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, WFC of Colton, California. The Evaporative Cooling segment produces and sells evaporative coolers from the Company's wholly-owned subsidiary, PMI 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 and Transit Mix of Pueblo, Inc. of Pueblo, collectively referred to as TMC. RMRM of Denver, previously part of this segment, was sold on July 17, 2009 and has been reclassified as a discontinued operation. See Notes 9 and 10. Doors are fabricated and sold along with the related hardware from Colorado Springs and Pueblo through the Company's wholly-owned subsidiary, MDHI 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 and assets of the discontinued operation. Expenses related to the corporate information technology group are allocated to all locations, including the corporate office.

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. Although liquidity followed this trend for the first half of 2009, the decline in borrowings toward the end of the second quarter were primarily due to reductions of inventory and receivable levels rather than improved sales in the Concrete, Aggregates and Construction Supplies segment.

Cash provided by operations was $887,000 during the first six months of 2009 compared to the $2,239,000 of cash used during the first six months of 2008.The Company's operating cash flow during the first six months of 2009 was positive primarily due to a decrease in receivables and inventory partially offset by a decrease in accounts payable and accrued expenses compared to an increase in all three categories during the first six months of 2008. The decrease in receivables was primarily due to weak sales in the Concrete, Aggregates and Construction Materials segment and the Heating and Cooling segment. The decline in inventory and accounts payable and accrued expenses was largely due to the reduction in inventory in the Heating and Cooling segment from an unusually high level at the end of 2008. Partially offsetting this net positive cash flow was the need to fund $4,840,000 of deposits with our insurance carriers in lieu of previously issued letters of credit.

During the six months ended July 4, 2009, investing activities used $1,020,000 of cash compared to the $271,000 of cash provided in the prior year's period. Capital expenditures during the first half of 2009 were primarily incurred by the Concrete, Aggregates and Construction Materials segment including almost $700,000 for development activities on the Pueblo East aggregates site. The proceeds from sale of assets during the 2008 period included the sale a small aggregate operation (Table Mountain) by the Concrete, Aggregates and Construction Materials segment during the first quarter of 2008. The proceeds were approximately $720,000 (including the buyer's assumption of just over $85,000 of liabilities associated with the property) which resulted in a pre-tax gain of about $344,000. 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 Company's business.

Financing activities used $460,000 of cash during the first six months of 2009 compared to providing $1,881,000 during the first six months of 2008. As discussed in Note 8, the Company refinanced its term and revolving credit facility during the 2009 second quarter. Financing activities provided less cash for the first six months of 2009 compared to the comparable 2008 period due to the $887,000 of cash provided by operations during 2009 compared to the $2,239,000 of cash used in operations during 2008. All scheduled debt repayments were made during the first six months of both 2009 and 2008. During the first six months of 2009, the highest amount of Company borrowings outstanding under the revolving credit agreement was $14,734,000 and the average amount outstanding was $9,670,000. See Note 8 for details regarding the New Credit Agreement signed April 16, 2009.

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.

Operations - Comparison of Quarter Ended July 4, 2009 to Quarter Ended June 28, 2008

Overall, consolidated sales declined over 24.0% from $37,729,000 for the second quarter of 2008 to $28,682,000 for the second quarter of 2009 with significant decreases reported by the Concrete, Aggregates and Construction Supplies segment and the Heating and Cooling segment. The Evaporative Cooling segment reported a significant increase in sales and operating income.

Cost of sales as a percentage of sales declined for all segments except Door which reported a modest increase primarily due to increased sales price competition directly related to the decline in construction activity. The improved margins in the Evaporative Cooling segment and the Heating and Cooling segment were largely due to lower material costs, a change in product mix in the Evaporative Cooling segment and some reduction in factory overhead costs in the Heating and Cooling segment. The Evaporative Cooling segment also benefitted from significantly higher sales. The improved margins in the Concrete, Aggregates and Construction Supplies segment were primarily due to reduced cement costs and a large project in Pueblo.

Selling and administrative costs decreased 5.2% but increased as a percentage of sales, from 13.5% to 16.4%, due to the lower sales volume and the fixed nature of some of these expenses. The substantial increase in gain on disposition of property and equipment during the first six months of 2009 compared to the comparable 2008 period was due to sale of the land in Colorado Springs. As disclosed in the 2008 Annual Report on Form 10-K, the Company received $2,114,000 during the fourth quarter of 2008 from the sale resulting in a pre-tax profit of $1,947,000. On July 2, 2009, the Company and the buyer of the property reached an agreement on the final purchase price for that property. Under the terms of the agreement, the Company will receive an additional cash payment of $2,026,000 all of which added to the operating income of the second quarter of 2009. The Company received the cash subsequent to the end of the quarter. The resulting operating income of $2,190,000 for the 2009 quarter significantly improved over the $388,000 reported for the second quarter of 2008 primarily due to the gain on the sale of land in Colorado Springs.

The loss from discontinued operations for the quarter, net of taxes was $38,000. The loss includes a pretax impairment charge against the net assets of the operation of $647,000. The small net loss was result of the sale generating a large capital loss of which the Company was able to utilize $769,000 to offset the capital gain realized from the sale of land in Colorado Spring discussed above.

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 group for the quarters
ended July 4, 2009 and June 28, 2008 (amounts in thousands):



                                                   Concrete,
                                                Aggregates and
                                                 Construction
                                                   Supplies         Doors
Quarter ended July 4, 2009
Revenues from external customers                $         9,142    $ 3,862
Segment operating (loss) income                            (359 )      368
Operating (loss) income as a percent of sales              (3.9 )%     9.5 %
Segment assets as of July 4, 2009               $        39,952    $ 6,053
Return on assets                                            (.9 )%     6.1 %

Quarter ended June 28, 2008
Revenues from external customers                $        16,843    $ 3,865
Segment operating income                                  1,430        368
Operating income as a percent of sales                      8.5 %      9.5 %
Segment assets as of June 28, 2008              $        39,496    $ 6,774
Return on assets                                            3.6 %      5.4 %

Concrete, Aggregates and Construction Supplies Segment

Sales of concrete, aggregates and construction supplies (collectively referred to herein as construction materials) declined by $7,701,000 or 45.7%. The lower level of sales is the result of a substantial slowing of construction activity in the Colorado Springs and Pueblo Colorado area in both the residential and commercial markets. The extent of the decrease in construction activity is not unlike that experienced throughout the country and is less severe than that experienced in some other regions. Concrete volume was 36.4% lower in the second quarter of 2009 compared to the second quarter of 2008. Aggregate volume (tonnage) was down 47% compared to the prior year quarter. In addition to the slow construction markets, the shutdown of the Company's Pikeview Quarry contributed to the lower aggregate volume. The Pikeview Quarry was shut down in December 2008 due to a landslide. The Company and its consultants are working on a new mining and reclamation plan for the Pikeview Quarry. The mining and reclamation plan requires the approval of the Colorado Division of Reclamation, Mining and Safety (DRMS) before the Company can resume production at the Pikeview Quarry. The DRMS has given the Company until May13, 2010 to submit a new mining and reclamation plan. In spite of the lower sales volume gross profit margins improved due to higher prices and some moderation in purchased materials costs, primarily cement resulting from increased cement production capacity in southern Colorado. In addition a couple of large jobs in the first half of 2009 that required high specification concrete contributed to both the higher price and the improved unit margins. Lower fuel prices and other cost containment measures also contributed to the improved margins. However, overall gross profit was down due to the diminished sales volume. The lower sales volume, the shutdown of the Pikeview Quarry and some higher costs experienced at our Arkansas River aggregate operations had a significant negative effect on the operating results for the second quarter of 2009. Sales of construction supplies also decreased due to the construction slowdown. The lower sales volume and more competitive pricing led to a significantly reduced profit margin for this segment. Overall gross profits on all construction materials were 17.3% compared to 20.1% in the second quarter of 2008. In response to the lower level of business, management reduced selling and administrative expenses through workforce reduction and other cost saving actions. In the second quarter of 2009 this segment had an operating loss of $359,000 compared to an operating profit of $1,430,000 in the second quarter of 2008.

As a result, both operating income as a percent of sales and the return on assets declined in the second quarter of 2009 from the second quarter of 2008.

Door Segment

Door segment sales of $3,862,000 for the second quarter of 2009 were virtually identical to the comparable 2008 quarter despite the decline in construction activity over the past year. 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. Sales are also influenced by the level of construction activity but the effect is generally slower to appear as the products supplied by this segment, when sold for new construction, are some of the last items installed on a project. Thus, although sales remained constant, the backlog at July 4, 2009 was approximately 45% lower than the backlog at June 28, 2008.

The slight decline in margins, approximately three tenths of a percent, was primarily due to more competitive pricing encountered on the more recent sales as bidding opportunities decline. Operating income remained constant as lower selling and administrative costs offset an increase in depreciation expense and the small decline in margins. As a result, operating income as a percent of sales remained the same while the return on assets improved from 5.4% for the 2008 quarter to 6.1% for the 2009 quarter. The improved return was largely due to lower inventory levels at July 4, 2009 reflecting the decreased backlog.

HVAC Products



The table below presents a summary of operating information for the two
reportable segments within the HVAC products group for the quarters ended
July 4, 2009 and June 28, 2008 (amounts in thousands):



                                                 Heating and      Evaporative
                                                   Cooling          Cooling
Quarter ended July 4, 2009
Revenues from external customers                $       5,539    $      10,050
Segment operating (loss) income                          (570 )          1,500
Operating (loss) income as a percent of sales           (10.3 )%          14.9 %
Segment assets as of July 4, 2009               $      17,628    $      15,877
Return on assets                                         (3.2 )%           9.4 %

Quarter ended June 28, 2008
Revenues from external customers                $       8,081    $       8,850
Segment operating (loss) income                          (779 )            148
Operating (loss) income as a percent of sales            (9.6 )%           1.7 %
Segment assets as of June 28, 2008              $      23,861    $      15,437
Return on assets                                         (3.3 )%           1.0 %

Heating and Cooling Segment

Sales in the Heating and Cooling segment were $5,539,000 for the second quarter of 2009, a decrease of $2,542,000, or 31.5%, from the comparable 2008 quarter. Fan coil volume accounted for most of the decrease in sales declining 44.2% from the prior year's quarter. This decrease was the result of the slowdown in commercial building, especially for new hotels. Furnace volume during the second quarter of 2009 also lagged behind the comparable 2008 quarter in what is traditionally this product's lowest sales quarter. Cost of sales as a percentage of sales decreased during the second quarter of 2009 to 83.9% from 88.2% for the comparable quarter of 2008. Lower commodity prices, some reduction in factory overhead expenses and the absence of a large low margin fan coil job in Las Vegas during the 2008 quarter were the primary reasons for the improved margins.

Despite a reduction in selling and administrative expenses by approximately $259,000 or 16.0% during the second quarter of 2009 compared to the second quarter of 2008, selling and administrative expenses increased as a percentage of sales from 20.0% to 24.5% as many of these costs are relatively fixed in nature. The operating loss for the 2009 quarter was reduced from $779,000 during the second quarter of 2008 to $570,000 primarily due to the improved margins. The return on assets improved slightly due to the large decrease in assets from June 28, 2008 to July 4, 2009. The decrease in inventory was a planned reduction from an unusually high level carried at the end of 2008 while the decrease in receivables is directly related to the decline in sales.

Evaporative Cooling Segment

Sales in the Evaporative Cooling segment improved to $10,050,000 or 13.6%, during the second quarter of 2009 from the comparable 2008 quarter. Although 2009 unit sales for the second quarter of 2009 were lower than expected and less than the 2008 quarter, an increase in commercial and industrial coolers and parts sales drove sales higher. The lower residential unit sales and increased parts sales may be the result of the depressed economic conditions leading more consumers to attempt to repair rather than replace older units. A slightly cooler weather pattern during the first part of the second quarter of 2009 was also a factor in the lower than expected sales.

Operating income for the second quarter of 2009 improved to $1,500,000 compared to $148,000 for the 2008 quarter. The improvement was the result of a more favorable product mix, lower material costs, primarily steel, increased production levels and reduced freight costs. Selling and administrative costs increased both in dollars and as a percentage of sales due to the increased commissions, co-op advertising, media advertising and customer discounts all related to the increase in sales and higher audit fees related to the first year the Company will be required to obtain an opinion on its internal controls over financial reporting. Both operating income as a percent of sales and return on assets improved in the 2009 quarter from the prior year's comparable quarter.

Operations - Comparison of Six Months Ended July 4, 2009 to Six Months Ended June 28, 2008

Consolidated sales from continuing operations during the first half of 2009 were $59,592,000 compared to $69,667,000 during the first half of 2008. The 14.5% decline was due to the decreases in the Concrete, Aggregates and Construction Supplies segment and the Heating and Cooling segment which more than offset increases in the Evaporative Cooling and the Door segments. The changes in sales levels are due to the factors noted in the discussion of the second quarter's results. The improved sales level in the Door segment was primarily due to the timing of shipments. For the six months ended July 4, 2009, the Evaporative Cooling segment and the Heating and Cooling segment both reported a decrease in the cost of sales as a percentage of sales. The Concrete, Aggregates and Construction Supplies segment and the Door segment both reported small increases in their cost of sales as a percentage of sales. On a consolidated basis cost of sales as a percentage of sales improved from 85.3% for the first half of 2008 to 80.6 during the first half of 2009. The improvement was primarily due to the factors cited in the discussion of the quarter's results. Selling and administrative costs decreased slightly for the six months ended July 4, 2009 from the corresponding 2008 period although they increased as a percentage of sales due to the relatively fixed nature of some of these costs. Also as noted in the quarter's discussion, the Company recorded an additional gain from the 2008 sale of land of $2,026,000 during the second quarter of 2009. The above factors including the gain on sale of land resulted in an operating income of $2,219,000 for the first six months of 2009 compared to an operating loss of $493,000 reported for the first six months of 2008.

The loss from discontinued operations was $295,000 for the six months ended July 4, 2009. The small net loss was the primarily due to the ability of the Company to utilize a portion of the capital loss that was generated by the sale as noted in the above discussion of the quarter's operations.

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 group for the six months
ended July 4, 2009 and June 28, 2008 (amounts in thousands):



                                                   Concrete,
                                                Aggregates and
                                                 Construction
                                                   Supplies         Doors
Six Months ended July 4, 2009
Revenues from external customers                $        18,030    $ 8,585
Segment operating (loss) income                          (1,671 )      978
Operating (loss) income as a percent of sales              (9.3 )%    11.4 %
Segment assets as of July 4, 2009               $        39,952    $ 6,053
Return on assets                                           (4.2 )%    16.1 %

Six Months ended June 28, 2008
Revenues from external customers                $        28,058    $ 7,625
Segment operating income                                    131        786
Operating income as a percent of sales                       .5 %     10.3 %
Segment assets as of June 28, 2008              $        39,496    $ 6,774
Return on assets                                             .3 %     11.6 %

Concrete, Aggregates and Construction Supplies Segment

The same factors as discussed in the results of the second quarter (principally the depressed construction markets and the shutdown of the Pikeview Quarry) had a similar impact on the results for the first six months of 2009 when compared to the results for the first half of 2008. Sales of construction materials were 35.7% lower in the first half of 2009 compared to a year ago. Concrete volume was down by 24%. Concrete pricing though was somewhat higher due to a modest price increase and the effect of certain jobs that called for higher specification concrete which entailed a higher cost and price. Aggregate volume fell by 42%. The combined aggregate operations generated a sizable loss in the second quarter of 2009 due to the low volume and the Pikeview shutdown. Sales of construction supplies were down 44% compared to the prior year. Selling and administrative expenses were reduced by approximately 10%. This segment's operating loss in the first six months of 2009 was $1,671,000 compared to an operating profit of $131,000 in the prior year. The operating profit in 2008 included a gain of approximately $338,000 from the sale of a small specialty aggregate operation.

As a result, both operating results as a percent of sales and return on assets declined for the six months ended July 4, 2009 compared to the six months ended June 28, 2008.

Door Segment

Sales in the Door segment for the first six months of 2009 increased $960,000 from the comparable 2008 period primarily due to the timing of shipments as described in the above discussion for the current quarter as backlog shrank by approximately $2,250,000. The decrease in the backlog corresponds to the decline in construction on a nationwide basis.

Operating income also improved from $786,000 during the first half of 2008 to $978,000 for the first half of 2009 largely due to the increased sales volume during the first quarter of 2009. A 4.6% decrease in selling and administrative expenses also added to the improved operating results. As a result, both operating income as a percent of sales and the return on assets increased during the six months ended July 4, 2009 compared to the six months ended June 28, 2008. The return on assets increased at a greater rate than the operating income as a percent of sales for the reasons noted in the above discussion of the quarter.

HVAC Products



The table below presents a summary of operating information for the two
reportable segments within the HVAC products group for the six months ended
July 4, 2009 and June 28, 2008 (amounts in thousands):



                                                 Heating and      Evaporative
                                                   Cooling          Cooling
Six Months ended July 4, 2009
Revenues from external customers                $      15,437    $      17,359
Segment operating (loss) income                          (133 )          2,535
Operating (loss) income as a percent of sales             (.9 )%          14.6 %
Segment assets as of July 4, 2009               $      17,628    $      15,877
Return on assets                                          (.8 )%          16.0 %

Six Months ended June 28, 2008
Revenues from external customers                $      19,604    $      14,199
Segment operating (loss) income                          (422 )            530
Operating (loss) income as a percent of sales            (2.2 )%           3.7 %
Segment assets as of June 28, 2008              $      23,861    $      15,437
Return on assets                                         (1.8 )%           3.4 %

Heating and Cooling Segment

Sales in the Heating and Cooling segment decreased $4,167,000, or 21.3%, during the first six months of 2009 from the comparable 2008 period. As with the quarter's results above, fan coil volume was primarily responsible for the decline although furnace volume also lagged behind the level achieved for the first six months of 2008. The reasons for the lower level of sales are similar to those discussed for the quarter although milder weather during the first quarter of 2009 also contributed to the lower furnace sales.

The operating loss narrowed from $422,000 during the first six months of 2008 to a loss of $133,000 for the 2009 period. Cost of sales as a percent of sales improved from 84.9% to 80.2% for the reasons noted in the discussion of the quarter above. Selling and administrative costs declined $302,000 for the first six months of 2009 compared to the first six months of 2008 but increased as a percent of sales due to the fixed nature of some of these costs. As a result of . . .