EX-99.(A)(1)(I) 2 a2240761zex-99_a1i.htm EX-99.(A)(1)(I)
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Exhibit (a)(1)(i)

Offer to Purchase for Cash
All Outstanding Common Stock
in

Continental Materials Corporation

Bee Street Holdings LLC

$9.50 per Common Share

THE OFFER (AS DEFINED HEREIN) AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MARCH 17, 2020, UNLESS THE OFFER IS EXTENDED. COMMON SHARES IN CONTINENTAL MATERIALS CORPORATION TENDERED PURSUANT TO THIS OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON MARCH 17, 2020.

Bee Street Holdings LLC ("Bee Street"), a Delaware limited liability company, is offering to purchase all of the outstanding common stock, $0.25 par value per share (each a "Share" and together the "Shares"), of Continental Materials Corporation, a Delaware corporation ("CMC"), not currently held by Bee Street, at a price of $9.50 per Share, net to the seller in cash, without interest, less any applicable withholding taxes (the "Offer Price"), upon the terms and subject to the conditions set forth in this Offer to Purchase, the related letter of transmittal and the related notice of guaranteed delivery enclosed with this Offer to Purchase, which, together with any amendments or supplements, collectively constitute the "Offer" described in this Offer to Purchase. On February 14, 2020, the last trading day before Bee Street announced the offer, the closing price of the Shares was $9.35 per Share; therefore the offer price represents a premium of 1.6% over the closing price of the Shares on the trading day prior to the announcement of the Offer and a premium of 22.3% over CMC's 60 trading day volume-weighted average Share price.

The Offer is subject to the satisfaction (or, to the extent permitted, waiver) of the conditions described in "The Offer—Conditions to the Offer", beginning on page 46, including the Minimum Tender Condition and the Majority Minority Condition (as defined below in Section 12—Conditions to the Offer). As of the date of this Offer to Purchase, Bee Street beneficially owns 1,027,171 Shares or approximately 61.3% of the outstanding Shares.

After consummation of the Offer and if the Minimum Tender Condition and the Majority Minority Condition are satisfied and certain other conditions are waived or satisfied, a wholly-owned subsidiary of Bee Street, Bee Street II, Inc., a Delaware corporation ("Bee Street II"), will promptly merge with and into CMC, subject to certain conditions, with CMC continuing as the surviving corporation (the "Surviving Corporation") (such transaction, the "Merger"). In the Merger, each Share issued and outstanding immediately prior to the effective time of the Merger (other than (i) Shares held by CMC as treasury stock, (ii) Shares held by stockholders who properly exercise appraisal rights under the General Corporation Law of the State of Delaware (the "DGCL"), or (iii) Shares held by Bee Street and its affiliates) will be converted into the right to receive an amount of merger consideration equal to the Offer Price, net to the holder in cash, without interest thereon and subject to any required tax withholding. Under no circumstances will interest be paid on the purchase price for the Shares, regardless of any extension of the Offer or any delay in making payment for the Shares.

If the Offer is consummated and the Minimum Tender Condition is satisfied, we do not anticipate seeking the approval of CMC's remaining stockholders before effecting the Merger. Section 253 of the DGCL provides that, if a corporation owns at least 90% of the outstanding shares of another corporation entitled to vote on a merger, the parent corporation may merge with or into the subsidiary corporation without the action of the other stockholders of the subsidiary corporation.

The board of directors of CMC has not made a public statement as to whether they recommend that holders of Shares tender their Shares in the Offer. CMC is required to make a recommendation or state that it is neutral or is unable to take a position with respect to the Offer, and to publish such recommendation or send it to holders of Shares within ten business days from the date of this Offer to Purchase. We encourage holders of Shares to carefully read such statement when it becomes available.

This transaction has not been approved or disapproved by the Securities and Exchange Commission or any state securities commission, nor has the Securities and Exchange Commission or any state securities commission passed upon the fairness or merits of such transaction or upon the accuracy or adequacy of the information contained in this document. Any representation to the contrary is unlawful.

IMPORTANT

If you desire to tender all or any portion of your Shares to Bee Street in the Offer you should either (i) complete and sign the letter of transmittal (or a photocopy of it) for the Offer, which is enclosed with this Offer to Purchase, in accordance with the instructions contained in the letter of transmittal (having your signature on the letter of transmittal guaranteed if required by Instruction 1 to the letter of transmittal), mail or deliver the letter of transmittal (or a photocopy of it) and any other required documents to Computershare Trust Company, N.A., the depositary for the Offer (the "Depositary"), and either deliver the certificates representing such Shares to the Depositary along with the letter of transmittal (or a photocopy of it) or tender such Shares by book-entry transfer by following the procedures described in The Offer—Procedures for Accepting the Offer and Tendering Shares, in each case prior to the Expiration Date of the Offer or (ii) request your broker, dealer, bank, trust company or other nominee to effect the transaction for you. If your Shares are registered in the name of a broker, dealer, bank, trust company or other nominee, then you must contact that institution in order to tender such Shares to Bee Street in the Offer.

If you desire to tender Shares to Bee Street in the Offer and your certificates representing such Shares are not immediately available, or you cannot comply in a timely manner with the procedures for tendering Shares by book-entry transfer, or you cannot deliver all required documents to the Depositary prior to the Expiration Date, you may tender such Shares to Bee Street in the Offer by following the procedures for guaranteed delivery described in The Offer—Procedures for Accepting the Offer and Tendering Shares.

Questions regarding the Offer, and requests for assistance in connection with the Offer, may be directed to the Information and Solicitation Agent for the Offer at the address and telephone number listed below. Additional copies of this Offer to Purchase, the letter of transmittal, the notice of guaranteed delivery and other related materials may be obtained from the Information and Solicitation Agent.

The Information and Solicitation Agent for the Offer is:

19 Old Kings Highway S.—Suite 210
Darien, CT 06820
Toll Free (877) 972-0090
Banks and Brokers call collect (203) 972-9300
info@investor-com.com

This Offer to Purchase and the related letter of transmittal contain important information and you should read both carefully and in their entirety before making a decision with respect to the Offer.

TABLE OF CONTENTS



I. SPECIAL FACTORS		14
1.	Background of the Offer	14
2.	Purpose of and Reasons for the Offer; Plans for CMC After the Offer and the Merger; Consideration of Alternatives	15
3.	The Position of Bee Street Regarding the Fairness of the Offer and the Merger	17
4.	Materials Provided by Financial Advisor to Bee Street	19
5.	Financial Results and Projections	27
6.	Transactions and Arrangements Concerning the Shares	30
7.	Conditions to the Merger	30
8.	Certain Effects of the Offer and the Merger	31
9.	Purposes, Reasons and Plans for CMC After the Merger	32
10.	Effects on CMC if the Offer Is Not Consummated	32
11.	Interests of Certain Persons in the Offer and the Merger	33
12.	Certain Relationships Between Bee Street and CMC	33
13.	Possible Actions by Bee Street with Regard to CMC if the Offer Is Not Completed	33
II. THE OFFER		34
1.	Terms of the Offer	34
2.	Acceptance for Payment and Payment for Shares	35
3.	Procedures for Accepting the Offer and Tendering Shares	36
4.	Withdrawal Rights	38
5.	Material U.S. Federal Income Tax Consequences	38
6.	Price Range of Shares; Dividends on Shares	40
7.	Possible Effects of the Offer on the Market for Shares; Stock Exchange Listing(s); Registration Under the Exchange Act; Margin Regulations	41
8.	Appraisal Rights; "Going-Private" Rules	42
9.	Certain Information Concerning CMC	43
10.	Certain Information Concerning Bee Street	44
11.	Source and Amount of Funds	45
12.	Conditions to the Offer	46
13.	Effect of CMC Dividends	47
14.	Certain Legal Matters; Regulatory Approvals	48
15.	Fees and Expenses	49
16.	Miscellaneous	50

SUMMARY TERM SHEET

We are Bee Street Holdings LLC ("Bee Street"), a Delaware limited liability company, and we are offering to purchase all of the outstanding common stock (the "Shares") in Continental Materials Corporation, a Delaware corporation ("CMC"), not currently held by Bee Street. The following are some of the questions you, as a holder of Shares, may have about the Offer and Merger (each as defined below) and our answers to those questions. This Summary Term Sheet provides important and material information about the Offer that is described in more detail elsewhere in this Offer to Purchase, but this Summary Term Sheet may not include all of the information about the Offer and Merger that is important to you. We urge you to carefully read the remainder of this Offer to Purchase and the letter of transmittal for the Offer because the information in this Summary Term Sheet is not complete. We have included cross-references in this Summary Term Sheet to other sections of this Offer to Purchase to direct you to the sections of this Offer to Purchase in which a more complete description of the topics covered in this Summary Term Sheet appears.

Who is offering to buy my Shares?

Bee Street is offering to buy all outstanding Shares in the Offer. Bee Street is controlled by James G. Gidwitz, the Chairman of the Board and Chief Executive Officer of CMC, and by the other members of the board of managers of Bee Street (the "Bee Street Board"), who are Nancy Gidwitz, Ralph W. Gidwitz, Steven B. Gidwitz and Scott Gidwitz. Messrs. James G. Gidwitz, Ralph W. Gidwitz, Steven B. Gidwitz and Scott Gidwitz are also directors of CMC. Bee Street currently owns 1,027,171 Shares, or approximately 61.3% of the outstanding Shares. See "Introduction" and "The Offer—Certain Information Concerning Bee Street", beginning on page 44, for more information.

Why are we making the Offer?

As of the date of this Offer to Purchase, Bee Street beneficially owns 1,027,171 Shares of CMC. We are making the Offer for the purpose of acquiring all of the remaining outstanding Shares.

What will I receive in exchange for the Shares that I tender into the Offer?

If we successfully complete the Offer and accept for purchase validly tendered and not properly withdrawn Shares, you will receive $9.50 per Share, net to you in cash, without interest and less any applicable withholding taxes (the "Offer Price"), for each Share that you validly tender into the Offer. On February 14, 2020, the last trading day before Bee Street announced the offer, the closing price of the Shares was $9.35 per Share; therefore the offer price represents a premium of 1.6% over the closing price of the Shares on the trading day prior to the announcement of the Offer and a premium of 22.3% over CMC's 60 trading day volume-weighted average Share price. If you are the record owner of your Shares and you tender them in the Offer, you will not have to pay any brokerage fees or similar expenses to do so. If you own your Shares through a broker or other nominee, and your broker tenders your Shares in the Offer on your behalf, your broker or nominee may charge you a fee for doing so. You should consult your broker or nominee to determine whether it will charge you a fee for tendering your Shares in the Offer. See "Introduction" and "The Offer—Terms of the Offer", beginning on page 34, for more information.

How many Shares are you offering to purchase?

We are offering to purchase all outstanding Shares that are not currently held by Bee Street, upon the terms and subject to the conditions set forth in this Offer to Purchase, the related letter of transmittal and the notice of guaranteed delivery enclosed with this Offer to Purchase, which, together with any amendments or supplements, collectively constitute the "Offer."

What are the most significant conditions to the Offer?

The obligation of Bee Street to accept for payment and pay for Shares validly tendered (and not properly withdrawn) pursuant to the Offer (the time of such acceptance, the "Acceptance Time") is subject to, among other things, there being validly tendered in accordance with the terms of the Offer and not withdrawn prior to 5:00 p.m., New York City time, on March 17, 2020 (as such time may be extended from time to time in Bee Street's discretion, the "Expiration Date"), sufficient Shares such that, following the Acceptance Time, Bee Street owns at least the amount of Shares required to permit the Merger (as defined herein) (the "Minimum Tender Condition").

On February 17, 2020, 1,675,484 Shares were outstanding. As of the date of the Offer to Purchase, Bee Street beneficially owns 1,027,171 Shares or approximately 61.3% of the outstanding Shares. Section 253 of the DGCL provides that, if a corporation owns at least 90% of the outstanding shares of another corporation entitled to vote on a merger, the parent corporation may merge with or into the subsidiary corporation without the action of the other stockholders of the subsidiary corporation. Accordingly, Bee Street expects that the Minimum Tender Condition will be satisfied if at least 480,765 Shares are validly tendered (and not properly withdrawn) pursuant to the Offer. Bee Street may waive the Minimum Tender Condition in its sole discretion.

In addition to the Minimum Tender Condition, the Offer is contingent upon securing sufficient Shares so that that, following the Acceptance Time, Bee Street owns at least a majority of the Shares which were not beneficially owned by Bee Street and its affiliates immediately prior to the Offer (the "Majority Minority Condition"). Bee Street expects that the Majority Minority Condition will be satisfied if at least 306,332 Shares are validly tendered (and not properly withdrawn) pursuant to the Offer.

Bee Street does not intend to waive the Majority Minority Condition.

The Offer is contingent upon Bee Street receiving net proceeds of debt financing which are adequate to pay the Offer Price for all Shares which are tendered into the Offer (and not withdrawn) before Expiration Date, to pay (if applicable) merger consideration at a price per share equal to the Offer Price for each Share which will be converted, pursuant to the Merger, into the right to receive merger consideration, and to pay Bee Street's expenses in connection with the Offer and (if applicable) the Merger, in each case with such debt financing to be on terms and conditions satisfactory to Bee Street in its discretion (the "Financing Condition"). See "The Offer—Source and Amount of Funds", beginning on page 45, for more information. If adequate debt financing is not secured, we currently do not intend consummate the Offer.

The Offer is also subject to other conditions described in "The Offer—Conditions to the Offer", beginning on page 46.

Do you have the financial resources to pay for all of the Shares that you are offering to purchase?

Yes. We estimate that the total amount of funds necessary to purchase all outstanding Shares not currently held by Bee Street in the Offer and, if applicable, in the Merger, and to complete the related transactions, including the payment of fees and expenses in connection with the Offer and the Merger, will be approximately $7,700,000, which we expect will be funded by borrowing under a committed senior secured revolving credit facility we have obtained for the purpose. See "The Offer—Source and Amount of Funds", beginning on page 45, for more information.

How long do I have to tender my Shares in the Offer?

Unless we extend the Offer as described below, you will have until the Expiration Date to tender your Shares into the Offer. If you cannot deliver everything that is required to tender your Shares by

that time, you may be able to use a guaranteed delivery procedure to tender your Shares, as described in "The Offer—Procedures for Accepting the Offer and Tendering Shares" beginning on page 36.

Can the Offer be extended, and under what circumstances?

We may extend the Offer at our discretion, including if any condition to the Offer has not been satisfied or, if such condition is waivable, waived by us prior to the scheduled expiration of the Offer. At this time, we have no intention of extending the Offer, but we reserve the right to do so. We may also be required to extend the Offer pursuant to the Securities and Exchange Commission's (the "SEC") tender offer rules. See "The Offer—Terms of the Offer", beginning on page 34, for more information.

How will I be notified if you extend the Offer?

If we extend the Offer, we will inform the Depositary of that fact and will make a public announcement of the extension not later than 9:00 a.m., New York City time, on the next business day after the day on which the Offer was previously scheduled to expire. See "The Offer—Terms of the Offer", beginning on page 34, for more information.

How do I participate in the Offer?

To tender your Shares, you should do the following:

•: If you hold Shares in your own name, complete and sign the enclosed letter of transmittal and return it with your common Share certificates to Computershare Trust Company, N.A., the Depositary for the Offer, at the appropriate address specified on the back cover page of this Offer to Purchase before the Expiration Date of the Offer.
•: If you hold your Shares in "street name" through a broker or other nominee, instruct your nominee to tender your Shares before the Expiration Date.

If you are unable to tender your Shares before the Expiration Date of the Offer, you may be able to use the guaranteed delivery procedures set forth in "The Offer—Procedures for Accepting the Offer and Tendering Shares" beginning on page 36. For more information on the timing of the Offer, extensions of the Offer period and your rights to withdraw your Shares from the Offer before the Acceptance Time, please refer to "The Offer" beginning on page 34.

Can I withdraw Shares that I previously tendered in the Offer? Until what time may I withdraw previously tendered Shares?

Yes. You can withdraw some or all of the Shares that you previously tendered in the Offer at any time prior to the Acceptance Time. Further, if the Acceptance Time has not occurred by April 18, 2020 (unless the Expiration Date has been extended, in which case the date for acceptance will also be extended), you can withdraw them at any time after such date. After the Acceptance Time, you will no longer be able to withdraw Shares. See "The Offer—Terms of the Offer", beginning on page 34, and "The Offer—Withdrawal Rights" for more information.

How do I withdraw my previously tendered Shares?

To withdraw any Shares that you previously tendered in the Offer, you (or, if your Shares are held in street name, the broker, dealer, bank, trust company or other nominee that holds your Shares) must deliver a written notice of withdrawal (or a photocopy of one), with the required information, to the Depositary while you still have the right to withdraw your Shares. See "The Offer—Terms of the Offer, beginning on page 34, and The Offer—Withdrawal Rights", beginning on page 38, for more information.

Is this the first step in a "going-private" transaction?

Yes, assuming that the Minimum Tender Condition and the Majority Minority Condition are satisfied and the Offer is consummated, a wholly-owned subsidiary of Bee Street, Bee Street II, will promptly merge with and into CMC, subject to certain conditions, with CMC continuing as the surviving corporation (the "Surviving Corporation") (the transaction, the "Merger"). In the Merger, each Share issued and outstanding immediately prior to the effective time of the Merger (other than (i) Shares held by CMC as treasury stock, (ii) Shares held by stockholders who properly exercise appraisal rights under the General Corporation Law of the State of Delaware (the "DGCL"), or (iii) Shares held by Bee Street and its affiliates) will be converted into the right to receive an amount of merger consideration equal to the Offer Price, net to the holder in cash, without interest thereon and subject to any required tax withholding.

After such purchase, CMC will cease to be a public company, the registration of CMC under the Securities Exchange Act of 1934, as amended, will be terminated, the Shares will cease to be quoted on the NYSE American (the "NYSE"), and CMC will not be required to file periodic reports with the SEC. In addition, if we waive the Minimum Tender Condition as described herein and consummate the Offer but do not consummate the Merger, the Shares could become ineligible to continue trading on the NYSE or another national securities exchange, and the more limited number of holders of Shares could result in a lower liquidity and trading volume in the Shares. If the Minimum Tender Condition is waived as described herein and Bee Street does not own sufficient Shares for the consummation of the Merger, then we may take additional actions in the future to seek to acquire additional Shares.

Is there any advantage in not tendering my Shares pursuant to the Offer and waiting instead for the completion of the Merger?

Even if the Minimum Tender Condition is satisfied, it is possible that, in certain circumstances, the Merger may not be consummated. If Bee Street does not consummate the Merger, then Bee Street may take additional actions in the future to seek to acquire the Shares that Bee Street does not currently own. There is no guarantee that the future price of the Shares will be equivalent to or greater than the Offer Price.

Moreover, the purchase of Shares by Bee Street pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and may reduce the number of unaffiliated holders of Shares, each of which could, during the period after the consummation of the Offer, affect the liquidity and market value of the remaining Shares held by the public.

Bee Street cannot reliably predict whether this would have an adverse or beneficial effect on the market price for, or marketability of, the Shares or whether it would cause future market prices to be greater or less than the price paid in the Offer. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the standards for continued listing on the NYSE resulting in the Shares ceasing to be listed on the NYSE. See "The Offer—Possible Effects of the Offer on the Market for Shares; Stock Exchange Listing(s); Registration Under the Exchange Act; Margin Regulations" beginning on page 41.

Will the board of directors of CMC make a recommendation concerning the Offer?

We do not know whether the board of directors of CMC will make a recommendation. Under SEC rules, CMC will be required to make a recommendation or state that it is neutral or is unable to take a position with respect to the Offer, and file with the SEC a solicitation/recommendation statement on Schedule 14D-9 describing its position, if any, and related matters, no later than ten business days from the date of the distribution of this Offer to Purchase. CMC is also required to send to you a copy of its Schedule 14D-9, which you should review carefully upon its receipt. For additional information on interests that board members and executive officers of the Bee Street may have in the Offer and subsequent Merger, see "Special Factors—Interests of Certain Persons in the Offer and the Merger" beginning on page 33.

Has Bee Street negotiated, or sought the approval of, the terms of this Offer with CMC?

No. We have not negotiated the terms of this Offer with CMC, the board of directors of CMC or any committee thereof and we do not intend to do so. Moreover, we have not requested that CMC, the board of directors of CMC or any committee thereof approve this Offer. The Offer is not conditioned upon the receipt of any approval or recommendation by CMC, the board of directors of CMC or any committee thereof.

Has the board of directors of CMC formed a special committee of independent directors to evaluate Bee Street's Offer?

No, as of the date of this Offer to Purchase, the board of directors of CMC has not formed a special committee of independent directors to evaluate Bee Street's Offer.

Are appraisal rights available in either the Offer or the Merger?

No appraisal rights are available to the holders of Shares in connection with the Offer.

If the Merger is completed, appraisal rights will be available in connection with the Merger as further described below, but, although the availability of appraisal rights depends on the Merger being completed, stockholders who wish to exercise such appraisal rights must do so no later than the time of the consummation of the Offer, even though the Merger will not have been completed as of such time. If the Merger is completed, the holders of Shares who (i) did not tender their Shares in the Offer; (ii) follow the procedures set forth in Section 262 of the DGCL; and (iii) do not thereafter lose their appraisal rights (by withdrawal, failure to perfect or otherwise), in each case in accordance with the DGCL, will be entitled to have their Shares appraised by the Delaware Court of Chancery and receive payment of the "fair value" of such Shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with a fair rate of interest, as determined by such court. Unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown, interest from the effective date of the Merger through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the Merger and the date of payment of the judgment.

The "fair value" of any Shares could be based upon considerations other than, or in addition to, the price paid in the Offer and the market value of such Shares. Moreover, the "fair value" so determined could be higher or lower than, or the same as, the Offer Price. Moreover, we may argue in an appraisal proceeding that, for purposes of such proceeding, the fair value of such Shares is less than the Offer Price.

If a stockholder wishes to elect to exercise appraisal rights under Section 262 of the DGCL in connection with the Merger, such stockholder must do all of the following:

•: before the later of the consummation of the Offer and twenty days after the date of mailing of the formal notice of appraisal rights, deliver to CMC a written demand for appraisal of Shares held, which demand must reasonably inform CMC of the identity of the stockholder and that the stockholder is demanding appraisal;
•: not tender such stockholder's Shares in the Offer; and
•: continuously hold of record the Shares from the date on which the written demand for appraisal is made through the effective time of the Merger.

Under Section 262 of the DGCL, a demand for appraisal rights must be made by the record holder of Shares. If you do not hold your Shares of record and desire to exercise appraisal rights in connection with the Merger, you will need to arrange for the record holder to make the demand for appraisal rights on your behalf in compliance with Section 262 of the DGCL.

The foregoing summary of the appraisal rights of stockholders under the DGCL does not purport to be a complete statement of the procedures to be followed by stockholders desiring to exercise any appraisal rights available thereunder and is qualified in its entirety by reference to Section 262 of the DGCL. The proper exercise of appraisal rights requires strict and timely adherence to the applicable provisions of the DGCL.

The information provided above is for informational purposes only with respect to your alternatives if the Merger is completed. If you tender your Shares into the Offer, you will not be entitled to exercise appraisal rights with respect to your Shares, but, instead, upon the terms and subject to the conditions to the Offer, you will receive the Offer Price for your Shares.

The "fair value" could be greater than, less than or the same as the Offer Price. See "The Offer—Appraisal Rights; "Going-Private" Rules" beginning on page 42.

What effect will the Offer have on my right to receive distributions from CMC?

To our knowledge, CMC has never paid dividends or other distributions on the Shares. Without prejudicing our rights under "The Offer—Conditions to the Offer," beginning on page 46, in the event that CMC declares any future cash distribution in respect of Shares with a record date on or after the date of commencement of this Offer and prior to the Acceptance Time, the Offer Price will be reduced by the amount of any such cash distribution. Bee Street will comply with all applicable federal securities laws in connection with such reduction in the Offer Price.

What is the market value of my Shares?

On February 14, 2020, the last trading day before Bee Street announced the Offer, the closing price of Shares reported on the NYSE was $9.35 per common Share; therefore, the Offer Price of $9.50 per common Share represents a premium of 1.6% over the closing price of Shares on the trading day prior to the announcement of the Offer, a premium of 22.3% over CMC's 60 trading day volume-weighted average closing Share price and a discount of 61.9% over CMC's two-year high Share price. We advise you to obtain a recent quotation for Shares when deciding whether to tender your Shares in the Offer. See "The Offer—Price Range of Shares; Dividends on Shares" beginning on page 40 for more information.

What are the U.S. federal income tax consequences of having my Shares accepted for payment in the Offer?

In general, if you are a U.S. holder (as defined in "The Offer—Material U.S. Federal Income Tax Consequences"), your tender of Shares for cash pursuant to the Offer will be a taxable transaction for federal income tax purposes. You should consult your tax advisor about the tax consequences to you of the Offer in light of your particular circumstances, including the consequences under applicable U.S. federal estate, gift and other non-income tax laws, and under any applicable state, local or foreign income or other tax laws. See "The Offer—Material U.S. Federal Income Tax Consequences" beginning on page 38 for more information.

Whom can I call with questions about the Offer?

You can contact our Information and Solicitation Agent for the Offer, InvestorCom, at the following telephone number, address and e-mail address:

The Information and Solicitation Agent for the Offer is:

19 Old Kings Highway S.—Suite 210
Darien, CT 06820
Toll Free (877) 972-0090
Banks and Brokers call collect (203) 972-9300
info@investor-com.com

INTRODUCTION

Bee Street Holdings LLC ("Bee Street"), a Delaware limited liability company, is offering to purchase all of the outstanding common stock (the "Shares"), of Continental Materials Corporation, a Delaware corporation ("CMC"), not currently held by Bee Street, at a price of $9.50 per Share, net to the seller in cash (the "Offer Price"), without interest, subject to applicable withholding taxes, on the terms and subject to the conditions set forth in this Offer to Purchase, in the related letter of transmittal and in the related notice of guaranteed delivery (which together with any amendments or supplements hereto or thereto, collectively constitute the "Offer"). Bee Street currently owns 1,027,171 Shares or approximately 61.3% of the outstanding Shares. On February 14, 2020, the last trading day before Bee Street announced the offer, the closing price of the Shares was $9.35 per Share; therefore the offer price represents a premium of 1.6% over the closing price of the Shares on the trading day prior to the announcement of the Offer and a premium of 22.3% over CMC's 60 trading day volume-weighted average closing Share price.

Tendering holders whose Shares are registered in their own names and who tender their Shares directly to the Depositary will not be obligated to pay brokerage fees or commissions in connection with the Offer or, except as set forth in Instruction 6 to the letter of transmittal for the Offer, transfer taxes on the sale of Shares in the Offer. A holder who holds Shares through a broker, dealer, bank, trust company or other nominee should consult with such institution to determine whether it will charge any service fees for tendering such Shares to Bee Street in the Offer.

Bee Street will pay all fees and expenses of the Depositary, and of ICOM Advisors LLC ("InvestorCom"), which is acting as the Information and Solicitation Agent for the Offer (the "Information and Solicitation Agent"), incurred in connection with the Offer. Bee Street is not aware of any licenses or other regulatory permits which appear to be material to the business of CMC and which might be adversely affected by the acquisition of Shares by Bee Street pursuant to the Offer or of any approval or other action by any governmental, administrative or regulatory agency or authority which would be required for the acquisition or ownership of Shares by Bee Street pursuant to the Offer. Should any such approval or other action be required, it is currently contemplated that such approval or action would be sought or taken. There can be no assurance that any such approval or action, if needed, would be obtained or, if obtained, that it will be obtained without substantial conditions or that adverse consequences might not result to CMC's or Bee Street's business or that certain parts of CMC's or Bee Street's business might not have to be disposed of in the event that such approvals were not obtained or such other actions were not taken, any of which could cause Bee Street to elect to terminate the Offer without the purchase of Shares thereunder. Bee Street's obligation under the Offer to accept for payment and pay for Shares is subject to certain conditions. See "The Offer—Conditions to the Offer."

The Offer is conditioned upon, among other things, there being validly tendered in accordance with the terms of the Offer and not properly withdrawn prior to the Expiration Date sufficient Shares such that, following the Acceptance Time, (i) Bee Street be capable of effectuating the Merger (as described herein) (the "Minimum Tender Condition") and (ii) Bee Street owns at least a majority of the Shares which were not beneficially owned by Bee Street and its affiliates prior to the Offer (the "Majority Minority Condition"). The Offer is also subject to the other conditions described in "The Offer—Conditions to the Offer."

After consummation of the Offer and if the Minimum Tender Condition is satisfied and certain other conditions are waived or satisfied, a wholly-owned subsidiary of Bee Street, Bee Street II, Inc., a Delaware corporation ("Bee Street II"), will promptly merge with and into CMC, subject to certain conditions, with CMC continuing as the surviving corporation (such transaction, the "Merger"). In the Merger, each Share issued and outstanding immediately prior to the effective time of the Merger (other than (i) Shares held by CMC as treasury stock, (ii) Shares held by stockholders who properly

exercise appraisal rights under the General Corporation Law of the State of Delaware (the "DGCL"), or (iii) Shares held by Bee Street and its affiliates) will be converted into the right to receive the Offer Price, net to the holder in cash, without interest thereon and subject to any required tax withholding.

Under no circumstances will interest be paid on the purchase price for the Shares, regardless of any extension of the Offer or any delay in making payment for Shares.

In order to determine whether the Majority Minority Condition is satisfied, Bee Street will take into account Shares that are owned directly or indirectly by Bee Street and its affiliates. As of February 17, 2020, there were 1,675,484 outstanding Shares according to information provided by CMC, and Bee Street owned 1,027,171 Shares, or approximately 61.3% of the outstanding Shares. Based on this information, Bee Street believes that the Minimum Tender Condition will be satisfied if at least 480,765 Shares are validly tendered in the Offer (and not withdrawn) before the Expiration Date and the Majority Minority Condition will be satisfied if at least 306,332 Shares are validly tendered in the Offer (and not withdrawn) before the Expiration Date (other than by any person described in the first sentence of this paragraph).

The Offer is not conditioned upon any recommendation by the board of directors of CMC or by any committee thereof. We expect that CMC's response to the Offer will be made in a Solicitation/Recommendation Statement on Schedule 14D-9, which will be filed with the SEC and provided to holders of Shares.

Antitrust Compliance. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice and the Federal Trade Commission and certain waiting period requirements have been satisfied. However, the Offer is not a reportable transaction under the HSR Act.

State Takeover Laws. Bee Street does not believe any state takeover statute or regulation will prevent the consummation of the Offer or the Merger. Bee Street reserves the right to challenge the applicability or validity of any state law purportedly applicable to the Offer or the Merger, and nothing in this Offer to Purchase or any action taken in connection with the Offer or the Merger is intended as a waiver of such right. If it is asserted that any state takeover statute is applicable to the Offer or the Merger and if an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer or the Merger, Bee Street might be required to file certain information with, or to receive approvals from, the relevant state authorities, and Bee Street might be unable to accept for payment or pay for Shares tendered pursuant to the Offer (assuming that the Minimum Tender Condition is met), or be delayed in consummating the Offer or the Merger. In such case, Bee Street may not be obligated to accept for payment or pay for any Shares tendered pursuant to the Offer. See "The Offer—Conditions to the Offer."

This Offer to Purchase and the related letter of transmittal contain important information and should be read in their entirety before any decision is made with respect to the Offer.

I. SPECIAL FACTORS

1. Background of the Offer

The Offer and the Merger are the result of deliberations initiated by James G. Gidwitz, initially solely for his own information, which resulted in an offer to various of Mr. Gidwitz's family members on or about February 12, 2020 to become members of the board of managers of Bee Street and to contribute to Bee Street the Shares which such family members beneficially owned. Specifically, the background of Mr. Gidwitz's and Bee Street's consideration and formulation of a "going private" transaction were as follows.

To apprise themselves of relevant duties, officers of CMC including James G. Gidwitz received, at Mr. Gidwitz's request, a briefing from attorneys of Taft Stettinius & Hollister LLP ("Taft") regarding the general principles of Delaware law pertaining to a "going private" transaction on October 16, 2019 without any specific plans or intentions regarding the Offer, the Merger or a transaction similar to the Offer or the Merger.

In December of 2019, those officers, including Mr. Gidwitz, communicated on several occasions by e-mail and telephone with Taft attorneys regarding possible processes and legal structures, and the hypothetical projected timeline, of a "going private" transaction, again for purposes of Mr. Gidwitz's general background information regarding transactions of that sort and without any specific plans or intentions regarding the Offer or the Merger. On December 5, 2019, Mr. Gidwitz met with Taft and several family members who were also beneficial owners of Shares for the purposes of sharing with such family members the general background information Mr. Gidwitz learned from Taft. In late December of 2019, Mr. Gidwitz sought Taft's legal advice to prepare a framework for a preliminary proposal for a potential "going private" transaction involving CMC by one or more affiliates of Mr. Gidwitz. As of December 31, 2019, no definitive proposal had been made to any of Mr. Gidwitz's family members, nor had any specific plans been developed regarding the Offer, the Merger or any similar transaction.

Commencing in December of 2019, Duff & Phelps Securities, LLC ("Duff & Phelps") commenced a preliminary review of relevant financial information and conducted preliminary valuation analyses consistent with its historic annual retention by CMC to conduct fair-value appraisal for executive compensation purposes and upon inquiry from Mr. Gidwitz and CMC's other officers. Effective January 15, 2020, Bee Street, through Taft, formally retained Duff & Phelps as financial advisor to advise Bee Street regarding the estimated fair market value of CMC's stock in connection with considering a potential "going private" transaction.

Commencing in January 2, 2020, Taft began to develop for Mr. Gidwitz's consideration alternative transaction processes and structures regarding a potential "going private" transaction for CMC. Attorneys from Taft also engaged in several fact-finding conference calls in January 2020 with Mr. Gidwitz regarding information that would be relevant to considering a potential "going private" transaction. On or about January 13, 2020, Mr. Gidwitz determined together with Taft that, if Bee Street were to pursue a potential going-private transaction, it would be most efficient to do so via a tender offer to purchase the Shares which were not owned by Mr. Gidwitz and his affiliates. At the time of that determination, no other family members had been involved in Mr. Gidwitz's determination or had been invited to participate in a potential tender offer.

On February 7, 2020, Mr. Gidwitz met with Taft and other members of the Gidwitz family who beneficially owned Shares. Mr. Gidwitz advised those other family members of his determination to structure any potential "going private" transaction involving CMC as a tender offer for Shares and of Taft's ongoing work at his direction to prepare documentation for a potential transaction. Mr. Gidwitz indicated that if he should decide to pursue such a potential transaction, that it was likely he would

invite participation from the other Gidwitz family members. No definitive terms were discussed with the other family members, nor was any documentation shared or any specific plans made.

On February 12, 2020, Kevin O'Keefe, Bee Street's Treasurer acting at James G. Gidwitz's direction, disseminated organizational documents for Bee Street to the Gidwitz family members who owned Shares pursuant to which they were invited, at their option, to contribute their Shares to Bee Street, thereby aggregating the Shares beneficially owned by the members of the Gidwitz Family for purposes of coordinating voting and current and potential future investments in Shares, including a potential tender offer if it were approved by the Bee Street board and ultimately commenced.

Such organizational documents were first effective February 13, 2020. Pursuant to such documentation, Bee Street ceased to be an instrumentality solely of James G. Gidwitz (with certain authorities delegated to Kevin O'Keefe), and the authority to manage Bee Street was vested in a board of managers consisting of James G. Gidwitz, Nancy Gidwitz, Ralph W. Gidwitz, Steven B. Gidwitz and Scott Gidwitz. On February 13, 2020, the board of managers of Bee Street met for the first time to approve the acceptance of contributions of Shares by certain Gidwitz family members and their affiliates, to memorialize the appointment of James G. Gidwitz as Chief Executive Officer and Kevin O'Keefe as Treasurer of Bee Street, and to authorize such officers, in their discretion subject to certain parameters and guidance from the Board, to cause to be prepared and finalized definitive documentation for the Offer and, if they determined to do so, to commence the Offer. Although the Offer was discussed and authorized by the board of managers of Bee Street on February 13, 2020, the power to decide whether and when definitively to commence the Offer was delegated to Bee Street's Chief Executive Officer in view of the many contingencies relating to the desirability of commencing the Offer.

On February 17, 2020, James G. Gidwitz, acting on the authority delegated by the board of managers of Bee Street, determined to commence the Offer as of the next trading day.

2. Purpose of and Reasons for the Offer; Plans for CMC After the Offer and the Merger; Consideration of Alternatives

As described above, the Offer and the Merger constitute a "going-private" transaction. A number of developments, opportunities and potential outcomes were considered in Bee Street's decision to undertake the Offer at the present time, including the following material reasons:

•: Bee Street's familiarity with the business, operations, properties, assets, financial condition, business strategy, and prospects of CMC, the nature of industry trends, safety regulations, the regulatory and legislative environment relevant to the industries in which CMC operates and global and national economic and market conditions, both on a historical and on a prospective basis;
•: Bee Street's belief that going private will reduce the disclosure of information which would otherwise be confidential business information to competitors, which has previously placed unnecessary stress on profit margins, and will increase the efficacy of CMC's business strategy of transitioning out of the commodified concrete and Aggregates businesses toward the production of unique products in its HVAC and Construction Products businesses;
•: Bee Street's belief that going private gives CMC the opportunity to achieve cost reductions by eliminating the compliance and other costs of maintaining CMC as a public company;
•: Bee Street's belief, based in part on management's projections, its review of the Duff & Phelps Valuation Report (as defined herein) and related financial analysis provided by Duff & Phelps and other information made available to the Bee Street board and management, that the Offer and Merger are more favorable to Bee Street than the potential value that could be expected to be generated from the various other strategic alternatives available with respect to Bee Street's

interests in CMC, including the alternative of maintaining CMC's status as a partially publicly-held independent corporation with low trading volume and limited analyst coverage;

•: the impact of the current size and scale of CMC, and its limited public float, liquidity, limited analyst coverage and investor interest, on CMC's capital markets access;
•: the historical trading price of Shares, including the fact that the Offer Price of $9.50 per Share represents a premium of 1.6% based upon the closing price of the Shares of $9.35 on February 14, 2020, the last trading day before announcement of the Offer, and a premium of 22.3% over CMC's 60 trading day volume-weighted average closing Share price;
•: that Bee Street is unwilling to sell its Shares or entertain offers for its interests in CMC and, accordingly, that the Offer represents a unique opportunity for holders of the Shares to get liquidity at a premium to market price;
•: that the consideration for the Offer will consist of cash, which permits holders of Shares the flexibility to reinvest the proceeds as they see fit;
•: that CMC will be run with an increased focus on long-term shareholder value without the burden of responding to the shorter-term imperatives of the public market;
•: that the terms of the Offer, which is structured to be non-coercive to holders of Shares, includes a condition that there be validly tendered sufficient Shares such that, following the closing of the Offer, Bee Street and its affiliates own at least 1,507,936 Shares, representing greater than 90% of the outstanding Shares (referred to herein as the Minimum Tender Condition) as well as a condition that there be validly tendered sufficient Shares that, following the Acceptance Time, Bee Street owns at least a majority of the Shares not beneficially owned by Bee Street and its affiliates prior to the Offer (referred to herein as the Majority Minority Condition); and
•: that the Offer is being made directly to the holders of Shares without being conditioned upon any requirement that the directors Bee Street recommend the Offer.

Bee Street is aware of and has considered the interests that certain members of Bee Street may have with respect to the Offer in addition to their interests as Shareholders, as described in "—Interests of Certain Persons in the Offer and the Merger" beginning on page 33.

The foregoing discussion summarizes the material factors considered by Bee Street in its consideration of the Offer and, if applicable, the subsequent Merger. In view of the wide variety of factors considered by Bee Street, the amount of information considered and the complexity of these matters, Bee Street did not find it practicable to, and did not attempt to, rank, quantify, make specific assignments of or otherwise assign relative weights to the specific factors considered in reaching its determination. In addition, individual members of Bee Street may have given different weights to different factors. Bee Street considered these factors as a whole, and in their totality considered them to be favorable to, and support, its determination.

Assuming the Minimum Tender Condition is satisfied, Bee Street and its affiliates will own more than 90% of the outstanding Shares after the Offer is completed. On that basis, Bee Street currently intends to promptly consummate the Merger, but Bee Street may change its intent and there can be no assurance that Bee Street will consummate the Merger

Bee Street currently intends that, after the completion of the Offer and, if applicable, the Merger, Bee Street will retain its interest in CMC. Bee Street further expects to operate CMC as a going concern under its control and to review CMC's assets, corporate structure, capitalization, operations, properties, policies, management and personnel to determine which changes may be necessary following the Offer and, if applicable, the Merger.

3. The Position of Bee Street Regarding the Fairness of the Offer and the Merger

The rules of the SEC require Bee Street to express its belief as to the fairness of the Offer to holders of Shares who are not affiliated with Bee Street. Bee Street and its management believe that the Offer is both financially and procedurally fair to holders of Shares that are not affiliates of Bee Street (whether those holders of Shares tender their Shares in the Offer or decline to tender and elect instead to remain as holders of Shares until the Merger is exercised immediately following the Offer or in the future). Bee Street and its management have based this belief on the following material factors:

•: the Offer Price represents a premium of 1.6% over the closing price of Shares on February 14, 2020, the last trading day prior to the public announcement of the Offer and a premium of 22.3% over CMC's 60 trading day volume-weighted average closing Share price;
•: Bee Street believes that the Offer Price is fair based upon the information made available to the board of managers of Bee Street on February 13, 2020, including the Duff & Phelps Materials as more fully described in "—Background of the Offer" and "—Materials of Financial Advisor to Bee Street", although Bee Street recognizes that the Duff & Phelps Materials do not constitute an opinion by Duff & Phelps as to the fairness of the Offer Price;
•: CMC's historical and current financial performance and results of operations, its prospects (including management's financial projections for CMC for fiscal years 2020 - 2022) and long-term strategy, and its competitive position in its industry;
•: updated estimates from CMC's management regarding its estimated reclamation liabilities and the estimated net proceeds available to CMC upon disposition of excess land and out-of-service mines;
•: that the consideration to be paid in the Offer and, assuming the Minimum Tender Condition is satisfied, the intended consummation of the Merger returns cash to Shareholders, which may be especially attractive to them given the limited public float and lack of trading liquidity of the Shares, and provides them with the ability to invest the proceeds as they choose;
•: that Bee Street already holds a controlling interest in the Shares and, accordingly, the Offer and related transactions do not involve a potential sale of control of CMC;
•: that Bee Street believes that the holders of Shares who are not affiliates of Bee Street are capable of evaluating the fairness of the Offer and the Merger;
•: that the Offer is subject to the Minimum Tender Condition, which requires that 74.2% of the Shares not held by Bee Street before the Offer be validly tendered and not withdrawn;
•: that the Offer is subject to the Majority Minority Condition, which requires that at least a majority of the Shares not held by Bee Street and its affiliates before the Offer be validly tendered and not withdrawn (excluding any Shares which are tendered by an affiliate of Bee Street);
•: each holder of Shares will be able to decide voluntarily whether or not to tender Shares in the Offer and, assuming the Minimum Tender Condition is satisfied and the Offer and the Merger are completed and any such holder of Shares has elected not to tender and not to assert and perfect appraisal rights, the holder will receive not less than the same type and amount of consideration from the consummation of the Merger that the holder would have received in the Offer; and
•: unaffiliated holders of Shares will have sufficient time to make a decision whether or not to tender because the Offer will remain open for at least twenty (20) business days (or longer if extended by Bee Street). If Bee Street amends the Offer to include any material additional information, Bee Street will, if necessary to allow adequate dissemination and investor response,

extend the Offer for a sufficient period to allow holders of Shares to consider the amended information.

Bee Street and its management also considered the following factors, each of which it considered negatively in its considerations concerning the fairness of the terms of the Offer and, assuming the Minimum Tender Condition is satisfied, the Merger:

•: with respect to the Offer Price, Bee Street's financial interest in acquiring the Shares for a low price is adverse to the financial interest of other holders of Shares in selling their Shares for a high price;
•: Shares have in the past traded at higher levels than the Offer Price. Shares reached an all-time intraday high trading price of $33.00 per Share in the 4^th quarter of 2005 and an all-time intraday low trading price of $1.25 per Share in the 4^th quarter of 1974. This trading price history suggests that certain holders of Shares may have acquired their Shares at prices higher than the current trading levels and at a higher price than the Offer Price;
•: if the Minimum Tender Condition is waived, Shares may remain outstanding, but could be ineligible to continue trading on the NYSE or any other national securities exchange, and the more limited number of holders of Shares could result in a lower liquidity and trading volume in the Shares;
•: the Offer and the Merger has not been reviewed or approved by the board of directors of CMC or any committee thereof;
•: Bee Street has not requested or received any opinion as to the fairness of the Offer or the Merger, from a financial point of view, to the unaffiliated holders of Shares;
•: any holder of Shares who tenders all its Shares in the Offer or has its Shares purchased in the Merger will cease to participate in future earnings or growth, if any, of CMC and will not benefit from increases, if any, in CMC's value, including any increases due to a general economic improvement; and
•: as described in "The Offer—Material U.S. Federal Income Tax Consequences," the tender of Shares in the Offer will generally be a taxable transaction to U.S. holders for U.S. federal income tax purposes.

Bee Street did not find it practicable to assign, nor did it assign, specific relative weights to the individual factors considered in reaching its conclusion as to fairness. Bee Street also did not consider the liquidation value of CMC's assets, and did not perform a liquidation analysis, because it considers CMC to be a viable going concern. Therefore, no appraisal of liquidation value was sought for purposes of valuing the Shares, and Bee Street believes that the liquidation value of Shares is irrelevant to a determination as to whether the Offer is fair to unaffiliated holders of Shares.

Bee Street's consideration of the factors described above reflects its assessment of the fairness of the Offer Price payable in the Offer and, if applicable, the Merger to unaffiliated holders of Shares (including holders of Shares who tender their Shares in the Offer as well as holders of Shares who decline to tender their Shares) in relation to the value of CMC without a control premium. Bee Street implicitly considered the value of CMC in a sale as a going concern by taking into account CMC's current and anticipated business, financial condition, results of operations, prospects and other forward-looking matters. Bee Street did not, however, explicitly calculate a going concern value of CMC on a stand-alone basis including a control premium because Bee Street believes that going concern value on a stand-alone basis including a control premium is not an appropriate method of determining the value of the Shares for purposes of the Offer and the Merger because Bee Street already has, and will continue to have, control of CMC, and Bee Street is unwilling to sell its Shares. Bee Street does not believe that it would be appropriate for the Shares held by the unaffiliated holders to be valued on a basis that includes a control premium.

The foregoing discussion of the information and factors considered and weight given by Bee Street is not intended to be exhaustive, but includes the material factors considered by Bee Street. Bee Street's views as to the financial and procedural fairness of the Offer and Merger should not be construed as a recommendation to any holder of Shares as to whether the holder should tender the holder's Shares in the Offer or seek to remain as a holder of Shares.

4. Materials Provided by Financial Advisor to Bee Street

Pursuant to an engagement letter effective as of January 15, 2020, Taft Stettinius & Hollister LLP ("Taft") retained Duff & Phelps, LLC ("Duff & Phelps") in connection with their legal representation of Bee Street as Bee Street's financial advisor in connection with the offer. On February 13, 2020, at the request of Bee Street, Duff & Phelps provided a report to the Bee Street Board setting forth Duff & Phelps' view, as of such date and based upon and subject to the factors, assumptions and procedures set forth in its report, as to the estimated range of fair market values of one Share (the "Duff & Phelps Valuation Report"), together with Duff & Phelps' related financial analysis (collectively, the "Duff & Phelps Materials").

The Duff & Phelps Materials were intended to assist the Bee Street Board (in its capacity as such) in connection with and for the purposes of its evaluation of the Offer. Neither the Duff & Phelps Valuation Report nor Duff & Phelps' related financial analysis constitutes, or is intended to represent, an opinion as to the fairness of the Offer Price or the Offer to the Shareholders of CMC or to any other person. The Duff & Phelps Materials do not constitute a recommendation as to whether any Shareholder of CMC should tender its Shares into the Offer and should not be relied upon by any Shareholder as such.

The full text of the Duff & Phelps Materials, which set forth the assumptions made, matters considered and limits on the review undertaken, have been filed as Exhibits to the Schedule TO filed with the SEC in connection with the Offer and are incorporated herein by reference. The summary of the Duff & Phelps Materials set forth in this Offer to Purchase is qualified in its entirety by reference to the full text of such Duff & Phelps Materials. The Duff & Phelps Materials may be examined at, and copies may be obtained from, the SEC in the manner described in "Available Information". CMC Shareholders are urged to read the Duff & Phelps Materials carefully and in their entirety.

Duff & Phelps was not requested to provide, and Duff & Phelps did not provide, to Bee Street, CMC, the holders of any class of securities, creditors or other constituencies of Bee Street or CMC, or any other person (i) any opinion as to the fairness, from a financial point of view or otherwise, of the terms of the Offer or the Offer Price to any Shareholder of CMC tendering Shares in the Offer or otherwise, or to the holders of any other class of securities, creditors or other constituencies of CMC or Bee Street, (ii) any other valuation of Bee Street or CMC for the purpose of assessing the fairness of the Offer Price to any such person, or (iii) any advice as to the underlying decision by Bee Street to engage in the Offer, or as to any other matter. Because Duff & Phelps was not requested to, and did not, deliver a fairness opinion in connection with the Offer, it did not follow all of the procedures in preparing the Duff & Phelps Materials that it would ordinarily follow in connection with delivering an opinion. The Duff & Phelps Materials were provided solely for the benefit of the Bee Street Board (in their capacities as such), and not on behalf of, nor do they convey rights or remedies upon, the holders of any class of securities, creditors or other constituencies of Bee Street or CMC or any other person other than the Bee Street Board (in their capacities as such) and should not be relied on as the basis for any other purpose or any investment decision. Duff & Phelps expressed no opinion as to the price at which CMC's Shares or the shares of Bee Street will trade at any future time.

In connection with rendering its view as set forth in the Duff & Phelps Valuation Report, Duff & Phelps made such reviews, analyses and inquiries as they deemed necessary and appropriate under the circumstances. Duff & Phelps also took into account its assessment of general economic, market and

financial conditions, as well as its experience in securities and business valuation, in general, and with respect to similar transactions, in particular. Duff & Phelps' procedures, investigations, and financial analysis with respect to the preparation of this presentation included, but were not limited to, the items summarized below:

•: reviewed CMC's annual reports and CMC's audited financial statements on Form 10-K filed with the Securities and Exchange Commission ("SEC") for the years ended 2015 through 2018;
•: reviewed CMC's unaudited internal financial statements for the year ending December 28, 2019;
•: reviewed CMC's consolidated outlook as of January 7, 2020, including financial projections of CMC's management for CMC for fiscal years 2020 - 2022;
•: reviewed CMC's fiscal year 2020 - 2022 strategic plans prepared for and presented to the CMC Board in December 2019;
•: reviewed various other internal documents provided to it by CMC management;
•: reviewed the historical trading price and trading volume of the Shares;
•: performed certain valuation and comparative analyses using generally accepted valuation and analytical techniques including a discounted cash flow analysis, an analysis of selected public companies that Duff & Phelps deemed relevant, and a premiums paid analysis that Duff & Phelps deemed relevant; and
•: conducted such other analyses and considered such other factors as Duff & Phelps deemed appropriate.

In addition, Duff & Phelps held discussions with certain members of the management of CMC with respect to the past and current business operations of CMC and its subsidiaries, the financial condition and future prospects and operations of CMC and its subsidiaries, and certain other matters Duff & Phelps believed necessary or appropriate to its inquiry.

In preparing the Duff & Phelps Materials and giving its view as set forth in the Duff & Phelps Valuation Report, Duff & Phelps relied upon and assumed, without assuming responsibility or liability for independent verification, the accuracy and completeness of all information that was publicly available or was furnished to or discussed with Duff & Phelps by Bee Street or otherwise reviewed by or for Duff & Phelps. No representation or warranty, express or implied, was made by Duff & Phelps in relation to the accuracy or completeness of the information presented in the Duff & Phelps Materials or their suitability for any particular purpose. Duff & Phelps did not conduct any valuation or appraisal of any specific assets or liabilities of Bee Street or CMC, nor did Duff & Phelps evaluate the solvency of Bee Street, CMC or any other company or business under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses, projections, assumptions and forecasts provided to Duff & Phelps by management of CMC or derived therefrom, Duff & Phelps assumed that such financial analyses, projections, assumptions and forecasts were reasonably prepared based on assumptions reflecting the best then-available estimates and judgments by management of CMC as to the expected future results of operations and financial condition of CMC to which such analyses, projections, assumptions or forecasts relate. Duff & Phelps expressed no view as to any of the foregoing analyses, projections or forecasts or the assumptions on which they were based, and Bee Street confirmed that Duff & Phelps could rely upon such analyses, projections, assumptions and forecasts when preparing the Duff & Phelps Materials and in rendering its view as set forth in the Duff & Phelps Valuation Report. Duff & Phelps is not a legal, regulatory, accounting or tax expert and relied on the assessments made by advisors to Bee Street with respect to such issues.

The matters considered by Duff & Phelps in its financial analyses and reflected in the Duff & Phelps Materials, including Duff & Phelps' view as set forth in the Duff & Phelps Valuation Report,

were necessarily based on economic, market and other conditions as in effect on, and information made available to Duff & Phelps as of, the respective dates of such materials. Many such conditions are beyond the control of Bee Street, CMC and Duff & Phelps. Accordingly, the analyses included in the Duff & Phelps Materials are inherently subject to uncertainty, and neither Duff & Phelps nor any other person assumes responsibility if future results are different from those forecasted. Furthermore, it should be understood that subsequent developments may affect the views expressed in the Duff & Phelps Materials, including Duff & Phelps' view as set forth in the Duff & Phelps Valuation Report, and that Duff & Phelps does not have any obligation to update, revise, or reaffirm its financial analyses, its view as set forth in the Duff & Phelps Valuation Report or any other contents of the Duff & Phelps Materials.

The Duff & Phelps Materials were not intended to provide the sole basis for Bee Street's evaluation of the Offer, do not purport to contain all relevant information relating to CMC, and do not constitute, and should not be viewed as, a recommendation with respect to any matter pertaining to the Offer. The terms of the Offer, including the Offer Price, were determined solely by management of Bee Street and the Bee Street Board, and the decision to delegate authority to management of Bee Street to commence the Offer on behalf of Bee Street was solely that of the Bee Street Board, and the decision of management of Bee Street to commence the Offer on behalf of Bee Street was solely that of management of Bee Street. The Duff & Phelps Materials, taken together, were only one of the many factors considered by the Bee Street Board in its evaluation of the proposed Offer and should not be viewed as determinative of the views of the Bee Street Board or the management of Bee Street with respect to the proposed Offer or the Offer Price. The Duff & Phelps Materials did not address the relative merits of the Offer or any other transactions contemplated in connection with the Offer compared to other business strategies or transactions that may have been considered by the Bee Street Board.

In accordance with customary investment banking practice, Duff & Phelps employed generally accepted valuation methodology in rendering the Duff & Phelps Valuation Report to the Bee Street Board on February 13, 2020 and in preparing the financial analyses contained in the Duff & Phelps Materials and delivered to the Bee Street Board on such date in connection with the rendering of the Duff & Phelps Valuation Report. The following is a summary of certain of the material financial analyses contained in the Duff & Phelps Materials. The following summary, however, does not purport to be a complete description of the financial analysis or data presented by Duff & Phelps. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by Duff & Phelps, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Duff & Phelps' analyses.

Discounted Cash Flow Analysis:

Duff & Phelps performed a discounted cash flow analysis of the estimated future unlevered free cash flows attributable to CMC for the fiscal years ending December 31, 2020 through December 31, 2029, with unlevered "free cash flow" defined as cash that is available either to reinvest or to distribute to security holders. The discounted cash flow analysis was used to determine the net present value of estimated future free cash flows utilizing a weighted average cost of capital as the applicable discount rate. For the purposes of its discounted cash flow analysis, Duff & Phelps utilized and relied upon the financial projections for CMC as provided by management.

Duff & Phelps estimated the net present value of all cash flows attributable to CMC after fiscal year 2029 (the "Terminal Value") using a perpetuity growth formula assuming a 3.00% terminal growth rate, which took into consideration an estimate of the expected long-term growth rate of the U.S.

economy and CMC's businesses. Duff & Phelps used discount rates ranging from 13.50% to 14.50%, reflecting Duff & Phelps' estimate of CMC's weighted average cost of capital, to discount the projected free cash flows and the Terminal Value. Duff & Phelps estimated CMC's weighted average cost of capital by estimating the weighted average of CMC's cost of equity (derived using the capital asset pricing model) and CMC's after-tax cost of debt. Duff & Phelps believes that this range of discount rates is consistent with the rate of return that security holders could expect to realize on alternative investment opportunities with similar risk profiles.

Based on these assumptions, Duff & Phelps' discounted cash flow analysis resulted in an estimated enterprise value for CMC of $33.830 million to $37.810 million as of February 12, 2020.

Selected Public Companies Analysis:

Duff & Phelps compared certain financial information of CMC to corresponding data and ratios from publicly traded companies in the industries in which CMC's subsidiaries operate that Duff & Phelps deemed relevant to its analysis. For purposes of its analysis, Duff & Phelps used certain publicly available historical financial data and consensus equity analyst estimates for the selected publicly traded companies. The 25 companies included in the selected public companies analysis (collectively, the "CMC Selected Public Companies") were:


HVAC		• AAON, Inc.
		• Daikin Industries, Ltd.
		• Ingersoll-Rand Plc
		• Lennox International
		• Meier Tobler Group AG
		• Munters Group AB (publ)
		• Rinnai Corporation
		• SPX Corporation
		• Volution Group plc
Doors		• Beacon Roofing Supply, Inc.
		• Foundation Building Materials, Inc.
		• GMS Inc.
		• Hardwoods Distribution Inc.
		• Quanex Building Products Corporation
		• Richelieu Hardware Ltd.
		• TopBuild Corp.
Construction		• Cementir Holding N.V.
		• Eagle Materials Inc.
		• Martin Marietta Materials, Inc.
		• Vulcan Materials Company
		• U.S. Concrete, Inc.
		• Summit Materials, Inc.
		• Boral Limited
		• CEMEX, S.A.B. de C.V.
		• CRH plc

Duff & Phelps selected these companies for its analysis based on their relative similarity, primarily in terms of business models, to that of CMC's subsidiaries.

For each company listed above, Duff & Phelps calculated and compared various financial multiples and ratios based on publicly available information as of February 11, 2020. For each of the following analyses performed by Duff & Phelps, estimated financial data for the relevant selected companies

were based on (except as otherwise noted) CMC management projections (in the case of CMC) and information obtained from S&P CapitalIQ and broker estimates (in the case of the selected companies). The tables below summarize certain observed trading multiples and historical and projected financial performance, on an aggregate basis, of the CMC Selected Public Companies. The estimates for 2020 and 2021 in the tables below with respect to the CMC Selected Public Companies were derived on information for the 12-month periods ending closest to CMC's fiscal year ends for which information was available. Data related to CMC's earnings before interest, taxes, depreciation and amortization ("EBITDA") and earnings before interest, taxes ("EBIT") were adjusted for purposes of this analysis to eliminate non-recurring income (expenses) and to include allocation of corporate expenses.

HVAC

	REVENUE GROWTH												EBITDA GROWTH												EBITDA MARGIN												EBIT MARGIN

	3-YR CAGR			2019			2020			2021			3-YR CAGR			2019			2020			2021			3-YR AVG			2019			2020			2021			3-YR AVG			2019			2020			2021
AAON, Inc.		6.6	%		8.1	%		12.3	%		7.3	%		–4.0	%		21.2	%		32.4	%		18.4	%		21.0	%		19.0	%		22.4	%		24.7	%		17.3	%		14.1	%		17.2	%		19.1	%
Daikin Industries,Ltd.		6.7	%		5.1	%		6.0	%		3.8	%		7.5	%		–0.5	%		9.8	%		9.9	%		15.3	%		14.3	%		14.8	%		15.7	%		11.2	%		11.4	%		NA			NA
Ingersoll-Rand Plc		7.1	%		5.9	%		3.8	%		3.7	%		9.7	%		9.1	%		7.6	%		6.8	%		15.1	%		16.2	%		16.2	%		16.6	%		12.9	%		13.2	%		13.9	%		14.5	%
Lennox International Inc.		1.5	%		4.4	%		4.0	%		0.4	%		6.2	%		8.8	%		7.4	%		0.3	%		15.8	%		17.3	%		17.9	%		17.9	%		14.0	%		15.4	%		15.9	%		16.4	%
Meier Tobler Group AG		NM			–3.5	%		2.1	%		1.4	%		NM			1.5	%		27.2	%		5.1	%		5.9	%		5.4	%		6.8	%		7.0	%		3.3	%		2.2	%		3.6	%		3.9	%
Munters Group AB (publ)		9.7	%		2.1	%		2.7	%		4.1	%		7.4	%		27.6	%		14.8	%		6.4	%		12.2	%		13.6	%		15.2	%		15.5	%		8.3	%		8.7	%		11.5	%		12.2	%
Rinnai Corporation		2.8	%		–0.3	%		0.7	%		2.4	%		–1.5	%		0.5	%		5.8	%		3.2	%		12.8	%		12.4	%		13.0	%		13.1	%		9.6	%		NA			NA			NA
SPX Corporation		–0.4	%		–1.6	%		4.9	%		1.6	%		10.7	%		15.0	%		11.8	%		5.5	%		10.0	%		13.2	%		14.1	%		14.7	%		8.2	%		11.2	%		12.2	%		12.3	%
Volution Group plc		15.1	%		4.8	%		2.2	%		2.9	%		8.5	%		8.9	%		4.1	%		4.9	%		19.9	%		19.8	%		20.2	%		20.6	%		11.3	%		17.9	%		18.2	%		18.5	%
Mean		6.1	%		2.8	%		4.3	%		3.1	%		5.6	%		10.2	%		13.4	%		6.7	%		14.2	%		14.6	%		15.6	%		16.2	%		10.7	%		11.8	%		13.2	%		13.8	%
Median		6.6	%		4.4	%		3.8	%		2.9	%		7.5	%		8.9	%		9.8	%		5.5	%		15.1	%		14.3	%		15.2	%		15.7	%		11.2	%		12.3	%		13.9	%		14.5	%

	ENTERPRISE VALUE AS MULTIPLE OF

	2019 EBITDA		2020 EBITDA		2021 EBITDA		2019 EBIT		2020 EBIT		2021 EBIT		2019 Revenue
AAON, Inc.		32.9x		24.8x		21.0x		44.2x		32.3x		27.1x		6.23x
Daikin Industries,Ltd.		13.1x		12.0x		10.9x		16.6x		NA		NA		1.88x
Ingersoll-Rand Plc		14.7x		13.7x		12.8x		17.4x		16.0x		14.7x		2.30x
Lennox International Inc.		15.0x		14.0x		14.0x		16.9x		15.7x		15.2x		2.60x
Meier Tobler Group AG		11.9x		9.4x		8.9x		29.5x		17.8x		16.0x		0.65x
Munters Group AB (publ)		12.8x		11.1x		10.5x		19.9x		14.7x		13.4x		1.74x
Rinnai Corporation		6.2x		5.9x		5.7x		NA		NA		NA		0.77x
SPX Corporation		13.3x		11.9x		11.3x		15.8x		13.8x		13.5x		1.77x
Volution Group plc		10.5x		10.1x		9.6x		11.6x		11.2x		10.7x		2.08x
Mean		14.5x		12.5x		11.6x		21.5x		17.3x		15.8x		2.22x
Median		13.1x		11.9x		10.9x		17.2x		15.7x		14.7x		1.88x

Doors

	REVENUE GROWTH												EBITDA GROWTH												EBITDA MARGIN												EBIT MARGIN

	3-YR CAGR			2019			2020			2021			3-YR CAGR			2019			2020			2021			3-YR AVG			2019			2020			2021			3-YR AVG			2019			2020			2021
Beacon Roofing Supply, Inc.		2.0	%		1.4	%		2.8	%		2.4	%		11.7	%		4.2	%		8.4	%		4.8	%		6.0	%		6.6	%		7.0	%		7.2	%		3.2	%		5.4	%		5.8	%		5.9	%
Foundation Building Materials, Inc.		NM			6.5	%		4.0	%		2.9	%		NM			14.8	%		5.6	%		3.7	%		6.9	%		8.1	%		8.2	%		8.3	%		3.1	%		4.3	%		4.6	%		4.8	%
GMS Inc.		19.4	%		3.4	%		3.3	%		3.6	%		29.1	%		4.1	%		3.5	%		3.7	%		7.9	%		9.3	%		9.3	%		9.3	%		5.0	%		5.6	%		6.0	%		6.3	%
Hardwoods Distribution Inc.		25.7	%		3.2	%		8.0	%		2.5	%		17.4	%		37.1	%		12.2	%		4.2	%		5.3	%		6.3	%		6.6	%		6.7	%		4.7	%		3.9	%		4.2	%		4.3	%
Quanex Building Products Corporation		–1.2	%		0.0	%		–1.8	%		NA			–2.4	%		8.3	%		12.3	%		NA			11.0	%		10.7	%		12.2	%		NA			5.2	%		5.0	%		6.7	%		NA
Richelieu Hardware Ltd.		7.2	%		7.3	%		3.2	%		NA			5.3	%		7.6	%		4.8	%		2.0	%		10.6	%		10.5	%		10.7	%		NA			9.3	%		9.1	%		9.3	%		NA
TopBuild Corp.		NM			4.9	%		5.9	%		5.7	%		NM			33.2	%		9.4	%		9.8	%		NM			13.6	%		14.0	%		14.6	%		NA			11.0	%		11.5	%		12.0	%
Mean		10.6	%		3.8	%		3.6	%		3.4	%		12.2	%		15.6	%		8.0	%		4.7	%		8.0	%		9.3	%		9.7	%		9.2	%		5.1	%		6.3	%		6.9	%		6.7	%
Median		7.2	%		3.4	%		3.3	%		2.9	%		11.7	%		8.3	%		8.4	%		4.0	%		7.4	%		9.3	%		9.3	%		8.3	%		4.8	%		5.4	%		6.0	%		5.9	%

	ENTERPRISE VALUE AS MULTIPLE OF

	2019 EBITDA		2020 EBITDA		2021 EBITDA		2019 EBIT		2020 EBIT		2021 EBIT		2019 Revenue
Beacon Roofing Supply, Inc.		11.5x		10.6x		10.1x		14.2x		12.8x		12.4x		0.77x
Foundation Building Materials, Inc.		7.7x		7.3x		7.0x		14.4x		12.8x		12.1x		0.62x
GMS Inc.		7.5x		7.3x		7.0x		12.4x		11.2x		10.3x		0.70x
Hardwoods Distribution Inc.		7.4x		6.6x		6.3x		11.9x		10.3x		9.7x		0.47x
Quanex Building Products Corporation		7.9x		7.0x		NA		16.7x		12.7x		NA		0.84x
Richelieu Hardware Ltd.		14.2x		13.5x		13.3x		16.4x		15.6x		NA		1.49x
TopBuild Corp.		12.9x		11.8x		10.7x		15.9x		14.4x		13.0x		1.75x
Mean		9.9x		9.2x		9.1x		14.6x		12.8x		11.5x		0.95x
Median		7.9x		7.3x		8.6x		14.4x		12.8x		12.1x		0.77x

Construction

	REVENUE GROWTH												EBITDA GROWTH												EBITDA MARGIN												EBIT MARGIN

	3-YR CAGR			2019			2020			2021			3-YR CAGR			2019			2020			2021			3-YR AVG			2019			2020			2021			3-YR AVG			2019			2020			2021
Cementir Holding N.V.		7.3	%		1.3	%		4.4	%		4.4	%		7.3	%		17.7	%		7.1	%		5.7	%		19.9	%		20.7	%		21.2	%		21.5	%		12.0	%		12.2	%		12.8	%		13.2	%
Eagle Materials Inc.		4.6	%		4.6	%		1.4	%		5.4	%		6.9	%		19.9	%		4.2	%		6.5	%		33.1	%		30.7	%		31.6	%		32.0	%		25.0	%		21.8	%		21.6	%		23.2	%
Martin Marietta Materials, Inc.		NM			7.0	%		6.5	%		6.4	%		NM			12.7	%		9.6	%		9.4	%		NM			29.9	%		30.8	%		31.7	%		NA			21.8	%		22.8	%		23.6	%
Vulcan Materials Company		NM			12.4	%		7.3	%		7.1	%		NM			14.2	%		13.0	%		10.7	%		25.1	%		26.2	%		27.6	%		28.6	%		17.4	%		18.6	%		20.5	%		21.7	%
U.S. Concrete, Inc.		8.6	%		–1.5	%		4.1	%		4.7	%		12.8	%		12.4	%		8.9	%		5.3	%		11.1	%		12.8	%		13.4	%		13.5	%		6.2	%		6.3	%		6.7	%		7.1	%
Summit Materials, Inc.		11.0	%		–3.0	%		5.4	%		6.5	%		7.1	%		5.1	%		8.0	%		5.2	%		19.8	%		21.5	%		22.0	%		21.8	%		9.8	%		10.4	%		11.9	%		12.1	%
Boral Limited		NM			0.1	%		3.3	%		5.3	%		NM			10.3	%		1.8	%		6.0	%		NM			17.3	%		17.1	%		17.2	%		NA			10.1	%		9.3	%		9.6	%
CEMEX, S.A.B. de C.V.		8.1	%		–7.7	%		3.8	%		8.1	%		5.7	%		–3.5	%		4.5	%		4.5	%		18.8	%		18.2	%		18.3	%		17.7	%		12.6	%		9.9	%		10.0	%		11.1	%
CRH plc		10.0	%		6.6	%		8.5	%		3.4	%		19.0	%		25.4	%		8.2	%		5.6	%		13.6	%		16.2	%		16.2	%		16.5	%		8.5	%		9.7	%		10.4	%		10.8	%
Mean		8.2	%		2.2	%		5.0	%		5.7	%		9.8	%		12.7	%		7.3	%		6.6	%		20.2	%		21.5	%		22.0	%		22.3	%		13.1	%		13.4	%		14.0	%		14.7	%
Median		8.3	%		1.3	%		4.4	%		5.4	%		7.2	%		12.7	%		8.0	%		5.7	%		19.8	%		20.7	%		21.2	%		21.5	%		12.0	%		10.4	%		11.9	%		12.1	%

	ENTERPRISE VALUE AS MULTIPLE OF

	2019 EBITDA		2020 EBITDA		2021 EBITDA		2019 EBIT		2020 EBIT		2021 EBIT		2019 Revenue
Cementir Holding N.V.		5.9x		5.5x		5.2x		9.9x		9.1x		8.5x		1.21x
Eagle Materials Inc.		9.7x		9.3x		8.7x		13.7x		13.6x		12.0x		2.98x
Martin Marietta Materials, Inc.		13.3x		12.1x		11.1x		18.3x		16.4x		14.9x		3.98x
Vulcan Materials Company		17.0x		15.0x		13.6x		24.0x		20.2x		17.9x		4.46x
U.S. Concrete, Inc.		7.3x		6.7x		6.3x		14.9x		13.4x		12.0x		0.93x
Summit Materials, Inc.		9.5x		8.8x		8.4x		19.8x		16.3x		15.0x		2.05x
Boral Limited		6.3x		6.2x		5.9x		10.8x		11.5x		10.5x		1.10x
CEMEX, S.A.B. de C.V.		7.6x		7.3x		7.0x		14.0x		13.4x		11.0x		1.38x
CRH plc		9.2x		8.5x		8.0x		15.3x		13.2x		12.3x		1.49x
Mean		9.5x		8.8x		8.2x		15.6x		14.1x		12.7x		2.18x
Median		9.2x		8.5x		8.0x		14.9x		13.4x		12.0x		1.49x

None of the companies utilized for comparative purposes in the selected public companies analysis are directly comparable to CMC or its subsidiaries. Duff & Phelps does not have access to nonpublic information on any of the companies used for comparative purposes. Accordingly, a complete valuation analysis cannot be limited to a quantitative review of the selected companies, and involves complex considerations and judgments concerning differences in financial and operating characteristics of such companies, as well as other factors that could affect their value relative to that of CMC.

Duff & Phelps did not rely solely on the quantitative results of the selected public companies analysis, but also made qualitative judgments concerning differences between the business, financial and operating characteristics and prospects of CMC and the CMC Selected Public Companies that could affect the public trading values of each in order to provide a context in which to consider the results of

the quantitative analysis. These qualitative judgments related primarily to the differing sizes, geography, corporate structure, growth prospects, asset profiles and capital structures between CMC and the companies included in the selected public companies analyses described above.

Based on these analyses, Duff & Phelps' selected public companies analysis resulted in an estimated enterprise value for CMC of $32.660 million to $39.250 million as of February 12, 2020.

Conclusion

Duff & Phelps concluded that CMC's enterprise value was within a range of $33.245 million to $38.530 million as of February 12, 2020, based on the average of the enterprise value indications from the discounted cash flow analysis and the selected public companies analysis.

Based on the concluded enterprise value, Duff & Phelps estimated the range of common equity value of CMC to be $11.197 million to $16.450 million by:

•: Deducting CMC's negative cash balance of $1.981 million as of December 31, 2019;
•: Adding the present value of net cash proceeds expected by CMC management from the expected divestiture by CMC of excess real property relating to its Aggregates business which is expected to wind down and concrete business divested in 2019 (Pikeview quarry, Pikeview buffer property and Black Canyon quarry in Colorado Springs, Colorado, and real estate divestitures of TMOP Legacy Co. (f/k/a Transit Mix of Pueblo) properties in Pueblo, Colorado) of $10.777 million to $10.821 million;
•: Adding the present value of CMC's net operating loss carryforward of $1.012 million to $1.028 million;
•: Deducting CMC's bank loan payable as of December 31, 2019 of approximately $800,000;
•: Deducting the present value of an expected earnout payments payable by CMC for recent business acquisitions (Global Flow Products, InOvate, Serenity Sliding Doors and Fastrac Doors) of $1.322 million;
•: Deducting the estimated reclamation liability of $27.191 million, which includes an additional $2.0 million of reclamation liabilities of TMOP Legacy Co. (f/k/a Transit Mix of Pueblo) which are not included on CMC's balance sheet as of September 30, 2019;
•: Deducting the present value of additional expense in CMC's Aggregates business which is expected to wind down of $2.401 million to $2.429 million; and
•: Deducting the value (net of tax benefits) of employee phantom equity grants at CMC and its subsidiaries of $141,000 to $205,000.

To calculate the per share estimate of CMC's stock price, Duff & Phelps used CMC's issued and outstanding shares of 1,683,067 as of February 12, 2020 plus 85,000 shares of phantom equity granted under CMC's Value Creation Incentive Plan to Ryan Sullivan, CMC's President and Chief Operating Officer for a total of 1,768,067 shares. Based on the foregoing analysis, Duff & Phelps estimated the value of each share to range from $6.33 to $9.30. Duff & Phelps noted that the Offer Price was above the range of the per share value indicated by its analyses.

Miscellaneous

As described above, Duff & Phelps was not asked to, and did not, render any opinion relating to the fairness of the Offer or the Offer Price. The Duff & Phelps Materials were one of many factors taken into consideration by the Bee Street Board in deciding to commence the Offer.

The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by Duff & Phelps. The preparation of financial analyses is a complex process involving subjective judgments and is not necessarily susceptible to partial analysis or summary description.

Duff & Phelps believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above were merely utilized to create points of reference for analytical purposes and should not be taken to be the view of Duff & Phelps with respect to the actual value of CMC. The order of analyses described does not represent the relative importance or weight given to those analyses by Duff & Phelps. In arriving at its view expressed in the Duff & Phelps Valuation Report, Duff & Phelps did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its view. Rather, Duff & Phelps considered the totality of the factors and analyses performed in arriving at its view expressed in the Duff & Phelps Valuation Report.

Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by Duff & Phelps are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, Duff & Phelps' analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be acquired or sold. None of the selected companies reviewed as described in the above summary is identical to CMC or its subsidiaries. However, the companies selected were chosen because they are publicly traded companies with operations and businesses that, for purposes of Duff & Phelps' analysis, may be considered similar to those of a CMC subsidiary, as the value of CMC is the value of CMC's subsidiary businesses. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to CMC.

Bee Street selected Duff & Phelps as its financial advisor because of Duff & Phelps' reputation as an internationally recognized investment banking and advisory firm with substantial experience in similar transactions and because of Duff & Phelps' familiarity with CMC and its businesses. As part of Duff & Phelps' investment banking business, Duff & Phelps is continuously engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes.

Bee Street has agreed to pay Duff & Phelps for its services in connection with the Offer and the Merger an aggregate fee of $275,000, all of which is contingent upon the completion of the Offer and the Merger. Bee Street also has agreed to reimburse Duff & Phelps for its expenses incurred in connection with Duff & Phelps' engagement and to indemnify Duff & Phelps, any controlling person of Duff & Phelps and each of its respective directors, officers, employees, agents and affiliates against specified liabilities.

Duff & Phelps and its affiliates in the past have provided, currently are providing, and in the future may provide valuation and other financial advisory services to CMC and have received or in the future may receive compensation for the rendering of these services, including providing valuation services for management equity compensation planning purposes.

5. Financial Results and Projections

CMC does not as a matter of course make public any financial projections as to future performance, earnings or other results, and is especially wary of making projections for earnings periods due to the unpredictability of the underlying assumptions and estimates. However, Bee Street was aware of certain non-public financial projections at the time they evaluated the Offer and the Merger. We have included below a summary of these projections to give CMC Shareholders access to certain non-public information that was considered by Bee Street in their evaluation of the Offer and the Merger.

Set forth below for each of CMC's operating subsidiaries is revenue, gross profit, earnings after allocation of corporate-level expenses and before interest, taxes, depreciation and amortization (EBITDA) for, and net working capital at the end of, CMC's most recently completed fiscal year 2019 on an unaudited basis (columns marked '2019 (E)'), which figures are subject to future adjustments when CMC reports its financial condition, results of operations and cash flows in its annual report on Form 10-K for the fiscal year ended December 28, 2019, and for CMC's fiscal years 2020, 2021 and 2022 on a projected basis (columns marked '2020 (P)', '2021 (P)' and '2022 (P)', respectively), which are based solely on the projections made by CMC's management as of January 7, 2020.

Unaudited Financial Results and Management Projections Related to CMC (in thousands)

Williams Furnace:	2019 (E)			2020 (P)		2021 (P)		2022 (P)

—Revenue	$	45,874		$	48,021	$	50,981	$	53,941
—Gross Profit	$	9,782		$	11,770	$	12,496	$	13,364
—EBITDA(1)	$	(1,549	)	$	1,151	$	1,618	$	1,809
—Net Working Capital	$	9,375		$	11,724	$	13,014	$	14,278
—Capital Expenditures	$	153		$	591	$	611	$	701

(1): Excludes Value Creation Plan expense

Phoenix Manufacturing:	2019 (E)			2020 (P)			2021 (P)		2022 (P)

—Revenue	$	24,100		$	26,795		$	28,403	$	29,823
—Gross Profit	$	4,149		$	3,834		$	4,537	$	5,622
—EBITDA(1)	$	(177	)	$	(84	)	$	432	$	1,290
—Net Working Capital	$	4,952		$	6,053		$	6,292	$	6,389
—Capital Expenditures	$	127		$	512		$	562	$	611

(1): Excludes Value Creation Plan expense

InOvate:	2019 (E)		2020 (P)		2021 (P)		2022 (P)

—Revenue	$	9,072	$	16,697	$	17,546	$	18,430
—Gross Profit	$	3,119	$	6,402	$	6,642	$	6,963
—EBITDA(1)	$	954	$	2,505	$	2,540	$	2,642
—Net Working Capital	$	929	$	1,229	$	1,261	$	1,271
—Capital Expenditures	$	403	$	155	$	599	$	296

(1): Excludes Value Creation Plan expense

Global Flow Products:	2019 (E)		2020 (P)		2021 (P)		2022 (P)

—Revenue	$	3,771	$	7,400	$	7,770	$	8,159
—Gross Profit	$	1,283	$	3,261	$	3,431	$	3,618
—EBITDA(1)	$	87	$	1,016	$	1,048	$	1,166
—Net Working Capital	$	1,096	$	1,143	$	1,197	$	1,255
—Capital Expenditures(2)	$	700	$	88	$	3,134	$	154

(1): Excludes Value Creation Plan expense
(2): Global Flow Products will require capacity expansion in 2021, which is expected to require capital expenditures of approximately $3.0 million

McKinney Door & Hardware:	2019 (E)		2020 (P)		2021 (P)		2022 (P)

—Revenue	$	18,897	$	19,026	$	19,977	$	20,976
—Gross Profit	$	5,154	$	5,179	$	5,470	$	5,747
—EBITDA(1)	$	1,125	$	987	$	1,051	$	1,089
—Net Working Capital(2)	$	3,510	$	2,641	$	2,766	$	2,904
—Capital Expenditures	$	154	$	36	$	98	$	109

(1): Excludes Value Creation Plan expense
(2): Balances based on pro forma allocation to Fastrac

Fastrac:	2019 (E)		2020 (P)		2021 (P)		2022 (P)

—Revenue	$	3,355	$	5,495	$	5,770	$	6,058
—Gross Profit	$	625	$	1,205	$	1,295	$	1,381
—EBITDA	$	368	$	387	$	444	$	515
—Net Working Capital(1)	$	1,096	$	839	$	880	$	928
—Capital Expenditures	$	11	$	10	$	28	$	32

(1): Balances based on pro forma allocation from McKinney

Serenity:	2019 (E)		2020 (P)		2021 (P)		2022 (P)

—Revenue	$	2,116	$	4,502	$	5,178	$	5,954
—Gross Profit	$	1,098	$	2,496	$	2,885	$	3,315
—EBITDA	$	385	$	147	$	314	$	779
—Net Working Capital(1)	$	1,028	$	844	$	966	$	1,012
—Capital Expenditures	$	15	$	32	$	43	$	53

(1): Balances based on pro forma allocation from McKinney

Castle Rebar:	2019 (E)			2020 (P)			2021 (P)			2022 (P)

—Revenue	$	4,641		$	5,232		$	5,494		$	5,768
—Gross Profit	$	279		$	395		$	411		$	422
—EBITDA	$	(17	)	$	(23	)	$	(20	)	$	(14	)
—Net Working Capital	$	1,192		$	988		$	1,038		$	1,094
—Capital Expenditures	$	290		$	72		$	77		$	147

Corporate Not Allocated to Subsidiaries:	2019 (E)			2020 (P)			2021 (P)			2022 (P)

—Revenue	$	(519	)	$	—		$	—		$	—
—Gross Profit	$	(176	)	$	—		$	—		$	—
—EBITDA	$	—		$	(113	)	$	(214	)	$	(323	)
—Net Working Capital(1)	$	3,272		$	3,304		$	(1,591	)	$	(1,602	)
—Capital Expenditures	$	(1,370	)	$	—		$	—		$	—

(1): Excludes Value Creation Plan expense

Consolidated:	2019 (E)		2020 (P)		2021 (P)		2022 (P)

—Revenue	$	111,308	$	133,168	$	141,118	$	149,110
—Gross Profit	$	25,312	$	34,542	$	37,169	$	40,432
—EBITDA	$	1,177	$	5,973	$	7,213	$	8,955
—Net Working Capital	$	26,450	$	28,764	$	25,825	$	27,530
—Capital Expenditures	$	482	$	1,497	$	5,152	$	2,103

One Time Adjustments Not Included Above:	2019 (E)			2020 (P)		2021 (P)			2022 (P)

Aggregates EBITDA	$	(32,902	)	$	8,201	$	(1,328	)	$	(1,239	)
Discontinued EBITDA	$	26,199		$	—	$	—		$	—
Corporate EBITDA(1)	$	(8,917	)	$	—	$	—		$	—

(1): Includes $6.4 million related to Transit sale, $0.2 million related to legal settlements, and $2.3 million M&A expenses

Bee Street considered the following one-time, non-recurring items in its financial projections:

•: The potential future sale of excess real property relating to CMC's Aggregates business and divested concrete business in 2020 and 2021 (Pikeview quarry, Pikeview buffer property and Black Canyon quarry in Colorado Springs, Colorado and TMOP Legacy Co. (f/k/a Transit Mix of Pueblo) properties in Pueblo, Colorado) for proceeds of approximately $11.7 million in the aggregate;
•: The Aggregates business will continue to generate corporate expenses of approximately $3.9 million in total from 2020 through 2022 as the business is expected to wind down;
•: A net operating loss carryforward of approximately $5.0 million will be created as a result of 2019 financial performance and is expected to be utilized in 2020 and 2021;
•: The reclamation liability related to TMOP Legacy Co. (f/k/a Transit Mix of Pueblo) increased by approximately $2.0 million relative to CMC's unaudited balance sheet as of September 30, 2019; and
•: Global Flow Products will require capacity expansion in 2021, which is expected to require capital expenditures of approximately $3.0 million.

The foregoing estimated and projected financial information is highly summarized and presented without audit and accompanying audit adjustments (if any), in the case of unaudited financial information for CMC's fiscal year 2019, or on the basis of management's assumptions which may or may not be accurate, in the case of projected information for CMC's fiscal years 2020, 2021 and 2022. Audit adjustments could affect such financial information furnished for the Company's fiscal year 2019, and such adjustments could be material.

These projections, which were prepared by CMC's management, were prepared solely for internal use. They were not prepared with a view to public disclosure or compliance with the published guidelines of the SEC or the guidelines established by the American Institute of Certified Public

Accountants regarding projections or forecasts. The projections, which do not reflect the proposed transaction, were substantially completed during the fourth quarter of 2019.

The unaudited financial information and projections do not purport to present operations or financial condition in accordance with accounting principles generally accepted in the U.S., and BKD, LLP, CMC's independent auditors have not examined, compiled nor performed any procedures with respect to the projections and, accordingly, BKD, LLP does not express an opinion or any other form of assurance with respect thereto nor assume any responsibility for them.

Bee Street's internal financial forecasts (which includes CMC's financial forecasts) are, in general, prepared solely for internal use and capital budgeting and other management decisions and are subjective in many respects and thus susceptible to interpretations and periodic revision based on actual experience and business developments. The projections reflect numerous assumptions made by CMC's management with respect to industry performance, general business, economic, market and financial conditions and other matters, driven primarily by prices of commercial construction in the US, which is difficult to predict, and which are generally factors which are beyond Bee Street's and CMC's control. Accordingly, there can be no assurance that the assumptions made at the time the projections were prepared will prove accurate. It is expected that there will be differences between actual and projected results, and actual results may be materially greater or less than those contained in the projections. The inclusion of these projections herein should not be regarded as an indication that any of Bee Street or CMC or their respective affiliates or representatives considered or consider the projections to be a reliable prediction of future events, and we caution you that the projections should not be relied upon as such or to make a decision regarding the Offer.

Neither Bee Street nor any of its affiliates or representatives has made or makes any representation to any person regarding the ultimate performance of CMC or Bee Street compared to the information contained in the projections, and to Bee Street's knowledge, none of them intends to update or otherwise revise the projections to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying the projections are shown to be in error.

6. Transactions and Arrangements Concerning the Shares

Except as described in this Offer to Purchase, including Schedule B to this Offer to Purchase, neither Bee Street nor, to the best of its knowledge, any of the persons listed on Schedule A to this Offer to Purchase, beneficially owns or has a right to acquire any Shares, has engaged in any transactions in Shares in the past 60 days or is a party to any agreement, arrangement or understanding with any other person with respect to Shares or any other securities of CMC (including, without limitation, any contract, arrangement, understanding or relationship concerning the transfer of the voting of any such securities, joint ventures, loans or option arrangements, puts or calls, guarantees of loans, guarantees against loss or the giving or withholding of proxies, consents or authorizations). Schedule B to this Offer to Purchase also sets forth certain details regarding acquisitions of Shares by Bee Street during the past two years.

As of the date of this Offer to Purchase, Bee Street owns 1,027,171 or approximately 61.3% of the outstanding Shares.

7. Conditions to the Merger

Bee Street cannot effect the Merger unless:

•: Bee Street receives net proceeds of debt financing which are adequate to pay the Offer Price for all Shares which are tendered into the Offer (and not withdrawn) before Expiration Date, to pay merger consideration at a price per share equal to the Offer Price for each Share which will be

converted, pursuant to the Merger, into the right to receive merger consideration, and to pay Bee Street's expenses in connection with the Offer and the Merger;

•: no law, temporary restraining order, preliminary or permanent injunction, judgement or ruling enacted, promulgated, issued or entered by any governmental authority will be in effect that enjoins, restrains, prevents or prohibits the consummation of the Offer or the Merger or makes the consummation of the Offer or the Merger illegal;
•: the Majority Minority Condition has been satisfied; and
•: the Minimum Tender Condition has been satisfied.

8. Certain Effects of the Offer and the Merger

The purchase of Shares pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and may reduce the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining Shares held by the public.

After consummation of the Offer, and if the Minimum Tender Condition is satisfied and certain other conditions are waived or satisfied, a wholly owned subsidiary of Bee Street, Bee Street II, Inc., a Delaware corporation, will promptly merge with and into CMC, subject to certain conditions, with CMC continuing as the surviving corporation (such transaction, the "Merger"). In the Merger, each Share issued and outstanding immediately prior to the effective time of the Merger (other than (i) Shares held by CMC as treasury stock, (ii) Shares held by stockholders who properly exercise appraisal rights under the General Corporation Law of the State of Delaware (the "DGCL"), or (iii) Shares held by Bee Street and its affiliates) will be converted into the right to receive an amount of merger consideration equal to the Offer Price, net to the holder in cash, without interest thereon and subject to any required tax withholding. Under no circumstances will interest be paid on the purchase price for the Shares, regardless of any extension of the Offer or any delay in making payment for Shares.

As a result of the Offer, Bee Street's interest in CMC's net book value and net income or loss will increase to the extent of the proportion of the outstanding Shares that it acquires. If the Merger is completed, Bee Street will be entitled to similar benefits proportionate to its increased ownership of CMC. Similarly, Bee Street and its affiliates will bear all of the risk of losses generated by CMC's operations and any decrease in the value of CMC after the Offer and the Merger. Upon consummation of the Merger, CMC will become a privately-held corporation. Accordingly, former holders of Shares will not have the opportunity to participate in the earnings and growth of CMC after the Offer and the Merger.

The Shares are currently registered under the Exchange Act and are quoted on the NYSE under the symbol "CUO." Upon consummation of the Merger, CMC will become a privately-held corporation, there will be no public market for the Shares, Shares will cease to be quoted on the NYSE and price quotations with respect to the Shares will no longer be available. In addition, after the Merger (or, depending on the results of the Offer, after the Offer), registration of CMC under the Exchange Act will be terminated, and CMC will no longer be required to file periodic reports with the SEC. Once the registration of the Shares under the Exchange Act has been terminated, certain provisions of the Exchange Act, such as the reporting requirements of Section 13 of the Exchange Act, the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement to

furnish a proxy statement in connection with Shareholders' meetings pursuant to Section 14(a) of the Exchange Act, and the requirements of Rule 13e-3 under the Exchange Act with respect to "going-private" transactions, will no longer be applicable to CMC. In addition, "affiliates" of CMC and persons holding "restricted securities" of CMC may be deprived of the ability to dispose of such securities under Rule 144 under the Securities Act of 1933, as amended.

9. Purposes, Reasons and Plans for CMC After the Merger

Other than as disclosed herein, Bee Street does not have any current intentions, plans or proposals to cause CMC to engage in any of the following:

•: an extraordinary corporate transaction following consummation of the Offer and the Merger involving CMC's corporate structure, business or management, such as a merger, reorganization or liquidation;
•: the relocation of any material operations or sale or transfer of a material amount of assets (see "—Financial Results and Projections"); or
•: any other material changes in CMC's business.

Nevertheless, following consummation of the Offer and, if applicable, the Merger, Bee Street may initiate a review of CMC and its assets, corporate and capital structure, capitalization, operations, business, properties and personnel to determine what changes, if any, would be desirable following the Offer and Merger to enhance the combined businesses and operations of Bee Street and CMC and may cause CMC to engage in the types of transactions set forth above if the management and/or board of directors of the Bee Street decides that such transactions are in the best interest of CMC upon such review.

In the event that either of the Offer or the Merger is not consummated for any reason, Bee Street will evaluate its other alternatives. Such alternatives could include commencing a tender offer for the Shares it does not already own on the same or different terms, including with a different offer price, different consideration or different conditions, proposing a merger on terms other than those described above, purchasing or selling additional Shares in the open market, in privately negotiated transactions, in another tender offer or exchange offer or otherwise, or taking no further action to acquire additional Shares.

10. Effects on CMC if the Offer Is Not Consummated

If the Offer is not consummated for any reason, holders of Shares will not receive any payment for their Shares in connection with the Offer. Instead, CMC will remain a public company and the Shares will continue to be listed for trading on the NYSE. In addition, if the Offer is not consummated, we expect that CMC management will operate the CMC business in a manner similar to that in which it is being operated today and that holders of Shares will continue to be subject to the same risks and opportunities as they currently are, including, among other things, that CMC's operations can be materially affected by commodity price risks, overall market conditions and a lack of trading liquidity due to a limited public float, among other factors. Accordingly, if the Offer is not consummated, there can be no assurance as to the effect of these risks and opportunities on the future value of your Shares. Moreover, we anticipate that liquidity and analyst coverage for the Shares would continue to be limited. If the Offer is not consummated for any reason, there can be no assurance that any other transaction acceptable to CMC Shareholders will be offered, or that the business, prospects or results of operations of CMC will not be adversely impacted.

11. Interests of Certain Persons in the Offer and the Merger

In considering the fairness of the consideration to be received in the Offer and the Merger, Shareholders should be aware that Bee Street and certain officers and directors of CMC have interests in the Offer and the Merger which may present them with certain actual or potential conflicts of interest.

Financial Interests. Bee Street's interests in respect of the Offer and, if applicable, the Merger are different from yours because Bee Street has an interest in acquiring the Shares as inexpensively as possible and you have an interest in selling your Shares for the highest possible price. The interests of the Company's directors and other affiliates in the Offer and the Merger may be the same as or different from your interests. To Bee Street's knowledge, the directors and officers of the Company collectively own 100,749 Shares that may be tendered in the Offer, which excludes 1,027,171 Shares held by Bee Street but includes 35,650 Shares held by James G. Gidwitz in a retirement account.

Interlocking Directors and Officers. There are five members of the board of managers of Bee Street, of whom four are also directors or executive officers of CMC. These overlaps are reflected in the table set forth in Schedule A attached hereto.

Other. CMC may describe other interests of its executive officers and directors in the transactions contemplated by this Offer to Purchase in the Schedule 14D-9 that CMC must file with the SEC. We encourage you to read a copy of CMC's Schedule 14D-9 before making a decision with respect to the Offer.

12. Certain Relationships Between Bee Street and CMC

To the extent the discussion below summarizes any agreement that has been filed by Bee Street or CMC with the SEC, each such summary is qualified entirely by reference to the complete text of the applicable agreement, which is incorporated into this Offer to Purchase by reference. We encourage you to read each such agreement carefully and in its entirety. You should also review "—Interests of Certain Persons in the Offer and the Merger" beginning on page 33 for a description of arrangements between Bee Street and CMC and between CMC and directors and executive officers of the Bee Street.

As of the date of this Offer to Purchase, Bee Street owns approximately 61.3% of the outstanding Shares. Bee Street's principal office address is c/o Riverbend Industries, LLC, which is a subtenant in CMC's principal offices. As affiliates, Bee Street and CMC are insured under a joint program of directors and officers insurance.

13. Possible Actions by Bee Street with Regard to CMC if the Offer Is Not Completed

If the Offer is not completed, Bee Street will re-evaluate its options with respect to the Shares not owned by it. In particular, Bee Street may consider commencing a tender offer for the Shares it does not already own on the same or different terms, including with a different offer price (which could be lower), different consideration, or different conditions, proposing a merger, purchasing additional Shares in the open market, in privately negotiated transactions, or otherwise, or taking no further action with respect to the Shares. Bee Street currently has no intention of selling the Shares it currently owns or of entertaining offers from third parties to purchase any Shares currently owned by Bee Street. Bee Street expects that Bee Street would remain the controlling and majority stockholder of CMC indefinitely. If the Offer is not completed and Shares remain outstanding, the public Shareholders of CMC would, absent a sale by them in the public markets, retain their Shares and would realize the benefit of any improvement in CMC's business or profitability but would also bear the risk that the trading price per Share could decline to a price that is less than the Offer Price, or Shares become less readily marketable.

To our knowledge, CMC has never paid a divided on the Shares. If Bee Street were to pursue any of these alternatives, it might take considerably longer for the public holders of Shares to receive any consideration for their Shares (other than through sales in the open market) than if they had tendered their Shares in the Offer. Any such transaction may result in proceeds per Shares to the public Shareholders of CMC that are more or less than or the same as the Offer Price.

II. THE OFFER

1. Terms of the Offer

Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), Bee Street shall accept for payment and pay for all Shares validly tendered and not properly withdrawn pursuant to the Offer as soon as practicable after the Expiration Date in accordance with the procedures set forth under "—Acceptance for Payment and Payment for Shares." If the conditions to the Offer are satisfied or waived, Bee Street will purchase all Shares validly tendered and not properly withdrawn as described above.

The obligation of Bee Street to accept for payment, and pay for all Shares tendered pursuant to the Offer shall be subject to the Minimum Tender Condition, unless waived, as well as the other conditions described under "—Conditions to the Offer." Bee Street may terminate the Offer without purchasing any Shares if certain events described under "—Conditions to the Offer" occur.

If at any scheduled Expiration Date, any of the conditions of the Offer shall not have been satisfied or earlier waived by Bee Street if it is a waivable condition, Bee Street may, in its sole discretion, extend the Offer and the Expiration Date for one or more periods of up to twenty (20) business days each, the length of each such period to be determined by Bee Street in its sole discretion. There can be no assurance that Bee Street will exercise its rights to extend the Offer.

If Bee Street is delayed in its payment for the Shares or is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to Bee Street's rights under the Offer, the Depositary may retain tendered Shares on behalf of Bee Street, and such Shares may not be withdrawn except to the extent tendering Shareholders are entitled to withdrawal rights as described under "—Withdrawal Rights." However, the ability of Bee Street to delay the payment for Shares which Bee Street has accepted for payment is limited by Rule 14e-1 promulgated under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by, or on behalf of, holders of securities promptly after the termination or withdrawal of the Offer.

Bee Street will accept for payment and pay for all Shares validly tendered and not properly withdrawn pursuant to the Offer if all of the conditions to the Offer are satisfied or waived on the Expiration Date (as it may be extended from time to time). Any extension, delay, termination, waiver or amendment of the Offer will be followed as promptly as practicable by public announcement thereof, and such announcement in the case of an extension will be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Without limiting the manner in which Bee Street may choose to make any public announcement, subject to applicable law (including Rules 14d-4(d) and 14e-1(d) promulgated under the Exchange Act, which require that material changes be promptly disseminated to holders of Shares in a manner reasonably designed to inform such holders of such change), Bee Street shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a press release.

If Bee Street makes a material change in the terms of the Offer, or if it waives a material condition to the Offer, Bee Street will extend the Offer and disseminate additional Offer materials to the extent required by Rules 14d-4(d), 14d-6(c) and 14e-1 promulgated under the Exchange Act. The minimum period during which an Offer must remain open following material changes in the terms of the Offer, other than a change in price or a change in the percentage of securities sought or a change in any dealer's soliciting fee, will depend upon the facts and circumstances, including the materiality of the changes. A minimum 10-business day period from the date of such change is generally required to allow for adequate dissemination of new information to Shareholders in connection with a change in price or, subject to certain limitations, a change in the percentage of securities sought or a change in

any dealer's soliciting fee. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or a federal holiday, and consists of the time period from 12:01 a.m. through 12:00 midnight, Eastern Time. The requirement to extend the Offer will not apply to the extent that the number of business days remaining between the occurrence of the change and then-scheduled Expiration Date equals or exceeds the minimum extension period that would be required because of such amendment.

If, on or before the Expiration Date, Bee Street increases the consideration being paid for Shares accepted for payment pursuant to the Offer, such increased consideration will be paid to all Shareholders whose Shares are purchased in the Offer, whether or not such Shares were tendered before the announcement of the increase in consideration.

CMC has provided Bee Street with its Shareholder lists and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase, the related letter of transmittal and other relevant materials will be mailed to record holders of Shares, and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the Shareholder lists, or, if applicable, who are listed as participants in a clearing agency's security position listing.

2. Acceptance for Payment and Payment for Shares

Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Bee Street will accept for payment, and will pay for, all Shares validly tendered prior to the Expiration Date and not properly withdrawn, promptly after the Expiration Date (as it may be extended from time to time). Subject to applicable rules of the SEC, Bee Street expressly reserves the right to delay acceptance for payment of, or payment for, Shares in order to comply in whole or in part with any other applicable law. If Bee Street desires to delay payment for Shares accepted for payment pursuant to the Offer, and such delay would otherwise be in contravention of Rule 14e-1 of the Exchange Act, Bee Street will extend the Offer. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) the certificates evidencing such Shares (the "Certificates") or timely confirmation of a book-entry transfer of such Shares into the Depositary's account at DTC (a "Book-Entry Confirmation") pursuant to the procedures set forth in "—Procedures for Accepting the Offer and Tendering Shares," (ii) the letter of transmittal (or a photocopy thereof), properly completed and duly executed, with any required signature guarantees or, in the case of a book-entry transfer, an "agent's message" in lieu of the letter of transmittal and (iii) any other documents required by the letter of transmittal. An "agent's message" is a message, transmitted by electronic means to, and received by, the Depositary and forming a part of a Book-Entry Confirmation which states that DTC has received an express acknowledgment from the participant in DTC tendering the Shares which are the subject of such Book-Entry Confirmation, that such participant has received and agrees to be bound by the terms of the letter of transmittal and that Bee Street may enforce such agreement against such participant.

For purposes of the Offer, Bee Street will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not properly withdrawn as, if and when Bee Street gives oral or written notice to the Depositary, as agent to receive tenders of Shares from the tendering Shareholders, of Bee Street's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent Bee Street for the purpose of receiving payments from Bee Street and transmitting such payments to tendering Shareholders whose Shares have been accepted for payment.

Shares tendered by notice of guaranteed delivery as described under "—Procedures for Accepting the Offer and Tendering Shares—Guaranteed Delivery" will be excluded from the determination of whether the Minimum Tender Condition has been satisfied, unless such Shares and other required documents are received by the Depositary by the Expiration Date.

If any tendered Shares are not accepted for payment for any reason pursuant to the terms and conditions of the Offer, or if certificates are submitted evidencing more Shares than are tendered, certificates evidencing unpurchased Shares will be returned, without expense to the tendering Shareholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at DTC pursuant to the procedure set forth in "—Procedures for Accepting the Offer and Tendering Shares," such Shares will be credited to an account maintained at DTC), promptly following the expiration or termination of the Offer.

3. Procedures for Accepting the Offer and Tendering Shares

For you to validly tender Shares into the Offer, you must do one of the following:

•: Deliver certificates for your Shares and a properly completed and duly executed letter of transmittal or a duly executed copy thereof, along with any other required documents, to the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the expiration of the Offer;
•: Arrange for a book-entry transfer of your Shares to be made to the Depositary's account at DTC and receipt by the Depositary of a confirmation of this transfer prior to the expiration of the Offer, and the delivery of a properly completed and duly executed letter of transmittal or a duly executed copy thereof, along with any other required documents, to the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the expiration of the Offer;
•: Arrange for a book-entry transfer of your Shares to the Depositary's account at DTC and receipt by the Depositary of confirmation of this transfer, including an "agent's message," prior to the expiration of the Offer; or
•: Follow the guaranteed delivery procedures described below.

The Depositary will establish an account with respect to the Shares at DTC for purposes of the Offer within two business days after the date of this Offer to Purchase, and any financial institution that is a participant in DTC may make book-entry delivery of the Shares by causing DTC to transfer these Shares into the Depositary's account in accordance with DTC's procedure for the transfer. For a tender made by transfer of Shares through book-entry delivery at DTC to be valid, the Depositary must receive a Book-Entry Confirmation of transfer and either a duly executed letter of transmittal or a duly executed copy thereof, along with any other required documents at one of its addresses set forth on the back cover of this Offer to Purchase by the Expiration Date of the Offer, or an agent's message as part of the Book-Entry Confirmation, or the guaranteed delivery procedures described below must be followed.

Signatures on all letters of transmittal must be guaranteed by an eligible institution, except in cases in which Shares are tendered either by a registered holder of Shares who has not completed the box entitled "Special Delivery Instructions" on the letter of transmittal or for the account of an eligible institution. By "eligible institution," we mean a bank, broker, dealer, credit union, savings bank or other entity which is a member in good standing of a recognized Medallion Program approved by the Securities Transfer Association Inc., including the Securities Transfer Agents Medallion Program (STAMP), the Stock Exchange Medallion Program (SEMP) and the New York Stock Exchange Medallion Signature Program (MSP) or any other "eligible guarantor institution," as that term is defined in Rule 17Ad-15 under the Exchange Act.

If the certificates for Shares are registered in the name of a person other than the person who signs the letter of transmittal, the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates, with the signature(s) on the certificates or stock powers guaranteed in the manner described above.

The method of delivery of certificates representing Shares and all other required documents, including delivery through DTC, is at your option and risk, and the delivery will be deemed made only when actually received by the Depositary. If delivery is by mail, we recommend registered mail with return receipt requested, properly insured. In all cases, you should allow sufficient time to ensure timely delivery.

By executing a letter of transmittal, you will agree and acknowledge that our acceptance for payment of the Shares you tender in the Offer will, without any further action, revoke any prior powers of attorney and proxies that you may have granted in respect of those Shares, that you will not grant any subsequent proxies, and that, if any are granted, they will not be deemed effective. We reserve the right to require that, in order for Shares to be validly tendered, we must be able to exercise full voting, consent and other rights with respect to those Shares immediately upon our acceptance of those Shares.

We will determine questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares, in our reasonable judgment, and our determination will be final and binding, subject to challenge by a court of competent jurisdiction. We reserve the absolute right to reject any and all tenders of Shares that we determine are not in proper form or the acceptance of or payment for which may, in the opinion of our counsel, be unlawful. No tender of Shares will be deemed to have been validly made until all defects and irregularities in tenders of those Shares have been cured or waived. None of Bee Street, the Depositary, the Information and Solicitation Agent nor any other person will be under any duty to give notification of any defects or irregularities in the tender of any Shares or will incur any liability for failure to give any such notification. Our interpretation of the terms and conditions of the Offer, including the letter of transmittal and instructions, will be final and binding, subject to challenge by a court of competent jurisdiction.

The tender of Shares pursuant to any of the procedures described above will constitute a binding agreement between you and us upon the terms and subject to the conditions of the Offer.

Guaranteed Delivery

If you wish to tender Shares pursuant to the Offer and your certificates are not immediately available or you cannot deliver the certificates and all other required documents to the Depositary prior to the Expiration Date or cannot complete the procedure for book-entry transfer on a timely basis, your Shares may nevertheless be tendered, so long as all of the following conditions are satisfied:

•: you make your tender by or through an eligible institution;
•: a properly completed and duly executed notice of guaranteed delivery, substantially in the form made available by us, is received by the Depositary, as provided below, on or prior to the Expiration Date; and
•: the certificates for all tendered Shares (or a confirmation of a book-entry transfer of such securities into the Depositary's account at DTC as described above), in proper form for transfer, together with a properly completed and duly executed letter of transmittal or a manually signed photocopy with any required signature guarantees, or, in the case of book-entry transfer, an agent's message, and all other documents required by the letter of transmittal are received by

the Depositary within two NYSE trading days after the date of execution of the notice of guaranteed delivery.

You may deliver the notice of guaranteed delivery by hand or transmit it by photocopy transmission or mail to the Depositary. You must include a guarantee by an eligible institution in the form set forth in that notice.

In all cases, we will exchange Shares tendered and accepted for payment pursuant to the Offer only after timely receipt by the Depositary of certificates for Shares, or timely confirmation of a book-entry transfer of those Shares into the Depositary's account at DTC as described above, a properly completed and duly executed letter of transmittal or a manually signed photocopy thereof, or an agent's message in connection with a book-entry transfer, and any other required documents.

Shares tendered by notice of guaranteed delivery will be excluded from the determination of whether the Minimum Tender Condition and Majority Minority Condition have been satisfied, unless such Shares and other required documents are received by the Depositary by the Expiration Date.

4. Withdrawal Rights

You may withdraw Shares that you tender pursuant to the Offer at any time before the expiration of the Offer. After the expiration of the Offer, tenders are irrevocable. However, if we have not accepted tendered Shares for payment by April 18, 2020 (as such date may be extended in connection with any extension of the Expiration Date), you may withdraw tendered common Shares at any time thereafter.

For your withdrawal to be effective, the Depositary must receive from you a manually signed written or photocopy transmission notice expressly withdrawing shares from the Offer at one of its addresses set forth on the back cover of this Offer to Purchase, and your notice must include your name, address, social security number, ITIN or FEIN (as applicable), the certificate number(s) and the number of Shares to be withdrawn as well as the name of the registered holder, if it is different from that of the person who tendered those Shares. If Shares have been tendered pursuant to the procedures for book-entry tender discussed above under "—Procedures for Accepting the Offer and Tendering Shares," any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn Shares and must otherwise comply with DTC's procedures. If certificates have been delivered or otherwise identified to the Depositary, the name of the registered holder and the serial numbers of the particular certificates evidencing the Shares withdrawn must also be furnished to the Depositary, as stated above, prior to the physical release of the certificates. We will decide all questions as to the form and validity (including time of receipt) of any notice of withdrawal, in our reasonable judgment, and our decision will be final and binding, subject to challenge by a court of competent jurisdiction.

An eligible institution must guarantee all signatures on the notice of withdrawal unless the Shares have been tendered for the account of an eligible institution.

None of Bee Street, the Depositary, the Information and Solicitation Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or will incur any liability for failure to give any notification. Any Shares that you properly withdraw will be deemed not to have been validly tendered for purposes of the Offer. However, you may retender withdrawn Shares by following one of the procedures discussed above under "—Procedures for Accepting the Offer and Tendering Shares" at any time before the expiration of the Offer.

5. Material U.S. Federal Income Tax Consequences

The following is a summary of the material U.S. federal income tax consequences to U.S. holders (as defined below). This summary is for general information only and is not tax advice. This summary

does not discuss all aspects of U.S. federal income taxation that may be relevant to you in light of your particular circumstances. In addition, this summary does not describe any tax consequences arising under the net investment income tax or the alternative minimum tax, nor does it address any tax consequences arising under the laws of any local, state or foreign jurisdiction nor any aspects of U.S. federal tax law other than income taxation. Furthermore, this discussion is limited to U.S. holders that hold their Shares as capital assets within the meaning of section 1221 of the Internal Revenue Code, as amended (the "Code") (generally property held for investment). This discussion does not address all U.S. federal income tax consequences that may be relevant to particular U.S. holders, including, without limitation, corporations, partnerships (including entities treated as partnerships for federal income tax purposes), estates, trusts or other U.S. holders subject to specialized tax treatment, such as banks, insurance companies and other financial institutions, tax-exempt institutions, individual retirement accounts ("IRAs"), dealers in securities or currencies, traders in securities, U.S. persons whose "functional currency" is not the U.S. dollar, persons holding their Shares as part of a "straddle," "hedge," "conversion transaction" or other risk reduction transaction, employee benefit plans, real estate investment trusts or mutual funds.

This summary is based on the Code, the regulations promulgated under the Code, and rulings and judicial decisions, all as in effect as of the date of this Offer to Purchase, and all of which are subject to change or differing interpretations at any time, with possible retroactive effect. We have not sought, and do not intend to seek, any ruling from the U.S. Internal Revenue Service (the "IRS") with respect to the statements made and the conclusions reached in the following summary, and no assurance can be given that the IRS will agree with the views expressed herein, or that a court will not sustain any challenge by the IRS in the event of litigation.

We urge you to consult with and rely upon your own tax advisor with respect to the specific tax consequences to you in connection with the Offer in light of your own particular circumstances, including federal estate, gift and other non-income tax consequences, and tax consequences under state, local or foreign tax laws.

Definition of a U.S. Holder

For purposes of this discussion, a "U.S. holder" is a beneficial owner of Shares that, for U.S. federal income tax purposes, is or is treated as:

•: an individual who is a citizen or resident of the United States;
•: a corporation created or organized under the laws of the United States, any state thereof, or the District of Columbia;
•: an estate, the income of which is subject to U.S. federal income tax regardless of its source; or
•: a trust that (1) is subject to the primary supervision of a U.S. court and the control of one or more "United States persons" (within the meaning of Section 7701(a)(30) of the Code), or (2) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes.

Payments with Respect to Shares in the Offer

The tender of Shares for cash pursuant to the Offer will be a taxable transaction for U.S. federal income tax purposes, and a U.S. holder will recognize gain or loss, if any, equal to the difference between (i) the sum of the amount of cash received and (ii) such U.S. holder's adjusted tax basis in the Shares tendered therefor.

A U.S. holder's tax basis in its Shares purchased with cash generally would be equal to the amount such U.S. holder paid for the Shares. Except as noted below, gain or loss recognized by a U.S. holder

on the tender of Shares in the Offer will generally be taxable as capital gain or loss. Capital gain or loss recognized by a U.S. holder will generally be long-term capital gain or loss if the U.S. holder's holding period for its Shares is more than one year as of the time such Shares are tendered. If the U.S. holder is not a corporation, such long-term capital gain will generally be eligible for reduced rates of taxation. Capital losses recognized by a U.S. holder may offset capital gains and, in the case of non-corporate taxpayers, no more than $3,000 of ordinary income per year. Capital losses recognized by U.S. holders that are corporations may be used to offset only capital gains.

The amount of gain or loss recognized by each U.S. holder will vary depending on each U.S. holder's particular situation, including the tax basis of the Shares tendered by each U.S. holder. Each holder is strongly urged to consult its own tax advisor with respect to the specific tax consequences to it of the Offer, taking into account its own particular circumstances.

Backup Withholding Tax

Proceeds from the tender of Shares generally will be subject to backup withholding tax at the applicable rate unless the applicable U.S. holder or other payee provides a valid taxpayer identification number and complies with certain certification procedures or otherwise establishes an exemption from backup withholding tax. Any amounts withheld under the backup withholding tax rules from a payment to a U.S. holder will be allowed as a credit against that U.S. holder's U.S. federal income tax liability and may entitle the U.S. holder to a refund, provided that the required information is timely furnished to the IRS. Each U.S. holder should complete and sign the IRS Form W-9, which will be included with the letter of transmittal to be returned to the Depositary, to provide the information and certification necessary to avoid backup withholding, unless an exemption applies and is otherwise established in a manner satisfactory to the Depositary.

Merger

The tax consequences of the Merger to a U.S. holder will generally be analogous to the tax consequences of the Offer in that the conversion of Shares into a right to receive merger consideration will be a taxable transaction for U.S. federal income tax purposes, and a U.S. holder will recognize gain or loss, if any, equal to the difference between (i) the sum of the amount of cash received as merger consideration and (ii) such U.S. holder's adjusted tax basis in the Shares tendered therefor.

6. Price Range of Shares; Dividends on Shares

Shares are listed on the NYSE under the symbol "CUO".

The following table sets forth, for each of the periods indicated, the high and low intraday sales prices per Share of Shares on the NYSE and quarterly cash dividends paid to our common Shareholders.

Quarter	Intraday High Price		Intraday Low Price		Dividends per Share

2020 Q1	$	9.59	$	7.03	$	0.00
2019 Q4		15.06		7.20		0.00
2019 Q3		16.95		14.60		0.00
2019 Q2		19.28		15.26		0.00
2019 Q1		24.92		10.08		0.00
2018 Q4		16.40		10.53		0.00
2018 Q3		17.86		15.50		0.00
2018 Q2		19.95		16.00		0.00
2018 Q1		19.95		18.26		0.00

On February 14, 2020, the last trading day prior to the printing of this Offer to Purchase, the last sale price reported on the NYSE was $9.35 per Share. Shareholders are urged to obtain current market quotations for Shares before making a decision with respect to the Offer.

7. Possible Effects of the Offer on the Market for Shares; Stock Exchange Listing(s); Registration Under the Exchange Act; Margin Regulations

Possible Effect of the Offer on the Market for the Shares

The purchase of Shares by Bee Street pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and reduce the number of holders of Shares, which could affect the liquidity and market value of the remaining Shares held by the public. Bee Street cannot reliably predict whether this would have an adverse or beneficial effect on the market price for, or marketability of, the Shares or whether it would cause future market prices to be greater or less than the price paid in the Offer. For additional information regarding the effects of the Offer, see "Special Factors—Certain Effects of the Offer and the Merger."

Stock Exchange Listing

The Shares are listed for trading on the NYSE. After completion of the Offer and depending upon the aggregate market value and the per common Share price of any Shares not purchased pursuant to the Offer, the Shares may no longer meet the requirements for continued listing on the NYSE, if, among other things, CMC does not meet the requirements for the number of publicly held Shares, the aggregate market value of the publicly held Shares or the number of market makers for the Shares. If, as a result of the purchase of Shares pursuant to the Offer, the Shares no longer meet the requirements of the NYSE for continued listing and the listing of the Shares is discontinued, the market for Shares could be adversely affected.

If the NYSE were to delist the Shares, it is possible that the Shares would continue to trade on other securities exchanges or in the over-the-counter market and that price quotations would be reported by such exchanges or other sources. The extent of the public market for the Shares and the availability of such quotations would depend, however, upon such factors as the number of holders of Shares and/or the aggregate market value of the publicly traded Shares remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration under the Exchange Act as described below, and other factors. Bee Street cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for, or the marketability of, Shares or whether it would cause future market prices to be greater or lesser than the Offer Price being offered in the Offer and the Merger.

Registration Under the Exchange Act

The Shares are currently registered under the Exchange Act. The purchase of the Shares pursuant to the Offer may result in the Shares becoming eligible for deregistration under the Exchange Act. Registration may be terminated upon application of CMC to the SEC if the Shares are neither listed on a national securities exchange nor held by 300 or more holders of record. The Company currently has fewer than 300 shareholders of record. Termination of the registration of the Shares under the Exchange Act, assuming there are no other securities of CMC subject to registration, would substantially reduce the information required to be furnished by CMC to holders of Shares and to the SEC and would make certain of the provisions of the Exchange Act, such as the periodic reporting requirements of Section 13, the short-swing profit recovery provisions of Section 16(b) and the requirements of Rule 13e-3 under the Exchange Act with respect to "going-private" transactions, no longer applicable to CMC. Furthermore, "affiliates" of CMC and persons holding "restricted securities"

of CMC may be deprived of the ability to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or eligible for stock exchange listing. If the Minimum Tender Condition is satisfied, we believe that the purchase of the Shares pursuant to the Offer may result in the Shares becoming eligible for deregistration under the Exchange Act, and, assuming that the Minimum Tender Condition is met, it would be our intention to cause CMC to terminate registration of the Shares under the Exchange Act after consummation of the Offer and the Merger.

If registration of the Shares under the Exchange Act is not terminated prior to the Merger, then the registration of the Shares under the Exchange Act and the listing of the Shares on the NYSE will be terminated following the completion of the Merger.

8. Appraisal Rights; "Going-Private" Rules

Appraisal Rights

No appraisal rights are available to the holders of Shares in connection with the Offer. If the Merger is completed, appraisal rights will be available in connection with the Merger as further described below, but, although the availability of appraisal rights depends on the Merger being completed, stockholders who wish to exercise such appraisal rights must do so no later than the time of the consummation of the Offer, even though the Merger will not have been completed as of such time. If the Merger is completed, the holders of Shares who (i) did not tender their Shares in the Offer; (ii) follow the procedures set forth in Section 262 of the DGCL; and (iii) do not thereafter lose their appraisal rights (by withdrawal, failure to perfect or otherwise), in each case in accordance with the DGCL, will be entitled to have their Shares appraised by the Delaware Court of Chancery and receive payment of the "fair value" of such Shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with a fair rate of interest, as determined by such court. Unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown, interest from the effective date of the Merger through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the Merger and the date of payment of the judgment.

If a stockholder wishes to elect to exercise appraisal rights under Section 262 of the DGCL in connection with the Merger, such stockholder must do all of the following:

•: within the later of the consummation of the Offer and twenty days after the date of mailing of the formal notice of appraisal rights, deliver to CMC a written demand for appraisal of Shares held, which demand must reasonably inform CMC of the identity of the stockholder and that the stockholder is demanding appraisal;
•: not tender such stockholder's Shares in the Offer; and
•: continuously hold of record the Shares from the date on which the written demand for appraisal is made through the effective time of the Merger.

"Going-Private" Rules

Because Bee Street is an affiliate of CMC, the Offer and the Merger constitute a "going private" transaction for purposes of Rule 13e-3 under the Exchange Act. Rule 13e-3 requires, among other things, that certain financial information concerning CMC and certain information relating to the fairness of the Offer and the Merger and the consideration offered to minority holders of Shares be filed with the SEC and disclosed to minority holders of Shares prior to the consummation of the Merger. Bee Street has provided such information in this Offer to Purchase.

9. Certain Information Concerning CMC

CMC is a Delaware corporation with its principal executive offices at 440 South LaSalle Street, Suite 3100, Chicago, IL 60605. The telephone number of CMC's principal executive offices is (312) 541-7200.

CMC describes itself as follows:

Continental Materials Corporation is the parent company of numerous light manufacturing companies. The Company operates primarily in two industry groups, Heating, Ventilation and Air Conditioning (HVAC) and Construction Products.

As of the date of this Offer to Purchase, (1) Bee Street does not know whether any executive officer, director or affiliate of CMC intends to tender Shares in the Offer, (2) none of CMC, its executive officers, directors or affiliates have made any public recommendation with respect to the Offer, and (3) CMC has not made public any appraisal, report or opinion on the fairness of this transaction. Under Rule 14e-2, the board of directors of CMC must state its position with respect to this Offer within ten business days of the date of this Offer to Purchase.

CMC operates primarily in two industry groups, HVAC and Construction Products. Within each of these two industry groups, CMC has identified two reportable segments: the Heating and Cooling segment and the Evaporative Cooling segment in the HVAC industry group and the CACS segment and the Door segment in the Construction Products industry group.

The Heating and Cooling segment produces and sells 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. of Colton, California, Phoenix Manufacturing, Inc. of Phoenix, Arizona, Global Flow Products /American HVAC of Broken Arrow, Oklahoma, and Inovate Dryer Technologies of Jupiter, Florida.. The Evaporative Cooling segment produces and sells primarily evaporative coolers from CMC's wholly-owned subsidiary, Phoenix Manufacturing, Inc. of Phoenix, Arizona. Sales of these two segments are nationwide, but are concentrated in the southwestern United States. Concrete, aggregates and construction supplies are offered from numerous locations along the Southern portion of the Front Range of Colorado operated by CMC's wholly-owned subsidiaries collectively referred to as TMC. The Door segment sells hollow metal and wood doors, sound-proof doors, door frames and related hardware, lavatory fixtures and

electronic access and security systems through CMC's wholly-owned subsidiaries, McKinney Door and Hardware, Inc., Fastrac Acquisition Co., Serenity Acquisition Co. and Castle Rebar and Supply Co. which operate out of facilities in Pueblo and Colorado Springs, Colorado. 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 TMOP Legacy Company (formerly Transit Mix of Pueblo, Inc.) of Pueblo, Colorado. Sales of this segment are highly concentrated in the Southern Front Range area of Colorado.

Sales in the Construction Materials and Door segments are affected by the level of construction activity in the areas served and general economic conditions. Sales of furnaces and evaporative coolers are less affected by the level of construction activity and are influenced by weather conditions as a large portion of their sales are for replacement units.

Financial Information

Annex I reproduces CMC's audited consolidated financial statements and other financial information contained in CMC's Annual Report on Form 10-K for the fiscal year ended December 29, 2018 (which includes audited financial statements for the fiscal years ended December 29, 2018 and December 30, 2017). More comprehensive financial information is included in such report (including management's discussion and analysis of financial condition and results of operations) and other documents filed by CMC with the SEC therein. Annex I also reproduces the unaudited consolidated financial statements and other financial information contained in CMC's Quarterly Report on Form 10-Q for quarterly period ended September 28, 2019. Copies of those reports and other documents filed by CMC may be examined at or obtained from the SEC in the manner set forth below under "Available Information."

Except as otherwise set forth herein, the information concerning CMC contained in this Offer to Purchase has been taken from or based upon publicly available documents and records on file with the SEC and other public sources and is qualified in its entirety by reference thereto. Bee Street has not independently verified the accuracy or completeness of the information contained in such documents and records, and cannot verify any failure by CMC to disclose events that may have occurred or may affect the significance or accuracy of any such information but which are unknown to Bee Street.

Available Information

CMC is subject to the information and reporting requirements of the Exchange Act and in accordance therewith is obligated to file reports and other information with the SEC relating to its business, financial condition, and other matters. Information, as of particular dates, concerning CMC's directors and officers, their remuneration, the principal holders of CMC's securities, any material interests of such persons in transactions with CMC and other matters is required to be disclosed in reports under the Exchange Act distributed to CMC's Shareholders and filed with the SEC. Such reports and other information should be available for inspection at the public reference room at the SEC's offices at 100 F Street, N.E., Washington, D.C. 20549, and can be obtained electronically on the SEC's website at www.sec.gov.

10. Certain Information Concerning Bee Street

Bee Street is a Delaware limited liability company. Their principal executive offices at c/o Riverbend Industries, LLC, 425 South Financial Place, Suite 3100, Chicago, IL 60605. The telephone number of Bee Street's principal executive offices is (312) 553-3653 .

Certain information regarding the members of Bee Street is set forth in Schedule A to this Offer to Purchase. None of Bee Street or any of the other persons referred to in Schedule A has been convicted in a criminal proceeding during the past five years (excluding traffic violations or similar

misdemeanors), nor have any of them been a party to any judicial or administrative proceeding during the past five years that resulted in a judgment, decree or final order enjoining them from future violations of, or prohibiting activities subject to, federal or state securities laws or a finding of any violation of federal or state securities laws. Bee Street has not made any arrangements in connection with the Offer to provide holders of Shares access to its corporate files or to obtain counsel or appraisal services at its expense.

11. Source and Amount of Funds

Bee Street estimates that the total amount of funds required to purchase all of the outstanding Shares not currently held by Bee Street pursuant to the Offer and the Merger and to pay related fees and expenses will be approximately $7.7 million. Bee Street has access to sufficient funds to pay this amount and will pay with the proceeds of a committed credit facility of up to $8.5 million (the "CIBC Facility") it has obtained from CIBC Bank USA ("CIBC")

Bee Street's commitment from CIBC is conditioned, among other things, on (i) the negotiation and execution of definitive loan documents and other related documentation reasonably satisfactory to CIBC and Bee Street, including additional documentation to renew and/or refinance the existing revolving credit facility of CMC with CIBC, which in any event shall include a maximum amount to be agreed of borrowing availability of CMC under its existing credit facility provided by CIBC, (ii) there being no material adverse change (in the reasonable opinion of CIBC) in the business, assets, liabilities, properties, financial condition or results of operations of Bee Street and of CMC and its subsidiaries, taken as a whole, and (iii) CIBC being satisfied in its reasonable discretion that all conditions and requirements for Bee Street to acquire 85% of the issued and outstanding Shares pursuant to the Offer have been satisfied and that, substantially concurrently with the funding of the CIBC Facility, which will occur substantially simultaneously with the consummation of the Offer, the indebtedness, liabilities and obligations under the CIBC Facility shall (whether pursuant to the Merger or otherwise) become additional indebtedness, liabilities and obligations of CMC.

Except for the CIBC Facility, Bee Street has not arranged or received any commitments, 'highly confident' letters or indications of interest from, and has not made or sought any arrangements or understandings with, any other debt or equity financing source than CIBC to fund the Offer and the Merger. Nevertheless, Bee Street's management currently believes, based on CIBC's historic lending relationship with CMC and management's discussions with CIBC regarding the CIBC Facility, that the CIBC Facility will be available, subject to the satisfaction of the foregoing conditions of the CIBC Facility and to the conditions to the Offer, to fund the consummation of the Offer and, if the Minimum Tender Condition is satisfied, the Merger.

The following table presents the estimated fees and expenses incurred or expected to be incurred by Bee Street in connection with the Offer and the Merger:


SEC Filing Fee	$	799
Printing and Mailing Expenses	$	15,000
Legal and Accounting Fees and Expenses	$	1,000,000
Information and Solicitation Agent	$	40,000
Depositary	$	40,000
Financial Advisor	$	275,000
Financing Fees and Expenses for the CIBC Facility	$	100,000
Miscellaneous Expenses	$	50,000

Total	$	1,520,799

Bee Street intends to borrow under the CIBC Facility to pay the Offer Price and, if applicable, the merger consideration payable for Shares pursuant to the Merger, as well as to pay such estimated fees

and expenses. Before the consummation of the Offer, CMC will have no obligation to pay any fees or expenses of Bee Street in connection with the Offer. It is a condition of the CIBC Facility that, substantially concurrently with the funding of the CIBC Facility, which will occur substantially simultaneously with the consummation of the Offer, the indebtedness, liabilities and obligations under the Facility shall (whether pursuant to the Merger or otherwise) become additional indebtedness, liabilities and obligations of CMC.

Except for the gross amount of the commitment and the foregoing material conditions to the CIBC Facility, CIBC's commitment does not set forth the other material terms of the CIBC Facility such as interest rate, borrowing base, advance rate and other terms. Bee Street anticipates that such terms may be available to Bee Street on similar terms as the existing revolving credit facility of CMC with CIBC. However, there can be no guaranty that Bee Street and CIBC will agree on such terms and, therefore, the CIBC Facility may not be available to fund the consummation of the Offer and, if applicable, the Merger.

12. Conditions to the Offer

Notwithstanding any other provision of the Offer, Bee Street shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) promulgated under the Exchange Act, pay for any Shares, may postpone the acceptance for payment or payment for tendered Shares and may, in its sole discretion, terminate or amend the Offer as to any Shares not then paid for if (i) at the expiration of the Offer, the Minimum Tender Condition has not been satisfied or waived or the Majority Minority Condition has not been satisfied, or (ii) the Financing Condition has not been waived or satisfied, or (iii) on or after February 18, 2020, and at or prior to the expiration of the Offer, any of the following events shall occur:

(a) there shall be instituted any action, proceeding or application by any U.S. or non-U.S. court, government or governmental authority or other U.S. or non-U.S. regulatory or administrative agency or commission (each, a "Governmental Entity") which, directly or indirectly (i) challenges the acquisition by Bee Street of the Shares, seeks to restrain, delay, enjoin, make illegal or otherwise prohibit the consummation of the Offer or the Merger or seeks to obtain any material damages as a result of, or otherwise adversely affects, the Offer or the Merger, (ii) seeks to prohibit or impose material limitations on Bee Street's acquisition, ownership or operation of all or any material portion of its or CMC's business or assets (including the business or assets of their respective affiliates and subsidiaries), or of all or any of the Shares (including, without limitation, the right to vote the Shares purchased by Bee Street, on an equal basis with all other Shares, on all matters presented to the holders of Shares, or seeks to compel Bee Street to dispose of or hold separate all or any material portion of its own or CMC's business or assets (including the business or assets of their respective affiliates and subsidiaries) as a result of the Offer or the Merger, (iii) reasonably would be expected to have an Adverse Effect (as defined below), or result in a diminution in the value of the Shares or in the value of CMC's or Bee Street's assets, in each case by more than $500,000 (a "Diminution in Value") or (iv) seeks to impose any condition to the Offer or the Merger that is materially burdensome to Bee Street; or

(b) there has been entered or issued any preliminary or permanent judgment, order, decree, ruling or injunction or any other action taken by any Governmental Entity which, directly or indirectly (i) restrains, delays, enjoins, makes illegal or otherwise prohibits the consummation of the Offer or the Merger or awards material damages as a result of, or otherwise adversely affects, the Offer or the Merger, (ii) prohibits or imposes material limitations on Bee Street's acquisition, ownership or operation of all or any material portion of its or CMC's business or assets (including the business or assets of their respective affiliates and subsidiaries), or of all or any of the Shares, or compels Bee Street to dispose of or hold separate all or any material portion of its own or CMC's business or assets (including the business or assets of their respective affiliates and

subsidiaries) as a result of the Offer or the Merger, (iii) reasonably would be expected to have an Adverse Effect, or result in a Diminution in Value or (iv) imposes any condition to the Offer or the Merger that is materially burdensome to Bee Street; or

(c) any statute, including without limitation any state anti-takeover statute, or any rule, decree, regulation, order or injunction, shall be enacted, entered, enforced or deemed applicable or which becomes applicable or asserted to be applicable directly or indirectly to the Offer or the Merger that would, directly or indirectly, result in any of the consequences referred to in clauses (i) through (iv) of paragraph (b) above; or

(d) any change (or any condition, event or development involving a prospective change) shall have occurred in the business, properties, assets, liabilities, capitalization, partners' equity, financial condition, operations, results of operations or prospects of CMC that has or reasonably would be expected to have, individually or in the aggregate, a material adverse effect on CMC and its subsidiaries taken as a whole (an "Adverse Effect"), or results or reasonably would be expected to result in a Diminution in Value; or

(e) there shall have occurred (i) any general suspension of, or limitation on times or prices for, trading in securities on any national securities exchange or in the over-the-counter market, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the U.S., (iii) the outbreak or escalation of a war, terrorist attack, armed hostilities or other international or national calamity directly or indirectly involving the U.S., (iv) any limitation by any Governmental Entity that materially adversely affects the extension of credit generally by banks or other lending institutions that regularly participate in the U.S. market in loans, (v) a suspension of or limitation (whether or not mandatory) on the currency exchange markets or the imposition of, or material changes in, any currency or exchange control laws in the U.S. or (vi) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; or

(f) Bee Street shall have become aware that (i) one or more governmental or other third party consents, waivers or approvals are required for or in connection with the consummation of the Offer or the Merger under any law, regulation, order or contract binding on CMC or any of its affiliates, (ii) any of the applicable consents, waivers or approvals have not been obtained and (iii) the failure to obtain such consents, waivers or approvals would reasonably be expected to have an Adverse Effect.

The foregoing conditions are for the sole benefit of Bee Street and may be asserted or waived by Bee Street in whole or in part at any time and from time to time in its sole discretion at or prior to the expiration of the Offer (other than those involving the receipt of any requisite governmental approvals). The determination as to whether any condition has been satisfied shall be in the reasonable judgment of Bee Street and, subject to applicable law, will be final and binding on all parties. The failure by Bee Street at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and, subject to the foregoing, each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. If Bee Street waives a condition with respect to the tender of any Share, it will waive the condition with respect to the tender of all Shares.

A public announcement shall be made of a material change in, or waiver of, such conditions, and the Offer may, in certain circumstances, be extended in connection with any such change or waiver.

13. Effect of CMC Dividends

If, on or after the date hereof, CMC should declare any cash dividend on the Shares, with a record date on or after the date of commencement of this Offer and prior to the Acceptance Time then, subject to the provisions set forth in "—Conditions to the Offer" above, the Offer Price will be reduced

by the amount of any such cash dividend. Bee Street will comply with all applicable federal securities laws in connection with such reduction in the Offer Price.

If, on or after the date hereof, CMC should (1) split, combine or otherwise change the Shares or its capitalization, (2) acquire currently outstanding Shares or otherwise cause a reduction in the number of outstanding Shares or (3) issue or sell additional Shares or any other class of equity security, other voting securities or any securities convertible into, or rights, warrants or options, to acquire any of the foregoing, then, subject to the provisions set forth in "—Conditions to the Offer" above, Bee Street, in its reasonable judgment, may make such adjustments as it deems appropriate in the Offer Price and other terms of the Offer, including, without limitation, the number or type of securities offered to be purchased.

14. Certain Legal Matters; Regulatory Approvals

General. Except as otherwise disclosed herein, Bee Street is not aware of any licenses or other regulatory permits which appear to be material to the business of CMC and which might be adversely affected by the acquisition of Shares by Bee Street pursuant to the Offer or of any approval or other action by any governmental, administrative or regulatory agency or authority which would be required for the acquisition or ownership of Shares by Bee Street pursuant to the Offer. Should any such approval or other action be required, it is currently contemplated that such approval or action would be sought or taken. There can be no assurance that any such approval or action, if needed, would be obtained or, if obtained, that it will be obtained without substantial conditions or that adverse consequences might not result to CMC's or Bee Street's business or that certain parts of CMC's or Bee Street's business might not have to be disposed of in the event that such approvals were not obtained or such other actions were not taken, any of which could cause Bee Street to elect to terminate the Offer without the purchase of the Shares thereunder. Bee Street's obligation under the Offer to accept for payment and pay for Shares is subject to certain conditions. See "—Conditions to the Offer."

Federal Reserve Board Regulations. Regulations G, T, U and X (the "margin regulations") promulgated by the Federal Reserve Board place restrictions on the amount of credit that may be extended for the purpose of purchasing margin stock (including the Shares) if such credit is secured directly or indirectly by margin stock. Bee Street is funding the acquisition of the Shares from borrowings under its credit facility. The margin regulations are thus inapplicable.

State Takeover Laws. In 1982, in Edgar v. MITE Corp., the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover Statute which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However, in 1987, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of Indiana could, as a matter of corporate law, constitutionally disqualify a potential acquirer from voting shares of a target corporation without the prior approval of the remaining stockholders where, among other things, the corporation is incorporated, and has a substantial number of stockholders, in the state. Subsequently, in TLX Acquisition Corp. v. Telex Corp., a U.S. federal district court in Oklahoma ruled that the Oklahoma statutes were unconstitutional as applied to corporations incorporated outside Oklahoma in that they would subject such corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a U.S. federal district court in Tennessee ruled that four Tennessee takeover statutes were unconstitutional as applied to corporations incorporated outside Tennessee. This decision was affirmed by the United States Court of Appeals for the Sixth Circuit. In December 1988, a U.S.

federal district court in Florida held in Grand Metropolitan PLC v. Butterworth that the provisions of the Florida Affiliated Transactions Act and the Florida Control Share Acquisition Act were unconstitutional as applied to corporations incorporated outside of Florida.

Bee Street does not believe that any state takeover laws will prevent the consummation of the Offer or the Merger. Accordingly, Bee Street has not taken any action to comply with any state takeover statute or regulation. Bee Street reserves the right to challenge the applicability or validity of any state law purportedly applicable to the Offer or the Merger, and nothing in this Offer to Purchase or any action taken in connection with the Offer or the Merger is intended as a waiver of such right. If it is asserted that any state takeover statute is applicable to the Offer or the Merger and if an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer or the Merger, Bee Street might be required to file certain information with, or to receive approvals from, the relevant state authorities, and Bee Street might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or be delayed in consummating the Offer or the Merger. In such case, Bee Street may not be obliged to accept for payment or pay for any Shares tendered pursuant to the Offer.

15. Fees and Expenses

Bee Street has retained Duff & Phelps to provide certain financial advisory services, for which Duff & Phelps will receive compensation as disclosed below. Bee Street has retained InvestorCom to act as the Information and Solicitation Agent for the Offer and Computershare Trust Company, N.A. to serve as the Depositary for the Offer. Each of the Information and Solicitation Agent and the Depositary will receive reasonable and customary compensation for its services, and each of the Information and Solicitation Agent and the Depositary will be reimbursed for certain reasonable out-of-pocket expenses, and will be indemnified against certain liabilities and expenses in connection with its services, including certain liabilities and expenses under U.S. federal securities laws.

The Information and Solicitation Agent may contact holders of Shares by mail, telephone, photocopy, email, telegraph and personal interview and may request banks, brokers, dealers and other nominees to forward materials relating to the Offer to beneficial owners of Shares.

Bee Street will not pay any fees or commissions to any broker or dealer or other person (other than to the Depositary and the Information and Solicitation Agent, and in the event that the laws of one or more jurisdictions require the Offer to be made by a broker or dealer licensed in such jurisdiction, to such broker or dealer) in connection with the solicitation of tenders of Shares in connection with the Offer. Upon request, Bee Street will reimburse brokers, dealers, banks, trust companies and other nominees for customary mailing and handling expenses incurred by them in forwarding material to their customers.

The following table presents the estimated fees and expenses incurred or expected to be incurred by Bee Street in connection with the Offer and the Merger:


SEC Filing Fee	$	799
Printing and Mailing Expenses	$	15,000
Legal and Accounting Fees and Expenses	$	1,000,000
Information and Solicitation Agent	$	40,000
Depositary	$	40,000
Financial Advisor	$	275,000
Financing Fees and Expenses for the CIBC Facility	$	100,000
Miscellaneous Expenses	$	50,000

Total	$	1,520,799

16. Miscellaneous

The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance of the Offer would not be in compliance with the laws of such jurisdiction. Bee Street is not aware of any jurisdiction in which the making of the Offer or the acceptance of the Offer would not be in compliance with the laws of such jurisdiction. To the extent that Bee Street becomes aware of any state law that would limit the class of Offerees in the Offer, Bee Street may amend, in its reasonable judgment, the Offer and, depending on the timing of such amendment, if any, may extend, in its reasonable judgment, the Offer to provide adequate dissemination of such information to holders of Shares prior to the expiration of the Offer. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Bee Street by one or more registered brokers or dealers licensed under the laws of such jurisdiction to be designated by Bee Street.

No person has been authorized to give any information or to make any representation on behalf of Bee Street that is not contained in this Offer to Purchase or in the letter of transmittal and, if given or made, such information or representation must not be relied upon as having been authorized.

Bee Street has filed with the SEC a Tender Offer Statement on Schedule TO pursuant to Rule 13e-4 under the Exchange Act and will promptly file a Transaction Statement on Schedule 13E-3 pursuant to Rule 13E-3 under the Exchange Act, together with exhibits, furnishing certain additional information with respect to the Offer, and may file amendments to such document. In addition, CMC is required to file with the SEC, within ten business days from the date of this Offer to Purchase, a Solicitation/Recommendation Statement on Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act, together with exhibits, containing its recommendation with respect to the Offer and the reasons for such recommendation and furnishing certain additional information with respect to the Offer.

Bee Street

February 18, 2020

SCHEDULE A

DIRECTORS AND EXECUTIVE OFFICERS OF Bee Street

The following table sets forth, to the best of our knowledge, for each executive officer and director of Bee Street, his or her name, principal occupation or employment at the present time and during the last five years, and the name of any corporation or other organization in which such employment is conducted or was conducted. During the past five years, to the best of our knowledge, none of the executive officers or directors of Bee Street has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which the person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of these laws. Unless otherwise indicated, the principal business address of each director and executive officer is c/o Riverbend Industries, LLC, 425 South Financial Place, Suite 3100, Chicago, IL 60605.

Name		Citizenship	Principal Occupation or Employment	Position with Bee Street

James G. Gidwitz	73	USA	Chairman of the Board and Chief Executive Officer of CMC since 1983	Chairman of the Board and Chief Executive Officer
Nancy Gidwitz	71	USA	Retired	Manager
Ralph Gidwitz	84	USA	Director of CMC and Chief Executive Officer of NCAComp	Manager
Steven Gidwitz	61	USA	Director of CMC	Manager
Scott Gidwitz	32	USA	Director of CMC and Senior Vice President of the Investments group at The John Buck Company	Manager

Mr. James G. Gidwitz is Chairman of the Board, Chief Executive Officer of CMC. He has served as the Chairman of the Board and its Chief Executive Officer since 1983. Mr. Gidwitz also serves on the Boards of several non-profit institutions involved in such diverse activities as medical research and political analysis. Mr. Gidwitz served as Chairman of the Endowment Committee of The Hotchkiss School where he continues to serve on the Committee. Mr. Gidwitz also formerly served on the Board of the Hoover Institution, an organization associated with Stanford University.

Ms. Nancy Gidwitz has created and implemented marketing communications programs and developed special communications projects for Chicago and Illinois clients for more than 40 years. In the corporate arena, she handled programs for the Chicago office of Coopers & Lybrand (now PricewaterhouseCoopers) and Plochman's. Governmental agencies that tapped her expertise included the Illinois Dept. of Commerce & Community Affairs, the Illinois Housing Development Authority, and the Illinois Tollway. Ms. Gidwitz served on the Board of Trustees of Brown University, her alma mater. As it was one of her major focuses, she co-chaired three regional capital campaigns and four class campaigns. Ms. Gidwitz developed an alumna cultivation program in Chicago which became a model for a national university initiative. Ms. Gidwitz serves on the Board of Directors of the Chicago Botanic Garden. Previously she was a board member of the Women's Business Development Center and the Chicago International Film Festival.

Mr. Ralph W. Gidwitz is Director of Continental Materials Corporation., since 1984. He is retired, having previously started Capital Results LLC, a financial consulting company, for which he also served as the Managing Partner and Chief Executive Officer until 2009. Mr. Gidwitz has also served as the President and Chief Executive Officer of a private company engaged in manufacturing. Mr. Gidwitz

served on the Board of Trustees for a local college as well as serving as its Treasurer and Chairman of its Finance and Investment Committees from 2006 to 2013. Mr. Gidwitz currently serves on the Executive Committee of the Board of Governors of the City of Hope, a large research driven hospital and health care organization. He also served as a Director for three community associations and as Chairman and a Governor for a Chicago cultural group.

Mr. Steven Gidwitz began his career in 1980 after graduating from Tulane University in New Orleans with a B.A. in Business Management. He worked for Consolidated Packaging in Chicago for several years in various positions before moving to Bakersfield, CA, and becoming an administrative manager at Riverwood International, a global leader in developing innovative packaging solutions.

In 1991, Mr. Gidwitz moved to Western New York and worked for Corson Manufacturing for more than a decade, first as vice president of operations, then as president, before becoming vice president of NCAComp in 2002, and its Chief Operating Officer in 2011.

Over the course of his career, Mr. Gidwitz's job responsibilities have included: human resources, purchasing, inside sales, sales management, quality control, accident prevention, plant management, and full company management.

In addition, Mr. Gidwitz has served as a board member and vice president of the Group Self-Insurance Association of New York (GSIANY) and served on a WCB/GSIANY committee to assist in rewriting the rules and regulations of self-insurance groups in the state of New York.

Mr. Scott Gidwitz is a Senior Vice President of the Investments group at The John Buck Company and serves as a member of its Investment Committee. His primary responsibilities include the evaluation, underwriting, and due diligence of new residential and commercial acquisition and development opportunities. Following an acquisition, Mr. Gidwitz is also involved in day-to-day project and asset management.

Currently, Mr. Gidwitz serves as asset manager for 3Eleven, a 245-unit residential development opening in Chicago's River North neighborhood in January 2018, and 333 S. Wabash Ave., a 1.2 million square foot office tower in Chicago's East Loop. In addition, Mr. Gidwitz is actively seeking new business in select submarkets of Chicago, Austin, Denver, and Los Angeles.

Prior to joining The John Buck Company, Mr. Gidwitz was an Analyst at Siebert Branford Shank, L.L.C., a boutique investment bank specializing in municipal finance. While at Siebert, Mr. Gidwitz provided quantitative and analytical support to senior bankers, as well as technical support on over $210 million in senior managed financing, and over $3 billion of co-senior and co-managed transactions.

Mr. Gidwitz earned his J.D. from Northwestern University School of Law, M.B.A. from Northwestern University's Kellogg School of Management, and B.A. from University of Pennsylvania.

SCHEDULE B

OWNERSHIP OF SHARES BY BEE STREET AND CERTAIN RELATED PERSONS

The following table sets forth the ownership of Shares as of February 18, 2020, by Bee Street and, to the knowledge of Bee Street, certain related persons, including the executive officers and directors of Bee Street and CMC, and the securities transactions by those persons in Shares during the 60 days prior to February 18, 2020:

Person

James G. Gidwitz	1,062,821	(1)	63.4	%	—	(2)
Bee Street Holdings LLC	1,027,171		61.3	%	+1,027,171	(2)
Scott Gidwitz	1,027,171	(1)	61.3	%	—	(2)
Steve Gidwitz	1,027,171	(1)	61.3	%	—	(2)
Ralph W. Gidwitz	1,027,171	(1)	61.3	%	—	(2)
Nancy Gidwitz	1,027,171	(1)	61.3	%	—	(2)
Darrell M Trent	21,833		1.3	%	—
Peter E. Thieriot	21,833		1.3	%	—
Theodore R. Tetzlaff	19,833		1.2	%	—
Paul Ainsworth	1,000		0.1	%	—
Ryan Sullivan	600		0.0	%	—
All directors, nominees and named executive officers of CMC as a group (includes nine persons)	1,127,920		67.3	%

(1): Includes 1,027,171 Shares owned by Bee Street. Beneficial ownership of such shares is disclaimed except to the extent of such person's authority as a member of the board of managers of Bee Street, which authority and such reporting person's capacity as a member of the board of managers is subject to the terms and provisions of the limited liability company agreement of Bee Street, as it may be amended from time to time. The board of managers of Bee Street has sole voting power and sole dispositive power with respect to the Shares which Bee Street owns. The members of the board of managers of Bee Street are James G. Gidwitz, Nancy Gidwitz, Ralph W. Gidwitz, Steven B. Gidwitz and Scott Gidwitz, none of whom has any individual voting power or dispositive power with respect to the Shares owned by Bee Street.
(2): Bee Street owns 1,027,171 shares of Common Stock as a result of contribution to Bee Street of such shares by its limited liability company members commencing on February 14, 2020.

Except for the contribution described in foregoing footnote (2), Bee Street has not engaged in any transactions in Shares during the two years prior to February 18, 2020.

ANNEX I

Financial Information of CMC

Continental Materials Corporation

Consolidated Statements of Operations

For Fiscal Years 2018 and 2017

(Amounts in thousands, except per share data)

	2018			2017

Net sales	$	163,983		$	152,810

Costs and expenses:
Cost of sales (exclusive of depreciation, depletion and amortization)		136,176			124,715
Depreciation, depletion and amortization		2,633			2,554
Selling and administrative		26,229			22,643
Charges related to write-off of deferred development		6,840			—
Charges related to write-off of overpayment of prepaid royalties		627			—
Gain on disposition of property and equipment		(919	)		(118	)

Operating (loss) income		(7,603	)		3,016
Interest income		76			79
Interest expense		(539	)		(366	)
Other income, net		25			110

(Loss) income before income taxes		(8,041	)		2,839
Benefit (provision) for income taxes		2,185			(1,021	)

Net (loss) income	$	(5,856	)	$	1,818



Basic and diluted (loss) income per share		(3.45	)		1.08



Average shares outstanding		1,697			1,680

The accompanying notes are an integral part of the consolidated financial statements.

F-1

Continental Materials Corporation

Consolidated Statements of Cash Flows For Fiscal Years 2018 and 2017

(Amounts in thousands)

	2018			2017

Operating activities
Net (loss) income	$	(5,856	)	$	1,818

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation, depletion and amortization		2,633			2,554
Write-off of deferred development costs		5,409			—
Write-off of overpayment of prepaid royalties		627			—
Deferred income tax provision		(1,798	)		—
Compensation of Board of Directors paid by issuance of treasury shares		315			326
Provision for doubtful accounts		165			134
Gain on disposition of property and equipment		(919	)		(118	)
Changes in working capital items:
Receivables		(1,187	)		(1,970	)
Inventories		3,639			286
Prepaid expenses		116			(94	)
Accounts payable and accrued expenses		(110	)		864
Income taxes payable and refundable		(437	)		682
Other		95			(95	)

Net cash provided by operating activities		2,692			4,387

Investing activities:
Capital expenditures		(2,700	)		(5,781	)
Cash proceeds from sale of property and equipment		1,430			126

Net cash used in investing activities		(1,270	)		(5,655	)

Financing activities:
Borrowings on the revolving bank loan		33,100			32,100
Repayments on the revolving bank loan		(34,400	)		(30,600	)
Principal repayments of capital lease obligations		(30	)		—
Payments to acquire treasury stock		(5	)		(26	)

Net cash (used) provided by financing activities		(1,335	)		1,474

Net decrease in cash and cash equivalents		87			206
Cash and cash equivalents:
Beginning of period		507			301

End of period	$	594		$	507



Supplemental disclosures of cash flow items:
Cash paid during the year for:
Interest, net	$	468		$	403
Income taxes, net		50			339
Capital expenditures purchased through capital lease obligation		200			—

The accompanying notes are an integral part of the consolidated financial statements.

F-2

Continental Materials Corporation

Consolidated Balance Sheets As of December 29, 2018 and December 30, 2017

(Amounts in thousands except share data)

	December 29, 2018			December 30, 2017

ASSETS
Current assets:
Cash and cash equivalents	$	594		$	507
Receivables less allowance of $560 and $240 for fiscal 2018 and 2017, respectively		24,375			24,227
Receivable for insured losses		874			—
Inventories		16,720			20,359
Prepaid expenses		1,785			1,901
Refundable income taxes		494			57
Other current assets		2,500			—

Total current assets		47,342			47,051

Property, plant and equipment
Land and improvements		2,781			2,781
Buildings and improvements		20,158			20,574
Machinery and equipment		77,991			78,062
Mining properties		6,383			11,792
Less accumulated depreciation and depletion		(90,142	)		(90,385	)

		17,171			22,824

Other assets
Goodwill		7,229			7,229
Deferred income taxes		3,414			1,616
Other assets		547			3,769

	$	75,703		$	82,489



LIABILITIES
Current liabilities:
Revolving bank loan payable	$	2,200		$	3,500
Accounts payable		7,002			8,492
Accrued expenses
Compensation		2,638			2,274
Reserve for self-insured losses		2,451			1,880
Liability for unpaid claims covered by insurance		874			—
Profit sharing		1,065			1,429
Reclamation		1,061			981
Other		2,899			3,318

Total current liabilities		20,190			21,874

Accrued reclamation		5,479			5,185
Other long-term liabilities		1,258			1,108
Commitments and contingencies (Note 6)
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		1,930			1,887
Retained earnings		61,131			66,987
Treasury shares, 876,409 and 892,097 at cost		(14,928	)		(15,195	)

		48,776			54,322

	$	75,703		$	82,489

The accompanying notes are an integral part of the consolidated financial statements.

F-3

Continental Materials Corporation

Consolidated Statements of Shareholders' Equity

For Fiscal Years 2018 and 2017

(Amounts in thousands except share data)

		Common shares amount		Capital in excess of par		Retained earnings					Treasury shares cost

Balance at December 31, 2016	2,574,264	$	643	$	1,765	$	65,169		903,097		$	15,373
Net income	—		—		—		1,818		—			—
Compensation of Board of Directors by issuance of treasury shares	—		—		122		—		(12,000	)		(204	)
Purchase of treasury shares	—		—		—		—		1,000			26

Balance at December 30, 2017	2,574,264		643		1,887		66,987		892,097			15,195
Net income	—		—		—		(5,856	)	—			—
Compensation of Board of Directors by issuance of treasury shares	—		—		43		—		(16,000	)		(272	)
Purchase of treasury shares	—		—		—		—		312			5

Balance at December 29, 2018	2,574,264	$	643	$	1,930	$	61,131		876,409		$	14,928

The accompanying notes are an integral part of the consolidated financial statements.

F-4

Notes to Consolidated Financial Statements

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

Continental Materials Corporation (the Company) is a Delaware corporation, incorporated in 1954. The Company operates primarily within two industry groups, Heating, Ventilation and Air Conditioning (HVAC) and Construction Products. The Company has identified two reportable segments in each of the two industry groups: the Heating and Cooling segment and the Evaporative Cooling segment in the HVAC industry group and the Concrete, Aggregates and Construction Supplies (CACS) segment and the Door segment in the Construction Products industry group.

The Heating and Cooling segment primarily produces and sells gas-fired wall furnaces, console heaters and fan coils from the Company's wholly-owned subsidiary, Williams Furnace Co. (WFC) of Colton, California. The Evaporative Cooling segment produces and sells evaporative coolers from the Company's wholly-owned subsidiary, Phoenix Manufacturing, Inc. (PMI) of Phoenix, Arizona. Concrete, aggregates and construction supplies are offered from numerous locations along the Southern Front Range of Colorado operated by the Company's wholly-owned subsidiaries Castle Concrete Company and Transit Mix Concrete Co., of Colorado Springs and Transit Mix of Pueblo, Inc. of Pueblo (the three companies collectively referred to as TMC). The Door segment sells hollow metal and wood doors, door frames and related hardware, lavatory fixtures and electronic access and security systems from the Company's wholly-owned subsidiary, McKinney Door and Hardware, Inc. (MDHI), which operates out of facilities in Pueblo and Colorado Springs, Colorado.

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

PRINCIPLES OF CONSOLIDATION

The Consolidated Financial Statements include Continental Materials Corporation and all of its subsidiaries (the Company). Intercompany transactions and balances have been eliminated. All subsidiaries of the Company are wholly-owned.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350), which removed the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, under the ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This guidance was adopted in the fourth quarter of fiscal 2017 in connection with our annual impairment testing. No impairment charges resulted from our impairment testing.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This new revenue standard creates a single source of revenue guidance for all companies in all industries and is more principles-based than current revenue guidance. Subsequently, the FASB has issued various ASUs to provide further clarification around certain aspects of ASC 606. The Company adopted this standard in the first quarter of fiscal 2018. The adoption of this standard did not result in

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Notes to Consolidated Financial Statements (Continued)

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

significant changes to the Company's accounting policies, business processes, systems of controls, or have a material impact on its financial position, consolidated results of operations or consolidated cash flows. As such, prior period financial statements were not recast and there was no cumulative effect adjustment upon adoption. See additional discussion of the Company's revenue recognition policies and practices below.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), requiring that the statement of cash flows explain the change in total cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. This standard was adopted by the Company in the first quarter of 2018 and did not have a material impact to the consolidated statement of cash flows.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This new standard supersedes existing lease guidance to require lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements. The standard will be effective for the Company in the first quarter of fiscal 2019. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which includes new transition guidance for the adoption of ASU 2016-02. Such guidance creates an additional transition method allowing entities to use the effective date of ASU 2016-02 as the date of initial application on transition. Under this method, entities will not be required to recast comparative periods when transitioning to the new guidance. Entities will also not be required to present comparative period disclosures under the new guidance in the period of adoption. The Company expects to select this new transition method upon its adoption in the first quarter of 2019. The Company is currently in the process of summarizing lease information to ensure compliance with the standard. This process is expected to continue through the effective date and will include analysis of contractual arrangements, evaluation of related disclosures and, potentially, changes/modifications to processes, accounting systems, and internal controls to ensure compliance. The Company expects that adoption of ASU 2016-02 will have a significant impact on its Consolidated Balance Sheets and disclosures, but does not anticipate a material impact on its consolidated cash flow or consolidated results of operations.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of December 29, 2018 and December 30, 2017 and the reported amounts of revenues and expenses during both of the two fiscal years in the period ended December 29, 2018. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

The Company considers all highly-liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The carrying amount of cash and cash equivalents approximates fair value. The Company has reclassified negative cash balances to Accounts Payable.

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Notes to Consolidated Financial Statements (Continued)

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

FAIR VALUE OF FINANCIAL INSTRUMENTS

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

Level 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 and 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 the 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 was estimated based on the borrowing rates 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.

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

INVENTORIES

Inventories are valued at the lower of cost or net realizable value and are reviewed periodically for excess or obsolete stock with a provision recorded, where appropriate. Cost for inventory in the HVAC industry group is determined using the last-in, first-out (LIFO) method. These inventories represent approximately 65% of total inventories at December 29, 2018 and 77% at December 30, 2017. The cost of all other inventory is determined by the first-in, first-out (FIFO) or average cost methods. Some commodity prices such as copper, steel, cement and diesel fuel have experienced significant fluctuations in recent years. Cement and diesel fuel prices are principally relevant to the CACS segment while steel prices and copper prices are principally relevant to our two HVAC businesses. The general effect of using LIFO is that higher prices are not reflected in the inventory carrying value. Current costs are reflected in the cost of sales. The inventories of the businesses using either FIFO or an average costing method for valuing inventories turn over frequently and at any point in time the amount of cement or fuel inventory is not significant. As a result of these circumstances, the commodity fluctuations have primarily affected the cost of sales with little effect on the valuation of inventory. Due to the nature of our products, obsolescence is not typically a significant exposure, however our HVAC businesses will from time to time contend with some slow-moving inventories or parts that are no longer used due to

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Notes to Consolidated Financial Statements (Continued)

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

engineering changes. At December 29, 2018 and December 30, 2017, inventory reserves were approximately 6.8% and 1.8% of the total FIFO inventory value, respectively. The increase between years is due to management's decision to increase valuation reserves as it works to streamline the number of products sold.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are carried at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method as follows:


Land improvements		5 to 31 years
Buildings and improvements		10 to 31 years
Leasehold improvements		Shorter of the term of the lease or useful life
Machinery and equipment		3 to 20 years

Depletion of rock and sand deposits and amortization of deferred development costs are computed by the units-of-production method based upon estimated recoverable quantities of rock and sand. The estimated recoverable quantities are periodically reassessed.

The cost of property sold or retired and the related accumulated depreciation, depletion and amortization are removed from the accounts and the resulting gain or loss is reflected in operating income. Maintenance and repairs are charged to expense as incurred. Major renewals and betterments are capitalized and depreciated over their estimated useful lives.

OTHER ASSETS

The Company annually assesses goodwill for potential impairment at the end of each year. In addition, the Company will reassess the recorded goodwill to determine if impairment has occurred if events arise or circumstances change in the relevant reporting segments or in their industries. No goodwill impairment was recognized for any of the periods presented.

In 2016 the Company paid $2,500,000 related to an aggregate property near Colorado Springs. As the Company negotiated with the State of Colorado to obtain the necessary mining permits the amount was held in an escrow account and is included in other assets as of December 30, 2017. During 2018 the Company was denied the mining permits by the State of Colorado for a second time. See Note 16 for additional discussion. The Company is in process of dissolving the escrow account and collecting the funds, therefore, the amount is included in other current assets as of December 29, 2018.

The Company is party to three aggregate property leases which require royalty payments. The leased gravel operation in Pueblo, Colorado is currently the subject of litigation for which the Company filed its Third Amended Complaint on November 16, 2018 in which it dropped its claim to recover royalty overpayments but seeks to recover $1,470,000 in Prepayments. The Company wrote off the remaining royalty overpayment of $627,000, previously reported as Other assets on the Consolidated Balance Sheet, as of December 29, 2018 due to filing of the Third Amended Complaint. See Note 2 for further discussion.

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Notes to Consolidated Financial Statements (Continued)

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

RETIREMENT PLANS

The Company and its subsidiaries have a contributory profit sharing retirement plan for specific employees. The plans allow qualified employees to make tax deferred contributions pursuant to Internal Revenue Code Section 401(k). The Company may make annual contributions, at its discretion, based primarily on profitability. In addition, any individuals whose compensation is in excess of the amount eligible for the Company matching contribution to the 401(k) plan as established by Section 401 of the Internal Revenue Code, participate in an unfunded Supplemental Profit Sharing Plan. This plan accrues an amount equal to the difference between the amount the person would have received as Company contributions to his account under the 401(k) plan had there been no limitations and the amount the person will receive under the 401(k) plan giving effect to the limitations. Costs under the plans are charged to operations as incurred. As of December 29, 2018 and December 30, 2017, the unfunded liabilities related to the Supplemental Profit Sharing Plan were $1,001,000 and $1,027,000, respectively.

RESERVE FOR SELF-INSURED AND INSURED LOSSES

The Company's risk management program provides for certain levels of loss retention for workers' compensation, automobile liability, healthcare plan coverage and general and product liability claims. The components of the reserve for self-insured losses have been recorded in accordance with Generally Accepted Accounting Principles (GAAP) requirements that an estimated loss from a loss contingency shall be accrued if information available prior to issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of loss can be reasonably estimated. The recorded reserve represents management's best estimate of the future liability related to these claims up to the associated deductible.

GAAP also requires an entity to accrue the gross amount of a loss even if the entity has purchased insurance to cover the loss. Therefore the Company has recorded losses for workers' compensation, automobile liability, medical plan coverage and general and product liability claims in excess of the deductible amounts, i.e., amounts covered by insurance contracts, in "Liability for unpaid claims covered by insurance" with a corresponding "Receivable for insured losses" on the balance sheet. The components of the liability represent both unpaid settlements and management's best estimate of the future liability related to open claims. Management has evaluated the creditworthiness of our insurance carriers and determined that recovery of the recorded losses is probable and, therefore, the receivable from insurance has been recorded for the full amount of the insured losses. The amount of claims and related insured losses at December 29, 2018 was $874,000.

RECLAMATION

In connection with permits to mine properties in Colorado, the Company is obligated to reclaim the mined areas whether the property is owned or leased. The Company records a reserve for future reclamation work to be performed at its various aggregate operations based upon an estimate of the total expense that would be paid to a third party to reclaim the disturbed areas. Reclamation expense is determined during the interim periods using the units-of-production method. At each fiscal year-end, a more formal and complete analysis is performed and the expense and reserve is adjusted to reflect the estimated cost to reclaim the then disturbed and unreclaimed areas. The assessment of the reclamation liability may be done more frequently if events or circumstances arise that may indicate a change in

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Notes to Consolidated Financial Statements (Continued)

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

estimated costs, recoverable material or period of mining activity. As part of the year-end analysis, the Company engages an independent specialist to assist in reevaluating the estimates of both the quantities of recoverable material and the cost of reclamation. Most of the reclamation on any mining property is generally performed concurrent with mining or soon after each section of the deposit is mined. The Company's reserve for reclamation activities was $6,540,000 at December 29, 2018 and $6,165,000 at December 30, 2017. The Company classifies a portion of the reserve as a current liability, $1,061,000 at December 29, 2018 and $981,000 at December 30, 2017 based upon historical expenditures and the anticipated reclamation timeframe for the Pueblo aggregate operation which is still under litigation as discussed in Note 2.

REVENUE RECOGNITION

Effective December 31, 2017, the Company adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606) and related amendments, which creates a single source of revenue guidance for all companies in all industries and is more principles-based than previous revenue guidance. The Company adopted the standard using the modified retrospective approach. The adoption of this standard did not result in significant changes to the Company's accounting policies, business processes, systems or controls, or have a material impact on its financial position, consolidated results of operations or consolidated cash flows. As such, prior period financial statements were not recast and there was no cumulative effect adjustment upon adoption.

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. Changes in the aggregated product warranty liability for the fiscal years 2018 and 2017 were as follows (amounts in thousands):

	2018			2017

Beginning balance	$	132		$	118
Warranty related expenditures		(148	)		(211	)
Warranty expense accrued		120			225

Ending balance	$	104		$	132

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Notes to Consolidated Financial Statements (Continued)

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The Company does not perform installation services except for installation of electronic access and security systems in the Door segment. These installation service contracts are generally short-term in nature, usually less than 30 days. It was determined for the installation service contracts there are two performance obligations, 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.

INCOME TAXES

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

The Tax Act repeals AMT and allows for all existing credit carryforwards to be used to offset regular tax liability for tax years beginning after December 31, 2017. Additionally, for tax years 2018, 2019 and 2020, to the extent that the AMT credit carryover exceeds the regular tax liability, 50% of the excess AMT credit is refundable. Any remaining credits will be fully refundable in 2021. For state tax purposes, net operating losses can be carried forward for various periods for the states that the Company is required to file in. California Enterprise Zone credits can be used through 2023 while Colorado credits can be carried forward for 7 years. The Company has established a valuation reserve related to a portion of the California Enterprise Zone credit not expected to be utilized prior to expiration.

The Company's income tax returns are subject to audit by the Internal Revenue Service (the "IRS") and state tax authorities. The amounts recorded for income taxes reflect the Company's tax positions based on research and interpretations of complex laws and regulations. The Company accrues liabilities related to uncertain tax positions taken or expected to be taken in its tax returns. The Company did not identify any such uncertain tax positions as of December 29, 2018 or December 30, 2017.

CONCENTRATIONS

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade receivables and temporary cash investments. The Company did not have any temporary cash investments in either fiscal 2018 or 2017.

The Company performs ongoing credit evaluations of its customers and generally does not require collateral. In many instances in the CACS segment and in the Heating and Cooling segment (as it

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Notes to Consolidated Financial Statements (Continued)

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

relates to the fan coil product line); the Company retains lien rights on the properties served until the receivable is collected. The Company writes off accounts when all efforts to collect the receivable have been exhausted. The Company maintains allowances for potential credit losses based upon the aging of accounts receivable, management's assessment of individual accounts and historical experience. Such losses have been within management's expectations. See Note 15 for a description of the Company's customer base.

All long-lived assets are in the United States. No customer accounted for 10% or more of total sales of the Company in fiscal 2018 or 2017. One customer in the Heating and Cooling segment accounted for 16.1% and 18.0% of consolidated accounts receivable at December 29, 2018 and at December 30, 2017, respectively.

Substantially all of the Heating and Cooling Segment's factory employees are covered by a collective bargaining agreement through the Carpenters Local 721 Union under a contract that expires on December 31, 2022. The Company considers relations with its employees and with their union to be good.

IMPAIRMENT OF LONG-LIVED ASSETS

In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability would be performed. If an evaluation were required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset's carrying amount to determine if a write-down to market value or discounted cash flow value is required. In the fiscal quarters ended March 31, 2018 and June 30, 2018 the Company wrote off a total of $6,840,000 of deferred development related to a granite mining property south of Colorado Springs. See Note 16 for additional discussion. The company wrote off $627,000 of royalty overpayments related to the leased gravel operation in Pueblo, Colorado as of December 29, 2018. See Note 2 for additional discussion.

FISCAL YEAR END

The Company's fiscal year-end is the Saturday nearest December 31. Fiscal 2018 and fiscal 2017 each consisted of 52 weeks.

2. CESSATION OF MINING AT LEASED PUEBLO GRAVEL SITE

On September 15, 2016 a Partial Summary Judgment Order was issued regarding the Company's previously disclosed litigation, Continental Materials Corporation v. Valco, Inc., Civil Action No. 2014-cv-2510, filed in the United States District Court for the District of Colorado. The suit regards a Fee Sand and Gravel Lease ("Lease") between the Company as Lessee and Valco, Inc. ("Valco") as Lessor that calls for the payment of royalties over the life of the Lease on an agreed 50,000,000 tons of sand and gravel reserves. In the suit the 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 to Valco in excess of tonnage actually produced ("Prepayments"). Based on information obtained through discovery, the Company alleges, in addition to the abovementioned claims, nondisclosure or concealment by Valco of material facts concerning the existence of Agreed Sand and Gravel Reserves of 50 million tons, and breach of warranty concerning the same. Valco

F-12

Notes to Consolidated Financial Statements (Continued)

2. CESSATION OF MINING AT LEASED PUEBLO GRAVEL SITE (Continued)

asserted counterclaims against the Company alleging breach of contract and seeking declaratory judgment regarding the Company's refusal to make further royalty payments under the Lease. In the ordinary course of business and absent any breach by Valco, the Company is 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 stopped making royalty payments at the start of the 2015 calendar year.

The Company has asserted partial failure of consideration as an affirmative defense to Valco's counterclaims to offset the alleged back-due quarterly royalty payments and the amount due on quarterly royalty payments in the future. The Partial Summary Judgment Order resolved many of the Company's claims in Valco's favor, but did not resolve Valco's counterclaims or the Company's affirmative defense. During the third quarter of 2016, the Company recorded a $632,000 write-down representing the portion of the royalty overpayment paid prior to the statutorily allowed period because of litigation risk attendant to recovering that amount. The Company sought certification of the Partial Summary Judgment Order because it and its legal counsel believe the court improperly resolved factual issues in its Partial Summary Judgment Order that should have been decided by a jury. On February 23, 2017, the Partial Summary Judgment Order was certified for immediate appeal, and all other claims, counterclaims and affirmative defenses were stayed pending the resolution of that appeal. The Company filed a notice of appeal which was denied on July 2, 2018 for lack of jurisdiction and remanded to the trial court for further proceedings. Subsequently, the trial court vacated its September 15, 2016 Partial Summary Judgment Order and set the matter for trial by jury on all issues on January 28, 2019. The Company filed its Third Amended Complaint on November 16, 2018 in which it dropped its claim to recover royalty overpayments but seeks to recover $1,470,000 in Prepayments. The Company wrote off the remaining royalty overpayment of $627,000, previously reported as Other assets on the Consolidated Balance Sheet, as of December 29, 2018 due to filing of the Third Amended Complaint. At the trial preparation conference on January 18, 2019, the court informed the parties that the trial would be rescheduled due to an ongoing shutdown of the federal government. The jury trial on all issues has been rescheduled for May 13, 2019.

The Company has paid royalties on approximately 17,700,000 tons, including the Prepayments, of the 50,000,000 tons of sand and gravel reserves through the end of the third quarter of 2014. The impact of these proceedings could have a material financial effect on the Company; however, the Company does not believe that there is a reasonable basis for estimating the financial impact, if any, of the final outcome of these proceedings and accordingly no accrual or reserve has been recorded in compliance with accounting principles generally accepted in the United States of America.

3. INVENTORIES

Inventories consisted of the following (amounts in thousands):

	December 29, 2018		December 30, 2017

Finished goods	$	5,448	$	8,391
Work in process		1,365		1,198
Raw materials and supplies		9,907		10,770

	$	16,720	$	20,359

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Notes to Consolidated Financial Statements (Continued)

3. INVENTORIES (Continued)

If inventories valued on the LIFO basis were valued at current costs, inventories would be higher by $7,176,000 and $6,677,000 at December 29, 2018 and December 30, 2017, respectively. Reductions in inventories during 2018 resulted in liquidations of LIFO quantities by charging cost of goods sold with LIFO costs significantly below current costs. By matching these older costs with current revenues, 2018 net loss decreased by approximately $968,000, net of tax.

Inventory valuation reserves at December 29, 2018 and December 30, 2017 were $1,747,000 and $518,000, respectively. The increase between years is due to management's decision to increase reserves as it works to streamline products sold.

4. GOODWILL AND AMORTIZABLE INTANGIBLE ASSETS

As of December 29, 2018 the Company has recorded $7,229,000 of goodwill consisting of $6,229,000 related to the CACS segment and $1,000,000 related to the Door segment. The Company assesses goodwill for potential impairment at the end of each year. For the CACS segment, the Company engages the services of an investment banking firm to assist management in determining the fair value of the reporting unit. For the Door segment, the Company prepares a discounted cash flow analysis to estimate the fair value of the reporting unit. In addition, if events occur or circumstances change in the relevant reporting segments or in their industries the Company will then reassess the recorded goodwill to determine if impairment has occurred. No goodwill impairment was recognized for any of the periods presented. The valuation of goodwill and other intangibles is considered a significant estimate. Future economic conditions could negatively impact the value of the business which could trigger an impairment that would materially impact earnings.

There were no changes in recorded goodwill for either of the years ended December 29, 2018 or December 30, 2017.

5. REVOLVING BANK LOAN

The Company entered into an Amended 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 rates on the Revolving Loans, (vi) extend the maturity date and (vii) decrease the Letter of Credit fee rate. 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.

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Notes to Consolidated Financial Statements (Continued)

5. REVOLVING BANK LOAN (Continued)

•: Borrowings under the Revolving Commitment are limited to (a) 80% of eligible accounts receivable, (b) the lesser of 50% of eligible inventories and $8,500,000 plus (c) 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 Minimum 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.
•: The maturity date of the credit facility is May 1, 2020.
•: Interest rate pricing for the revolving credit facility is currently LIBOR plus 2.25% or the prime rate.

Definitions under the Credit Agreement as amended are as follows:

•: Fixed Charge Coverage Ratio is defined as, for any computation period, the ratio of (a) the sum for such period of (i) EBITDA, as defined, minus (ii) the sum of income taxes paid in cash, the amount expended related to the development of the mining property discussed in Note 12 and all unfinanced capital expenditures to (b) the sum for such period of interest expense related to the Credit Agreement.
•: EBITDA means for any Computation Period (or another time period to the extent expressly provided for in the Credit Agreement) 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 revolving debt was $2,200,000 as of December 29, 2018 compared to $3,500,000 as of December 30, 2017. The highest balance outstanding during 2018 and 2017 was $9,800,000 and $10,000,000 respectively. Average outstanding funded debt was $6,058,000 and $5,909,000 for 2018 and 2017, respectively. At December 29, 2018, the Company had outstanding letters of credit (LOC) totaling $4,745,000. At all times since the inception of the Credit Agreement, the Company has had sufficient qualifying and eligible assets such that the available borrowing capacity exceeded the cash needs of the Company and this situation is expected to continue for the foreseeable future.

F-15

Notes to Consolidated Financial Statements (Continued)

5. REVOLVING BANK LOAN (Continued)

The Company believes that its existing cash balance, anticipated cash flow from operations and borrowings available under the Credit Agreement will be sufficient to cover expected cash needs, including planned capital expenditures, for the next twelve months. The Company expects to be in compliance with all debt covenants, as amended, throughout the facility's remaining term.

6. COMMITMENTS AND CONTINGENCIES

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, cash flows or financial condition as the Company has established adequate accruals for matters that are probable and estimable. The Company does not accrue estimated future legal costs related to the defense of these matters but rather expenses legal costs as incurred. Also see Note 2 for discussion of litigation regarding the Pueblo sand and gravel lease.

7. SHAREHOLDERS' EQUITY

Four hundred thousand shares of preferred stock ($.50 par value) are authorized and unissued.

The Company purchased 1,000 shares of its common stock from a former employee to become treasury stock during fiscal year 2017. There were no such purchases in fiscal year 2018. Under the 2010 Non-Employee Directors Stock Plan (the "Plan") the Company reserved 150,000 treasury shares representing the maximum number of shares allowed to be granted to non-employee directors in lieu of the base director 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 2017 retainer fee. The Company issued a total of 12,000 shares to the eight eligible board members effective March 8, 2017 as full payment for their 2017 retainer fee.

8. EARNINGS PER SHARE

The Company does not have any common stock equivalents, warrants or other convertible securities outstanding, therefore there are no differences between the calculation of basic and diluted EPS for the fiscal years 2018 or 2017.

9. RENTAL EXPENSE, LEASES AND COMMITMENTS

The Company leases certain of its facilities and equipment and is required to pay the related taxes, insurance and certain other expenses. Rental expense was $4,044,000 and $3,779,000 for 2018 and 2017, respectively.

Future minimum rental commitments under non-cancelable operating leases for 2019 and thereafter are as follows: 2019—$1,827,000; 2020—$1,495,000; 2021—$1,400,000; 2022—$1,360,000; 2023—$823,000 and thereafter—$1,323,000. The commitments do not include any amounts related to minimum royalty payments due on a contested aggregates property lease in conjunction with the Pueblo, Colorado operation as discussed in Note 2. The commitments do include amounts expected to be reimbursed to the Company by related party tenants as discussed in Note 13. These related party amounts for 2019 and thereafter are as follows: 2019—$143,000; 2020—$145,000; 2021—$147,000; 2022—$150,000; 2023—$152,000 and thereafter—$579,000.

F-16

Notes to Consolidated Financial Statements (Continued)

10. RETIREMENT PLANS

As discussed in Note 1, the Company maintains a defined contribution retirement benefit plan for eligible employees. Total plan expenses charged to continuing operations were $951,000 and $1,537,000 in 2018 and 2017, respectively.

11. CURRENT ECONOMIC CONDITIONS

Construction activity in the Colorado Springs, Colorado vicinity is expected to continue to rise from the levels seen during 2018. Pricing is expected to increase although slow some from prior years as material costs are expected to level off compared to increases seen in the past couple of years. Pricing on larger bid jobs will remain competitive.

The markets for products manufactured or fabricated by the Heating and Cooling, Evaporative Cooling and Door segments are expected to remain fairly constant compared with the 2018 levels although sales of fan coils in the Heating and Cooling segment are anticipated to grow as construction spending in the lodging industry continues to increase during 2019. As has historically been the case, sales of all segments, other than the Door segment, are influenced by weather conditions.

12. INCOME TAXES

On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was enacted in the United States. The Tax Act significantly revised the U.S. tax code by, among other items, reducing the Company's federal tax rate from 34% to 21%, providing for the full expensing of certain depreciable property and eliminating the corporate alternative minimum tax (AMT). In accordance with GAAP, the Company recorded a $27,000 income tax benefit for the period ending December 30, 2017, primarily related to the re-measurement of the Company's deferred tax items.

The (benefit) provision for income taxes is summarized as follows (amounts in thousands):

	2018			2017

Federal: Current	$	(387	)	$	988
Deferred		(1,454	)		27
State: Current		1			32
Deferred		(345	)		(26	)

	$	(2,185	)	$	1,021

The percentage effect of an item on the statutory tax rate in a given year will fluctuate based upon the magnitude of the pre-tax profit or loss in that year. At December 30, 2017 the Company's deferred tax items were revalued for the estimated impact of the Tax Act legislation. The effect of this

F-17

Notes to Consolidated Financial Statements (Continued)

12. INCOME TAXES (Continued)

revaluation was to reduce the Company's effective tax rate 1.0%. The difference between the tax rate on income for financial statement purposes and the federal statutory tax rate was as follows:



Statutory tax rate	(21.0	)%	34.0	%
Percentage depletion	(0.9	)	(4.7	)
Non-deductible expenses	0.4		1.7
Valuation allowance for tax assets	1.2		2.5
State income taxes, net of federal benefit	(4.5	)	2.0
Domestic production deduction	—		(0.3	)
Revaluation of deferred items for new Tax Act	—		(1.0	)
Other	(2.4	)	1.8

	(27.2	)%	36.0	%

For financial statement purposes, deferred tax assets and liabilities are recorded at a blend of the current statutory federal and states' tax rates—25.74%. The principal temporary differences and their related deferred taxes are as follows (amounts in thousands):

	2018			2017

Deferred tax assets
Reserves for self-insured losses	$	466		$	328
Accrued reclamation		1,445			1,386
Unfunded supplemental profit sharing plan liability		263			275
Asset valuation reserves		685			293
Future state tax credits		833			863
Net state operating loss carryforwards		226			126
Federal AMT carryforward		387			620
Federal NOL carryforward		468			—
Other		700			701

		5,473			4,592
Deferred tax liabilities
Depreciation		1,200			859
Deferred development		116			1,298
Prepaid royalties		—			161
Other		443			458

		1,759			2,776

Net deferred tax asset before valuation allowance		3,714			1,816
Valuation allowance
Beginning balance		(200	)		(130	)
(Increase) decrease during the period		(100	)		(70	)

Ending Balance		(300	)		(200	)

Net deferred tax asset	$	3,414		$	1,616

F-18

Notes to Consolidated Financial Statements (Continued)

12. INCOME TAXES (Continued)

The deduction of charitable contributions made during 2018 and 2017 was limited by the level of taxable income; however, no valuation reserve was established for the amount carried forward as the Company expects to be able to utilize these deductions in future years. The Tax Act repeals AMT and allows any existing AMT credit carryforwards to be used to offset regular tax obligations for a three year period beginning in 2018. Any AMT credit carryforwards that are not utilized to offset regular tax obligations will be 100 percent refundable by 2021. For State purposes, net operating losses can be carried forward for various periods for the states that the Company is required to file in. Of the $833,000 of state tax credits recorded by the Company at December 29, 2018, $792,000 relates to California Enterprise Zone hiring credits earned in prior years. California has repealed the credit and limited its use to tax years through 2023. At December 29, 2018 and December 30, 2017 the Company carried valuation reserves of $430,000 ($300,000 tax effected) and $303,000 ($200,000), respectively, related to the carry forward of the California Enterprise Zone hiring credits due to the uncertainty that the Company will be able to utilize the credits prior to their expiration in 2023.

The realization of the deferred tax assets is subject to our ability to generate sufficient taxable income during the periods in which the temporary differences become realizable. In evaluating whether a valuation allowance is required, we consider all available positive and negative evidence, including prior operating results, the nature and reason of any losses, our forecast of future taxable income and the dates, if any, on which any deferred tax assets are expected to expire. These assumptions require a significant amount of judgment, including estimates of future taxable income. The estimates are based on our best judgment at the time made based on current and projected circumstances and conditions.

As a result of the evaluation of the realizability of our deferred tax assets as of December 29, 2018, we concluded that it was more likely than not that all of our deferred tax assets would be realized to the extent not reserved for by a valuation allowance.

The Company accounts for uncertainty in income taxes recognized in its financial statements by applying GAAP's recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The financial statement effects of a tax position are initially recognized when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. A tax position that meets the more-likely-than-not recognition threshold should initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon effective settlement with a taxing authority. There were no unrecognized tax benefits at either December 29, 2018 or December 30, 2017.

We file income tax returns in the United States Federal and various state jurisdictions. Federal and state income tax returns are subject to examination based upon the statute of limitations in effect for the various jurisdictions.

13. RELATED PARTY TRANSACTIONS

A director of the Company is a partner in a law firm engaged to represent the Company in various legal matters including the lawsuit filed by the Company related to the sand and gravel lease discussed in Note 2. For the year ending December 29, 2018 the Company has paid the director's firm $474,000 for services rendered. During fiscal 2017 the same director's firm was paid $510,000.

The corporate office leases space in Chicago, Illinois that is shared with three organizations related to the Company's principal shareholders. Each of the organizations pays its pro-rata share of rent and

F-19

Notes to Consolidated Financial Statements (Continued)

13. RELATED PARTY TRANSACTIONS (Continued)

other expenses based on a square footage allocation. See Note 9 for additional discussion. Furthermore, the Company purchases insurance coverage for workers' compensation, general and umbrella liability together with another company controlled by the Company's principal shareholders to minimize insurance costs. Allocation of the expense of the program is either provided by the underwriter or based upon a formula that considers, among other things, sales levels, loss exposure and claim experience. Claims under the self-insured portion of the policies are charged directly to the incurring party. Amounts receivable from these organizations at December 29, 2018 and December 30, 2017 were $28,000 and $14,000, respectively.

14. UNAUDITED QUARTERLY FINANCIAL DATA

The following table and footnotes provide summarized unaudited fiscal quarterly financial data for 2018 and 2017 (amounts in thousands, except per share amounts):

2018	First Quarter			Second Quarter		Third Quarter			Fourth Quarter

Sales	$	36,873		$	43,300	$	40,978		$	42,832
Gross profit		5,528			8,205		6,233			7,841
Depreciation, depletion and amortization		676			707		682			568
Net (loss) income		(6,193	)		2,113		(1,236	)		(540	)
Basic and Diluted (loss) income per share		(3.65	)		1.24		(0.73	)		(0.32	)

2017	First Quarter			Second Quarter		Third Quarter		Fourth Quarter

Sales	$	34,103		$	39,887	$	38,627	$	40,193
Gross profit		6,031			8,153		7,201		6,710
Depreciation, depletion and amortization		638			677		617		622
Net income		(422	)		1,028		835		377
Basic and Diluted income per share		(0.25	)		0.61		0.50		0.22

Earnings per share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly earnings per share may not equal the total for the year.

15. INDUSTRY SEGMENT INFORMATION

The Company operates primarily in two industry groups, HVAC and Construction Products. The Company has identified two reportable segments in each of the two industry groups: the Heating and Cooling segment and the Evaporative Cooling segment in the HVAC industry group and the CACS segment and the Door segment in the Construction Products industry group. The Heating and Cooling segment primarily produces and sells gas-fired wall furnaces, console heaters and fan coils from the Company's wholly-owned subsidiary, WFC of Colton, California. The Evaporative Cooling segment primarily produces and sells evaporative coolers from the Company's wholly-owned subsidiary, PMI of Phoenix, Arizona. Sales of these two segments are nationwide, but are concentrated in the southwestern United States. Concrete, aggregates and construction supplies are offered by the CACS segment from numerous locations along the Southern portion of the Front Range of Colorado operated by the Company's wholly-owned subsidiaries collectively referred to as TMC. The Door segment sells hollow metal and wood doors, door frames and related hardwares, lavatory fixtures and electronic access and security systems from the Company's wholly-owned subsidiary, MDHI, which operates out of

F-20

Notes to Consolidated Financial Statements (Continued)

15. INDUSTRY SEGMENT INFORMATION (Continued)

facilities in Pueblo and Colorado Springs, Colorado. Sales of these latter two segments are highly concentrated in the Southern Front Range area in Colorado although door sales are also made throughout the United States.

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 fiscal years 2018 and 2017 along with the items necessary to reconcile the segment information to the totals reported in the financial statements (amounts in thousands):

	Construction Products Industry

	Construction Products Industry								HVAC Industry
	Concrete, Aggregates & Construction Supplies								HVAC Industry
	Concrete, Aggregates & Construction Supplies			Doors		Combined Construction Products			Heating and Cooling		Evaporative Cooling		Combined HVAC		Unallocated Corporate(a)			Total
Year Ended December 29, 2018
Revenues from external customers	$	70,246		$	20,158	$	90,404		$	45,953	$	27,525	$	73,478	$	101		$	163,983
Depreciation, depletion and amortization		1,462			171		1,633			588		361		949		51			2,633
Operating (loss) income		(6,717	)		2,233		(4,484	)		613		318		931		(4,050	)		(7,603	)
Segment assets		35,351			8,003		43,354			19,668		9,335		29,003		3,346			75,703
Capital expenditures		1,672			119		1,791			752		312		1,064		45			2,900

	Construction Products Industry

	Construction Products Industry						HVAC Industry
	Concrete, Aggregates & Construction Supplies						HVAC Industry
	Concrete, Aggregates & Construction Supplies		Doors		Combined Construction Products		Heating and Cooling		Evaporative Cooling			Combined HVAC		Unallocated Corporate(a)			Total
Year Ended December 30, 2017
Revenues from external customers	$	66,407	$	18,652	$	85,059	$	42,517	$	25,216		$	67,733	$	18		$	152,810
Depreciation, depletion and amortization		1,405		152		1,557		550		409			959		38			2,554
Operating income (loss)		2,656		1,861		4,517		2,140		(550	)		1,590		(3,091	)		3,016
Segment assets		39,020		7,360		46,380		21,543		11,896			33,439		2,670			82,489
Capital expenditures		4,566		135		4,701		804		230			1,034		46			5,781

(a): Includes unallocated corporate office expenses and assets which consist primarily of cash and cash equivalents, prepaid expenses, property, plant and equipment.

F-21

Notes to Consolidated Financial Statements (Continued)

15. INDUSTRY SEGMENT INFORMATION (Continued)

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

16. WRITE OFF OF DEFERRED DEVELOPMENT

During July 2015, TMC began development of a 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 owner. This amount was previously included in Other long-term assets on the Consolidated Balance 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.

TMC made its initial application for a mining permit from the state of Colorado in 2016. TMC filed its second application to the state in November 2017, which was rejected on April 26, 2018. The Company wrote off all capitalized costs associated with the permit application in the first quarter of 2018. As of December 30, 2017 the Company had capitalized $5,430,000 of deferred development which was included in Property, plant and equipment on the Consolidated Balance Sheet. As of March 31, 2018 TMC had invested $6,308,000 in the project. This amount plus an estimated $626,000 of additional expenses incurred during April 2018, a total of $6,934,000, was written off as of March 31, 2018. During the second quarter of 2018, final billings and adjustments related to the permit application resulted in a net recovery of $94,000 reducing the total write-off to $6,840,000 as of June 30, 2018.

As of December 29, 2018 the $2,500,000 escrow balance mentioned above was included in Other current assets as the Company has begun the process to settle the account and recover the funds.

17. SUBSEQUENT EVENT—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.

18. SUBSEQUENT EVENT—DISPOSITION OF ASSETS

On February 1, 2019, the Company sold substantially all of the real property, tangible personal property and executory contracts of the Transit Mix Concrete Company ready-mix business to Aggregate Industries—WCR, Inc. (the Buyer), a Colorado corporation for $27,129,000. The purchase price was paid to the Company on the Closing Date less certain amounts to be held in escrow, as provided in the Asset Purchase Agreement (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 additional 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.

Among other things, the Purchase Agreement includes customary representations, warranties, covenants and indemnities of the Company and of the Buyer, including a customary agreement by the

F-22

Notes to Consolidated Financial Statements (Continued)

18. SUBSEQUENT EVENT—DISPOSITION OF ASSETS (Continued)

Company not to compete for five years after the Closing Date in the manufacture, sale, distribution and/or supply of ready mix concrete or similar products or services within Colorado Springs or Pueblo, Colorado, or the area within a 150 mile radius from the city limits of the two cities. Additionally, as part of the Purchase Agreement, the Company agreed to change the corporate name of Transit Mix Concrete to a name which does not include "Transit Mix Concrete".

The Company retained the aggregates operations and retail building materials business of Transit Mix and all related assets and liabilities. These operations include the Pike View 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.

F-23

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Shareholders
Continental Materials Corporation
Chicago, Illinois

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Continental Materials Corporation as of December 29, 2018 and December 30, 2017, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the years in the two-year period then ended, and the related notes and schedule listed in the Form 10-K Index at Part IV, Item 15 (a)2 (collectively referred to as the financial statements). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 29, 2018 and December 30, 2017, and the results of its operations and its cash flows for each of the years in the two-year period ended in conformity with accounting principles generally accepted in the United States of America

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ BKD, LLP

We have served as the Company's auditor since 2009.
Indianapolis, Indiana
March 28, 2019

F-24

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

CONTINENTAL MATERIALS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 28, 2019 AND DECEMBER 29, 2018

(000's omitted except share data)

	SEPTEMBER 28, 2019			DECEMBER 29, 2018

	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	4,297		$	594
Receivables, net		20,754			15,321
Receivable for insured losses		840			874
Inventories
Finished goods		4,193			5,448
Work in process		1,564			1,365
Raw materials and supplies		7,191			7,993
Prepaid expenses		2,227			1,785
Refundable income taxes		2,400			494
Other current assets		4,552			2,500
Other current assets held for sale		—			10,968

Total current assets		48,018			47,342

Property, plant and equipment		11,729			10,431
Right-of use assets		5,258			—
Goodwill		6,011			1,000
Intangible assets		12,991			—
Deferred income taxes		7,823			3,414
Other long-term assets		666			448
Other long-term assets held for sale		—			13,068

	$	92,496		$	75,703



LIABILITIES
Current liabilities:
Revolving bank loan payable	$	—		$	2,200
Accounts payable and accrued expenses		20,341			12,299
Short-term asset retirement obligation		4,946			1,017
Short-term lease liabilities		1,129			—
Liability for unpaid claims covered by insurance		840			874
Other current liabilities held for sale		—			3,800

Total current liabilities		27,256			20,190

Long-term lease liabilities		4,168			—
Long-term compensation liability		456			—
Asset retirement obligation		21,018			5,252
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		2,013			1,930
Retained earnings		49,333			61,131
Treasury shares, 862,201 and 876,409 at cost		(14,694	)		(14,928	)

		37,295			48,776

	$	92,496		$	75,703

See notes to condensed consolidated financial statements.

F-25

CONTINENTAL MATERIALS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

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

(Unaudited)

(000's omitted except per-share amounts)

	SEPTEMBER 28, 2019			SEPTEMBER 29, 2018

Net sales	$	31,987		$	23,965
Costs and expenses:
Cost of sales (exclusive of depreciation, depletion and amortization)		24,452			18,740
Depreciation, depletion and amortization		597			393
Selling and administrative		8,102			6,100
Impairment related to cessation of mining an aggregate deposit		20,217			—
Loss on legal settlement (Note 20)		6,400			—
Loss on disposition of property and equipment		125			—

		59,893			25,233

Operating loss		(27,906	)		(1,268	)
Interest income		39			14
Interest expense		(100	)		(140	)
Other loss net		(16	)		(70	)

Loss from continuing operations before income taxes		(27,983	)		(1,464	)
Benefit for income taxes		(7,699	)		(366	)

Loss from continuing operations		(20,284	)		(1,098	)
Loss from discontinued operations net of income tax benefit of $0 and $46		—			(138	)

Net loss		(20,284	)		(1,236	)
Retained earnings, beginning of period		69,617			62,907

Retained earnings, end of period	$	49,333		$	61,671



Basic and diluted loss per share:
Loss from continuing operations		(11.85	)		(0.65	)
Loss from discontinued operations		—			(0.08	)

Basic and diluted loss per share	$	(11.85	)	$	(0.73	)



Average shares outstanding		1,712			1,698

See notes to condensed consolidated financial statements

F-26

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, 2019			SEPTEMBER 29, 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

F-27

CONTINENTAL MATERIALS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

(Unaudited)

(000's omitted)

	SEPTEMBER 28, 2019			SEPTEMBER 29, 2018

Net cash provided (used) by continuing operations	$	5,492		$	(1,459	)
Net cash provided (used) by discontinued operations		294			(797	)

Net cash provided (used) by operating activities		5,786			(2,256	)

Investing activities:
Capital expenditures by continuing operations		(973	)		(963	)
Capital expenditures by discontinued operations		(172	)		(1,439	)
Payments for acquisitions		(23,213	)		—
Cash proceeds from sale of discontinued operations		23,679			—
Cash proceeds from sale of continuing operations property and equipment		956			—
Cash proceeds from sale of discontinued operations property and equipment		—			1,403

Net cash provided (used) in investing activities		277			(999	)

Financing activities:
Borrowings on the revolving bank loan		12,550			27,600
Repayments on the revolving bank loan		(14,750	)		(24,400	)
Repayments of finance lease obligations		(36	)		—
Payments to acquire treasury stock		(124	)		—

Net cash (used) provided by financing activities		(2,360	)		3,200

Net increase (decrease) in cash and cash equivalents		3,703			(55	)
Cash and cash equivalents:
Beginning of period		594			507

End of period	$	4,297		$	452



Supplemental disclosures of cash flow items:
Cash paid during the year for:
Interest, net	$	284		$	404
Contingent consideration from acquisitions		1,540			—
Income taxes, net		1,840			50

See notes to condensed consolidated financial statements

F-28

CONTINENTAL MATERIALS CORPORATION

CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)

(000's omitted, except per share data)

Nine Months ended September 28, 2019

		Common shares amount		Capital in excess of par		Retained earnings					Treasury shares cost			Total

Balance at December 29, 2018	2,574,264	$	643	$	1,930	$	61,131		876,409		$	(14,928	)	$	48,776
Net income	—		—		—		13,322		—			—			13,322
Compensation of Board of Directors by issuance of treasury shares	—		—		83		—		(21,000	)		358			441
Purchase of treasury shares	—		—		—		—		3,368			(69	)		(69	)

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

		Common shares amount		Capital in excess of par		Retained earnings					Treasury shares cost			Total

Balance at December 30, 2017	2,574,264	$	643	$	1,887	$	66,987		892,097		$	(15,195	)	$	54,322
Net loss	—		—		—		(6,193	)				—			(6,193	)
Compensation of Board of Directors by issuance of treasury shares	—		—		43		—		(16,000	)		271			314
Purchase of treasury shares	—		—		—		—		112			—			—

Balance at March 31, 2018	2,574,264	$	643	$	1,930	$	60,794		876,209		$	(14,924	)	$	48,443
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

F-29

CONTINENTAL MATERIALS CORPORATION

SECURITIES AND EXCHANGE COMMISSION FORM 10-Q

NOTES TO THE QUARTERLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

QUARTER ENDED SEPTEMBER 28, 2019

(Unaudited)

1.: Basis of Presentation:

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 29, 2018 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. Certain reclassifications have been made to the 2018 consolidated financial statements to conform to the 2019 presentation. The reclassifications had no effect on the consolidated results of operations, the net change 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:

F-30

CONTINENTAL MATERIALS CORPORATION

SECURITIES AND EXCHANGE COMMISSION FORM 10-Q

NOTES TO THE QUARTERLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

QUARTER ENDED SEPTEMBER 28, 2019

(Unaudited)

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.

Certain reclassifications have been made to prior period financial information in order to conform to the current period's presentation, including a change to the Company's reporting segments. See Note 7 for further information and 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.

The Tax Cuts and Jobs Act, enacted December 22, 2017, eliminated the corporate Alternative Minimum Tax (AMT) and allows for all existing credit carryforwards to be used to offset regular

F-31

CONTINENTAL MATERIALS CORPORATION

SECURITIES AND EXCHANGE COMMISSION FORM 10-Q

NOTES TO THE QUARTERLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

QUARTER ENDED SEPTEMBER 28, 2019

(Unaudited)

tax liability for tax years beginning after December 31, 2017. Additionally, for tax years 2018, 2019 and 2020, to the extent that the AMT credit carryover exceeds the regular tax liability, 50% of the excess AMT credit is refundable. Any remaining credits will be fully refundable in 2021. For state tax purposes, net operating losses can be carried forward for various periods for the states that the Company is required to file in. California Enterprise Zone credits can be used through 2023 while Colorado credits can be carried forward for 7 years. The Company has established a valuation reserve related to a portion of the California Enterprise Zone credit not expected to be utilized prior to expiration.

The Company's income tax returns are subject to audit by the Internal Revenue Service (IRS) and state tax authorities. The amounts recorded for income taxes reflect the Company's tax positions based on research and interpretations of complex laws and regulations. The Company accrues liabilities related to uncertain tax positions taken or expected to be taken in its tax returns. The Company did not identify any such uncertain tax positions as of September 28, 2019 or December 29, 2018.

3.

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 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 equity and phantom equity appreciation liability awards: Fair value is estimated based on the use of a Black-Scholes option pricing model based on publically available inputs. The carrying

F-32

CONTINENTAL MATERIALS CORPORATION

SECURITIES AND EXCHANGE COMMISSION FORM 10-Q

NOTES TO THE QUARTERLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

QUARTER ENDED SEPTEMBER 28, 2019

(Unaudited)

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 2.

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 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 May 2014, 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.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), requiring that the statement of cash flows explain the change in total cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. This standard was adopted by the Company in the first quarter of fiscal 2018 and did not have a material impact to the consolidated statement of cash flows.

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 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.

F-33

CONTINENTAL MATERIALS CORPORATION

SECURITIES AND EXCHANGE COMMISSION FORM 10-Q

NOTES TO THE QUARTERLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

QUARTER ENDED SEPTEMBER 28, 2019

(Unaudited)

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, 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 activity should help smooth the seasonality of the Company's portfolio and make operating results more consistent.
6.: There is no difference in the calculation of basic and diluted earnings per share (EPS) for the three-month or nine-month periods ended September 28, 2019 and September 29, 2018 as the Company does not have any dilutive instruments.
7.: The Company sold substantially all of the assets of its ready mix concrete and Daniels sand operations in the first quarter of 2019. See Note 15. During the second quarter of 2019, the Company acquired the assets of four operating businesses through three separate transactions. See Note 16 for additional discussion of the acquisitions. In conjunction with these transactions management reviewed its segment reporting structure and determined it was no longer appropriate for the consolidated business going forward. The segment reporting was revised to align with the way the Company's decision makers evaluate, manage and allocates resources to the operating businesses after the sale of the concrete and aggregates assets of the Company's wholly-owned subsidiaries (collectively referred to as TMC) and the acquisitions discussed below. Segment information for prior periods has been reclassified to conform to current segment reporting structure.

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 Dryer Technologies (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

F-34

CONTINENTAL MATERIALS CORPORATION

SECURITIES AND EXCHANGE COMMISSION FORM 10-Q

NOTES TO THE QUARTERLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

QUARTER ENDED SEPTEMBER 28, 2019

(Unaudited)

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.

The following table presents information about reported segments for the nine-month and three-month periods ended September 28, 2019 and September 29, 2018 along with the items necessary to reconcile the segment information to the totals reported in the financial statements (amounts in thousands):

	HVAC			Doors			Construction Materials			Unallocated Corporate			Held for Sale		Total

Nine Months ended September 28, 2019
Revenues from external customers	$	57,712		$	17,483		$	4,579		$	0		$	—	$	79,773
Depreciation, depletion and amortization		842			199			276			54			—		1,369
Operating income (loss)		(837	)		1,288			(15,105	)		(6,295	)		—		(20,949	)
Segment assets		53,540			13,607			9,799			15,550			—		92,496
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

F-35

CONTINENTAL MATERIALS CORPORATION

SECURITIES AND EXCHANGE COMMISSION FORM 10-Q

NOTES TO THE QUARTERLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

QUARTER ENDED SEPTEMBER 28, 2019

(Unaudited)

	HVAC			Doors		Construction Materials			Unallocated Corporate			Held for Sale		Total

Nine Months ended September 29, 2018
Revenues from external customers	$	52,294		$	14,824	$	5,746		$	68		$	—	$	72,932
Depreciation, depletion and amortization		809			123		238			33			—		1,203
Operating income (loss)		83			1,787		(6,439	)		(3,208	)		—		(7,777	)
Segment assets(a)		29,003			8,003		11,315			3,346			24,036		75,703
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 29, 2018.
(b): Capital expenditures are presented on the accrual basis of accounting.

8.: On October 16, 2019 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 States District Court for the District of Colorado. The suit regarded a Fee Sand and Gravel Lease (Lease) between the Company as Lessee and Valco, Inc. (Valco) as Lessor that called for the payment of royalties over the life of the Lease on an agreed 50,000,000 tons of sand and gravel reserves. In the suit the 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 to Valco in excess of tonnage actually produced (Prepayments). Based on information obtained through discovery, the Company alleged, in addition to the abovementioned claims, nondisclosure or concealment by Valco of material facts concerning the existence of Agreed Sand and Gravel Reserves of 50 million tons, and breach of warranty concerning the same. Valco asserted counterclaims against the Company alleging breach of contract and seeking declaratory judgment regarding the Company's refusal to make further royalty payments under the Lease. In the ordinary course of business and absent any breach by Valco, the Company was 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 stopped making royalty payments at the start of the 2015 calendar year.

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

F-36

CONTINENTAL MATERIALS CORPORATION

SECURITIES AND EXCHANGE COMMISSION FORM 10-Q

NOTES TO THE QUARTERLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

QUARTER ENDED SEPTEMBER 28, 2019

(Unaudited)

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.

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.: The Company entered into an Amended 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 rates on the Revolving Loans, (vi) extend the maturity date and (vii) decrease the Letter of Credit fee rate. 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 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.

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) 80% of eligible accounts receivable, (b) the lesser of 50% 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 Minimum 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.
•: The maturity date of the credit facility is May 1, 2020.

F-37

CONTINENTAL MATERIALS CORPORATION

SECURITIES AND EXCHANGE COMMISSION FORM 10-Q

NOTES TO THE QUARTERLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

QUARTER ENDED SEPTEMBER 28, 2019

(Unaudited)

•: Interest rate pricing for the revolving credit facility is currently LIBOR plus 2.25% or the prime rate.

Definitions under the Credit Agreement as amended are as follows:

•: Fixed Charge Coverage Ratio is defined as, for any computation period, the ratio of (a) the sum for such period of (i) EBITDA, as defined, minus (ii) the sum of income taxes paid in cash, the amount expended related to the development of the mining property discussed in Note 12 and all unfinanced capital expenditures to (b) the sum for such period of interest expense related to the Credit Agreement.
•: EBITDA means for any Computation Period (or another time period to the extent expressly provided for in the Credit Agreement) 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 revolving debt was zero as of September 28, 2019 compared to $2,200,000 as of December 29, 2018. The highest balance outstanding during the first nine months 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 nine months of 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 the available borrowing capacity exceeded the cash needs of the Company and this situation is expected to continue for the foreseeable future.

11.: 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

F-38

CONTINENTAL MATERIALS CORPORATION

SECURITIES AND EXCHANGE COMMISSION FORM 10-Q

NOTES TO THE QUARTERLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

QUARTER ENDED SEPTEMBER 28, 2019

(Unaudited)

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.

12.: During July 2015, TMC began development of a 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 owner. This amount was previously included in Other long-term assets on the Consolidated Balance 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.

As of September 28, 2019 and December 29, 2018 the $2,500,000 escrow balance mentioned above was included in Other current assets as the Company has begun the process to settle the account and recover the funds.

13.: 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.

Substantially all of the Company's leases are considered operating leases. 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

F-39

CONTINENTAL MATERIALS CORPORATION

SECURITIES AND EXCHANGE COMMISSION FORM 10-Q

NOTES TO THE QUARTERLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

QUARTER ENDED SEPTEMBER 28, 2019

(Unaudited)

September 28, 2019, along with a reconciliation to the discounted amount recorded on the September 28, 2019 Consolidated Balance Sheet (amounts in thousands):

	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

Short-term lease cost represents the Company's cost with respect to leases with a duration of 12 months or less and are not reflected on the Company's Consolidated Balance Sheet. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. For the three and nine months ended September 28, 2019 operating lease cost was $628,000 and $1,459,000, respectively, including $274,000 and $484,000 of short-term lease costs. Cash paid for amounts included in the measurement of lease liabilities for the three and nine months ended September 28, 2019 was $396,000 and $1,014,000, respectively.

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.

14.: 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 approximately $200,000. The Settlement Agreement does not contain any admission of liability, wrongdoing, or responsibility by any of the parties.
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

F-40

CONTINENTAL MATERIALS CORPORATION

SECURITIES AND EXCHANGE COMMISSION FORM 10-Q

NOTES TO THE QUARTERLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

QUARTER ENDED SEPTEMBER 28, 2019

(Unaudited)

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.

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 (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.

In the quarter ended March 30, 2019, the Company recorded a $6,508,000 pre-tax gain on the sale of TMC assets. During the quarter ending June 29, 2019 the working capital adjustment was finalized and resulted in the Company paying a net $1,248,000 to the Buyer. This adjustment, plus an adjustment to transaction fees, reduced the pre-tax gain on the sale to $5,283,000. The operations of the ready-mix and Daniels sand businesses were classified as discontinued operations and assets held for sale for all periods presented. 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					Nine Months ended

	SEPTEMBER 28, 2019		SEPTEMBER 29, 2018			SEPTEMBER 28, 2019		SEPTEMBER 29, 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 results of discontinued operations are summarized as follows:

	Three Months ended					Nine Months ended

	SEPTEMBER 28, 2019		SEPTEMBER 29, 2018			SEPTEMBER 28, 2019			SEPTEMBER 29, 2018
Operating income (loss)	$	—	$	(184	)	$	(724	)	$	1,075
Gain on sale of assets		—		—			5,283			—
Income tax (benefit) provision		—		(46	)		1,255			268

Loss (income) from discontinued operations	$	—	$	(138	)	$	3,304		$	806

F-41

CONTINENTAL MATERIALS CORPORATION

SECURITIES AND EXCHANGE COMMISSION FORM 10-Q

NOTES TO THE QUARTERLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

QUARTER ENDED SEPTEMBER 28, 2019

(Unaudited)

The assets and liabilities held for sale related to TMC's ready-mix and Daniels sand businesses were as follows:

	SEPTEMBER 28, 2019		DECEMBER 29, 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

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 $12,685,000, subject to a traditional post-closing working capital adjustment currently estimated to be $778,000, 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

F-42

CONTINENTAL MATERIALS CORPORATION

SECURITIES AND EXCHANGE COMMISSION FORM 10-Q

NOTES TO THE QUARTERLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

QUARTER ENDED SEPTEMBER 28, 2019

(Unaudited)

(36) months. Approximately $1,300,000 has been accrued based on estimated fair values of these earn out agreements. We acquired trade receivables of $1,787,000, inventory of $1,269,000, property and equipment of $2,530,000, other assets of $250,000, intangibles of $4,302,000 and goodwill of $3,675,000 and retained liabilities of $1,128,000. 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 transaction and work continues on final valuation of the fair value of assets and liabilities including receivables, inventory, fixed assets, intangibles, goodwill and accounts payable. Transaction costs, included in Selling and administrative expenses on the Condensed Consolidated Statements of Operations for the three and nine month periods ended September 28, 2019, were $66,000 and $1,177,000, respectively.

On June 17, 2019 the Company acquired the assets of Inovate, a supplier of commercial and residential dryer and HVAC venting systems and components. The total purchase price for the net assets acquired was $11,505,000, 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 $240,000 has been accrued based on an estimated fair value of this earn out agreement. The results of the acquisition of Inovate are included in the Company's Consolidated Financial Statements from the date of acquisition. Transaction costs included in Selling and administrative expense on the Condensed Consolidated Statement of Operations for the three and nine months ended September 28, 2019 were $39,000 and $515,000, respectively.

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

F-43

CONTINENTAL MATERIALS CORPORATION

SECURITIES AND EXCHANGE COMMISSION FORM 10-Q

NOTES TO THE QUARTERLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

QUARTER ENDED SEPTEMBER 28, 2019

(Unaudited)

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 had occurred as of December 31, 2017. 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, 2019			SEPTEMBER 29, 2018			SEPTEMBER 28, 2019			SEPTEMBER 29, 2018
Revenue	$	31,987		$	27,407		$	87,575		$	83,573
Pre-tax (loss) income from continuing operations	$	(27,983	)	$	(669	)	$	(19,706	)	$	(6,074	)
Basic and diluted (loss) earnings per share:
From continuing operations	$	(11.85	)	$	(0.28	)	$	(8.34	)	$	(2.53	)
Average shares outstanding		1,712			1,698			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 respective period.

	Three Months ended					Nine Months ended

	SEPTEMBER 28, 2019			SEPTEMBER 29, 2018		SEPTEMBER 28, 2019			SEPTEMBER 29, 2018
Revenue	$	31,987		$	30,982	$	96,751		$	92,170
Pre-tax (loss) income from continuing operations	$	(27,983	)	$	75	$	(17,526	)	$	(4,026	)

Revenue of the acquired companies increased total revenue by 24.3% in the third quarter of 2019. The impact of the acquired companies on earnings for the current year quarter was not material. Total goodwill added to the Consolidated Balance Sheet due to acquisition activity during the second quarter of 2019 was $5,011,000. 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 $2,817,000 and $2,194,000, 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 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 are still in the process of being finalized. The amounts are subject to change as additional information is obtained over the coming months. See Note 16 for additional discussion. Collectively, these assets were carried at $12,991,000, net of

F-44

CONTINENTAL MATERIALS CORPORATION

SECURITIES AND EXCHANGE COMMISSION FORM 10-Q

NOTES TO THE QUARTERLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

QUARTER ENDED SEPTEMBER 28, 2019

(Unaudited)

$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.

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.

18.: The Company adopted the Continental Materials Corporation Value Creation Incentive Plan (the "VCIP") effective July 1, 2019. The VCIP is designed to attract and retain key management personnel by providing an incentive and reward for selected executive officers and employees of the Company. The VCIP involves only the payment of cash, not the issuance of common stock, based on appreciation of Phantom Equity or Phantom Equity Appreciation Rights (PE or PEARs, respectively) of the defined business unit, over a certain period of time. Fair value of the PE or PEAR awards was measured as of the balance sheet date presented. The awards vest over a period of four or five years and are payable over a three-year period following vesting. At September 28, 2019 total future compensation expense related to unvested awards yet to be recognized by the Company was approximately $2,796,000. This expense is expected to be recognized over a weighted-average remaining vesting period of approximately 4.3 years.

The Company used the Black-Scholes option pricing model as its method for determining fair value of the awards. The compensation 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.

19.: During the quarter ended September 28, 2019 the Company made a strategic decision to cease mining operations at its Pikeview quarry in Colorado Springs, Colorado as it was no longer in the best economic interest of the consolidated portfolio to continue operations. The Company has a legal obligation to complete reclamation of the property as required by its mining permits with the State of Colorado. Generally accepted accounting 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. Prior to cessation of mining, reclamation was performed concurrently by backfilling mined areas with overfill from current mining. The reclamation costs were reported as operating expense as the Company could not reasonably estimate the ultimate liability. Since the Company will no longer perform concurrent reclamation and can now reasonably estimate the cost of final reclamation, an asset retirement obligation (ARO) has been recorded as of September 28, 2019. The ARO liability of $20,950,000 represents the estimated fair value of the total reclamation costs. The fair value of the liability was calculated by applying 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. The related ARO asset was considered 100% impaired as total carrying value including future costs to maintain and dispose of the asset will exceed the fair value. Therefore, the Company also recorded an impairment charge of $20,217,000 related to the asset.

F-45

CONTINENTAL MATERIALS CORPORATION

SECURITIES AND EXCHANGE COMMISSION FORM 10-Q

NOTES TO THE QUARTERLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

QUARTER ENDED SEPTEMBER 28, 2019

(Unaudited)

20.: Subsequent to the end of the third quarter of 2019, on October 15, 2019, the Company completed the acquisition from Valco of certain real property located in Pueblo, Colorado for $9 million in connection with the full and final settlement of the previously disclosed litigation between the Company and Valco. A portion of the settlement was for the property purchase and a portion was attributed to the settlement of the litigation. As the litigation claim was a known event prior to the current quarter balance sheet date, the Company has recognized the portion of the agreement related to the legal settlement in the financial statements for the period ended September 28, 2019. Since the asset purchase agreement was not a known event prior to the balance sheet date it was not recorded in the financial statements for the period ended September 28, 2019. The Company has engaged a third party to perform a valuation of the land. As the valuation has not been completed, the Company used its best estimate to allocate the final settlement to the property and settlement expense. Considering a current offer to purchase a portion of the land and research on similar properties in the same area the Company estimates the land value to be approximately $2,600,000 leaving a value of $6,400,000 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.

F-46

Manually signed photocopies of the letter of transmittal will be accepted. The letter of transmittal, certificates for Shares and any other required documents should be sent or delivered by each holder of Shares or such holder's broker, dealer, bank, trust company or other nominee to the Depositary at one of its addresses set forth below.

The Depositary for the Offer is:

By Email Transmission (for eligible institutions only): CANOTICEOFGUARANTEE@computershare.com


If delivering by mail:		By overnight courier:
Computershare Trust Company, N.A. c/o Voluntary Corporate Actions P.O. Box 43011 Providence, RI 02940-3011		Computershare Trust Company, N.A. c/o Voluntary Corporate Actions 150 Royall Street, Suite V Canton, MA 02021

Questions regarding the Offer, and requests for assistance in connection with the Offer, may be directed to the Information and Solicitation Agent for the Offer at the addresses and telephone numbers listed below. Additional copies of this Offer to Purchase, the letter of transmittal, the notice of guaranteed delivery and other related materials may be obtained from the Information and Solicitation Agent.

The Information and Solicitation Agent for the Offer is:

19 Old Kings Highway S.—Suite 210
Darien, CT 06820
Toll Free (877) 972-0090
Banks and Brokers call collect (203) 972-9300
info@investor-com.com

QuickLinks

IMPORTANT
The Information and Solicitation Agent for the Offer is
TABLE OF CONTENTS
SUMMARY TERM SHEET
INTRODUCTION
Unaudited Financial Results and Management Projections Related to CMC (in thousands)
II. THE OFFER
SCHEDULE A DIRECTORS AND EXECUTIVE OFFICERS OF Bee Street
SCHEDULE B OWNERSHIP OF SHARES BY BEE STREET AND CERTAIN RELATED PERSONS
ANNEX I Financial Information of CMC
Continental Materials Corporation Consolidated Statements of Operations For Fiscal Years 2018 and 2017 (Amounts in thousands, except per share data)
Continental Materials Corporation Consolidated Statements of Cash Flows For Fiscal Years 2018 and 2017 (Amounts in thousands)
Continental Materials Corporation Consolidated Balance Sheets As of December 29, 2018 and December 30, 2017 (Amounts in thousands except share data)
Continental Materials Corporation Consolidated Statements of Shareholders' Equity For Fiscal Years 2018 and 2017 (Amounts in thousands except share data)
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

CONTINENTAL MATERIALS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS SEPTEMBER 28, 2019 AND DECEMBER 29, 2018 (000's omitted except share data)
CONTINENTAL MATERIALS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS FOR THE THREE MONTHS ENDED SEPTEMBER 28, 2019 AND SEPTEMBER 29, 2018 (Unaudited) (000's omitted except per-share amounts)
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)
CONTINENTAL MATERIALS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 28, 2019 AND SEPTEMBER 29, 2018 (Unaudited) (000's omitted)
CONTINENTAL MATERIALS CORPORATION CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (000's omitted, except per share data)
CONTINENTAL MATERIALS CORPORATION SECURITIES AND EXCHANGE COMMISSION FORM 10-Q NOTES TO THE QUARTERLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS QUARTER ENDED SEPTEMBER 28, 2019 (Unaudited)
The Information and Solicitation Agent for the Offer is