**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

** **

**FORM 10-Q**

** **

| **(Mark One)**                                                                                                                                                                                                                                    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                              |   |
| **ý**                                                                                                                                                                                                                                        | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                                                                                                                                                              |   |
| **For the quarterly period ended March 29, 2003**                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                              |   |
| **OR**                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                              |   |
| **o**                                                                                                                                                                                                                                             | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                                                                                                                                                              |   |
| **For the transition period  from                 to                 ** |
|                                                                                                                                                                                                                                              |   |
| **Commission File number 1-3834**                                                                                                                                                                                                                 |

 

**CONTINENTALMATERIALS CORPORATION**

(Exact name of registrantas specified in its charter)

 

| **Delaware**                                                                  |   | **36-2274391**                        |
|-------------------------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of  incorporation or organization)              |   | (I.R.S. Employer  Identification No.) |
|                                                                          |   |                                  |
| **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 markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the Registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.

 

Yes     ý     No     o

 

Indicate by check mark whether the registrant is an accelerated filer(as defined in Rule 12b-2 of the Exchange Act).

 

Yes     o          No     ý

 

| Number of common shares  outstanding at May 5, 2003 |   | 1,771,812 |
|-----------------------------------------------------|--------|-----------|

 

 

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PART I - FINANCIAL INFORMATION

 

## **Item 1.   FinancialStatements**

 

CONTINENTAL MATERIALS CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETSMARCH 29, 2003 and DECEMBER 28, 2002 (000’s omitted except share data)

 
|                                                                                                  |   | **MARCH 29,  2003** |       | **DECEMBER  28,  2002** | ** ** |
|-------------------------------------------------------------------------------------------------------|--------|---------------------|------------|-------------------------|------------|
|                                                                                                  |   | **(Unaudited)**     |       |                    |       |
| ***ASSETS***                                                                                          |   |                |       |                    | ** ** |
| Current  assets:                                                                                      |   |                |       |                    |       |
| Cash  and cash equivalents                                                                            |   | $                   | 11         |                    | $          | 3,536 |   |
| Receivables,  net                                                                                     |   | 16,213              |       | 16,740                  |       |
| Inventories:                                                                                          |   |                |       |                    |       |
| Finished  goods                                                                                       |   | 8,424               |       | 6,855                   |       |
| Work  in process                                                                                      |   | 1,494               |       | 1,523                   |       |
| Raw  materials and supplies                                                                           |   | 5,777               |       | 6,214                   |       |
| Prepaid  expenses                                                                                     |   | 4,012               |       | 3,530                   |       |
| Total  current assets                                                                                 |   | 35,931              |       | 38,398                  |       |
|                                                                                                  |   |                |       |                    |       |
| Property,  plant and equipment, net                                                                   |   | 33,569              |       | 34,033                  |       |
|                                                                                                  |   |                |       |                    |       |
| Goodwill                                                                                              |   | 7,374               |       | 7,374                   |       |
| Non-compete  agreements                                                                               |   | 1,347               |       | 1,403                   |       |
| Other  assets                                                                                         |   | 1,309               |       | 1,426                   |       |
|                                                                                                  |   |                |       |                    |       |
|                                                                                                  |   | **$**               | **79,530** |                    | **$**      | **82,634** |   |
|                                                                                                  |   |                |       |                    |       |
| ***LIABILITIES***                                                                                     |   |                |       |                    |       |
| Current  liabilities:                                                                                 |   |                |       |                    |       |
| Bank  loan payable                                                                                    |   | $                   | 1,000      |                    | $          | — |   |
| Current  portion of long-term debt                                                                    |   | 3,296               |       | 3,300                   |       |
| Accounts  payable and accrued expenses                                                                |   | 11,400              |       | 13,358                  |       |
| Income  taxes                                                                                         |   | —              |       | 308                     |       |
| Total  current liabilities                                                                            |   | 15,696              |       | 16,966                  |       |
|                                                                                                  |   |                |       |                    |       |
| Long-term  debt                                                                                       |   | 10,135              |       | 10,220                  |       |
| Deferred  income taxes                                                                                |   | 3,037               |       | 3,037                   |       |
| Other  long-term liabilities                                                                          |   | 2,355               |       | 2,422                   |       |
|                                                                                                  |   |                |       |                    |       |
| ***SHAREHOLDERS’  EQUITY***                                                                      |   |                |       |                    |       |
| Common  shares, $0.25 par value; authorized 3,000,000 shares; issued 2,574,264 shares                 |   | 643                 |       | 643                     |       |
| Capital  in excess of par value                                                                       |   | 1,982               |       | 1,982                   |       |
| Retained  earnings                                                                                    |   | 56,455              |       | 57,851                  |       |
| Accumulated  other comprehensive losses net of tax of $227 and $214 (interest rate swap  adjustments) |   | (371                | )          | (404                    | )          |
| Treasury  shares, 802,452 and 790,766, at cost                                                        |   | (10,402             | )          | (10,083                 | )          |
|                                                                                                  |   | 48,307              |       | 49,989                  |       |
|                                                                                                  |   |                |       |                    |       |
|                                                                                                  |   | **$**               | **79,530** |                    | **$**      | **82,634** |   |

 

See accompanying notes

 

2

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CONTINENTAL MATERIALSCORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGSFOR THE THREE MONTHS ENDED MARCH 29, 2003 AND MARCH 30, 2002(Unaudited)(000’s omitted except per-share amounts)

 
|                                                                   |   | **THREE  MONTHS ENDED** | ** ** |
|------------------------------------------------------------------------|--------|-------------------------|------------|
|                                                                   |   | **MARCH 29,  2003**     |       | **MARCH 30,  2002** | ** ** |
|                                                                   |   |                    |       |   |   |
| Sales                                                                  |   | $                       | 23,681     |   | $ | 26,602 |   |
|                                                                   |   |                    |       |   |   |
| Costs  and expenses:                                                   |   |                    |       |   |   |
| Cost  of sales (exclusive of depreciation, depletion and amortization) |   | 20,407                  |       | 21,654 |   |
| Depreciation,  depletion and amortization                              |   | 1,532                   |       | 1,506 |   |
| Selling  and administrative                                            |   | 3,878                   |       | 4,278 |   |
|                                                                   |   | 25,817                  |       | 27,438 |   |
|                                                                   |   |                    |       |   |   |
| Operating  loss                                                        |   | (2,136                  | )          | (836 | ) |
|                                                                   |   |                    |       |   |   |
| Interest                                                               |   | (161                    | )          | (227 | ) |
| Other  income, net                                                     |   | 46                      |       | 100 |   |
|                                                                   |   |                    |       |   |   |
| Loss  before income taxes                                              |   | (2,251                  | )          | (963 | ) |
|                                                                   |   |                    |       |   |   |
| Benefit  from income taxes                                             |   | (855                    | )          | (356 | ) |
|                                                                   |   |                    |       |   |   |
| Net  loss                                                              |   | (1,396                  | )          | (607 | ) |
|                                                                   |   |                    |       |   |   |
| Retained  earnings, beginning of period                                |   | 57,851                  |       | 54,576 |   |
|                                                                   |   |                    | ** ** |   | ** ** |
| Retained  earnings, end of period                                      |   | **$**                   | **56,455** | ** ** | **$** | **53,969** | ** ** |
|                                                                   |   |                    |       |   |   |
| Basic  loss per share                                                  |   | **$**                   | **(.78**   | **)** | **$** | **(.34** | **)** |
|                                                                   |   |                    |       |   |   |
| Average  shares outstanding                                            |   | **1,781**               | ** ** | **1,805** | ** ** |
|                                                                   |   |                    |       |   |   |
| Diluted  loss per share                                                |   | **$**                   | **(.78**   | **)** | **$** | **(.34** | **)** |
|                                                                   |   |                    |       |   |   |
| Average  shares outstanding                                            |   | **1,781**               | ** ** | **1,805** | ** ** |

 

See accompanying notes

 

3

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CONSOLIDATED MATERIALSCORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE THREE MONTHS ENDED MARCH 29, 2003 AND MARCH 30, 2002(Unaudited)(000’s omitted)

 
|                                              |   | **THREE  MONTHS ENDED** | ** ** |
|---------------------------------------------------|--------|-------------------------|------------|
|                                              |   | **MARCH 29,  2003**     |       | **MARCH 30,  2002** | ** ** |
|                                              |   |                    | ** ** |   | ** ** |
| Net  cash used in operating activities            |   | $                       | (3,106     | ) | $ | (3,063 | ) |
|                                              |   |                    |       |   |   |
| Investing  activities:                            |   |                    |       |   |   |
| Capital  expenditures                             |   | (1,027                  | )          | (3,324 | ) |
| Proceeds  from sale of property and equipment     |   | 16                      |       | 41 |   |
| Net  cash used in investing activities            |   | (1,011                  | )          | (3,283 | ) |
|                                              |   |                    |       |   |   |
| Financing  activities:                            |   |                    |       |   |   |
| Borrowings  under revolving credit facility       |   | 1,000                   |       | — |   |
| Repayment  of long term debt                      |   | (89                     | )          | (134 | ) |
| Payment  to acquire treasury stock                |   | (319                    | )          | (58 | ) |
| Net  cash provided (used) by financing activities |   | 592                     |       | (192 | ) |
|                                              |   |                    |       |   |   |
| Net  decrease in cash and cash equivalents        |   | (3,525                  | )          | (6,538 | ) |
| Cash  and cash equivalents:                       |   |                    |       |   |   |
| Beginning  of period                              |   | 3,536                   |       | 7,579 |   |
|                                              |   |                    |       |   |   |
| End  of period                                    |   | **$**                   | **11**     | ** ** | **$** | **1,041** | ** ** |
|                                              |   |                    | ** ** |   | ** ** |
| Supplemental  disclosures of cash flow items:     |   |                    |       |   |   |
| Cash  paid during the three months for:           |   |                    |       |   |   |
| Interest                                          |   | $                       | 227        |   | $ | 352 |   |
| Income  taxes                                     |   | (164                    | )          | (6 | ) |

 

See accompanying notes

 

4

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CONTINENTALMATERIALS CORPORATIONSECURITIES AND EXCHANGE COMMISSION FORM 10-QNOTES TO THE QUARTERLY CONSOLIDATED FINANCIAL STATEMENTSQUARTER ENDED MARCH 29, 2003(Unaudited)

 

1.               The unauditedinterim consolidated financial statements included herein are prepared pursuantto the rules and regulations for reporting on Form 10-Q.  Accordingly, certain information andfootnote disclosures normally accompanying the annual financial statements havebeen omitted.  The interim financialstatements and notes should be read in conjunction with the consolidatedfinancial statements and notes thereto included in the Company’s latest annualreport on Form 10-K including any amendments thereto.  In the opinion of management, the consolidated financialstatements include all adjustments (none of which were other than normalrecurring adjustments) necessary for a fair statement of the results for theinterim periods.

 

2.               The provision forincome taxes is based upon the estimated effective of tax rate of 38% for theyear.

 

3.               As discussed inNote 3 of the Form 10-K filed for the year ended December 28, 2002, the Companyamended its term loan agreement modifying the covenant requirements of theFixed Charge Coverage Ratio.  Theamendment was dated March 24, 2003.

 

4.               Operating resultsfor the first three months of 2003 are not necessarily indicative ofperformance for the entire year. Historically, sales of construction materials are higher in the secondand third quarters.  Overall, sales ofheating and air conditioning products have not shown strong seasonalfluctuations in recent years although product mix has historically yieldedhigher gross profit margins in the fourth quarter.  (See Note 11 of Notes to Consolidated Financial Statements in theCompany’s 2002 Annual Report.)

 

5                  The following isa reconciliation of the calculation of basic and diluted earnings per share(EPS) for the three months ended March 29, 2003 and March 30, 2002 (amounts inthousands, except per-share amounts):

 
|                        |   | **Income  (Loss)** |   | **Shares** | ** ** | **Per-share  (loss) earnings** |   |
|-----------------------------|--------|--------------------|--------|------------|------------|--------------------------------|--------|
| March  29, 2003             |   |               |   |       |       |                           |   |
| Basic  EPS                  |   | $                  | (1,396 | )          | 1,781      |                           | $      | (.78 | ) |
| Effect  of dilutive options |   | —             |   | —     |       |                           |   |
| Diluted  EPS                |   | $                  | (1,396 | )          | 1,781      |                           | $      | (.78 | ) |
|                        |   |               |   |       |       |                           |   |
| March  30, 2002             |   |               |   |       |       |                           |   |
| Basic  EPS                  |   | $                  | (607   | )          | 1,805      |                           | $      | (.34 | ) |
| Effect  of dilutive options |   | —             |   | —     |       |                           |   |
| Diluted  EPS                |   | $                  | (607   | )          | 1,805      |                           | $      | (.34 | ) |

 

6.               Thefollowing table presents information about reported segments for the threemonths ended March 29, 2003 and March 30, 2002 along with the items necessaryto reconcile the segment information to the totals reported in the financialstatements (amounts in thousands):

 

5

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|                              |   | **Heating  and Air  Conditioning** |   | **Construction  Materials** | ** ** | **All Other** | ** ** | **Unallocated  Corporate** | ** ** | **Total** | ** ** |
|-----------------------------------|--------|------------------------------------|--------|-----------------------------|------------|---------------|------------|----------------------------|------------|-----------|------------|
| 2003                              |   |                               |   |                        |       |          |       |                       |       |      |       |
| Revenues  from external customers |   | $                                  | 10,260 |                        | $          | 13,350        |       | $                          | 70         |      | $          | 1 |   | $ | 23,681 |   |
| Segment  operating (loss) income  |   | 813                                |   | (2,175                      | )          | (13           | )          | (761                       | )          | (2,136    | )          |
| Segment  assets                   |   | 29,354                             |   | 47,332                      |       | 102           |       | 2,742                      |       | 79,530    |       |
|                              |   |                               |   |                        |       |          |       |                       |       |      |       |
| 2002                              |   |                               |   |                        |       |          |       |                       |       |      |       |
| Revenues  from external customers |   | $                                  | 12,587 |                        | $          | 13,979        |       | $                          | 36         |      | $          | — |   | $ | 26,602 |   |
| Segment  operating (loss) income  |   | 1,118                              |   | (1,112                      | )          | (41           | )          | (801                       | )          | (836      | )          |
| Segment  assets                   |   | 33,111                             |   | 46,505                      |       | 64            |       | 2,782                      |       | 82,462    |       |

 

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

 

7.               Identifiable intangibleassets as of March 29, 2003 consist of three amortizable non-compete agreementsthat were carried at $1,347,000 net of $653,000 accumulated amortization.  The pre-tax amortization expense forintangible assets during the quarter ended March 29, 2003 was $56,000.  Based upon the intangible assets recorded onthe balance sheet at March 29, 2003, amortization expense for the next fiveyears is estimated to be as follows: 2003 – $225,000, 2004 – $225,000, 2005 –$225,000, 2006 – $216,000, and 2007 – $137,000.

 

8.               Theinterest rate swap agreement is reported consistent with SFAS No. 133,“Accounting for Derivative Instruments and Hedging Activities,” and its relatedamendment, SFAS No. 138, “Accounting for Certain Derivative Instruments andCertain Hedging Activities” which require recognition of derivatives as eitherassets or liabilities and measurement at fair value.  During the three months ended March 29, 2003, a pre-tax gain of$20,000 is reported under comprehensive income as a result of the cash flowhedge as follows (amounts in thousands):

 
|                                                                                      |   | **Three  Months Ended  March 29, 2003** |   |
|-------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|
| Net  loss, as reported                                                                    |   | $                                       | (1,396 | ) |
| Swap  agreement gain, net of tax effect of $8, for the three months ended March 29,  2003 |   | 12                                      |   |
| Comprehensive  net loss                                                                   |   | $                                       | (1,384 | ) |

 

**Item 2.**                       **Management’sDiscussion and Analysis of Financial Condition and Results of**           **Operations**

 

Financial Condition

 

The cash balance decreased in the normal pattern dueto the seasonality of sales and the corresponding production schedules as wellas the sales programs related to the evaporative cooler product line.  Operations for the first three months of2003 used $3,106,000 of cash compared to $3,063,000 in 2002.  The larger loss in 2003 was largely offsetby a smaller increase in inventories as compared to the increase in inventories

 

6

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during the first quarter of 2002.  As expected, capital spending was much lowerduring the quarter as compared to the prior year’s quarter.  Current expenditures were primarily for theconstruction materials segment and related to the opening of the Brighton batchplant during March 2003 and several projects associated with the new aggregatesand concrete batching operations on the east side of Pueblo.  The unusually high level of capital spendingduring the 2002 quarter related to four major projects as described in theManagement’s Discussion and Analysis section of the Company’s 2002 AnnualReport.  The Company anticipates thatthe level of capital spending in 2003 will be significantly reduced compared tothe spending in recent years.

 

During March, 2003, the Company amended the revolvingcredit and term loan agreement with its two banks to extend the terminationdate of the revolving loan to June 15, 2005 and to revise the fixed chargecoverage ratio requirement (as defined in the agreement) for the first threequarters of 2003.

 

The Company believes that the existing cash balancesand anticipated cash flow, supplemented by seasonal borrowings against therevolving line of credit, (of which $1,000,000 was outstanding at March 29,2003) will be sufficient to cover expected cash needs, including servicing debtand planned capital expenditures for at least the next twelve months.  Historically, the Company’s borrowingsagainst the revolving credit facility peak during the second quarter anddecline over the remainder of the year.

 

Operations - Comparisonof Quarter Ended March 29, 2003 to Quarter Ended March 30, 2002

 

Consolidated sales during the first quarter of 2003decreased $2,921,000 to $23,681,000 when compared to the first quarter of2002.  The sales of the constructionmaterials segment declined $629,000 or 4.5%. Excluding the sales of McKinney Door and Hardware, Inc., purchased onApril 1, 2002, the decline would have been 16.1%.  A reduced level of construction activity along the Front Range inColorado combined with inclement weather, including a near record snowfall onMarch 17, 2003, sharply reduced sales volumes. The diminished demand lead to increased price competition resulting inlower ready-mixed concrete prices, most notably in the Denver metropolitanarea.  The weather also hinderedproduction at all of our aggregates operations.  The heating and air conditioning segment reported a $2,327,000decrease in sales.  A sharp decline infan coil sales and lower evaporative cooler sales combined to account for thesegment’s decrease.  The decline inevaporative cooler sales was primarily due to a change in shipping schedules ofa few large wholesale accounts.  TheCompany expects that the reduced sales of evaporative coolers will be made upin the second quarter.  Fan coil salescontinue to reflect the deepening nationwide slump in commercial construction,notably hotel construction.

 

Consolidated cost of sales (exclusive of depreciationand depletion) as a percentage of sales increased from 81.4% to 86.2%.  The increase was experienced by bothsegments, although the construction materials segment was more severelyaffected.  The higher cost ratio in theconstruction materials segment was the result of the reduced volume, higheroperating costs, particularly maintenance and fuel, and lower selling pricesdue to the competitive pressures discussed above.  The heating and air conditioning segment also reported anincrease primarily due to the fan coil product line where reduced productionlevels increased unit costs.

 

Selling and administrative expenses declined$400,000.  As a percentage of sales,selling and administrative expenses increased slightly from 16.1% to 16.4% forthe current quarter.  The savings werethe result of lower headcount and cost savings measures

 

7

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primarily in the heating and air conditioningsegment.  The slight increase as apercentage of sales was due to the decline in sales and the fixed nature ofsome of the expenses.

 

Net interest expense declined from $227,000 to$161,000 largely due to interest received on a state tax refund.  The effect of decreased levels of debt oninterest expense was largely offset by the reduction of interest earned on theinvestment of excess cash compared to the prior year.  The decrease in the interest earned was a combination of loweramounts invested and lower rates paid.

 

Historically, the Company has experienced operatinglosses during the first quarter except when the construction activity is strongand the weather is mild along the Front Range in Colorado.

 

OUTLOOK

 

The weak construction market in Colorado and thedepressed commercial construction market nationwide, notably hotelconstruction, is expected to continue for at least the near future and may notimprove during the balance of 2003.

 

NEW ACCOUNTING STANDARDS

 

OnDecember 30, 2002, the Company adopted Statement of Financial AccountingStandards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations.” Thisstandard requires recording the fair value of a liability for an assetretirement obligation in the period in which it is incurred. In connection withpermits to mine aggregate deposits in Colorado, the Company is obligated toreclaim the mined areas.  The Companyrecords a reserve for future reclamation work to be performed at its variousaggregate operations based upon estimates of the recoverable quantities of rockand sand available in each location combined with an estimate of the totalexpense that will be incurred to reclaim a property.  Provision is made based upon the units of production method.  Reclamation costs are charged to operationsas the properties are mined.  Actualreclamation costs are charged against the reserve.  The adequacy of the recorded reserve is assessed annually.  Estimates of both the quantities ofrecoverable material and the cost of reclamation are periodically updated withthe assistance of an independent professional. Reclamation on any mining property is performed soon after each sectionof the deposit is mined.  Reclamation issubstantially complete by the time the entire deposit is depleted.  The Company believes that this approach,which had been previously used to establish the annual expense and the reserverecorded for future reclamation obligations, continues to provide the bestestimate of the fair value of these obligations.   Therefore the adoption of SFAS No. 143 did not have an impact onthe Company’s consolidated balance sheet or consolidated statement ofoperations as of December 30, 2002.

 

Ifthe provisions of Statement 143 had been adopted effective December 30, 2001,there would have been no impact on earnings per share, net of income taxeffect. Since a change in earnings per share would not have occurred, proformaearnings per share disclosures are not presented.

 

FORWARD-LOOKING STATEMENTS

 

Theforegoing discussion contains forward-looking statements within the meaning ofSection 27A of the Securities Act of 1933, as amended.  Such forward-looking statements are based onthe beliefs of the Company’s management as well as on assumptions made by andinformation available to the Company at the time such statements weremade.  When used in this Report, wordssuch as “anticipates,” “believes,” “contemplates,” “estimates,” “expects,”“plans,” “projects,” and similar expressions are intended to identify

 

8

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forward-lookingstatements.  Actual results could differmaterially from those projected in the forward-looking statements as a resultof factors including but not limited to: weather, interest rates, availabilityof raw materials and their related costs, economic conditions and competitiveforces.  Changes in accountingpronouncements could also alter projected results.  Forward-looking statements speak only as of the date they weremade, and we undertake no obligation to publicly update them.

 

**Item 3.**                       **QuantitativeAnd Qualitative Disclosures About Market Risk**

 

There have been no changes in the market risks thatthe Company is exposed to since those discussed in the Company’s 2002 AnnualReport on Form 10-K.  At March 29, 2003,the amount subject to the interest rate swap agreement was $12,000,000.  Also see Note 8 to the quarterly financialstatements above.

 

**Item 4.**                       **DisclosureControls and Procedures**

 

(a)                        Evaluation of disclosure controls andprocedures.

 

The Company’s chiefexecutive officer and chief financial officer, with the participation ofmanagement, have evaluated the effectiveness of our “disclosure controls andprocedures” (as defined in Rules 13a-14(c) and 15d-14(c) under the SecuritiesExchange Act of 1934) as of a date within 90 days prior to the filing of thisquarterly report on Form 10-Q. Based on their evaluation, they have concludedthat the Company’s disclosure controls and procedures are effective in timelyalerting them to material information relating to the Company (including itssubsidiaries) required to be disclosed in the Company’s periodic Securities andExchange Commission filings.

 

(b)                       Changes in internal controls.

 

There were no significantchanges in the Company’s internal controls or in other factors that couldsignificantly affect these controls subsequent to the date of their evaluation.

 

PART II -  Other Information

 

Item 6.                       Exhibitsand Reports on Form 8-K

 

(a)            Exhibits

 
| **Exhibit No.** |   | **Description**                                                                                     |
|-----------------|--------|-----------------------------------------------------------------------------------------------------|
|            |   |                                                                                                |
| 10.1            |   | Eighth Amendment to  Amended and Restated Revolving Credit and Term Loan Agreement                  |
|            |   |                                                                                                |
| 99.1            |   | Certification of Chief  Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|            |   |                                                                                                |
| 99.2            |   | Certification of Chief  Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |

 

(b)           Registrant filed noreports on Form 8-K during the quarter ended March 29, 2003.

 

9

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SIGNATURE

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
|   | CONTINENTAL  MATERIALS CORPORATION |
|--------|------------------------------------|
|   |                               |
|   |                               |
| Date:  | May 13, 2003                       |   | By: | /S/ Joseph J.  Sum |   |
|   |                               | Joseph J. Sum,  Vice President  and Chief Financial Officer |
|        |                                    |  |  |  |  |

 

10

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CERTIFICATION

 

I, James G. Gidwitz, certify that:

 

1.               I have reviewedthis quarterly report on Form 10-Q of Continental Materials Corporation;

 

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

 

3.               Based on myknowledge, the financial statements, and other financial information includedin this quarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;

 

4.               The registrant’sother certifying officers and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

(a)          designed suchdisclosure controls and procedures to ensure that material information relatingto the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which thisquarterly report is being prepared;

 

(b)         evaluated theeffectiveness of the registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

(c)          presented in thisquarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.               The registrant’sother certifying officers and I have disclosed, based on our most recentevaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunction):

 

(a)          all significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant’s ability to record, process, summarize andreport financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

(b)         any fraud, whetheror not material, that involves management or other employees who have asignificant role in the registrant’s internal controls; and

 

6.               The registrant’sother certifying officers and I have indicated in this quarterly report whetheror not there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

 
| Date: May 13, 2003 |   |
|--------------------|--------|
|               |   |
|               | By:    | /s/ James G. Gidwitz |   |
|               |   | James G. Gidwitz  Chairman of the Board andChief  Executive Officer |

 

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CERTIFICATION

 

I, Joseph J. Sum, certify that:

 

1.               I have reviewedthis quarterly report on Form 10-Q of Continental Materials Corporation;

 

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

 

3.               Based on myknowledge, the financial statements, and other financial information includedin this quarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;

 

4.               The registrant’sother certifying officers and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

(a)          designed suchdisclosure controls and procedures to ensure that material information relatingto the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which thisquarterly report is being prepared;

 

(b)         evaluated theeffectiveness of the registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

(c)          presented in thisquarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.               The registrant’sother certifying officers and I have disclosed, based on our most recentevaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunction):

 

(a)          all significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant’s ability to record, process, summarize andreport financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

(b)         any fraud, whetheror not material, that involves management or other employees who have asignificant role in the registrant’s internal controls; and

 

6.               The registrant’sother certifying officers and I have indicated in this quarterly report whetheror not there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

 
| Date: May 13, 2003 |   |
|--------------------|--------|
|               |   |
|               | By:    | /s/ Joseph J. Sum |   |
|               |   | Joseph J. Sum  Vice President and Chief Financial Officer |

 

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