Forward-Looking Statements

This discussion contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect our current views with respect to future events and financial performance. The words "believe," "expect," "anticipate," "intend," "estimate," "forecast," "project," "should" and similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All forecasts and projections in this document are "forward-looking statements," and are based on management's current expectations or beliefs of the Company's near-term results, based on current information available pertaining to the Company, including the risk factors noted under Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended March 1, 2008. From time to time, we may also provide oral and written forward-looking statements in other materials we release to the public such as press releases, presentations to securities analysts or investors, or other communications by the Company. Any or all of our forward-looking statements in this report and in any public statements we make could be materially different from actual results.

Accordingly, we wish to caution investors that any forward-looking statements made by or on behalf of the Company are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. These uncertainties and other risk factors include, but are not limited to, the risks and uncertainties set forth under Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended March 1, 2008.

We wish to caution investors that other factors might in the future prove to be important in affecting the Company's results of operations. New factors emerge from time to time; it is not possible for management to predict all such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or a combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

We are a leader in certain technologies involving the design and development of value-added glass products, services and systems. The Company is comprised of two segments: Architectural Products and Services (Architectural) and Large-Scale Optical (LSO). Our Architectural segment companies design, engineer, fabricate, install, maintain and renovate the walls of glass, windows, storefront and entrances comprising the outside skin of commercial and institutional buildings. Businesses in this segment are: Viracon, Inc., a leading fabricator of coated, high-performance architectural glass for global markets; Harmon, Inc., one of the largest U.S. full-service building glass installation, maintenance and renovation companies; Wausau Window and Wall Systems, a manufacturer of custom aluminum window systems and curtainwall; and Linetec, a paint and anodizing finisher of architectural aluminum and PVC shutters. In December 2007, we acquired all of the shares of Tubelite Inc. (Tubelite), a privately held business that fabricates aluminum storefront, entrance and curtainwall products for the U.S. commercial construction industry that is reported in our Architectural segment. Our LSO segment consists of Tru Vue, Inc., a manufacturer of value-added glass and acrylic for the custom picture framing and commercial optics markets.

The following selected financial data should be read in conjunction with the Company's Form 10-K for the year ended March 1, 2008 and the consolidated financial statements, including the notes to consolidated financial statements, included therein.

Sales and Earnings

The relationship between various components of operations, stated as a percent
of net sales, is illustrated below for the three and six-month periods of the
current and past fiscal year.



                                                 Three months ended           Six months ended
                                               Aug. 30,      Sept. 1,      Aug. 30,      Sept. 1,
(Percent of net sales)                           2008          2007          2008          2007
Net sales                                         100.0 %       100.0 %       100.0 %       100.0 %
Cost of sales                                      80.2          78.5          79.8          79.0

Gross profit                                       19.8          21.5          20.2          21.0
Selling, general and administrative
expenses                                           12.1          13.6          12.9          13.5

Operating income                                    7.7           7.9           7.3           7.5
Interest income                                     0.1           0.1           0.1           0.1
Interest expense                                    0.1           0.3           0.2           0.3
Other income (expense), net                          -             -            0.1            -
Equity in income (loss) of affiliated
companies                                           0.1           0.7            -            0.4

Earnings from continuing operations before
income taxes                                        7.8           8.4           7.3           7.7
Income tax expense                                  2.8           3.0           2.6           2.7

Earnings from continuing operations                 5.0           5.4           4.7           5.0
(Loss) earnings from discontinued
operations, net of income taxes                      -           (0.1 )        (0.1 )         0.4

Net earnings                                        5.0 %         5.3 %         4.6 %         5.4 %

Effective tax rate for continuing
operations                                         35.4 %        35.5 %        35.7 %        34.8 %

Highlights of Second Quarter and First Six Months of Fiscal 2009 Compared to Second Quarter and First Six Months of Fiscal 2008

• Consolidated net sales increased 12.5 percent, or $27.3 million, during the second quarter ended August 30, 2008 compared to the prior-year period, and increased 13.1 percent or $55.9 million during the six month period. The increase over the prior year for both the quarter and year-to-date periods was primarily due to the addition of the storefront and entrance business within the Architectural segment and increased revenues from additional architectural glass capacity put in place over past quarters to support the demand for our products and pricing. This was partially offset by a decline in LSO segment revenues due to the planned elimination of less-profitable product lines and soft picture-framing market conditions.

• Gross profit as a percent of sales for the quarter ended August 30, 2008 decreased to 19.8 percent from 21.5 percent in the prior-year period. Gross profit as a percent of sales for the six months ended August 30, 2008 decreased to 20.2 percent from 21.0 percent in the prior-year period. Both the current-year quarter and six-month period gross margins were negatively impacted by operational challenges in our architectural glass business, which led to higher than planned labor costs to overcome production bottlenecks. Our Architectural segment installation and window businesses and LSO segment business all saw strong operating performance in the quarter and year-to-date period as compared to the prior-year. The prior-year six-month period included the startup of our new architectural glass facility in St. George, Utah that reduced prior-year margins by 0.5 percentage points.

• Selling, general and administrative (SG&A) expenses for the second quarter decreased to 12.1 percent of net sales compared to 13.6 percent in the prior-year period. The decrease as a percent of sales primarily relates to reduced bonus and incentive expenses as a result of reducing our full-year outlook. The remaining decrease as a percent of revenue is due to leveraging expenses over higher sales dollars.

• Selling, general and administrative (SG&A) expenses for the six-month period decreased to 12.9 percent of net sales compared to 13.5 percent in the prior-year period, but increased $4.6 million year-over-year. The reduced bonus and incentive expenses contributed to the decrease as a percent of sales and the remaining decrease as a percent of revenue is due to leveraging expenses over a higher level of sales dollars. The increase in spending was due to expenditures to update our computer systems and information technology infrastructure, as well as the impact of amortization of intangibles related to the storefront and entrance business acquisition.

• Equity in affiliated companies, which includes our 34 percent interest in PPG Auto Glass, LLC (PPG AG), an automotive replacement glass distribution business, reported income of $0.3 million during the second quarter of fiscal 2009, compared to income of $1.5 million in the prior-year period. For the six months ended August 30, 2008, there was a loss of $0.1 million compared to income of $1.5 million in the prior-year period. The joint venture has been negatively impacted by soft conditions in the auto glass replacement market during fiscal 2009. The prior-year six-month period also included a $0.3 million charge related to a small investment that was written-off.

• The effective tax rate for continuing operations for the second quarter was 35.4 percent compared to 35.5 percent in the prior-year period and was 35.7 percent for the year-to-date period compared to 34.8 percent in the prior year. The increase in the effective tax rate for the six-month period was primarily due to the impact of an increased amount of nondeductible expenses in the first quarter of the current year, as well as the statutory expiration of research and development tax credits taken in the prior year.

Segment Analysis

The following table presents sales and operating income data for our two
segments and on a consolidated basis for the three and six-month periods ended
August 30, 2008, when compared to the corresponding period a year ago.



                                             Three months ended                      Six months ended
                                     Aug. 30,      Sept. 1,        %        Aug. 30,      Sept. 1,        %
(In thousands)                         2008          2007        Change       2008          2007        Change
Net Sales
Architectural                        $ 228,631     $ 198,084       15.4 %   $ 449,351     $ 386,311       16.3 %
Large-Scale Optical                     16,340        19,594      (16.6 )      34,089        41,249      (17.4 )
Intersegment eliminations                   (1 )          (5 )       NM            (1 )          (2 )       NM

Net sales                            $ 244,970     $ 217,673       12.5 %   $ 483,439     $ 427,558       13.1 %


Operating Income (Loss)
Architectural                        $  15,246     $  14,392        5.9 %   $  30,089     $  25,977       15.8 %
Large-Scale Optical                      3,475         3,605       (3.6 )       6,746         7,532      (10.4 )
Corporate and Other                         76          (732 )       NM        (1,404 )      (1,278 )       NM

Operating income                     $  18,797     $  17,265        8.9 %   $  35,431     $  32,231        9.9 %

NM = not meaningful

Due to the varying combinations of individual window systems and curtainwall, the Company has determined that it is impractical to report product and service revenues generated by the Architectural segment by class of product, beyond the segment revenues currently reported.

Architectural Products and Services (Architectural)

• Second quarter net sales of $228.6 million increased 15.4 percent over the prior-year period, and net sales of $449.4 million for the six-month period increased 16.3 percent over the prior-year period. Both the quarter and year-to-date periods were impacted by the addition of the storefront and entrance business, which contributed 8.8 percent to the quarter growth and 8.6 percent to the six-month growth. The remaining increase in both the quarter and six-month periods was primarily as a result of additional capacity due to the continued ramp-up of the new architectural glass capacity in St. George, Utah as well as other converted facilities added last year and pricing.

• Operating income of $15.2 million in the current quarter increased 5.9 percent over the prior-year period, and operating margins decreased to 6.7 percent compared to 7.3 percent in the prior-year period. The decrease in operating margins was due to the operating challenges in the architectural glass business referred to above, somewhat offset by improved operating margins in the installation and window businesses.

• Operating income of $30.1 million for the six-month period increased 15.8 percent over the prior-year period while operating margins remained flat at 6.7 percent. The current year margins were negatively impacted by the operating challenges in the architectural glass business during the second quarter, project and product mix and labor costs due to the mix shift; and continued ramp-up costs for new capacity. The prior year included the startup costs for the new architectural glass facility in St. George, Utah, which reduced margins by 0.6 percentage points.

• Architectural backlog at August 30, 2008 increased to $446.7 million from $405.4 million in the prior-year period; was down from the $491.0 million reported in the first quarter, and down from the $510.9 million reported at fiscal 2008 year-end. Backlog was down from the first quarter due to an increase in the bid-to-award timing, cancellation of two architectural glass casino projects and increasing competitive pressures in commercial construction markets. We expect approximately $261.0 million of this backlog to flow during the remainder of fiscal 2009.

Large-Scale Optical Technologies (LSO)

• Second quarter revenues were $16.3 million, down 16.6 percent from the prior-year period. For the six months ended August 30, 2008, revenues were $34.1 million, down 17.4 percent from the prior-year. The decrease for both the three and six-month periods was due primarily to the planned elimination of less profitable product lines, as well as soft picture framing market conditions in the current year. During this year, we have continued to see growth in our best value-added picture framing products.

• Operating income of $3.5 million in the quarter was down 3.6 percent from the prior-year period, while operating margins increased to 21.3 percent compared to 18.4 percent in the prior year. Operating income of $6.7 million for the six months of fiscal 2009 was down 10.4 percent from the prior year, while operating margins increased to 19.8 percent compared to 18.3 percent in the prior year. The improved margins for both the quarter and year-to-date periods were due to a strong mix of our best value-added picture framing glass in the current year and the elimination of less profitable product lines.

Consolidated Backlog

• At August 30, 2008, our consolidated backlog was $448.4 million, up 9.9 percent over the prior-year period and down 9.0 percent from the $493.0 million reported at first quarter.

• The backlog of the Architectural segment represented 99.6 percent of the Company's consolidated backlog.

• We view backlog as an important statistic in evaluating the level of sales activity and short-term sales trends in our business. We do not feel that sequential growth in backlog is necessary to grow revenues. Additionally, as backlog is only one indicator, and is not an effective indicator of the ultimate profitability of the Company's sales, the Company does not believe that backlog should be used as the sole indicator of future earnings of the Company.

Acquisitions

On December 21, 2007, we acquired all of the shares of Tubelite Inc., a privately held business, for $45.7 million, including transaction costs of $1.0 million and net of cash acquired of $0.9 million. Tubelite's results of operations have been included in the consolidated financial statements and within the Architectural segment since the date of acquisition. Tubelite fabricates aluminum storefront, entrance and curtainwall products for the U.S. commercial construction industry. The purchase is part of our strategy to grow our presence in commercial architectural markets. Goodwill recorded as part of the purchase price allocation was $21.7 million and is not tax deductible. Identifiable intangible assets acquired as part of the acquisition were $17.6 million and include customer relationships, trademarks and non-compete agreements with a weighted average useful life of 15 years.

Discontinued Operations

During fiscal 2007, we announced our intention to discontinue the manufacturing of automotive replacement glass products and also announced the decision to sell the remaining portion of the Auto Glass segment that manufactures and sells original equipment manufacturer and aftermarket replacement windshields for the recreational vehicle and bus markets. We restated the consolidated financial statements to show the results of the Auto Glass segment in discontinued operations. We completed the sale of certain assets related to the business during the third quarter of fiscal 2008 resulting in a pre-tax gain of $5.8 million.

In several transactions in fiscal years 1998 through 2000, we completed the sale of our large-scale domestic curtainwall business, the sale of our detention/security business and the exit from international curtainwall operations. The remaining estimated cash expenditures related to these discontinued operations are recorded as liabilities of discontinued operations and a majority of the remaining cash expenditures related to discontinued operations is expected to be paid within the next three years. The majority of these liabilities relate to the international curtainwall operations, including bonds outstanding, of which the precise degree of liability related to these matters will not be known until they are settled within the U.K. courts. The reserve for discontinued operations also covers other liability issues, consisting of warranty issues relating to these and other international construction projects.

During the first quarter of fiscal 2008, these reserves were reduced by $3.5 million, primarily due to resolution of an outstanding legal matter related to a significant French curtainwall project, resulting in non-cash income from discontinued operations of $2.0 million. The remaining amounts in results from discontinued operations in the current and prior-year periods reflect the operating loss of the Auto Glass segment that has been sold.

Subsequent Events

On September 30, 2008, subsequent to quarter-end and in connection with PPG's sale of its automotive replacement glass businesses, we executed our right to sell our minority interest in the PPG Auto Glass joint venture, resulting in cash proceeds of $27.1 million and a pretax gain on sale of approximately $2.0 million. We anticipate using these proceeds to lower debt on our revolving credit facility.

Liquidity and Capital Resources



                                                                 Six months ended
                                                          August 30,         September 1,
(Cash effect, in thousands)                                  2008                2007
Net cash provided by continuing operating activities     $     39,481       $       34,517
Capital expenditures                                          (39,235 )            (26,030 )
Net increase (decrease) in borrowings                           5,500              (11,100 )

Operating activities. Cash provided by operating activities of continuing operations was $39.5 million for the first six months of fiscal 2009, compared to $34.5 million in the prior-year period. The change was primarily driven by cash generated by continued improvement in our working capital management processes.

Non-cash working capital (current assets, excluding cash and cash equivalents, less current liabilities) was $72.8 million at August 30, 2008 or 7.8 percent of last 12-month sales, a metric we use to measure our effectiveness for managing working capital. This compares to $69.5 million at September 1, 2007 or 8.3 percent of last 12-month sales.

Investing Activities. Through the first six months of fiscal 2009, investing activities used $38.0 million of cash, compared to $27.9 million in the same period last year. New capital investments through the first six months of fiscal 2009 totaled $39.2 million, compared to $26.0 million in the prior-year period. The current year spending was primarily for productivity improvements and capacity expansion in both operating segments, including approximately $19.0 million for a new LEED-certified architectural window facility and equipment. The prior year included completion of our new architectural glass fabrication plant in St. George, Utah.

Fiscal 2009 capital expenditures are expected to be approximately $60 million. This includes the cost of the new architectural window facility, and capacity expansions and productivity improvements in the Architectural and LSO segments. We plan for maintenance and safety capital expenditures to be approximately $25 million to $30 million annually.

We continue to review our portfolio of businesses and their assets in comparison to our internal strategic and performance objectives. As part of this review, we may acquire other businesses and further invest in, fully divest and/or sell parts of our current businesses.

Financing Activities. Total outstanding borrowings increased to $63.7 million at August 30, 2008 from the $58.2 million outstanding at March 1, 2008, due to planned capital expenditures and share repurchases. The majority of our long-term debt, $55.3 million, consisted of bank borrowings under our $100.0 million syndicated revolving credit facility. Our debt-to-total-capital ratio was 17.6 percent at August 30, 2008, up from 17.0 percent at March 1, 2008.

We paid dividends of $4.2 million during the first six months of fiscal 2009, compared to $3.9 million in the same period of fiscal 2008. We expect to continue to make quarterly dividend payments and spend approximately $8.9 million on dividends for the year.

During fiscal 2004, the Board of Directors authorized a share repurchase program of 1,500,000 shares of common stock in the open market at prevailing market prices. The Board of Directors increased this authorization by 750,000 shares in January 2008. We repurchased 535,324 shares under this program, for a total of $7.2 million, through February 25, 2006. No share repurchases were made under this plan during fiscal 2007. We repurchased 338,569 shares during fiscal 2008 for $5.4 million. During the first six months of fiscal 2009, we repurchased 455,230 shares for $8.1 million under the program. Therefore, we have purchased a total of 1,329,123 shares, at a total cost of $20.6 million, since the inception of this program and have remaining authority to repurchase 920,877 shares under this program, which has no expiration date.

Other Financing Activities. The following summarizes our significant contractual obligations that impact our liquidity:

                                                      Future Cash Payments Due by Fiscal Period
                                      2009
(In thousands)                      Remaining     2010      2011       2012      2013      Thereafter      Total
Continuing Operations
Borrowings under credit facility   $        -    $    -    $    -    $ 55,300   $    -    $         -    $  55,300
Industrial revenue bonds                    -         -         -          -         -           8,400       8,400
Operating leases (undiscounted)          3,736     6,601     5,304      3,836     2,858          5,133      27,468
Purchase obligations                    17,415     1,674        -          -         -              -       19,089
Interest on fixed-rate debt                278       325        14         -         -              -          617
Other obligations                          309       516        -          -         -              -          825

Total cash obligations             $    21,738   $ 9,116   $ 5,318   $ 59,136   $ 2,858   $     13,533   $ 111,699

We maintain a $100.0 million revolving credit facility, which expires in November 2011. Borrowings of $55.3 million were outstanding as of August 30, 2008. The credit facility requires that we maintain a minimum level of net worth as defined in the credit facility based on certain quarterly financial calculations. The minimum required net worth computed in accordance with the credit agreement at August 30, 2008 was $235.3 million, whereas our net worth as defined in the credit facility was $298.0 million. The credit facility also requires that we maintain a debt-to-cash flow ratio of no more than 2.75. This ratio is computed daily, with cash flow computed on a rolling 12-month basis. Our ratio was 0.68 at August 30, 2008. If we are not in compliance with either of these covenants, the lender may terminate the commitment and/or declare any loan then outstanding to be immediately due and payable. At August 30, 2008, we were in compliance with all of the financial covenants of the credit facility. Long-term debt also includes $8.4 million of industrial development bonds that mature in fiscal years 2021 through 2023.

We have purchase obligations for raw material commitments and capital expenditures. As of August 30, 2008, these obligations totaled $19.1 million.

We expect to make contributions of $0.9 million to our pension plans in fiscal 2009. The fiscal 2009 expected contributions will equal or exceed our minimum funding requirements.

As of August 30, 2008, we had $14.3 million and $2.0 million of unrecognized tax benefits and environmental liabilities, respectively. We are unable to reasonably estimate in which future periods these amounts will ultimately be settled.

We maintain two interest rate swap agreements that, at August 30, 2008, effectively converted $20.0 million of variable rate borrowings into a fixed-rate obligation. These agreements expire in fiscal 2011. For each of these interest rate swaps, we receive payments at variable rates while making payments at fixed rates of between 2.59 and 2.72 percent. The impact of these interest rate swaps is reflected in the interest on fixed-rate debt in the above table. We had a third interest rate swap that expired in the second quarter of fiscal 2009.

From time to time, we acquire the use of certain assets, such as warehouses, automobiles, forklifts, vehicles, office equipment, hardware, software and some manufacturing equipment through operating leases. Many of these operating leases . . .