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

The following Management’s Discussion and Analysis gives effect to the restatement discussed in Note 5.

Company Overview

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

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

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

Financial Condition

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 strongly seasonal nor are they much affected by weather conditions. Historically, the Company has experienced operating losses during the first quarter except when the weather is mild along the Front Range. 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. Fourth quarter results can vary based on weather conditions in Colorado as well as in the principal markets for the Company’s heating equipment. The Company typically experiences operating cash flow deficits during the first half of the year reflecting operating results, the use of sales dating programs (extended payment terms)

related to the Evaporative Cooling segment and payments of the prior year’s accrued incentive bonuses and Company profit-sharing contributions. As a result, the Company’s borrowings against its revolving credit facility tend to peak during the second quarter and then decline over the remainder of the year. This trend has continued thus far in 2007.

As expected, the Company’s cash flow during the first quartersix months of 2007 was negative due to the seasonality of sales, production schedules and the sales dating programs related to the evaporative cooler product line and the payment of 2006 bonus awards.line. Operations for the first three months of 2007 used $2,358,000$1,105,000 of cash compared to $5,684,000the $2,183,000 of cash used during the first threesix months of 2006. The reducedimproved cash flow required during the first quarter of 2007 was due to changes in working capital accounts primarily the result of ana larger increase in accounts payable and accrued expenses as well as long term liabilities,during the first six months of 2007 as compared to the first quarter2006 period.

During the six months ended June 30, 2007, investing activities used $4,314,000 of 2006. This change was largely duecash compared to $5,895,000 in the timing of payments.

prior year’s period. Capital expenditures of $4,631,000 during the first six months of 2007, primarily for the Concrete, Aggregates and Construction Supplies segment, were significantly higher than the expenditures during the 2007 quarter compared the prior year’s quarter due to the timing of the purchases.comparable 2006 period. The replacement of two loaders and a scraper for the quarry operations and the construction and installation of an industrial sand plant all occurred during the first quarter. Completionsix months of 2007. The proceeds from the industrial sand plant is plannedsale of assets for 2007 include $230,000 received from the June sale of stock received from the demutualization of a mutual insurance company. Investing activities during the first half of 2006 included $2,452,000 for the second quarter.acquisition of certain assets of two companies.

ScheduledFinancing activities provided $5,488,000 during the first six months of 2007 compared to $5,500,000 provided during the first six months of 2006. All scheduled debt repayments were made during the first quartersix months of both 2007 and 2006. As expected, the Company borrowed against its revolving credit facility during the second quarter of 2007. During the first six months of 2007, quarter. Thethe highest amount of Company borrowings outstanding under the revolving credit agreement during the first quarter of 2007 was the $6,000,000 outstanding at March 31, 2007$8,600,000 and the average amount outstanding was $3,687,000. At June 30, 2007, the Company was not in compliance with the Cash Flow Ratio as defined in the loan agreement. The Company has obtained waivers of the requirement for the quarter and is in discussions with the banks to establish revised requirements such that the Company would expect to be in compliance with the covenant in future quarters. A principal reason for not meeting the required ratio was the high level of capital expenditures during the first quarter was $1,255,000.past twelve months.

We believeThe Company believes that the anticipated cash flow from operations, supplemented by seasonal borrowings against the revolving line of credit, (which balance(of which $6,800,000 was $6,000,000outstanding at March 31,June 30, 2007) will be sufficient to cover expected cash needs, including business expansion, servicing debt and planned capital expenditures for at least the next twelve months.

Results of Operations -— Comparison of Quarter Ended March 31,June 30, 2007 to Quarter Ended AprilJuly 1, 2006

Consolidated sales during the first quarter of 2007 were $40,079,000 resulting in a $292,000 operating loss.  In the first quarter of 2006 sales were $33,684,000 with an operating loss of $420,000. Historically, the Company has experienced improved operating lossesresults during the firstsecond quarter except whenas sales in the Concrete, Aggregates and Construction Supplies segment increase due to weather more conducive to construction activity is strongactivity. The 2007 operating results were consistent with this trend. Consolidated sales during the second quarter of 2007 were $45,651,000 compared to $43,704,000 in the second quarter of 2006.

The Heating and Cooling segment and the weather is mild along the Front Range in Colorado.

All segmentsDoor segment both reported increased sales however much offor the increase was due to price increases implemented in response to increased costs.quarter while the Concrete, Aggregates and Construction Supplies segment and the Evaporative Cooling segment reported declines. Cost of sales as a percentage of sales increased slightly from 83.1%80.0% to 84.3%. The increase in cost of sales was81.6% primarily due to cementnarrower margins in the Heating and aggregate price increases that slightly outpaced our ability to increase concrete prices and the lingering effects from 2006 of increased copper, aluminum and steel costs and pricing decisions made to retain a national home center account.Cooling segment. Selling and administrative costs increased $286,000 largely1.6% but decreased as a percentage of sales. An increase in selling and administrative costs at the subsidiary level was partially offset by a reduction at the Corporate office resulting from adjustments to accrued incentive based compensation. Depreciation, depletion and amortization for the 2007 quarter increased $73,000 over the prior year’s quarter due to increased capital expenditures during 2006 and 2007 and amortization of intangible assets associated with the increase in sales.ASCI acquisition. The resulting operating lossincome of $292,000 improved$1,802,000 lagged behind the $2,376,000 reported for the second quarter of 2006.

Interest expense increased from $202,000 for the second quarter of 2006 to $368,000 in the 2007 quarter due to increased average debt and higher interest rates.

Other income for the 2007 quarter includes a $230,000 gain on the sale of stock received from the prior year’s operating lossdemutualization of $420,000.a mutual insurance company.

A discussion of operations by segment follows.

Construction Products

As discussed in Note 5, as a result of certain organizational changes, we have reevaluated our segment reporting under FASB Statement No. 131. The Door Division of TMC, previously reported within the Concrete, Aggregates and Construction Supplies segment is now reported within the Door segment. Accordingly, the 2006 information presented in the table below has been restated to conform to the current year’s segment composition.

The table below presents a summary of operating information for the two reportable segments within the Construction Products industry group for the quarters ended March 31,June 30, 2007 and AprilJuly 1, 2006 (dollar amounts(amounts in thousands):

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Concrete, Aggregates and Construction Supplies Segment

Sales in the Concrete, Aggregates and Construction Supplies segment for the firstsecond quarter of 2007 increased 4.5% overdeclined 1.5% from the prior year’s comparable quarter as a result of increased pricing in response to increased material costs.quarter. Concrete volume improved; however margins deteriorated as pricing decisions made in order to protect our market share were insufficient to fully recover higher material and delivery costs, including fuel. Aggregate volumes declined slightly3% as construction activity along the Front Range of Colorado, especially housing construction, declined. Concrete margins narrowedMargins, however, improved as pricing decisions madeproduction efficiency improved. In addition, the recovery of $725,000 from our insurance carrier as settlement of flood claims at our two Arkansas River operations during the third quarter of 2006, further enhanced aggregates margins. All expenses incurred to repair the damage and resume production had been recognized in ordercost of sales as incurred. Both quarries were back in operation by the end of 2006 although some measures to protect our market sharemitigate future vulnerability were unableperformed in 2007. No recovery had been recorded prior to fully recover higher material and delivery costs, including fuel. Aggregates volumes improved in the 2007settlement during the second quarter despite the decline in concrete volume as the sale of some bulk product, including fill sand, added to sales. Construction supplies volume declined in2007.

Operating income remained relatively constant for the 2007 quarter compared to the 2006 quarter primarily due toquarter. The improved aggregates operations including the reduced construction activity in Colorado Springs.

The operating loss declined ininsurance recovery largely offset the 2007 quarter from the 2006 quarter as a resultdeterioration of the reduced concrete margins and volume.margins. Depreciation, depletion and amortization increased because of the higher capital spending during 2006 and 2007 to date, including the addition of $1,010,000 of amortizable intangibles. Offsetting this increase was a reduction in sellingSelling and administrative costs attributablerose moderately during the second quarter of 2007 compared to the consolidation of administrative functions into the Colorado Springs office.2006 quarter. As a result, both operating lossincome as a percent of sales andimproved modestly while the return on assets declined in the 2007 quarter compared tofrom the prior year’s quarter.quarter largely due to an increase in segment assets. The increase in segment assets is attributable to the higher level of capital spending and receivables.

Door Segment

SalesDoor segment sales rose $1,244,000, or 38%, during the firstsecond quarter of 2007 in the Door segment rose 50.6% over the comparable 2006 quarter due to the timing of shipments and some growth.quarter. Sales during a specific quarter can be heavily influenced by customer requests to either accelerate or delay shipments of jobs to better coincide with their own construction schedules. The backlog which had grown overduring the past year and, although it remains quite strong, itlatter part of 2006 has declined during the 2007 quarter as a number of jobs were shipped. The June 2007 backlog is at approximately the same level as it was at the end of June 2006.  Sales prices increased in response to increased costs while also recovering some ofcosts. Margin improved principally due to the margin lost in the 2006 quarter which was the result of pricing decisions made in response to more competitive bidding on available jobs.higher volume.

Operating income improved from $334,000$325,000 during the firstsecond quarter of 2006 to $596,000$571,000 for the 2007 quarter as a result of the higher sales volume, increased salesprices and improved pricing. Slightly offsettingan improvement in the improvement were increased sellingelectronics business (acquired at the beginning of 2006). Selling and administrative costs increased during the 2007 quarter primarily due to

the addition of TMC’s door division in 2007.increased sales. As a result, both operating income as a percent of sales and return on assets improved in the 2007 quarter from the prior year’s quarter.

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 June 30, 2007 and July 1, 2006 (amounts in thousands):

Heating and Cooling Segment

Sales in the Heating and Cooling segment were $6,794,000 for the second quarter of 2007, an increase of $1,749,000, or 34.7%, from the comparable 2006 quarter. Fan coil volume accounted for the increase with sales surging nearly 87% from the prior year’s quarter. This increase was the result of favorable market conditions and the restructured sales representative network which was completed in late 2005. Pricing remained relatively flat. Partially offsetting this increase was an 11% decline in furnace volume after a particularly strong first quarter. Cost of sales as a percentage of sales increased during the second quarter of 2007 to 90.6% from 75.0% for the comparable quarter of 2006. Higher material and manufacturing costs contributed to this increase.

The operating loss for the 2007 quarter was $1,050,000 compared to the loss of $354,000 incurred during the second quarter of 2006. Selling and administrative expenses were higher primarily due to the addition of personnel in the sales and engineering departments. Also contributing to the increase in selling costs were higher sales incentives and other related expenses incurred on sales to a national home center. A larger share of wall furnace sales during the second quarter of 2007 as compared to 2006, were made to this national home center account. As a result, both operating loss as a percent of sales and return on assets declined in the 2007 quarter from the prior year’s quarter.

Evaporative Cooling Segment

Sales in the Evaporative Cooling segment declined $653,000, or 7.7%, during the second quarter of 2007 from the comparable 2006 quarter. Cool weather in the markets served, especially during May, caused the decline.

Operating income also declined $282,000, or 79% from the same quarter in 2006. The decline resulted from of an increase in cost of sales as a percentage of sales which was due to the reduced sales volume, competitive pressures that restricted price increases in response to cost increases and an additional accrual for workers compensation claims. Depreciation and amortization remained constant between the periods. The reduction of selling and administrative expenses was related to the decline in sales as these expenses as a percentage of sales stayed relatively constant compared to the second quarter of 2006. As a result, both operating income as a percent of sales and return on assets declined in the 2007 quarter from the prior year’s quarter.

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Operations - Comparison of Six Months Ended June 30, 2007 to Six Months Ended July 1, 2006

Consolidated sales during the first half of 2007 were $85,730,000 compared to $77,388,000 during the first half of 2006. The improvement was led by the Heating and Cooling segment, although all segments reported increased sales for the six months ended June 30, 2007 compared to the six months ended July 1, 2006 except for the Concrete, Aggregates and Construction Supplies segment. Cost of sales as a percentage of sales increased from 81.3% for the 2006 period to 82.9% during the 2007 period. Depreciation, depletion and amortization increased $198,000 over the prior year’s period due to increased capital expenditures during 2006 and 2007 and amortization of intangible assets associated with the ASCI acquisition. Selling and administrative costs declined as a percentage of sales. The resulting operating income of $1,510,000 was less than the $1,956,000 reported for the first six months of 2006. As noted above, other income for the first half of 2007 includes a $230,000 gain on the sale of stock received from the demutualization of a mutual insurance company.

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 June 30, 2007 and July 1, 2006 (amounts in thousands):

Concrete, Aggregates and Construction Supplies Segment

Sales in the Concrete, Aggregates and Construction Supplies segment for the first six months of 2007 increased slightly over the prior year’s comparable period. Concrete volume declined but sales dollars increased due to increased prices in response to higher material and delivery costs, including fuel. Margins, however, deteriorated as pricing increases did not keep pace with higher cement, fuel and other costs. Aggregate volumes increased primarily due to the sale of some bulk product, including fill sand, during the first quarter of 2007. Aggregate margins improved as a result of the production efficiencies and insurance settlement as described above for the current quarter. Construction supplies sales declined during the first six months of 2007 as compared to the 2006 period due to the slow-down in construction.

Operating income declined to $2,318,000 during the 2007 period from $2,746,000 for the 2006 period. The decline was due to the reduced concrete volume and margins. Partially offsetting this decline was the improved aggregate margins for the reasons noted above. Depreciation, depletion and amortization increased during the 2007 period for the reasons noted for the quarter. For the 2007 six month period, the lower selling and administrative expenses were attributable to the consolidation of administrative functions into the Colorado Springs office. As a result, both operating income as a percent of sales and return on assets declined for the six months ended June 30, 2007 compared to the six months ended July 1, 2006.

Door Segment

Sales in the Door segment for the first six months of 2007 increased $2,897,000 over the comparable 2006 period due to the timing of shipments as described in the discussion for the current quarter.

Operating income improved from $659,000 during the first half of 2006 to $1,167,000 for the 2007 period due to higher sales volume, increased prices and an improvement in the electronics business. The backlog was also reduced during the first quarter of 2007. As a result, both operating income as a percent of sales and the return on assets improved in the six months ended June 30, 2007 compared to the six months ended July 1, 2006.

HVAC Products

The table below presents a summary of operating information for the two reportable segments within the HVAC products industry group for the quarterssix months ended March 31,June 30, 2007 and AprilJuly 1, 2006 (dollar amounts(amounts in thousands):

Heating and Cooling Segment

Sales in the Heating and Cooling segment increased $2,796,000,$4,545,000, or 42.5%39%, during the first quartersix months of 2007 over the comparable 2006 quarter. Furnaceperiod. Fan coil volume (both unitwas responsible for the majority of the increase although furnace volume and sales dollars) improved roughly 28%was higher on the strength of January sales which were aided by cold weather in the areas served. Fan coil volume surged nearly 87% from the low volume in the prior year’s quarter as a result of favorable market conditions and the restructured sales representative network which was completed in late 2005. Pricing improved during the 2007 quarter.

Operating income improved from $205,000 during the first quarter, largely in January. For the first six months of 2007, fan coil sales increased 87% due to the reasons cited for the quarter above.

The operating loss increased from $149,000 during the first six months of 2006 to $371,000a loss of $679,000 for the 2007 quarter as a result ofperiod despite the increasedincrease in sales. Partially offsetting the improvement was the rise in costCost of sales as a percent of sales which increased from 72.2%73.4% to 77.5% as a result of83% due to the lingering effect of the higher copper, aluminum and steel materials costs experienced in the second and third quarters of 2006. Areasons noted above. In addition, pricing decisiondecisions made to retain a national home center account during the second quarter of 2006 also decreased the margins. Selling and administrative costs were higher due to reasons noted above. As a result, both operating income as a percent of sales and the return on assets improved indeclined for the first six months of 2007 quarter overfrom the prior year’s quarter.period.

Evaporative Cooling Segment

Sales in the Evaporative Cooling segment increased $1,093,000,$440,000, or 22.8%3.2%, during the first quartersix months of 2007 over the comparable 2006 quarter. The increase in sales is attributable to earlyperiod. Early shipments to a national home center account as a result of a warm March and two new customers.customers increased sales during the first quarter of 2007. The increased first quarter sales turned out largely to be a timing difference between quarters as a milder April and May, noted above, caused the sales for the second quarter to lag behind the prior year.

The segment reported operating incomeprofit declined from $331,000 during the first six months of $51,0002006 to $127,000 for the first six months of 2007. Cost of sales as a percentage of sales increased to 85.5% in 2007 from 83.7% for the comparable 2006 period due to the reasons cited above. Depreciation and amortization remained constant between the periods while selling and administrative expenses, although modestly higher during the first six months of 2007 compared to the 2006 quarter’s loss of $27,000 primarily due to the increase in sales. The improved operating results were partially offset by higher raw material costs. Selling and administrative expenses increased modestly during the 2007 quarter butperiod, declined as a percentage of sales compared to the first quarter of 2006.sales. As a result, both operating resultsincome as a percent of sales and the return on assets increased indecreased during the 2007 quarter fromfirst six months of 2007from the prior year’s quarter.period.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States which require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of March 31,June 30, 2007 and December 30, 2006 and affect the reported amounts of revenues and expenses for the periods reported. Actual results could differ from those estimates.

Information with respect to the Company’s critical accounting policies which the Company believes could have the most significant effect on the Company’s reported results and require subjective or complex judgments by management is contained in Item 7, Management’s Discussion and Analysis of Financial

Condition and Results of Operations, of the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2006.

OUTLOOK

Concrete prices throughout our Colorado markets have improved compared to 2006, however not enough to recover the higher prices paid for cement and increased delivery costs. The pressure on pricing has come from aggressive competition, especially from a small new concrete producer in Colorado Springs, in response to a softening in construction activity along the Front Range of Colorado. The sales volume and backlog for the doorDoor segment remain strong.

Sales of the evaporative coolingEvaporative Cooling segment are not expected to grow significantly and will remain weather sensitive. However, sales of fan coil products in the heating and cooling segment are expected to grow as a result of favorable market conditions and the restructured sales representative network and marketing efforts.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 2 for discussion of the accounting standards adopted in 2007.

The Company discusses recently issued accounting standards and tax law changes in the Critical Accounting Policies section under Item 7 and in Note 1 to Consolidated Financial Statements in Item 8 of the Company’s Annual Report on Form 10-K for the fiscal year 2006. Other than as discussed in those sections, the Company does not currently have any transactions or circumstances that have been addressed by recently issued accounting pronouncements. Therefore, adoption of any of these statements or pronouncements would not have a material impact on the Company’s results of operations, financial position or liquidity.

FORWARD-LOOKING STATEMENTS

The foregoing discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended. Such forward-looking statements are based on the beliefs of the Company’s management as well as on assumptions made by and information available to the Company at the time such statements were made.  When used in this Report, words such as “anticipates,” “believes,” “contemplates,” “estimates,” “expects,” “plans,” “projects,” and similar expressions are intended to identify forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements as a result of factors including but not limited to: weather, interest rates, availability of raw materials and their related costs, national and local economic conditions and competitive forces. Some of these factors are discussed in more detail in the Company’s 2006 Annual Report on Form 10-K. Changes in accounting rules and pronouncements could also alter projected results. Forward-looking statements speak only as of the date they were made, and the Company undertakes no obligation to publicly update them.them, except as required by law.

Item 3.                          Quantitative And Qualitative Disclosures About Market Risk

There have been no material changes in the market risks that the Company is exposed to since those discussed in the Company’s 2006 Annual Report on Form 10-K.

Item 4.                          Controls and Procedures

(a)                  Disclosure Controls and Procedures.

The Company’s Chief Executive Officer and Chief Financial Officer, with the participation of management, have evaluated the effectiveness of the Company’s “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of March 31,June 30, 2007. Based on that evaluation, they have concluded that the Company’s disclosure controls and procedures as of such date are effective and are reasonably designed to ensure that all material information relating to the Company (including its subsidiaries) is accumulated and communicated to management to allow timely decisions regarding required disclosure and to ensure that all material information required to be disclosed in this quarterly report is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

(b)                 Changes in Internal Control Over Financial Reporting.

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There have been no significant changes in the Company’s internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 2.        Unregistered Sales of Equity Securities and Use of Proceeds

The following table presents information with respect to purchases made by the Company of its common stock to become treasury stock for the period December 31, 2006April 1, 2007 through March 31,June 30, 2007. The shares were purchased from the Continental Materials Corporation Employees Profit Sharing Retirement Plan. The shares became available

due to changes in participants’ accounts. The Company purchased the shares rather than having the Plan Administrator sell the shares on the open market.

Issuer Purchases of Equity Securities