UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~September~~ March 28, ~~2019~~ 2020

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

For the transition period from to

Commission File number 1-3834

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.)

440 South LaSalle Street, Suite 3100, Chicago, Illinois		60605
(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)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	CUO	NYSE American

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:.

Large Accelerated Filer ☐ Accelerated Filer ☐ Non-Accelerated Filer ☒☐ Smaller reporting company ☒ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

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 ~~November 5~~May 1, ~~2019~~ 2020: 1,~~710~~671,~~698~~304.

PART I — FINANCIAL INFORMATION

Item 1.Financial Statements

CONTINENTAL MATERIALS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

~~SEPTEMBER~~MARCH 28, ~~2019~~2020 AND DECEMBER 2928, ~~2018~~2019

(000’s omitted except share data)

	SEPTEMBER 28, 2019		DECEMBER 29,
	MARCH 28, 2020		DECEMBER 28,
	(Unaudited)		~~2018~~2019
ASSETS
Current assets:
Cash and cash equivalents	$	4,~~297~~596	$	~~594~~178
Receivables, net		20,754		15,321
Receivables, net of allowance of $634 and $494		18,138		21,555
Receivable for insured losses		~~840~~1,033		~~874~~911
Inventories
Finished goods		47,~~193~~372		56,~~448~~419
Work in process		1,~~564~~014		1,~~365~~061
Raw materials and supplies		7,~~191~~961		76,~~993~~473
Prepaid expenses		21,~~227~~762		12,~~785~~171
Refundable income taxes		23,~~400~~807		~~494~~2,397
Other current assets		~~4,552~~111		24,~~500~~229
Other current assets held for sale		—380		~~10,968~~896
Total current assets		4846,~~018~~174		4746,~~342~~290
Property, plant and equipment		11,~~729~~716		1012,~~431~~025
Right-of use assets		54,~~258~~695		—4,978
Goodwill		65,~~011~~932		15,~~000~~932
Intangible assets		12,~~991~~274		—12,437
Deferred income taxes		76,~~823~~755		37,~~414~~667
Other long-term assets		~~666~~641		~~448~~654
Other long-term assets held for sale		—		13,068
	$	88,187	$	89,983
	$	92,496	$	75,703
LIABILITIES
Current liabilities:
Revolving bank loan payable	$	—	$	~~2,200~~800
Accounts payable and accrued expenses		2016,~~341~~155		1216,~~299~~725
Short-term asset retirement obligation		4,~~946~~181		14,~~017~~200
Short-term lease liabilities		1,~~129~~182		—1,170
Liability for unpaid claims covered by insurance		~~840~~1,033		~~874~~911
Other current liabilities held for sale		—		3,800
Total current liabilities		22,551		23,806
Total current liabilities		27,256		20,190
Long-term lease liabilities		3,695		3,991
Long-term lease liabilities		4,168		—
Long-term compensation liabilities		1,945		1,842
Long-term compensation liability		456		—
Asset retirement obligation		23,855		23,713
Asset retirement obligation		21,018		5,252
Other long-term liabilities		528		1,442
Other long-term liabilities		2,303		1,193
Other long-term liabilities held for sale		—		292
SHAREHOLDERS’ EQUITY
Common shares, $.25 par value; authorized 3,000,000 shares; issued 2,574,264 shares		643		643
Capital in excess of par value		21,~~013~~853		1,~~930~~853
Retained earnings		4947,~~333~~936		6147,~~131~~232
Treasury shares, 862,201 and 876,409 at cost		(14,694)		(14,928)
Treasury shares, 898,780 and 860,910 at cost		(14,819)		(14,539)
		37,295		48,776
		35,613		35,189
	$	9288,~~496~~187	$	7589,~~703~~983

See notes to condensed consolidated financial statements.

CONTINENTAL MATERIALS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

FOR THE THREE MONTHS ENDED ~~SEPTEMBER~~MARCH 28, ~~2019~~2020 AND ~~SEPTEMBER~~MARCH 2930, ~~2018~~2019

(Unaudited)

(000’s omitted except per-share amounts)

	SEPTEMBER 28,		SEPTEMBER 29,
	MARCH 28,		MARCH 30,
	2019		2018
	2020		2019
Net sales	$	3130,~~987~~845	$	2322,~~965~~528
Costs and expenses:
Cost of sales (exclusive of depreciation, depletion and amortization)		24,452		18,740
Cost of sales (exclusive of depreciation and amortization)		22,565		17,847
Depreciation, depletion and amortization		597		393
Depreciation and amortization		513		519
Selling and administrative		87,~~102~~778		6,~~100~~792
Impairment related to cessation of mining an aggregate deposit		20,217		—
Gain on legal settlement				(15,000)
Loss on legal settlement (Note 20)		6,400		—
Gain on disposition of property and equipment		(145)		(5)
Loss on disposition of property and equipment		125		—
		30,711		10,153
		59,893		25,233
Operating income		134		12,375
Operating loss		(27,906)		(1,268)
Interest income		114		149
Interest income		39		14
Interest expense		(101)		(71)
Interest expense		(100)		(140)
Other income, net		59		13
Other loss net		(16)		(70)
Income from continuing operations before income taxes		206		12,466
Loss from continuing operations before income taxes		(27,983)		(1,464)
Credit (provision) for income taxes		498		(3,366)
Benefit for income taxes		(7,699)		(366)
Income from continuing operations		704		9,100
Loss from continuing operations		(20,284)		(1,098)
Income from discontinued operations net of income tax provision of $0 and $1,562		—		4,222
Loss from discontinued operations net of income tax benefit of $0 and $46		—		(138)
Net income		704		13,322
Net loss		(20,284)		(1,236)
Retained earnings, beginning of period		47,232		61,131
Retained earnings, beginning of period		69,617		62,907
Retained earnings, end of period	$	47,936	$	74,453
Retained earnings, end of period	$	49,333	$	61,671
Basic and diluted loss per share:
Loss from continuing operations		(11.85)		(0.65)
Income from continuing operations	$	0.42	$	5.33
Loss from discontinued operations		-		(0.08)
Income from discontinued operations		-		2.47
Basic and diluted loss per share	$	(11.85)	$	(0.73)
Basic and diluted income per share	$	0.42	$	7.80
Average shares outstanding		1,~~712~~685		1,~~698~~709

See notes to condensed consolidated financial statements

CONTINENTAL MATERIALS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

FOR THE NINE MONTHS ENDED SEPTEMBER 28, 2019 AND SEPTEMBER 29, 2018

(Unaudited)

(000’s omitted except per-share amounts)

	SEPTEMBER 28,		SEPTEMBER 29,
	2019		2018
Net sales	$	79,773	$	72,932
Costs and expenses:
Cost of sales (exclusive of depreciation, depletion and amortization)		63,834		56,728
Depreciation, depletion and amortization		1,369		1,203
Selling and administrative		23,991		15,938
Charges related to write off of deferred development		—		6,840
Loss on legal settlement (Note 20)		6,400		—
Gain on legal settlement (Note 14)		(14,781)		—
Impairment related to cessation of mining an aggregate deposit		20,217		—
Gain on disposition of property and equipment		(308)		—
		100,722		80,709
Operating loss		(20,949)		(7,777)
Interest income		349		59
Interest expense		(274)		(415)
Other income (loss), net		42		(29)
Loss from continuing operations before income taxes		(20,832)		(8,162)
Benefit for income taxes		(5,730)		(2,040)
Net loss from continuing operations		(15,102)		(6,122)
Income from discontinued operations net of income tax provision of $1,255 and $268		3,304		806
Net loss		(11,798)		(5,316)
Retained earnings, beginning of period		61,131		66,987
Retained earnings, end of period	$	49,333	$	61,671
Basic and diluted income (loss) per share:
Loss from continuing operations	$	(8.82)	$	(3.61)
Income from discontinued operations		1.93		0.47
Basic and diluted loss per share	$	(6.89)	$	(3.13)
Average shares outstanding		1,712		1,697

See notes to condensed consolidated financial statements

CONTINENTAL MATERIALS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE ~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER~~ MARCH 28, ~~2019~~2020 AND ~~SEPTEMBER~~MARCH 2930, ~~2018~~2019

(Unaudited)

(000’s omitted)

	SEPTEMBER 28,		SEPTEMBER 29,
	MARCH 28,		MARCH 30,
	2019		2018
	2020		2019
Net cash provided (used) by continuing operations	$	5,492	$	(1,459)
Net cash provided by continuing operations	$	2,955	$	11,624
Net cash provided (used) by discontinued operations		294		(797)
Net cash (used) provided by discontinued operations		—		(15)
Net cash provided (used) by operating activities		5,786		(2,256)
Net cash provided by operating activities		2,955		11,609
Investing activities:
Capital expenditures by continuing operations		(~~973~~26)		(~~963~~63)
Capital expenditures by discontinued operations		~~(172)~~—		(~~1,439~~172)
Payments for acquisitions		(23,213)		—
Cash proceeds from sale of discontinued operations		1,918		24,927
Cash proceeds from sale of discontinued operations		23,679		—
Cash proceeds from sale of continuing operations property and equipment		664		5
Cash proceeds from sale of continuing operations property and equipment		956		—
Net cash provided by investing activities		2,556		24,697
Cash proceeds from sale of discontinued operations property and equipment		—		1,403
Financing activities:
Net cash provided (used) in investing activities		277		(999)
Borrowings on the revolving bank loan		3,450		4,050
Financing activities:
Repayments on the revolving bank loan		(4,250)		(5,450)
Borrowings on the revolving bank loan		12,550		27,600
Repayments of finance lease obligations		(13)		(10)
Repayments on the revolving bank loan		(14,750)		(24,400)
Payments to acquire treasury stock		(280)		(69)
Repayments of finance lease obligations		(36)		—
Net cash used by financing activities		(1,093)		(1,479)
Payments to acquire treasury stock		(124)		—
Net increase in cash and cash equivalents		4,418		34,827
Net cash (used) provided by financing activities		(2,360)		3,200
Cash and cash equivalents:
Net increase (decrease) in cash and cash equivalents		3,703		(55)
Beginning of period		178		594
Cash and cash equivalents:
End of period	$	4,596	$	35,421
Beginning of period		594		507
Supplemental disclosures of cash flow items:
End of period	$	4,297	$	452
Cash paid during the period for:
Supplemental disclosures of cash flow items:
Interest, net	$	111	$	72
Cash paid during the year for:
Income taxes, net		—		—
Interest, net	$	284	$	404
Contingent consideration from acquisitions		1,540		—
Income taxes, net		1,840		50

See notes to condensed consolidated financial statements

CONTINENTAL MATERIALS CORPORATION

CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

(000’s omitted, except ~~per~~ share data)

Nine Months ended September 28, 2019
Three Months ended March 28, 2020
		Common		Capital
	Common	shares		in excess		Retained		Treasury	Treasury
	shares	amount		of par		earnings		shares	shares cost		Total
Balance at December 29, 2018	2,574,264	$	643	$	1,930	$	61,131	876,409	$	(14,928)	$	48,776
Balance at December 28, 2019	2,574,264	$	643	$	1,853	$	47,232	860,910	$	(14,539)	$	35,189
Net income	—		—		—		~~13,322~~704	—		—		~~13,322~~704
Compensation of Board of Directors by issuance of treasury shares	—		—		83		—	(21,000)		358		441
Purchase of treasury shares	—		—		—		—	37,870		(280)		(280)
Purchase of treasury shares	—		—		—		—	3,368		(69)		(69)
Balance at March 28, 2020	2,574,264	$	643	$	1,853	$	47,936	898,780	$	(14,819)	$	35,613
Balance at March 30, 2019	2,574,264	$	643	$	2,013	$	74,453	858,777	$	(14,639)	$	62,470
Net loss	—		—		—		(4,836)	—		—		(4,836)
Purchase of treasury shares	—		—		—		—	1,752		(29)		(29)
Balance at June 29, 2019	2,574,264	$	643	$	2,013	$	69,617	860,529	$	(14,668)	$	57,605
Net loss	—		—		—		(20,284)	—		—		(20,284)
Purchase of treasury shares	—		—		—		—	1,672		(26)		(26)
Balance at September 28, 2019	2,574,264	$	643	$	2,013	$	49,333	862,201	$	(14,694)	$	37,295

Nine Months ended September 29, 2018
Three Months ended March 30, 2019
		Common		Capital
	Common	shares		in excess		Retained		Treasury	Treasury
	shares	amount		of par		earnings		shares	shares cost		Total
Balance at December 30, 2017	2,574,264	$	643	$	1,887	$	66,987	892,097	$	(15,195)	$	54,322
Balance at December 29, 2018	2,574,264	$	643	$	1,930	$	61,131	876,409	$	(14,928)	$	48,776
Net loss	—		—		—		(613,~~193)~~322			—		(613,~~193)~~322
Compensation of Board of Directors by issuance of treasury shares	—		—		4383		—	(1621,000)		~~271~~358		~~314~~441
Purchase of treasury shares	—		—		—		—	~~112~~3,368		—(69)		—(69)
Balance at March 31, 2018	2,574,264	$	643	$	1,930	$	60,794	876,209	$	(14,924)	$	48,443
Balance at March 30, 2019	2,574,264	$	643	$	2,013	$	74,453	858,777	$	(14,639)	$	62,470
Net income	—		—		—		2,113			—		2,113
Purchase of treasury shares	—		—		—		—	—		—		—
Balance at June 30, 2018	2,574,264	$	643	$	1,930	$	62,907	876,209	$	(14,924)	$	50,556
Net income	—		—		—		(1,236)			—		(1,236)
Purchase of treasury shares	—		—		—		—	200		(4)		(4)
Balance at September 29, 2018	2,574,264	$	643	$	1,930	$	61,671	876,409	$	(14,928)	$	49,316

See notes to condensed consolidated financial statements

CONTINENTAL MATERIALS CORPORATION

SECURITIES AND EXCHANGE COMMISSION FORM 10-Q

NOTES TO THE QUARTERLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

QUARTER ENDED ~~SEPTEMBER~~MARCH 28, ~~2019~~2020

(Unaudited)

1. ~~Basis~~Significant ofAccounting ~~Presentation~~Policies:

Basis of Presentation:

The unaudited interim condensed consolidated financial statements included herein are prepared pursuant to the Securities and Exchange Commission (the “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 2928, ~~2018~~2019 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 and to ensure the financial statements are not misleading. The results of operations for the period are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made to the ~~2018~~2019 consolidated financial statements to conform to the ~~2019~~2020 presentation. The reclassifications had no effect on the consolidated results of operations, the net ~~change~~decrease in cash or the total assets, liabilities or shareholders’ equity of the Company. During the quarter ended March 30, 2019 the Company sold substantially all of the assets of Transit Mix Concrete Company’s ready-mix business and Daniels sand operation. ~~The assets and liabilities related to these operations are presented as held for sale in accordance with generally accepted accounting principles.~~ See Note 15. Accordingly, the operations of these businesses are presented as discontinued operations for all periods presented.

Revenue Recognition:

~~Effective~~The ~~December~~Company ~~31,~~recognizes ~~2017,~~revenue ~~the~~in ~~Company~~accordance ~~adopted~~with Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). Sales ~~and~~are ~~related~~recognized ~~amendments,~~when ~~which~~control ~~creates~~of athe ~~single~~promised ~~source~~goods ofor ~~revenue~~services ~~guidance~~transfers ~~for~~to ~~all~~the ~~companies~~Company’s customers in ~~all~~an ~~industries~~amount ~~and~~that isreflects ~~more~~the ~~principles-based~~consideration ~~than~~the ~~previous~~Company ~~revenue~~expects ~~guidance.~~to ~~The~~be ~~Company~~entitled ~~adopted~~to ~~the~~in ~~standard~~exchange ~~using~~for ~~the~~those ~~modified~~goods ~~retrospective~~or ~~approach~~services. The ~~adoption~~Company’s ofpayment ~~this~~terms ~~standard~~generally ~~did~~range ~~not~~between ~~result~~30 into ~~significant~~90 ~~changes~~days after invoice is billed to the ~~Company’s~~customer. ~~accounting~~Sales ~~policies,~~are ~~business~~reported ~~processes,~~net ~~systems~~of orsales ~~controls,~~tax. orShipping ~~have~~and aother ~~material~~transportation ~~impact~~costs onpaid ~~its~~by ~~financial~~the ~~position,~~Company ~~consolidated~~and ~~results~~rebilled ofto ~~operations~~the orbuyer ~~consolidated~~are ~~cash~~recorded ~~flows.~~gross As(as ~~such,~~both ~~prior~~sales ~~period~~and ~~financial~~cost ~~statements~~of ~~were~~sales). ~~not~~The ~~recast~~Company ~~and~~generally ~~there~~recognizes ~~was~~revenue nofrom ~~cumulative~~the ~~effect~~sale ~~adjustment~~of ~~upon~~products ~~adoption~~at the time the products are shipped.

Sales are recognized when control of the promised goods or services transfers to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company’s payment terms generally range between 30 to 90 days after invoice is billed to the customer. Sales are reported net of sales tax. Shipping and other transportation costs paid by the Company and rebilled to the buyer are recorded gross (as both sales and cost of sales). The Company generally recognizes revenue from the sale of products at the time the products are shipped.

While the return of products is generally not allowed, some large customers have been granted the right to return a certain amount at the end of the normal selling season for seasonal products. Sales returns and allowances are estimated based on current program terms and historical experience. Provisions for estimated returns, discounts, volume rebates and other price adjustments are provided for in the same period the related revenues are recognized and are netted against revenues.

The Company is responsible for warranties related to the manufacture of its HVAC products and estimates the future warranty claims based upon historical experience and management estimates. The Company reviews warranty and related claims activities and records provisions, as necessary.

7 The majority of sales within the Door division do not include extended installation components. Most of the sales of MDHI that contain installation are completed within 30 days and contain two specific components, the product and the installation service. The transaction price for these contracts is allocated to each performance obligation based on its stated stand-alone price. Revenue is recognized at a point in time as each performance obligation is completed. The Company does not offer maintenance or service contracts. The acquisition of Fastrac and Serenity in mid-2019 expanded the type of contracts that require analysis under Topic 606 guidelines as these operations may include extended installation services within the contracts. The company negotiates the terms of the contract and prepares a detailed project quote that might include number and type of doors, number and style of hardware, locks, electronic items and estimated installation cost. Contract price for each item of the quote is negotiated and stated in

The Company performs installation services for certain projects within its Door segment. Management determined there are two performance obligations related to most of these contracts, the equipment and the installation services. The transaction price for these contracts is allocated to each performance obligation based on its stated stand-alone selling price. Revenue is recognized at a point in time as each performance obligation is completed. No maintenance or service contracts are offered by the Company.6

~~Certain~~the ~~reclassifications~~contract. ~~have~~Modifications ~~been~~are ~~made~~treated as adjustments to ~~prior~~an ~~period~~existing ~~financial~~contract ~~information~~and are part of the changes in ~~order~~billing toinvoices. ~~conform~~Revenue tois ~~the~~recognized ~~current~~as ~~period’s~~performance ~~presentation~~obligations, ~~including~~per the contract agreement, are completed. Revenue for product is recognized as shipped. Revenue for installation services is recognized on a ~~change~~percentage toof ~~the~~completion ~~Company’s~~method ~~reporting~~with ~~segments~~costs in excess of billings and/or billings in excess of costs being recorded as an asset or liability until recognized. ~~See~~Costs ~~Note~~in 7excess ~~for~~of ~~further~~billings, ~~information~~of approximately $238,000 and ~~for~~ ~~disaggregation~~$420,000, are included in Prepaid expenses and retainage on contracts of ~~revenue~~approximately $182,000 byand ~~segment~~$345,000 is included in Receivables on the Consolidated Balance Sheets as of March 28, 2020 and December 28, 2019, respectively.

See Note 7, Segment reporting for disaggregation of revenue by segment.

Leases

Effective December 30, 2018 (the beginning of fiscal 2019) the Company adopted ASU No. 2016-02, “Leases (Topic 842),” which superseded Topic 840, “Leases”. As allowed under the new accounting standard, the Company elected to apply practical expedients to carry forward the original lease determinations, lease classifications and accounting of initial direct costs for all asset classes at the time of adoption. The Company also elected not to separate lease components from non-lease components for asset categories, except office space, and to exclude short-term leases from its Consolidated Balance Sheet. For the office space lease category the election was made to report lease and non-lease components separately as the non-lease components are billed and paid separately and are not a fixed amount over the lease term. The implicit discount rate of leases is used to calculate present values when available. When an implicit discount rate is not readily available an incremental borrowing rate is used to calculate present values.

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.Taxes

~~The~~Income ~~Tax~~taxes ~~Cuts~~are ~~and~~accounted ~~Jobs~~for ~~Act,~~under ~~enacted December 22, 2017, eliminated~~ the ~~corporate~~asset ~~Alternative Minimum Tax (AMT)~~ and ~~allows~~liability ~~for~~method ~~all~~that ~~existing~~requires ~~credit~~deferred ~~carryforwards~~income totaxes ~~be used~~ to ~~offset~~reflect ~~regular~~the ~~tax~~future ~~liability for~~ tax ~~years~~consequences ~~beginning~~attributable ~~after~~to ~~December~~differences ~~31,~~between ~~2017.~~the ~~Additionally, for~~ tax ~~years 2018, 2019~~ and ~~2020,~~financial toreporting ~~the~~bases ~~extent that the AMT credit carryover exceeds the regular tax liability, 50%~~ of ~~the~~assets ~~excess~~and ~~AMT credit is refundable~~liabilities. ~~Any~~Deferred ~~remaining~~tax ~~credits~~assets ~~will~~and beliabilities ~~fully~~recognized ~~refundable~~are inbased ~~2021.~~on ~~For~~the ~~state~~ tax ~~purposes,~~rates ~~net~~in ~~operating~~effect ~~losses~~in ~~can be carried forward for various periods for~~ the ~~states~~year ~~that~~in ~~the~~which ~~Company~~differences isare ~~required~~expected to ~~file in~~reverse. ~~California~~Deferred ~~Enterprise~~tax ~~Zone~~assets ~~credits~~are ~~can~~reduced beby ~~used~~a ~~through~~valuation ~~2023~~allowance ~~while~~when, ~~Colorado~~based ~~credits~~on ~~can~~available bepositive ~~carried~~and ~~forward~~negative ~~for~~evidence, 7it ~~years.~~is ~~The~~“more ~~Company~~likely ~~has~~than ~~established~~not” (greater than a ~~valuation~~50% ~~reserve~~likelihood) ~~related~~that tosome aor ~~portion~~all of the ~~California~~net ~~Enterprise~~deferred ~~Zone~~tax ~~credit~~assets will not ~~expected to~~ be ~~utilized prior to expiration~~realized.

~~The~~On ~~Company’s~~March ~~income~~27, ~~tax~~2020 ~~returns~~Congress ~~are~~passed ~~subject~~the toCoronavirus ~~audit~~Aid, byRelief, ~~the~~and ~~Internal~~Economic ~~Revenue~~Security ~~Service~~Act (~~IRS~~the Act). The Act provides various relief for businesses including a temporary five-year NOL carryback for losses incurred in 2018, 2019 and ~~state~~2020 ~~tax~~as ~~authorities~~well as an NOL deduction of 100% of taxable income for the same years. The ~~amounts~~current ~~recorded~~quarter ~~for~~tax provision includes a $541,000 benefit representing the difference between the anticipated tax refund related to the expected NOL carryback and the value of the NOL asset previously included in Deferred income taxes ~~reflect~~on the Company’s Consolidated Balance Sheet. For state tax ~~positions~~purposes, ~~based~~net onoperating ~~research~~losses ~~and~~can ~~interpretations~~be ofcarried ~~complex~~forward ~~laws~~for ~~and~~various ~~regulations.~~periods ~~The~~for ~~Company~~the ~~accrues~~states ~~liabilities~~that ~~related~~the Company is required to ~~uncertain~~file ~~tax~~in. ~~positions~~California ~~taken~~Enterprise orZone ~~expected~~credits tocan be ~~taken~~used inthrough ~~its~~2023 ~~tax~~while ~~returns~~Colorado credits can be carried forward for 7 years. The Company ~~did~~has ~~not~~established ~~identify~~a ~~any~~valuation ~~such~~reserve ~~uncertain~~related ~~tax~~to ~~positions~~a asportion of ~~September 28,~~the ~~2019~~California orEnterprise ~~December~~Zone ~~29,~~credit ~~2018~~not expected to be utilized prior to expiration.

~~3. Fair~~The ~~value~~Company’s isincome ~~the~~tax ~~price~~returns ~~that~~are ~~would~~subject beto ~~received~~audit toby ~~sell~~the anInternal ~~asset~~Revenue orService ~~paid~~(the to“IRS”) ~~transfer~~and astate ~~liability~~tax inauthorities. anThe ~~orderly~~amounts ~~transaction~~recorded ~~between~~for ~~market~~income ~~participants~~taxes atreflect the ~~measurement~~Company’s ~~date.~~tax ~~Fair~~positions ~~value~~based ~~measurements~~on ~~must~~research ~~maximize~~and ~~the~~interpretations ~~use~~ of ~~observable~~complex ~~inputs~~laws and ~~minimize~~regulations. ~~the~~The ~~use~~Company ofaccrues ~~unobservable~~liabilities ~~inputs~~related to uncertain tax positions taken or expected to be taken in its tax returns. ~~There~~The isCompany adid ~~hierarchy~~not ofidentify ~~three~~any ~~levels~~such ofuncertain ~~inputs~~tax ~~that~~positions ~~may~~as beof ~~used~~March to28, ~~measure~~2020 ~~fair~~or ~~value:~~December 28, 2019.

Level 1	Quoted prices in active markets for identical assets or liabilities.
Level 2	Observable 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.

3. Fair Value Measurements

8Fair 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 3 Unobservable inputs supported by little or no market activity that are significant to the fair value of the assets or liabilities. Unobservable inputs reflect the assumptions that market participants would use when pricing the asset or liability including assumptions about risk. 7

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

Level 2	Observable 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 3	Unobservable inputs supported by little or no market activity that are significant to the fair value of the assets or liabilities. Unobservable inputs 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~~then 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.

~~Phantom~~Lease ~~equity and phantom equity appreciation liability awards~~liabilities: Fair value iswas estimated based on the ~~use~~borrowing ofrates athen ~~Black-Scholes~~available ~~option~~to ~~pricing~~the ~~model~~Company ~~based~~for onbank ~~publically~~loans ~~available~~with ~~inputs~~similar terms and maturities and determined through the use of a discounted cash flow model. The carrying amount of the ~~liability~~Lease liabilities represents a reasonable estimate of the ~~vested portion of the~~ corresponding fair value ~~of the awards granted~~ and was valued as Level 2.

Phantom equity and phantom equity appreciation liability awards: Fair value is estimated based on the use of a Black-Scholes option pricing model based on publicly available inputs. The carrying amount of the liability represents a reasonable estimate of the vested portion of the corresponding fair value of the awards granted and was valued as Level 3.

Contingent consideration: Fair value is estimated based on the use of a Monte Carlo Simulation model based on significant inputs that are not observable in the market, which are considered Level 3 inputs in accordance with ASC Topic 820.

ARO liability: Fair value is estimated using an expected present value technique using estimated cash flows over a period of time and then discounting the expected cash flows using a credit-adjusted risk-free interest rate using significant inputs that are not observable in the market, which are considered Level 3 inputs in accordance with ASC Topic 820.

ARO for asset impairment: Fair value is estimated using an expected present value technique using estimated cash flows over a period of time and then discounting the expected cash flows using a credit-adjusted risk-free interest rate using significant inputs that are not observable in the market, which are considered Level 3 inputs in accordance with ASC Topic 820.

There were no transfers between fair value measurement levels of any financial instruments in the current quarter.

4. In Recently ~~May~~Issued ~~2014,~~Accounting the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This new revenue standard created a single source of revenue guidance for all companies in all industries and is more principles-based than prior revenue guidance. Subsequently, the FASB issued various ASUs to provide further clarification around certain aspects of ASC 606. This standard was adopted by the Company in the first quarter of fiscal 2018. See Note 1 for further discussion of the Company’s revenue recognition policies and practices.Pronouncements

In ~~November~~February 2016, the FASB issued ASU No. 2016-1802, ~~Statement~~“Leases of(Topic ~~Cash~~842),” ~~Flows~~which (superseded Topic ~~230)~~840, ~~requiring~~“Leases”. ~~that~~The new accounting standard was effective for the ~~statement~~Company beginning on December 30, 2018 (the beginning of ~~cash~~fiscal ~~flows~~2019) ~~explain~~and required the ~~change~~recognition inon ~~total~~the ~~cash~~balance sheet of right-of-use assets (ROU) and lease liabilities for all long-term leases, ~~cash~~including ~~equivalents~~operating leases. The Company elected the optional transition method and ~~amounts~~adopted ~~generally~~the ~~described~~new asguidance ~~restricted~~on ~~cash~~December or30, ~~restricted~~2018 ~~cash~~on ~~equivalents~~a modified retrospective basis with no restatement of prior period amounts. ~~This~~As ~~standard~~allowed ~~was~~under ~~adopted~~the bynew accounting standard, the Company inelected to apply practical expedients to carry forward the ~~first~~original ~~quarter~~lease ofdeterminations, ~~fiscal~~lease ~~2018~~classifications and ~~did~~accounting ~~not~~of ~~have~~initial adirect ~~material~~costs ~~impact~~for toall ~~the~~asset ~~consolidated~~classes ~~statement~~at ofthe ~~cash~~time ~~flows~~of adoption. The Company also elected not to separate lease components from non-lease

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which superseded Leases (Topic 840). The new accounting standard was effective for the Company beginning on December 30, 2018 (the beginning of fiscal 2019) and required the recognition on the balance sheet of right-of-use assets (ROU) and lease liabilities for all long-term leases, including operating leases. The Company elected the optional transition method and adopted the new guidance on December 30, 2018 on a modified retrospective basis with no restatement of prior period amounts. As allowed under the new accounting standard, the Company elected to apply practical expedients to carry forward the original lease determinations, lease classifications and accounting of initial direct costs for all asset classes at the time of adoption. The Company also elected not to separate lease components from non-lease components for most asset categories and to exclude short-term leases from its Consolidated Balance Sheet. The Company’s adoption of the new standard resulted in the recognition of ROUs of $5,353,000 and liabilities of $5,427,000 related to operating leases, with no material cumulative effect adjustment to equity as of the date of adoption. In connection with the adoption of this guidance, as required, the Company reclassified deferred rent 8

components for most asset categories and to exclude short-term leases from its Consolidated Balance Sheet. The Company’s adoption of the new standard resulted in the recognition of ROUs of $5,353,000 and liabilities of $5,427,000 related to operating leases, with no material cumulative effect adjustment to equity as of the date of adoption. In connection with the adoption of this guidance, as required, the Company reclassified deferred rent liabilities as reductions to lease assets. Adoption of the new standard did not have a material impact on the Company’s Consolidated Statements of Income or Cash Flows. See Note 13. 9

liabilities as reductions to lease assets. Adoption of the new standard did not have a material impact on the Company’s Consolidated Statements of Income or Cash Flows. See Note 13.

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

5. ~~Historically,~~Seasonality operating results of the Company for the first half of the year were not necessarily indicative of performance for the entire year due to the seasonality of most of the Company’s products. Management believes the recent disposal and ~~acquisition~~Current ~~activity~~Economic ~~should help smooth the seasonality of the Company’s portfolio and make operating results more consistent.~~Conditions

~~6. There~~Certain isproducts nowithin ~~difference~~the Company’s portfolio are seasonal, primarily furnaces and evaporative coolers in the ~~calculation~~HVAC ofsegment ~~basic~~which ~~and~~are ~~diluted~~sensitive ~~earnings~~to ~~per~~weather ~~share~~conditions ~~(EPS)~~particularly ~~for~~during their respective peak selling seasons. Other products within the ~~three-month~~HVAC orsegment, ~~nine~~specifically fan-~~month~~coils ~~periods~~and ~~ended~~dryer ~~September~~boxes, 28and Door segment sales are, ~~2019~~to ~~and~~a ~~September 29~~significant extent, ~~2018~~dependent ason construction activity. Historically, the Company ~~does~~has ~~not~~experienced operating losses during the first quarter and typically improved in the second and third quarters reflecting more favorable weather conditions for legacy products. Fourth quarter results have ~~any~~typically ~~dilutive~~varied ~~instruments~~based on weather conditions affecting the Company’s discontinued operations as well as in the principal markets for the Company’s heating equipment. The 2019 sale of the Company’s ready-mix and Daniels Sand operations along with the acquisitions completed in 2019 are expected to reduce the seasonality of the Company’s operations.

7. The ~~Company sold substantially all of the assets of its ready mix concrete and Daniels sand operations in the~~ first quarter of ~~2019.~~2020 ~~See~~has ~~Note~~presented ~~15.~~significant ~~During~~economic ~~the~~challenges ~~second~~from ~~quarter of 2019,~~ the ~~Company~~effects ~~acquired the assets~~ of ~~four operating businesses through three separate transactions~~COVID-19. ~~See~~The ~~Note~~Company 16cannot ~~for~~reasonably ~~additional~~determine ~~discussion~~what of the ~~acquisitions.~~future Inimpact ~~conjunction~~on ~~with~~revenue, ~~these~~cash ~~transactions~~flow ~~management~~or ~~reviewed~~earnings ~~its~~from ~~segment~~operations ~~reporting~~will ~~structure and determined it was no longer appropriate for the consolidated business going forward~~be. ~~The~~Our ~~segment~~operations ~~reporting~~were ~~was~~considered ~~revised~~essential ~~to align with the way the Company’s decision makers evaluate, manage~~ and ~~allocates~~thus ~~resources~~far all ~~to the operating~~ businesses ~~after~~within the ~~sale~~portfolio ofcontinue ~~the~~to ~~concrete~~manufacture and ~~aggregates~~sell ~~assets~~product, ofbut ~~the~~we ~~Company’s~~are ~~wholly-owned~~seeing ~~subsidiaries~~a ~~(collectively~~slowdown ~~referred~~in todemand ~~as TMC)~~ and ~~the~~are ~~acquisitions~~anticipating ~~discussed~~potentially ~~below.~~significant ~~Segment~~impacts ~~information~~through ~~for~~the ~~prior~~remainder ~~periods~~of ~~has been reclassified to conform to current segment reporting structure~~2020.

6. Earnings Per Share

There is no difference in the calculation of basic and diluted earnings per share (EPS) for the three-month periods ended March 28, 2020 and March 30, 2019 as the Company does not have any dilutive instruments.

7. Industry Segment Information

The Company operates primarily in the Building Products industry group. Within this industry group the Company has identified three reportable segments: the HVAC segment, the Door segment and the Construction Materials segment.

The HVAC segment produces and sells a variety of products including wall furnaces, fan coils, evaporative coolers, boiler room equipment and dryer boxes and related accessories from the Company’s wholly-owned subsidiaries, Williams Furnace Co. (WFC) of Colton, California, Phoenix Manufacturing, Inc. (PMI) of Phoenix, Arizona, Global Flow Products /American HVAC (GFP) of Broken Arrow, Oklahoma, and ~~Inovate~~InOvate Dryer Technologies (~~Inovate~~InOvate) of Jupiter, Florida. Sales of this segment are nationwide although WFC and PMI sales are more concentrated in the southwestern United States. The Door segment sells hollow metal and wood doors, door frames and related hardware, sliding door systems and electronic access and security systems from the Company’s wholly-owned subsidiaries: McKinney Door and Hardware, Inc. (MDHI), Fastrac Building Supply (Fastrac) and Serenity Sliding Door Systems (Serenity), which operate out of facilities in Pueblo and Colorado Springs, Colorado. Sales of this segment are concentrated in Colorado, California and the Northwestern United States although door sales are also made throughout the United States. The Construction Materials segment offers ~~aggregates and~~ construction supplies from locations along the Southern Front Range of Colorado operated by the Company’s wholly-owned subsidiaries, Castle Aggregates and Castle Rebar & Supply of Colorado Springs, and TMOP Legacy Company (formerly Transit Mix of Pueblo, Inc.) of Pueblo, Colorado (the three companies collectively are referred to as the Castle Companies). During the quarter ended September 28, 2019 the Company determined to cease mining at its Pikeview aggregates quarry as continuing mining operations was no longer in the best interest of the consolidated portfolio. Accordingly, the Company recognized a $20,217,000 charge to record the reclamation liability associated with the property. The Company expects most of the reclamation to be completed by an outside party over approximately the next five years. See Note 19 for additional discussion.

In addition to the above reporting segments, an “Unallocated Corporate and Other” 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. The classification also includes expenses related to a property held by the Company which are not material to the consolidated Company. 9

10In 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.

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 ~~nine-month and~~ three-month periods ended ~~September~~March 28, ~~2019~~2020 and ~~September~~March 2930, ~~2018~~2019 along with the items necessary to reconcile the segment information to the totals reported in the financial statements (amounts in thousands):

					Construction		Unallocated		Held for
	HVAC		Doors		Materials		Corporate		Sale		Total
Three Months ended March 28, 2020	HVAC		Doors		Materials		Corporate		Sale		Total
Nine Months ended September 28, 2019
Revenues from external customers	$	23,655	$	5,721	$	1,470	$	—	$	—	$	30,845
Revenues from external customers	$	57,712	$	17,483	$	4,579	$	0	$	—	$	79,773
Depreciation and amortization		332		73		48		61		—		513
Depreciation, depletion and amortization		842		199		276		54		—		1,369
Operating income (loss)		2,536		79		(636)		(1,845)		—		134
Operating income (loss)		(837)		1,288		(15,105)		(6,295)		—		(20,949)
Segment assets		46,250		11,506		7,291		22,760		380		88,187
Segment assets		53,540		13,607		9,799		15,550		—		92,496
Capital expenditures (b)		12		14		—		—		—		26
Capital expenditures		479		72		407		15		—		973
Three Months ended September 28, 2019
Revenues from external customers	$	23,702	$	6,787	$	1,515	$	(16)	$	—	$	31,987
Depreciation, depletion and amortization		320		111		142		26		—		597
Operating income (loss)		1,499		295		(28,288)		(1,412)		—		(27,906)
Segment assets		53,540		13,607		9,799		15,550		—		92,496
Capital expenditures (b)		286		(36)		275		—		—		525

					Construction		Unallocated		Held for
	HVAC		Doors		Materials		Corporate		Sale		Total
Three Months ended March 30, 2019	HVAC		Doors		Materials		Corporate		Sale		Total
Nine Months ended September 29, 2018
Revenues from external customers	$	16,720	$	4,242	$	1,554	$	11	$	—	$	22,528
Revenues from external customers	$	52,294	$	14,824	$	5,746	$	68	$	—	$	72,932
Depreciation and amortization		411		43		52		13		—		519
Depreciation, depletion and amortization		809		123		238		33		—		1,203
Operating income (loss)		(481)		379		14,044		(1,567)		—		12,375
Operating income (loss)		83		1,787		(6,439)		(3,208)		—		(7,777)
Segment assets (a)		50,822		14,248		10,463		13,554		896		89,983
Segment assets (a)		29,003		8,003		11,315		3,346		24,036		75,703
Capital expenditures (b)		44		19		—		—		—		63
Capital expenditures		642		94		181		46		—		963
Three Months ended September 29, 2018
Revenues from external customers	$	17,163	$	4,746	$	2,021	$	35	$	—	$	23,965
Depreciation, depletion and amortization		268		41		74		10		—		393
Operating income (loss)		(511)		431		121		(1,309)		—		(1,268)
Segment assets (a)		29,003		8,003		11,315		3,346		24,036		75,703
Capital expenditures (b)		377		61		142		(5)		—		575

(a) Segment assets are as of December 2928, ~~2018~~2019.

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

~~8.On~~There ~~October~~are ~~16,~~no ~~2019~~differences ~~an Order of Dismissal was entered regarding the Company’s previously disclosed litigation, Continental Materials Corporation v. Valco, Inc., Civil Action No. 2014-cv-2510, filed~~ in the ~~United~~basis ~~States District Court for the District~~ of ~~Colorado.~~segmentation ~~The~~or ~~suit~~in ~~regarded a Fee Sand and Gravel Lease (Lease) between~~ the ~~Company~~basis ~~as Lessee and Valco, Inc. (Valco) as Lessor that called for the payment~~ of ~~royalties~~measurement ~~over the life~~ of ~~the~~segment ~~Lease~~profit onor anloss ~~agreed~~from ~~50,000,000 tons of sand and gravel reserves. In~~ the ~~suit~~last ~~the~~annual Company sought declaratory judgment and damages pursuant to the Lease on the grounds that Agreed Sand and Gravel Reserves of 50 million tons did not exist, and for other relief including return of approximately $1,470,000 in royalty payments made by the Company report.

118. Fair Value Measurement

to The ~~Valco~~outstanding inPhantom ~~excess~~Equity ~~of tonnage actually produced~~ (~~Prepayments~~PE). ~~Based~~and onPhantom ~~information~~Equity ~~obtained~~Appreciation ~~through~~Rights ~~discovery,~~(PEAR) awards ~~the~~under the Company’s ~~alleged,~~Value inCreation ~~addition~~Incentive toPlan ~~the~~(VCIP; ~~abovementioned~~see ~~claims,~~Note ~~nondisclosure~~19) were orrecorded ~~concealment~~at byfair ~~Valco~~value ofusing ~~material facts concerning~~ the ~~existence~~Black-Scholes ofoption ~~Agreed~~pricing ~~Sand and Gravel Reserves of 50 million tons, and breach of warranty concerning the same~~model. ~~Valco~~There ~~asserted~~were ~~counterclaims~~no ~~against~~PE ~~the~~or ~~Company~~PEAR ~~alleging~~appreciation ~~breach~~awards ofgranted ~~contract~~during ~~and seeking declaratory judgment regarding~~ the ~~Company’s~~quarter ~~refusal~~ended toMarch ~~make~~28, ~~further~~2020 ~~royalty~~or ~~payments~~March ~~under~~30, ~~the Lease~~2019. InThe ~~the~~following ~~ordinary~~assumptions ~~course~~were ofused ~~business~~in ~~and~~determining ~~absent any breach by Valco,~~ the ~~Company~~fair ~~was~~value ~~required to make quarterly royalty payments amounting to not less than $300,000 in a calendar year. In response to Valco’s breaches~~ of ~~contract,~~ the ~~Company~~award ~~stopped~~liability ~~making~~as ~~royalty payments at the start~~ of ~~the~~March ~~2015~~28, ~~calendar year~~2020.

Subsequent to the end of the third quarter, on October 9, 2019, the Company and Valco filed a Joint Notice of Settlement stating that the parties had reached a settlement agreement resolving all claims. Trial had previously been scheduled for October 21, 2019. On October 16, 2019, the Company and Valco filed a Stipulated Motion for Dismissal with Prejudice which stated: the parties “agree that this matter, including all claims and counterclaims, dismissed with prejudice and without costs, each party to bear its own attorneys’ fees.” The Court entered the Order of Dismissal with Prejudice on October 16, 2019. See Note 20 for additional discussion.


Risk-free interest rate			1.58% - 1.62%
Dividend rate			0.00%
Volatility range			24% - 38%
Weighted average expected term (years)			3.8

9. The Company issued a total of 21,000 shares to the seven eligible board members effective February 7, 2019 as full payment for their 2019 retainer fee. The Company issued a total of 16,000 shares to the eight eligible board members effective January 16, 2018 as full payment for their 2018 retainer fee. All shares were issued under the 2010 Non-Employee Directors Stock Plan and pursuant to private offering exemptions available under Regulation D or Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).10

~~10.~~ The ~~Company~~following ~~entered~~table ~~into~~is ana ~~Amended~~reconciliation and Restated Credit Agreement (the “Credit Agreement”) effective November 18, 2011. The Company entered into the Tenth Amendment to Credit Agreement effective March 22, 2019. The Company had previously entered into nine separate amendments to the Credit Agreement. Cumulatively, the amendments were entered into by the Company to, among other things, (i) modify certain of the financial covenants, (ii) adjust the amount of the Revolving Commitment, (iii) terminate the Term Loan Commitment upon the repayment in full of the outstanding principal balance (and accrued interest thereon) of the Term Loan, (iv) modify the Borrowing Base calculation to provide for ~~borrowing availability in respect of new Capital Expenditures, (v) decrease~~ the ~~interest~~PE ~~rates on the Revolving Loans, (vi) extend the maturity date~~ and ~~(vii)~~PEAR ~~decrease~~liability ~~the~~measured ~~Letter~~at offair ~~Credit~~value ~~fee~~using ~~rate.~~Level ~~Borrowings~~3 ~~under~~unobservable ~~the~~inputs 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. Borrowings under the Credit Agreement bear interest based on a London Interbank Offered Rate (~~LIBOR) or prime rate based option. The Company was not~~ in compliance with the Fixed Coverage Charge Ratio as of September 28, 2019. The lender has provided a waiver of the covenant violation for the period ended September 28, 2019. The Company and the lender will work to address terms of the existing loan agreement prior to the end of the fiscal year ending December 28, 2019. thousands):


Balance at December 28, 2019	$	496
Awards related to acquired companies		-
Change due to vesting of awards granted		166
Change in fair value measurement of liability		(52)
Balance at March 28, 2020	$	610

Contingent consideration was recorded at fair value using a Monte Carlo Simulation model. The following assumptions were used in determining the fair value of contingent consideration at March 28, 2020:


Risk-free interest rate			.09% - 1.6%
Expected term (years)			.18 - 2.33

The following table is a reconciliation for the contingent consideration liability measured at fair value using Level 3 unobservable inputs (in thousands):


Balance at December 28, 2019	$	1,482
Contingent consideration granted with acquisitions		-
Change in fair value measurement of liability		120
Balance at March 28, 2020	$	1,602

The ARO liabilities were recorded at fair value using an expected present value technique. The following assumptions were used in determining the fair value of the ARO liabilities at March 28, 2020:


Credit adjusted risk-free interest rate			3.66%
Expected term (years)			4.5

9. Non-Employee Directors Share Based Compensation

The Company issued a total of 16,998 shares to the six eligible board members effective December 13, 2019 as partial payment for their 2020 retainer fee. The Company issued a total of 21,000 shares to the seven eligible board members effective February 7, 2019 as full payment for their 2019 retainer fee. All shares were issued under the 2010 Non-Employee Directors Stock Plan.

10. Revolving Bank Loan and Long-Term Debt

The Company entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) effective March 16, 2020, with the Lenders from time to time party thereto and CIBC Bank USA, as administrative agent. 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. Borrowings under the Credit Agreement 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 provides for the following:

The Revolving Commitment is $20,000,000.

· Borrowings under the Revolving Commitment are limited to (a) 8085% of eligible accounts receivable, (b) the lesser of 5060% of eligible inventories and $8,500,000 plus (c) 80% of new qualifying Capital Expenditures not to exceed $5,500,000 in any fiscal year (excluding the aggregate amount of any Capital Expenditures financed with the proceeds of a Revolving Line Advance).

· ~~The~~Financial ~~Minimum~~Covenants ~~Fixed Charge Coverage Ratio is not permitted to be below 1.06 to 1.0 for each trailing twelve month period measured at the end of each Fiscal Quarter.~~include:

· o Minimum ~~The~~EBITDA ~~maturity~~for ~~date of~~ the ~~credit~~three ~~facility~~months isending ~~May~~March 131, 2020. must exceed $(525,000)

· o Minimum ~~Interest~~EBITDA ~~rate pricing~~ for the ~~revolving~~three ~~credit~~months ~~facility~~ending isJune ~~currently~~30, ~~LIBOR~~2020 ~~plus~~must ~~2.25%~~exceed ~~or the prime rate.~~$265,000

12o The Minimum Fixed Charge Coverage Ratio is not permitted to be below 1.06 to 1.0 for each computation period measured at the end of each fiscal quarter, provided that the Fixed Charge Coverage Ratio shall not be tested if the average daily Excess Availability during the Fiscal Quarter exceeds $5,000,000. A computation period is the nine months ending September 30, 2020 or twelve months for all subsequent fiscal quarters

The maturity date of the credit facility is May 1, 2023.

Interest rate pricing for the revolving credit facility is currently LIBOR plus 2.0% or the prime rate.

Definitions under the Credit Agreement as amended are as follows:

· Fixed Charge Coverage Ratio ~~is defined as~~means, for any ~~computation~~Computation ~~period~~Period, the ratio of (a) the sum (without duplication) for such period of (i) EBITDA, asminus ~~defined~~(ii) income taxes paid in cash by the Loan Parties, minus (iiiii) all unfinanced Capital Expenditures, minus (iv) all amounts paid in cash in respect of any Permitted Capital Securities Repurchase, to (b) the sum for such period of ~~income~~(i) ~~taxes~~cash ~~paid~~Interest inExpense, plus (ii) scheduled payments of principal of Funded Debt (excluding the Revolving Loans), plus (iii) cash payments made in respect of Capital Leases, plus (iv) the amount ~~expended~~by ~~related~~which reclamation or similar costs paid in such period exceed the cash proceeds received from the sale of quarry assets and cash refunds of escrow balances; provided, however that for purposes hereof, to the ~~development~~extent during any period there are excess cash proceeds from the sale of quarry assets after netting such proceeds against the ~~mining~~reclamation ~~property~~or ~~discussed~~similar costs in ~~Note~~such 12period, such excess cash proceeds may be carried forward and ~~all~~netted ~~unfinanced~~against ~~capital~~the ~~expenditures~~reclamation toor similar costs in a later period, plus (bv) ~~the~~all ~~sum~~amounts ~~for~~paid ~~such~~in ~~period~~respect of ~~interest~~any ~~expense~~earnout ~~related~~or toother ~~the~~deferred ~~Credit~~payment ~~Agreement~~in connection with any Permitted Acquisition.

· EBITDA means, for any Computation Period (or another time period to the extent expressly provided ~~for in the Credit Agreement~~herein), the sum of the following with respect to the Company and its Subsidiaries each as determined in accordance with GAAP: (a) Consolidated Net Income, plus (b) federal, state and other income taxes deducted in the determination of Consolidated Net Income, plus (c) Interest Expense deducted in the determination of Consolidated Net Income, plus (d) depreciation, depletion and amortization expense deducted in the determination of Consolidated Net Income, plus (e) non-recurring fees and costs paid by the Company in respect of the following: (i) fees and due diligence costs associated with the Company’s permitted acquisitions; (ii) legal fees and costs associated with the Valco trial preparation; (iii) executive recruitment fees for the Company’s new Chief Financial Officer and Chief Operating Officer; and (iv) additional fees and costs associated with the exploration of the Company’s Hitch Rack Ranch facility in Colorado Springs, Colorado to determine the suitability for mining and the pursuit of mining permits, plus (f) any other non-cash charges and any extraordinary charges deducted in the determination of Consolidated Net Income, including any asset impairment charges (including write downs of goodwill), minus (g) any gains from Asset Dispositions, any extraordinary gains and any gains from discontinued operations included in the determination of Consolidated Net Income.

~~Outstanding~~· ~~funded~~Consolidated ~~revolving~~Net ~~debt was zero as of September 28~~Income, ~~2019~~ ~~compared~~plus to(without ~~$2,200,000~~duplication) aseach of ~~December 29, 2018. The highest balance outstanding during~~ the ~~first~~following ~~nine~~items ~~months~~to ~~of 2019 and 2018 was $2,200,000 and $9,800,000, respectively. Average outstanding funded debt was $405,000 and $6,188,000 for~~ the ~~first~~extent ~~nine~~deducted ~~months~~in ofdetermining 2019 and 2018, respectively. At September 28, 2019, the Company had outstanding letters of credit totaling $5,620,000. At all times since the inception of the Credit Agreement, the Company has had sufficient qualifying and eligible assets such ~~that~~Consolidated ~~the~~Net ~~available borrowing capacity exceeded the cash needs of the Company and this situation is expected to continue for the foreseeable future.~~ Income:

~~The~~i. ~~Company believes that its existing cash balance~~federal, ~~anticipated~~state ~~cash~~and ~~flow~~other ~~from~~income ~~operations~~taxes ~~and~~deducted ~~borrowings~~in ~~available under~~ the ~~Credit~~determination ~~Agreement~~of ~~will~~Consolidated beNet ~~sufficient to cover expected cash needs, including planned capital expenditures, for the next twelve months.~~ Income;

11ii. ~~The~~ ~~Company~~interest isExpense ~~involved~~deducted in ~~litigation matters related to its business. In~~ the ~~Company’s~~determination ~~opinion, none~~ of ~~these~~Consolidated ~~proceedings,~~Net when concluded, will have a material adverse effect on the Company’s consolidated results of operations 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 legal costs as incurred. See Note 8 for additional discussion.Income;

12ii. ~~During~~ ~~July 2015~~depreciation, ~~TMC~~depletion ~~began~~and ~~development~~amortization ofexpense adeducted ~~granite mining property south of Colorado Springs. Prior to beginning the development process, the Company deposited $2,500,000~~ in ~~an escrow account per agreement with~~ the ~~land~~determination ~~owner.~~of ~~This amount was previously included in Other long-term assets on the~~ Consolidated ~~Balance~~Net Sheet. The development costs included drilling the property to ascertain its suitability for mining, engineering studies and legal expenses related to the preparation of TMC’s application to obtain the required mining permits from the State of Colorado and El Paso County. Income;

~~TMC~~iv.non-recurring ~~made~~fees ~~its~~and ~~initial~~costs ~~application~~paid ~~for~~by athe ~~mining~~Company ~~permit~~and ~~from~~its ~~the~~Subsidiaries ~~state~~in respect of ~~Colorado~~the infollowing: ~~2016.~~(i) ~~TMC~~fees, ~~filed~~expenses ~~its~~(including ~~second~~legal ~~application~~fees toand expenses) and due diligence costs associated with Permitted Acquisitions, whether or not consummated; (ii) legal fees and costs associated with the ~~state~~Valco intrial ~~November~~preparation; ~~2017~~(iii) fees, ~~which~~costs ~~was~~and ~~rejected~~expenses on(including ~~April~~legal 26fees and expenses) in connection with the amendment and restatement of this agreement and all matters reasonably related thereto; (iv) fees, ~~2018.~~costs ~~The~~and expenses (including legal fees and expenses) in connection with the purchase of Capital Securities of the Company ~~wrote~~by ~~off~~Bee ~~all~~Street ~~capitalized~~Holdings LLC or a Subsidiary thereof and transactions and other matters reasonably related thereto; (v) additional fees and costs associated with the ~~permit~~exploration ~~application~~of the Hitch Rack Ranch facility in Colorado Springs, Colorado to determine the ~~first~~sustainability ~~half~~for mining and the pursuit of ~~2018~~mining permits; and (vi) fees, acosts ~~total~~and expenses in connection with reclamation or similar transactions related to the sale of ~~$6,840,000.~~ quarry assets;

Asv.any ofother ~~September 28, 2019~~non-cash charges and ~~December~~any ~~29,~~extraordinary ~~2018~~charges ~~the~~deducted ~~$2,500,000 escrow balance mentioned above was included~~ in ~~Other~~the ~~current~~determination ~~assets~~of asConsolidated ~~the~~Net ~~Company~~Income, ~~has~~including ~~begun~~any ~~the~~asset ~~process~~impairment tocharges ~~settle~~(including ~~the~~write ~~account~~downs ~~and~~of ~~recover~~goodwill); ~~the funds.~~and

vi.the amount of any earnout or other deferred payment paid in connection with any Permitted Acquisition; minus

any gains from Asset Dispositions, any extraordinary gains and any gains from discontinued operations included in the determination of Consolidated Net Income

Outstanding funded revolving debt was zero as of March 28, 2020 compared to $800,000 as of December 28, 2019. The highest balance outstanding during the first three months of 2020 and 2019 was $2,950,000 and $2,200,000, respectively. Average outstanding funded debt was $1,134,000 and $802,000 for the first three months of 2020 and 2019 respectively. At March 28, 2020, the Company had outstanding letters of credit totaling $5,620,000. 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.

Management expects a trend of decreased working capital and decreased cash from continuing operations, relative to fiscal year 2019, may occur over the remainder of fiscal 2020 due to uncertainty of the impact of the COVID-19 coronavirus pandemic and related governmental reaction on economic conditions. Although no assurance can be provided that the Company will obtain forgiveness of the PPP Loan (See note 20) in whole or in part, management currently expects to use the proceeds of the PPP Loan for forgivable purposes in accordance with the CARES Act, and management expects that such proceeds will substantially fund any trend of increased working capital requirements and to offset the decreased cash from continuing operations, relative to fiscal year 2019, that may occur into the second quarter of fiscal 2020.

Management cannot currently predict when the negative impacts on the Company and its businesses related to the COVID-19 coronavirus pandemic and related governmental reaction will end. Although the Company believes that its existing cash balance, anticipated cash flow from continuing operations and available borrowing capacity under the Credit Agreement and the PPP Loan will be sufficient to cover expected cash needs during the remainder of fiscal year 2020, that belief is based on the assumption that negative impacts related to the COVID-19 coronavirus pandemic and related governmental reaction will substantially improve commencing in the second quarter and continuing thereafter.

The Company was not in compliance with the Fixed Coverage Charge Ratio covenant under the Credit Agreement as of December 28, 2019. The lender provided a waiver of the covenant violation for the period ended December 28, 2019. Based on the assumption that negative impacts related to the COVID-19 coronavirus pandemic and related governmental reaction will substantially improve commencing in the second quarter and continuing thereafter, the Company currently expects to be in compliance with all covenants under the Credit Agreement throughout the facility’s remaining term.

11. Legal Proceedings

The Company is involved in litigation matters related to its business. 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 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 legal costs as incurred.

12. Other Assets

The Company had previously paid $2,500,000 related to an aggregate property near Colorado Springs. During fiscal year 2019, the Company decided to cease negotiations with the State of Colorado to obtain mining permits for the property. The amount, less $325,000 that was not expected to be recovered, was included in Other current assets in the Consolidated Balance Sheet as of December 28, 2019. The funds were refunded to the Company during the first quarter of 2020.

The Company sold the assets of its ready-mix and Daniels Sand Company operations in the first quarter of 2019. In conjunction with the transaction, certain amounts were held in escrow (see Note 15). Combined escrow amounts of

~~13. The Company adopted ASU No. 2016-02 Leases (Topic 842) on December 30~~$2,049,000 ~~2018~~were ~~(the~~included ~~beginning~~in ofOther ~~fiscal~~current ~~2019),~~assets ~~resulting~~ in the ~~recognition~~Consolidated ofBalance ~~operating~~Sheet ~~right-of-use~~at ~~assets~~December ~~of $5~~28,~~353,000~~ ~~and operating lease liabilities of $5,427,000~~2019. The ~~Company~~escrow ~~has entered into lease arrangements for office space~~amounts, ~~manufacturing~~less ~~facilities,~~fees ~~water rights~~ and ~~certain~~$111,000 ~~equipment.~~still Ain ~~number of the leases include one or more options to renew the lease terms~~question, ~~purchase~~were ~~the~~received ~~leased~~by ~~property or terminate~~ the ~~lease. The exercise of these options is at the~~ Company’s ~~discretion~~in ~~and is therefore recognized on~~ the ~~balance~~first ~~sheet~~quarter ~~when~~of ~~it is reasonably certain the Company will exercise such options~~2020.

~~Substantially all of the Company’s leases are considered operating leases~~13. Finance leases were not material as of September 28, 2019 or for the three months ended September 28, 2019. The following table displays the undiscounted cash flows related to operating leases as of September 28, 2019, along with a reconciliation to the discounted amount recorded on the September 28, 2019 Consolidated Balance Sheet (amounts in thousands): Leases

	OPERATING
	LEASE
	LIABILITIES
2019	$	342
2020		1,402
2021		1,389
2022		1,307
2023		761
Thereafter		910
Total lease payments		6,111
Less: interest		(814)
Present value of operating lease liabilities	$	5,297

The Company adopted ASU No. 2016-02 “Leases (Topic 842)” on December 30, 2018 (the beginning of fiscal 2019), resulting in the recognition of operating right-of-use assets of $5,353,000 and operating lease liabilities of $5,427,000. The Company has entered into lease arrangements for office space, manufacturing facilities, water rights and certain equipment. A number of the leases include one or more options to renew the lease terms, purchase the leased property or terminate the lease. The exercise of these options is at the Company’s discretion and is therefore recognized on the balance sheet when it is reasonably certain the Company will exercise such options.

~~Short-term~~Substantially ~~lease~~all ~~cost~~of ~~represents~~ the Company’s ~~cost~~leases ~~with~~are ~~respect~~considered tooperating leases. ~~with~~Finance aleases ~~duration~~were ofnot 12material ~~months~~for orany ~~less~~of ~~and are not reflected on~~ the ~~Company’s~~periods ~~Consolidated Balance Sheet~~presented. ~~Lease~~The ~~expense~~following ~~for~~table ~~minimum~~displays ~~lease payments is recognized on a straight-line basis over~~ the ~~lease~~undiscounted ~~term.~~cash ~~For~~flows ~~the~~related ~~three~~to ~~and nine months ended September 28, 2019~~ operating ~~lease~~leases ~~cost~~along ~~was~~with ~~$628,000~~a ~~and~~reconciliation ~~$1,459,000,~~to ~~respectively,~~the ~~including~~discounted ~~$274,000~~amount ~~and~~recorded ~~$484,000~~on ofthe ~~short-term~~Consolidated ~~lease~~Balance ~~costs.~~Sheets ~~Cash paid for~~ (amounts ~~included~~ in ~~the~~thousands) ~~measurement~~as of ~~lease~~March ~~liabilities for the three and nine months ended September~~ 28, ~~2019 was $396,000 and $1,014,000, respectively.~~2020:

New leases entered into during the three and nine month periods ended September 28, 2019 resulted in the recognition of operating right-of-use assets and lease liabilities of $60,000 and $649,000, respectively. At September 28, 2019 the weighted-average remaining lease term and discount rate for operating leases was 4.9 years and 6.0%, respectively.


	OPERATING
	LEASE
	LIABILITIES
2020	$	1,062
2021		1,389
2022		1,307
2023		761
2024		255
Thereafter		655
Total lease payments		5,429
Less: interest		(552)
Present value of operating lease liabilities	$	4,877

~~14.~~ Short-term Onlease ~~January~~cost ~~15,~~represents ~~2019,~~ the Company’s ~~reached~~cost anwith ~~amicable~~respect ~~resolution~~ to aleases ~~business~~with ~~dispute~~a byduration ~~way~~ of a12 ~~settlement~~months ~~agreement.~~or ~~Pursuant~~less toand ~~the~~are ~~settlement~~not ~~agreement,~~reflected on the Company’s ~~received~~Consolidated ~~$15,000,000~~Balance Sheet. ~~The~~Lease ~~other~~expense ~~party~~for ~~and~~minimum ~~the~~lease ~~Company~~payments ~~further~~is ~~agreed~~recognized toon ~~set up~~ a ~~joint~~straight-line ~~escrow~~basis ~~account~~over ~~to support certain conditions in~~ the ~~agreement.~~lease ~~The Company’s contribution to the escrow account was approximately $200,000~~term. ~~The~~Components ~~Settlement Agreement does not contain any admission~~ of ~~liability,~~lease ~~wrongdoing,~~expense orand ~~responsibility~~other byinformation ~~any~~is ofas ~~the parties.~~follows:

15. On February 1, 2019, the Company and certain of its subsidiaries sold substantially all of the real property, tangible personal property and executory contracts of TMC’s ready-mix business and the operations of Daniels Sand Company (Daniels) to Aggregate Industries — WCR, Inc. (the Buyer), a Colorado corporation for $27,129,000. The purchase price was paid to the Company on February 1, 2019 less certain amounts to be held in escrow, as provided in the Asset Purchase Agreement among the Company parties and the Buyer (Purchase Agreement), to secure the Company’s obligations to pay its working capital adjustment and indemnification obligations under the Purchase Agreement. The escrow also retained amounts to be held pending the subdivision of certain real property to be sold to the Buyer at a subsequent date as included in the Purchase Agreement. Combined escrow amounts of $2,049,000 were included in Other current assets in the Consolidated Balance Sheet at September 28, 2019.


	Three Months ended
	MARCH 28,		MARCH 30,
	2020		2019
Operating lease expense	$	356	$	529
Short-term lease expense	$	215	$	203

Weighted-average remaining lease term (years)		4.5		5.5
Weighted-average discount rate		6.0%		6.1%

New leases entered into during the three month periods ended March 28, 2020 and March 30, 2019 were not material.

14. Settlement Receipt

On January 15, 2019, the Company reached an amicable resolution to a business dispute by way of a settlement agreement. Pursuant to the settlement agreement, the Company received $15,000,000. The other party and the Company further agreed to set up a joint escrow account to support certain conditions in the agreement. The Company’s contribution to the escrow account was $200,000. The Settlement Agreement does not contain any admission of liability, wrongdoing, or responsibility by any of the parties.

~~The~~15. Disposition ~~Company retained the aggregates operations and retail building materials business~~ of TMC and all related assets and liabilities. These operations include the Pikeview quarry (see Note 19) business located in Colorado Springs, the aggregates mining business located in Pueblo, the sand and gravel mining business located in Fremont County, and the retail building materials business at sites located in Colorado Springs and Pueblo. Assets

InOn ~~the~~February ~~quarter ended March 30~~1, 2019, the Company ~~recorded~~and acertain ~~$6,508,000~~of ~~pre-tax~~its ~~gain~~subsidiaries onsold ~~the~~substantially ~~sale~~all of ~~TMC~~the ~~assets.~~real ~~During~~property, ~~the~~tangible ~~quarter~~personal ~~ending~~property ~~June~~and ~~29,~~executory ~~2019~~contracts ~~the~~of ~~working~~Transit ~~capital~~Mix ~~adjustment~~Concrete ~~was~~Company’s ~~finalized~~(TMC) ready-mix business and ~~resulted~~the inoperations ~~the~~of Daniels Sand Company ~~paying~~(Daniels) to Aggregate Industries — WCR, Inc. (the Buyer), a ~~net~~Colorado corporation for $127,~~248~~129,000. The purchase price was paid to the ~~Buyer.~~Company ~~This~~on ~~adjustment~~February 1, ~~plus~~2019 anless ~~adjustment~~certain amounts to ~~transaction~~be ~~fees~~held in escrow, ~~reduced~~as provided in the ~~pre-tax~~Asset ~~gain~~Purchase onAgreement among the ~~sale~~Company toparties $5and the Buyer (Purchase Agreement),~~283,000~~ to secure the Company’s obligations to pay its working capital adjustment and indemnification obligations under the Purchase Agreement. The ~~operations~~escrow ofalso retained amounts to be held pending the ~~ready-mix~~subdivision ~~and~~of ~~Daniels~~certain ~~sand~~real ~~businesses~~property ~~were~~to ~~classified~~be assold ~~discontinued~~to ~~operations~~the ~~and~~Buyer ~~assets~~at ~~held~~a ~~for~~subsequent ~~sale~~date ~~for~~as ~~all~~included ~~periods~~in ~~presented~~the Purchase Agreement. ~~General~~Combined ~~corporate~~escrow ~~overhead~~amounts ~~charges~~of $2,049,000 were ~~not~~included ~~allocated~~in toOther ~~discontinued~~current ~~operations~~assets in the Consolidated Balance Sheet at December 28, 2019. ~~Revenue~~The escrow funds, less nominal expenses and ~~pre-tax~~$111,000 under ~~income~~dispute, ~~reclassified~~were toreceived ~~discontinued~~by ~~operations~~the ~~were~~Company asduring ~~follows~~the ~~(amounts~~first inquarter ~~thousands):~~2020.

	Three Months ended				Nine Months ended
	SEPTEMBER 28,		SEPTEMBER 29,		SEPTEMBER 28,		SEPTEMBER 29,
	2019		2018		2019		2018
Revenue	$	-	$	17,013	$	4,058	$	48,219
Costs and expenses		-		16,005		3,900		44,457
Depreciation, depletion and amortization		-		288		578		862
Selling and administrative		-		907		304		2,718
Gain on sales of equipment		-		3		-		892
(Loss) gain on sale of assets		-		-		5,283		-
Pre-tax (loss) income	$	-	$	(184)	$	4,559	$	1,075

The Company retained the aggregates operations and retail building materials business of TMC and all related assets and liabilities. These operations include the Pikeview quarry business located in Colorado Springs, the aggregates mining business located in Pueblo, the sand and gravel mining business located in Fremont County, and the retail building materials business at sites located in Colorado Springs and Pueblo.

In the quarter ended March 30, 2019, the Company recorded a $6,508,000 pre-tax gain on the sale of TMC assets. The operations of the ready-mix and Daniels sand businesses were classified as discontinued. General corporate overhead charges were not allocated to discontinued operations. Revenue, expenses and pre-tax income reclassified to discontinued operations were as follows (amounts in thousands):


	Three Months ended
	MARCH 28,		MARCH 30,
	2020		2019
Revenue	$	—	$	4,058
Costs and expenses		—		(3,900)
Depreciation, depletion and amortization		—		(578)
Selling and administrative		—		(304)
Gain on sales of equipment		—		—
Gain on sale of assets		—		6,508
Pre-tax income	$	—	$	5,784

The results of discontinued operations are summarized as follows:

	Three Months ended				~~Nine Months ended~~
	SEPTEMBER 28,		SEPTEMBER 29,		SEPTEMBER 28,		SEPTEMBER 29,
	MARCH 28,		MARCH 30,
	2019		2018		2019		2018
	2020		2019
Operating income (loss)	$	-	$	(184)	$	(724)	$	1,075
Operating loss	$	—	$	(724)
Gain on sale of assets		-—		—6,508		~~5,283~~		—
Income tax (benefit) provision		-		(46)		1,255		268
Income tax benefit		—		(1,562)
Loss (income) from discontinued operations	$	-	$	(138)	$	3,304	$	806
Income from discontinued operations	$	—	$	4,222

~~The assets and liabilities held for sale related to TMC’s ready-mix and Daniels sand businesses were as follows:~~16. Acquisitions

	SEPTEMBER 28,		DECEMBER 29,
	2019		2018
Accounts receivable, net	$	—	$	9,054
Inventory		—		1,914
Property, plant and equipment, net		—		6,741
Other assets		—		6,327
Total assets held for sale	$	—	$	24,036
Accounts payable and accrued expenses	$		$	3,800
Other long-term liabilities		—		292
Total liabilities held for sale	$	—	$	4,092

During fiscal 2019 the Company completed three different asset purchase transactions, acquiring the assets of four operating businesses. On May 20, 2019 the Company acquired the assets of Serenity and Fastrac, both based in Colorado Springs, Colorado, using available cash reserves. Serenity is a proprietary sliding door system providing superior sound attenuation, sold primarily into healthcare markets across the country. Fastrac is a leading supplier of commercial doors and hardware to healthcare and hospitality customers across the country. Serenity continues to

16. During the quarter ended June 29, 2019 the Company completed three different asset purchase transactions, acquiring the assets of four operating businesses.

On May 20, 2019 the Company acquired the assets of Serenity and Fastrac, both based in Colorado Springs, Colorado, using available cash reserves. Serenity is a proprietary sliding door system providing superior sound attenuation, sold primarily into healthcare markets across the country. Fastrac is a leading supplier of commercial doors and hardware to healthcare and hospitality customers across the country. Serenity continues to operate as a stand-alone business while Fastrac operations were consolidated with the Company’s existing portfolio company, McKinney Door and Hardware, which has similar operations. The results of the acquisition of Serenity and Fastrac are included in the Company’s Consolidated Financial Statements from the date of acquisition. Both companies are included in the Door segment for reporting purposes.

On June 3, 2019 the Company acquired the assets of American Wheatley HVAC and Global Flow Products (together “GFP”), based in Broken Arrow, Oklahoma using available cash reserves. GFP sells American Wheatley HVAC branded products, including a broad line of ASME pressure vessels, custom fabricated products, valves, strainers and other hydronic accessories to commercial HVAC customers. The results of the acquisition of GFP are included in the Company’s Consolidated Financial Statements from the date of acquisition. GFP is included in the HVAC segment for reporting purposes.

These two transactions are not considered material individually. However, they are considered material in the aggregate. The total purchase price paid for these transactions was $12,~~685~~855,000, ~~subject~~which toincluded a traditional post-closing working capital adjustment ~~currently~~for ~~estimated to be~~ $~~778~~608,000, with approximately $12,163,000 paid in cash at closing. The Company will pay additional contingent consideration, if earned, in the form of an earn out amount pursuant to the terms of earn out agreements in amounts of up to $4,300,000, the payment of which is subject to certain conditions and the successful achievement of gross profit growth targets for the acquired businesses following the closing of the transactions over a period of twenty-four (24) to thirty-six (36) months. Approximately $1,300,000 has been accrued based on estimated fair values of these earn out agreements. We acquired trade receivables of $1,~~787~~916,000, inventory of $1,~~269~~745,000, property and equipment of $2,530,000, other assets of $~~250~~256,000, intangibles of $4,~~302~~000,000 and goodwill of $3,~~675~~614,000 and retained liabilities of $1,~~128~~205,000. The current value assigned to trade receivables represents ~~anticipated~~ fair market value. ~~These values are management’s current estimates of fair value and may change as additional information becomes available over the next several months.~~ The working capital adjustment has ~~not~~ been finalized on ~~either~~both ~~transaction~~transactions and ~~work continues on~~ final valuation of the fair value of assets and liabilities including receivables, inventory, fixed assets, intangibles, goodwill and accounts payable has been recorded as of December 28, 2019. ~~Transaction~~There were no transaction costs, related to either acquisition included in Selling and administrative expenses on the Condensed Consolidated Statements of Operations for the three ~~and nine~~ month periods ended ~~September~~Mach 28, ~~2019,~~2020 ~~were~~or ~~$66,000~~March ~~and $1~~30,~~177,000,~~ ~~respectively~~2019.

On June 17, 2019 the Company acquired the assets of ~~Inovate~~InOvate, a supplier of commercial and residential dryer and HVAC venting systems and components. The total purchase price for the net assets acquired was $11,~~505~~206,000, including a post-closing working capital adjustment of $84,000, with approximately $11,050,000 paid in cash at closing, using available cash reserves. The Company will pay additional contingent consideration, if earned, in the form of an earn out amount pursuant to the terms of an earn out agreement in an amount of up to $1,250,000, the payment of which is subject to certain conditions and the successful achievement of gross profit growth targets for the acquired business following the closing of the transaction over a period of twelve (12) months. Approximately $~~240~~1,202,000 has been accrued based on an estimated fair value of this earn out agreement. The results of the acquisition of ~~Inovate~~InOvate are included in the Company’s Consolidated Financial Statements from the date of acquisition. ~~Transaction~~There ~~costs~~were ~~included~~no intransaction ~~Selling~~costs ~~and~~related ~~administrative~~to ~~expense~~the ontransaction included in the Condensed Consolidated Statement of Operations for the three ~~and nine~~ months ended ~~September~~March 28, ~~2019~~2020 ~~were~~or ~~$39,000~~March ~~and $515~~30,~~000,~~ ~~respectively~~2019.

In accordance with GAAP, the total purchase price has been allocated to the tangible and intangible net assets acquired based on their fair values. The working capital adjustment was finalized in the fourth quarter of 2019. The condensed balance sheet of InOvate at the acquisition date was as follows:


Purchase price	$	11,206

Accounts receivable, net		1,448
Other tangible assets		984
Intangible assets		8,808
Right of use asset		387
Accounts payable and accrued expenses		(1,353)
Right of use liability		(387)
Total identifiable net assets		9,887
Goodwill	$	1,319

In accordance with GAAP, the total purchase price has been allocated to the tangible and intangible net assets acquired based on management’s preliminary estimates of their fair values and may change as additional information becomes available over the next several months. The working capital adjustment was finalized although work continues on final valuation of the fair value of assets and liabilities including receivables, inventory, fixed assets, intangibles, goodwill and accounts payable. The condensed balance sheet of Inovate at the acquisition date was as follows:

Purchase price	$	11,505
Accounts receivable, net		1,448
Other tangible assets		578
Intangible assets		8,808
Accounts payable and accrued expenses		(665)
Total identifiable net assets		10,169
Goodwill	$	1,336

Accounts receivable are valued at anticipated fair market value and are not materially different from contracted value.

The following table presents selected unaudited pro forma information for the Company assuming the acquisition of ~~Inovate~~InOvate had occurred as of December 3130, ~~2017~~2018. This pro forma information does not purport to represent what the Company’s actual results would have been if the acquisition had occurred as of the date indicated or what such results would be for any future periods.

	Three Months ended				~~Nine Months ended~~
	SEPTEMBER 28,		SEPTEMBER 29,		SEPTEMBER 28,		SEPTEMBER 29,
	MARCH 28,		MARCH 30,
	2019		2018		2019		2018
	2020		2019
Revenue	$	3130,~~987~~845	$	2726,~~407~~485	$	~~87,575~~	$	~~83,573~~
Pre-tax (loss) income from continuing operations	$	(27,983)	$	(669)	$	(19,706)	$	(6,074)
Pre-tax income from continuing operations	$	206	$	13,240
Basic and diluted (loss) earnings per share:
Basic and diluted loss per share:
From continuing operations	$	(11.85)	$	(0.28)	$	(8.34)	$	(2.53)
Income from continuing operations	$	0.42	$	5.66
Average shares outstanding		1,~~712~~685		1,~~698~~709		~~1,712~~		~~1,697~~

Per ASC 805, the chart below summaries the comparative financial statements for revenue and earnings as if all the acquisitions occurred at the beginning of ~~the~~beginning ~~respective~~of ~~period~~fiscal 2019.

	Three Months ended				~~Nine Months ended~~
	SEPTEMBER 28,		SEPTEMBER 29,		SEPTEMBER 28,		SEPTEMBER 29,
	MARCH 28,		MARCH 30,
	2019		2018		2019		2018
	2020		2019
Revenue	$	3130,~~987~~845	$	3031,~~982~~334	$	~~96,751~~	$	~~92,170~~
Pre-tax (loss) income from continuing operations	$	(27,983)	$	75	$	(17,526)	$	(4,026)
Pre-tax income from continuing operations	$	206	$	14,146

Revenue of the acquired companies increased total revenue by 2434.36% in the ~~third~~first quarter of ~~2019~~2020. The ~~impact~~acquired ofcompanies ~~the~~contributed ~~acquired~~a ~~companies~~combined on$411,000 to earnings for the current year quarter ~~was not material~~. Total goodwill added to the Consolidated Balance Sheet ~~due~~as toof ~~acquisition~~December ~~activity~~28, ~~during the second quarter of~~ 2019 was $54,~~011~~932,000. The goodwill is attributable to the skills and technical talent of the established work force at each of the acquired businesses and synergies expected to be achieved from integrating the individual acquired business operations in to the Company’s existing consolidated business portfolio. This amount is attributable to the HVAC and Door segments in the amounts of $2,~~817~~734,000 and $2,~~194~~198,000, respectively. ~~The goodwill amounts are not final and are subject to change as additional information is obtained over the coming months. Additionally, goodwill deductible for tax purposes is still being determined.~~

17. ~~Identifiable~~ Intangible amortizable intangible assets as of September 28, 2019 include trade names, intellectual property and customer related intangibles. These intangibles were all related to acquisition activity in the second quarter 2019 and Assets

Intangible assets with definite lives include trade names, intellectual property, and customer relationships. These intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortizable intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying value may be greater than the fair value. There were no amortizable intangible assets as of March 30, 2019. See Note 16 for additional discussion of intangible assets acquired during 2019. Amortizable intangible assets on the Consolidated Balance Sheet as of March 28, 2020 were $12,274,000, net of $534,000 accumulated amortization.

Amortization Expense for the quarter ended March 28, 2020 was $164,000. The estimated amortization expense for each of the next five years is $664,000.

18. Asset Retirement Obligation

The Company has recorded asset retirement obligations (AROs) for its legal obligation to complete reclamation of certain mining properties, in the Construction Materials segment, as required by its mining permits with the State of Colorado. The related ARO assets were considered 100% impaired as total carrying value including future costs to maintain and dispose of the asset will exceed the fair value and therefore were previously impaired.

~~are~~ The ~~still~~following intable ~~the~~details ~~process~~activity ofrelated ~~being finalized. The amounts are subject~~ to ~~change as additional information is obtained over~~ the ~~coming~~Company’s ~~months.~~ARO ~~See~~liabilities ~~Note~~(amounts 16in for additional discussion. Collectively, these assets were carried at $12,991,000, net of $119,000 accumulated amortization as of September 28, 2019. The pre-tax amortization expense for intangible assets during the quarters ended September 28, 2019 and September 29, 2018 was $119,000 and zero, respectively.thousands):

Based upon the intangible assets recorded on the balance sheet at September 28, 2019, amortization expense for the next five years is estimated to be as follows: 2019 – $337,000; 2020 through 2023 – $675,000 each year.


	MARCH 28,
	2020
Beginning balance	$	27,913
Obligations settled		(94)
Accretion expense		217
Ending balance		28,036
Less current portion		4,181
Long-term portion	$	23,855

~~18. The~~In ~~Company~~connection ~~adopted~~with the ~~Continental~~third ~~Materials~~quarter ~~Corporation Value Creation Incentive Plan (the “VCIP”) effective July 1,~~ 2019. ~~The~~decision ~~VCIP is designed~~ to ~~attract~~cease ~~and~~mining ~~retain~~activities, ~~key~~ management ~~personnel~~performed bya ~~providing~~review ~~an incentive and reward for selected executive officers and employees~~ of ~~the~~remaining ~~Company.~~assets ~~The~~to ~~VCIP~~determine ~~involves only the payment of cash~~which, ~~not~~if ~~the issuance of common stock~~any, ~~based~~should onbe ~~appreciation~~classified ofas ~~Phantom~~assets ~~Equity~~held orfor ~~Phantom~~sale ~~Equity~~(AHS). ~~Appreciation~~Based ~~Rights~~on ~~(PE~~this orreview ~~PEARs,~~a ~~respectively)~~total of ~~the defined business unit~~$896,000, ~~over~~previously areported ~~certain~~as ~~period~~Machinery ofand ~~time.~~equipment ~~Fair~~on ~~value of~~ the PEConsolidated orBalance ~~PEAR~~Sheet, ~~awards~~ was ~~measured~~reclassified as ofAHS ~~the~~as ~~balance~~of ~~sheet~~December ~~date~~28, ~~presented~~2019. ~~The~~As ~~awards vest over a period~~ of ~~four or five~~March ~~years and are payable over a three-year period following vesting. At September~~ 28, ~~2019~~2020 a total ~~future~~of ~~compensation expense related to unvested awards yet to be recognized by the Company was approximately~~ $2380,~~796,~~000. ~~This~~remains ~~expense~~classified isas ~~expected to be recognized over a weighted-average remaining vesting period of approximately 4~~AHS.~~3 years.~~

~~The Company used the Black-Scholes option pricing model as its method for determining fair value of the awards~~19. Value ~~The~~Creation ~~compensation~~Incentive expense related to the awards is recognized over the vesting period for each award. For the three and nine month periods ended September 28, 2019 the Company’s net loss included $156,000 of stock-based compensation. The total liability related to the PE and PEAR awards was $456,000, which includes $300,000 from an acquisition recorded at the opening balance sheet date, and is included as Long-term compensation on the Consolidated Balance Sheet as of September 28, 2019. Plan

~~19. During~~The ~~the~~Company ~~quarter~~adopted ~~ended September 28, 2019~~ the ~~Company~~Continental ~~made~~Materials aCorporation ~~strategic~~Value ~~decision~~Creation toIncentive ~~cease~~Plan ~~mining~~(VCIP) ~~operations~~effective atJuly ~~its Pikeview quarry in Colorado Springs~~1, ~~Colorado as it was no longer in the best economic interest of the consolidated portfolio to continue operations~~2019. The ~~Company~~VCIP ~~has~~is adesigned ~~legal obligation~~ to ~~complete~~attract ~~reclamation~~and ofretain ~~the~~key ~~property~~management aspersonnel ~~required~~ by ~~its~~providing ~~mining~~an ~~permits~~incentive ~~with~~and ~~the~~reward ~~State~~for ofselected ~~Colorado.~~executive ~~Generally~~officers ~~accepted~~and ~~accounting~~employees ~~principles require the recognition~~ of ~~a liability in~~ the ~~period in which it is incurred if a reasonable estimate of fair value can be made~~Company. ~~Prior to cessation of mining, reclamation was performed concurrently by backfilling mined areas with overfill from current mining.~~ The ~~reclamation~~VCIP ~~costs~~involves ~~were~~only ~~reported as operating expense as~~ the ~~Company~~payment ~~could~~of cash, not ~~reasonably estimate~~ the ~~ultimate~~issuance ~~liability.~~of ~~Since~~common ~~the~~stock, ~~Company~~based ~~will~~on noappreciation ~~longer~~of ~~perform~~Phantom ~~concurrent~~Equity ~~reclamation~~or ~~and~~Phantom ~~can~~Equity ~~now~~Appreciation ~~reasonably~~Rights ~~estimate~~(PE ~~the~~or ~~cost of final reclamation~~PEARs, ~~an asset retirement obligation (ARO~~respectively) ~~has~~of ~~been~~the ~~recorded~~defined asbusiness ~~of September 28~~unit, ~~2019.~~over ~~The~~a ~~ARO~~certain ~~liability~~period of ~~$20,950,000~~time. ~~represents~~Fair ~~the estimated fair~~ value of the ~~total~~PE ~~reclamation~~or ~~costs. The~~PEAR ~~fair~~awards ~~value of the liability~~ was ~~calculated~~measured byas ~~applying~~of anthe ~~expected~~balance ~~present~~sheet ~~value~~date ~~technique~~presented. ~~using~~The ~~estimated~~awards ~~cash~~vest ~~flows~~ over a period of ~~time~~four ~~and~~or ~~then~~five ~~discounting~~years ~~the~~and ~~expected~~are ~~cash~~payable ~~flows~~over ~~using~~ a ~~credit~~three-~~adjusted~~year ~~risk-free~~period ~~interest~~following ~~rate~~vesting. ~~The~~At ~~related~~March ~~ARO~~28, ~~asset~~2020 ~~was~~total ~~considered~~future ~~100%~~compensation ~~impaired~~expense asrelated ~~total~~to ~~carrying~~unvested ~~value~~awards ~~including~~yet ~~future costs~~ to ~~maintain~~be ~~and~~recognized ~~dispose~~by of the ~~asset~~Company ~~will~~was ~~exceed~~approximately ~~the~~$1,595,000. ~~fair~~This ~~value. Therefore,~~expense ~~the~~is ~~Company~~expected ~~also~~to ~~recorded~~be anrecognized ~~impairment~~over ~~charge~~a ofweighted-average ~~$20,217,000~~remaining ~~related~~vesting toperiod ~~the~~of ~~asset~~approximately 3.8 years.

~~20. Subsequent~~The ~~to the end of the third quarter of 2019, on October 15, 2019, the~~ Company ~~completed~~used the ~~acquisition~~Black-Scholes ~~from~~option ~~Valco of~~pricing ~~certain~~model ~~real~~as ~~property~~its ~~located~~method ~~in Pueblo, Colorado~~ for $9determining ~~million~~fair invalue ~~connection with the full and final settlement~~ of the ~~previously disclosed litigation between the Company and Valco~~awards. AThe ~~portion~~compensation ofexpense ~~the~~related ~~settlement was for the property purchase and a portion was attributed~~ to the ~~settlement~~awards ofis ~~the~~recognized ~~litigation.~~over As the ~~litigation~~vesting ~~claim~~period ~~was~~for aeach ~~known~~award. ~~event~~For ~~prior to~~ the ~~current~~three ~~quarter~~months ~~balance~~ended ~~sheet~~March ~~date~~28, 2020 the Company’s ~~has~~net ~~recognized~~income ~~the~~included ~~portion~~$114,000 of ~~the~~stock-based ~~agreement related to the legal settlement in the financial statements for the period ended September 28, 2019~~compensation. ~~Since~~The ~~the~~total ~~asset~~liability ~~purchase~~related ~~agreement was not a known event prior~~ to the ~~balance~~PE ~~sheet~~and ~~date~~PEAR itawards was ~~not~~$610,000, ~~recorded~~which inincludes ~~the financial statements for the period ended September 28~~$292,000 ~~2019. The~~from ~~Company~~an ~~has~~acquisition ~~engaged~~recorded aat ~~third party to perform a valuation of~~ the ~~land.~~opening Asbalance ~~the~~sheet ~~valuation has not been completed~~date, ~~the Company used its best estimate to allocate the final settlement to the property~~ and ~~settlement~~is ~~expense.~~included ~~Considering~~as aLong-term ~~current~~compensation ~~offer to purchase a portion of the land and research~~ on ~~similar properties in~~ the ~~same~~Consolidated ~~area~~Balance ~~the~~Sheet ~~Company~~as ~~estimates~~of ~~the~~March ~~land~~28, ~~value~~2019. toThe befollowing ~~approximately~~table


Balance at December 28, 2019	$	496
Awards related to acquired companies		-
Change due to vesting of awards granted		166
Change in fair value measurement of liability		(52)
Balance at March 28, 2020	$	610

20. Subsequent Events

Tender Offer

On February 18, 2020, Bee Street Holdings LLC (Bee Street), commenced an unsolicited tender offer for all outstanding shares of Common Stock of the Company (Common Stock) not already owned by Bee Street. The subsequent offering period of the extended tender offer expired on April 17, 2020. Bee Street is an entity controlled by James G. Gidwitz, our chairman and Chief Executive Officer, and other members of Mr. Gidwitz’ s family. Mr. Gidwitz and three other members of the Company's Board of Directors are also board members of Bee Street. Bee Street owns 1,494,511, or approximately 89.2%, of the outstanding shares of Common Stock.

~~$2,600,000~~ Delisting ~~leaving~~and aDeregistration ~~value~~ of ~~$6,400,000~~Common as legal settlement expense which has been recognized in the Statement of Operations for the period ended September 28, 2019 and was included in accrued expenses on the Condensed Consolidated Balance for the same period end. The property purchase will be reported by the Company in the fourth quarter. These amounts are management’s best estimate and are subject to change as additional information is received. See Note 8 for additional discussion. Stock

On April 20, 2020, the Company, acting pursuant to authorization from its Board of Directors, issued a press release announcing its intention to voluntarily delist its Common Stock from the NYSE American Stock Exchange and to deregister its Common Stock under Section 12(g) of the Exchange Act of 1934, as amended (the “Exchange Act”) and suspend its SEC reporting obligations under Section 15(d) of the Exchange Act. The Company also provided written notice to NYSE American, LLC (the “Exchange”) on April 20, 2020 of the Company’s decision to voluntarily withdraw the listing of the Common Stock from the Exchange.

On May 1, 2020, the Company filed with the SEC a Form 25 relating to the delisting of its Common Stock. The Company expects the delisting to be effective May 11, 2020, at which time the Common Stock will no longer be traded on the Exchange.

On May 11, 2020, the Company filed with the SEC a Form 15 to deregister its Common Stock under Section 12(g) of the Exchange Act and suspend its reporting obligations under Section 15(d) of the Exchange Act, as the Common Stock is held by less than 300 stockholders of record.

Paycheck Protection Program

On April 14, 2020, the Company received proceeds of $5,487,000 from a loan by CIBC Bank USA (the “PPP Loan”) pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). Under the PPP, the Company may apply for forgiveness of the PPP Loan in an amount equal to the sum of the following costs incurred during the 8-week period beginning on the date of the first disbursement of the PPP Loan: (a) payroll costs, (b) any payment of interest on a covered obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation), (c) any payment on a covered rent obligation, and (d) any covered utility payment, calculated in accordance with the terms of the CARES Act. Although no assurance can be provided that the Company will obtain forgiveness of the PPP Loan in whole or in part, management currently expects to use the proceeds of the PPP Loan for forgivable purposes in accordance with the CARES Act.

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 condensed 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 2928, ~~2018~~2019.

Company Overview

~~The~~In ~~Company~~December ~~has experienced various changes in~~ 2019, ~~with~~a ~~the~~novel ~~sale~~strain of ~~substantially~~coronavirus ~~all assets of its ready~~(SARS-~~mix~~CoV-2) ~~concrete~~emerged ~~and Daniels sand operations~~ in ~~the~~Wuhan, ~~first~~Hubei ~~quarter~~Province, ~~of 2019~~China, ~~the~~ ~~acquisition~~which on ofMarch ~~four~~11, ~~new~~2020 ~~operating~~was ~~businesses~~announced inby the ~~second~~World ~~quarter~~Health ofOrganization ~~2019 and the cessation of mining at Pikeview quarry in the third quarter of 2019. In conjunction with this activity, management reviewed its operating and reporting structure and made adjustments~~ to ~~align the structure with how operations will~~ be ~~measured~~causing ~~and~~a ~~evaluated~~global ~~going~~pandemic ~~forward~~disease ~~including revisions to the Company’s reporting segments~~(COVID-19). ~~Segment~~The ~~information~~outbreak ~~for~~of ~~prior~~novel ~~periods~~coronavirus ~~has~~and ~~been~~resulting ~~reclassified~~pandemic todisease ~~conform~~continues to ~~current~~spread ~~segment~~throughout ~~reporting structure.~~the ~~For~~United ~~additional~~States ~~detail of the Company’s operations~~ and ~~operating~~around ~~structure, see Note 7 to~~ the ~~condensed consolidated financial statements contained in this Quarterly Report~~world.

~~Liquidity~~At various times since the commencement of the COVID-19 coronavirus outbreak, the Governors of each state in which the Company has material operations have declared states of emergency and/or ~~Capital~~disaster ~~Resources~~and ordered that all non-essential businesses cease activities except for certain minimum basic operations. Management believes that the Company and its subsidiaries qualify as essential businesses as defined in the respective Governors’ orders, but we have nevertheless reduced our operations and implemented additional cleaning and social distancing protocols in response to the COVID-19 coronavirus pandemic. Among other issues considered by management in reaching this belief, our business operates within a critical infrastructure sector as established by the Cybersecurity & Infrastructure Security Agency of the Department of Homeland Security. Thus, as of the date of the filing of this Quarterly Report, we believe our manufacturing and distribution facilities generally are permitted to continue to operate subject to enhanced safety protocols, both voluntary and government mandated, that are aimed to protect the health of our workforce.

Certain products within the Company’s portfolio are seasonal, primarily furnaces and evaporative coolers in the HVAC segment which are sensitive to weather conditions particularly during their respective peak selling seasons. Other products within the HVAC segment, specifically fan-coils and dryer boxes, and Door segment are, to a significant extent, dependent on construction activity. Historically, the Company has experienced operating losses during the first quarter and typically improved in the second and third quarters reflecting more favorable weather conditions in southern Colorado and the seasonal sales of evaporative coolers. Fourth quarter results could vary based on weather conditions in Colorado as well as in the principal markets for the Company’s heating equipment. The sale of the Company’s ready-mix and Daniels sand operations along with the acquisitions recently completed is expected to reduce the seasonality of the Company’s operations.

Historically, the Company would typically experience 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 HVAC 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 tended to peak during the second quarter and then decline over the remainder of the year. In the current year, a legal settlement and the sale of TMC assets in the first quarter provided sufficient cash reserves such that borrowings against the revolving credit facility were significantly less than historical experience. The cash reserves allowed the Company to complete the acquisitions of four operating businesses without taking on additional debt. The divestiture and acquisition activity is expected to smooth cash flow over the course of the fiscal year and result in more consistent levels of borrowings throughout future years.

Cash provided by continuing operations was $5,492,000 during the first nine months of 2019 compared to $1,459,000 used during the first nine months of 2018. The current year period included a net $14,781,000 cash received from a legal settlement realized earlier in the year. The prior year period included $6,840,000 related to deferred development of a mining property which was written off in the first half of 2018. See Note 12 for additional detail. Cash provided by discontinued operations in the first nine months of 2019 was $294,000 compared

to Based ~~$797,000~~on ~~used~~the financial results reported in the ~~first~~unaudited ~~nine~~condensed ~~months~~consolidated financial statements included elsewhere in this Quarterly Report, management believes that the COVID-19 coronavirus pandemic and the related governmental reaction had only a limited impact on our business during the quarter ended March 28, 2020; however, management expects that the COVID-19 coronavirus pandemic and the related governmental reaction has and will negatively impact our business during second quarter of ~~2018.~~fiscal ~~Both~~2020 ~~periods~~and, ~~reflect~~depending ~~operating~~on the duration of the pandemic and related governmental reaction, thereafter, including our liquidity and financial position, results ~~combined~~of operations, ~~with~~stock ~~changes~~price and ability to convert backlog to revenue among other negative impacts. Management cannot currently quantify the magnitude of such negative impacts or predict when the negative impacts on the Company and its businesses related to the COVID-19 coronavirus pandemic and related governmental reaction will end. These risks to our business are more fully described in ~~working~~Part ~~capital~~I, ~~items~~Item 1A “Risk Factors” of our Annual Report on Form 10-K for Fiscal Year 2019, which we filed with the SEC on March 23, 2020. We are closely monitoring the impact of the COVID-19 coronavirus pandemic and the related governmental reaction on all aspects of our business.

~~During~~For ~~the~~an ~~nine~~overview ~~months ended September 28, 2019, investing activities provided $277,000~~ of ~~cash compared to $999,000 of cash used during~~ the ~~nine~~Company’s ~~months~~operations ~~ended September 29, 2018. The current year period included $23,679,000 of cash proceeds from the sale of TMC assets~~ and ~~cash~~operating ~~payments of $23~~structure,~~213,000~~ tosee ~~acquire assets of four operating businesses. See~~ Note 157 ~~and~~to ~~Note 16 for additional detail. Capital expenditures by continuing operations during~~ the ~~first~~condensed ~~nine~~consolidated ~~months~~financial ofstatements ~~2019 and~~contained 2018 were $973,000 and $963,000, respectively. Capital expenditures by discontinued operations were $172,000 and $1,439,000 for the first nine months of 2019 and 2018, respectively. The first nine months of 2019 included $956,000 in ~~proceeds~~this ~~from~~Quarterly ~~the sale of equipment primarily in the Construction Materials division~~Report. ~~The first nine months of 2018 included $1,403,000 in proceeds from the sale of equipment in discontinued operations.~~

~~Financing~~Liquidity activities during the first nine months of 2019 used $2,360,000 of cash as the Company used excess cash to pay down the revolving debt. During the first nine months of 2018 financing activities provided $3,200,000 of cash as borrowings which were used to finance the increase in working capital. See also the discussion of the Revolving Credit and ~~Term~~Capital ~~Loan Agreement below.~~ Resources

~~Revolving~~Certain ~~Credit~~products within the Company’s portfolio are seasonal, primarily furnaces and ~~Term~~evaporative ~~Loan~~coolers ~~Agreement~~in the HVAC segment which are sensitive to weather conditions particularly during their respective peak selling seasons. Other products within the HVAC segment, specifically fan-coils and dryer boxes, and Door segment sales are, to a significant extent, dependent on construction activity. Historically, the Company has experienced operating losses during the first quarter and typically improved in the second and third quarters reflecting more favorable weather conditions for legacy products. Fourth quarter results have typically varied based on weather conditions affecting the Company’s discontinued operations as well as in the principal markets for the Company’s heating equipment. The sale of the Company’s Transit Mix Concrete (TMC) ready-mix and Daniels Sand operations along with the acquisitions completed in the 2019 fiscal year are expected to reduce the seasonality of the Company’s operations. The first quarter 2019 profit was attributable to the legal settlement and sale of TMC ready-mix and Daniels sand operations’ assets, both non-recurring items.

Historically, the Company would typically experience 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 HVAC segment and payment of the prior year’s accrued incentive bonuses and Company profit-sharing contributions, if any. As ~~discussed~~a inresult, ~~Note~~the 10Company’s borrowings against its revolving credit facility tended to peak during the ~~condensed~~second ~~consolidated~~quarter ~~financial~~and ~~statements~~then ~~contained~~decline inover ~~this~~the ~~Quarterly~~remainder ~~Report~~of the year. In the first quarter of 2019, a legal settlement and the sale of TMC assets provided sufficient cash reserves such that borrowings against the revolving credit facility were significantly less than historical experience. The fiscal 2019 divestiture and acquisition activity is expected to smooth cash flow over the course of the fiscal year and result in more consistent levels of borrowings throughout future years.

~~Company~~Cash ~~maintains~~provided aby ~~Credit~~continuing ~~Agreement,~~operations ~~which,~~was ~~as amended, provides for a Revolving Commitment of~~ $202,~~000~~955,000. ~~Borrowings~~during ~~under~~ the ~~Credit~~first ~~Agreement~~three ~~are~~months ~~secured~~of by2020 ~~the~~compared ~~Company’s~~to ~~accounts receivable~~$11, ~~inventories~~624,000 provided ~~machinery,~~during ~~equipment,~~the ~~vehicles,~~first ~~certain~~three ~~real~~months ~~estate~~of ~~and~~2019. The ~~the~~first ~~common~~quarter ~~stock~~ of ~~all~~2020 ofincluded ~~the~~$2,321,000 ~~Company’s~~cash ~~subsidiaries.~~received ~~Borrowings~~from ~~under~~ the ~~Revolving~~release ~~Commitment~~of ~~are~~escrow ~~limited~~amounts related to ~~(a)~~an ~~80%~~aggregate ofproperty ~~eligible~~near ~~accounts~~Colorado ~~receivable~~Springs, ~~(b)~~Colorado. ~~the~~See ~~lesser~~Note of12 ~~50%~~for ofadditional ~~eligible~~discussion. The ~~inventories~~first ~~and~~quarter of 2019 included $815,~~500~~000,000 ~~plus~~cash ~~(c)~~received ~~80%~~related ~~of new Capital Expenditures not~~ to ~~exceed~~a ~~$5,500,000~~legal insettlement. ~~any~~See ~~fiscal~~Note ~~year~~14 ~~(excluding~~for ~~the~~further ~~aggregate~~discussion. ~~amount~~Cash ofused ~~any~~by ~~Capital~~discontinued ~~Expenditures~~operations ~~financed~~in ~~with~~ the ~~proceeds~~first quarter of a2019 ~~Revolving~~was ~~Line~~$15,000 that ~~advance).~~reflected ~~Borrowings~~operating ~~under~~results ~~the~~combined ~~Credit~~with ~~Agreement~~changes ~~bear~~in ~~interest~~working ~~based~~capital ~~on a LIBOR or prime rate based option~~items.

~~The~~During ~~Credit~~the ~~Agreement~~three ~~either~~months ~~limits~~ended orMarch ~~requires~~28, ~~prior~~2020, ~~approval~~investing byactivities ~~the~~provided $2,556,000 ~~lender~~ of ~~additional~~cash ~~borrowings,~~compared ~~acquisition~~to $24,697,000 of ~~stock~~cash ofprovided ~~other~~in ~~companies~~the prior year’s first quarter. Capital expenditures by continuing operations were $26,000 ~~purchase~~during the first three months of ~~treasury~~2020. ~~shares~~Capital expenditures for continuing and ~~payment~~discontinued ofoperations ~~cash~~were ~~dividends.~~$63,000 ~~Payment~~and $172,000, respectively, during the first three months of ~~accrued~~2019. ~~interest~~The isreduction ~~due~~in ~~monthly~~capital orexpenditures atis attributable to the ~~end~~sale of ~~the~~TMC’s ~~applicable~~ready-mix ~~LIBOR~~business ~~period.~~which, ~~The~~historically, ~~Credit~~was ~~Agreement~~more ~~has~~capital aintensive. The ~~maturity~~three ~~date~~months ofended ~~May~~March 128, 2020. included $1,918,000 cash received from escrow released from the sale of TMC’s

The Company had no outstanding borrowings against the revolving credit facility at September 28, 2019. 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. This situation is expected to continue for the foreseeable future.

The Company was not in compliance with the Fixed Coverage Charge Ratio as of September 28, 2019. The lender has provided a waiver of the covenant violation for the period ended September 28, 2019. The Company and the lender intend to work to address terms of the existing loan agreement prior to the end of the fiscal year ending December 28, 2019. 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.

Results of Continuing Operations Comparison of Quarter Ended September 28, 2019 to the Quarter Ended September 29, 2018

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~~ready-mix ~~sales~~and inDaniels ~~the~~Sand ~~third quarter of 2019 were $31,987,000, an increase of $8,022,000, or 33~~operations.~~5%,~~ ~~compared to the third quarter of 2018.~~ The ~~increase was~~three ~~primarily~~months ~~due~~ended toMarch ~~contributions by the businesses acquired in the second quarter of the current year which~~30, ~~combined,~~2019 ~~reported~~included ~~sales of~~ $724,~~800~~927,000~~. The~~ ~~HVAC~~cash ~~and~~received ~~Door~~from ~~segments reported increased sales of 38.1% and 43.0%, respectively, in~~ the ~~third~~sale ~~quarter~~ of ~~2019~~TMC’s ~~compared~~ready-mix ~~to the third quarter of 2018. The Construction Materials segment reported a sales decrease of 25.0% between the third quarter of 2019~~ and ~~the~~ ~~same~~Daniels ~~period~~Sand ~~of the prior year, as one of the main operating quarries was mined out and moved to complete reclamation~~operations.

~~The~~Cash ~~consolidated~~used ~~gross~~by ~~profit~~financing ~~ratio~~activities induring the ~~third~~first ~~quarter~~three months of ~~2019~~ 2020 was $1,093,000 ~~23.6%~~as ~~compared~~available cash was used to ~~21.8%~~reduce inborrowings on the ~~same~~revolving ~~period~~line of ~~2018~~credit. ~~driven~~Financing ~~primarily~~activities byduring the ~~impact~~first ofthree ~~second~~months ~~quarter~~of 2019 used $1,479,000 ~~acquisitions~~as inavailable cash was used to reduce borrowings on the ~~HVAC~~revolving ~~segment~~line of credit.

~~Consolidated~~Management ~~selling~~expects a trend of decreased working capital and ~~administrative~~decreased ~~expenses~~cash ~~were~~from $2continuing operations,~~002~~ relative to fiscal year 2019,~~000~~ ~~higher~~may inoccur over the ~~third~~remainder ~~quarter~~of fiscal 2020 due to uncertainty of ~~2019~~the ~~compared~~impact of the COVID-19 pandemic on economic conditions. On April 14, 2020, the Company received proceeds of $5,487,000 from loan by CIBC Bank USA (the “PPP Loan”) pursuant to the ~~third~~Paycheck ~~quarter~~Protection Program (the “PPP”) under Division A, Title I of Coronavirus ~~2018~~Aid, Relief, and Economic Security Act (“CARES Act”). ~~The~~ Under ~~increase~~the ~~between~~PPP, ~~years~~the ~~was~~Company ~~due~~may ~~primarily~~apply for forgiveness of the PPP Loan in an amount equal to the ~~addition~~sum of ~~four~~the ~~new~~following ~~operating~~costs ~~businesses~~incurred toduring the ~~company~~8-week ~~portfolio~~period asbeginning ~~well~~on asthe ~~other~~date ~~investments to~~of ~~stimulate~~the ~~growth~~first disbursement of the ~~Company.~~PPP AsLoan: (a) ~~percentage~~payroll costs, (b) any payment of ~~consolidated~~interest ~~sales~~on a covered obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation), ~~selling~~(c) any payment on a covered rent obligation, and ~~administrative~~(d) ~~expenses~~any ~~decreased~~covered toutility 25payment, calculated in accordance with the terms of the CARES Act.3% Although no assurance can be provided that the Company will obtain forgiveness of the PPP Loan in whole or in part, management currently expects to use the ~~third~~proceeds ~~quarter~~of the PPP Loan for forgivable purposes in accordance with the CARES Act, and management expects that such proceeds will substantially fund any trend of increased working capital requirements and to offset the decreased cash from continuing operations, relative to fiscal year 2019, that may occur into the second quarter of fiscal 2020. ~~from~~The 25term of the PPP Loan is two years.5% The Company will be required to pay any unforgiven principal of and interest on the PPP Loan in eighteen equal monthly installments, with the ~~third~~first payment being due in the fourth quarter of ~~2018~~fiscal 2020. The PPP Loan may be prepaid by the Company at any time prior to maturity with no prepayment penalties.

~~The~~Management ~~third~~cannot ~~quarter~~currently ofpredict ~~2019~~when ~~included a $20,217,000 charge related to~~ the ~~recent~~negative ~~decision~~impacts toon ~~cease operations at~~ the Company’s ~~Pikeview~~and ~~quarry~~its inbusinesses ~~Colorado~~related ~~Springs, Colorado. Due~~ to the ~~cessation~~COVID-19 ofcoronavirus ~~mining,~~pandemic ~~the~~and ~~Company~~related ~~has~~governmental ~~recorded~~reaction anwill ~~asset~~end. Although ~~retirement~~the ~~obligation~~Company ~~(ARO)~~believes ~~for reclamation costs~~ that ~~represents~~its ~~the~~existing ~~fair~~cash ~~value~~balance, ofanticipated ~~the~~cash ~~liability~~flow tofrom ~~reclaim~~continuing ~~the~~operations, ~~property~~available inborrowing ~~accordance~~capacity ~~with~~under the ~~mining~~Credit ~~permits~~Agreement ~~issued~~and by the ~~State~~PPP ofLoan ~~Colorado.~~will ~~See~~be ~~Note~~sufficient 19to ~~for~~cover ~~additional~~expected ~~discussion.~~cash ~~The~~needs, ~~third~~including ~~quarter~~planned ofcapital ~~2019 includes a $6~~expenditures,~~400,000~~ ~~legal~~during ~~settlement~~the ~~expense~~remainder ~~for~~of ~~litigation~~fiscal ~~settlement~~year 2020, that ~~occurred~~belief ~~subsequent~~is tobased on the ~~quarter~~assumption ~~ended~~that ~~September~~negative ~~28,~~impacts ~~2019.~~related ~~Since~~to the ~~claim~~COVID-19 ~~existed~~coronavirus ~~prior~~pandemic toand ~~the~~related ~~balance~~governmental ~~sheet~~reaction ~~date~~will ~~the~~substantially ~~settlement~~improve ~~was~~commencing ~~included~~ in the ~~current~~second quarter and ~~financial~~continuing ~~statements.~~thereafter, ~~See~~and ~~Note~~such 20assumption ~~for~~may ~~additional~~not prove ~~discussion~~accurate.

~~The~~Revolving ~~consolidated~~Credit operating loss for the third quarter of 2019 was $27,906,000 compared to an operating loss of $1,268,000 in the third quarter of the prior year. The decreased performance is primarily attributable to the ARO and ~~legal~~Term ~~settlement~~Loan discussed above. Excluding the impact of the ARO and legal settlement, operating income in the current quarter decreased $21,000, or 1.7%, compared to the third quarter of 2018. The HVAC segment reported increased operating profit while the Door and Construction Materials segments reported decreases in operating income. Individual segment performance is discussed further below.Agreement

~~Interest~~As ~~expense~~discussed in ~~the~~Note ~~third~~10 ~~quarter of 2019 was $100,000 compared~~ to ~~$140,000 in~~ the ~~third~~condensed ~~quarter~~consolidated offinancial ~~2018.~~statements ~~Interest~~contained ~~expense~~in ~~includes~~this ~~interest~~Quarterly ~~on outstanding funded debt~~Report, ~~finance~~the ~~charges~~Company onmaintains ~~outstanding~~a ~~letters~~Credit ~~of credit~~Agreement, ~~the~~which ~~fee~~provides onfor ~~the~~a ~~unused~~Revolving ~~revolving~~Commitment ~~credit~~of ~~line~~up ~~and~~to ~~other~~$20,000,000. ~~recurring~~Borrowings ~~fees~~under ~~charged by~~ the ~~lending~~Credit ~~bank.~~Agreement ~~The~~are ~~decrease~~secured ~~from~~by the ~~prior~~Company’s ~~year~~accounts ~~quarter~~receivable, isinventories, ~~attributable~~machinery, toequipment, ~~lower~~vehicles, ~~average~~certain ~~borrowings.~~real ~~Average~~estate ~~outstanding~~and ~~funded debt in~~ the ~~third~~common ~~quarter~~stock of ~~2019~~all ~~was~~of ~~$188,000~~the ~~compared~~Company’s tosubsidiaries. ~~$7,007,000~~Borrowings ~~for~~under the ~~third~~Revolving ~~quarter~~Commitment ofare ~~2018.~~limited Atto ~~the~~(a) ~~end~~85% of ~~the~~eligible ~~third~~accounts ~~quarter~~receivable, of(b) ~~2019~~ the ~~outstanding~~lesser ~~funded~~of ~~debt~~60% ~~was~~of ~~zero~~eligible ~~compared~~inventories toand $68,~~700~~500,000. atBorrowings under the ~~end~~Credit ofAgreement ~~the~~bear ~~third~~interest ~~quarter~~based ofon ~~2018~~a LIBOR or prime rate based option.

The ~~Company’s~~Credit ~~effective~~Agreement ~~income~~either ~~tax~~limits ~~rate~~or ~~reflects~~requires ~~federal~~prior ~~and~~approval ~~state~~by ~~statutory~~the ~~income~~lender ~~tax~~of ~~rates~~additional ~~adjusted~~borrowings, ~~for~~acquisition ~~non-deductible~~of ~~expenses~~stock of other companies, ~~tax~~purchase ~~credits~~of treasury shares and ~~other~~payment ~~tax~~of ~~items~~cash dividends. ~~The~~Payment ~~estimated~~of ~~effective~~accrued ~~income~~interest ~~tax~~is ~~rate~~due inmonthly ~~the~~or ~~third~~at ~~quarter~~the end of ~~2019 was~~the 27applicable LIBOR period.5% ~~compared~~The toCredit ~~25.0%~~Agreement ~~for~~has ~~the~~a ~~third~~maturity ~~quarter~~date of ~~2018~~May 1, 2023.

AsThere ~~discussed~~were inno ~~Note~~outstanding 7,borrowings against the ~~Company~~revolving ~~has~~credit ~~revised~~facility ~~its~~at ~~segment~~March ~~reporting~~28, to2020. ~~align~~At ~~with~~all ~~how~~times ~~key~~since ~~management~~the isinception ~~reviewing and measuring performance~~ of the ~~portfolio~~Credit ~~companies~~Agreement, ~~going~~the ~~forward. The~~ Company ~~operates~~has ~~nine~~had ~~businesses~~sufficient inqualifying ~~three reportable~~and ~~segments.~~eligible ~~The~~assets ~~following~~such ~~addresses~~that ~~various~~the ~~aspects~~entire ofrevolving ~~operating~~credit ~~performance~~facility ~~within each~~was ofavailable to the ~~reportable segments~~Company.

~~Results~~As of ~~Discontinued~~March ~~Operations~~28, -2020 the ~~Comparison~~Company ofwas ~~Quarter~~in ~~Ended~~compliance ~~September~~with ~~28,~~all ~~2019~~covenants in the Credit Agreement. Based on the assumption that negative impacts related to the ~~Quarter~~COVID-19 ~~Ended~~coronavirus ~~September~~pandemic ~~29,~~and ~~2018~~ related governmental reaction

~~discontinued~~will ~~operations~~substantially improve commencing in the ~~third~~second quarter ~~2019. The~~and ~~pre-tax~~continuing ~~loss~~thereafter, ~~from~~the ~~discontinued~~Company ~~operations~~currently ~~for~~expects to be in compliance with all covenants under the ~~third~~Credit ~~quarter~~Agreement ofthroughout ~~2018~~the ~~was~~facility’s ~~$184,000~~remaining term.

~~HVAC~~Results ~~Segment~~of Continuing Operations - Comparison of Quarter Ended March 28, 2020 to the Quarter Ended March 30, 2019

~~The~~(In ~~table~~the ~~below~~ensuing ~~presents~~discussions aof ~~summary~~the results of ~~operating~~operations ~~information~~the ~~for~~Company defines the ~~HVAC~~term ~~segment~~gross ~~for~~profit as the ~~quarters~~amount ~~ended~~determined ~~September~~by ~~28,~~deducting ~~2019~~cost of sales before depreciation and ~~September~~amortization ~~29,~~from ~~2018~~sales. ~~(dollar~~The ~~amounts~~gross inprofit ~~thousands~~ratio is gross profit divided by sales.):

	Three Months ended
	SEPTEMBER 28,			SEPTEMBER 29,
	2019			2018
Revenues from external customers	$	23,702		$	17,163
Segment gross profit		6,234			3,077
Gross profit as percent of sales		26.3	%		17.9	%
Segment operating income (loss)	$	1,499		$	(511)
Operating income (loss) as a percent of sales		6.3	%		(3.0)	%
Segment assets	$	53,540		$	32,200
Return on assets		2.8	%		(1.6)	%

Consolidated sales in the first quarter of 2020 were $30,845,000, an increase of $8,317,000, or 36.9%, compared to the first quarter of 2019. The increase in sales is substantially attributable to acquisitions completed after the first quarter of 2019. On a pro forma basis, as if all the acquisitions had occurred at the beginning of fiscal 2019, sales in the first quarter would have declined $489,000. See Note 16 for additional discussion.

InThe ~~the~~consolidated ~~third~~gross ~~quarter~~profit ofratio ~~2019, approximately 26% of sales~~ in the ~~HVAC~~first ~~segment~~quarter ~~consisted~~ of ~~coolers.~~2020 ~~Wall~~was ~~furnaces and heaters accounted for 33~~26.8% ~~while~~compared ~~fan~~to ~~coils accounted for 17~~20.8% ~~of the segment’s sales~~ in the ~~third~~same ~~quarter~~period of 2019. ~~Boiler room equipment and dryer vent products made up approximately 23% of 2019 third quarter sales.~~ InThe ~~the~~increase ~~third~~is ~~quarter~~primarily ofdue ~~2018~~to ~~these~~results ~~shares of total segment sales were 59%, 21%, 20% and 0%, respectively. Overall sales~~ in the HVAC segment inreflecting the ~~third~~acquisitions ~~quarter~~ of ~~2019 increased~~Global byFlow ~~$6,539,000~~and ~~(38~~InOvate.~~1%)~~ The ~~compared~~variances ~~to the same period~~ in ~~2018, primarily~~gross ~~due~~profit toare ~~the~~discussed ~~businesses acquired~~ in ~~the~~segment ~~current~~discussion ~~year which contributed $5,639,000 of sales in the current year third quarter~~below.

~~Sales~~Consolidated ofselling ~~furnaces~~ and ~~heaters~~administrative ~~increased 14.3%~~expenses inwere ~~the three months ended September 28~~$986, ~~2019~~000 ~~compared to the three months ended September 29, 2018. Unit shipments of furnaces and heaters were 13.1%~~ higher in the ~~third~~first quarter of ~~2019~~2020 ~~compared~~than to the comparable prior year ~~third~~ quarter. ~~Management~~driven ~~believes~~primarily by the ~~increase~~2019 isacquisition ~~attributable~~activity. As toa ~~the~~percentage ~~elimination~~ of aconsolidated ~~pre-season~~sales, ~~discount~~selling ~~program~~and ~~earlier~~administrative expenses decreased to 25.2% in the ~~year~~first ~~which~~quarter ~~pushed~~of ~~sales~~2020 from ~~earlier quarters to~~ 30.1% in the ~~current~~first quarter asof ~~well~~2019. asThe adecrease ~~proposed~~between ~~price~~periods ~~increase~~is ~~causing~~attributable ~~some customers~~ to ~~purchase~~reduced ~~before~~investments ~~the price increase. Average sales prices for furnaces and heaters~~ in the ~~third~~HVAC ~~quarter~~segment ofrelated ~~2019 remained fairly consistent compared~~ to ~~the~~previously ~~prior~~owned ~~year~~business ~~third quarter, increasing about 1~~lines.~~1%.~~

~~Sales~~The offirst ~~fan coils during the third~~ quarter of 2019 ~~increased 4.4% compared to the third quarter of 2018. Typically~~included a $15,000,000 ~~approximately~~gain ~~90%~~from ofa ~~the~~legal ~~sales~~settlement ofrecognized ~~fan~~in ~~coils~~January ~~are custom-made systems for hotels and other commercial buildings~~2019. ~~Fan~~See ~~coil~~Note ~~jobs~~14 ~~are~~for ~~obtained~~additional ~~through a competitive bidding process~~discussion. ~~Since~~The ~~every~~first ~~bid~~quarter ~~job is a unique configuration~~ of ~~materials~~2020 ~~and~~included ~~parts~~$145,000 ~~the Company does not track unit sales or production as such unit volume data would not be useful~~ in ~~managing~~gains ~~the~~from ~~business. Management focuses on~~ the ~~contribution~~sale ~~margin by job, the current level~~ of ~~sales~~property and ~~the~~equipment, ~~sales~~primarily ~~backlog~~ in ~~managing~~ the ~~fan~~Construction ~~coil~~Materials ~~business~~segment. Contribution margin is measured by deducting variable manufacturing costs and variable selling expenses from sales for a particular product line and is used as an internal measure of profitability for a product or product line. The ~~fan~~first ~~coil contribution margin percentage in the third~~ quarter of 2019 ~~increased~~ toincluded ~~28.0%~~$5,000 ~~from 25.7%~~ in ~~the~~gains ~~third~~from ~~quarter of 2018. Increased production levels contributed to~~ the ~~increase~~sale ~~in contribution margin in the current quarter. The contribution margins in both the third quarter~~ of ~~2019~~property and ~~the third quarter of 2018were considered within acceptable performance levels~~equipment.

~~Sales~~The consolidated operating profit in the first quarter of ~~evaporative~~2020 ~~coolers~~was ~~remained~~$134,000. ~~basically~~The ~~flat~~consolidated operating loss in the ~~third~~first quarter of 2019, before ~~compared~~the togain ~~the~~from ~~third~~legal ~~quarter~~settlement ofdiscussed ~~2018~~above, was $2,625,000. The ~~Unit~~increase ~~sales~~in ofoperating ~~evaporative~~performance ~~coolers~~was ~~declined~~driven ~~3.3%.~~by ~~Average~~the ~~selling~~HVAC ~~prices~~and ~~increased~~Construction 5Materials segments.2% ~~between~~The ~~the~~HVAC ~~third~~segment ~~quarter~~reported an increase of ~~2019~~$3,017,000 ~~and~~in operating profit. The Construction Materials segment, excluding the ~~third~~$15,000,000 ~~quarter~~legal settlement, reported a reduction in operating loss of $320,000. ~~2018~~Individual ~~primarily~~segment ~~due~~results ~~product~~are ~~mix~~discussed further in the segment section below.

~~Sales~~Interest ofincome ~~newly~~for ~~acquired~~the ~~business~~first ~~operations~~quarter ~~are~~of ~~included~~2020 inwas ~~the~~$114,000 ~~HVAC~~compared ~~results~~to ~~from~~$149,000 for the ~~date~~first quarter of ~~acquisition~~2019. ~~These~~The ~~sales~~decrease ~~contributed~~in ~~approximately~~interest ~~$5,639,000~~income is primarily due to ~~current~~interest ~~quarter~~earned ~~results.~~on ~~See~~the ~~Note~~higher 2019 16cash ~~for~~reserves ~~further~~resulting ~~discussion~~from the proceeds from the legal settlement and the sale of ~~acquisitions~~TMC assets.

Interest expense in the first quarter of 2020 was $101,000 compared to $71,000 in the first quarter of 2019. 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. The increase from the prior year quarter is attributable to higher average borrowings. Outstanding funded debt in the first quarter of 2020 was $1,134,000 compared to $802,000 for the first quarter of 2019. At the end of the first quarter of 2020 the outstanding funded debt was zero compared to $800,000 at the end of the first quarter of 2019.

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 in the first quarter of 2020 was 21.0% compared to 27.0% for the first quarter of 2019.

The ~~HVAC~~Company ~~segment’s~~operates ~~gross~~businesses ~~profit~~primarily ~~ratio~~within ~~for~~ the ~~third~~Building ~~quarter~~Products ofindustry ~~2019~~group. ~~was~~The ~~26.3%~~businesses ~~compared~~are togrouped ~~17.9%~~into inthree reportable segments: the ~~third~~HVAC ~~quarter~~segment, ofthe ~~2018.~~Door ~~The~~segment ~~increase~~and inthe ~~gross~~Construction ~~profit~~Materials segment. ~~ratio~~The isfollowing ~~attributable~~addresses tovarious ~~impact~~aspects of ~~newly~~operating ~~acquired~~performance ~~businesses~~focusing ~~combined~~on ~~with~~the ~~improved~~reportable ~~gross profit ratios in existing operations~~segments.

~~Selling~~Results ~~and administrative expenses in the third quarter~~ of ~~2019~~Discontinued ~~were~~Operations ~~$1,097,000~~- ~~higher~~Comparison ~~than the third quarter~~ of ~~the~~Quarter ~~previous~~Ended ~~year.~~March ~~The~~28, ~~increase~~2020 ~~was mainly attributable~~ to the ~~acquired~~Quarter ~~businesses. As~~Ended aMarch ~~percentage of sales~~30, ~~selling and administrative expenses decreased to 18.6% in the third quarter of~~ 2019 ~~from 19.3% in the third quarter of 2018.~~

~~Door~~The ~~Segment~~results of discontinued operations reflect the operations of the ready-mix and Daniels sand businesses of TMC. The Company sold the assets of these business units on February 1, 2019. There was no income or loss from discontinued operations recognized in the first quarter of 2020. The 2019 income realized from discontinued operations included a pre-tax loss from operations of $724,000 and a pre-tax gain on the sale of assets of $6,508,000.

The table below presents a summary of operating information for the Door segment for the quarters ended September 28, 2019 and September 29, 2018 (dollar amounts in thousands):

	Three Months ended
	SEPTEMBER 28,			SEPTEMBER 29,
	2019			2018
Revenues from external customers	$	6,787		$	4,746
Segment gross profit		1,865			1,244
Gross profit as percent of sales		27.5	%		26.2	%
Segment operating income	$	295		$	918
Operating income as a percent of sales		4.3	%		19.3	%
Segment assets	$	13,607		$	8,190
Return on assets		2.2	%		11.2	%

The Door segment sells hollow metal doors, door frames and related hardware, wood doors, sliding door systems, lavatory fixtures and electronic access and security systems. The Door segment’s sales are primarily for commercial and institutional buildings such as schools and healthcare facilities as well as hospitality buildings. A majority 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. As the product components of any one job likely vary significantly from any other job, the Door segment does not track unit sales of the various products through its accounting or management reporting systems. Management focuses on the level of the sales backlog, the trend in sales and the gross profit rate in managing the business.

Door sales in the third quarter of 2019 were $2,041,000 (43.0%) higher than in the third quarter of the previous year primarily due to the recent acquisition of Fastrac and Serenity. Bidding prices remain competitive. The gross profit ratio in the third quarter of 2019 and 2018 was 27.5% versus 26.2%, respectively, reflecting the impact of the newly acquired businesses and better pricing in existing businesses.

Selling and administrative expenses were $688,000 higher in the third quarter of 2019 compared to the third quarter of 2018 mainly due to the recent acquisitions. As a percentage of sales, these expenses increased to 21.5% in the third quarter of 2019 from 16.3% in the comparable 2018 quarter.

Construction Materials

The table below presents a summary of operating information for the Construction Materials segment for the quarters ended September 28, 2019 and September 29, 2018 (dollar amounts in thousands):

	Three Months ended
	SEPTEMBER 28,			SEPTEMBER 29,
	2019			2018
Revenues from external customers	$	1,515		$	2,021
Segment gross (loss) profit		(549)			869
Gross profit as percent of sales		(36.2)	%		43.0	%
Segment operating (loss) income	$	(28,288)		$	121
Operating (loss) income as a percent of sales		(1,867.6)	%		6.0	%
Segment assets	$	9,799		$	11,021
Return on assets		(288.7)	%		1.1	%

The ready-mix concrete and Daniels sand operational assets of TMC were sold on February 1, 2019. The operations of the ready-mix and Daniels sand businesses were classified as discontinued operations and assets held for sale for all periods presented. See Note 15 for further discussion of the transaction. The discontinued operations, together with the continuing operations formerly known as the Concrete, Aggregate and Construction Supply (CACS) segment, were reclassified to the Construction Materials segment for current reporting. The product offerings of continuing operations of the former CACS segment consisted of aggregates and construction supplies. 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. Revenue of the Construction Materials segment decreased 25.0% in the third quarter of 2019 compared to the third quarter of 2018. Management made a strategic decision to cease mining at the Pikeview quarry at the end of the third quarter of 2019 when it was determined that continued mining was not in the best economic interests of the consolidated portfolio. The current quarter includes a $20,217,000 impairment charge related to the cessation of mining. The quarry may continue to report some revenue from dumping fees or for remaining inventory sales, but otherwise will turn to full reclamation status. See Note 19 for further discussion.

Prior to the decision to cease mining operations made at the end of the current quarter, the CACS segment produced and sold sand, crushed limestone and gravel (collectively “aggregates”) from deposits in and around Colorado Springs. Sales volume of aggregates decreased in the third quarter of 2019 compared to the comparable 2018 quarter. This is mainly attributable to the Grisenti pit being fully mined and working to complete reclamation with minimal sales. Sales at the Pikeview quarry were nominal in the third quarter of the current year as the Company prioritized completing the reclamation at Grisenti. The reduced sales volumes and additional reclamation related costs, in part, led management to its decision to cease mining operations at the remaining quarry in the current quarter.

Sales of construction supplies decreased by 19.5% in the third quarter of 2019 compared to the prior year quarter. The division reported an operating profit in the third quarter of 2019 and the third quarter of 2018. The operating profit was lower in the current year quarter due to reduced sales volume.

Selling and administrative expenses were $181,000 higher in the third quarter of 2019 compared to the same period in 2018. The increase was attributable to reallocation of certain compensation and other general expenses related to the aggregates operations.

The third quarter of 2019 includes $6,400,000 legal settlement expense related to litigation that was settled after the quarter end September 28, 2019. As the claim was a known event prior to the balance sheet date the expense was included in the financial statements for the period ended September 28, 2019. See Note 20 for additional discussion. The third quarter of 2019 included a loss of $125,000 on the sale of equipment. There was a nominal gain in the third quarter of 2018.

Results of Continuing Operations - Comparison of Nine Months Ended September 28, 2019 to Nine Months Ended September 29, 2018

Consolidated sales in the first nine months of 2019 were $79,773,000, an increase of $6,841,000 or 9.4% compared to the first nine months of 2018. The HVAC and Door segments reported sales increases of 10.4% and 17.9%, respectively, in the first nine months of 2019 compared to the first nine months of 2018. The Construction Materials segment reported a sales decrease of 20.3%, as one of the main operating quarries was mined out and moved to complete reclamation and management made the decision to cease operations at Pikeview quarry in the current year quarter. Individual segments are discussed below.

The consolidated gross profit ratio in the first nine months of 2019 was 20.0% compared to 22.2% in the first nine months of 2018. The decrease was mainly due to results of the Construction Materials segment which reported a gross loss of $1,500,000 in the first nine months of the current year compared to positive gross profit of $1,960,000 in the first nine months of 2018. The changes are addressed in more detail in the discussion by segment below.

Selling and administrative expenses in the first nine months of 2019 were $8,053,000 (50.5%) higher compared to the same period of the prior year. The primary source of the increase was in the HVAC segment and Unallocated Corporate expenses. The increase is attributable to investments made to promote future growth of the company. Specifically, in the HVAC segment there were investments in personnel, R&D and sales and marketing as WFC and PMI worked towards future product design and development. Additionally, at the corporate level there were key personnel investments and transaction expenses related to second quarter 2019 acquisition activity discussed further in Note 16. As a percentage of consolidated sales, selling and administrative expenses increased to 30.1% in the first nine months of 2019 compared to 21.9% in the same period of the prior year.

The first nine months of 2019 included a $20,217,000 charge related to the decision to halt mining at the Company’s Pikeview quarry discussed in the quarterly review above. See Note 19 for additional discussion. The first nine months of 2019 included $6,400,000 legal settlement expense discussed in the quarterly review above. See Note 20 for additional discussion. The first nine months of 2019 included a $14,780,000 net gain from legal settlement recognized earlier in the year. See Note 14 for additional discussion. The first nine months of 2018 included the net write-off of $6,840,000 of deferred development costs previously capitalized in property, plant and equipment on the consolidated balance sheet or incurred in the first half of 2018. See Note 12 for further discussion.

The first nine months of 2019 included a gain of $308,000 from the sale of property and equipment primarily in the Construction Materials segment. There were no similar gains in the prior year period.

The consolidated operating loss for the first nine months of 2019, before the charge related to reclamation of the non-operating property, legal settlement expense and gain from a legal settlement discussed above, was $9,113,000. The consolidated operating loss for the first nine months of 2018, before the write-off of deferred development, was $937,000. The Door segment reported an increase of 15.1% in operating income in the first nine months of 2019 compared to the same period in the prior year. Decreases in operating profit in the HVAC and Construction Materials segments, as well as the Corporate expenses discussed above, more than offset the increase in the Door segment and contributed to the overall decrease in operating profit.

Interest income for the first nine months of 2019 was $349,000 compared to $59,000 for the first nine months of 2018. The increase was due to interest earned on cash reserves resulting from the legal settlement and the sale of TMC assets. Interest expense for the first nine months of 2019 was $274,000 compared to $415,000 in the first nine months of 2018 due to lower average borrowings combined with the fixed nature of certain bank fees and charges. Average outstanding funded debt in the first nine months of 2019 was $405,000 compared to $6,188,000 in the first nine months of 2018.

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 in the first nine months of 2019 was 27.5% compared to a benefit of 25.0% for the first nine months of 2018.

Results of Discontinued Operations - Comparison of the Nine Months Ended September 28, 2019 to the Nine Months Ended September 29, 2018

The results of discontinued operations reflect the operations of the ready-mix and Daniels sand businesses of TMC. The Company sold the assets of these business units on February 1, 2019. The 2019 income realized from discontinued operations included a pre-tax loss from operations of $724,000 and a pre-tax gain on the sale of assets of $5,283,000. The pre-tax income from discontinued operations for the nine months ended September 29, 2018 was $1,075,000.

HVAC Segment

The table below presents a summary of operating information for the two reportable segments within the HVAC ~~segment~~products industry group for the ~~nine~~quarters ~~months~~ ended ~~September~~March 28, ~~2019~~2020 and ~~September~~March 2930, ~~2018~~2019 (dollar amounts in thousands).:

	Nine Months ended
	Three Months ended
	SEPTEMBER 28,			SEPTEMBER 29,
	MARCH 28,			MARCH 30,
	2019			2018
	2020			2019
Revenues from external customers	$	5723,~~712~~655		$	5216,~~294~~720
Segment gross profit		127,~~674~~421			103,~~035~~819
Gross profit as percent of sales		2231.04	%		1922.28	%
Segment operating (loss) income		(837)			83
Segment operating income (loss)	$	2,536		$	(481)
Operating (loss) income as a percent of sales		(1.5)	%		0.2	%
Operating income (loss) as a percent of sales		10.7	%		(2.9)	%
Segment assets	$	5346,~~540~~250		$	3230,~~200~~171
Return on assets		(15.6)5	%		0(1.36)	%

InThe ~~the first nine months of 2019, approximately 34% of sales in the~~ HVAC segment ~~consisted~~is comprised of ~~wall~~four ~~furnaces~~operating companies and ~~heaters.~~sells ~~Fan~~a ~~coils~~variety ~~accounted for 17%~~ of ~~the~~products ~~segment’s~~including ~~sales.~~residential ~~Coolers~~and ~~accounted~~commercial ~~for 37%~~wall offurnaces, ~~the~~fan ~~segment’s~~coils, ~~sales~~evaporative ~~and~~coolers, boiler room equipment, dryer boxes and ~~other~~related ~~products~~accessories ~~accounted~~from ~~for approximately 12%. In~~ the ~~first~~Company’s ~~nine~~wholly-owned ~~months of 2018 these shares of total segment sales were 38%~~subsidiaries, ~~25%, 36%~~Williams ~~and~~Furnace ~~1%, respectively~~Co. ~~Overall sales in the HVAC segment in the first nine months of 2019 increased by $5,418,000~~ (~~10.4%~~WFC), ~~compared~~Phoenix to the same period in 2018 reflecting the newly acquired businesses contribution and increased furnace sales. Sales of furnaces increased by 8.1% in the first nine months of 2019 compared to the first nine months of 2018. Sales of fan coils declined 5.5% between the first nine months of 2019 and the same period in the prior year. As discussed aboveManufacturing, ~~contribution margin is an internal measure of profitability for a product or product line~~Inc. ~~The~~(PMI) ~~fan~~Global ~~coil~~Flow ~~contribution~~Products ~~margin~~(GFP) ~~percentage in the first nine months of 2019 was 27.2% compared to 30.4% in the first nine months of 2018. Unit shipments of furnaces~~ and ~~heaters~~InOvate ~~increased 1.8%~~Dryer inTechnologies ~~the first nine months of 2019 versus the first nine months of 2018~~(InOvate). Management believes a proposed price increase may be causing certain customers to purchase in advance of the increase. Average sales price increased by 6.2% in the first nine months of 2019 compared to the first nine months of 2018 primarily due to changes in product mix. Unit sales of evaporative coolers in the first nine months of 2019 were 12.9% lower compared to the first nine months of 2018. Revenue from evaporative cooler sales in the first nine months of 2019 decreased 6.5% compared to the same period in the prior year. Average selling prices per unit increased 8.7% in the first nine months of 2019 compared to the same period of 2018, primarily attributable to changes in product mix.

~~The~~Sales ~~gross~~in ~~profit ratio for~~ the HVAC segment induring the first ~~nine~~quarter ~~months~~ of ~~2019 was 22~~2020 increased 41.05% compared to ~~19.2% in~~ the first ~~nine~~quarter ~~months~~ of ~~2018~~2019. The increase ~~was~~is primarily attributable to ~~impact from~~ the ~~newly~~acquisitions ~~acquired~~of ~~businesses.~~GFP ~~Selling~~ and ~~administrative~~InOvate ~~expenses were $3,532,000 higher~~ in the ~~first~~second ~~nine~~quarter ~~months~~ of 2019 ~~due to addition of the~~ .

26The HVAC segment’s gross profit ratio for the first quarter of 2020 was 31.4% compared to 22.8% in the first quarter of 2019. The increase is primarily due to the impact of the acquisitions noted above.

~~new~~ Selling ~~businesses~~ and ~~past~~administrative ~~investments~~expenses in the first quarter of 2020 were $661,000 higher than the first quarter of the previous year primarily due to 2019 acquisition activity. ~~made~~The year over year increase was mitigated by investment spending on personnel and processes to ~~grow~~stimulate future growth in previously owned lines of business in the ~~existing~~first ~~businesses~~quarter of 2019. As a percentage of sales, selling and administrative expenses ~~were~~decreased 22to 19.02% ~~and~~in 17the first quarter of 2020 compared to 23.53% in the first ~~nine~~quarter ~~months~~ of 2019 ~~and 2018, respectively~~.

The HVAC segment reported operating income of $2,536,000 for the first quarter of 2020 compared to an operating loss of $481,000 for the first quarter of 2019. The increase is attributable to the 2019 acquisition activity combined with lower selling and administrative costs in previously owned lines of business.

Door Segment

The table below presents a summary of operating information for the Door segment for the ~~nine~~quarters ~~months~~ ended ~~September~~ March 28, ~~2019~~2020 and ~~September 29~~March 30, ~~2018~~2019 (dollar amounts in thousands):

	Nine Months ended
	Three Months ended
	SEPTEMBER 28,			SEPTEMBER 29,
	MARCH 28,			MARCH 30,
	2019			2018
	2020			2019
Revenues from external customers	$	175,~~483~~721		$	144,~~824~~242
Segment gross profit		41,~~765~~409			41,~~141~~219
Gross profit as percent of sales		2724.36	%		2728.97	%
Segment operating income	$	~~1,288~~79		$	~~1,787~~379
Operating income as a percent of sales		71.4	%		128.19	%
Segment assets	$	1311,~~607~~506		$	86,~~190~~805
Return on assets		90.57	%		215.86	%

The Door ~~sales~~segment insells ~~the~~hollow ~~first~~metal ~~nine~~doors, ~~months~~door frames and related hardware, wood doors, sliding door systems, lavatory fixtures and electronic access and security systems. Nearly all of ~~2019~~the ~~increased~~Door $2segments sales are for commercial and institutional buildings such as schools,~~659~~ hotels,~~000~~ ~~(17~~and healthcare facilities.~~9%)~~ ~~compared~~Approximately 65% to ~~the~~70% ~~nine~~of ~~months~~the sales of the ~~previous~~Door ~~year~~segment ~~primarily~~are ~~due~~related to ~~the~~jobs ~~recent~~obtained ~~acquisitions~~through ofa ~~Fastrac~~competitive ~~and~~bidding ~~Serenity~~process. ~~The~~Bid ~~gross~~prices ~~profit~~may ~~ratio~~be ~~declined 0.6%~~higher or lower than bid prices on similar jobs in the ~~first~~prior ~~nine~~year. ~~months~~The ofDoor ~~2019~~segment ~~compared~~does tonot track unit sales of the ~~first~~various ~~nine~~products ~~months~~through ofits ~~2018~~accounting or management reporting, but instead tracks gross profit by job. ~~The~~Management ~~decrease~~relies ison ~~attributable~~the totrend ~~increased~~in ~~labor~~sales and ~~material~~the ~~costs~~gross onprofit ~~certain~~rate ~~projects~~by job and in the aggregate in managing the business.

~~Selling~~Door ~~and~~sales ~~administrative expenses~~ in the first ~~nine~~quarter ~~months~~ of ~~2019 increased~~2020 bywere $1,~~048~~479,000 ~~compared~~(34.9%) tohigher than in the first ~~nine~~quarter ~~months~~ of ~~2018~~the previous year. The ~~addition~~increase ofis ~~two~~primarily ~~new~~due ~~operating~~to ~~businesses and~~the ~~additional~~acquisition ~~compensation~~of ~~related~~Fastrac ~~costs~~and atSerenity ~~the~~in ~~existing operations accounted for~~ the ~~increase.~~second Asquarter ~~a percentage~~ of ~~sales,~~2019. ~~these~~The ~~expenses~~gross ~~increased~~profit toratio ~~18.8%~~ in the first ~~nine~~quarter ~~months~~ of ~~2019~~2020 ~~from~~was 1524.06% compared to 28.7% in the first ~~nine~~quarter ~~months~~ of ~~2018~~2019.

~~Construction~~Sales ~~Materials~~and administrative expenses were $461,000 higher in the first quarter of 2020 compared to the first quarter of 2019. As a percentage of sales, these expenses were 22.0% and 18.8% in the first quarters of 2020 and 2019, respectively.

~~The table below presents a summary of operating information for the~~ Construction Materials ~~segment for the nine months ended September 28, 2019 and September 29, 2018 (dollar amounts in thousands):~~Segment

	Nine Months ended
	SEPTEMBER 28,			SEPTEMBER 29,
	2019			2018
Revenues from external customers	$	4,579		$	5,746
Segment gross (loss) profit		(1,501)			1,960
Gross profit as percent of sales		(32.8)	%		34.1	%
Segment operating loss		(15,105)			(6,440)
Operating loss as a percent of sales		(329.9)	%		(112.1)	%
Segment assets	$	9,799		$	11,021
Return on assets		(154.1)	%		(58.4)	%

The table below presents a summary of operating information for the Construction Materials segment for the quarters ended March 28, 2020 and March 30, 2019 (dollar amounts in thousands):

The ready-mix concrete and Daniels sand operational assets of TMC were sold on February 1, 2019. The operations of the ready-mix concrete and Daniels sand businesses were classified as discontinued operations and assets held for sale for all periods presented. See Note 15 for further discussion of the transaction. The discontinued operations, together with the continuing operations formerly known as the Concrete, Aggregate and Construction Supply (CACS) segment, were reclassified to Construction Materials segment for current reporting. The product offerings of continuing operations of the former CACS segment consisted of aggregates and construction supplies. Prior to the end of the current year third quarter, aggregates were produced at multiple locations in or near Colorado Springs


	Three Months ended
	MARCH 28,			MARCH 30,
	2020			2019
Revenues from external customers	$	1,470		$	1,554
Segment gross loss		(550)			(367)
Gross loss as percent of sales		(37.4)	%		(23.6)	%
Segment operating (loss) income		(636)			14,044
Operating (loss) income as a percent of sales		(43.3)	%		903.5	%
Segment assets	$	7,291		$	11,760
Return on assets		(8.7)	%		119.4	%

27 The ready-mix concrete and Daniels Sand operational assets of TMC were sold on February 1, 2019. The operations of the ready-mix and Daniels Sand businesses were classified as discontinued for periods presented. See Note 15 for further discussion of the transaction. The discontinued operations, together with the continuing operations formerly known as the Concrete, Aggregate and Construction Supply (CACS) segment, were reclassified to the Construction Materials segment for current reporting. The product offerings of continuing operations of the former CACS segment consisted of aggregates and construction supplies. Aggregates were produced at multiple locations in or

~~and Pueblo, Colorado. Construction supplies encompass numerous products purchased from third party suppliers and sold to the construction trades, particularly concrete sub-contractors.~~ 24

Innear ~~the~~Colorado ~~first~~Springs ~~nine months~~and ofPueblo, ~~2019 sales~~Colorado. inConstruction ~~the~~supplies ~~Construction~~encompass ~~Materials~~numerous ~~segment~~products ~~decreased~~purchased ~~20.3%~~from ~~compared~~third party suppliers and sold to the ~~first~~construction ~~nine~~trades, ~~months~~particularly ofconcrete ~~2018~~sub-contractors. ~~The~~ Management ~~decrease~~made isa ~~due~~strategic decision to ~~the~~cease ~~Company’s~~mining ~~Grisenti~~operations ~~pit~~at ~~being~~the ~~fully~~end ~~mined~~of ~~and~~the ~~working~~third onquarter ~~completing~~of ~~reclamation~~2019 ~~versus~~when ~~mining~~it atwas ~~other~~determined ~~locations.~~that ~~Sales~~continued ofmining ~~construction~~was ~~supplies~~not ~~decreased 23.7%~~ in the ~~first~~best ~~nine~~economic ~~months~~interests of ~~2019 compared to~~ the ~~first~~consolidated ~~nine~~portfolio. ~~months~~The ofquarries ~~2018.~~may ~~Decreased~~continue ~~sales~~to ~~combined~~report ~~with~~some ~~additional~~revenue ~~reclamation~~from ~~costs~~dumping ~~contributed~~fees toor ~~the~~for ~~current~~remaining ~~year~~inventory ~~negative~~sales, ~~gross~~but ~~profit~~otherwise ofwill ~~$1,501,000~~turn ~~compared~~ to afull ~~gross~~reclamation ~~profit~~status. Revenue of ~~$1,960,000 reported for~~ the ~~first~~Construction ~~nine~~Materials ~~months~~segment decreased ~~of 2018~~5. ~~As discussed~~ 4% in the ~~quarterly~~first ~~results,~~quarter ~~management~~of ~~made~~2020 acompared ~~strategic~~to ~~decision at~~ the ~~end~~first ~~of the third~~ quarter of 2019 toas ~~cease~~management ~~mining~~continued ~~operations~~the atprocess ~~its~~of ~~Pikeview~~winding ~~quarry.~~down ~~See~~the ~~Note~~aggregates ~~19 for further discussion~~operations.

Selling and administrative expenses were $~~693~~353,000 ~~higher~~lower in the first ~~nine~~quarter ~~months~~ of ~~2019~~2020 compared to the same period in ~~2018~~2019. The ~~increase~~decrease was ~~primarily~~ ~~due~~attributable primarily to ~~increased~~decreased legal fees. Litigation fees ~~related~~during to the ~~Pueblo~~first ~~aggregate~~quarter ~~lease~~of 2020 were $~~910~~50,000 ~~during the nine months ended September 28, 2019~~ compared to $~~445~~305,000 incurred during the ~~nine~~comparable ~~months~~period ~~ended~~of ~~September 29, 2018~~2019. ~~This~~ ~~litigation~~As ~~was~~a ~~settled~~percentage ~~subsequent~~of tosales, ~~the~~selling ~~nine~~and ~~months~~administrative ~~ended~~expenses ~~September~~decreased ~~28,~~to ~~2019~~12.5% ~~The $6,400,000 legal settlement expense was reported~~ in the ~~financial~~first ~~statements~~quarter ~~for~~of ~~the~~2020 ~~period~~compared ~~ended September 28, 2019 as the claim was a known event prior~~ to ~~the balance sheet date~~34.5% ~~See~~in ~~Note~~the 8first ~~and~~quarter ~~Note~~of ~~20 for additional discussion~~2019.

The ~~first~~operating ~~nine~~loss ~~months~~reported ofin ~~2019~~the ~~included~~first aquarter of 2020 was $14636,~~781,~~000. ~~net~~The ~~gain~~first ~~from~~quarter aof ~~legal~~2019 ~~settlement~~included ~~recognized earlier in the year and~~ a $2015,~~217~~000,000 ~~charge~~gain ~~related~~from toa ~~the~~legal ~~cessation of mining at Pikeview, as discussed in the quarterly results~~settlement. See Note 14. ~~and~~Excluding ~~Note~~this 19non-recurring ~~for~~item, ~~additional~~the ~~discussion.~~operating ~~The~~loss ~~first~~for ~~nine~~the ~~months~~first quarter of ~~2018~~2019 ~~included~~would ahave been $6956,~~934,~~000. ~~write-off~~The ofreduced ~~deferred~~operating ~~development~~loss ~~costs~~between ~~associated~~comparable ~~with~~periods ais ~~mining~~attributable ~~property for which the Company had applied~~ to ~~the~~reduced ~~state~~sales ofvolume ~~Colorado~~in ~~for~~ the ~~required~~aggregates ~~mining~~operations ~~permits.~~offset ~~See~~by ~~Note~~reduced 12selling ~~for~~and ~~further~~administrative ~~discussion~~spending.

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 ~~September~~March 28, ~~2019~~2020 and December 2928, ~~2018~~2019 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 2928, ~~2018~~2019.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 4 to the ~~Quarterly~~condensed ~~Condensed~~consolidated ~~Consolidated~~financial ~~Financial~~statements ~~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 ~~September~~March 28, ~~2019~~2020.

FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 3b-6 promulgated under 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,” “will,” “continue” 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: the severity and duration of the COVID-19 coronavirus pandemic and governmental reaction thereto, the amount of new construction, 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

2825

When used in this Quarterly Report, words such as “anticipates,” “believes,” “contemplates,” “estimates,” “expects,” “plans,” “projects,” “will,” “continue” 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: the amount of new construction, 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. Forward-looking statements speak only as of the date they were made and we undertake no obligation to publicly update them.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is a smaller reporting company as defined by Item 10(f) of Regulation S-K 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.

~~Our~~The ~~management, under the supervision and with the participation of 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 ~~September~~March 28, ~~2019~~2020. In ~~connection~~The ~~with~~Chief ~~this~~Executive ~~evaluation,~~Officer ~~management~~and ~~identified~~Chief aFinancial ~~material~~Officer, ~~weakness~~based inon ~~our~~that ~~internal controls as of September 28~~evaluation, ~~2019~~concluded ~~which~~that ~~required~~the ~~material~~Company’s ~~adjustments~~disclosure bycontrols ~~management~~and inprocedures ~~order~~are ~~for~~effective ~~the~~and ~~interim~~were ~~financial~~reasonably ~~information~~designed to ~~conform~~ensure tothat ~~generally~~all ~~accepted~~material ~~accounting~~information ~~principles.~~relating ~~Specifically,~~to the ~~lack~~Company of(including ~~formalized~~its ~~processes~~subsidiaries) ~~and~~required ~~technical~~to ~~resources~~be ~~available~~disclosed toin ~~handle~~ the ~~increased~~reports ~~volume~~filed ofand ~~the~~submitted ~~complex~~by ~~non-routine~~the ~~transactions~~Company ~~resulted~~under inthe ~~several~~Exchange ~~material~~Act ~~adjustments~~is ~~being~~ recorded~~. Based~~, ~~on this material weakness~~processed, ~~management~~summarized ~~concluded~~and ~~that~~reported ~~our~~within ~~disclosure~~the ~~controls~~time ~~and~~periods ~~procedures~~specified ~~were~~in ~~not~~the ~~effective~~rules and asforms of ~~September~~the ~~28, 2019~~Commission.

~~Remediation~~(b)Changes ~~Plans~~in Internal Control Over Financial Reporting.

WeDuring ~~recognize~~ the ~~importance~~quarter ofended ~~the~~March ~~control~~28, ~~environment~~2020, asthere itwere ~~sets~~no ~~the~~changes ~~overall~~in ~~tone for~~ the ~~organization~~Company’s ~~and is the foundation for all other components of~~ internal control. ~~Accordingly,~~over tofinancial ~~remediate~~reporting ~~the~~that ~~material~~have ~~weakness~~materially ~~associated~~affected, ~~with~~or ~~the~~are ~~increased~~reasonably ~~volume~~likely ofto ~~the~~materially ~~complex non-routine transactions~~affect, ~~management~~the ~~will~~Company’s ~~formalize~~ internal control ~~processes~~over ~~and~~financial enhance the level of technical resources available to address non-routine complex transactions, in order to record and report these transactions timely and appropriately in accordance with generally accepted accounting principles in each reporting ~~period~~.

~~Changes in Internal Control Over Financial Reporting~~26

During the quarter ended September 28, 2019, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. However, we currently expect to implement changes in our internal control over financial reporting, in connection with the remediation efforts discussed above, subsequent to the date of this filing.

PART II - OTHER INFORMATION

Items 1, 1A, 2, 3 and 5 are not applicable or the Company has nothing to report thereunder; therefore, the items have been omitted and no reference is required in this Quarterly Report.

Item 42. ~~Mine~~Unregistered ~~Safety~~Sales ~~Disclosure~~of Equity Securities and Use of Proceeds

During the quarter ended March 28, 2020, the Company made the following repurchases of Common Stock under

the program:


	Issuer Purchases of Equity Securities
Period		(a) Total number of shares (or units) purchased (1)	(b) Average price paid per share (or unit)	(c) Total number of shares (or units) purchased as part of publicly announced plans or programs	(d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs
December 29, 2019 – January 25, 2020		22,342	$7.30	22,342	$649,281
January 26, 2020 – February 22, 2020		15,528	$7.57	15,528	$531,737
February 23, 2020 – March 28, 2020		—	—	—	$531,737
Total		37,870	$7.41	37,870	$531,737

(1) The Company has an open-ended program which was announced on March 6, 2019 to repurchase its common stock under which the Board authorized purchases up to a maximum amount of $1,000,000. Repurchases may be made on the open market or in block trades at the discretion of management.

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.

Item 5.Other Information

On May 1, 2020, Continental Materials Corporation (the “Company”), filed with the Securities and Exchange Commission (the “SEC”) a Form 25 Notification of Removal from Listing in connection with its previously announced plan to voluntarily delist its Common Stock, $0.25 par value per share (the “Common Stock”), from the NYSE American Stock Exchange (the “Exchange”). The Company expects the delisting to be effective May 11, 2020, at which time the Common Stock will no longer be traded on the Exchange.

The Company currently anticipates that, on or about May 11, 2020, it will file with the SEC a Form 15 to deregister its Common Stock under Section 12(g) of the Exchange Act and suspend its reporting obligations under Section 15(d) of the Exchange Act, as the Common Stock is held by less than 300 stockholders of record.

The Company is taking these steps in order to reduce legal, accounting and administrative costs associated with being an SEC reporting company, to reduce the specificity of the financial information which the Company is

required to disclose publicly in connection with its business segments, which disclosure the Company believes has, at times in the past, been competitively disadvantageous to the Company, and to allow the Company’s management to increase its focus on executing the Company’s strategic and business plan by reducing time spent in complying with applicable SEC reporting requirements. In addition, the number of shares of Common Stock which are publicly held (exclusive of holdings of officers, directors, controlling shareholders or other family or concentrated holdings) is less than 200,000 as a result the tender offer made by Bee Street Holdings LLC which was completed at midnight at the end of April 17, 2020, and the Common Stock may consequently no longer be eligible for listing on the Exchange pursuant to Section 1003(b)(i)(A) of the NYSE American Company Guide.

Item 6.Exhibits

Exhibit No.		Description
10.1		Promissory Note, dated 04/08/2020, made by the Company and payable to CIBC Bank USA evidencing a loan under the Paycheck Protection Program under Division A, Title I of Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
31.1		Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e) and Exchange Act Rules 13a-15(f) and 15d-15(f), filed herewith.
31.2		Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e) and Exchange Act Rules 13a-15(f) and 15d-15(f), 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 ~~September~~March 28, ~~2019~~2020 filed with the SEC on ~~November~~May 1211, ~~2019~~2020, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Operations and Retained Earnings for the three ~~and nine~~-month periods ended ~~September~~March 28, ~~2019~~2020 and ~~September~~March 2930, ~~2018~~2019, (ii) the Condensed Consolidated Balance Sheets at ~~September~~March 28, ~~2019~~2020 and December 2928, ~~2018~~2019, (iii) the Condensed Consolidated Statements of Cash Flows for the ~~nine~~three-month periods ended ~~September~~March 28, ~~2019~~2020 and ~~September~~March 2930, ~~2018~~2019, and (iv) Notes to the Quarterly Condensed Consolidated Financial Statements.

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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:	~~November~~May 1211, ~~2019~~2020	By:	/s/ Paul Ainsworth
			Paul Ainsworth, Vice President, Secretary
			and Chief Financial Officer

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