. Stan Westhoff - WaltHausen & Co: $260 million?

Yes. Stan Westhoff - WaltHausen & Co: Okay. That's all I have, guys. Thank you very much.

Okay.

Our next question comes from Brian Levison from Private FundManagement. Please proceed. Brian Levison -Private Fund Management: Good morning. Thanks for taking my questions.

Good morning. Brian Levison -Private Fund Management: I am sorry to belabor this and I also apologize if I just missedit in the prepared remarks, but what was the actual breakdown of the $6.5million of the write-off?

In terms of components or -- you mean there… Brian Levison -Private Fund Management: How much for were the breakdowns?

Most of the $6.5 million -- most of the cost will be forlabor. Brian Levison -Private Fund Management: It is, okay. So this is your estimate of incremental labor?

Yes. To complete the projects.

Right. To complete this projects within a timeline. Brian Levison -Private Fund Management: Okay. How much AR and retainage is there associated withthese projects?

About $2 million.

Yeah. It’s estimated to be about $2 million. Brian Levison -Private Fund Management: Okay. And how much more revenue is going to be build forthese projects in the next, I think it was 60 to 90 days?

About $2 million. Brian Levison -Private Fund Management: Okay. So are you going to have roughly $4 million of just ARand retainages. Is any of that potentially subject to a back-charge or somekind of liquidated damages provision in a contract?

This $6.5 million write-down anticipates any exposure wefeel we have related to that. Brian Levison -Private Fund Management: Okay. The next question is, the next couple of questions Ihave are just about the backlog and I'm just wondering, I didn't reallyunderstand, you had $260 million of new bookings in the third quarter?

Yeah, it's the growth plus replacement of the sales, I mean,that's basically the number. Brian Levison -Private Fund Management: Okay. And so was that $69 million in for 2010 were allbooked to this quarter?

No, roughly about 50 million of that was new to this quarter. Brian Levison -Private Fund Management: Okay. And so then, I guess, what I'm trying to get backaround to is, it look like in Q3 that you added $83 million of bookings thatwill be worked off in 2009, is that accurate?

You mean in terms of new bookings relative to the priorquarter? Brian Levison -Private Fund Management: New bookings relative to 2009.

That's probably right, yeah. Brian Levison -Private Fund Management: Okay. And so coming into the fourth quarter, how much do youhave out in bids that you anticipate, that are sort of your late stagenegotiations?

Yeah, that would be primarily that would be centered aroundcommitments, because you're getting to, when you're talking about negotiations,we may not have received a commitment but between backlog and negotiations,there is still of the large commitment volume that we do not report. And thatcommitment volume you are bidding, you are competing, you win, you get acommitment on the job and then it turns into backlog. Our commitment levels, combined with our backlog are thebasis of our projections. So, when you talk about bidding activities and theway we described those bidding activities is sort of the level of activityassociated with biddings, which is as high as it's ever been. So, bidding activity is quite strong and very active,commitments are very strong, just like our backlog and the combination of thosegives us the ability to say to you that we can, we are turning orders awaytoday in glass fabrication and we do not expect that to change through the nexttwelve to fifteen months. So, we still cannot accommodate even if all the addedcapacity coming on accommodate all the work. And then, on the window andinstallation side, as we described the installation is very much booked for thenext year in terms of backlog and commitments and we will not oversell thatbusiness, we will not sell more than we can execute and on our window sideprobably that means we have short terms window business that turns veryquickly. And that is a part of the window business that always leaves capacityopen. But it fills in, it's a short-term backlog. It is why it does that way.So, I am just trying to give you a better vision of how this backlog andcommitments work. Brian Levison -Private Fund Management: And I appreciate that. And I guess, what I am trying to dois attach some numbers to it. When I look back at, you ended your fiscal yearof 2007 with almost $316 million of backlog that was indicated to work-off infiscal 2008. At the end of Q3 of this year we’re at 228, do you anticipateadding say $200 million of work to backlog in the fourth quarter to get youthrough ’09?

We would anticipate replacing volume. Certainly replacingvolume that shift during the quarter, and enabling us to grow the 8%, so wewould look for slight increase.

Yeah, roughly because again we don’t require a sequentialgrowth in our backlog and so, but we do look at how is our backlog at the endof Q3 relative to kind of what the outlook for revenue is next year and I thinkthat percentage of next year’s revenue that we have in backlog today is roughlycomparable to what the percentage of backlog was a year ago at this point intime. And I think, overall, as Russ said, that our visibility of backlog aswell as projects in process and commitments above that give us a lot ofconfidence in our outlook for next year. Brian Levison -Private Fund Management: And I apologize if I’m just being dense about this and appreciateyour I guess humor, but it’s -- you are going to work off a $160 million ofbacklog in the fourth quarter of this year and so I am really focused more onthe portion for 2009 that when I look at -- when I look at what you can add tobacklog now that will affect 2009. The window is kind of closing no punintended, but the fourth quarter is a major quarter of ads for your backlog for’09, just given the timeline or lifecycle of when you did a project to when itactually breaks ground and then you are on size.

Let me break it down just a little bit to help you withunderstanding the numbers. The glass fabrication business backlog generallyruns from 10 to 16 weeks. And it's a very significant piece of the overallbacklog. So it turns over every quarter, so to speak. It's only theinstallation and the engineered curtainwall business that has these long tailsto it that show up in the backlog. So I appreciate what you are trying to do, and in fact, Iwould try to do the same if I were you. It's just a little more complicatedbecause of the way the backlog turns. Brian Levison -Private Fund Management: Okay. No. I understand that, the Harmon side of thebusiness.

Right. Brian Levison -Private Fund Management: Is longer lead time and that you do have a significant --it's not really a walk-in business, but short of backlog. The last question Ihave is just about your billing in excess of cost numbers, I was wondering whatthat was in the third quarter?

Well, we don't have to take that one out.

Right. Brian Levison -Private Fund Management: Okay. Did it go up versus the second quarter?

Just a moment. We're still…

Sure. I am trying to find my notes too.

Do you have last... Brian Levison -Private Fund Management: Well just follow-up.

Billingsin excess amount went up about $6 million in the quarter. Brian Levison -Private Fund Management: Okay. I think that we're now at a point of where you had roughlya $189 million of architectural sales. I am guessing that the mix of Harmon tothe total architectural was roughly consistent with the second quarter, whichwas what 39% I think. And if you get that as kind of a day sales number, you'renow at 45 days on a billing in excess a cost number relative to your onlypercentage of completion portion of the business, I’m just wondering when Ilook back three quarters ago, it was 19.7 million and 24 days, two quarters agoit was 26 million and 32 days and this last quarter it was 30.5 million and 35days. Now it's almost 45 days, that's a pretty significant portionof revenue that's now built ahead of when you are going to install it. So, I’mjust wondering what accounts for it and what kind of margins implied in thatand what kind of effect that's going to have on your profitability if thecustomer doesn't agree to all of the things that you build ahead for.

First of all, your math is accurate and we did actually kindof put some processes in place at the end of last year basically to acceleratethe whole cash cycle in this business by doing exactly what you said and whichis doing more advanced billing which as we lapse that you won't see thatdifferential in terms of the way that you are calculating the DSO, but weactually think that that's the positive thing for the total company in terms ofaccelerating the cash cycle of the business and we think our businessesappropriately recognize collectibility associated with them. Brian Levison - PrivateFund Management: Okay. Well, I guess and we've talked about this before, butI'm just a little confused on a business that is primarily bonded work and frommy understanding of how through our request work and how the cash cycle at yourcustomer end, the customers end works for the GC and the owner that they reallycan't pay you before, on bonded work they can't pay you before something isinstalled because they actually, it will, I mean, for lack of the better word,screw up their rights under the bond, under the performance bond. And so, I am just wondering, it does increase the cash cycleand I understand that and it's what you want to see but I am just wonderinghow, when does it stop happening and when and eventually it's going to comearound to, say impact the P&L.

Actually, every contract is a little bit different. But ourgeneral terms really are based on percentage of completion and actually ourcustomer, the GC, is able to bill their customer and so, it doesn't justaccelerate the cash cycle for our business that it generally accelerates itthrough the supply chain. And so other than retention, our contracts are nottied to payment upon final installation. Brian Levison -Private Fund Management: Okay. It's just that, you say that you have done Xpercentage of the job and that the project manager approves. In the field, theproject manager will approve it and send it to his or her home office and thenthe bank will then approve withdrawal request despite material not being installedor material not or labor or material not being completed. Even the withdrawalrequest is incidental?

I can't speak to our customers processes. Brian Levison -Private Fund Management: Okay. Well, I guess, what is the...

Well, I can't speak to, it’s that our process is that it hasbeen an approach that has effectively accelerated the cash cycle for ourbusiness. Brian Levison -Private Fund Management: Okay. And you are in fact getting paid on these.

Yeah. Brian Levison -Private Fund Management: Okay. And what is the, is there some way that you cancommunicate to just what the -- I guess the implied margin on those drawrequest, on that $36.5 million?

The margin is consistent with the rest of our business. Imean there isn't a differentiation in margin and those versus other aspects ofthe project phase and billings. Brian Levison -Private Fund Management: And there is no difference in terms of the recognition ofthat margin through the P&L for a percentage of completion?

That's correct. Brian Levison -Private Fund Management: Okay thank you for taking the time to answer my questions.

Okay, you're welcome.

Our last question comes from [Joseph Rial from Breaker BookCapital]. Please proceed. Joseph Rial - BreakerBook Capital: Yes thank you very much. I guess my main question is, youmentioned that you expect income growth well in excess of revenue growth until2010 and I was wondering whether you view that as just the fact that you arekind of going to a peak of a cycle and then this is more of a -- it doesn'tnecessarily imply any permanent change in your margins or would you say thatbecause of your process improvements in the way you are improving the businessthat would almost be like a permanent change, so that the margin in 2010 willbe kind of like a mid-cycle type of margin.

The thing that you have to watch, that I watch and I believeis that the demand for the high value-added products and services, energyefficient products that we produce will continue to grow and become a greaterportion of the market served. So in a market that's described like a [bobsled],going up slightly and then down, very small downward move and then a sustain, sortof sustaining itself at these levels, provides the backdrop for this kind ofperformance to be sustained for several year. So, market conditions like thathave been described and what's going on, we believe we will be able to sustainthis. I think that's the best way to answer that. Joseph Rial - BreakerBook Capital: Okay. And then just one quick related question to that. Doyou think your trough type of margin is the result of this your trough type ofmargins would be a little better than in the past?

Yes. Absolutely. But again, the demand for high performanceenergy-efficient products, increased demand will offset the downward movementof the overall market. Joseph Rial - BreakerBook Capital: Okay. Thanks very much.

You're welcome.

I would now like to turn the call over to Mr. Russ Hufferfor closing remarks.

All right. You know our business has remained strong anddespite our third quarter execution setback in the installation business, weare executing on our strategies and our overall business is improving and ourkey architectural markets are strong as reflected in our sustained high levelsof backlog and commitment. We're excited about the opportunities for Apogee infiscal 2008 and beyond. Thank you.

Thank you for your participation in today's conference. Youmay now disconnect. Have a great day. Thank you.