SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.  20549 FORM 10-Q  (Mark One)x
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period
  ending March 31, 2001OR ̈
  TRANSITION REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the transition
period from ________ to ________ Commission File number 1-3834 CONTINENTAL MATERIALS
  CORPORATION
(Exact name of registrant as specified
  in its charter)
   Delaware
  36-2274391(State or other jurisdiction of
  (I.R.S. Employer Identification No.)incorporation or organization)
  225 West Wacker Drive, Suite 1800, Chicago, Illinois  60606
(Address
  of principal executive office)(Zip
  Code)
  (312) 541-7200
(Registrant's
  telephone number, including area code)
  (Former name, former address and former
year, if changed since last report) Indicate by
check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YesxNo ̈ Number of common shares outstanding at April 30,
2001............................................................ 1,811,725 PART
I - FINANCIAL INFORMATION

Item 1.   Financial
Statements

CONTINENTAL
MATERIALS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2001 and DECEMBER 30, 2000
(Unaudited)
(000's omitted except share data)



MARCH 31,
  DECEMBER 30,ASSETS
  2001
  2000Current assets:Cash and cash equivalents
  $2,824
  $6,216Receivables, net
  18,282
  16,723Inventories:Finished goods
  7,111
  6,595Work in process
  1,745
  1,720Raw materials and supplies
  7,877
  7,699Prepaid expenses
  3,469
  2,572Total current assets
  41,308
  41,525Property, plant and
  equipment, net
  30,316
  24,727Goodwill
  6,209
  Other assets
  2,565
  1,998$80,398
  $68,250LIABILITIESCurrent liabilities:Current portion of long-term debt
  $3,534
  $2,158Accounts payable and accrued expenses
  14,222
  14,810Income taxes
  68
  312Total current liabilities
  17,824
  17,280Long-term debt
  17,002
  5,147Deferred income taxes
  2,075
  1,598Other long-term
  liabilities
  2,059
  2,412SHAREHOLDERS' EQUITYCommon shares, $0.25
  par value; authorized 3,000,000 shares; issued 2,574,264 shares
  643
  643Capital in excess of
  par value
  1,985
  1,985Retained earnings
  48,057
  48,138Treasury shares,
  759,167 and 741,040, at cost
  (9,247)
  (8,953)41,438
  41,813$80,398
  $68,250See
accompanying notesCONTINENTAL MATERIALS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND APRIL 1, 2000
(Unaudited)
(000's omitted except per share amounts)

MARCH
  31,
  2001
  APRIL
  1,
  2000Sales
  $28,359
  $25,350Freight costs
  1,257
  975Net sales
  27,102
  24,375Costs and expenses:Cost of sales (exclusive of depreciation,
  depletion and amortization)
  21,131
  18,495Depreciation, depletion and amortization
  1,651
  1,352Selling and administrative
  4,323
  3,97827,105
  23,825Operating (loss)
  income
  (3)
  550Interest
  (284)
  (139)Other income, net
  161
  197(Loss) income before
  income taxes
  (126)
  608(Benefit) provision
  for income taxes
  (45)
  225Net (loss) income
  (81)
  383Retained earnings,
  beginning of period
  48,138
  42,803Retained earnings, end
  of period
  $48,057
  $43,186Basic (loss) earnings
  per share
  $(.04)
  $.20Average shares outstanding
  1,824
  1,892Diluted (loss)
  earnings per share
  $(.04)
  $.20Average shares outstanding
  1,824
  1,926See
accompanying notesCONSOLIDATED MATERIALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND APRIL 1, 2000
(Unaudited)
(000's omitted)

MARCH
  31,
  2001
  APRIL
  1,
  2000Net cash used in
  operating activities
  $(1,225)
  $(294)Investing activities:Purchase of Rocky Mountain Ready Mix
  Concrete, Inc. net of cash received
  (11,262)
  Capital expenditures
  (2,498)
  (1,122)Proceeds from sale of property and
  equipment
  16
  Net cash used in
  investing activities
  (13,744)
  (1,122)Financing activities:Borrowings under revolving credit
  facility
  
  3,300Long-term borrowings
  12,000
  Repayment of long term debt
  (129)
  (35)Proceeds from exercise of stock options
  
  164Payment to acquire treasury stock
  (294)
  (2,360)Net cash provided by
  financing activities
  11,577
  1,069Net decrease in cash
  and cash equivalents
  (3,392)
  (347)Cash and cash equivalents:Beginning of period
  6,216
  347End of period
  $2,824
  $Supplemental
  disclosures of cash flow items:Cash paid during the
  three months for:Interest
  $158
  $155Income taxes
  200
  656

See
accompanying notes

CONTINENTAL
MATERIALS CORPORATION
SECURITIES AND EXCHANGE COMMISSION FORM 10-Q
NOTES TO THE QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED MARCH 31, 2001
(Unaudited)
Amounts in thousands, except per share amounts.



1.          The
unaudited interim consolidated financial statements included herein are
prepared pursuant to the rules and regulations for reporting on Form 10-Q.  Accordingly, certain information and
footnote disclosures normally accompanying the annual financial statements have
been omitted.  The interim 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 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.

2.          The
provision for income taxes is based upon the estimated effective tax rate for the
year.

3.          Operating
results for the first three months of 2001 are not necessarily indicative of
performance for the entire year. 
Historically, sales of construction materials are higher in the second
and third quarters.  Overall, sales of
heating and air conditioning products have not shown strong seasonal
fluctuations in recent years although product mix has historically yielded
higher gross profit margins in the fourth quarter.  (See Note 11 of Notes to Consolidated Financial Statements in the
Company's 2000 Annual Report.)

4.          The
following is a reconciliation of the calculation of basic and diluted earnings
per share (EPS) for the three months ended March 31, 2001 and April 1, 2000.



Income
  (Loss)
  Shares
  Per-share
  (loss) earningsMarch 31, 2001Basic EPS
  $(81)
  1,824
  $(.04)Effect of dilutive
  options
  
  Diluted EPS
  $(81)
  1,824
  $(.04)April 1, 2000Basic EPS
  $383
  1,892
  $.20Effect of dilutive
  options
  
  34Diluted EPS
  $383
  1,926
  $.20

5.          The
following table presents information about reported segments for the three
months ended March 31, 2001 and April 1, 2000 along with the items necessary to
reconcile the segment information to the totals reported in the financial
statements.

Heating
  and Air
  Construction
  UnallocatedConditioning
  Materials
  All
  Other
  Corporate
  Total2001Revenues from external
  customers
  $12,220
  $16,102
  $36
  $1
  $28,359Segment operating
  income
  858
  (70)
  (6)
  (785)
  (3)Segment assets
  29,387
  46,045
  35
  4,931
  80,3982000Revenues from external
  customers
  $9,566
  $15,747
  $36
  $1
  $25,350Segment operating
  income
  185
  1,164
  (13)
  (786)
  550Segment assets
  31,398
  34,041
  38
  1,895
  67,372There are no differences in the basis of
segmentation or in the basis of measurement of segment profit or loss from the
last annual report.

6.          On
December 31, 2000, the Company acquired all of the stock of Rocky Mountain
Ready Mix Concrete, Inc. (RMRM), a ready-mix concrete producer in the
metropolitan Denver, Colorado area for a cash purchase price of $11,262,000 net
of $1,320,000 of cash received and $2,541,000 of liabilities and debt.  The acquisition has been accounted for under
the purchase method and, accordingly, the operating results of RMRM have been
included in the consolidated results since the date of acquisition.

The funds used to acquire RMRM were
provided by a renegotiated unsecured term loan with the Companys two existing
banks.  Goodwill of $6,245,000 and the
cost of a non-competition agreement of $1,250,000 (included in other assets) related
to the acquisition are being amortized over 40 and 10 years, respectively.

The purchased company is involved in the
production of ready-mix concrete from three locations in the metropolitan
Denver, Colorado area.  Sales are made
primarily within a 60 mile radius of Denver, Colorado.

The table below summarizes the unaudited
pro-forma results of operation for the year ended December 30, 2000 assuming
the acquisition described had been consummated as of January 1, 2000, with
adjustments primarily attributed to interest expense relating to the
renegotiated debt, depreciation expense relating to the write-up to fair value
of the assets acquired and amortization of the related goodwill and
non-competition agreement.

2000
  UnauditedSales
  $129,963Net income
  5,536Diluted earnings per
  share
  2.91

These pro-forma results have been
prepared for comparative purposes only and do not purport to be indicative of
what would have occurred had the acquisition been made at the beginning of the
period presented, or the results which may occur in the future.

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

Financial
ConditionOperations
for the first three months of 2001 used $1,225,000 of cash compared to $294,000
in 2000.  During the first quarter of
2000, a significant increase in inventories was largely offset by a decrease in
accounts receivable.  An increase in
both receivables and inventories accounted for the increased use of cash in
2001.On
December 31, 2000, the Company acquired all of the stock of RMRM, a ready-mix
concrete producer in the metropolitan Denver, Colorado area.  RMRM operates three ready-mix batch plants
in the Denver area and will continue to do business under its current
name.  The $11,262,000 purchase price
was funded by $12,000,000 of additional unsecured term debt obtained from the
Companys two existing banks.  Terms and
conditions of the amended credit agreement remain similar to those of the
previous agreement.Other
than the funds provided for the acquisition by the increased term loan noted
above, the Company expects that the existing cash balances and estimated
operating cash flow from its subsidiaries, supplemented by the revolving line
of credit (which was unused at March 31, 2001) will be sufficient to cover
anticipated cash requirements, including servicing debt and planned capital
expenditures.  Historically, the
Company's borrowings against the revolving credit facility peak during the
second quarter and decline over the remainder of the year.Operations
- Comparison of Quarter Ended March 31, 2001 to Quarter Ended April 1, 2000Consolidated
sales increased $3,009,000 to $28,359,000 largely due to the heating and air
conditioning segment.  Sales of the
heating and air conditioning segment increased $2,654,000 reflecting strong
furnace sales related to the cold winter experienced particularly in the
western states.  Evaporative cooler
sales also increased to a more normal level. 
Sales for this line were dampened in the first quarter of 2000 due to
the carryover into the 2000 season of cooler inventory at customers locations
as a result of the unseasonably cool 1999 spring and summer.  The $355,000 increase in sales of the
construction materials segment was entirely due to the acquisition of Rocky
Mountain Ready Mix.  A particularly cold
and snowy winter along the Front Range in Colorado prevented progress on most
construction projects despite the continuing high level of scheduled
construction activity, thus causing lower than anticipated concrete sales.Consolidated
cost of sales (exclusive of depreciation and depletion) as a percentage of
sales increased from 73% to 74.5% due to the construction materials
segment.  The increase reflects
increased costs at three of the aggregates sites and the reduction in sales
noted above, when adjusted for the effect of the acquisition of RMRM.  Many of the expenses of this segment are
relatively fixed in nature.Selling
and administrative expenses increased $345,000 but declined as a percentage of
sales from 15.7% to 15.2%. The decrease in percentage is related to increased
sales in heating and air conditioning segment while holding selling and
administrative expenses relatively constant.Depreciation,
depletion and amortization increased from $1,352,000 to $1,651,000 as a result
of the acquisition of RMRM.Interest
expense increased due to higher levels of debt related to the acquisition of
RMRM.Historically,
the Company has experienced operating losses during the first quarter.  This pattern had changed in recent years due
to the strong performance of the construction materials segment, which
benefited from the continuing strong economy and mild weather along the Front
Range of Colorado.  As noted, the weather
returned to a more normal pattern in 2001. 
Additionally, the fan coil product line, of the heating and air
conditioning segment, has grown and shows little seasonality.FORWARD-LOOKING
STATEMENTSThe
foregoing discussion contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended.  Such forward-looking statements are based on
the beliefs of the Companys management as well as on assumptions made by and
information available to the Company at the time such statements were
made.  When used in this Report, words
such as estimates, anticipates, contemplates, expects and similar
expressions are intended to identify forward-looking statements. Actual results
could differ materially from those projected in the forward-looking statements
as a result of factors including but not limited to: weather, interest rates,
availability of raw materials and their related costs and competitive forces.PART
  II -
  Other
  InformationItem
  6.
  Exhibits
  and Reports on Form 8-K(b)
  A Form 8-K dated December 31, 2000 was filed related to the Companys
  purchase of the stock of RMRM discussed in Note 6.

SIGNATURE

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





CONTINENTAL MATERIALS
  CORPORATIONDate:
  May
  11, 2001
  
  By:
  /S/ Joseph J. SumJoseph
  J. Sum, Vice Presidentand
  Chief Financial Officer