Company Overview

The Company operates in four reportable segments within its two principal industry groups; the Heating and Cooling segment and the Evaporative Cooling segment in the HVAC industry group and the Concrete, Aggregates and Construction Supplies segment and the Door segment in the Construction Products industry group.

The Heating and Cooling segment produces and sells gas-fired wall furnaces, console heaters and fan coils from the Company's wholly-owned subsidiary, Williams Furnace Co. of Colton, California. The Evaporative Cooling segment produces and sells evaporative coolers from the Company's wholly-owned subsidiary, Phoenix Manufacturing, Inc. of Phoenix, Arizona. Concrete, Aggregates and Construction Supplies are offered from numerous locations along the Front Range of Colorado operated by the Company's wholly-owned subsidiaries Castle Concrete Company and Transit Mix Concrete Co., of Colorado Springs, Transit Mix of Pueblo, Inc. of Pueblo and Rocky Mountain Ready Mix Concrete, Inc. of Denver. Doors are fabricated and sold along with the related hardware from Colorado Springs and Pueblo through the Company's wholly-owned subsidiary, McKinney Door and Hardware, Inc. of Pueblo, Colorado.

In addition to the above reporting segments, an "Unallocated Corporate" classification is used to report the unallocated expenses of the corporate office which provides treasury, insurance and tax services as well as strategic business planning and general management services and an "Other" classification is used to report a real estate operation. Expenses related to the corporate information technology group are allocated to all locations, including the corporate office.

Financial Condition, Liquidity and Capital Resources

Sales of the Company's HVAC products are seasonal and weather sensitive except for fan coils. Revenues in the Company's Concrete, Aggregates and Construction Supplies segment are influenced by the level of construction activity and weather conditions along the Front Range of Colorado. Sales for the Door segment are not as seasonal nor are they much affected by weather conditions. Historically, the Company has experienced operating losses during the first quarter except when construction activity is strong along the Front Range of Colorado and the weather is mild. Operating results typically improve in the second and third quarters reflecting more favorable weather conditions in Colorado and the seasonal sales of the Evaporative Cooling segment however; the Company expects construction activity along the Front Range will remain weak for the balance of 2009.

Fourth quarter results can vary based on weather conditions in Colorado as well as in the principal markets for the Company's heating equipment. The Company typically experiences operating cash flow deficits during the first half of the year reflecting operating results, the use of sales dating programs (extended payment terms) related to the Evaporative Cooling segment and payments of the prior year's accrued incentive bonuses and Company profit-sharing contributions. As a result, the Company's borrowings against its revolving credit facility tend to peak during the second quarter and then decline over the remainder of the year. This trend has continued thus far in 2009.

As expected, the Company's cash flow from operations during the first quarter was negative due to the seasonality of sales, production schedules and the sales dating programs related to the evaporative cooler product line. Operations for the first three months of 2009 used $889,000 of cash compared to $1,874,000 during the first three months of 2008. The reduced cash requirement was primarily the result of a decrease in inventory levels during the first quarter of 2009 compared to an increase in inventory levels during the first quarter of 2008 which resulted in just over $3,000,000 less cash used. Inventory, largely raw materials and finished goods had been increased during the latter part of 2008 in the Evaporative Cooling segment in anticipation of added sales resulting from the departure of a large competitor from the United States market. Inventory in the Heating and Cooling segment was also higher at the end of the 2008 fiscal year due to reduced furnace sales related to a very mild winter in many of the markets served. Offsetting approximately $2,275,000 of this improvement was an increase in receivables primarily related to the increase in sales of the Evaporative Cooling segment, many of which were under our sales dating programs.

As more fully discussed in Note 8 above, on April 16, 2009, the Company entered into a secured New Credit Agreement whereby the new bank lender will provide a total credit facility of $30,000,000 consisting of a $20,000,000 revolving credit facility for a three year period and a $10,000,000 term loan facility. The increase in the total credit facility is to provide additional liquidity during the Company's peak seasonal credit need. The Company was in compliance with the loan covenants as of the quarter ended April 4, 2009 under the Amended Credit Agreement which the New Credit Agreement replaced.

The New Credit Agreement extends the revolving credit facility until April 16, 2012 and accordingly, the outstanding revolving credit balances at April 4, 2009 and January 3, 2009 were classified as long-term obligations.

Capital expenditures are expected to be held to a minimum during 2009; however, approximately $540,000 was expended on the completion of the slurry wall at the new mining site at Pueblo East during first quarter of 2009. The decrease in proceeds from the sale of property and equipment was due to the inclusion of $520,000 of cash received on the sale of a small aggregates operation during the first quarter of 2008.

Scheduled debt repayments were made during the first quarter of both 2009 and 2008. As expected, the Company borrowed against its revolving credit facility during the first quarter of 2009. The highest amount of Company borrowings outstanding under the revolving credit agreement during the first quarter of 2009 was $9,450,000 and the average amount outstanding during the first quarter was $7,757,000.

The Company has prepared a projection of cash sources and uses for the next 12 months. Under this projection, the Company believes that its existing cash balance, anticipated cash flow from operations and borrowings available under the New Credit Agreement will be sufficient to cover expected cash needs, including servicing debt and planned capital expenditures for the next twelve months. The Company expects to be in compliance with all debt covenants during this period.

Results of Operations - Comparison of Quarter Ended April 4, 2009 to Quarter Ended March 29, 2008

Consolidated sales during the first quarter of 2009 were $32,731,000 resulting in a $492,000 operating loss. In the first quarter of 2008 sales were $34,512,000 with an operating loss of $1,479,000. Historically, the Company has experienced operating losses during the first quarter except when the construction activity is strong and the weather is mild along the Front Range in Colorado.

The Concrete, Aggregates and Construction Supplies segment and the Heating and Cooling segment reported decreased sales partially offset by increases in the Door and Evaporative Cooling segments. The declines in sales of the two segments were due to reduced construction levels and a relatively mild winter in the furnace market areas. As reported in the Company's 2008 Annual Report on Form 10-K, the Company continues to evaluate potential alternative operating and strategic plans related to RMRM. The Door segment sales were strong despite the slow construction largely due to this segments products being installed near the completion of a construction job. The Door segment's backlog declined throughout the first quarter. Sales of evaporative coolers were strong primarily due to new customers that were gained when a major competitor exited the United States market at the end of 2008. Overall cost of sales as a percentage of sales improved from 86.5 to 82.0% as materials costs declined over the first quarter, primarily steel, copper and fuel, and product mix changed to products with better margins. Selling and administrative costs decreased $48,000 but increased as a percentage of sales. The first quarter of 2008 also included the sale of a small aggregate operation (Table Mountain), during the 2008 quarter resulting in a pre-tax gain of

approximately $338,000 for the Concrete, Aggregates and Construction Materials segment. Table Mountain did not provide aggregates to the Company's ready-mix operations and management did not consider it to be a strategic part of its business.

Interest expense declined to $181,000 in the first quarter of 2009 from $330,000 during the first quarter of 2008 due to lower interest rates and slightly lower average debt outstanding.

A discussion of operations by segment follows.

Construction Products



The table below presents a summary of operating information for the two
reportable segments within the Construction Products industry group for the
quarters ended April 4, 2009 and March 29, 2008 (dollar amounts in thousands):



                                                   Concrete,
                                                Aggregates and
                                                 Construction
                                                   Supplies         Doors
Quarter ended April 4, 2009
Revenues from external customers                $        10,709    $ 4,760
Segment operating (loss) income                          (1,846 )      610
Operating (loss) income as a percent of sales             (17.2 )%    12.8 %
Segment assets as of April 4, 2009              $        45,802    $ 6,904
Return on assets                                           (4.0 )%     8.8 %

Quarter ended March 29, 2008
Revenues from external customers                $        13,789    $ 3,760
Segment operating (loss) income                          (1,884 )      418
Operating (loss) income as a percent of sales             (13.7 )%    11.1 %
Segment assets as of March 29, 2008             $        50,265    $ 6,847
Return on assets                                           (3.7 )%     6.1 %

Concrete, Aggregates and Construction Supplies Segment

Sales in the Concrete, Aggregates and Construction Supplies segment for the first quarter of 2009 decreased 22.3% from the prior year's comparable quarter as a result of lower concrete and aggregate volumes, a direct result of the continuing decline in construction activity along the Front Range of Colorado, especially housing construction. Both concrete and aggregate margins were negative largely due to the lower volume and the fixed nature of many of the costs in this segment, most notably batching and delivery costs. The only positive results were achieved by the Pueblo operation which benefitted from two large commercial concrete jobs, one of which will continue into the second quarter. Also exacerbating the lower sales volume was the shutdown of the Pikeview Quarry due to a landslide that occurred in December 2008. The Pikeview Quarry will remain shut down until the Company develops a new mining and reclamation plan. Such plan will be subject to the approval of the Colorado Division of Reclamation, Mining and Safety (DRMS). The Company and its consultants are working on a new mining and reclamation plan. The DRMS has given the Company until May 13, 2010 to submit the new plan. In the meantime, the Company has ramped up production in the Black Canyon Quarry which is expected to begin production early in the second quarter. The costs involved in purchasing rock from third parties for our own concrete needs during the first quarter of 2009 as well as some start-up expenses at the Black Canyon Quarry further suppressed margins. Construction supplies volume also declined in the 2009 first quarter compared to the 2008 quarter due to the reduced construction activity in Colorado Springs although margins were maintained. A final factor affecting the comparative results of the two quarters was the inclusion of a $338,000 profit from the sale of a small aggregate operation (Table Mountain), during the 2008 quarter.

The operating loss in the 2009 first quarter was approximately the same as the 2008 first quarter loss in spite of much lower volumes, the loss of aggregate production from the Pikeview Quarry and the aforementioned gain on the sale of a small aggregates operation during the first quarter of 2008. Selling and administrative costs were reduced during the first quarter of 2009; however they increased as a percentage of sales from 11.0% to 12.8% due to the lower sales volume. As a result, both the operating loss as a percent of sales and the negative return on assets increased in the 2009 first quarter compared to the prior year's first quarter.

Door Segment

Sales during the first quarter of 2009 in the Door segment increased $1,000,000 or 26.6% from the comparable 2008 quarter due primarily to a strong backlog and the timing of shipments. Sales during a specific quarter can be heavily influenced by customer requests to either accelerate or delay shipments of jobs to better coincide with their own construction schedules. The backlog shrank during the first quarter of 2009 compared to the 2008 year-end by approximately $1,600,000 as a result of the decline in construction on a nationwide basis.

Operating income increased from $418,000 for the 2008 quarter to $610,000 for the 2009 quarter as a result of the increased sales. However, the Door segment is beginning to experience a tightening of gross profit margins as more competitive pricing is being encountered in the slower economy. Selling and administrative costs declined modestly; however, these costs decreased as a percentage of sales from 15.6% to 11.7% due to the increased sales volume. As a result, operating income as a percent of sales increased in the 2009 first quarter compared to the prior year's quarter. The return on assets for the 2009 first quarter increased at a higher rate due to the comparable asset base for both quarters.

HVAC Products

The table below presents a summary of operating information for the two
reportable segments within the HVAC products industry group for the quarters
ended April 4, 2009 and March 29, 2008 (dollar amounts in thousands):



                                          Heating and     Evaporative
                                            Cooling         Cooling
Quarter ended April 4, 2009
Revenues from external customers         $       9,898   $       7,309
Segment operating income                           437           1,035
Operating income as a percent of sales             4.4 %          14.2 %
Segment assets as of April 4, 2009       $      20,253   $      21,691
Return on assets                                   2.2 %           4.8 %

Quarter ended March 29, 2008
Revenues from external customers         $      11,523   $       5,349
Segment operating income                           357             382
Operating income as a percent of sales             3.1 %           7.1 %
Segment assets as of March 29, 2008      $      23,222   $      16,966
Return on assets                                   1.5 %           2.3 %

Heating and Cooling Segment

Sales in the Heating and Cooling segment declined $1,625,000, or 14.1%, during the first quarter of 2009 from the comparable 2008 quarter. Furnace sales dollars and volume during the first quarter of 2009 declined from the 2008 results due to milder weather while fan coil sales declined due to a decline in commercial construction. Also during 2008, WFC provided fan coils for a large new hotel in Las Vegas. Overall, pricing for this segment showed mixed results due to competitive pressures partially offset by lower materials prices, primarily steel and copper.

Operating income improved from $357,000 during the first quarter of 2008 to $437,000 for the 2009 quarter despite the decline in sales as a result of lower material costs and a shift in business to smaller, higher margin jobs. As noted above, a significant portion of the fan coil volume during 2008 was due to the job in Las Vegas which carried lower margins. Largely the result of lower material prices, cost of sales as a percent of sales declined from 85.5% for the first quarter of 2008 to 78.2% for the comparable 2009 quarter. Selling and administrative expenses were reduced by $43,000 but increased as a percentage of sales by 1.9% largely due to the lower sales. Both operating income as a percent of sales and return on assets improved due to the increased margins that resulted from reduced materials costs during the first quarter of 2009 from the level of the prior year's quarter.

Evaporative Cooling Segment

Sales in the Evaporative Cooling segment increased $1,960,000, or 36.6%, during the first quarter of 2009 from the comparable 2008 quarter. The increase in sales was almost entirely due to the initial stocking orders from new customers, including a major national retailer, as the result of a major competitor exiting the United States market. Continuation of the increased demand is now largely dependent upon the existence of hot, dry weather in the Southwest during the second and third quarters.

The segment reported operating income of $1,035,000 for the 2009 first quarter compared to $382,000 for the 2008 first quarter. The improved operating results were the due to the increased sales and improved margins based in part on lower material prices, notably steel. Margins also benefitted from increased production levels and efficiencies. Selling and administrative expenses increased $191,000 during the 2009 first quarter largely due to volume incentives, commissions, co-op advertising and other expenses directly related to the increase in sales. However, these costs declined as a percentage of sales from 12.5% for the 2008 first quarter to 11.8% for the 2009 quarter. As a result, both operating results as a percent of sales and return on assets increased in the 2009 first quarter from the prior year's quarter.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States which require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of April 4, 2009 and January 3, 2009 and affect the reported amounts of revenues and expenses for the periods reported. Actual results could differ from those estimates.

Information with respect to the Company's critical accounting policies which the Company believes could have the most significant effect on the Company's reported results and require subjective or complex judgments by management is contained in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 2009.

OUTLOOK

Concrete and aggregate volumes are expected to remain at comparatively low levels for the near term until construction activity along the Front Range of Colorado improves. While the sales volume of the Door segment was quite strong during the first quarter of 2009, the backlog has diminished and we may see some erosion in margins in order to maintain sales volume in a declining market if the construction slow-down continues.

Sales of the Evaporative Cooling segment are expected to grow significantly with the departure of a major competitor from the United States market, but as always, volume will remain weather sensitive. Sales of fan coil products in the Heating and Cooling segment are expected to remain somewhat depressed due to the decline in commercial construction activity nationwide; however, furnace sales could improve if the weather returns to a more normal pattern during the next heating season.

RECENTLY ISSUED ACCOUNTING STANDARDS

In April 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position 142-3, "Determination of the Useful Life of Intangible Assets" (FSP 142-3) which amends the list of factors an entity should consider in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under Statement of Financial Accounting Standard (SFAS) No. 142, "Goodwill and Other Intangible Assets" (SFAS No. 142). FSP 142-3 applies to intangible assets that are acquired individually or with a group of asset and intangible assets acquired in both business combinations and asset acquisitions. FSP 142-3 removes the provision under SFAS No. 142 that requires an entity to consider whether the renewal or extension can be accomplished without substantial cost or material modification of the existing terms and conditions associated with the asset. Instead, FSP 142-3 requires that an entity consider its own experience in renewing similar arrangements. An entity would consider market participant assumptions regarding renewal if no such relevant experience exits. Upon adoption of FSP 142-3 on January 4, 2009, the first day of fiscal 2009, this statement had no impact on the Company's consolidated financial position, results of operation and cash flows.

In March 2008, the FASB issued SFAS No. 161, "Disclosures About Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133". The new statement requires expanded disclosure about an entity's derivative instruments and hedging activities. It is effective for fiscal years beginning after November 15, 2008, including interim periods within those fiscal years, with early application encouraged. The disclosures are required only for those derivative instruments and related hedged items accounted for under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" and its related interpretations (including nonderivative instruments that are designated and qualify as hedging instruments). At April 4, 2009, the Company did not have any derivative or hedging activities that were addressed by this pronouncement.

In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations-a replacement of FASB No. 141" (SFAS No. 141(R)). SFAS No. 141(R) requires (a) a company to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at fair value as of the acquisition date; and (b) an acquirer in pre-acquisition periods to expense all acquisition-related costs. SFAS No. 141(R) also requires that any adjustments to an acquired entity's deferred tax asset, valuation allowance, cash contingency, or deferred tax liability balance that occur after the measurement period be recorded as a component of income tax expense. This accounting treatment is required for business combinations consummated before the effective date of SFAS No. 141(R) (non-prospective); otherwise SFAS No. 141(R) must be applied prospectively. The presentation and disclosure requirements must be applied retrospectively to provide comparability in the financial statements. Early adoption is prohibited. SFAS No. 141(R) is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company will be required to comply with the provisions of this statement for any business combinations subsequent to December 15, 2008. The adoption of this statement had no impact on the Company's first quarter financial statements since there were no current or recent acquisitions.

The Company discusses other recently issued accounting standards and tax law changes in the Critical Accounting Policies section under Item 7 and in Note 1 to Consolidated Financial Statements in Item 8 of the

Company's Annual Report on Form 10-K for the fiscal year 2008. Other than as discussed above, in Note 3 to this Report on Form 10-Q and in those sections of the 2008 Report on Form 10-K, the Company does not currently have any transactions or circumstances that have been addressed by recently issued accounting pronouncements. Therefore, adoption of any of these statements or pronouncements would not have a material impact on the Company's results of operations, financial position or liquidity.

MATERIAL CHANGES TO CONTRACTUAL OBLITATIONS

There were no material changes to contractual obligations that occurred during the quarter ended April 4, 2009.

FORWARD-LOOKING STATEMENTS

The foregoing discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended. Such forward-looking statements are based on the beliefs of the Company's management as well as on assumptions made by and information available to the Company at the time such statements were made. When used in this Report, words such as "anticipates," "believes," "contemplates," "estimates," "expects," "plans," "projects," and similar expressions are intended to identify forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements as a result of factors including but not limited to: weather, interest rates, availability of raw materials and their related costs, national and local economic conditions, competitive forces and changes in governmental regulations and policies. Some of these factors are discussed in more detail in the Company's 2008 Annual Report on Form 10-K. Changes in accounting pronouncements could also alter projected results. Forward-looking statements speak only as of the date they were made, and the Company undertakes no obligation to publicly update them.