10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 28, 2014

OR

oTRANSITION 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

CONTINENTAL MATERIALS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	36-2274391
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
200 South Wacker Drive, Suite 4000, Chicago, Illinois	60606
(Address of principal executive offices)	(Zip Code)

(312) 541-7200

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-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 o	Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 or the Exchange Act).  Yes o  No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock, $0.25 par value, shares outstanding at August 7, 2014: 1,650,167.

PART I — FINANCIAL INFORMATION

Item 1.   Financial Statements

CONTINENTAL MATERIALS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 28, 2014 and DECEMBER 28, 2013

(000’s omitted except share data)

	JUNE 28,
	2014			DECEMBER 28,
	(Unaudited)			2013
ASSETS
Current assets:
Cash and cash equivalents	$	1,017		$	924
Receivables, net	24,544			22,600
Receivable for insured losses	156			156
Inventories:
Finished goods	7,774			6,958
Work in process	965			985
Raw materials and supplies	8,854			8,269
Prepaid expenses	1,674			1,357
Refundable income taxes	334			812
Deferred income taxes	225			1,173
Total current assets	45,543			43,234
Property, plant and equipment, net	19,059			19,009
Goodwill	7,229			7,229
Amortizable intangible assets, net	92			118
Prepaid royalties	1,798			1,859
Other assets	513			513
Deferred income taxes	878			—
	$	75,112		$	71,962
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses	15,576			12,879
Liability for unpaid claims covered by insurance	156			156
Total current liabilities	15,732			13,035
Revolving bank loan payable	5,400			1,000
Long-term debt	—			3,408
Deferred income taxes	—			360
Other long-term liabilities	2,268			2,095
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	1,827			1,815
Retained earnings	64,961			65,529
Treasury shares, 924,097 and 936,097, at cost	(15,719		)	(15,923		)
	51,712			52,064
	$	75,112		$	71,962

See notes to condensed consolidated financial statements.

2

CONTINENTAL MATERIALS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

FOR THE THREE MONTHS ENDED JUNE 28, 2014 AND JUNE 29, 2013

(Unaudited)

(000’s omitted except per-share amounts)

	JUNE 28,			JUNE 29,
	2014			2013
Net sales	$	37,367		$	32,857
Costs and expenses:
Cost of sales (exclusive of depreciation, depletion and amortization)	30,890			26,320
Depreciation, depletion and amortization	743			844
Selling and administrative	4,701			4,655
Williams EcoLogix project expenses	—			662
Gain (loss) on disposition of property and equipment	1			(2		)
	36,333			32,483
Operating income	1,034			374
Interest expense, net	(110		)	(92		)
Other income, net	5			5
Income before income taxes	929			287
Provision for income taxes	316			100
Net income	613			187
Retained earnings, beginning of period	64,348			65,585
Retained earnings, end of period	$	64,961		$	65,772
Net income per basic and diluted share	$	.37		$	.11
Average shares outstanding	1,650			1,646

See notes to condensed consolidated financial statements

3

CONTINENTAL MATERIALS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

FOR THE SIX MONTHS ENDED JUNE 28, 2014 AND JUNE 29, 2013

(Unaudited)

(000’s omitted except per-share amounts)

	JUNE 28,			JUNE 29,
	2014			2013
Net sales	$	64,191		$	59,070
Costs and expenses:
Cost of sales (exclusive of depreciation, depletion and amortization)	53,918			48,327
Depreciation, depletion and amortization	1,481			1,659
Selling and administrative	9,444			9,131
Williams EcoLogix project expenses	—			710
Gain (loss) on disposition of property and equipment	1			(2		)
	64,842			59,829
Operating loss	(651		)	(759		)
Interest expense, net	(209		)	(179		)
Other income, net	—			18
Loss before income taxes	(860		)	(920		)
Benefit for income taxes	(292		)	(304		)
Net loss	(568		)	(616		)
Retained earnings, beginning of period	65,529			66,388
Retained earnings, end of period	$	64,961		$	65,772
Net loss per basic and diluted share	$	(.34	)	$	(.37	)
Average shares outstanding	1,647			1,643

See notes to condensed consolidated financial statements

4

CONTINENTAL MATERIALS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 28, 2014 AND JUNE 29, 2013

(Unaudited)

(000’s omitted)

	JUNE 28, 2014			JUNE 29, 2013
Net cash provided by operating activities	$	605		$	1,777
Investing activities:
Capital expenditures	(1,505		)	(816		)
Cash proceeds from sale of property and equipment	1			61
Net cash used in investing activities	(1,504		)	(755		)
Financing activities:
Borrowings against the revolving bank loan, net	4,400			—
Repayment of long-term debt	(3,408		)	(250		)
Payments to acquire treasury stock	—			(125		)
Net cash provided by (used in) financing activities	992			(375		)
Net increase in cash and cash equivalents	93			647
Cash and cash equivalents:
Beginning of period	924			1,734
End of period	$	1,017		$	2,381
Supplemental disclosures of cash flow items:
Cash paid during the six months for:
Interest, net	$	215		$	212
Income taxes refunded	(481		)	(700		)

See notes to condensed consolidated financial statements

5

CONTINENTAL MATERIALS CORPORATION

SECURITIES AND EXCHANGE COMMISSION FORM 10-Q

NOTES TO THE QUARTERLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

QUARTER ENDED JUNE 28, 2014

(Unaudited)

1.Basis of Presentation:

The unaudited interim condensed consolidated financial statements included herein are prepared pursuant to the Securities and Exchange Commission rules and regulations for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures normally accompanying the annual consolidated financial statements have been omitted. The condensed consolidated balance sheet of Continental Materials Corporation (the “Company”) as of December 28, 2013 has been derived from the audited consolidated balance sheet of the Company as of that date. The interim condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s latest annual report on Form 10-K. In the opinion of management, the condensed consolidated financial statements include all adjustments (none of which were other than normal recurring adjustments) necessary for a fair statement of the results for the interim periods. Certain reclassifications have been made to the 2013 consolidated financial statements to conform to the 2014 presentation. The reclassifications had no effect on the consolidated results of operations, the net increase in cash or the total assets, liabilities or shareholders’ equity of the Company.

2.Income taxes are accounted for under the asset and liability method that requires deferred income taxes to reflect the future tax consequences attributable to differences between the tax and financial reporting bases of assets and liabilities. Deferred tax assets and liabilities recognized are based on the tax rates in effect in the year in which differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, based on available positive and negative evidence, it is “more likely than not” (greater than a 50% likelihood) that some or all of the net deferred tax assets will not be realized.

The Company has established a valuation reserve related to the carry-forward of all charitable contributions deductions arising from prior years and the portion of contributions in 2014 that the Company believes it will be unable to utilize prior to the expiration of their carry-forward periods. The Company also established a valuation reserve related to the carry-forward of the long-term capital loss related to the sale of the stock of Rocky Mountain Ready Mix Concrete, Inc. due to the uncertainty that the Company will be able to generate offsetable long-term capital gains prior to the expiration of the carry-forward period, December 31, 2014. For Federal purposes, net operating losses can be carried forward for a period of 20 years while alternative minimum tax credits can be carried forward indefinitely. For state purposes, net operating losses can be carried forward for periods ranging from 5 to 20 years for the states that the Company is required to file in. California Enterprise Zone credits can be carried forward indefinitely while Colorado credits can be carried forward for 7 years.

The Company’s income tax returns are subject to audit by the Internal Revenue Service (the “IRS”) and state tax authorities. The amounts recorded for income taxes reflect the Company’s tax positions based on research and interpretations of complex laws and regulations. The Company accrues liabilities related to uncertain tax positions taken or expected to be taken in its tax returns. The IRS has completed examinations for periods through 2009. Various state income tax returns also remain subject to examination.

3.Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1Quoted prices in active markets for identical assets or liabilities.

Level 2Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3Unobservable inputs supported by little or no market activity and are significant to the fair value of the assets or liabilities. Unobservable inputs shall reflect the assumptions that market participants would use when pricing the asset or liability including assumptions about risk.

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying balance sheet.

Cash and Cash Equivalents: The carrying amount approximates fair value and was valued as Level 1.

Revolving Bank Loan Payable: Fair value is estimated based on the borrowing rates currently available to the Company for bank loans with similar terms and maturities and determined through the use of a discounted cash flow model. The carrying amount of the Revolving Bank Loan Payable represents a reasonable estimate of the corresponding fair value as the Company’s debt is held at variable interest rates and was valued as Level 2.

6

Long-term Debt: Fair value was estimated based on the borrowing rates currently available to the Company for bank loans with similar terms and maturities and determined through the use of a discounted cash flow model. The carrying amount of long-term debt represents a reasonable estimate of the corresponding fair value as the Company’s debt was held at variable interest rates and was valued as Level 2.

4.There are currently no significant prospective accounting pronouncements that are expected to have a material effect on the Company’s consolidated financial statements.

5.Operating results for the first six months of 2014 are not necessarily indicative of performance for the entire year due to the seasonality of most of our products. Historically, sales of the Evaporative Cooling segment are higher in the first and second quarters, sales of the Concrete, Aggregates and Construction Supplies (CACS) segment are higher in the second and third quarters and sales of the Heating and Cooling segment are higher in the third and fourth quarters. The sales of the Door segment are more evenly spread throughout the year.

6.There is no difference in the calculation of basic and diluted earnings per share (EPS) for the three-month or six-month periods ended June 28, 2014 and June 29, 2013 as the Company does not have any dilutive instruments.

7.The Company operates primarily in two industry groups, Heating, Ventilation and Air Conditioning (HVAC) and Construction Products. The Company has identified two reportable segments within each of the industry groups: the Heating and Cooling segment and the Evaporative Cooling segment in the HVAC industry group and the CACS 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. (WFC) of Colton, California. The Evaporative Cooling segment produces and sells evaporative coolers from the Company’s wholly-owned subsidiary, Phoenix Manufacturing, Inc. (PMI) of Phoenix, Arizona. Sales of these two segments are nationwide, but are concentrated in the southwestern United States. Concrete, Aggregates and Construction Supplies are offered from numerous locations along the Southern Front Range of Colorado operated by the Company’s wholly-owned subsidiaries Castle Concrete Company and Transit Mix Concrete Co., of Colorado Springs and Transit Mix of Pueblo, Inc. of Pueblo, Colorado (the three companies collectively are referred to as “TMC”). The Door segment sells hollow metal doors, door frames and related hardware, wood doors, lavatory fixtures and electronic access and security systems from the Company’s wholly-owned subsidiary, McKinney Door and Hardware, Inc. (MDHI), which operates out of facilities in Pueblo and Colorado Springs, Colorado. Sales of these two segments are highly concentrated in the Southern Front Range of Colorado although door sales are also made throughout the United States.

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. Expenses related to the corporate information technology group are allocated to all locations, including the corporate office. An “Other” classification is used to report a real estate operation and the activity of Williams EcoLogix, Inc. (WEI). WEI is a wholly-owned subsidiary of Continental Materials Corporation which was set up in anticipation of distributing a product that was being developed by a third party. The expenses incurred were associated with the subsidiary’s sole employee and miscellaneous related expenses. Development of the product has ceased and the sole employee was terminated in February 2013.

The Company evaluates the performance of its segments and allocates resources to them based on a number of criteria including operating income, return on investment and other strategic objectives. Operating income is determined by deducting operating expenses from all revenues. In computing operating income, none of the following has been added or deducted: unallocated corporate expenses, interest, other income or loss or income taxes.

The following table presents information about reported segments for the six-month and three-month periods ended June 28, 2014 and June 29, 2013 along with the items necessary to reconcile the segment information to the totals reported in the financial statements (dollar amounts in thousands):

7

	Construction Products								HVAC Products
	Concrete, Aggregates & Construction Supplies			Doors		Combined Construction Products			Heating and Cooling			Evaporative Cooling		Combined HVAC Products		Unallocated Corporate			Other		Total
2014
Six Months ended June 28, 2014
Revenues from external customers	$	27,341		$	8,421	$	35,762		$	12,618		$	15,804	$	28,422	$	7		$	—	$	64,191
Depreciation, depletion and amortization	920			71		991			257			209		466		24			—		1,481
Operating (loss) income	(1,358		)	936		(422		)	(399		)	1,649		1,250		(1,479		)	—		(651		)
Segment assets	35,727			7,320		43,047			16,095			13,415		29,510		2,421			134		75,112
Capital expenditures (b)	1,225			35		1,260			111			134		245		—			—		1,505
Quarter ended June 28, 2014
Revenues from external customers	$	17,023		$	4,525	$	21,548		$	5,694		$	10,121	$	15,815	$	4		$	—	$	37,367
Depreciation, depletion and amortization	464			35		499			128			104		232		12			—		743
Operating income (loss)	225			541		766			(369		)	1,386		1,017		(749		)	—		1,034
Segment assets	35,727			7,320		43,047			16,095			13,415		29,510		2,421			134		75,112
Capital expenditures (b)	602			1		603			55			40		95		—			—		698

	Construction Products								HVAC Products
	Concrete, Aggregates & Construction Supplies			Doors		Combined Construction Products			Heating and Cooling			Evaporative Cooling		Combined HVAC Products		Unallocated Corporate			Other			Total
2013
Six Months ended June 29, 2013
Revenues from external customers	$	19,594		$	8,126	$	27,720		$	15,089		$	16,226	$	31,315	$	6		$	29		$	59,070
Depreciation, depletion and amortization	1,185			62		1,247			206			179		385		27			—			1,659
Operating (loss) income	(2,122		)	610		(1,512		)	1,214			1,843		3,057		(1,530		)	(774		)	(759		)
Segment assets (a)	26,471			6,837		33,308			18,748			12,118		30,866		7,654			134			71,962
Capital expenditures (b)	147			39		186			384			240		624		6			—			816
Quarter ended June 29, 2013
Revenues from external customers	$	11,777		$	4,401	$	16,178		$	5,530		$	11,145	$	16,675	$	4		$	—		$	32,857
Depreciation, depletion and amortization	607			31		638			103			89		192		14			—			844
Operating (loss) income	(174		)	494		320			(80		)	1,602		1,522		(806		)	(662		)	374
Segment assets (a)	26,471			6,837		33,308			18,748			12,118		30,866		7,654			134			71,962
Capital expenditures (b)	51			3		54			318			34		352		(9		)	—			397

(a)Segment assets are as of December 28, 2013.

(b)Capital expenditures are presented on the accrual basis of accounting.

There are no differences in the basis of segmentation or in the basis of measurement of segment profit or loss from the last Annual Report on Form 10-K.

8.Identifiable amortizable intangible assets as of June 28, 2014 include a restrictive land covenant and customer relationships. Collectively, these assets were carried at $92,000, net of $628,000 accumulated amortization. The pre-tax amortization expense for intangible assets during the quarter ended June 28, 2014 was $13,000 compared to $15,000 for the quarter ended June 29, 2013 and was $26,000 and $30,000 for the six months ended June 28, 2014 and June 29, 2013, respectively.

Based upon the intangible assets recorded on the balance sheet at June 28, 2014, amortization expense for the next five years is estimated to be as follows: 2014 – $52,000; 2015 – $45,000; 2016 – $21,000.

9.The Company issued a total of 12,000 shares to the eight eligible board members effective February 12, 2014 as full payment for their 2014 retainer fee. The Company issued a total of 12,000 shares to the eight eligible board members effective February 11, 2013 as full payment for their 2013 retainer fee. All shares were issued under the 2010 Non-Employee Directors Stock Plan.

10.The Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) effective November 18, 2011. The Company entered into a Second Amendment to Credit Agreement effective March 20, 2014 to, among other things,

8

(i) increase the Revolving Commitment to $18,000,000 from $15,000,000, (ii) terminate the Term Loan Commitment upon the repayment in full of the outstanding principal balance (and accrued interest thereon), (iii) modify the Borrowing Base calculation to provide for borrowing availability in respect of new Capital Expenditures, (iv) decrease the interest rates on the Revolving Loans beginning in the third quarter of 2014, and (v) extend the maturity date to May 1, 2016, in each case, on the terms and conditions set forth in the Second Amendment. Borrowings under the Credit Agreement are secured by the Company’s accounts receivable, inventories, machinery, equipment, vehicles, certain real estate and the common stock of all of the Company’s subsidiaries. The Company entered into a Third Amendment to Credit Agreement effective June 28, 2014 to defer the Fixed Charge Coverage Ratio covenant until the third quarter of fiscal 2014 and to add a minimum Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) requirement of $2,000,000 for the twelve months ended June 28, 2014, which the Company has met. Borrowings bear interest based on a London Interbank Offered Rate (LIBOR) or prime rate based option.

The Credit Agreement either limits or requires prior approval by the lender of additional borrowings, acquisition of stock of other companies, purchase of treasury shares and payment of cash dividends. Payment of accrued interest is due monthly or at the end of the applicable LIBOR period.

The Credit Agreement, as amended, also provides for the following:

·The Revolving Commitment is $18,000,000.

·Borrowings under the Revolving Commitment are limited to (a) 80% of eligible accounts receivable, (b) the lesser of 50% of eligible inventories and $8,500,000 plus (c) the lesser of 80% of new Capital Expenditures not to exceed $4,000,000 in the aggregate and $2,000,000 with respect to each of Fiscal Years 2014 and 2015.

·The Minimum Fixed Charge Coverage Ratio is not permitted to be below 1.05 to 1.0 for the Computation Period ending June 28, 2014 increasing to 1.15 to 1.0 for the Computation Period ending September 27, 2014 and each Fiscal Quarter end thereafter.

·The Company must not permit Earnings Before Interest, Taxes, Depreciation and Amortization (Minimum EBITDA) to be less than $2,500,000 for the fiscal year ended December 28, 2013 or permit the Minimum EBITDA to be less than $1,500,000 for the trailing twelve-month period ending March 29, 2014.

·The Company must maintain a Minimum Tangible Net Worth as of the last day of any Computation Period of $35,000,000 increased by (but not decreased by) 50% of the Consolidated Net Income beginning with the 2013 fiscal year.

·The Balance Sheet Leverage Ratio as of the last day of any Computation Period may not exceed 1.00 to 1.00.

·The Company must pay within 120 days after the end of each Fiscal Year, an amount equal to fifty percent of Excess Cash Flow for such Fiscal Year. The lender waived this provision for the 2012 fiscal year.

·The maturity date of the credit facility is May 1, 2016.

·Interest rate pricing for the revolving credit facility is currently LIBOR plus 3.25% or the prime rate plus 1%. Commencing July 1, 2014, interest rate pricing will be lowered to LIBOR plus 3.00% or the prime rate plus .75%. An additional reduction is possible in the event the Fixed Charge Coverage Ratio is equal to or exceeds 1.5 to 1.0 with respect to any Computation Period ending on or after December 31, 2014.

Definitions under the Credit Agreement as amended are as follows:

·Minimum Tangible Net Worth is defined as net worth plus subordinated debt, minus intangible assets (goodwill, intellectual property, prepaid expenses, deposits and deferred charges), minus all obligations owed to the Company or any of its subsidiaries by any affiliate or any or its subsidiaries and minus all loans owed by its officers, stockholders, subsidiaries or employees.

·Excess Cash Flow is defined as meaning for any period, the remainder of (a) EBITDA for such period, minus (b) the sum, without duplication, of (i) scheduled repayments of principal of the term loan made during such period, plus (ii) voluntary prepayments of the term loan during such period, plus (iii) mandatory prepayments of the term loan during such period to the extent the amount of such mandatory prepayment was included in EBITDA for such period, plus (iv) cash payments made in such period with respect to capital expenditures, plus (v) all income taxes paid in cash by the Company during such period, plus (vi) cash interest expense of the Company during such period.

·Fixed Charge Coverage Ratio is defined as, for any computation period, the ratio of (a) the sum for such period of (i) EBITDA minus (ii) the sum of income taxes paid in cash and all unfinanced capital expenditures to (b) the sum for such period of (i) interest expense, plus (ii) required payments of principal of the term debt.

·Balance Sheet Leverage Ratio is defined as the ratio of Total Debt to Tangible Net Worth.

9

As noted above, the Second Amendment to the Credit Agreement called for the payoff of the then outstanding balance of the term loan with borrowings against the new revolving line of credit. Outstanding funded debt (term debt and revolving credit) was $5,400,000 as of June 28, 2014 compared to $3,658,000 at June 29, 2013. The highest balance outstanding during the first six months of 2014 and 2013 was $8,000,000 and $3,908,000, respectively. Average outstanding funded debt was $5,175,000 and $3,721,000 for the first six months of 2014 and 2013, respectively. At June 28, 2014, the Company had outstanding letters of credit totaling $5,415,000. At all times since the inception of the Credit Agreement, the Company has had sufficient qualifying and eligible assets such that the available borrowing capacity exceeded the cash needs of the Company and this situation is expected to continue for the foreseeable future.

The Company believes that its existing cash balance, anticipated cash flow from operations and borrowings available under the Credit Agreement, will be sufficient to cover expected cash needs, including planned capital expenditures, for the next twelve months. The Company expects to meet or exceed the Minimum Fixed Charge Coverage Ratio of 1.15 to 1.00 for all succeeding Computation Periods.

11.The Company is involved in litigation matters related to its business, principally product liability matters related to the gas-fired heating products and fan coil products in the Heating and Cooling segment. In the Company’s opinion, none of these proceedings, when concluded, will have a material adverse effect on the Company’s consolidated results of operations, cash flows or financial condition as the Company has established adequate accruals for matters that are probable and estimable. The Company does not accrue estimated future legal costs related to the defense of these matters but rather expenses them as incurred.

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

The Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help investors understand the Company’s results of operations, financial condition and current business environment. The MD&A is provided as a supplement to, and should be read in conjunction with, the Company’s unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report and the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2013.

Company Overview

For an overview of the Company’s operations and operating structure, see Note 7 to the condensed consolidated financial statements contained in this Quarterly Report.

Liquidity and Capital Resources

Various factors affect the sales of the Company’s products which in turn, can impact the Company’s liquidity and capital resources. Historically, the Company has experienced operating losses during the first quarter except when construction activity is strong along the Southern Front Range of Colorado and the weather is mild. Operating results typically improve in the second and third quarters reflecting more favorable weather conditions in Colorado and the seasonal sales of the Evaporative Cooling segment. Fourth quarter results can vary based on weather conditions in Colorado as well as in the principal markets for the Company’s heating equipment. Notwithstanding weather conditions, however, the Company expects construction activity along the Southern Front Range of Colorado to continue to improve from the very depressed levels of 2009 through 2012.

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, if any. 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.

Cash provided by operations was $605,000 during the first six months of 2014 compared to the $1,777,000 of cash provided during the first six months of 2013. The Company’s operating cash flow during the first six months of 2014 was positive primarily due to non-cash expenses partially offset by a net increase in working capital. The Company’s operating cash flow during the first six months of 2013 was positive primarily due to non-cash expenses as well as the refund of $700,000 of estimated income taxes paid in 2012 partially offset by a net increase in working capital.

During the six months ended June 28, 2014, investing activities used $1,504,000 of cash compared to $755,000 of cash used in the prior year’s period. Capital expenditures during the first six months of 2014 were $1,505,000 compared to $816,000 during the corresponding 2013 period. The increase in capital expenditures during the first six months of 2014 were incurred by the CACS segment primarily related to the increase in sales.

10

Financing activities during the first six months of 2014 provided $992,000 compared to using $375,000 during the comparable 2013 period. As noted above, the Second Amendment to the Credit Agreement called for the payoff of the then outstanding balance of the term loan ($3,408,000) with borrowings against the new revolving line of credit. During the first six months of 2014, the Company borrowed a net of $4,400,000 against the new revolving line of credit including the funds used to retire the term loan. As of June 28, 2014, the balance borrowed against the new revolving line totaled $5,400,000. During the first six months of 2013, scheduled term debt repayments of $250,000 were made. The Company also purchased $125,000 of Company stock in June 2013.

As discussed in Note 10, the Company entered into a Third Amendment to Credit Agreement effective June 28, 2014. As of June 28, 2014 the Company was in compliance with all covenants in the Credit Agreement, as amended. The Company expects to be in compliance with all loan covenants for all succeeding Computation Periods.

Revolving Credit and Term Loan Agreement

As discussed in Note 10 to the condensed consolidated financial statements contained in this Quarterly Report, the Company amended its Credit Agreement effective March 20, 2014 such that the Company now has a Revolving Commitment of $18,000,000 and no term debt. Borrowings under the Credit Agreement are secured by the Company’s accounts receivable, inventories, machinery, equipment, vehicles, certain real estate and the common stock of all of the Company’s subsidiaries. The Company entered into a Third Amendment to Credit Agreement effective June 28, 2014 to defer the Fixed Charge Coverage Ratio covenant until the third quarter of fiscal 2014 and to add a minimum EBITDA requirement of $2,000,000 for the twelve months ended June 28, 2014, which the Company has met. Borrowings under the Credit Agreement are limited to 80% of eligible accounts receivable, the lesser of 50% of eligible inventories or $8,500,000 plus the lesser of 80% of new capital expenditures not to exceed $4,000,000 in the aggregate and $2,000,000 with respect to each of Fiscal Years 2014 and 2015. Borrowings under the Credit Agreement bear interest based on a LIBOR or prime rate based option.

The Credit Agreement either limits or requires prior approval by the lender of additional borrowings, acquisition of stock of other companies, purchase of treasury shares and payment of cash dividends. Payment of accrued interest is due monthly or at the end of the applicable LIBOR period. The Credit Agreement has a maturity date of May 1, 2016.

The Company had borrowings against the revolving credit facility of $5,400,000 at June 28, 2014. At all times since the inception of the Credit Agreement, the Company has had sufficient qualifying and eligible assets such that the entire revolving credit facility was available to the Company.

The Company believes that its existing cash balance, anticipated cash flow from operations and borrowings available under the Credit Agreement, will be sufficient to cover expected cash needs, including planned capital expenditures, for the next twelve months. The Company expects to be in compliance with all loan covenants for all succeeding Computation Periods.

Results of Operations - Comparison of Quarter Ended June 28, 2014 to Quarter Ended June 29, 2013

(In the ensuing discussions of the results of operations the Company defines the term gross profit as the amount determined by deducting cost of sales before depreciation, depletion and amortization from sales. The gross profit ratio is gross profit divided by sales.)

Consolidated sales in the second quarter of 2014 were $37,367,000, an increase of $4,510,000 or 13.7% compared to the second quarter of 2013. Sales in the CACS segment increased $5,246,000 (44.5%) while sales in the Door segment improved by $124,000 (2.8%). The increase in sales in the CACS segment is reflective of the continuing improvement in the construction markets in the Colorado Springs area as well as the servicing of a wind-energy project in Limon, Colorado with ready mix concrete that represented approximately 22% of the concrete volume for the quarter. Sales in the Heating and Cooling segment improved by $164,000 (3.0%) in the second quarter of 2014 compared to the same period in 2013. Sales in the Evaporative Cooling segment declined $1,024,000 (9.2%) in the second quarter of 2014 compared to the second quarter of the prior year.

The consolidated gross profit ratio in the second quarter of 2014 was 17.3% compared to 19.9% in the second quarter of 2013. The gross profit ratio declined in the Heating and Cooling and CACS segments, which more than offset improvements in the Door and Evaporative Cooling segments. The decline in the Heating and Cooling segment was largely due to a reduced level of furnace production. The decline in the CACS segment was primarily due to a narrower margin on the wind-energy project. See further discussion of this segment’s results below.

11

Consolidated selling and administrative expenses, excluding expenses related to the WEI project incurred during the second quarter of 2013, were virtually the same as the year-ago period. As a percentage of consolidated sales, selling and administrative expenses were 12.6% in the second quarter of 2014 compared to 14.2% in the same period of 2013.

Depreciation and amortization charges in the second quarter of 2014 were $101,000 less than in the second quarter of 2013. This reduction reflects the reduced level of capital spending in recent years especially in the CACS segment.

In the second quarter of 2013, the Company ceased all activities related to WEI and recorded a charge of $662,000 including $225,000 of severance pay and $352,000 to establish a reserve for a note receivable from the sole employee involved with the venture.

The operating income in the second quarter of 2014 was $1,034,000 compared to $374,000 in the second quarter of 2013 which included $662,000 of expenses related to WEI. The higher sales and lower depreciation charges were largely offset by the reduction in the gross profit ratio.

Interest expense includes interest on outstanding funded debt, finance charges on outstanding letters of credit, the fee on the unused revolving credit line and other recurring fees charged by the lending bank. In the second quarter of 2014 interest expense was $110,000 compared to $92,000 in the second quarter of 2013. The weighted average interest rate on outstanding funded debt in the second quarter of 2014, including the fee on the unused line of credit and other recurring bank charges but excluding finance charges on letters of credit, was approximately 5.2% compared to 7.1% in the second quarter of 2013. Average outstanding funded debt in the second quarter of 2014 was $6,231,000. In the second quarter of 2013 average outstanding funded debt was $3,658,000. At the end of the second quarter of 2014 the outstanding funded debt was $5,400,000 compared to $3,658,000 at the end of the second quarter of 2013.

The Company’s effective income tax rate reflects federal and state statutory income tax rates adjusted for non-deductible expenses, tax credits and other tax items. The estimated effective income tax rate from continuing operations in the second quarter of 2014 was 34.0% compared to 34.8% for the second quarter of 2013.

The Company operates four businesses in two industry groups. The businesses are seasonal, weather sensitive and subject to cyclical factors. The following addresses various aspects of operating performance focusing on the reportable segments within each of the two industry groups.

Construction Products

The table below presents a summary of operating information for the two reportable segments within the Construction Products industry group for the quarters ended June 28, 2014 and June 29, 2013 (dollar amounts in thousands):

	Concrete, Aggregates and Construction Supplies			Doors
Quarter ended June 28, 2014
Revenues from external customers	$	17,023		$	4,525
Gross profit	1,683			1,220
Gross profit as a percent of sales	9.9		%	27.0		%
Segment operating income	225			541
Operating income as a percent of sales	1.3		%	12.0		%
Segment assets as of June 28, 2014	$	35,727		7,320
Return on assets	.6		%	7.4		%
Quarter ended June 29, 2013
Revenues from external customers	$	11,777		$	4,401
Gross profit	1,325			1,090
Gross profit as a percent of sales	11.3		%	24.8		%
Segment operating (loss) income	(174		)	494
Operating (loss) income as a percent of sales	(1.5		)%	11.2		%
Segment assets as of June 29, 2013	$	31,126		$	6,317
Return on assets	(.6		)%	7.8		%

12

Concrete, Aggregates and Construction Supplies Segment

The product offerings of the CACS segment consist of ready-mix concrete, aggregates and construction supplies.  Ready-mix concrete and aggregates are produced at multiple locations in or near Colorado Springs and Pueblo, Colorado.  Construction supplies encompass numerous products purchased from third party suppliers and sold to the construction trades particularly concrete sub-contractors.  In the second quarter of 2014 concrete, aggregates and construction supplies account for approximately 73%, 20% and 7% of sales of the CACS segment, respectively, including aggregates consumed internally in the production of concrete.  In the second quarter of 2013 the sales mix between concrete, aggregates and construction supplies was 70%, 22% and 8%, respectively. Sales including aggregates consumed internally increased by $6,280,000 (46.2%).  Sales to third parties increased $5,246,000 (44.5%).  The higher sales reflect a continuing improvement in the local construction markets and the servicing of a wind energy project in Limon, Colorado with ready-mix concrete in the second quarter of 2014. Ready mix concrete sales, excluding flow fill material, increased by $4,339,000 (49.4%) in 2014. The wind energy job accounted for $2,687,000 of the higher concrete sales. Concrete volume increased by 42.5%. Exclusive of the wind energy project, concrete volume increased by 13.4%. Average concrete prices, excluding flow fill material, increased by approximately 4.8% compared to 2013. Most of this increase is reflective of higher selling prices. Changes in product mix had a nominal impact on the change in average selling price. While concrete prices have increased, the market remains sharply competitive especially on large construction projects. Cement costs per yard increased by 5.4% in the second quarter of 2014 compared to the same period in 2013. Cement is the highest cost raw material used in the production of ready mix concrete. Batching cash costs per yard increased by 8.2% but delivery cash costs per yard fell by 6.3%. The increase in batching costs and the drop in delivery expenses was primarily related to the servicing of the wind energy job with an on-site portable batch plant. The gross profit ratio from concrete decreased from 11.8% in the second quarter of 2013 to 8.9% in the second quarter of 2014.  The Company estimates that most of the decrease was due to the competitive price on the wind energy job. Sales of flow fill material were not material in either quarter.

The CACS segment also produces and sells sand, crushed limestone and gravel (“aggregates”) from various deposits in and around Colorado Springs and Pueblo, Colorado.  In the second quarter of 2014 and 2013 aggregates were produced from four separate locations; two in or near Colorado Springs and two in or near Pueblo. However, the Pikeview Quarry in Colorado Springs was in full production throughout the second quarter of 2014 whereas in 2013 production at the Pikeview Quarry did not resume until the latter part of May 2013. Prior to May 2013 the Pikeview Quarry was shut-down since December 2008 due to a landslide. Sales volume (tons) of construction aggregates, including those used internally in the production of ready mix concrete, increased by 31.5% in the second quarter of 2014 compared to the second quarter of 2013.  Average selling prices increased by 8¢ per ton or approximately 1.3%. The 1.3% price increase reflects a combination of increased selling prices and a higher level of sales of unprocessed fill sand from the company’s sand operation. Fill sand is a lower priced product as it requires no additional processing. Net sales of construction aggregates, including those consumed internally in the production of concrete, increased by 44.6%, including the sales of fill sand. The company’s Colorado Springs’ sand operation also produces industrial sand used in well fracking, the production of stucco and for other purposes. However, as a percentage of total tons of aggregates sold in the second quarter of 2014 and 2013, industrial sand sales were only approximately 1.0% of total aggregate sales volume. The gross profit from all aggregate operations in the second quarter of 2014 was $336,000 compared to $125,000 in the second quarter of 2013. The benefit of a full quarter’s production at the Pikeview Quarry more than offset an increase in the loss from the Pueblo aggregate operation.

Sales of construction supplies increased by approximately 20% compared to the prior year quarter. The gross profit rate was one percentage point higher due to the higher sales.

Depreciation expenses decreased by $143,000 reflecting a lower level of capital spending in recent years.

Selling and administrative expenses were $103,000 higher in the second quarter of 2014 compared to the same period in 2013. The second quarter of 2013 included a credit for $55,000 related to an insurance claim recovery.

The prices of two commodities, cement and diesel fuel, can have a significant effect on the results of operations of this segment.  The Company negotiates cement prices with producers who have production facilities in or near the concrete markets that we serve. The Company may negotiate separate cement prices for large construction projects depending on the demand for and availability of cement from the local producers. The Company buys diesel fuel from local distributors. It may from time to time enter into a short term arrangement with a distributor whereby the price of diesel fuel is fixed for a period of up to six months.  In the past year the Company has not hedged diesel fuel prices. Changes in the cost of these two commodities have a direct effect on the results of operations depending upon whether competitive conditions prevailing in the marketplace enable the Company to adjust its selling prices to recover the increased costs.

13

Door Segment

The Door segment sells hollow metal doors, door frames and related hardware, wood doors, lavatory fixtures and electronic access and security systems. Nearly all of the Door segment’s sales are for commercial and institutional buildings such as schools and healthcare facilities. Approximately 65% to 70% of the sales of the Door segment are related to jobs obtained through a competitive bidding process. Bid prices may be higher or lower than bid prices on similar jobs in the prior year. The Door segment does not track unit sales of the various products through its accounting or management reporting systems. Management relies on the level of the sales backlog, the trend in sales and the gross profit rate in managing the business.

Door sales in the second quarter of 2014 were $124,000 (2.8%) more than in the second quarter of the previous year. The construction markets in general and within the State of Colorado in particular continue to demonstrate moderate improvement. Bid prices are still competitive. The gross profit ratio in the second quarter of 2014 was 27.0%, up from 24.8% in 2013. The increase in the gross profit ratio is due to both improved pricing levels and a change in product sales mix.

Sales and administrative expenses increased by $81,000 compared to the second quarter of 2013 principally due to increased sales incentive compensation. As a percentage of sales, these expenses were 14.2% and 12.8%, respectively, in the second quarters of 2014 and 2013.

The Door segment sales backlog at the end of the second quarter of 2014 was $4,887,000 compared to $5,490,000 a year ago.

HVAC Products

The table below presents a summary of operating information for the two reportable segments within the HVAC products industry group for the quarters ended June 28, 2014 and June 29, 2013 (dollar amounts in thousands):

	Heating and Cooling			Evaporative Cooling
Quarter ended June 28, 2014
Revenues from external customers	$	5,694		$	10,121
Gross profit	994			2,576
Gross profit as a percent of sales	17.5		%	25.5		%
Segment operating (loss) income	(369		)	1,386
Operating income as a percent of sales	(6.5		)%	13.7		%
Segment assets as of June 28, 2014	$	16,095		$	13,415
Return on assets	(2.3		)%	10.3		%
Quarter ended June 29, 2013
Revenues from external customers	$	5,530		$	11,145
Gross profit	1,321			2,797
Gross profit as a percent of sales	23.9		%	25.1		%
Segment operating (loss) income	(80		)	1,602
Operating income as a percent of sales	(1.4		)%	14.4		%
Segment assets as of June 29, 2013	$	15,440		$	12,580
Return on assets	(.5		)%	12.7		%

Heating and Cooling Segment

In the second quarter of 2014, approximately 49% of sales in the Heating and Cooling segment consisted of wall furnaces and heaters. Fan coils also accounted for 49% of the segment’s sales and other products made up the remaining 2%. In the second quarter of 2013 these shares of total segment sales were 54%, 38% and 8%, respectively. Overall sales in the Heating and Cooling segment in the second quarter of 2014 increased by just $164,000 (3.0%) compared to the same period in 2013. Unit shipments of furnaces and heaters are typically low during the second quarter due to warm weather conditions. Unit shipments in the second quarter of 2014 were 16.8% lower than in the second quarter of the prior year. Sales of furnaces and heaters were approximately 10.0% lower in the second quarter of 2014 and average selling prices were about 8.4% higher compared to the same quarter a year ago. The higher selling price is principally the result of product mix.

Sales of fan coils increased by approximately $621,000 (28.7%) compared to the second quarter of 2013.  The pace of new construction spending in the lodging industry has improved over the last twelve months. Typically, approximately 90% of the sales of fan coils are custom-made systems for hotels and other commercial buildings. The jobs are obtained through a

14

competitive bidding process.  Since every bid job is a unique configuration of materials and parts, the company does not track units of sales or production as such unit volume data would not be useful in managing the business. Management focuses on the current level of sales, the sales backlog, and the contribution margin in managing the fan coil business. Contribution margin is an internal measure of profitability for a product or product line. Contribution margin is measured by deducting variable manufacturing costs and variable selling expenses from sales for a particular product line. The fan coil contribution margin percentage in the second quarter of 2014 was at a satisfactory level, about one percentage point lower than in the second quarter of 2013. The fan coil sales backlog at the end of the second quarter of 2014 was approximately $1,924,000 compared to $583,000 a year ago.

The Heating and Cooling segment’s gross profit ratio for the second quarter of 2014 was 17.5% compared to 23.9% for the second quarter of 2013. The lower gross profit ratio is principally related to a lower level of furnace production and the change in product mix as typically profit margins on furnaces and heaters are higher than the margin on fan coils.

Selling and administrative expenses in the second quarter of 2014 were $63,000 lower than during the second quarter of the previous year due to the lower furnace sales and a reduction in provisions for incentive compensation. As a percentage of sales, selling and administrative expenses were 21.7% in the second quarter of 2014 compared to 23.5% in the second quarter of 2013.

Evaporative Cooling Segment

Unit sales of evaporative coolers in the second quarter of 2014 were 13.1% lower compared to the second quarter of 2013. Sales of evaporative coolers in the second quarter of 2014 decreased by $1,024,000, approximately 9.2%, compared to the same period in the prior year. Average selling prices per unit, including parts sales, were approximately 4.7% higher compared to a year ago. Sales of parts were higher in 2014 accounting for an increase of 2.1%. There was a higher ratio of single inlet and commercial coolers sold in the second quarter of 2014 compared to the second quarter of 2013. The single inlet and commercial coolers are higher priced compared to standard residential models. This change in product sales mix accounted for the balance of the increase in average selling prices. The gross profit ratio in the second quarter of 2014 was 25.5% compared to 25.1% a year ago. Selling and administrative expenses were only $20,000 (1.8%) lower in the second quarter of 2014. As a percentage of sales, selling and administrative expenses were 10.7% and 9.9% in the second quarter of 2014 and 2013, respectively.

Both businesses in the HVAC group are sensitive to changes in prices for a number of different raw materials, commodities and purchased parts. Prices of steel and copper in particular can have a significant effect on the results of operations of this group. We are not currently a party to any hedging arrangements with regard to steel or copper.

Results of Operations - Comparison of Six Months Ended June 28, 2014 to Six Months Ended June 29, 2013

(In the ensuing discussions of the results of operations the Company defines the term gross profit as the amount determined by deducting cost of sales before depreciation, depletion and amortization from sales. The gross profit ratio is gross profit divided by sales.)

Consolidated sales in the first half of 2014 were $64,191,000, an increase of $5,121,000 or 8.7% compared to the first six months of 2013. Sales in the CACS segment increased $7,747,000 (39.5%) while sales in the Door segment improved by $295,000 (3.6%). The increase in sales in the CACS segment is reflective of the continuing improvement in the construction markets in the Colorado Springs area as well as the servicing of a large industrial project during the second quarter as noted above. Sales in the Heating and Cooling segment declined $2,471,000 compared to the prior year period. The Company believes that colder temperatures in the first quarter of 2013 throughout California, a principal wall furnace market, drove wall furnace shipments to higher than normal levels in the during the first three months of 2013. Sales in the Company’s Evaporative Cooler segment were modestly lower in the first half of 2014 compared to the first six months of 2013.

The consolidated gross profit ratio in the first half of 2014 was 16.0% compared to 18.2% in the first six months of 2013. The gross profit ratio in the Heating and Cooling segment declined by 6.6 points due to lower sales, an unfavorable change in sales mix and reduced furnace production. The gross profit ratio in the CACS and Door segments improved while the gross profit ration in the Evaporative Cooler segment remained unchanged.

Selling and administrative expenses in the first half of 2014 were $313,000 (3.4%) higher compared to the year-ago period, excluding expenses related to the WEI project during the first six months of 2013. Higher credit and collection charges as well as legal expenses in CACS were the primary causes of the increase. Lesser increases in selling and administrative expenses were reported by the Door and Evaporative Cooler segments during the first half of 2014 however these were largely offset by reductions in the Heating and Cooling segment as well as the Corporate Office. As a percentage of consolidated sales, selling and administrative expenses were 14.7% in the first half of 2014 compared to 15.5% in the same period of the prior year.

15

Depreciation and amortization charges in the first half of 2014 were $178,000 less than in the first six months of 2013. This reduction reflects the reduced level of capital spending in the past three years especially in the CACS segment.

The expenses of the WEI project in the first half of 2013 were $710,000 and were largely the same as those described in the discussion of the results for the second quarter. The Company does not expect any future expenses related to WEI.

The operating loss in the first half of 2014 was $651,000 compared to an operating loss of $49,000 ($759,000 including WEI expenses) in the first six months of the prior year. The decline in operating results is attributable primarily to the Heating and Cooling segment for the reasons noted in the above discussion of the gross profit ratio. The decline in the Heating and Cooling segment more than offset the improved sales and gross profit ratio reported by the CACS segment. The operating profit of the Door segment was largely offset by a decline in the operating profit of the Evaporative Cooling segment.

In the first half of 2014 net interest expense was $209,000 compared to $179,000 in the first half of 2013. The weighted average interest rate on outstanding funded debt in the first six months of 2014, including the availability fee on the unused line of credit and other recurring bank charges but excluding finance charges on letters of credit was approximately 5.2% compared to 7.5% in the first half of 2013. Average outstanding funded debt in the first half of 2014 was $5,175,000 compared to $3,721,000 in the first half of 2013.

The Company’s effective income tax rate reflects federal and state statutory income tax rates adjusted for non-deductible expenses, tax credits and other tax items. The estimated effective income tax rate related to the loss from continuing operations in the first half of 2014 was 34.0% compared to 33.1% for the first six months of 2013.

A discussion of operations by segment follows.

Construction Products

The table below presents a summary of operating information for the two reportable segments within the Construction Products industry group for the six months ended June 28, 2014 and June 29, 2013 (dollar amounts in thousands):

	Concrete, Aggregates and Construction Supplies			Doors
Six Months ended June 28, 2014
Revenues from external customers	$	27,341		$	8,421
Gross profit	1,547			2,211
Gross profit as a percent of sales	5.7		%	26.3		%
Segment operating (loss) income	(1,358		)	936
Operating (loss) income as a percent of sales	(5.0		)%	11.1		%
Segment assets as of June 28, 2014	$	35,727		$	7,320
Return on assets	(3.8		)%	12.8		%
Six Months ended June 29, 2013
Revenues from external customers	$	19,594		$	8,126
Gross profit	877			1,802
Gross profit as a percent of sales	4.5		%	22.2		%
Segment operating (loss) income	(2,122		)	610
Operating (loss) income as a percent of sales	(10.8		)%	7.5		%
Segment assets as of June 29, 2013	$	31,126		$	6,317
Return on assets	(6.8		)%	9.7		%

Concrete, Aggregates and Construction Supplies Segment

In the first six months of 2014 concrete, aggregates and construction supplies account for approximately 71%, 21% and 8% of sales of the CACS segment, respectively, including aggregates consumed internally in the production of concrete. In the first half of 2013 the sales mix among concrete, aggregates and construction supplies was 69%, 22% and 9%, respectively. Sales including aggregates consumed internally increased by $9,067,000 (40.0%). Sales to third parties increased $7,747,000 (39.5%).  As in the discussion related to the quarterly results, the higher sales reflect a continuing improvement in the local construction markets and the servicing of the wind energy project in Limon, Colorado. Ready mix concrete sales, excluding flow fill material, increased by

16

$5,923,000 (40.6%) in 2014. The wind energy job accounted for $2,687,000 of the higher concrete sales. Concrete volume increased by 32.3%. Exclusive of the wind energy job, ready mix volume increased by 14.8%. Average concrete prices, excluding flow fill material, increased by 6.3% compared to the first half of 2013. Most of this increase is reflective of higher selling prices. Changes in product mix had a nominal impact on the change in average selling price. While concrete prices have increased, the market remains sharply competitive especially on large construction projects. Cement costs per yard increased by 6.1% in the first half of 2014 compared to the same period in 2013. Cement is the highest cost raw material used in the production of ready mix concrete. Batching cash costs per yard increased by 4.6% while cash delivery costs per yard were 1.9% lower in the 2014. As in the second quarter the increase in the batching costs and the decrease in delivery expenses were primarily related to the servicing of the wind energy job with an on-site portable batch plant. The gross profit ratio from concrete decreased from 7.5% in the first half of 2013 to 6.1% in 2014. Again, the Company estimates that most of the decrease in the gross profit ratio was due to the competitive price on the wind energy job. Sales of flow fill material were not material in the first half of either year.

In the first half of 2014 and 2013 aggregates were produced from four separate locations; two in or near Colorado Springs and two in or near Pueblo. However, as noted in the discussion of the second quarter results, in 2014 the Pikeview Quarry was in full production throughout the first half of 2014 while in 2013 production there recommenced in the latter part of May. Sales volume (tons) of construction aggregates, including those used internally in the production of ready mix concrete, increased by 21.7% in 2014. Average selling prices increased by approximately 48¢ per ton or approximately 7.9%. The higher price is largely reflective of increased selling prices. The gravel operation located on the east side of Pueblo continues to experience a high ratio of sand to rock. Much of the sand under current market conditions is not readily salable. The low yield has an adverse impact on unit costs and gross profits at the Pueblo aggregate operation. This operation’s loss in the first half of 2014 was $343,000 higher than in the first six months of 2013. However, the Pikeview Quarry returned to profitability with a full six months of production. Its gross profit result represented a $579,000 improvement compared to the first half of 2013. Industrial sand sales were only approximately 1.0% of total aggregate sales volume in both years. The gross profit from all aggregate operations in the first half of 2014 was slightly better than break-even compared to a loss of $439,000 in the first six months of 2013.

Sales of construction supplies increased by $366,000 (18.9%) in the first half of 2014 compared to the same period in 2013. The gross profit ratio improved from 6.13% to 8.54% principally due to the higher sales.

Depreciation expenses decreased by $265,000 in the first half of 2014 compared to the first half of 2013 due to a lower level of capital spending in recent years.

Selling and administrative expenses were $172,000 higher in the first six months of 2014 compared to the same period in 2013. In part, the higher level of expense reflects an insurance claim recovery in 2013 and higher credit card processing fees related to the increased sales volume in 2014.

Door Segment

Door sales in the first half of 2014 were $295,000 (3.6%) more than in the first six months of the previous year. As previously noted, the construction markets in general and within the State of Colorado continue to exhibit moderate improvement. The gross profit ratio in the first half of 2014 was 26.3%, compared to 22.2% in 2013. The improvement in the gross profit ratio is reflective of enhanced pricing levels from extremely competitive levels in the first half of 2013 and a change in product sales mix.

Sales and administrative expenses in the first half of 2014 increased by $76,000 compared to the first six months of 2013 principally due to higher incentive compensation. As a percentage of sales, these expenses were 14.3% and 13.9%, respectively, in the first six months of 2014 and 2013.

HVAC Products

The table below presents a summary of operating information for the two reportable segments within the HVAC products industry group for the six months ended June 28, 2014 and June 29, 2013 (dollar amounts in thousands).

17

	Heating and Cooling			Evaporative Cooling
Six Months ended June 28, 2014
Revenues from external customers	$	12,618		$	15,804
Gross profit	2,655			3,853
Gross profit as a percent of sales	21.0		%	24.4		%
Segment operating (loss) income	(399		)	1,649
Operating (loss) income as a percent of sales	(3.2		)%	10.4		%
Segment assets as of June 28, 2014	$	16,095		$	13,415
Return on assets	(2.5		)%	12.3		%
Six Months ended June 29, 2013
Revenues from external customers	$	15,089		$	16,226
Gross profit	4,162			3,960
Gross profit as a percent of sales	27.6		%	24.4		%
Segment operating income	1,214			1,843
Operating income as a percent of sales	8.0		%	11.4		%
Segment assets as of June 29, 2013	$	15,440		$	12,580
Return on assets	7.9		%	14.7		%

Heating and Cooling Segment

In the first half of 2014, approximately 63% of sales in the Heating and Cooling segment consisted of wall furnaces and heaters.  Fan coils accounted for 35% of the segment’s sales and other products made up the remaining 2%. In the first six months of 2013 these shares of total segment sales were 71%, 24% and 5%, respectively. Overall sales in the Heating and Cooling segment in the first six months of 2014 decreased by $2,471,000 (16.4%) compared to the same period in 2013.  Unit shipments of furnaces and heaters were 34.3% lower in the first half of 2014 compared to 2013. In the first quarter of 2013 colder temperatures throughout California drove furnace and heater sales to well above normal levels. Temperatures in the first quarter of 2014 in California were substantially warmer. The average selling price of furnaces and heaters in the first half of 2014 was approximately 8.8% higher than the previous year. As in the second quarter, the increase in the average price in the first half of 2014 is largely a function of the product sales mix.

Sales of fan coils increased by approximately $728,000 (19.5%) compared to the first six months of 2013. The increase in sales is reflective of increased construction spending in the lodging industry. Contribution margin is an internal measure of profitability for a product or product line. Contribution margin is measured by deducting variable manufacturing costs and variable selling expenses from sales for a particular product line. The fan coil contribution margin percentage in the first half of 2014 was at a satisfactory level and, as in the second quarter, about 1.0 percentage points lower than the first six months of 2013.

The Heating and Cooling segment’s gross profit ratio for the first six months of 2014 was 21.0% compared to 27.6% for the first half of 2013. The lower gross profit ratio is principally related to a reduced level of furnace production and the change in product mix as typically profit margins on furnaces and heaters are higher than the margin on fan coils.

Selling and administrative expenses in the first half of 2014 were essentially unchanged compared to the first six month of 2013. As a percentage of sales, selling and administrative expenses were 22.2% in the first half of 2014 compared to 18.2% in the first half of 2013.

Evaporative Cooling Segment

Unit sales of evaporative coolers in the first half of 2014 were down 6.6% compared to the first six months of 2013. The decrease in unit shipments all occurred in the first quarter of the year. Sales of evaporative coolers in the first half of 2014 decreased by $422,000, approximately 2.6%, compared to the same period in the prior year. Average selling prices per unit were approximately 4.5% higher compared to a year ago. Parts sales were higher in 2014 accounting for approximately one-half of the increase in the average price. As in the second quarter there was a higher ratio of single inlet and commercial coolers sold in the first half of 2014 compared to the same period 2013. The single inlet and commercial coolers are higher priced compared to standard residential models. The change in product mix accounted for the balance of the increase in the average price.  The gross profit ratio in the first six months of 2014 was 24.4%, unchanged from the first half of 2013. Selling and administrative expenses were only $57,000 (2.9%) higher in the first half of 2014. As a percentage of sales, selling and administrative expenses were 12.6% and 11.9% in the first half of 2014 and 2013, respectively.

18

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The condensed consolidated financial statements contained in this Quarterly Report have been prepared in accordance with accounting principles generally accepted in the United States of America 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 June 28, 2014 and December 28, 2013 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 28, 2013.

OUTLOOK

The revenues of the CACS segment are dependent on the level of construction activity along the Front Range in Southern Colorado as well as the level of selling price. Construction activity has exhibited modest and thus far sustained improvement during the past eighteen months in the Colorado Springs markets; however construction activity in the Pueblo markets remains depressed. Concrete pricing has also improved although the pricing on most bid jobs remains highly competitive. The Company anticipates further improvement in the CACS segment operating results will depend on a sustained improvement in the Colorado Springs construction markets, the recovery of the Pueblo markets and the ability to maintain or enhance ready mix concrete prices especially in response to any increases in cement and/or fuel costs.

The Door segment’s sales are also, to a significant extent, reliant on new construction. Bidding activity remains at a healthy level; however the sales backlog of the Door segment at June 28, 2014 declined 11% compared to the June 29, 2013 level.

July typically marks the end of the selling season for evaporative coolers.

In-season furnace sales later this year will be largely weather-dependent. Fan coil sales are generally driven by the level of commercial construction, particularly the development of new hotels. Recent sales and bidding activity indicate that the commercial construction market is improving with 2014 year-to-date fan coil sales increasing 19.5% over the prior year period and an increase in the backlog of over 200% from a very weak level at June 29, 2013.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 4 to the condensed consolidated financial statements contained in this Quarterly Report for a discussion of recently issued accounting standards.

MATERIAL CHANGES TO CONTRACTUAL OBLIGATIONS

There were no material changes to contractual obligations that occurred during the quarter ended June 28, 2014.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended by Section 21-E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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 Quarterly 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 various factors including but not limited to: weather, interest rates, availability of raw materials and their related costs, economic conditions and competitive forces in the regions where the Company does business, changes in governmental regulations and policies and the ability of the Company to obtain credit on commercially reasonable terms. Changes in accounting pronouncements could also alter projected results. Other factors not currently anticipated may also materially and adversely affect the Company’s results of operations, cash flows and financial position. There can be no assurance that future results will meet expectations. While the Company believes that the forward-looking statements in this Quarterly Report are reasonable, readers should not place reliance on any forward-looking statement. In addition, these statements speak only as of the date they were made. The Company does not undertake any obligation to update or alter any statements whether as a result of new information, future events or otherwise, except as may be required by applicable law.

19

Item 3.Quantitative and Qualitative Disclosures About Market Risk

The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and as such, is not required to provide information in response to this item.

Item 4.Controls and Procedures

(a)Evaluation of 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 (Exchange Act) as of June 28, 2014. The Chief Executive Officer and Chief Financial Officer, based on that evaluation, concluded that the Company’s disclosure controls and procedures are effective and were reasonably designed to ensure that all material information relating to the Company (including its subsidiaries) 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 Commission.

(b)Changes in Internal Control Over Financial Reporting.

The Company continually reassesses its internal control over financial reporting and makes changes as deemed prudent. During the quarter ended June 28, 2014, there were no material weaknesses identified in our review of internal control over financial reporting and no changes in the Company’s internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Items 1, 1A, 3 and 5 are not applicable or the answer to such items is negative; therefore, the items have been omitted and no reference is required in this Quarterly Report.

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

The Company reserved 150,000 treasury shares representing the maximum number allowed to be granted under the 2010 Non-Employee Directors Stock Plan (“Plan”) to non-employee directors in lieu of the base director retainer fee. The Company issued a total of 12,000 shares to eight eligible board members effective February 12, 2014 as full payment of the base retainer fee for 2014. On February 11, 2013, the Company issued a total of 12,000 shares to eight eligible board members as full payment of the base retainer fee for 2013. At June 28, 2014, a total of 90,000 shares remain eligible for issuance under the Plan.

Item 4.Mine Safety Disclosure

The Company’s aggregates mining operations, all of which are surface mines, are subject to regulation by the Federal Mine Safety and Health Administration (MSHA) under the Federal Mine Safety and Health Act of 1977 (as amended, the “Mine Act”). MSHA inspects these operations on a regular basis and issues various citations and orders when it believes a violation of the Mine Act has occurred. Information concerning mine safety violations and other regulatory matters required to be disclosed by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of SEC Regulation S-K is included in Exhibit 95 to this Quarterly Report.

20

Item 6.Exhibits

Exhibit No.	Description
3	Registrant’s Restated Certificate of Incorporation dated May 28, 1975, as amended on May 24, 1978, May 27, 1987 and June 3, 1999 filed as Exhibit 3 to Form 10-K for the year ended January 1, 2005 (Accession # 0001104659-05-016256), incorporated by reference.
3a	Registrant’s By-laws, as amended September 19, 1975 filed herewith.
10	Third Amendment to Credit Agreement dated August 11, 2014, effective as of June 28, 2014 among Continental Materials Corporation, financial institutions that are or may from time to time become parties to the Credit Agreement and The PrivateBank and Trust Company, as Administrative Agent, filed herewith.
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 filed herewith.
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 filed herewith.
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 filed herewith.
95	Mine Safety Disclosures filed herewith.
101	The following financial information from Continental Materials Corporation’s Quarterly Report on Form 10-Q for the period ended June 28, 2014 filed with the SEC on August 12, 2014, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Operations and Retained Earnings for the three and six-month periods ended June 28, 2014 and June 29, 2013, (ii) the Condensed Consolidated Balance Sheets at June 28, 2014 and December 28, 2013, (iii) the Condensed Consolidated Statements of Cash Flows for the six-month periods ended June 28, 2014 and June 29, 2013, and (iv) Notes to the Quarterly Condensed Consolidated Financial Statements.*

*Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed part of a registration statement, prospectus or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filings.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		CONTINENTAL MATERIALS CORPORATION
Date:	August 12, 2014	By:	/s/ Joseph J. Sum
			Joseph J. Sum, Vice President
			and Chief Financial Officer

21

EX-3.A

Exhibit 3a

Continental Materials Corporation

Amended and Restated By-Laws

September 19, 1975

CONTINENTAL MATERIALS CORPORATION

By-Laws

Restated September 19, 1975

ARTICLE I

OFFICES

Section 1.  The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware.

Section 2.  The corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1.  The annual meeting of stockholders for the election of directors and the transaction of any other proper business as may be brought before the meeting shall be held at such time and place, within or without the State of Delaware, on the fourth Wednesday in May of each year, or on such other date, as the board of directors may determine.

Section 2.  Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by resolution of the board of directors or by the president, and shall be called by the president or secretary at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote.  Such request shall state the purpose or purposes of the proposed meeting.  Special meetings shall be held at such time and place within or without the State of Delaware as may from time to time be fixed by the person or entity calling the meeting.

Section 3.  The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder.  Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held.  The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

Section 4.  Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and in the case of a special meeting, the purpose or purposes for which the meeting is called.  Business transacted at special meetings shall be confined to the purpose or purposes stated in the notice of such meeting.

Section 5.  The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute.  If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented.

VOTING

Section 6.  When a quorum is present at any meeting, the vote of the holders or a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes, a different vote is required in which case such express provision shall govern and control the decision of such question.

Section 7.  At any meeting of the stockholders every stockholder having the right to vote shall be entitled to vote in person, or by proxy appointed by an instrument in writing subscribed by such stockholder and bearing a date not more than three years prior to

said meeting, unless said instrument provides for a longer period.  Each stockholder shall have one vote for each share of stock having voting power, registered in his name on the books of the corporation.

Section 8.  Any action required by statute to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.  Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stock holders who have not consented in writing.

Section 9.  Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held.  Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the corporation he has expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon.

If shares or other securities having voting power stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the secretary of the corporation is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect:

(1)If only one votes, his act binds all;

(2)If more than one vote, the act of the majority so voting binds all;

(3)If more than one vote, but the vote is evenly split on any particular matter, each faction may note the securities in question proportionally, or any person voting the shares, or a beneficiary, if any, may apply to the Court of Chancery or such other court as may have jurisdiction to appoint an additional person to act with the persons so voting the shares, which shall then be voted as determined by a majority of such persons appointed by the Court.  If the instrument so filed shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of this subsection shall be a majority or even-split in interest.

ARTICLE III

DIRECTORS

Section 1.  The number of directors which shall constitute the whole board shall be nine.  The directors of the Corporation shall be divided into three classes whose terms of office shall expire at different times.  At the 1975 election of directors by stockholders, one class of such directors was elected for a one-year term, one class for a two-year term, and one class for a three-year term.  At each succeeding annual meeting of stockholders, successors to the class of directors whose term expires in that shall be elected for a three-year term.  If the number of such directors is changed, any increase or decrease in such number shall be apportioned among the classes so as to maintain the classes as nearly equal in number as possible, and any director added to any class shall hold office for a term which shall coincide with the term of such class.  A director shall hold office until the annual meeting for the year in which his term expires or until his successor is elected and qualifies; subject, however, to prior resignation, death or removal as provided by law.  Upon the resignation, death or removal of any director, the term of his successor shall be the same term as that of the director who has so resigned, died or been removed.  No director may be removed except for cause.

Section 2.  Vacancies and newly created directorships resulting from any increase in the authorized number of directors shall be filled by a majority of the directors then in office, even though less than a quorum.

Section 3.  The business and affairs of the corporation shall be managed by or under the direction of its board of directors which may exercise all powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these by-laws directed or required to be exercised or done by the stockholders.

MEETINGS OF THE BOARD

Section 4.  The directors of the corporation may hold their meetings, both regular and special, either within or without the State of Delaware in any manner authorized by law, including conference telephone.

Section 5.  The first meeting of each newly elected board shall be held at the place of the annual meeting of stockholders at which such board is elected and immediately subsequent thereto, or at such time and place as shall be fixed by the vote of the stockholders at the annual meeting, or the directors may meet at such time and place as shall be fixed by the consent in writing of all the directors.  No notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting provided a quorum shall be present.

Section 6.  Regular meetings of the board may be held without notice at such time and place as shall from time to time be determined by the board.

Section 7.  Special meetings of the board may be called by the president on two days oral or written notice to each director; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two directors.

Section 8.  A majority of the total number of directors shall constitute a quorum for the transaction of business and the vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors except as may be otherwise specifically provided by statute.  If a quorum shall not be present at any meeting of directors the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

Section 9.  Any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee.

Section 10.  No contract or transaction between the corporation and one or more of its directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if:

(1)The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors or the committee, and the board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or

(2)The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or

(3)The contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the board of directors, a committee thereof, or the stockholders.

Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee which authorizes the contract or transaction.

COMMITTEES OF DIRECTORS

Section 11.  The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation which, to the extent provided in the resolution of the board of directors, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation’s property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of dissolution, or amending the by-laws of the corporation.  In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the board of directors to act at that meeting in the place of any such absent or disqualified member.  Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors.

Section 12.  The committee shall keep regular minutes of their proceedings and report the same to the board when required.

COMPENSATION OF DIRECTORS

Section 13.  Directors, as such, shall not receive any stated salary for their services, but, by resolution of the board a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the board; provided that nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor.  Members of special or standing committees may be allowed like compensation for attending committee meetings.

ARTICLE IV

NOTICES

Section 1.  Unless otherwise provided by statute, the written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting.  If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation.  An affidavit of the secretary or an assistant secretary or of the transfer agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

Section 2.  When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken.  At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting.  If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

Section 3.  Whenever notice is required to be given by statute or by the certificate of incorporation or these by-laws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice.  Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.  Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice.

ARTICLE V

OFFICERS

Section 1.  The officers of the corporation shall be chosen by the directors and shall be a chairman of the board of directors, a vice chairman of the board of directors, a president, a secretary, a treasurer, and one or more vice presidents, assistant secretaries and assistant treasurers.  Any number of offices may be held by the same person, except the offices of the president and secretary.

Section 2.  The board of directors at its first meeting after each annual meeting of stockholders shall choose a chairman of the board of directors and a vice chairman of the board of directors from its members, and shall choose the other officers, none of whom need be a member of the board.

Section 3.  The board may appoint such agents as it shall deem fit, for such terms and to exercise such powers and to perform such duties as shall be determined from time to time by the board.

Section 4.  The remuneration of all officers of the corporation shall be fixed by the board of directors.

Section 5.  Each officer of the corporation shall hold his office until his successor is elected and qualified or until his earlier resignation or removal.  Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the whole board of directors.  If any office becomes vacant for any reason, the vacancy may be filled by the board of directors.

CHAIRMAN OF THE BOARD

Section 6.  The chairman of the board of directors, in addition to his participation in the formulation of general policy as a member of the board of directors, shall be the chief executive office of the corporation, and subject to the powers, decisions and

directions of the board of directors, shall at his discretion, and to the extent determined by him, assume the general supervision of the operating affairs of the corporation.  He shall preside at all meetings of the board of directors and stockholders.  In his capacity as an executive officer of the corporation, the chairman shall at his discretion and to the extent determined by him from time to time have the leading voice in the formulation of general operating programs.  The chairman shall execute proxies for voting shares or corporate stock owned or held by the corporation including subsidiaries, unless in the opinion of the chairman, material and important questions of personnel or policy are involved requiring consideration by the board of directors.

The chairman shall act in an advisory capacity to the president who shall, to the extent not assumed by the chairman, retain supervision over the acts of the other officers and the employees and shall have authority to and shall perform the usual executive, operating and ministerial functions of the office of president.  Unless a resolution of direction of the board of directors designates a specific person for such purpose, any act of the corporation or of its executive officers, including the execution of documents, and the performance of any executive function under the resolutions of the board of directors, the by-laws of the corporation, or the laws of the State of Delaware shall be effective to the same extent, whether carried out by the chairman or by the president.  As to all third persons dealing with the corporation, the acts of either the chairman or the president shall be valid and binding, if the act of either of them would be valid and binding.

VICE CHAIRMAN OF THE BOARD

Section 7.  The vice chairman of the board of directors shall, in the absence of disability of the chairman of the board of directors, preside at meetings of the board of directors and perform the other duties and exercise the other powers of the chairman.

PRESIDENT

Section 8.  The president shall, in those areas not assumed by the chairman of the board of directors, and in the absence of the chairman and the vice chairman of the board of directors in all areas, be the chief executive officer of the corporation.  He shall, in the absence of the chairman and the vice chairman of the board of directors, preside at all meetings of the stockholders.  Subject to the control and powers of the board of directors and the chairman of the board of directors, he shall have general charge and active management of the business of the corporation.  He shall keep the chairman of the board of directors and the board of directors fully informed, and shall freely consult them concerning the business of the corporation in his charge.  He may sign and execute all authorized bonds, contracts, checks or other obligations in the name of the corporation.  He may execute proxies for voting shares or corporate stock owned or held by the corporation including subsidiaries, unless in the opinion of the chairman of the board or in his absence or failure to act, the opinion of the president, material and important questions of personnel or policy are involved requiring consideration by the board of directors, or may vote such shares in the form of a consent in writing under any statute permitting the use of consents in lieu of stockholders meetings.  He shall do and perform such other duties as from time to time may be assigned to him by the board of directors or the chairman of the board of directors.  As to all third persons dealing with the corporation, the acts of either the chairman of the board of directors or the president shall be valid and binding, if the act of either of them would be valid and binding.

Section 9.  He shall execute bonds, mortgages, deeds, contracts, other instruments and acknowledgments thereof, all under the seal of the corporation where required, except where permitted or required by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors, the chairman of the board of directors or the president to some other officer or agent of the corporation.

VICE PRESIDENTS

Section 10.  The vice presidents in the order of their seniority shall, in the absence of disability of the president, perform the duties and exercise the powers of the president, and shall perform such other duties as the board of directors shall prescribe.

The seniority of the vice presidents shall be determined as follows:

(1)By the date of first appointment as vice president, or

(2)In the event of two or more vice presidents being appointed on the same day, then in accordance with their seniority as employees of the corporation or its subsidiaries.

THE SECRETARY AND ASSISTANT SECRETARIES

Section 11.  The secretary shall attend all sessions of the board and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose and shall perform like duties for the standing committees when required.  He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors.  He shall keep in safe custody the seal of the corporation and, when authorized by the board, affix the same to any instrument requiring it and, when so affixed, it shall be attested by his signature or by the signature of the treasurer or an assistant secretary.

Section 12.  The assistant secretaries in order of their seniority shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties as the board of directors shall prescribe.

The seniority of the assistant secretaries shall be determined as follows:

(1)By the date of first appointment as assistant secretary, or

(2)In the event of two or more assistant secretaries being appointed on the same day, then in accordance with their seniority as employees of the corporation or its subsidiaries.

THE TREASURER AND ASSISTANT TREASURERS

Section 13.  The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors.

Section 14.  The treasurer shall disburse the funds of the corporation as may be ordered by the board, taking proper vouchers for such disbursements, and shall render to the president and directors, at the regular meetings of the board, or whenever they may require it, an account of all his transactions as treasurer and of the financial condition of the corporation.

Section 15.  The assistant treasurers in the order of their seniority shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer and shall perform such other duties as the board of directors shall prescribe.

(1)By the date of first appointment as assistant treasurer, or

(2)In the event of two or more assistant treasurers being appointed on the same day, then in accordance with their seniority as employees of the corporation or its subsidiaries.

ARTICLE VI

CERTIFICATES OF STOCK

Section 1.  The certificates of stock of the corporation shall be numbered and shall be entered in the books of the corporation as they are issued.  They shall exhibit the holder’s name and number of shares and shall be signed by the chairman or vide chairman of the board of directors, or the president or a vice president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary.  If any stock certificate is countersigned (1) by a transfer agent other than the corporation or its employee, of (2) by a registrar other than the corporation or its employee, any and all signatures on the certificate may be a facsimile.  In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such office, transfer agent, or registrar at the date of issue.

LOST CERTIFICATES

Section 2.  The corporation may issue a new certificate of stock in place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

TRANSFERS OF STOCK

Section 3.  Upon surrender to the corporation or the transfer agent of the corporation of a certificate of stock duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

CLOSING OF TRANSFER BOOKS

Section 4.  In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of the stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action.

If no record date is fixed:

(1)The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

(2)The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the board of directors is necessary, shall be the day on which the first written consent is expressed.

(3)The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting.

REGISTERED STOCKHOLDERS

Section 5.  The corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

ARTICLE VII

GENERAL PROVISIONS

DIVIDENDS

Section 1.  The directors of the corporation, subject to any restrictions contained in the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock either (1) out of its surplus, as defined in and computed in accordance with the Laws of Delaware, or (2) in case there shall be no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.  If the capital of the corporation, computed in accordance with the Laws of Delaware, shall have been diminished by depreciation in the value of its property, or by losses, or otherwise, to an amount less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets, the directors of the corporation shall not declare and pay out of such net profits any dividends upon any shares of any classes of its capital stock until the deficiency in the amount of capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets shall have been repaired.

Subject to any restrictions contained in the certificate of incorporation, the directors may determine the net profits derived from the exploitation of wasting assets (including but not limited to the exploitation of natural resources or other wasting assets, including patents) without taking into consideration the depletion of such assets resulting from lapse of time, consumption or exploitation of such assets.

Section 2.  Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, may think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.

FISCAL YEAR

Section 3.  The fiscal year of the corporation shall be fixed by resolution of the board of directors.

SEAL

Section 4.  The corporate seal shall have inscribed thereon the name of the corporation and the words “Corporate Seal, Delaware.”  Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

ARTICLE VIII

AMENDMENTS

Section 1.  These by-laws may be altered or repealed by the board of directors.

ARTICLE IX

INDEMNIFICATION

Section 1.  The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.  The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

Section 2.  The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

Section 3.  To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in sections 1 and 2 of this Article of these by-laws, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection therewith.

Section 4.  Any indemnification under sections 1 and 2 of this Article of these by-laws (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in said sections 1 and 2.  Such determination shall be made (1) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) if submitted to them, by the stockholders.

Section 5.  Expenses incurred with respect to any investigation or claim or in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding as authorized by the board of directors in the specific case upon receipt of a written undertaking by or on behalf of the director, officer, employee, agent or other recipient to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the corporation as authorize in this Article of these by-laws.

Section 6.  The right to indemnification provided by this Article of these by-laws shall not be deemed exclusive and shall be in addition to and not in restriction or limitation of any other rights to which those seeking indemnification may be entitled as a matter of law or under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while serving as a director, officer, employee or agent, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

Section 7.  For purposes of this Article of these by-laws, no officer, director, employee or agent or other person shall be deemed to have acted otherwise than in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, or with respect to any criminal action or proceeding to have acted with reasonable cause to believe his conduct was unlawful, if his action or omission is based on the records or books of account of the corporation, or on information supplied to him by the officers of the corporation or of any of its subsidiaries or divisions in the course of their duties, or upon the advice of legal counsel for the corporation, or on information or reports made to the corporation by an independent certified public accountant or by an appraiser selected with reasonable care by the board of directors of the corporation.

Section 8.  The corporation shall have power to purchase and maintain insurance on behalf of any person who is, was or hereafter shall become a director, officer, employee or agent of the corporation, or who serves or may have served at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability.

Section 9.  For the purposes of this Article of these by-laws, references to “the corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if it separate existence had continued.

EXHIBIT A

ARTICLE IX

INDEMNIFICATION

The following sets forth Article XI of the Company’s By-Laws as adopted by the Board of Directors:

Section 1.  Indemnification of Directors and Officers.  To the fullest extent permitted by law, the Corporation shall indemnify any person made or threatened to be made a party to any action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person or such person’s testator or intestate is or was a director or officer of the Corporation or serves or served at the request of the Corporation any other enterprise as a director or officer.  Expenses incurred by any such person in defending any such action, suit or proceeding shall be paid or reimbursed by the corporation promptly upon receipt by it of an undertaking of such person to repay such expenses if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation.  For purposes of this By-Laws, the term “Corporation” shall include any predecessor of the Corporation and any constituent corporation (including any constituent of a constituent) absorbed by the Corporation in a consolidation or merger; the term “other enterprise” shall include any corporation, partnership, joint venture, trust or employee benefit plan; service “at the request of the Corporation” shall include service as a director or officer of the Corporation which imposes duties on, or involves services by, such director or officer with respect to any other enterprise or any employee benefit plan, its participants or beneficiaries; any excise taxes assessed on a person with respect to an employee benefit plan shall be deemed to be indemnifiable expenses; and action by a person with respect to any employee benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interest of the Corporation.  The indemnification and advancement of expenses provided by, or granted pursuant to, this Article shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.

Section 2.  Contract with the Corporation.  The provisions of this Article shall be deemed to be a contract between the Corporation and each such director or officer who serves in any such capacity at any time while this Article and the relevant provisions of the General Corporation Law of Delaware or other applicable laws, if any, are in effect, and any repeal or modification

of any such laws or of this Article shall not affect any rights or obligations then existing with respect to any state of fact then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought or threatened based in whole or in part upon any such state of facts.

Section 3.  Indemnification of Other Employees and Agents.  Persons who are not covered by the foregoing provisions of this Article and who are or were employees or agents of the Corporation, or are or were serving at the request of the Corporation as employees or agents of another corporation, partnership, joint venture, trust or other enterprise, may be indemnified to the extent authorized at any time or from time to time by the Board of Directors within its sole and unfettered discretion.

Section 4.  Other Rights of Indemnification.  The indemnification provided or permitted by this Article shall not be deemed exclusive or any other rights to which those indemnified may be entitled by law or otherwise, and shall continue as to a person who has ceased to be a director or officer, and unless otherwise provided by the Board of Directors acting pursuant to Section 3 of this Article as to a person who has ceased to be an employee or agent, and shall inure to the benefit of the heirs, executors and administrators of any such person.

Section 5.  Insurance.  The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power or chose to indemnify such person against such liability under the provisions of these sections.

EX-10

Exhibit 10

THIRD AMENDMENT TO CREDIT AGREEMENT

1.THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), dated as of August 11, 2014, is entered into by and among CONTINENTAL MATERIALS CORPORATION, a Delaware corporation (the “Company”), the financial institutions that are or may from time to time become parties to the Credit Agreement referenced below (together with their respective successors and assigns, the “Lenders” and each, a “Lender”), and THE PRIVATEBANK AND TRUST COMPANY, an Illinois state chartered bank as Administrative Agent for each Lender (the “Administrative Agent”), and this Amendment is effective as of June 28, 2014.  Capitalized terms used herein and not otherwise defined shall have the meanings given to such terms in the Credit Agreement referenced below.

2.WHEREAS, the Lender previously made available to the Company a credit facility pursuant to the terms and conditions of that certain Amended and Restated Credit Agreement, dated as of November 18, 2011, by and among the Company, the Lender and the Administrative Agent, as amended by that certain First Amendment to Credit Agreement, dated as of March 21, 2013, by and among the Company, the Lender and the Administrative Agent, and as amended by that certain Second Amendment to Credit Agreement, dated as of March 20, 2014, by and among the Company, the Lender and the Administrative Agent (as further amended, restated or supplemented from time to time, the “Credit Agreement”);

3.WHEREAS, as of the date hereof, the Revolving Commitment is $18,000,000; and

4.WHEREAS, the parties to this Amendment desire to amend the Credit Agreement to, among other things, (i) waive testing of the Fixed Charge Coverage Ratio for the Computation Period ending June 28, 2014, and (ii) implement testing of the minimum EBITDA covenant for the Computation Period ending June 28, 2014, in each case, on the terms and conditions set forth herein.

5.NOW, THEREFORE, in consideration of the premises, to induce the Lender and Administrative Agent to enter into this Amendment, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed by the parties hereto as follows:

Incorporation of Recitals.  The foregoing recitals are hereby incorporated into and made a part of this Amendment.

Amendment of the Credit Agreement.  It is hereby agreed and understood that, subject to the complete fulfillment and performance of the conditions precedent set forth in Section 4 of this Amendment, the Credit Agreement is hereby amended and modified as follows:

Section 11.13.1 of the Credit Agreement is hereby amended and restated in its entirety and replaced with the following:

“11.13.1 Minimum Fixed Charge Coverage Ratio.  Not permit the Fixed Charge Coverage Ratio for any Computation Period referenced below to be less than the applicable amount set forth below:

Computation Period Ending	Fixed Charge Coverage Ratio
September 27, 2014 and each Fiscal Quarter end thereafter	1.15 to 1.0”

Section 11.13.6 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“11.13.6 Minimum EBITDA.  Not permit EBITDA for any period referenced below to be less than the applicable amount set forth below:

Computation Period Ending	EBITDA
June 28, 2014	$	2,000,000”

Amendment of the Loan Documents.  It is hereby agreed and understood by the Administrative Agent, each Lender and the Company that, subject to the complete fulfillment and performance of the conditions precedent set forth in Section 4 of this Amendment and effective as of the effective date of this Amendment, each reference to the Credit Agreement, the Revolving Loan,

the Amended and Restated Revolving Loan Note and/or any other defined terms or any Loan Documents in any Loan Documents shall be deemed to be a reference to any such defined terms or such agreements as such terms or agreements are amended or modified by this Amendment.  Any breach of any representation, warranty, covenant or agreement contained in this Amendment shall be deemed to be an Event of Default for all purposes of the Credit Agreement.

Conditions Precedent.  The effectiveness of this Amendment and the obligations of the Administrative Agent and each Lender hereunder are subject to the satisfaction, or waiver by the Administrative Agent, of the following conditions precedent on or before the date hereof (unless otherwise provided or agreed to by the Administrative Agent) in addition to the conditions precedent specified in Section 12.2 of the Credit Agreement:

The Company shall have paid and/or reimbursed all reasonable fees, costs and expenses relating to this Amendment and owed to the Lender pursuant to the Credit Agreement in connection with this Amendment.

The Company shall have paid a $10,000 amendment/waiver fee to the Lender.

The Company shall have delivered, or caused to be delivered, original fully completed, dated and executed originals of (i) this Amendment, and (ii) such other certificates, instruments, agreements or documents as the Administrative Agent may reasonably request (each of the foregoing certificates, instruments, agreements and documents described in this Section 4(C) (other than this Amendment) which constitute Loan Documents are hereinafter referred to collectively as the “Other Documents”).

The Company shall have delivered certified copies of all documents evidencing any necessary corporate action, consents and governmental approvals (if any) required for the execution, delivery and performance by the Loan Parties of this Amendment and the Loan Documents referenced herein.

The following statements shall be true and correct and the Company, by executing and delivering this Amendment to the Lender and the Administrative Agent, hereby certifies that the following statements are true and correct as of the date hereof:

Other than as expressly contemplated by this Amendment, since the date of the most recent financial statements furnished by the Company to the Administrative Agent (which financial statements were true and correct in all material respects and otherwise conformed to the requirements set forth in the Credit Agreement for such financial statements), there shall have been no change which has had or will have a material adverse effect on the business, operations, properties or financial condition of the Loan Parties taken as a whole;

The representations and warranties of the Company set forth in the Credit Agreement and the other Loan Documents (as amended by this Amendment) are true and correct in all respects on and as of the date of this Amendment with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, and no Unmatured Event of Default or Event of Default has occurred and is continuing; and

No consents, licenses or approvals are required in connection with the execution, delivery and performance by the Company of this Amendment or the Other Documents or the validity or enforceability against the Company of this Amendment or the Other Documents which have not been obtained and delivered to the Lender.

Miscellaneous.

Except as expressly amended and modified by this Amendment, the Credit Agreement and the other Loan Documents are and shall continue to be in full force and effect in accordance with the terms thereof.

This Amendment may be executed by the parties hereto in counterparts, and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

This Amendment shall be construed in accordance with and governed by the internal laws, and not the laws of conflict, of the State of Illinois.

The headings contained in this Amendment are for ease of reference only and shall not be considered in construing this Amendment.

[SIGNATURE PAGES FOLLOW]

6.IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to Credit Agreement to be duly executed as of the day and year first above written.

COMPANY:
CONTINENTAL MATERIALS CORPORATION
By:	/s/  Joseph J. Sum
	Joseph J. Sum
	Chief Financial Officer
ADMINISTRATIVE AGENT AND LENDER:
THE PRIVATEBANK AND TRUST COMPANY
By:	/s/ Richard Pierce
	Richard Pierce
	Managing Director

EX-31.1

Exhibit 31.1

CERTIFICATION

I, James G. Gidwitz, certify that:

1.I have reviewed this Form 10-Q for the quarterly period ended June 28, 2014 of Continental Materials Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 12, 2014

By:	/s/ James G. Gidwitz
	James G. Gidwitz
	Chairman of the Board and
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Joseph J. Sum, certify that:

1.I have reviewed this Form 10-Q for the quarterly period ended June 28, 2014 of Continental Materials Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 12, 2014

By:	/s/ Joseph J. Sum
	Joseph J. Sum
	Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Continental Materials Corporation (the “Company”) on Form 10-Q for the period ended June 28,  2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James G. Gidwitz, the Chairman of the Board and Chief Executive Officer of the Company, and I, Joseph J. Sum, the Vice President and Chief Financial Officer of the Company, hereby certify, pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and Section 1350, of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that to our knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 12, 2014

By:	/s/    James G. Gidwitz
	James G. Gidwitz
	Chairman of the Board and
	Chief Executive Officer
By:	/s/    Joseph J. Sum
	Joseph J. Sum
	Vice President and Chief Financial Officer

EX-95

Exhibit 95

Mine Safety Disclosures

The following disclosures are provided pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of SEC Regulation S-K, which require certain disclosures by companies required to file periodic reports under the Securities Exchange Act of 1934, as amended, that operate mines regulated under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”).

Mine Safety Information. Whenever the Federal Mine Safety and Health Administration (“MSHA”) believes a violation of the Mine Act, any health or safety standard or any regulation has occurred, it may issue a citation which describes the alleged violation and fixes a time within which the mining operator must abate the alleged violation. In some situations, such as when MSHA believes that conditions pose a hazard to miners, MSHA may issue an order removing miners from the area of the mine affected by the condition until the alleged hazards are corrected. When MSHA issues a citation or order, it generally proposes a civil penalty, or fine, as a result of the alleged violation, that the operator is ordered to pay.  Citations and orders can be contested and appealed, and as part of that process, are often reduced in severity and amount, and are sometimes dismissed. The number of citations, orders and proposed assessments vary depending on the size and type (underground or surface) of the mine as well as by the MSHA inspectors assigned.

Mine Safety Data. The following headings are used in the table below to describe the categories of violations, orders or citations issued by MSHA under the Mine Act with respect to the Company’s mines:

·Section 104 S&S Citations: Citations received from MSHA under Section 104 of the Mine Act for violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a mine safety or health hazard.

·Section 104(b) Orders: Orders issued by MSHA under Section 104(b) of the Mine Act, which represents a failure to abate a citation under Section 104(a) within the period of time prescribed by MSHA. This results in an order of immediate withdrawal from the area of the mine affected by the condition until MSHA determines that the violation has been abated.

·Section 104(d) Citations and Orders: Citations and orders issued by MSHA under Section 104(d) of the Mine Act for unwarrantable failure to comply with mandatory health or safety standards

·Section 110(b)(2) Violations: Flagrant violations issued by MSHA under Section 110(b)(2) of the Mine Act

·Section 107(a) Orders: Orders issued by MSHA under Section 107(a) of the Mine Act for situations in which MSHA determined an “imminent danger” existed.

The following table details the violations, citations and orders issued to us by MSHA during the fiscal quarter ended June 28, 2014 (Dollar amounts in thousands):

Mine(1)	Section 104 S&S Citations(2)(#)	Section 104(b) Orders(#)	Section 104(d) Citations and Orders(#)	Section 110(b)(2) Violations(#)	Section 107(a) Orders(#)	Proposed Assessments(3) ($)		Mining Related Fatalities(#)
Snyder Quarry	—	—	—	—	—	$	—	—
Grisenti Farms Gravel Pit	—	—	—	—	—	—		—
Daniels Sand Pit 1 & 2	1	—	—	—	—	—		—
Pueblo East	2	—	—	—	—	—		—
Pikeview Quarry	5	—	—	—	—	—		—

(1)The definition of “mine” found in Section 3 of the Mine Act includes the mine, as well as other items used in, or to be used in, or resulting from, the work of extracting minerals, such as land, structures, facilities, equipment, machines, tools and minerals preparation facilities. Unless otherwise indicated, any of these other items associated with a single mine have been aggregated in the totals for that mine. MSHA assigns an identification number to each mine and may or may not assign separate identification numbers to related facilities such as preparation facilities. We are providing the information in the table by mine rather than MSHA identification number because that is how we manage and operate our mining business and we believe this presentation will be more useful to the reader than providing information based on MSHA identification numbers.

(2)No Section 104 Citations were subject to contest as of June 28, 2014.

(3)Represents the total dollar value of the proposed assessment from MSHA under the Mine Act pursuant to the citations and/or orders preceding such dollar value in the corresponding row.

Pattern or Potential Pattern of Violations. During the fiscal quarter ended June 28, 2014, none of the mines operated by us received written notice from MSHA of (a) a pattern of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of mine health or safety hazards under Section 104(e) of the Mine Act or (b) the potential to have such a pattern.

Pending Legal Actions. There were no legal actions pending before the Federal Mine Safety and Health Review Commission (the “Commission”) as of June 28, 2014, nor were any legal actions instituted and resolved during the fiscal quarter ended June 28, 2014. The Commission is an independent adjudicative agency established by the Mine Act that provides administrative trial and appellate review of legal disputes arising under the Mine Act. These cases may involve, among other questions, challenges by operators to citations, orders and penalties they have received from MSHA, or complaints of discrimination by miners under Section 105 of the Mine Act. The following provides additional information of the types of proceedings that may be brought before the Commission:

·Contest Proceedings: A contest proceeding may be filed by an operator to challenge the issuance of a citation or order issued by MSHA.

·Civil Penalty Proceedings: A civil penalty proceeding may be filed by an operator to challenge a civil penalty MSHA has proposed for a violation contained in a citation or order. We do not institute civil penalty proceedings based solely on the assessment amount of proposed penalties. Any initiated adjudications address substantive matters of law and policy instituted on conditions that are alleged to be in violation of mandatory standards of the Mine Act.

·Discrimination Proceedings: Involves a miner’s allegation that he or she has suffered adverse employment action because he or she engaged in activity protected under the Mine Act, such as making a safety complaint. Includes also temporary reinstatement proceedings involving cases in which a miner has filed a complaint with MSHA stating that he or she has suffered discrimination and the miner has lost his or her position.

·Compensation Proceedings: A compensation proceeding may be filed by miners entitled to compensation when a mine is closed by certain closure orders issued by MSHA. The purpose of the proceeding is to determine the amount of compensation, if any, due to miners idled by the orders.

·Temporary Relief: Applications for temporary relief are applications filed under Section 105(b)(2) of the Mine Act for temporary relief from any modification or termination of any order.

·Appeals: An appeal may be filed by an operator to challenge judges’ decisions or orders to the Commission, including petitions for discretionary review and review by the Commission on its own motion.

During the fiscal quarter ended June 28, 2014, we had no legal actions instituted or resolved.  As of June 28, 2014, we had no pending legal actions.

XML

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

6 Months Ended

Jun. 28, 2014

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

4.There are currently no significant prospective accounting pronouncements that are expected to have a material effect on the Company’s consolidated financial statements.

XML

FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 28, 2014

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

3.Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1Quoted prices in active markets for identical assets or liabilities.

Level 2Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3Unobservable inputs supported by little or no market activity and are significant to the fair value of the assets or liabilities. Unobservable inputs shall reflect the assumptions that market participants would use when pricing the asset or liability including assumptions about risk.

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying balance sheet.

Cash and Cash Equivalents: The carrying amount approximates fair value and was valued as Level 1.

Revolving Bank Loan Payable: Fair value is estimated based on the borrowing rates currently available to the Company for bank loans with similar terms and maturities and determined through the use of a discounted cash flow model. The carrying amount of the Revolving Bank Loan Payable represents a reasonable estimate of the corresponding fair value as the Company’s debt is held at variable interest rates and was valued as Level 2.

Long-term Debt: Fair value was estimated based on the borrowing rates currently available to the Company for bank loans with similar terms and maturities and determined through the use of a discounted cash flow model. The carrying amount of long-term debt represents a reasonable estimate of the corresponding fair value as the Company’s debt was held at variable interest rates and was valued as Level 2.

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Jun. 28, 2014	Dec. 28, 2013
Current assets:
Cash and cash equivalents	$ 1,017	$ 924
Receivables, net	24,544	22,600
Receivable for insured losses	156	156
Inventories:
Finished goods	7,774	6,958
Work in process	965	985
Raw materials and supplies	8,854	8,269
Prepaid expenses	1,674	1,357
Refundable income taxes	334	812
Deferred income taxes	225	1,173
Total current assets	45,543	43,234
Property, plant and equipment, net	19,059	19,009
Goodwill	7,229	7,229
Amortizable intangible assets, net	92	118
Prepaid royalties	1,798	1,859
Other assets	513	513
Deferred income taxes	878
Total assets	75,112	71,962
Current liabilities:
Accounts payable and accrued expenses	15,576	12,879
Liability for unpaid claims covered by insurance	156	156
Total current liabilities	15,732	13,035
Revolving bank loan payable	5,400	1,000
Long-term debt		3,408
Deferred income taxes		360
Other long-term liabilities	2,268	2,095
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	1,827	1,815
Retained earnings	64,961	65,529
Treasury shares, 927,986 and 936,097 at cost	(15,719)	(15,923)
Total shareholders' equity	51,712	52,064
Total liabilities and shareholders' equity	$ 75,112	$ 71,962

XML

BASIS OF PRESENTATION

6 Months Ended

Jun. 28, 2014

BASIS OF PRESENTATION

BASIS OF PRESENTATION

1.Basis of Presentation:

The unaudited interim condensed consolidated financial statements included herein are prepared pursuant to the Securities and Exchange Commission rules and regulations for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures normally accompanying the annual consolidated financial statements have been omitted. The condensed consolidated balance sheet of Continental Materials Corporation (the “Company”) as of December 28, 2013 has been derived from the audited consolidated balance sheet of the Company as of that date. The interim condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s latest annual report on Form 10-K. In the opinion of management, the condensed consolidated financial statements include all adjustments (none of which were other than normal recurring adjustments) necessary for a fair statement of the results for the interim periods. Certain reclassifications have been made to the 2013 consolidated financial statements to conform to the 2014 presentation. The reclassifications had no effect on the consolidated results of operations, the net increase in cash or the total assets, liabilities or shareholders’ equity of the Company.

XML

AMORTIZABLE INTANGIBLE ASSETS (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 28, 2014	Jun. 29, 2013	Jun. 28, 2014	Jun. 29, 2013
AMORTIZABLE INTANGIBLE ASSETS
Accumulated amortization	$ 628		$ 628
Amortization expense	13	15	26	30
Estimated amortization expense
2015	52		52
2016	45		45
2017	$ 21		$ 21

XML

REVOLVING BANK LOAN AND LONG-TERM DEBT (Details) (USD $)	0 Months Ended	6 Months Ended		6 Months Ended	12 Months Ended		6 Months Ended	3 Months Ended	6 Months Ended			0 Months Ended		3 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended	0 Months Ended	6 Months Ended
	Jun. 28, 2014	Jun. 28, 2014	Jun. 29, 2013	Jun. 28, 2014 Period Ending September272014 [Member]	Dec. 28, 2013 Minimum [Member] December302012 To December282013 [Member]	Mar. 29, 2014 Minimum [Member] Period Ending March292014 [Member]	Jun. 28, 2014 Minimum [Member] Period Ending June282014 [Member]	Jun. 28, 2014 Minimum [Member] Period Ending On Or After December312014 [Member]	Jun. 28, 2014 Revolving Credit Facility [Member]	Mar. 20, 2014 Revolving Credit Facility [Member]	Mar. 21, 2013 Revolving Credit Facility [Member]	Jul. 01, 2014 Revolving Credit Facility [Member] Subsequent Event [Member]	Jun. 28, 2014 Revolving Credit Facility [Member] Minimum [Member]	Mar. 29, 2014 Revolving Credit Facility [Member] Debt Instrument Variable Rate Base London Inter Bank Offered Rate [Member]	Jun. 28, 2014 Revolving Credit Facility [Member] Debt Instrument Variable Rate Base London Inter Bank Offered Rate [Member]	Mar. 29, 2014 Revolving Credit Facility [Member] Debt Instrument Variable Rate Base Prime [Member]	Jun. 28, 2014 Revolving Credit Facility [Member] Debt Instrument Variable Rate Base Prime [Member]	Jul. 01, 2014 Revolving Credit Facility [Member] Debt Instrument Variable Rate Base Prime [Member] Subsequent Event [Member]	Jun. 28, 2014 Term Debt And Revolving Credit [Member]	Jun. 29, 2013 Term Debt And Revolving Credit [Member]
REVOLVING BANK LOAN AND LONG-TERM DEBT
Maximum revolving credit facility line										$ 18,000,000	$ 15,000,000
Borrowings as a percentage of eligible accounts receivable													80.00%
Borrowings as a percentage of eligible inventories													50.00%
Maximum inventory borrowings													8,500,000
Borrowings as a percentage of capital expenditures									80.00%
Maximum line of credit borrowing amount based on aggregate new capital expenditures									4,000,000
Maximum annual line of credit borrowing amount for fiscal 2014 based on new capital expenditures									2,000,000
Maximum annual line of credit borrowing amount for fiscal 2015 based on new capital expenditures									2,000,000
Fixed charge coverage ratio				1.15			1.05	1.50
EBITDA requirements	2,000,000				2,500,000	1,500,000
Minimum tangible net worth threshold, base amount			35,000,000
Minimum tangible net worth threshold, percentage of the consolidated net income			50.00%
Maximum balance sheet leverage ratio		1.00
Period after the end of each fiscal year, within which specified percentage of excess cash flow to be paid		120 days
Specified percentage of excess cash flow to be paid after the end of each fiscal year		0.50%
Variable interest rate base														LIBOR		prime rate		prime rate
Percentage points added to the reference rate												3.00%			3.25%		1.00%	0.75%
Outstanding amount																			5,400,000	3,658,000
Highest balance outstanding during the period																			8,000,000	3,908,000
Average outstanding																			5,175,000	3,721,000
Outstanding amount of letters of credit total																			$ 5,415,000
Period over which existing cash balance, anticipated cash flow from operations and borrowings available under the credit agreement will be sufficient to cover expected cash needs		12 months

XML

INCOME TAXES

6 Months Ended

Jun. 28, 2014

INCOME TAXES

INCOME TAXES

2.Income taxes are accounted for under the asset and liability method that requires deferred income taxes to reflect the future tax consequences attributable to differences between the tax and financial reporting bases of assets and liabilities. Deferred tax assets and liabilities recognized are based on the tax rates in effect in the year in which differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, based on available positive and negative evidence, it is “more likely than not” (greater than a 50% likelihood) that some or all of the net deferred tax assets will not be realized.

The Company has established a valuation reserve related to the carry-forward of all charitable contributions deductions arising from prior years and the portion of contributions in 2014 that the Company believes it will be unable to utilize prior to the expiration of their carry-forward periods. The Company also established a valuation reserve related to the carry-forward of the long-term capital loss related to the sale of the stock of Rocky Mountain Ready Mix Concrete, Inc. due to the uncertainty that the Company will be able to generate offsetable long-term capital gains prior to the expiration of the carry-forward period, December 31, 2014. For Federal purposes, net operating losses can be carried forward for a period of 20 years while alternative minimum tax credits can be carried forward indefinitely. For state purposes, net operating losses can be carried forward for periods ranging from 5 to 20 years for the states that the Company is required to file in. California Enterprise Zone credits can be carried forward indefinitely while Colorado credits can be carried forward for 7 years.

The Company’s income tax returns are subject to audit by the Internal Revenue Service (the “IRS”) and state tax authorities. The amounts recorded for income taxes reflect the Company’s tax positions based on research and interpretations of complex laws and regulations. The Company accrues liabilities related to uncertain tax positions taken or expected to be taken in its tax returns. The IRS has completed examinations for periods through 2009. Various state income tax returns also remain subject to examination.

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Jun. 28, 2014	Dec. 28, 2013
CONDENSED CONSOLIDATED BALANCE SHEETS
Common shares, par value (in dollars per share)	$ 0.25	$ 0.25
Common shares, authorized shares	3,000,000	3,000,000
Common shares, issued shares	2,574,264	2,574,264
Treasury, shares	924,097	936,097

XML

INDUSTRY SEGMENT INFORMATION (Tables)

6 Months Ended

Jun. 28, 2014

INDUSTRY SEGMENT INFORMATION

Schedule of information about reported segments along with the items necessary to reconcile the segment information to totals reported in financial statements

	Construction Products								HVAC Products
	Concrete, Aggregates & Construction Supplies			Doors		Combined Construction Products			Heating and Cooling			Evaporative Cooling		Combined HVAC Products		Unallocated Corporate			Other		Total
2014
Six Months ended June 28, 2014
Revenues from external customers	$	27,341		$	8,421	$	35,762		$	12,618		$	15,804	$	28,422	$	7		$	—	$	64,191
Depreciation, depletion and amortization	920			71		991			257			209		466		24			—		1,481
Operating (loss) income	(1,358		)	936		(422		)	(399		)	1,649		1,250		(1,479		)	—		(651		)
Segment assets	35,727			7,320		43,047			16,095			13,415		29,510		2,421			134		75,112
Capital expenditures (b)	1,225			35		1,260			111			134		245		—			—		1,505
Quarter ended June 28, 2014
Revenues from external customers	$	17,023		$	4,525	$	21,548		$	5,694		$	10,121	$	15,815	$	4		$	—	$	37,367
Depreciation, depletion and amortization	464			35		499			128			104		232		12			—		743
Operating income (loss)	225			541		766			(369		)	1,386		1,017		(749		)	—		1,034
Segment assets	35,727			7,320		43,047			16,095			13,415		29,510		2,421			134		75,112
Capital expenditures (b)	602			1		603			55			40		95		—			—		698

	Construction Products								HVAC Products
	Concrete, Aggregates & Construction Supplies			Doors		Combined Construction Products			Heating and Cooling			Evaporative Cooling		Combined HVAC Products		Unallocated Corporate			Other			Total
2013
Six Months ended June 29, 2013
Revenues from external customers	$	19,594		$	8,126	$	27,720		$	15,089		$	16,226	$	31,315	$	6		$	29		$	59,070
Depreciation, depletion and amortization	1,185			62		1,247			206			179		385		27			—			1,659
Operating (loss) income	(2,122		)	610		(1,512		)	1,214			1,843		3,057		(1,530		)	(774		)	(759		)
Segment assets (a)	26,471			6,837		33,308			18,748			12,118		30,866		7,654			134			71,962
Capital expenditures (b)	147			39		186			384			240		624		6			—			816
Quarter ended June 29, 2013
Revenues from external customers	$	11,777		$	4,401	$	16,178		$	5,530		$	11,145	$	16,675	$	4		$	—		$	32,857
Depreciation, depletion and amortization	607			31		638			103			89		192		14			—			844
Operating (loss) income	(174		)	494		320			(80		)	1,602		1,522		(806		)	(662		)	374
Segment assets (a)	26,471			6,837		33,308			18,748			12,118		30,866		7,654			134			71,962
Capital expenditures (b)	51			3		54			318			34		352		(9		)	—			397

(a) Segment assets are as of December 28, 2013.

(b) Capital expenditures are presented on the accrual basis of accounting.

XML

Document and Entity Information	3 Months Ended
	Jun. 28, 2014	Aug. 08, 2014
Document and Entity Information
Entity Registrant Name	CONTINENTAL MATERIALS CORP
Entity Central Index Key	0000024104
Document Type	10-Q
Document Period End Date	Jun. 28, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-27
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		1,650,167
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2

XML

INCOME TAXES (Details)	6 Months Ended
	Jun. 28, 2014
Internal Revenue Service I R S [Member]
Net operating losses
Net operating losses carryforward period	20 years
State And Local Jurisdiction [Member] | Minimum [Member]
Net operating losses
Net operating losses carryforward period	5 years
State And Local Jurisdiction [Member] | Maximum [Member]
Net operating losses
Net operating losses carryforward period	20 years

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 28, 2014	Jun. 29, 2013	Jun. 28, 2014	Jun. 29, 2013
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Net sales	$ 37,367	$ 32,857	$ 64,191	$ 59,070
Costs and expenses:
Cost of sales (exclusive of depreciation, depletion and amortization)	30,890	26,320	53,918	48,327
Depreciation, depletion and amortization	743	844	1,481	1,659
Selling and administrative	4,701	4,655	9,444	9,131
Williams EcoLogix project expenses		662		710
Total costs and expenses	36,333	32,483	64,842	59,829
Gain on disposition of property and equipment	1	(2)	1	(2)
Operating loss	1,034	374	(651)	(759)
Interest expense, net	(110)	(92)	(209)	(179)
Other income, net	5	5		18
Income before income taxes	929	287	(860)	(920)
Benefit from income taxes	316	100	(292)	(304)
Net income	613	187	(568)	(616)
Retained earnings, beginning of period	64,348	65,585	65,529	66,388
Retained earnings, end of period	$ 64,961	$ 65,772	$ 64,961	$ 65,772
Net income per basic and diluted share (in dollars per share)	$ 0.37	$ 0.11	$ (0.34)	$ (0.37)
Average shares outstanding (in shares)	1,650	1,646	1,647	1,643

XML

INDUSTRY SEGMENT INFORMATION

6 Months Ended

Jun. 28, 2014

INDUSTRY SEGMENT INFORMATION

INDUSTRY SEGMENT INFORMATION

7.The Company operates primarily in two industry groups, Heating, Ventilation and Air Conditioning (HVAC) and Construction Products. The Company has identified two reportable segments within each of the industry groups: the Heating and Cooling segment and the Evaporative Cooling segment in the HVAC industry group and the CACS 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. (WFC) of Colton, California. The Evaporative Cooling segment produces and sells evaporative coolers from the Company’s wholly-owned subsidiary, Phoenix Manufacturing, Inc. (PMI) of Phoenix, Arizona. Sales of these two segments are nationwide, but are concentrated in the southwestern United States. Concrete, Aggregates and Construction Supplies are offered from numerous locations along the Southern Front Range of Colorado operated by the Company’s wholly-owned subsidiaries Castle Concrete Company and Transit Mix Concrete Co., of Colorado Springs and Transit Mix of Pueblo, Inc. of Pueblo, Colorado (the three companies collectively are referred to as “TMC”). The Door segment sells hollow metal doors, door frames and related hardware, wood doors, lavatory fixtures and electronic access and security systems from the Company’s wholly-owned subsidiary, McKinney Door and Hardware, Inc. (MDHI), which operates out of facilities in Pueblo and Colorado Springs, Colorado. Sales of these two segments are highly concentrated in the Southern Front Range of Colorado although door sales are also made throughout the United States.

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. Expenses related to the corporate information technology group are allocated to all locations, including the corporate office. An “Other” classification is used to report a real estate operation and the activity of Williams EcoLogix, Inc. (WEI). WEI is a wholly-owned subsidiary of Continental Materials Corporation which was set up in anticipation of distributing a product that was being developed by a third party. The expenses incurred were associated with the subsidiary’s sole employee and miscellaneous related expenses. Development of the product has ceased and the sole employee was terminated in February 2013.

The Company evaluates the performance of its segments and allocates resources to them based on a number of criteria including operating income, return on investment and other strategic objectives. Operating income is determined by deducting operating expenses from all revenues. In computing operating income, none of the following has been added or deducted: unallocated corporate expenses, interest, other income or loss or income taxes.

The following table presents information about reported segments for the six-month and three-month periods ended June 28, 2014 and June 29, 2013 along with the items necessary to reconcile the segment information to the totals reported in the financial statements (dollar amounts in thousands):

	Construction Products								HVAC Products
	Concrete, Aggregates & Construction Supplies			Doors		Combined Construction Products			Heating and Cooling			Evaporative Cooling		Combined HVAC Products		Unallocated Corporate			Other		Total
2014
Six Months ended June 28, 2014
Revenues from external customers	$	27,341		$	8,421	$	35,762		$	12,618		$	15,804	$	28,422	$	7		$	—	$	64,191
Depreciation, depletion and amortization	920			71		991			257			209		466		24			—		1,481
Operating (loss) income	(1,358		)	936		(422		)	(399		)	1,649		1,250		(1,479		)	—		(651		)
Segment assets	35,727			7,320		43,047			16,095			13,415		29,510		2,421			134		75,112
Capital expenditures (b)	1,225			35		1,260			111			134		245		—			—		1,505
Quarter ended June 28, 2014
Revenues from external customers	$	17,023		$	4,525	$	21,548		$	5,694		$	10,121	$	15,815	$	4		$	—	$	37,367
Depreciation, depletion and amortization	464			35		499			128			104		232		12			—		743
Operating income (loss)	225			541		766			(369		)	1,386		1,017		(749		)	—		1,034
Segment assets	35,727			7,320		43,047			16,095			13,415		29,510		2,421			134		75,112
Capital expenditures (b)	602			1		603			55			40		95		—			—		698

	Construction Products								HVAC Products
	Concrete, Aggregates & Construction Supplies			Doors		Combined Construction Products			Heating and Cooling			Evaporative Cooling		Combined HVAC Products		Unallocated Corporate			Other			Total
2013
Six Months ended June 29, 2013
Revenues from external customers	$	19,594		$	8,126	$	27,720		$	15,089		$	16,226	$	31,315	$	6		$	29		$	59,070
Depreciation, depletion and amortization	1,185			62		1,247			206			179		385		27			—			1,659
Operating (loss) income	(2,122		)	610		(1,512		)	1,214			1,843		3,057		(1,530		)	(774		)	(759		)
Segment assets (a)	26,471			6,837		33,308			18,748			12,118		30,866		7,654			134			71,962
Capital expenditures (b)	147			39		186			384			240		624		6			—			816
Quarter ended June 29, 2013
Revenues from external customers	$	11,777		$	4,401	$	16,178		$	5,530		$	11,145	$	16,675	$	4		$	—		$	32,857
Depreciation, depletion and amortization	607			31		638			103			89		192		14			—			844
Operating (loss) income	(174		)	494		320			(80		)	1,602		1,522		(806		)	(662		)	374
Segment assets (a)	26,471			6,837		33,308			18,748			12,118		30,866		7,654			134			71,962
Capital expenditures (b)	51			3		54			318			34		352		(9		)	—			397

(a) Segment assets are as of December 28, 2013.

(b) Capital expenditures are presented on the accrual basis of accounting.

There are no differences in the basis of segmentation or in the basis of measurement of segment profit or loss from the last Annual Report on Form 10-K.

XML

EARNINGS PER SHARE

6 Months Ended

Jun. 28, 2014

EARNINGS PER SHARE

EARNINGS PER SHARE

6.There is no difference in the calculation of basic and diluted earnings per share (EPS) for the three-month or six-month periods ended June 28, 2014 and June 29, 2013 as the Company does not have any dilutive instruments.

XML

NON-EMPLOYEE DIRECTORS SHARE-BASED COMPENSATION (Details) (Director [Member])	0 Months Ended
	Feb. 12, 2014	Feb. 11, 2013 director
Director [Member]
SHAREHOLDERS' EQUITY
Number of shares issued to eligible board members	12,000	12,000
Number of eligible board members		8

XML

INCOME TAXES (Details 2) (State And Local Jurisdiction [Member], C [O])	6 Months Ended
	Jun. 28, 2014
State And Local Jurisdiction [Member] | C [O]
Tax credits
Tax credits carry-forward period	7 years

XML

REVOLVING BANK LOAN AND LONG-TERM DEBT

6 Months Ended

Jun. 28, 2014

REVOLVING BANK LOAN AND LONG-TERM DEBT

REVOLVING BANK LOAN AND LONG-TERM DEBT

10.The Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) effective November 18, 2011. The Company entered into a Second Amendment to Credit Agreement effective March 20, 2014 to, among other things, (i) increase the Revolving Commitment to $18,000,000 from $15,000,000, (ii) terminate the Term Loan Commitment upon the repayment in full of the outstanding principal balance (and accrued interest thereon), (iii) modify the Borrowing Base calculation to provide for borrowing availability in respect of new Capital Expenditures, (iv) decrease the interest rates on the Revolving Loans beginning in the third quarter of 2014, and (v) extend the maturity date to May 1, 2016, in each case, on the terms and conditions set forth in the Second Amendment. Borrowings under the Credit Agreement are secured by the Company’s accounts receivable, inventories, machinery, equipment, vehicles, certain real estate and the common stock of all of the Company’s subsidiaries. The Company entered into a Third Amendment to Credit Agreement effective June 28, 2014 to defer the Fixed Charge Coverage Ratio covenant until the third quarter of fiscal 2014 and to add a minimum Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) requirement of $2,000,000 for the twelve months ended June 28, 2014, which the Company has met. Borrowings bear interest based on a London Interbank Offered Rate (LIBOR) or prime rate based option.

The Credit Agreement either limits or requires prior approval by the lender of additional borrowings, acquisition of stock of other companies, purchase of treasury shares and payment of cash dividends. Payment of accrued interest is due monthly or at the end of the applicable LIBOR period.

The Credit Agreement, as amended, also provides for the following:

· The Revolving Commitment is $18,000,000.

· Borrowings under the Revolving Commitment are limited to (a) 80% of eligible accounts receivable, (b) the lesser of 50% of eligible inventories and $8,500,000 plus (c) the lesser of 80% of new Capital Expenditures not to exceed $4,000,000 in the aggregate and $2,000,000 with respect to each of Fiscal Years 2014 and 2015.

· The Minimum Fixed Charge Coverage Ratio is not permitted to be below 1.05 to 1.0 for the Computation Period ending June 28, 2014 increasing to 1.15 to 1.0 for the Computation Period ending September 27, 2014 and each Fiscal Quarter end thereafter.

· The Company must not permit Earnings Before Interest, Taxes, Depreciation and Amortization (Minimum EBITDA) to be less than $2,500,000 for the fiscal year ended December 28, 2013 or permit the Minimum EBITDA to be less than $1,500,000 for the trailing twelve-month period ending March 29, 2014.

· The Company must maintain a Minimum Tangible Net Worth as of the last day of any Computation Period of $35,000,000 increased by (but not decreased by) 50% of the Consolidated Net Income beginning with the 2013 fiscal year.

· The Balance Sheet Leverage Ratio as of the last day of any Computation Period may not exceed 1.00 to 1.00.

· The Company must pay within 120 days after the end of each Fiscal Year, an amount equal to fifty percent of Excess Cash Flow for such Fiscal Year. The lender waived this provision for the 2012 fiscal year.

· The maturity date of the credit facility is May 1, 2016.

· Interest rate pricing for the revolving credit facility is currently LIBOR plus 3.25% or the prime rate plus 1%. Commencing July 1, 2014, interest rate pricing will be lowered to LIBOR plus 3.00% or the prime rate plus .75%. An additional reduction is possible in the event the Fixed Charge Coverage Ratio is equal to or exceeds 1.5 to 1.0 with respect to any Computation Period ending on or after December 31, 2014.

Definitions under the Credit Agreement as amended are as follows:

· Minimum Tangible Net Worth is defined as net worth plus subordinated debt, minus intangible assets (goodwill, intellectual property, prepaid expenses, deposits and deferred charges), minus all obligations owed to the Company or any of its subsidiaries by any affiliate or any or its subsidiaries and minus all loans owed by its officers, stockholders, subsidiaries or employees.

· Excess Cash Flow is defined as meaning for any period, the remainder of (a) EBITDA for such period, minus (b) the sum, without duplication, of (i) scheduled repayments of principal of the term loan made during such period, plus (ii) voluntary prepayments of the term loan during such period, plus (iii) mandatory prepayments of the term loan during such period to the extent the amount of such mandatory prepayment was included in EBITDA for such period, plus (iv) cash payments made in such period with respect to capital expenditures, plus (v) all income taxes paid in cash by the Company during such period, plus (vi) cash interest expense of the Company during such period.

· Fixed Charge Coverage Ratio is defined as, for any computation period, the ratio of (a) the sum for such period of (i) EBITDA minus (ii) the sum of income taxes paid in cash and all unfinanced capital expenditures to (b) the sum for such period of (i) interest expense, plus (ii) required payments of principal of the term debt.

· Balance Sheet Leverage Ratio is defined as the ratio of Total Debt to Tangible Net Worth.

As noted above, the Second Amendment to the Credit Agreement called for the payoff of the then outstanding balance of the term loan with borrowings against the new revolving line of credit. Outstanding funded debt (term debt and revolving credit) was $5,400,000 as of June 28, 2014 compared to $3,658,000 at June 29, 2013. The highest balance outstanding during the first six months of 2014 and 2013 was $8,000,000 and $3,908,000, respectively. Average outstanding funded debt was $5,175,000 and $3,721,000 for the first six months of 2014 and 2013, respectively. At June 28, 2014, the Company had outstanding letters of credit totaling $5,415,000. At all times since the inception of the Credit Agreement, the Company has had sufficient qualifying and eligible assets such that the available borrowing capacity exceeded the cash needs of the Company and this situation is expected to continue for the foreseeable future.

The Company believes that its existing cash balance, anticipated cash flow from operations and borrowings available under the Credit Agreement, will be sufficient to cover expected cash needs, including planned capital expenditures, for the next twelve months. The Company expects to meet or exceed the Minimum Fixed Charge Coverage Ratio of 1.15 to 1.00 for all succeeding Computation Periods.

XML

AMORTIZABLE INTANGIBLE ASSETS

6 Months Ended

Jun. 28, 2014

AMORTIZABLE INTANGIBLE ASSETS

AMORTIZABLE INTANGIBLE ASSETS

8.Identifiable amortizable intangible assets as of June 28, 2014 include a restrictive land covenant and customer relationships. Collectively, these assets were carried at $92,000, net of $628,000 accumulated amortization. The pre-tax amortization expense for intangible assets during the quarter ended June 28, 2014 was $13,000 compared to $15,000 for the quarter ended June 29, 2013 and was $26,000 and $30,000 for the six months ended June 28, 2014 and June 29, 2013, respectively.

Based upon the intangible assets recorded on the balance sheet at June 28, 2014, amortization expense for the next five years is estimated to be as follows: 2014 – $52,000; 2015 – $45,000; 2016 – $21,000.

XML

NON-EMPLOYEE DIRECTORS SHARE-BASED COMPENSATION

6 Months Ended

Jun. 28, 2014

NON-EMPLOYEE DIRECTORS SHARE-BASED COMPENSATION

NON-EMPLOYEE DIRECTORS SHARE-BASED COMPENSATION

9.The Company issued a total of 12,000 shares to the eight eligible board members effective February 12, 2014 as full payment for their 2014 retainer fee. The Company issued a total of 12,000 shares to the eight eligible board members effective February 11, 2013 as full payment for their 2013 retainer fee. All shares were issued under the 2010 Non-Employee Directors Stock Plan.

XML

LEGAL PROCEEDINGS

6 Months Ended

Jun. 28, 2014

LEGAL PROCEEDINGS

LEGAL PROCEEDINGS

11.The Company is involved in litigation matters related to its business, principally product liability matters related to the gas-fired heating products and fan coil products in the Heating and Cooling segment. In the Company’s opinion, none of these proceedings, when concluded, will have a material adverse effect on the Company’s consolidated results of operations, cash flows or financial condition as the Company has established adequate accruals for matters that are probable and estimable. The Company does not accrue estimated future legal costs related to the defense of these matters but rather expenses them as incurred.

XML

INDUSTRY SEGMENT INFORMATION (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 28, 2014	Jun. 29, 2013	Jun. 28, 2014	Jun. 29, 2013	Dec. 28, 2013
INDUSTRY SEGMENT INFORMATION
Revenues from external customers	$ 37,367	$ 32,857	$ 64,191	$ 59,070
Depreciation, depletion and amortization	743	844	1,481	1,659
Operating Income (Loss)	1,034	374	(651)	(759)
Segment assets	75,112	71,962	75,112	71,962	71,962
Capital expenditures	698	397	1,505	816
Concrete Aggregates And Construction Supplies [Member]
INDUSTRY SEGMENT INFORMATION
Revenues from external customers	17,023	11,777	27,341	19,594
Depreciation, depletion and amortization	464	607	920	1,185
Operating Income (Loss)	225	(174)	(1,358)	(2,122)
Segment assets	35,727	26,471	35,727	26,471
Capital expenditures	602	51	1,225	147
Doors [Member]
INDUSTRY SEGMENT INFORMATION
Revenues from external customers	4,525	4,401	8,421	8,126
Depreciation, depletion and amortization	35	31	71	62
Operating Income (Loss)	541	494	936	610
Segment assets	7,320	6,837	7,320	6,837
Capital expenditures	1	3	35	39
Heating And Cooling [Member]
INDUSTRY SEGMENT INFORMATION
Revenues from external customers	5,694	5,530	12,618	15,089
Depreciation, depletion and amortization	128	103	257	206
Operating Income (Loss)	(369)	(80)	(399)	1,214
Segment assets	16,095	18,748	16,095	18,748
Capital expenditures	55	318	111	384
Evaporative Cooling [Member]
INDUSTRY SEGMENT INFORMATION
Revenues from external customers	10,121	11,145	15,804	16,226
Depreciation, depletion and amortization	104	89	209	179
Operating Income (Loss)	1,386	1,602	1,649	1,843
Segment assets	13,415	12,118	13,415	12,118
Capital expenditures	40	34	134	240
Corporate Non Segment [Member]
INDUSTRY SEGMENT INFORMATION
Revenues from external customers	4	4	7	6
Depreciation, depletion and amortization	12	14	24	27
Operating Income (Loss)	(749)	(806)	(1,479)	(1,530)
Segment assets	2,421	7,654	2,421	7,654
Capital expenditures		(9)		6
All Other Segments [Member]
INDUSTRY SEGMENT INFORMATION
Revenues from external customers				29
Operating Income (Loss)		(662)		(774)
Segment assets	134	134	134	134
Construction Products [Member]
INDUSTRY SEGMENT INFORMATION
Revenues from external customers	21,548	16,178	35,762	27,720
Depreciation, depletion and amortization	499	638	991	1,247
Operating Income (Loss)	766	320	(422)	(1,512)
Segment assets	43,047	33,308	43,047	33,308
Capital expenditures	603	54	1,260	186
Heating Ventilation And Air Conditioning Products [Member]
INDUSTRY SEGMENT INFORMATION
Revenues from external customers	15,815	16,675	28,422	31,315
Depreciation, depletion and amortization	232	192	466	385
Operating Income (Loss)	1,017	1,522	1,250	3,057
Segment assets	29,510	30,866	29,510	30,866
Capital expenditures	$ 95	$ 352	$ 245	$ 624

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 28, 2014	Jun. 29, 2013
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Net cash used in operating activities	$ 605	$ 1,777
Investing activities:
Capital expenditures	(1,505)	(816)
Net cash used in investing activities	(1,504)	(755)
Cash proceeds from sale of property and equipment	1	61
Financing activities:
Borrowings against the revolving bank loan, net	4,400
Repayment of long term debt	(3,408)	(250)
Payments to acquire treasury stock		(125)
Net cash provided by (used in) financing activities	992	(375)
Net increase in cash and cash equivalents	93	647
Cash and cash equivalents:
Beginning of period	924	1,734
End of period	1,017	2,381
Cash paid(received) during the three months for:
Interest, net	215	212
Income taxes refunded	$ (481)	$ (700)

XML

SEASONALITY AND CURRENT ECONOMIC CONDITIONS

6 Months Ended

Jun. 28, 2014

SEASONALITY AND CURRENT ECONOMIC CONDITIONS

SEASONALITY AND CURRENT ECONOMIC CONDITIONS

5.Operating results for the first six months of 2014 are not necessarily indicative of performance for the entire year due to the seasonality of most of our products. Historically, sales of the Evaporative Cooling segment are higher in the first and second quarters, sales of the Concrete, Aggregates and Construction Supplies (CACS) segment are higher in the second and third quarters and sales of the Heating and Cooling segment are higher in the third and fourth quarters. The sales of the Door segment are more evenly spread throughout the year.

XML

EARNINGS PER SHARE (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 28, 2014	Jun. 29, 2013	Jun. 28, 2014	Jun. 29, 2013
EARNINGS PER SHARE
Difference between the calculation of basic and diluted EPS (in dollars per share)	$ 0	$ 0	$ 0	$ 0