• Despite a decrease in revenues, operating income in the LSO segment improved 10 percent due to improved productivity and a strong mix of our best value-added picture framing glass and acrylic products.

• We completed key strategic capital investments that position us for efficient growth when markets improve, and allow us to reduce capital spending to less than $20 million in fiscal 2010, a level that adequately funds safety and maintenance requirements, as well as expansion of our "green" product offerings.

• Our backlog decreased 38 percent to $317.4 million at February 28, 2009 compared to $512.6 million at March 1, 2008.

• The Architectural segment backlog, which represents more than 99 percent of the backlog, decreased 38 percent from the prior year as a result of cancellations and slowing bid-to-award timing, despite strong bidding activity.

• During the third quarter and in connection with PPG's sale of its automotive replacement glass businesses, we exercised 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. These proceeds were used to pay down outstanding borrowings on our revolving credit facility.

• We generated strong cash flow from operations, while paying off all of our bank debt. As of February 28, 2009 the only long-term debt remaining was $8.4 million in low-interest industrial revenue bonds, which we intend to retain.

Strategy. The following describes our business strategy for each of our segments.
Architectural segment. Our Architectural segment serves the commercial construction market which is highly cyclical. We have five companies within this segment that participate at various stages of the glass fabrication, window and wall supply chain - each with nationally recognized brands and leading positions in their target market segments. These window and wall systems enclose commercial buildings such as offices, hospitals, educational facilities, government facilities, high-end condominiums and retail centers. We believe building contractors value our ability to deliver quality, customized window and curtainwall solutions to projects on time and on budget, helping to minimize costly job-site labor overruns. Their customers - building owners and developers
- value the distinctive look, energy efficient and hurricane and blast protection features of our glass systems. These benefits can contribute to higher lease rates, lower operating costs due to the energy efficiency of our value-added glass, a more comfortable environment for building occupants, and protection for buildings and occupants from hurricanes and blasts. We look at several market indicators such as office space vacancy rates, architectural billing statistics and other economic indicators to gain insight into the commercial construction market. One of our primary indicators is the U.S. non-residential construction market activity as documented by McGraw-Hill Construction/F.W. Dodge (McGraw-Hill), a leading independent provider of construction industry analysis, forecasts and trends. We adjust this information (which is based on construction starts) to align with our fiscal year and the lag that is required to account for when our products and services typically are initiated in a construction project - approximately nine months after project start. From the spring calendar 2009 McGraw-Hill report, the U.S. non-residential construction market had an annual compounded growth rate of 13 percent over our past three fiscal years. Our segment's compounded annual growth rate over that same period was 14 percent. Our overall strategy in this segment is to defend and grow over a cycle by extending our presence while remaining focused on distinctive solutions for enclosing commercial buildings by leveraging our leading brands, energy-efficient products and high quality and service. Each of our existing businesses has the ability to grow through geographic or product line expansion, and there are also adjacent market segments we regularly penetrate. In addition, we aspire to lead our markets in the development of practical energy-efficient products for "green" buildings and the ability to deliver them in a sustainable manner. Over the last several years we have added capacity to serve the U.S. market for architectural window and wall systems. These investments included construction of a third location and expansion of two existing locations for our architectural glass fabrication business. We also constructed a new window and wall manufacturing facility to Leadership in Energy and Environmental Design (LEED) Silver standards to replace antiquated facilities. In addition, we acquired Tubelite, a storefront and entrance fabricator, in the fourth quarter of fiscal 2008, entering a significant segment of the commercial building enclosure market in which we had not previously had a presence. Our architectural businesses have introduced products and services designed to meet the growing demand for green building materials. These products have included new energy efficient glass coatings, thermally-enhanced aluminum framing systems, and systems with high amounts of recycled content. While the U.S. commercial construction market will continue to contract, we continue to pursue the same basic strategy with some adjustment for market conditions. We have been and continue to take measures to keep our cost structure in line with revenue including continuing to focus on productivity. We are more aggressively pursuing international markets and the broader domestic markets for our architectural glass products. We are bidding installation work in new metropolitan markets to offset declines in core markets. We are focusing on renovation and new projects in the institutional sector, which should be more stable than private sector construction. We are tightening our capital spending criteria, although we continue to have cash available for strategic investments. We expect to emerge from the current recession poised to win market share from competitors who were not as well positioned to weather the current down cycle. LSO segment. Our basic strategy in this segment is to convert the custom picture framing market from clear uncoated glass to value-added glass that protects art from UV damage while minimizing reflection from the glass so that viewers see the art rather than the glass. We estimate that approximately 30 percent of the retail picture framing market has converted to value-added glass while the ultimate potential is significantly higher. We offer a variety of products with varying levels of reflection control and promote the benefits to consumers with point-of-purchase displays and other promotional materials. We also work to educate the fragmented custom picture framing market on the opportunity to improve the profitability of their framing business by offering value-added glass. In fiscal 2009, we extended this strategy to the fine art market, which includes museums and private collections. We also made capital investments to support the conversion to value-added picture framing products as well as to grow the fine art market. As part of that extension, we developed value-added acrylic products in addition to glass. Acrylic is a preferred material in the fine art markets because the art can be much larger and weight is an important consideration.

Results of Operations
Net Sales

(Dollars in thousands)      2009          2008          2007        2009 vs. 2008      2008 vs. 2007

Net sales                $ 925,502     $ 881,809     $ 778,847              5.0 %              13.2 %

Fiscal 2009 Compared to Fiscal 2008
The 5.0 percent increase in sales was primarily due to the full-year impact of the acquisition of the storefront and entrance business late in fiscal 2008 and from volume increases resulting from the fiscal 2008 capacity expansions in our architectural glass business. This business also benefited from price increases as a result of the improved commercial construction market experienced through most of the year. These were offset by the impacts of cancellations and delays that occurred late in the third quarter and through the fourth quarter, mostly impacting volume in our architectural glass and window and wall business, and lower LSO segment sales from reduced picture framing demand. Fiscal 2008 Compared to Fiscal 2007
The 13.2 percent increase in sales was primarily due to an improved commercial construction market, enabling us to increase volume across all our Architectural segment businesses, but primarily in the architectural glass fabrication business. We were able to increase volume in glass fabrication as a result of increased capacity, including the start-up of the St. George, Utah facility. Sales were also impacted by improved pricing/mix in the architectural glass fabrication and window businesses, and improved job cost flow in our architectural glass installation business. It should be noted that fiscal 2008 contained only 52 weeks compared to 53 weeks in fiscal 2007, which negatively impacted fiscal 2008 net sales by 2 percent. Performance
The relationship between various components of operations, as a percentage of net sales, is illustrated below for the past three fiscal years.

(Percentage of net sales)                                2009             2008             2007
Net sales                                                   100.0 %          100.0 %          100.0 %
Cost of sales                                                78.3             79.0             80.9

Gross profit                                                 21.7             21.0             19.1
Selling, general and administrative expenses                 13.3             13.5             13.0

Operating income                                              8.4              7.5              6.1
Interest income                                               0.1              0.1              0.1
Interest expense                                              0.2              0.3              0.3
Other income, net                                               -                -                -
Results from equity method investee                           0.2             (0.3 )            0.4

Earnings from continuing operations before income
taxes                                                         8.5              7.0              6.3
Income tax expense                                            3.0              2.1              2.2

Earnings from continuing operations                           5.5              4.9              4.1
Earnings from discontinued operations, net of
income taxes                                                    -              0.6                -

Net earnings                                                  5.5 %            5.5 %            4.1 %


Effective income tax rate for continuing operations          35.0 %           30.7 %           35.1 %

Fiscal 2009 Compared to Fiscal 2008
Consolidated gross profit improved by 0.7 percentage points primarily as a result of better execution by the installation and window businesses on projects with good margins, a good overall mix of projects and good pricing at our architectural glass business, slightly offset by operational challenges in the second and third quarters at our architectural glass business. Additionally, our picture framing business saw a strong mix of our best value-added glass and acrylic products and improved productivity.
Selling, general and administrative (SG&A) expenses decreased as a percent of sales to 13.3 percent in fiscal 2009 from 13.5 percent in fiscal 2008, while spending increased by $4.4 million. The decrease as a percent of sales primarily relates to reduced long-term executive compensation expenses, related to lower projected payouts of stock-based incentives as a result of reducing our financial outlook for future years. The remaining decrease as a percent of sales 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.

Interest expense decreased $0.7 million from fiscal 2008 to fiscal 2009. This decrease includes a $0.4 million decline due to lower weighted average interest rates on our revolving credit facility and a $0.3 million increase in the amount of interest capitalized for capital expenditure projects.
Equity in affiliated companies reflected our 34 percent interest in an automotive replacement glass distribution business, PPG Auto Glass, LLC (PPG AG). During fiscal 2009 and in connection with PPG's sale of its automotive replacement glass businesses, we exercised 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. Excluding the gain on sale, equity in affiliated companies reported a loss of $0.1 million for fiscal 2009 compared to $2.2 million of income in the prior-year period. This was due primarily to soft conditions in the auto glass replacement market during fiscal 2009. During fiscal 2008, we recorded a $4.7 million impairment charge related to the PPG Auto Glass joint venture, as well as a $0.3 million write-off of another equity-method investment. Both charges are reflected in our consolidated results of operations as an impairment charge on investment in affiliated company.
The effective income tax rate for fiscal 2009 was 35.0 percent compared to 30.7 percent in fiscal 2008. The increase in the effective tax rate was primarily due to a benefit recognized in the prior year upon conclusion of the analysis of research and development tax credits. The prior year included both fiscal 2008 and additional prior years' research and development tax credits, which lowered the rate. The current year was also impacted, to a lesser extent, by research and development tax credits taken, for fiscal 2009 only. In fiscal 2009, there was an immaterial net loss from discontinued operations of $0.2 million compared to income of $5.4 million in fiscal 2008. Prior-year results included the gain on sale of certain assets related to our Auto Glass business of $3.7 million, a reduction in reserves of $2.2 million related to resolution of an outstanding legal matter in our discontinued European curtainwall operations, and net loss from operations of our Auto Glass business of $0.5 million.
Fiscal 2008 Compared to Fiscal 2007
Consolidated gross profit improved by 1.9 percentage points primarily as a result of pricing and better mix of projects within our architectural glass, window and installation businesses. The gross margin also benefited from higher capacity utilization in the Architectural segment businesses, as well as improved mix in the LSO segment. Gross profit as a percentage of sales includes the impact of approximately 0.7 negative percentage points for the year as a result of third-quarter write downs of $6.5 million on three architectural glass installation projects in the Florida market. As we neared completion of the projects in the third quarter, we identified significant workmanship and quality issues that would require significant costs to remediate and would likely result in the payment of additional contractual remedies to our customers. These write-downs reflected our conclusions that, as a result of these developments, the ultimate costs of the projects would exceed contract revenues. During the fourth quarter, we recorded $2.3 million of additional costs for remediation activities to complete these projects and additional backcharges not previously identified. Two of these jobs were essentially completed by the end of fiscal 2008, while we anticipated the last project would be completed during the first quarter of fiscal 2009. The fourth-quarter cost increases were offset by write-ups on other jobs within the installation business that occur in the normal course of business.
Selling, general and administrative (SG&A) expenses increased as a percent of sales from 13.0 percent in fiscal 2007 to 13.5 percent in fiscal 2008, an increase of $18 million. This increase relates primarily to expenditures to update our computer systems and information technology infrastructure, higher salaries and wages to support our growth, and increased incentive compensation expense due to improved financial performance.
Interest expense decreased $0.2 million from fiscal 2007 to fiscal 2008. This decrease includes a $0.9 million decline due to lower average daily borrowing and lower weighted average interest rates on our revolving credit facility, partially offset by a decrease in interest capitalized for capital expenditure projects.
Equity in affiliated companies reflects our 34 percent interest in an automotive replacement glass distribution business, PPG Auto Glass, LLC (PPG AG). During fiscal 2008, we recorded an impairment charge of $4.7 million on the goodwill associated with this investment. In addition, our equity in the earnings of PPG AG decreased from $2.8 million in fiscal 2007 to $2.2 million in fiscal 2008 as this business faces difficult market conditions.
The effective income tax rate for fiscal 2008 was 30.7 percent compared to 35.1 percent in fiscal 2007. The primary reason for this decrease in rate was due to the completion of an analysis of activities that are eligible for current and prior-year research and development tax credits. Both fiscal 2008 and additional prior-years' research and development tax credits were reflected in the fiscal 2008 rate.

Earnings from discontinued operations of $5.4 million net of tax in fiscal 2008 resulted from the gain on sale of certain assets related to our Auto Glass business of $3.7 million; the reduction in reserves of $2.2 million related to resolution of an outstanding legal matter in our discontinued European curtainwall operations; and net loss from operations of our Auto Glass business of $0.5 million. In fiscal 2007, we had immaterial net earnings from discontinued operations.
Segment Analysis
Architectural Products and Services (Architectural)

      (In thousands)                              2009          2008          2007

      Net sales                                $ 854,034     $ 798,819     $ 694,888
      Operating income                            64,693        53,549        40,323
      Operating income as a percent of sales         7.6 %         6.7 %         5.8 %

Fiscal 2009 Compared to Fiscal 2008. Fiscal 2009 net sales increased $55.2 million or 6.9 percent over fiscal 2008, primarily due to the full-year impact of the acquisition of Tubelite late in fiscal 2008. The full-year impact of the acquisition accounted for 5.3 percentage points of the 6.9 percent change. Additionally, volume increases from the fiscal 2008 capacity expansions, and price increases as a result of the improved commercial construction market experienced through most of the year in our architectural glass business increased revenues. These were offset by the impacts of cancellations and delays that occurred late in the third quarter and through the fourth quarter, mostly impacting volume in our architectural glass and window and wall businesses. The Architectural segment's operating income of $64.7 million, or 7.6 percent of sales, increased $11.2 million or 20.8 percent over fiscal 2008 operating income of $53.5 million. The primary driver of the year-over-year growth was solid execution of projects with good margins and a good overall mix of projects within our installation business. The architectural glass business saw good pricing during the year, which was offset by mid-year operational challenges in this business.
Fiscal 2008 Compared to Fiscal 2007. The $103.9 million or 15 percent increase in Architectural net sales from fiscal 2007 to fiscal 2008 reflected increased volume across all businesses, primarily due to an improved commercial construction market. The improved market enabled us to utilize increased capacity in the architectural glass fabrication business, leading to a significant portion of the increase in volume. The increase in net sales was also due to improved pricing, project mix and productivity in our architectural glass fabrication and window businesses, and improved job cost flow in our architectural glass installation business. Revenue from Tubelite subsequent to our December 2007 acquisition totaled $10.5 million, or 1.5 percentage points, of the overall fiscal-year increase.
The Architectural segment's operating income of $53.5 million, or 6.7 percent of sales, increased $13.2 million or 32.8 percent over fiscal 2007 operating income of $40.3 million. All businesses in the segment had improved operating income except our architectural glass installation business, where we experienced write-downs during the third and fourth quarters of fiscal 2008 on three projects within the Florida market. Operating income improvements for the Architectural segment reflected the impact of higher revenues as discussed above, improved pricing and a more favorable mix of projects with higher value-added features.

Large-Scale Optical Technologies (LSO)

       (In thousands)                              2009         2008         2007

       Net sales                                $ 71,476     $ 82,993     $ 84,082
       Operating income                           16,897       15,398       10,215
       Operating income as a percent of sales       23.6 %       18.6 %       12.1 %

Fiscal 2009 Compared to Fiscal 2008. LSO revenues were down $11.5 million in fiscal 2009 to $71.5 million from $83.0 million in fiscal 2008. Revenues for this business were impacted by a declining custom picture framing industry that reduced square foot volume by 18 percent. The prior year also included $3.4 million in sales from the pre-framed art product line that was sold during the third quarter of fiscal 2008. These negative factors were partially offset by the incremental revenues earned from the shift in mix to our best value-added products. LSO segment operating income as a percent of sales improved to 23.6 percent in fiscal 2009 from 18.6 percent in fiscal 2008 as our picture framing business experienced improved productivity and a stronger mix of our best value-added picture framing glass and acrylic products in the current year, and as we exited our unprofitable pre-framed art product line. Fiscal 2008 Compared to Fiscal 2007. LSO revenues in fiscal 2008 decreased $1.1 million from fiscal 2007. This net decrease reflected a modest increase in revenues from our picture framing business resulting from favorable product mix of our value-added products, partially offset by a $4.0 million decrease in sales from the pre-framed art product line that was

sold during the third quarter of fiscal 2008. LSO segment operating income as a percent of sales improved from 12.1 percent in fiscal 2007 to 18.6 percent in fiscal 2008 as our picture framing business sold a higher percentage of our best, value-added picture framing glass in fiscal 2008. Consolidated Backlog
At February 28, 2009, our consolidated backlog was $317.4 million, down 38 percent from the $512.6 million reported at March 1, 2008. Project cancellations and slow bid-to-award timing are impacting backlog levels, despite steady bidding activity. The backlog of the Architectural segment represented . . .