**UNITEDSTATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

 

| x                                                                                                                                                                                                                                                              | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934**  |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|
| ** **                                                                                                                                                                                                                                                     | ** **                                                                                               |
| **For the  quarterly period ended March 29, 2008**                                                                                                                                                                                                        |
| ** **                                                                                                                                                                                                                                                     | ** **                                                                                               |
| **OR**                                                                                                                                                                                                                                                         |
| ** **                                                                                                                                                                                                                                                     | ** **                                                                                               |
| **o**                                                                                                                                                                                                                                                          | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
| ** **                                                                                                                                                                                                                                                     | ** **                                                                                               |
| **For the  transition period  from                  to                  ** |

 

**Commission File number 1-3834**

 

**CONTINENTALMATERIALS CORPORATION**

(Exact name of registrantas specified in its charter)

 

| **Delaware**                                                    | ** ** | **36-2274391**                        |
|-----------------------------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction of incorporation or organization) |       | (I.R.S. Employer  Identification No.) |

 

**200 SouthWacker Drive, Suite 4000, Chicago, Illinois       60606**

(Address ofprincipal executive offices)                               (Zip Code)

 

**(312)541-7200**

(Registrant’s telephone number, including area code)

 

 

(Former name, former address and former fiscal year, if changed sincelast report)

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.

 

Yes  x            No  o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See definitions of“large accelerated filer,” “accelerated filer,” and “smaller reporting company”in Rule 12b-2 of the Exchange Act. (Check one):

 

| Large accelerated filer  o                     |   | Accelerated filer o          |
|------------------------------------------------|--------|-----------------------------------|
|                                           |   |                              |
| Non-accelerated filer x                        |   | Smaller reporting  company o |
| (Do not check if a  smaller reporting company) |   |                              |

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2or the Exchange Act).

 

Yes  o             No x

 

Indicate the number ofshares outstanding of each of the issuer’s classes of common stock, as of thelatest practicable date: Common Stock, $0.25 par value, shares outstanding at May 5,2008                                                                                                       1,598,674

 

 

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PART I - FINANCIAL INFORMATION

 

## **Item 1.   FinancialStatements**

## ** **

CONTINENTAL MATERIALS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH 29, 2008 AND DECEMBER 29, 2007

(Unaudited)

 (000’s omitted except sharedata)

 

 
| ** **                                                                            | ** ** | **MARCH 29,** | ** ** | **DECEMBER 29,** | ** ** |
|---------------------------------------------------------------------------------------|------------|--------------------|------------|------------------|------------|
| **ASSETS**                                                                            | ** ** | **2008**           | ** ** | **2007**         | ** ** |
| Current assets:                                                                       |       |               |       |             |       |
| Cash and cash  equivalents                                                            |       | $                  | 2,296      |             | $          | 3,326 |   |
| Receivables, net                                                                      |       | 23,955             |       | 22,652           |       |
| Receivable for  insured losses                                                        |       | 1,444              |       | 1,548            |       |
| Inventories:                                                                          |       |               |       |             |       |
| Finished goods                                                                        |       | 8,858              |       | 7,940            |       |
| Work in process                                                                       |       | 1,459              |       | 1,372            |       |
| Raw materials  and supplies                                                           |       | 11,389             |       | 9,915            |       |
| Prepaid expenses                                                                      |       | 5,656              |       | 5,508            |       |
| Total current  assets                                                                 |       | 55,057             |       | 52,261           |       |
|                                                                                  |       |               |       |             |       |
| Property, plant and equipment, net                                                    |       | 33,458             |       | 34,917           |       |
|                                                                                  |       |               |       |             |       |
| Goodwill                                                                              |       | 7,829              |       | 7,829            |       |
| Amortizable intangible assets, net                                                    |       | 1,122              |       | 1,198            |       |
| Other assets                                                                          |       | 2,403              |       | 2,305            |       |
|                                                                                  |       |               |       |             |       |
|                                                                                  |       | $                  | 99,869     |             | $          | 98,510 |   |
| **LIABILITIES**                                                                       |       |               |       |             |       |
| Current liabilities:                                                                  |       |               |       |             |       |
| Current portion  of long-term debt                                                    |       | $                  | 2,400      |             | $          | 2,400 |   |
| Accounts payable  and accrued expenses                                                |       | 19,450             |       | 17,912           |       |
| Liability for  unpaid claims covered by insurance                                     |       | 1,444              |       | 1,548            |       |
| Income taxes                                                                          |       | —             |       | 19               |       |
| Total current  liabilities                                                            |       | 23,294             |       | 21,879           |       |
|                                                                                  |       |               |       |             |       |
| Revolving bank loan payable                                                           |       | 9,000              |       | 7,900            |       |
| Long-term debt                                                                        |       | 9,800              |       | 10,400           |       |
| Deferred income taxes                                                                 |       | 3,773              |       | 3,848            |       |
| Other long-term liabilities                                                           |       | 2,446              |       | 1,796            |       |
|                                                                                  |       |               |       |             |       |
| **SHAREHOLDERS’  EQUITY**                                                        |       |               |       |             |       |
| Common shares,  $0.25 par value; authorized 3,000,000 shares; issued 2,574,264 shares |       | 643                |       | 643              |       |
| Capital in excess of par value                                                        |       | 1,830              |       | 1,830            |       |
| Retained earnings                                                                     |       | 65,679             |       | 66,810           |       |
| Treasury shares, 975,590 and 972,170, at cost                                         |       | (16,596            | )          | (16,596          | )          |
|                                                                                  |       | 51,556             |       | 52,687           |       |
|                                                                                  |       |               |       |             |       |
|                                                                                  |       | $                  | 99,869     |             | $          | 98,510 |   |

 

 

See accompanying notes

 

2

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CONTINENTAL MATERIALSCORPORATION

CONDENSED CONSOLIDATEDSTATEMENTS OF OPERATIONS AND RETAINED EARNINGS

FOR THE THREE MONTHSENDED MARCH 29, 2008 AND MARCH 31, 2007

(Unaudited)

(000’s omitted exceptper-share amounts)

 

 
| ** **                                                             | ** ** | **MARCH 29,  2008** | ** ** | **MARCH 31,  2007** | ** ** |
|------------------------------------------------------------------------|------------|--------------------------|------------|--------------------------|------------|
|                                                                   |       |                     |       |                     |       |
| Sales                                                                  |       | $                        | 34,512     |                     | $          | 40,079 |   |
|                                                                   |       |                     |       |                     |       |
| Costs and expenses:                                                    |       |                     |       |                     |       |
| Cost of sales  (exclusive of depreciation, depletion and amortization) |       | 29,800                   |       | 33,794                   |       |
| Depreciation,  depletion and amortization                              |       | 1,335                    |       | 1,315                    |       |
| Selling and  administrative                                            |       | 5,200                    |       | 5,293                    |       |
|                                                                   |       |                     |       |                     |       |
| Gain on disposition of property and equipment                          |       | 344                      |       | 31                       |       |
|                                                                   |       | 35,991                   |       | 40,371                   |       |
|                                                                   |       |                     |       |                     |       |
| Operating loss                                                         |       | (1,479                   | )          | (292                     | )          |
|                                                                   |       |                     |       |                     |       |
| Interest, net                                                          |       | (330                     | )          | (213                     | )          |
| Other income, net                                                      |       | 28                       |       | 16                       |       |
|                                                                   |       |                     |       |                     |       |
| Loss before income taxes                                               |       | (1,781                   | )          | (489                     | )          |
|                                                                   |       |                     |       |                     |       |
| Benefit from income taxes                                              |       | (650                     | )          | (161                     | )          |
|                                                                   |       |                     |       |                     |       |
| Net loss                                                               |       | (1,131                   | )          | (328                     | )          |
|                                                                   |       |                     |       |                     |       |
| Retained earnings, beginning of period                                 |       | 66,810                   |       | 67,373                   |       |
|                                                                   |       |                     |       |                     |       |
| Retained earnings, end of period                                       |       | $                        | 65,679     |                     | $          | 67,045 |   |
|                                                                   |       |                     |       |                     |       |
| Basic and diluted loss per share                                       |       | $                        | (.71       | )                        | $          | (.20 | ) |
|                                                                   |       |                     |       |                     |       |
| Average shares  outstanding                                            |       | 1,599                    |       | 1,604                    |       |

 

 

See accompanying notes

 

3

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CONTINENTAL MATERIALSCORPORATION

CONDENSED CONSOLIDATEDSTATEMENTS OF CASH FLOWS

FOR THE THREE MONTHSENDED MARCH 29, 2008 AND MARCH 31, 2007

(Unaudited)

(000’s omitted)

 

 
| ** **                                                                                                        | ** ** | **MARCH 29,  2008** | ** ** | **MARCH 31,  2007** | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|--------------------------|------------|
|                                                                                                              |       |                     |       |                     |       |
| Net cash (used in) operating activities                                                                           |       | $                        | (1,874     | )                        | $          | (2,358 | ) |
|                                                                                                              |       |                     |       |                     |       |
| Investing activities:                                                                                             |       |                     |       |                     |       |
| Capital  expenditures                                                                                             |       | (176                     | )          | (3,542                   | )          |
| Proceeds from  sale of property and equipment                                                                     |       | 520                      |       | 42                       |       |
| Net cash provided by (used in) investing activities                                                               |       | 344                      |       | (3,500                   | )          |
|                                                                                                              |       |                     |       |                     |       |
| Financing activities:                                                                                             |       |                     |       |                     |       |
| Borrowings under  revolving credit facility                                                                       |       | 1,100                    |       | 6,000                    |       |
| Repayment of  long term debt                                                                                      |       | (600                     | )          | (666                     | )          |
| Payment to  acquire treasury stock                                                                                |       | —                   |       | (46                      | )          |
| Net cash provided by financing activities                                                                         |       | 500                      |       | 5,288                    |       |
|                                                                                                              |       |                     |       |                     |       |
| Net decrease in cash and cash equivalents                                                                         |       | (1,030                   | )          | (570                     | )          |
| Cash and cash equivalents:                                                                                        |       |                     |       |                     |       |
| Beginning of  period                                                                                              |       | 3,326                    |       | 2,770                    |       |
|                                                                                                              |       |                     |       |                     |       |
| End of period                                                                                                     |       | $                        | 2,296      |                     | $          | 2,200 |   |
|                                                                                                              |       |                     |       |                     |       |
| Supplemental disclosures of cash flow items:                                                                      |       |                     |       |                     |       |
| Cash paid during the three months for:                                                                            |       |                     |       |                     |       |
| Interest                                                                                                          |       | $                        | 384        |                     | $          | 293 |   |
| Income taxes                                                                                                      |       | —                   |       | 560                      |       |
|                                                                                                              |       |                     |       |                     |       |
| Supplemental disclosures of noncash investing  activities                                                         |       |                     |       |                     |       |
| Capital  expenditures purchased on account                                                                        |       | $                        | —     |                     | $          | 187 |   |
| Cash receivable  as partial consideration on asset sale ($115)   and buyer’s assumption of liabilities ($88) |       |                     | 203        |                     |       | — |   |

 

 

See accompanying notes

 

4

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CONTINENTAL MATERIALSCORPORATION

SECURITIES AND EXCHANGECOMMISSION FORM 10-Q

NOTES TO THE QUARTERLYCONDENSED CONSOLIDATED FINANCIAL STATEMENTS

QUARTER ENDED MARCH 29,2008

(Unaudited)

 

 

1.               The unaudited interim condensed consolidated financialstatements included herein are prepared pursuant to the Securities and ExchangeCommission rules and regulations for reporting on Form 10-Q.Accordingly, certain information and footnote disclosures normally accompanyingthe annual consolidated financial statements have been omitted. The interimcondensed consolidated financial statements and notes should be read inconjunction with the consolidated financial statements and notes theretoincluded in the Company’s latest annual report on Form 10-K. In theopinion of management, the condensed consolidated financial statements includeall adjustments (none of which were other than normal recurring adjustments)necessary for a fair statement of the results for the interim periods.

 

2.               Our effective income tax rate is based on expectedincome, statutory tax rates and tax positions taken in the variousjurisdictions in which we operate. For this interim financial period, wecalculated the effective rate based upon both the estimated annual income taxrate based on projected taxable income for the full year and the rate thatwould be effective considering only the first quarter’s operating results. Theeffective tax rate based upon the projected taxable income for the full yeardoes not yield a tax benefit that would be meaningful to the Company’s interimfinancial statements based on the first quarter’s loss. As a result, inaccordance with FASB Interpretation No. 18: “Accounting for Income Taxes inInterim Periods,” the effective tax rate specific to the first quarter’s operatingresults was used for purposes of our interim financial statements. This rate is36.5%. As the year progresses, we refine the estimates of the year’s taxableincome as new information becomes available, including year-to-date financialresults. This continual estimation process often results in a change to ourexpected effective income tax rate for the year. When this occurs, we adjustthe income tax provision during the quarter in which the change in estimateoccurs so that the year-to-date provision reflects the expected annual incometax rate. Significant judgment is required in determining our effective incometax rate and in evaluating our tax positions.

 

On December 31,2006, the first day of the 2007 fiscal year, we adopted the provisions of FinancialAccounting Standards Board Interpretation No. 48, “Accounting forUncertainty in Income Taxes, an Interpretation of FASB Statement No. 109”(FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxesrecognized in an enterprise’s financial statements in accordance with Statementof Financial Accounting Standards (SFAS) No. 109, “Accounting for IncomeTaxes,” by prescribing a recognition threshold and measurement attribute forthe financial statement recognition and measurement of a tax position taken orexpected to be taken in a tax return. Under FIN 48, the financial statementeffects of a tax position should initially be recognized when it is more likelythan not, based on the technical merits, that the position will be sustainedupon examination. A tax position that meets the more-likely-than-notrecognition threshold should initially and subsequently be measured as thelargest amount of tax benefit that has a greater than 50% likelihood of beingrealized upon effective settlement with a taxing authority.

 

There was no cumulativeadjustment to retained earnings required as a result of the implementation ofFIN 48. The gross amount of unrecognized tax benefits at December 29, 2007was $328,000 of which $74,000 would affect the effective tax rate. No changeoccurred in the calculation during the first quarter of 2008.

 

We classify interest andpenalties recognized on the liability for unrecognized tax benefits as incometax expense. Accrued interest and penalties included in our total liability forunrecognized tax benefits were approximately $69,000 as of March 29, 2008and December 29, 2007.

 

The United States Federaland various state statutes of limitations expire during the third quarter of2008 for our 2004 tax year. Included in the balance at March 29, 2008 isapproximately $9,000 related to tax positions expected to be resolved within12 months of this reporting date.

 

We file income taxreturns in the United States federal and various state jurisdictions.Generally, we are not subject to changes in income taxes by any taxingjurisdiction for the years prior to 2003.

 

5

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3.               FAIR VALUE MEASUREMENTS

 

Effective December 30,2007, the Company adopted SFAS No. 157, “Fair Value Measurements,” whichprovides a framework for measuring fair value under accounting principlesgenerally accepted in the United States of America. The adoption of thisstatement had an immaterial impact on our consolidated financial statements.  The Company also adopted the deferralprovisions of the Financial Accounting Standards Board Staff Position No. 157-2,which delays the effective date of SFAS No. 157 for all nonrecurring fairvalue measurements of non-financial assets and liabilities until fiscal yearsbeginning after November 15, 2008.

 

Fair value is defined asthe exchange price that would be received for an asset or paid to transfer aliability (an exit price) in the principal or most advantageous market for theasset or liability in an orderly transaction between market participants on themeasurement date.  SFAS No. 157 alsoexpands disclosures about instruments measured at fair value and establishes afair value hierarchy which requires an entity to maximize the use of observableinputs and minimize the use of unobservable inputs when measuring fairvalue.  The standard describes threelevels of inputs that may be used to measure fair value:

 

Level 1 — Quoted pricesfor identical assets and liabilities in active markets;

 

Level 2 — Quoted pricesfor similar assets and liabilities in active markets; quoted prices foridentical or similar assets and liabilities in markets that are not active; andmodel-derived valuations in which all significant inputs and significant valuedrivers are observable  in active markets;and

 

Level 3 — Valuationsderived from valuation techniques in which one or more significant inputs orsignificant value drivers are unobservable.

 

The Company designatesthe cash equivalents as Level 1, as they are money market accounts backed by TreasuryBills.  As of March 29, 2008, and December 29,2007, the Company did not have any cash equivalents, therefore there were noassets measured at fair value.

 

4.               Operating results for the first three months of 2008are not necessarily indicative of performance for the entire year.Historically, sales of the Evaporative Cooling segment are higher in the firstand second quarters, sales of the Concrete, Aggregates and ConstructionSupplies segment are higher in the second and third quarters and sales of theHeating and Cooling segment are higher in the third and fourth quarters. Thesales of the Door segment have not shown strong seasonal fluctuations in recentyears.

 

5.               There is no difference in the calculation of basic anddiluted earnings per share (EPS) for the three months ended March 29, 2008and March 31, 2007.

 

6.               The Company operates primarily in fourreportable segments within its two principal industry groups; the Heating andCooling segment and the Evaporative Cooling segment in the Heating, Ventilationand Air Conditioning (HVAC) industry group and the Concrete, Aggregates andConstruction Supplies segment and the Door segment in the Construction Productsindustry group. The Heating and Cooling segment produces and sells gas-firedwall furnaces, console heaters and fan coils from the Company’s wholly-ownedsubsidiary, Williams Furnace Co. of Colton, California. The Evaporative Coolingsegment produces and sells evaporative coolers from the Company’s wholly-ownedsubsidiary, Phoenix Manufacturing, Inc. of Phoenix, Arizona. Sales ofthese two segments are nationwide, but are concentrated in the southwesternUnited States. Concrete, Aggregates and Construction Supplies are offered fromnumerous locations along the Front Range of Colorado operated by the Company’swholly-owned subsidiaries Castle Concrete Company and Transit Mix Concrete Co.(TMC), of Colorado Springs, Transit Mix of Pueblo, Inc. of Pueblo andRocky Mountain Ready Mix Concrete, Inc. of Denver. Doors are fabricatedand sold along with the related hardware from locations in Pueblo and ColoradoSprings by the Company’s wholly-owned subsidiary, McKinney Door and Hardware, Inc.(MDHI) of Pueblo, Colorado. Sales of these two segments are highly concentratedin the Front Range area in Colorado although door sales are also madethroughout the United States.

 

TheCompany evaluates the performance of its segments and allocates resources tothem based on a number of criteria including operating income, return oninvestment and other strategic objectives. Operating income is determined bydeducting operating expenses from all revenues. In computing operating income,none of the following has been added or deducted: unallocated corporateexpenses, interest, other income or loss or income taxes.

 

6

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In addition to the abovereporting segments, an “Unallocated Corporate” classification is used to reportthe unallocated expenses of the corporate office which provides treasury,insurance and tax services as well as strategic business planning and generalmanagement services and an “Other” classification is used to report a realestate operation. Expenses related to the corporate information technologygroup are allocated to all locations, including the corporate office.

 

Thefollowing table presents information about reported segments for the threemonths ended March 29, 2008 and March 31, 2007 along with the itemsnecessary to reconcile the segment information to the totals reported in thefinancial statements (amounts in thousands):

 

| ** **                                | ** ** | **Construction  Products**                                     | ** ** | **HVAC  Products** | ** ** | ** **                         | ** ** | ** **              | ** ** | ** **              | ** ** |
|-------------------------------------------|------------|----------------------------------------------------------------|------------|--------------------|------------|------------------------------------|------------|-------------------------|------------|-------------------------|------------|
| **Quarter ended   March 29, 2008**   | ** ** | **Concrete,  Aggregates   &   Construction Supplies** | ** ** | **Doors**          | ** ** | **Combined Construction Products** | ** ** | **Heating and Cooling** | ** ** | **Evaporative Cooling** | ** ** | **Combined  HVAC Products** | ** ** | **Unallocated Corporate** | ** ** | **Other** | ** ** | **Total** | ** ** |
|                                      |       |                                                           |       |               |       |                               |       |                    |       |                    |       |   |   |   |   |   |   |   |   |
| Revenues from  external customers         |       | $                                                              | 13,789     |               | $          | 3,760                              |       | $                       | 17,549     |                    | $          | 11,523 |   | $ | 5,349 |   | $ | 16,872 |   | $ | 5 |   | $ | 86 |   | $ | 34,512 |   |
| Depreciation,  depletion and amortization |       | 1,037                                                          |       | 33                 |       | 1,070                              |       | 108                     |       | 138                     |       | 246 |   | 19 |   | — |   | 1,335 |   |
| Operating income (loss)                   |       | (1,884                                                         | )          | 418                |       | (1,466                             | )          | 357                     |       | 382                     |       | 739 |   | (779 | ) | 27 |   | (1,479 | ) |
| Segment assets                            |       | 50,265                                                         |       | 6,847              |       | 57,112                             |       | 23,222                  |       | 16,966                  |       | 40,188 |   | 2,510 |   | 59 |   | 99,869 |   |
| Capital expenditures                      |       | 4                                                              |       | 86                 |       | 90                                 |       | 30                      |       | 51                      |       | 81 |   | 5 |   | — |   | 176 |   |
|                                           |            |                                                                |            |                    |            |                                    |            |                         |            |                         |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

| ** **                                | ** ** | **Construction  Products**                                     | ** ** | **HVAC  Products** | ** ** | ** **                         | ** ** | ** **              | ** ** | ** **              | ** ** |
|-------------------------------------------|------------|----------------------------------------------------------------|------------|--------------------|------------|------------------------------------|------------|-------------------------|------------|-------------------------|------------|
| **Quarter ended   March 29, 2008**   | ** ** | **Concrete,  Aggregates   &   Construction Supplies** | ** ** | **Doors**          | ** ** | **Combined Construction Products** | ** ** | **Heating and Cooling** | ** ** | **Evaporative Cooling** | ** ** | **Combined  HVAC Products** | ** ** | **Unallocated Corporate** | ** ** | **Other** | ** ** | **Total** | ** ** |
|                                      |       |                                                           |       |               |       |                               |       |                    |       |                    |       |   |   |   |   |   |   |   |   |
| Revenues from  external customers         |       | $                                                              | 19,807     |               | $          | 4,918                              |       | $                       | 24,725     |                    | $          | 9,382 |   | $ | 5,881 |   | $ | 15,263 |   | $ | 5 |   | $ | 86 |   | $ | 40,079 |   |
| Depreciation,  depletion and amortization |       | 1,008                                                          |       | 35                 |       | 1,043                              |       | 105                     |       | 150                     |       | 255 |   | 17 |   | — |   | 1,315 |   |
| Operating income (loss)                   |       | (527                                                           | )          | 596                |       | 69                                 |       | 371                     |       | 51                      |       | 422 |   | (810 | ) | 27 |   | (292 | ) |
| Segment assets (a)                        |       | 53,002                                                         |       | 7,398              |       | 60,400                             |       | 22,810                  |       | 13,101                  |       | 35,911 |   | 2,140 |   | 59 |   | 98,510 |   |
| Capital expenditures (b)                  |       | 3,091                                                          |       | 144                |       | 3,235                              |       | 143                     |       | 329                     |       | 472 |   | 22 |   | — |   | 3,729 |   |
|                                           |            |                                                                |            |                    |            |                                    |            |                         |            |                         |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(a)          Segmentassets are as of December 29, 2007.

 

(b)         Capital expenditures for the Concrete, Aggregates andConstruction Supplies segment include $184,000 of additions purchased onaccount and capital expenditures for the Evaporative Cooling segment include$3,000 of additions purchased on account.

 

There are no differences in the basis ofsegmentation or in the basis of measurement of segment profit or loss from thelast annual report.

 

7.               Identifiable amortizable intangible assets as of March 29,2008 include five non-compete agreements, a restrictive land covenant andcustomer relations. Collectively, these assets were carried at $1,122,000, netof $1,488,000 accumulated amortization. The pre-tax amortization expense forintangible assets during the quarter ended March 29, 2008 was $76,000compared to $88,000 for the quarter ended March 31, 2007. Based upon theintangible assets recorded on the balance sheet at March 29, 2008,amortization expense for the next five years is estimated to be as follows:2008 — $300,000, 2009 — $294,000, 2010 — $262,000, 2011 — $101,000 and 2012 —$65,000.

 

7

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**Item 2.        Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**

 

Company Overview

 

The Company operates infour reportable segments within its two principal industry groups; the Heatingand Cooling segment and the Evaporative Cooling segment in the HVAC industrygroup and the Concrete, Aggregates and Construction Supplies segment and theDoor segment in the Construction Products industry group.

 

The Heating and Coolingsegment produces and sells gas-fired wall furnaces, console heaters and fancoils from the Company’s wholly-owned subsidiary, Williams Furnace Co. ofColton, California. The Evaporative Cooling segment produces and sellsevaporative coolers from the Company’s wholly-owned subsidiary, PhoenixManufacturing, Inc. of Phoenix, Arizona. Concrete, Aggregates andConstruction Supplies are offered from numerous locations along the Front Rangeof Colorado operated by the Company’s wholly-owned subsidiaries Castle ConcreteCompany and Transit Mix Concrete Co., of Colorado Springs, Transit Mix ofPueblo, Inc. of Pueblo and Rocky Mountain Ready Mix Concrete, Inc. ofDenver. Doors are fabricated and sold along with the related hardware fromColorado Springs and Pueblo through the Company’s wholly-owned subsidiary,McKinney Door and Hardware, Inc. of Pueblo, Colorado.

 

In addition to the abovereporting segments, an “Unallocated Corporate” classification is used to reportthe unallocated expenses of the corporate office which provides treasury,insurance and tax services as well as strategic business planning and generalmanagement services and an “Other” classification is used to report a realestate operation. Expenses related to the corporate information technologygroup are allocated to all locations, including the corporate office.

 

FinancialCondition, Liquidity and Capital Resources

 

Salesof the Company’s HVAC products are seasonal and weather sensitive except forfan coils. Revenues in the Company’s Concrete, Aggregates and ConstructionSupplies segment are influenced by the level of construction activity andweather conditions along the Front Range of Colorado. Sales for the Doorsegment are not as strongly seasonal nor are they affected significantly byweather conditions. Historically, the Company has experienced operating lossesduring the first quarter except when construction activity is strong along theFront Range of Colorado and the weather is mild. Operating results typicallyimprove in the second and third quarters reflecting more favorable weatherconditions in Colorado and the seasonal sales of the Evaporative Coolingsegment. Fourth quarter results can vary based on weather conditions inColorado as well as in the principal markets for the Company’s heatingequipment. The Company typically experiences operating cash flow deficitsduring the first half of the year reflecting operating results, the use ofsales dating programs (extended payment terms) related to the EvaporativeCooling segment and payments of the prior year’s accrued incentive bonuses andCompany profit-sharing contributions. As a result, the Company’s borrowingsagainst its revolving credit facility tend to peak during the second quarterand then decline over the remainder of the year. Although this trend was notfollowed throughout 2007, the results during the first quarter of 2008 havebegun in the historical manner.

 

Asexpected, the Company’s cash flow from operations during the first quarter wasnegative due to the seasonality of sales, production schedules, the salesdating programs related to the evaporative cooler product line and the paymentof 2007 bonus awards. Operations for the first three months of 2008 used $1,874,000of cash compared to $2,358,000 during the first three months of 2007. Theimproved cash flow required during the first quarter of 2008 was primarily theresult of a smaller increase in receivables and an increase in accounts payableand accrued expenses as compared to the first quarter of 2007. The change inreceivables was largely due to the reduced sales while the increase in accountspayable and accrued expenses was due to the timing of payments.

 

On March 28, 2008,the Company entered into an Amended and Restated Term Loan and Revolving CreditAgreement (the Amended Credit Agreement). This Amended Credit Agreement increasedthe revolving credit facility from $15,000,000 to $18,000,000 until September 30,2008. On September 30, 2008, the revolving credit facility is reduced backto $15,000,000. The temporary increase in the revolving credit facility is toprovide additional liquidity during the Company’s peak seasonal credit need.The Company was in compliance with the loan covenants as of the quarter ended March 29,2008.

 

The Amended CreditAgreement provides that, at the Company’s option, the term loan and revolvingcredit facility will bear interest at prime or a performance-based LIBOR rate.Based on the terms of the Amended Credit Agreement and the Company’sperformance for the twelve months ended December 29, 2007, the

 

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performance based ratewould be LIBOR plus 2.50% for both the term loan and for borrowings under therevolving credit facility.****Such rate issubject to adjustment depending upon the Company’s performance. Payment ofaccrued interest is due and payable quarterly by the Company. Payments ofprincipal under the term loan are payable on a quarterly basis, ending on March 31,2011. The Amended Credit Agreement extends the Revolving Credit facility until June 30,2009 and accordingly, the outstanding revolving credit balance at March 29,2008 and December 29, 2007 was classified as a long-term obligation.

 

Capitalexpenditures were held to a minimum during the first quarter of 2008 due to thedecline in sales and were primarily for routine replacements of equipment andthe completion of improvements to the building purchased for the Door segmentduring 2007.

 

Scheduleddebt repayments were made during the first quarter of both 2008 and 2007. Asexpected, the Company borrowed against its revolving credit facility during thefirst quarter of 2008. The highest amount of Company borrowings outstandingunder the revolving credit agreement during the first quarter of 2008 was the$9,100,000 and the average amount outstanding during the first quarter was$7,865,000.

 

Webelieve that the anticipated cash flow from operations, supplemented byseasonal borrowings against the revolving line of credit as amended, (whichbalance was $9,000,000 at March 29, 2008) will be sufficient to coverexpected cash needs, including business expansion, servicing debt and plannedcapital expenditures for at least the next twelve months.

 

Results ofOperations - Comparison of Quarter Ended March 29, 2008 to Quarter Ended March 31,2007

 

Consolidatedsales during the first quarter of 2008 were $34,512,000 resulting in a$1,479,000 operating loss.  In the firstquarter of 2007 sales were $40,079,000 with an operating loss of $292,000.Historically, the Company has experienced operating losses during the firstquarter except when the construction activity is strong and the weather is mildalong the Front Range in Colorado.

 

Allsegments reported decreased sales except the Heating and Cooling segment whichreported a 22.8% increase due to fan coil sales. The declines in sales in theother segments were either due to lower demand or timing of orders and arediscussed below. Cost of sales as a percentage of sales increased from 84.3% to86.3%. The increase in cost of sales was primarily due to a change in productmix and the decrease in sales as many costs are somewhat fixed. Selling andadministrative costs decreased $93,000 largely due to the decrease in sales.The Concrete, Aggregates and Construction Materials segment sold the assets ofa small aggregate operation (Table Mountain), during the 2008 quarter forapproximately $714,000 resulting in a pre-tax gain of approximately $338,000.Table Mountain did not provide aggregates to the Company’s ready-mix operationsand management did not consider it to be a strategic part of its business.Despite this gain, the 2008 first quarter operating loss of $1,479,000increased significantly from the prior year’s operating loss of $292,000. Adiscussion of operations by segment follows.

 

**Construction Products**

 

The table below presentsa summary of operating information for the two reportable segments within theConstruction Products industry group for the quarters ended March 29, 2008and March 31, 2007 (dollar amounts in thousands):

 

| ** **                                    | ** ** | **Concrete,   Aggregates and   Construction   Supplies** | ** ** | **Doors** | ** ** |
|-----------------------------------------------|------------|----------------------------------------------------------|------------|-----------|------------|
| 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       | %          |
|                                          |       |                                                     |       |      |       |
| Quarter ended March 31, 2007             |       |                                                     |       |      |       |
| Revenues from external customers              |       | $                                                        | 19,807     |      | $          | 4,918 |   |
| Segment operating (loss) income               |       | (527                                                     | )          | 596       |       |
| Operating (loss) income as a percent of sales |       | (2.7                                                     | )%         | 12.1      | %          |
| Segment assets as of March 31, 2007      |       | $                                                        | 59,998     |      | $          | 5,847 |   |
| Return on assets                              |       | (.9                                                      | )%         | 10.2      | %          |

 

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Concrete,Aggregates and Construction Supplies Segment

 

Salesin the Concrete, Aggregates and Construction Supplies segment for the firstquarter of 2008 decreased 30.4% from the prior year’s comparable quarter as aresult of lower concrete and aggregate volumes, a direct result of the declinein construction activity along the Front Range of Colorado, especially housingconstruction. Both concrete and aggregate margins were negative largely due tothe lower volume and the fixed nature of many of the costs in this segment,most notably batching and delivery costs. Construction supplies volume alsodeclined in the 2008 quarter compared to the 2007 quarter due to the reducedconstruction activity in Colorado Springs although margins were maintained.

 

Theoperating loss increased in the 2008 quarter from the 2007 quarter as a resultof the reduced volumes. Selling and administrative costs remained relativelyconstant between the two periods. As a result, both the operating loss as apercent of sales and the negative return on assets increased significantly inthe 2008 quarter compared to the prior year’s quarter.

 

DoorSegment

 

Salesduring the first quarter of 2008 in the Door segment decreased $1,158 or 23.5%from the comparable 2007 quarter due primarily to the timing of shipments.Sales during a specific quarter can be heavily influenced by customer requeststo either accelerate or delay shipments of jobs to better coincide with theirown construction schedules. March 2008 sales were adversely affected byone electronics job scheduled to ship during the first quarter that was delayeduntil the second quarter. The backlog has grown since the 2007 year-end and iscomparable to the backlog at the end of the 2007 first quarter. Sales priceswere increased in response to increased costs but failed to fully recover theincreased costs due to pricing pressures from competitors.

 

Operatingincome declined from $596,000 for the 2007 quarter to $418,000 for the 2008quarter as a result of the decreased sales and increased material cost of salesas a percentage of sales. Although selling and administrative costs declined,these costs increased as a percentage of sales due to the fixed nature of manyof these costs. As a result, operating income as a percent of sales declined inthe 2008 quarter compared to the prior year’s quarter. The return on assets forthe 2008 quarter declined at a higher rate due to the purchase and renovationof an existing building in Colorado Springs to replace a smaller and olderfacility which added a total of $1,908,000 to the asset base for the 2008quarter. The building was purchased during the third quarter of 2007 andrenovations were completed in early 2008.

 

**HVACProducts**

 

Thetable below presents a summary of operating information for the two reportablesegments within the HVAC products industry group for the quarters ended March 29,2008 and March 31, 2007 (dollar amounts in thousands):

 

| ** **                               | ** ** | **Heating and   Cooling** | ** ** | **Evaporative   Cooling** | ** ** |
|------------------------------------------|------------|---------------------------|------------|---------------------------|------------|
| 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                       | %          |
|                                     |       |                      |       |                      |       |
| Quarter ended March 31, 2007        |       |                      |       |                      |       |
| Revenues from external customers         |       | $                         | 9,382      |                      | $          | 5,881 |   |
| Segment operating income                 |       | 371                       |       | 51                        |       |
| Operating income as a percent of sales   |       | 4.0                       | %          | .9                        | %          |
| Segment assets as of March 31, 2007 |       | $                         | 16,886     |                      | $          | 17,111 |   |
| Return on assets                         |       | 2.2                       | %          | .3                        | %          |

 

Heating andCooling Segment

 

Sales in the Heating andCooling segment increased $2,141,000, or 22.8%, during the first quarter of2008 over the comparable 2007 quarter. Furnace sales dollars and volume duringthe first quarter of 2008 declined from the 2007 results due to milder weather.Fan coil sales again improved more than doubling the amount achieved in theprior year’s quarter. A large commercial job was largely responsible for theincrease although bidding activity on the whole continues to improve due tofavorable market conditions, the restructured sales representative network andthe introduction of a web based design and pricing program which aids ourcustomers in the design of the systems. Overall, pricing for this segmentshowed mixed results due to competitive pressures and a change in product mix.

 

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Operating income declinedslightly from $371,000 during the first quarter of 2007 to $357,000 for the2008 quarter as a result of the change in product mix and the lingering effectof the higher copper, aluminum and steel materials costs. As a result of thesefactors, cost of sales as a percent of sales increased from 77.5% for the firstquarter of 2007 to 81.5% for the comparable 2008 quarter. Selling andadministrative expenses increased $60,000 but decreased as a percentage ofsales by 2.7% largely due to the increased sales. Both operating income as apercent of sales and return on assets declined due to the increased cost ofsales in the 2008 quarter over the prior year’s quarter. The return on assetsdeclined at a higher rate due to an increase in assets largely due to increasedreceivables and inventories related to the increase in sales.

 

EvaporativeCooling Segment

 

Sales in the EvaporativeCooling segment declined $532,000, or 9.9%, during the first quarter of 2008from the comparable 2007 quarter. The decrease in sales was almost entirely dueto sales during March and is likely due to the timing of orders which havebeen affected by a milder March 2008 compared to 2007. Orders from anational home center account were less than had been received during the firstquarter of 2007.

 

The segmentreported operating income of $382,000 for the 2008 quarter compared to $51,000for the 2007 quarter. The improved operating results were the result ofimproved labor efficiencies in the plant and the reduction of workers’compensation expense due to improved experience and closing of some open claimsat lower amounts than anticipated. Selling and administrative expenses declinedduring the 2008 quarter both in real dollars and as a percentage of salescompared to the first quarter of 2007 largely due to the decreased sales. As aresult, both operating results as a percent of sales and return on assetsincreased in the 2008 quarter from the prior year’s quarter.

 

CRITICALACCOUNTING POLICIES AND ESTIMATES

 

The condensedconsolidated financial statements have been prepared in accordance withaccounting principles generally accepted in the United States which require theCompany to make estimates and assumptions that affect the reported amounts ofassets and liabilities and disclosure of contingent assets and liabilities asof March 29, 2008 and December 29, 2007 and affect the reportedamounts of revenues and expenses for the periods reported. Actual results coulddiffer from those estimates.

 

Information with respect tothe Company’s critical accounting policies which the Company believes couldhave the most significant effect on the Company’s reported results and requiresubjective or complex judgments by management is contained in Item 7,Management’s Discussion and Analysis of Financial Condition and Results ofOperations, of the Company’s Annual Report on Form 10-K for the fiscalyear ended December 29, 2007.

 

OUTLOOK

 

Concrete andaggregate volumes are expected to remain depressed for the near term untilconstruction activity along the Front Range of Colorado improves. The salesvolume and backlog for the door segment remain strong but may be expected todecline if the nationwide construction slow-down continues.

 

Sales of theevaporative cooling segment are not expected to grow significantly and willremain weather sensitive. However, sales of fan coil products in the heatingand cooling segment are expected to grow as a result of favorable marketconditions and the restructured sales representative network and marketingefforts.

 

RECENTLY ISSUEDACCOUNTING STANDARDS

 

In September 2006, the Financial AccountingStandards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”)No. 157, Fair Value Measurements.This statement defines fair value in generally accepted accounting principlesand expands disclosures about fair value measurements that are required orpermitted under other accounting pronouncements.  This statement was effective for financialstatements issued for fiscal years beginning after November 15, 2007 andinterim periods within those fiscal years. The Company’s adoption of this statement had an immaterial impact on itsconsolidated financial position, results of operations and cash flows.  The Company also adopted the deferral provisionsof SFAS No. 157-2, which delayed the effective date of SFAS No. 157for all nonrecurring fair value measurements of non-financial assets andliabilities until fiscal years beginning after November 15, 2008.

 

In February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities.  This statement permits entities to choose tomeasure many financial instruments and certain other

 

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items at fair value. This statement was effective as of the beginning of the first fiscalyear beginning after November 15, 2007. Upon the Company’s adoption of SFAS No. 159 it did not elect thefair value option for any assets or liabilities.  Therefore this statement had no impact on theCompany’s consolidated financial position, results of operations and cashflows.

 

In March 2008, the FASB issued SFAS No. 161,“Disclosures about Derivative Instruments and Hedging Activities, an amendmentof WFAS No. 133,” which requires enhanced disclosures for derivative andhedging activities. SFAS No. 161 becomes effective in the first quarter of2009 and is not expected to have any impact on the Company’s consolidatedfinancial statements.

 

In April 2008, the FASB issued FASB Staff Position(FSP) FAS 142-3, “Determination of theUseful Life of Intangible Assets.” This FSP amends the factors that should be considered in developingrenewal or extension assumptions used to determine the useful life of arecognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible**Assets.”The intent of this FSP is to improve the consistency between the useful life ofa recognized intangible asset under SFAS No. 142 and the period ofexpected cash flows used to measure the fair value of the asset under SFAS No. 141(Revised 2007), “Business Combinations”and other U.S. generally accepted accounting principles (GAAP). This FSPis effective for financial statements issued for fiscal years beginning after December 15,2008, and interim periods within those fiscal years. Early adoption isprohibited.  The Company is in theprocess of determining the impact of adopting this new accounting position onits consolidated financial position.

 

The Company discusses other recently issued accountingstandards and tax law changes in the Critical Accounting Policies section underItem 7 and in Note 1 to Consolidated Financial Statements in Item 8 of theCompany’s Annual Report on Form 10-K for the fiscal year 2007. Other thanas discussed above and in those sections, the Company does not currently haveany transactions or circumstances that have been addressed by recently issuedaccounting pronouncements. Therefore, adoption of any of these statements orpronouncements would not have a material impact on the Company’s results ofoperations, financial position or liquidity.

 

MATERIAL CHANGES TO CONTRACTUAL OBLITATIONS

 

There were no material changes to contractualobligations that occurred during the quarter ended March 29, 2008.

 

FORWARD-LOOKING STATEMENTS

 

The foregoing discussioncontains forward-looking statements within the meaning of Section 27A ofthe Securities Act of 1933, as amended. Such forward-looking statements arebased on the beliefs of the Company’s management as well as on assumptions madeby and information available to the Company at the time such statements weremade.  When used in this Report, wordssuch as “anticipates,” “believes,” “contemplates,” “estimates,” “expects,” “plans,”“projects,” and similar expressions are intended to identify forward-lookingstatements. Actual results could differ materially from those projected in theforward-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 and competitive forces. Some of thesefactors are discussed in more detail in the Company’s 2007 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 theCompany undertakes no obligation to publicly update them.

 

**Item 3.****                      ****Quantitative And Qualitative Disclosures AboutMarket Risk**

 

There were no material changes in themarket risks nor legal proceedings that the Company is exposed to since thosediscussed in the Company’s 2007 Annual Report on Form 10-K.

 

**Item 4.****                      ****Controls and Procedures**

 

(a)                      DisclosureControls and Procedures.

 

TheCompany’s Chief Executive Officer and Chief Financial Officer, with the participationof management, have evaluated the effectiveness of the Company’s “disclosurecontrols and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) underthe Securities Exchange Act of 1934, as amended) as of March 29, 2008.Based on that evaluation, they have concluded that the Company’s disclosurecontrols and procedures as of such date are effective and are reasonablydesigned to ensure that all material information relating to the Company

 

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includingits subsidiaries) is accumulated and communicated to management to allow timelydecisions regarding required disclosure and to ensure that all materialinformation required to be disclosed in this quarterly report is recorded,processed, summarized and reported within the time periods specified in the rules andforms of the Securities and Exchange Commission.

 

(b)                     Changesin Internal Control Over Financial Reporting.

 

Asnoted above, the Company continually reassesses our internal control over financialreporting and makes changes as deemed prudent. We did not identify any materialweaknesses in our review of internal controls, and no changes in the Company’sinternal controls over financial reporting occurred during the quarter ended March 29,2008 that have materially affected, or are reasonably likely to materiallyaffect, the Company’s internal controls over financial reporting.

 

PART II -OTHER INFORMATION

 

**Item 2.****                      ****Unregistered Sales of EquitySecurities and Use of Proceeds**

 

The following table presentsinformation with respect to purchases made by the Company of its common stockto become treasury stock for the period December 29, 2007 through March 29,2008. No shares were purchased during the current quarter.

 

| **Issuer Purchases of Equity Securities**            | ** ** |
|------------------------------------------------------|------------|
| **Period**                                           | ** ** | **(a) Total   Number of   Shares   Purchased** | ** ** | **(b) Average   Price Paid per   Share** | ** ** | **(c) Total Number of   Shares Purchased as Part  of Publicly Announced   Plans or Programs** | ** ** | **(d) Maximum Dollar   Value of shares that May  Yet Be Purchased Under   the Plans or Programs** | ** ** |
| December 30,  2007 — January 26, 2008 |       | — |   | $ | — |   | — |   | $ | 1,326,116 |   |
| January 27  —   February 24, 2008     |       | — |   | — |   | — |   | 1,326,116 |   |
| February 23  —   March 29, 2008       |       | — |   | — |   | — |   | 1,326,116 |   |
| Total                                                |       | — |   | $ | — |   | — |   | $ | 1,326,116 |   |

 

On January 19, 1999,the Company initiated purchases under the current open-ended program torepurchase its common stock. Purchases are made on the open market or in blocktrades at the discretion of management. The dollar amount authorized for theprogram has been periodically increased by the Board of Directors and approvedby the Company’s two banks as required by the Company’s Revolving Credit andTerm Loan Agreement. The Amended and Restated Revolving Credit and Term LoanAgreement dated as of March 28, 2008 provides that the Company may makepurchases of its own stock in an amount not to exceed $1,438,000. Since the2005 tender offer, management has not actively sought to repurchase shares.

 

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**Item 6.****                      ****Exhibits**

 
| Exhibits             | ** ** | ** **                                                                                                                                                                                                                                                                        |
|----------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **           | ** ** | ** **                                                                                                                                                                                                                                                                        |
| **Exhibit No.** | ** ** | **Description**                                                                                                                                                                                                                                                                   |
|                 |       |                                                                                                                                                                                                                                                                              |
| 10.1                 |       | Amended and Restated  Revolving Credit and Term Loan Agreement dated as of March 28, 2008, by  and among the Company and LaSalle Bank National Association and Fifth Third  Bank (incorporated by reference to Exhibit 99.1 of Form 8-K filed  April 3, 2008. |
|                 |       |                                                                                                                                                                                                                                                                              |
| 31.1                 |       | Certification of Chief  Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) and  Rule 13a-14(d)/15d-14(d) of the Securities Exchange Act of 1934, as  adopted pursuant to Section 302 of the Sarbanes — Oxley Act of 2002                        |
|                 |       |                                                                                                                                                                                                                                                                              |
| 31.2                 |       | Certification of Chief  Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) and  Rule 13a-14(d)/15d-14(d) of the Securities Exchange Act of 1934, as  adopted pursuant to Section 302 of the Sarbanes — Oxley Act of 2002                        |
|                 |       |                                                                                                                                                                                                                                                                              |
| 32                   |       | Certification of Chief  Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the Sarbanes —  Oxley Act of 2002                                                                                 |

 

 

 

 

**SIGNATURE**

 

 

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
|   |              |   | CONTINENTAL MATERIALS  CORPORATION |
|--------|-------------------|--------|------------------------------------|
|   |              |   |                               |   |
|   |              |   |                               |   |
| Date:  | May 13, 2008 |   | By:                                | /s/ Joseph J. Sum |
|   |              |   |                               | Joseph J. Sum, Vice  President |
|   |              |   |                               | and Chief Financial  Officer |

 

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