<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K

(Mark One)

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

      For the fiscal year ended December 30, 2000

                                       OR

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

     For the transition period from  _______________ to _____________________

            Commission file number 1-3834

                        CONTINENTAL MATERIALS CORPORATION
             (Exact name of registrant as specified in its charter)


              Delaware                                    36-2274391
   (State or other jurisdiction of          (I.R.S. Employer Identification No.)
    incorporation or organization)

   225 West Wacker Drive, Suite 1800                        60606
          Chicago, Illinois                               (Zip Code)
 (Address of principal executive offices)


Registrant's telephone number, including area code 312-541-7200

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


        TITLE OF EACH CLASS            NAME OF EACH EXCHANGE ON WHICH REGISTERED
        -------------------            -----------------------------------------
   Common Stock - $.25 par value               American Stock Exchange


Securities registered pursuant to Section 12(g) of the Act: NONE

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes_X_  No___

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. [ ]

      The aggregate market value (based on March 21, 2001 closing price) of
voting stock held by non-affiliates of registrant: Approximately $17,090,000.

      Number of common shares outstanding at March 21, 2001: 1,815,097.

      Incorporation by reference: Portions of registrant's definitive proxy
statement for the 2001 Annual meeting of stockholders to be held on May 23, 2001
into Part III of this Form 10-K. (The definitive proxy statement will be filed
with the Securities and Exchange Commission within 120 days after the close of
the fiscal year covered by this Form 10-K.)

      Index to Exhibits: on page 27 hereof.


                                       1.
<PAGE>

NOTE:    References to a "Note" are to the Notes to Consolidated Financial
         Statements which are included on pages 16 through 24 of this Annual
         Report on Form 10-K.

                                     PART I

Item 1.    BUSINESS

There have been no significant changes in the business during the past five
years other than the purchase of substantially all of the assets of Valco,
Inc.'s (Valco) ready-mix concrete and aggregates operation in Pueblo, Colorado
on October 21, 1996. The Company formed a new subsidiary, Transit Mix of Pueblo,
Inc. to hold and operate these acquired assets. Subsequent to the fiscal 2000
year-end, the Company acquired all of the stock of Rocky Mountain Ready Mix
Concrete, Inc., a ready-mix concrete producer in the metropolitan Denver,
Colorado area. Accordingly, results for 2000 do not include any activity for
this new company.

The Company operates primarily in two industry segments, the Heating and Air
Conditioning segment and the Construction Materials segment.  The Heating and
Air Conditioning segment is comprised principally of wall furnaces, console
heaters, evaporative coolers and fan coils which are manufactured by Phoenix
Manufacturing, Inc. of Phoenix, Arizona and Williams Furnace Co. of Colton,
California.  The Construction Materials segment is comprised of ready mix
concrete, construction aggregates, building supplies and doors which are
offered by Castle Concrete Company and Transit Mix Concrete Co. both of
Colorado Springs, Colorado, and Transit Mix of Pueblo, Inc. of Pueblo,
Colorado.

In addition to the above operating segments, an Other classification is
utilized to cover a small real estate operation and the holding costs for
certain mining interests that remain from the period the Company maintained
significant interests in mining operations. The expenses of the corporate
office, which provides treasury, insurance and tax services as well as
strategic business planning and general management services, are not
allocated to the segments. Expenses related to the Management Information
Systems group are allocated to all locations, including the corporate office,
based upon a formula that is intended to capture use of the system and time
spent by MIS staff.

The Company has a 30% interest in Oracle Ridge Mining Partners (ORMP). ORMP is a
general partnership that owns an inactive copper mine near Tucson, Arizona. The
Company is not the managing partner of ORMP and thus its operations are
accounted for on the equity method with the Company's share of ORMP's operations
included in other income and expense in the Company's statement of operations.
See Note 3 on page 18 for further discussion of the Company's accounting for and
valuation of the investment in ORMP.

Financial information relating to industry segments appears in Note 12 on pages
23 and 24 of this Form 10-K.

MARKETING, SALES AND SUPPORT

MARKETING

The Heating and Air Conditioning segment markets its products throughout the
United States through plumbing, heating and air conditioning wholesale
distributors as well as directly to some major retail home-centers and other
retail outlets.  Fan coils are also sold to HVAC installing contractors and
equipment manufacturers for commercial applications.  Independent


                                       2.
<PAGE>

manufacturers' representatives are utilized for all products. The Company also
employs and utilizes a small staff of sales and sales support personnel. Sales
in this segment are predominantly in the United States and are concentrated in
the Western and Southwestern states. Sales of furnaces and console heaters
usually increase in the months of August through January. Sales of evaporative
coolers usually increase in the months of March through July. Sales of the fan
coil product line are more evenly distributed throughout the year although the
highest volume typically occurs during the late spring and summer. In order to
sell wall furnaces and evaporative coolers during the off season, extended
payment terms are offered to customers.

The Construction Materials segment markets its products primarily through its
own direct sales representatives and confines its sales to the Front Range area
in southern Colorado. Sales are made to general and sub-contractors, government
entities and individuals. Sales are affected by the general economic conditions
in the areas serviced (as it relates to construction) and weather conditions.
Revenues usually decline in the winter months as the pace of construction slows.

During 2000, no customer accounted for 10% or more of the total sales of the
Company.

CUSTOMER SERVICE AND SUPPORT

The Heating and Air Conditioning segment offers parts departments and help lines
to assist contractors, distributors and end users in servicing the products. The
Company does not perform installation services, nor are maintenance or service
contracts offered. In addition, training and product information sessions for
the furnace, cooler and fan coil product lines are offered at our plants and
other sites for distributors, contractors, utility company employees and other
customers. This segment does not derive any revenue from after-sales service and
support other than from parts sales. The personnel in the Construction Materials
segment routinely take a leadership role in formulation of the products to meet
the specifications of the customers.

BACKLOG

The order backlog at December 30, 2000 and January 1, 2000 for the Heating and
Air Conditioning segment were as follows:

<TABLE>
<CAPTION>
                       December 30, 2000     January 1, 2000
                       -------------------  ------------------
<S>                       <C>                    <C>
   Furnaces                $      366,000         $    25,000
   Console heaters                 20,000               5,000
   Evaporative coolers          1,100,000             750,000
   Fan coil                     1,469,000           2,100,000
                       -------------------  ------------------
   Total                   $    2,955,000         $ 2,880,000
                       ===================  ==================
</TABLE>

The above backlogs are expected to be substantially filled during the first
quarter of 2001.

At December 30, 2000, the Construction Materials segment had a backlog of
approximately $5,225,000 ($2,785,000 at January 1, 2000) primarily relating to
construction contracts awarded and expected to be filled during the first half
of 2001.

Management does not believe that any of the above backlogs represent a trend but
rather are indicative only of the timing of orders received or contracts
awarded.

                                       3.
<PAGE>

RESEARCH AND DEVELOPMENT/PATENTS

In general, the companies rely upon, and intend to continue to rely upon,
unpatented proprietary technology and information. However, research and
development activities in the Heating and Air Conditioning segment have resulted
in a patent related to the Power Cleaning System (expiring January 2014) for the
evaporative coolers and a patent entitled "Wall Furnace With Side Vented Draft
Hood" (expiring November 2011) which has increased efficiency above that
previously offered by the industry. A patent is pending related to the Company's
new combination cooling and heating product. The amounts expended on research
and development are not material and are expensed as incurred. The Company
believes its interests in its patent applications, as well as its proprietary
knowledge, are sufficient for its businesses as currently conducted.

MANUFACTURING

The Company conducts its manufacturing operations through a number of facilities
as more completely described in Item 2, Properties, below.

Due to the seasonality of the businesses, furnaces and evaporative coolers build
inventory during their off seasons in order to have adequate supplies to sell
during the season.

In general, raw materials required by the Company can be obtained from various
sources in the quantities desired. The Construction Materials companies have
historically purchased most of their cement requirements from a single supplier.
These companies experienced some difficulty in obtaining cement during the
latter half of 1998 and 1999 but were able to purchase sufficient quantities
from non-traditional sources, which are expected to remain available in the
future. The Company has no long-term supply contracts and does not consider
itself dependent on any individual supplier.

In connection with permits to mine properties in Colorado, the Company is
obligated to reclaim the mined areas. In recent years, reclamation costs have
had a more significant effect on the results of operations compared to prior
years.

COMPETITIVE CONDITIONS

HEATING AND AIR CONDITIONING - The Company is one of four principal companies
producing wall furnaces (excluding units sold to the recreational vehicle
industry) and gas fired console heaters. The wall furnace and console heater
markets are only a small component of the heating industry. The Company serves
these market areas from a plant in Colton, California. The sales force consists
of in-house sales personnel and external manufacturers' representatives. The
entire heating industry is dominated by manufacturers (most of which are
substantially larger than the Company) selling diversified lines of heating and
air conditioning units directed primarily toward central heating and cooling
systems. All of the producers compete on a basis of price, service and
timeliness of delivery.

Fan coils are also produced at the Colton plant. Fan coil sales are usually
obtained through a competitive bidding process. International Environmental
Corp., a subsidiary of LSB Industries, Inc., a manufacturer of a diversified
line of commercial and industrial products, dominates this market. There are
also a number of other companies that produce fan coils. All of the producers
compete on the basis of price, ability to meet customers' specific requirements
and timeliness of delivery.

The Company manufactures evaporative air coolers at a plant located in Phoenix,
Arizona. The cooler market is dominated by Adobe Air. The other principal
competitor is Champion/Essick. All producers of evaporative air coolers compete
aggressively on the basis of price and service.

                                       4.
<PAGE>

CONSTRUCTION MATERIALS - The Company is one of five companies producing ready
mix concrete in the Colorado Springs area, and one of three companies producing
ready mix concrete in the Pueblo area. Although we hold a significant share of
both of the markets served, the other competitors compete aggressively on the
basis of price, service and product features.

The Company is one of six producers of aggregates in the marketing area served.
All producers compete aggressively on the basis of price, quality of material
and service.

Sales of metal doors and door frames, rebar reinforcement and other building
materials in the Colorado Springs and Pueblo metropolitan areas are subject to
intense competition from two larger companies from Denver, one large company in
Colorado Springs and a number of small local competitors. However, the Company
has a slight competitive advantage in that many of our customers also purchase
concrete, sand and aggregates from us whereas our competitors for these
particular product lines do not offer concrete, sand or aggregates. In addition,
our Pueblo location has a slight competitive advantage with respect to the two
Denver companies based upon delivery costs.

EMPLOYEES

The Company employed 758 people as of December 30, 2000. Employment varies
throughout the year due to the seasonal nature of the businesses. A breakdown of
the prior three years employment at year-end by segment was:

<TABLE>
<CAPTION>
                                            2000        1999          1998
                                         -----------  ----------    ----------
<S>                                      <C>          <C>           <C>
             Heating and Air                397          433           402
             Conditioning
             Construction Materials         347          354           332
             Corporate Office                14           14            12
                                         -----------  ----------    ----------
               Total                        758          801           746
                                         ===========  ==========    ==========
</TABLE>

The factory employees at the Colton, California plant are represented by the
Carpenters Local 721 Union under a contract that expires in June 2002.
Certain drivers and mechanics at the Pueblo facility are represented by
Teamsters Local 435 under a contract that expired in December 2000. No
settlement on a new contract has been reached.

The Company considers relations with its employees and with its unions to be
good.

Item 2.    PROPERTIES

The Heating and Air Conditioning segment operates out of one owned (Colton,
California) and one leased (Phoenix, Arizona) facility. Both manufacturing
facilities utilized by this segment are, in the opinion of management, in good
condition and sufficient for the Company's current needs. Productive capacity
exists at the locations such that the Company could exceed the highest volumes
achieved in prior years or expected in the foreseeable future and maintain
timely delivery.

The Company serves the southern Colorado ready-mix concrete market from seven
owned batch plants. In addition, the Company currently operates aggregate
processing facilities on three owned and three leased mining properties.
These facilities are, in the opinion of management, in good condition and
sufficient for the Company's current needs. The Company also owns or leases
other aggregate deposits not currently in production.

                                       5.
<PAGE>

In the opinion of management, the owned and leased properties contain
permitted and minable reserves sufficient to service sand, rock and gravel
requirements for the foreseeable future.

In the opinion of management, all of the facilities of the Company can be
subject to seasonal fluctuations but are believed to be generally well utilized.

The corporate office operates out of leased facilities in Chicago, Illinois.

Item 3.    LEGAL PROCEEDINGS

See Management Discussion and Analysis of Financial Condition and Results of
Operations on pages 8 through 11 and Note 5 on page 19 of this Annual Report on
Form 10-K.

Item 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS


There were no matters submitted to a vote of security holders during the fourth
quarter of fiscal 2000.

                                     PART II

Item 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
           STOCKHOLDER MATTERS

Continental Materials Corporation shares are traded on the American Stock
Exchange under the symbol CUO. Market prices (restated for the stock split, see
Note 6 on pages 19 through 21) for the past two years are:

<TABLE>
<CAPTION>
                                                 High              Low
<S>                           <C>               <C>              <C>
                  2000        Fourth Quarter     $14              $10.75
                              Third Quarter      17.25            12.63
                              Second Quarter     23               16
                              First Quarter      23 3/4           21 5/8

                  1999        Fourth Quarter     $23 1/8          $21
                              Third Quarter      23               19 1/4
                              Second Quarter     20               17 13/16
                              First Quarter      18 7/16          15 7/8
</TABLE>


At March 16, 2001, the Company had approximately 325 shareholders of record.

The Company has never paid a dividend. The Company's policy is to reinvest
earnings from operations, and the Company expects to follow this policy for the
foreseeable future.

                                       6.
<PAGE>


Item 6.      SELECTED FINANCIAL DATA
(Amounts in thousands, except per share amounts)
------------------------------------------------
<TABLE>
<CAPTION>

                                2000        1999        1998        1997        1996
<S>                            <C>         <C>         <C>         <C>         <C>
SUMMARY OF OPERATIONS
Sales                          $ 116,002   $ 123,886   $ 113,210   $ 101,852   $ 95,138

Earnings before interest,
 taxes, depreciation and
 amortization (EBITDA)            14,300      16,209      11,570       9,224      6,703

Net income                     $   5,335   $   6,902   $   4,618   $   3,110   $  2,355

PER SHARE DATA
Basic earnings per share       $    2.86   $    3.39   $    2.15   $    1.41   $   1.06
Weighted average shares
 outstanding                       1,869       2,035       2,147       2,200      2,210

Diluted earnings per share     $    2.81   $    3.32   $    2.10   $    1.39   $   1.05
Weighted average shares
 outstanding                       1,901       2,082       2,196       2,239      2,228

FINANCIAL CONDITION
Current ratio                      2.4:1       1.7:1       2.0:1       2.4:1      2.1:1

Total assets                   $  68,250   $  67,751   $   63,617  $   54,355  $ 53,550

Long-term debt, including
 current portion                   7,305       4,457        6,810       8,300     8,000

Shareholders' equity              41,813      39,043       36,238      31,858    29,350

Long-term debt to net worth          .18         .11          .19         .26       .27

Book value per diluted share   $   22.00   $   18.75   $    16.50  $    14.23  $  13.17

CASH FLOWS
Net cash provided by (used in):
  Operating activities         $  10,108   $   6,328   $   14,223  $    6,086  $  6,676
  Investing activities            (2,749)     (9,038)      (6,899)     (4,239)   (9,174)
  Financing activities            (1,490)     (4,063)      (1,728)       (702)    1,803
                               ---------   ---------   ----------  ----------  --------
  Net (decrease) increase
  in cash and cash equivalents $   5,869   $  (6,773)  $    5,596  $    1,145  $   (695)
                               =========   =========   ==========  ==========  ========
</TABLE>






                                       7.
<PAGE>

Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(References to a "Note" are to Notes to Consolidated Financial Statements)

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents increased to $6,216,000 at year-end compared to
$347,000 in the prior year. Operations in 2000 provided $10,108,000 of cash
compared to $6,328,000 in 1999 and the $14,223,000 generated in 1998. The
increase in net cash generated by operating activities in 2000 compared to 1999
was due primarily to the net change in receivables. The decrease in net cash
generated by operations in 1999 was primarily due to an increase in inventories.
This increase in inventories was due to the low level of finished goods furnace
inventory on hand at year-end 1998. Raw materials and work-in-process also
increased in 1999 due to the higher fan coil volume.

Net cash used in investing activities was $2,749,000 in 2000, $9,038,000 in
1999, and $6,899,000 in 1998. Capital expenditures for 2000, 1999 and 1998 were
$3,306,000, $9,024,000 and $6,464,000, respectively. The capital expenditures
were principally to support the continuing strong business demand that has been
experienced by the companies in the construction materials segment although some
projects planned for 2000 were postponed. The 1999 and 1998 capital additions
include approximately $1,100,000 and $1,300,000, respectively, related to the
implementation of a Year 2000 compliant enterprise planning system as well as
the modernization and integration of Company systems. Also during 1999, the
Company invested approximately $1,237,000 in new office and warehouse space in
Phoenix while during 1998, the Company invested $470,000 to acquire a new
product line for the heating and air conditioning segment.

Budgeted capital expenditures for 2001 are approximately $9,300,000 ($7,000,000
for the construction materials segment and $2,300,000 for the heating and air
conditioning segment), which is approximately $3,300,000 more than planned
depreciation. The construction materials budget includes approximately
$2,100,000 for new batch plant sites and expansions of existing plants,
$1,500,000 for a new aggregates crushing and screening plant for the east side
of Pueblo and $1,250,000 for a new sand plant that is expected to increase
yield, improve quality and reduce costs. The heating and air conditioning budget
includes approximately $1,350,000 for new office space in Colton with the
balance primarily for routine replacement and upgrades. The Company expects that
the 2001 expenditures will be funded from existing cash balances, operating cash
flow and leasing capacity.

During 2000, cash of $1,490,000 was used in financing activities. The Company
increased its term debt by $4,000,000. Scheduled long-term debt repayments of
$1,152,000 were made during the year and the $1,600,000 balance outstanding on
the revolving line of credit at the end of 1999 was repaid. Cash of $2,770,000
was used to acquire 146,032 shares of treasury stock partially offset by
proceeds from the exercise of stock options which generated $32,000. During
1999, cash of $4,063,000 was used in financing activities. Scheduled long-term
debt repayments of $2,556,000 were made during the year. Costs and expenses
associated with the June cancellation of 79,096 (post-split) shares were
$1,595,000. An additional $2,746,000 was used to acquire 139,574 shares of
treasury stock. Borrowings against the revolving credit facility of $1,600,000
and an increase in the capital lease of $203,000 provided a portion of the above
cash while proceeds from the exercise of stock options generated $144,000.
During 1998, cash of $1,728,000 was used in financing activities. Scheduled
long-term debt repayments of $1,900,000 were made during the year and cash of
$238,000 was used to acquire 16,060 shares of treasury stock.


                                       8.
<PAGE>

The Company maintains a term loan and revolving credit facility with two banks.
At December 30, 2000 $7,000,000 was outstanding on the term loan. A revolving
credit facility of up to $10,000,000 is available for seasonal needs including
the funding of seasonal sales programs related to the furnace and evaporative
cooler product lines. The line is also used for stand-by letters of credit to
insurance carriers in support of self-insured amounts under the Company's
insurance program. Borrowings are unsecured and bear interest at prime or an
adjusted LIBOR rate. Effective January 3, 2001, the Company amended the credit
agreement with its two banks to increase the unsecured term loan portion to
$19,000,000. The additional $12,000,000 of funds was used to purchase the
capital stock of Rocky Mountain Ready Mix Concrete, Inc., see Note 13. The
amended agreement provides for semi-annual principal repayments of $1,500,000
beginning June 15, 2001 with final payment of $2,500,000 due on December 15,
2006. Terms and conditions of the amended 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 anticipates the primary source of cash flow in 2001 to
be from its operating subsidiaries. The existing cash balances and anticipated
cash flow in 2001, supplemented by the revolving line of credit, will be
sufficient to cover expected cash needs, including servicing debt and planned
capital expenditures.

The Company purchases insurance coverage for workers' compensation, general,
product and automobile liability, maintaining certain levels of retained risk
(self-insured portion). Provisions for both claims and unasserted claims that
would be covered under the self-insured portion of the policies are recorded in
accordance with the requirements of Statement of Financial Accounting Standards
(SFAS) No. 5, "Accounting for Contingencies."

OPERATIONS   2000 vs. 1999

Consolidated sales declined $7,884,000, or 6% to $116,002,000. The sales of the
heating and air conditioning segment declined $7,685,000 (14%) while sales of
the construction materials segment were off $195,000, less than 1%, compared to
the previous year. The decline in the heating and air conditioning segment was
experienced by all three of the product lines.

The Company experienced a high level of price competition in all of its product
lines, which the Company expects to continue into 2001. During 2000, inflation
was not a significant factor at any of the operations.

Cost of sales (exclusive of depreciation, depletion and amortization), as a
percent of sales, remained relatively constant at approximately 70%. The slight
increase is primarily due to the decline in sales in the heating and air
conditioning segment although heightened competition in the Pueblo, Colorado
ready-mix concrete market and increased costs at two construction aggregate
operations affected profit margins in the construction materials segment.

Depreciation, depletion and amortization increased from $4,998,000 to $5,419,000
due to the high level of capital expenditures during 1999.

Selling and administrative expenses decreased $988,000. As a percentage of
sales, selling and administrative expenses remained relatively constant at just
over 13%

The decline in operating income primarily reflects the decreased sales, the
heightened competition in Pueblo, Colorado and the increased costs at the two
construction aggregate operations. The increased depreciation also had a
dampening effect on operating income.


                                       9.
<PAGE>

The increase in interest expense of $102,000 is the result of the higher term
loan balance and higher interest rates.

The increase in other income is primarily the result of a $383,000 gain on the
sale of a depleted gravel property in Colorado Springs.

The Company's 2000 effective income tax rate on income (35.8%) reflects federal
and state statutory rates adjusted for non-deductible and other tax items. See
Note 10.

OPERATIONS   1999 vs. 1998

Consolidated sales increased $10,676,000, or 9%, to $123,886,000. The sales of
the construction materials segment rose $6,152,000 (10%) while the sales of the
heating and air conditioning segment rose $4,517,000 (9%) compared to the
previous year. The construction materials segment continued to report gains due
to a very strong construction market along the Front Range in southern Colorado.
The improvement in the heating and air conditioning segment was due to the
combined improvements in the fan coil and furnace lines offset by the decline in
evaporative cooler sales. The decline in the evaporative cooler line was the
result of an unseasonably cool 1999 spring and summer which also affected the
fourth quarter's pre-season sales.

The Company experienced a high level of price competition in all of its product
lines. During 1999, inflation was not a significant factor at any of the
operations.

Cost of sales (exclusive of depreciation, depletion and amortization), as a
percent of sales, improved from 72% to just under 70%. The improvement reflects
the increased volume in the fan coil and furnace lines as well as the
construction materials segment. Cost of sales in the heating and air
conditioning segment were reduced by approximately $361,000 during 1998 due to
liquidation of LIFO inventory layers carried at costs that were lower than the
costs of current purchases.

Depreciation, depletion and amortization increased from $3,992,000 to $4,998,000
due to the increased capital expenditure level the past two years.

Selling and administrative expenses increased $1,090,000. As a percentage of
sales, selling and administrative expenses remained relatively constant at just
over 13%

The increased operating income is principally attributed to the improved sales
volume.

The decline in interest expense of $116,000 is the result of the lower term loan
balance and the strong cash position at the beginning of the year which delayed
the use of the line of credit.

The Company wrote off the remaining $100,000 investment in Oracle Ridge Mining
Partners (ORMP) during 1999 and recorded a loss of $56,000 related to on going
carrying costs of the property. Carrying costs at this level are expected to be
on going.

The Company's 1999 effective income tax rate on income (35.7%) reflects federal
and state statutory rates adjusted for non-deductible and other tax items. See
Note 10.


                                       10.
<PAGE>

FORWARD-LOOKING STATEMENTS

This Annual Report 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 "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.

Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is exposed to market risks related to interest rates and commodity
prices. To manage these risks, the Company has, from time to time, entered into
various interest rate swaps to create synthetic-debt instruments as authorized
by the Company's policies and procedures. The Company does not use swaps or
hedging instruments for trading purposes, and is not a party to any transaction
involving leveraged derivatives. The Company is not currently involved in any
swaps or hedging contracts.

Interest Rates

The Company utilizes revolving credit and term-loan facilities that bear
interest at either prime or an adjusted LIBOR rate. The amount outstanding under
these facilities aggregated $7 million at December 30, 2000. In addition, the
Company has entered into a capital lease with fixed interest rates and original
maturity dates (based upon the date of the draw) of 42 months. As the draws
occurred during 1998 and 1999 and the total remaining due is $305,000, its book
and fair value was considered to be approximately the same. See Note 4.

Commodities

The Company purchases commodities, such as steel, copper, cement and cardboard
for packaging, at market prices and does not currently use financial instruments
to hedge commodity prices.

The statements and other information in this section constitute forward-looking
statements.


                                       11.
<PAGE>

Item 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


<TABLE>
<CAPTION>
                                                        PAGE
<S>                                                    <C>
Financial Statements and Schedule of Continental
 Materials Corporation and report thereon:

   Consolidated statements of operations and
   Retained earnings for fiscal years
   2000, 1999 and 1998                                   13

   Consolidated statements of cash flows
   for fiscal years ended 2000, 1999 and 1998            14

   Consolidated balance sheets at December 30, 2000
   and January 1, 2000                                   15

   Notes to consolidated financial statements         16-24

   Report of Independent Accountants                     25
</TABLE>






                                       12.
<PAGE>

CONTINENTAL MATERIALS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND
RETAINED EARNINGS FOR FISCAL YEARS 2000, 1999 AND 1998
(Amounts in thousands, except per share data)
---------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                             2000            1999          1998
                                             ----            ----          ----
<S>                                      <C>          <C>           <C>
Sales                                    $  116,002   $   123,886   $   113,210
Freight costs                                 5,714         5,266         4,466
                                         ----------   -----------   -----------
Net sales                                   110,288       118,620       108,744
Costs and expenses
    Cost of sales (exclusive of
      depreciation, depletion and
      amortization)                          81,521        86,181        81,881
    Depreciation, depletion and
     amortization                             5,419        4,998        3,992
    Selling and administrative               15,158        16,146        15,056
                                         ----------   -----------   -----------
Operating income                              8,190        11,295         7,815
Interest expense                              (571)         (469)         (585)
Other income (expense), net                     691          (84)         (237)
                                         ----------   -----------   -----------
Income before income taxes                    8,310        10,742         6,993
Income tax provision                          2,975         3,840         2,375
                                         ----------   -----------   -----------
Net income                                    5,335         6,902         4,618
Retained earnings, beginning of year         42,803        35,901        31,283
                                         ----------   -----------   -----------
Retained earnings, end of year           $   48,138     $  42,803    $   35,901
                                         ==========     =========    ==========

Basic earnings per share                 $     2.86     $    3.39    $     2.15
  Weighted average shares outstanding         1,869         2,035         2,147

Diluted earnings per share               $     2.81     $    3.32    $     2.10
  Weighted average shares outstanding         1,901         2,082         2,196

</TABLE>


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

                                       13.
<PAGE>

   CONTINENTAL MATERIALS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
   FOR FISCAL YEARS 2000, 1999, AND 1998
   (Amounts in thousands)
   -----------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                 2000        1999        1998
                                                 ----        ----        ----
<S>                                            <C>         <C>         <C>
OPERATING ACTIVITIES

Operating activities
   Net income                                  $  5,335    $  6,902    $  4,618
   Adjustments to reconcile net income
    to net cash provided by operating
    activities Depreciation, depletion
    and amortization                              5,419       4,998       3,992
    Deferred income tax provision
         (benefit)                                  532         109        (708)
    Provision for doubtful accounts                (110)        486         304
    Tax benefit from exercise of stock
        options                                     174         100          --
    (Gain) loss on disposition of
     property and equipment                        (402)         57         (42)
    Equity loss from mining partnership              87          56          52
       Write-down of investment in
       mining partnership                            --         100         500

   Changes in operating assets and
     liabilities
    Receivables                                   3,548      (3,926)     (3,243)
    Inventories                                     (48)     (3,916)      2,243
    Prepaid expenses                               (142)       (450)        524
    Income taxes                                   (615)       (344)      1,050
    Accounts payable and accrued expenses        (3,139)      1,778       5,367
    Prepaid royalties                              (414)        (11)       (218)
    Other                                          (117)        389        (216)
                                               --------    --------    --------
Net cash provided by operating activities        10,108       6,328      14,223
                                               --------    --------    --------
Investing activities
  Capital expenditures                           (3,306)     (9,024)     (6,464)
  Investment in new product line                     --          --        (470)
  Investment in mining partnership                  (87)        (56)        (52)
  Proceeds from sale of property and
   equipment                                        644          42          87
                                               --------    --------    --------
Net cash used in investing activities            (2,749)     (9,038)     (6,899)
                                               --------    --------    --------

Financing activities
  (Repayment) borrowings of revolving
   credit facility                               (1,600)      1,600          --
  Long-term borrowings                            4,000         203         440
  Repayment of long-term debt                    (1,152)     (2,556)     (1,930)
  Payment to purchase and cancel stock               --        (708)         --
  Proceeds from exercise of stock options            32         144          --
  Payments to acquire treasury stock             (2,770)     (2,746)       (238)
                                               --------    --------    --------
Net cash used in financing activities            (1,490)     (4,063)     (1,728)
                                               --------    --------    --------
Net increase (decrease) in cash and
 cash equivalents                                 5,869      (6,773)      5,596

Cash and cash equivalents
  Beginning of year                                 347       7,120       1,524
                                               --------    --------    --------
  End of year                                  $  6,216    $    347    $  7,120
                                               ========    ========    ========
Supplemental disclosures of cash flow items
    Cash paid during the year
      Interest                                 $    731    $    644    $    471
      Income taxes                                2,897       4,062       2,038

</TABLE>

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

                                       14.


<PAGE>

CONTINENTAL MATERIALS CORPORATION
CONSOLIDATED BALANCE SHEETS DECEMBER 30, 2000 AND JANUARY 1, 2000
(Amounts in thousands except share data)
-----------------------------------------------------------------
<TABLE>
<CAPTION>
                                       December 30, 2000  January 1, 2000
<S>                                         <C>              <C>
ASSETS
Current assets
  Cash and cash equivalents                 $  6,216         $    347
  Receivables less allowance of
    $475 and $800                             16,723           20,161
  Inventories                                 16,014           15,966
  Prepaid expenses                             2,572            2,592
                                            --------         --------
       Total current assets                   41,525           39,066
                                            --------         --------

Property, plant and equipment:
  Land and improvements                        2,723            3,970
  Buildings and improvements                  11,885           11,837
  Machinery and equipment                     59,310           57,792
  Mining properties                            4,009            2,170
  Less accumulated depreciation
    and depletion                            (53,200)         (48,878)
                                            --------         --------
                                              24,727           26,891
                                            --------         --------
Other assets:
  Prepaid royalties                              641              228
  Other                                        1,357            1,566
                                            --------         --------
                                            $ 68,250         $ 67,751
                                            ========         ========
LIABILITIES
Current liabilities
  Bank loan payable                         $     --         $  1,600
  Current portion of long-term debt            2,158            2,582
  Accounts payable                             4,437            7,263
  Income taxes                                   312              927
  Accrued expenses
      Compensation                             2,767            3,214
      Reserve for self-insured
         losses                                2,415            2,579
      Profit sharing                           2,440            2,515
      Other                                    2,751            2,377
                                            --------         --------
        Total current liabilities             17,280           23,057
                                            --------         --------

Long-term debt                                 5,147            1,875
Deferred income taxes                          1,598            1,227
Accrued reclamation                            1,004            1,311
Other long-term liabilities                    1,408            1,238
Commitments and contingencies
        (Notes 5 and 8)

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                 1,985            1,983
Retained earnings                             48,138           42,803
Treasury shares, at cost                      (8,953)          (6,386)
                                            --------         --------
                                              41,813           39,043
                                            --------         --------
                                            $ 68,250         $ 67,751
                                            ========         ========
</TABLE>

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


                                       15.

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include Continental Materials Corporation
and all of its subsidiaries (the Company).

In accordance with the Emerging Issues Task Force Issue 00-10, "Sales" are
reported prior to deduction of freight costs, traditionally netted by the
Company against sales in arriving at "Net sales." In addition, certain prior
years' amounts have been reclassified to conform to the current presentation.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with generally accepted
accounting principles 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 30, 2000 and January 1, 2000
and the reported amounts of revenues and expenses during each of the three
years in the period ended December 30, 2000. 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.

INVENTORIES

Inventories are valued at the lower of cost or market. Cost is determined using
the last-in, first-out (LIFO) method for approximately 86% of total inventories
at December 30, 2000 (85% at January 1, 2000). The cost of all other inventory
is determined by the first-in, first-out (FIFO) method.

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:

                    Buildings                   10 to 31 years
                    Leasehold improvements      Terms of leases
                    Machinery and equipment      3 to 10 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 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 other income. Maintenance and repairs are charged to
expense as incurred. Major renewals and betterments are capitalized and
depreciated over their useful lives.

OTHER ASSETS

Amortization of certain other assets is computed on a straight-line basis
over periods of 5 and 10 years.

                                       16.
<PAGE>

RETIREMENT PLANS

The Company and certain subsidiaries have various contributory profit sharing
retirement plans for specific employees. The plans allow qualified employees to
make tax deferred contributions pursuant to Internal Revenue Code Section
401(k). The Company makes annual contributions, at its discretion, based
primarily on profitability. Costs under the plans are charged to operations as
incurred.

RESERVE FOR SELF-INSURED LOSSES

The Company's risk management program provides for certain levels of loss
retention for workers' compensation, automobile liability and general and
product liability claims. The components of the reserve have been recorded in
accordance with the requirements of Statement of Financial Accounting Standards
(SFAS) No. 5, "Accounting for Contingencies," and represent management's best
estimate of future liability.

RECLAMATION

In connection with permits to mine properties in Colorado, the Company is
obligated to reclaim the mined areas. Reclamation costs are calculated using a
rate based on the total estimated reclamation costs, units of production and
estimates of recoverable reserves. Reclamation costs are charged to operations
as the properties are mined.

REVENUE RECOGNITION

The Company's practice is to recognize revenues from product sales when title
transfers.

INCOME TAXES

Income taxes are reported consistent with SFAS No. 109, "Accounting for Income
Taxes." Deferred taxes reflect the future tax consequences associated with the
differences between financial accounting and tax bases of assets and
liabilities.

CONCENTRATION OF CREDIT RISK

Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist principally of trade receivables and temporary cash
investments. The Company invests its excess cash in government securities. The
Company has not experienced any losses on these investments.

The Company performs ongoing credit evaluations of its customers and generally
does not require collateral. The Company maintains reserves for potential credit
losses and such losses have been within management's expectations. See Note 12
for a description of the Company's customer base and geographical location by
segment.

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.

FISCAL YEAR END

The Company's fiscal year end is the Saturday nearest December 31. Fiscal 2000,
1999 and 1998 each consist of 52 weeks.


                                       17.
<PAGE>

2. INVENTORIES

Inventories consisted of the following (amounts in thousands):

<TABLE>
                      December 30, 2000    January 1, 2000
<S>                      <C>            <C>
      Finished goods       $   6,595      $   7,557
      Work in process          1,720          1,642
      Raw materials and
        supplies               7,699          6,767
                               -----          -----
                            $ 16,014       $ 15,966
                            ========       ========
</TABLE>

If inventories valued on the LIFO basis were valued at current costs,
inventories would be higher as follows: 2000 -- $1,942,000, 1999 -- $1,713,000,
1998 -- $1,610,000.

Reduction in inventory quantities during 1998 at one of the locations, resulted
in liquidation of LIFO inventory layers carried at costs that were lower than
the costs of current purchases. The effect, recorded in the fourth quarter, was
to decrease cost of goods sold by approximately $361,000 and to increase net
earnings by $224,000 or $.10 per diluted share.

3. INVESTMENT IN MINING PARTNERSHIP

The Company has a 30% ownership interest in ORMP, a general partnership, which
operated a copper mine primarily situated in Pima County, Arizona. The equity
method of accounting is used to include 30% of ORMP's income and losses in the
Company's consolidated financial statements.

Production at the mine was halted in February 1996. Although the Partners are
attempting to sell the mine, continued low prices of copper makes it unlikely
that the property will be sold. In accordance with SFAS No. 121, the remaining
investment in the mining partnership was written off as of January 1, 2000. The
related impairment loss of $100,000 is included in the $156,000 loss recorded
for 1999. During 1998, the Company recorded an equity loss of $552,000 including
an impairment loss of $500,000. The equity losses are included in "Other
(expense) income, net" in the Consolidated Statements of Operations. Future cash
contributions to ORMP for carrying costs will be expensed when made.

4. LONG-TERM DEBT

Long-term debt consisted of the following (amounts in thousands):

<TABLE>
<CAPTION>
                  December 30, 2000 January 1, 2000
<S>                         <C>            <C>
      Unsecured term loan   $  7,000       $  4,000
      Capital lease              305            457
                            --------       --------
                               7,305          4,457
      Less current portion     2,158          2,582
                            --------       --------
      Long-term amount      $  5,147       $  1,875
                            ========       ========
</TABLE>

The unsecured term loan is payable to two banks in semi-annual installments with
final principal payment due June 15, 2001. The loan, at the Company's option,
bears interest at either prime or an adjusted LIBOR rate.

The Company is required to maintain certain levels of consolidated tangible net
worth, to attain certain levels of cash flow (as defined) on a rolling
four-quarter basis, and to maintain certain ratios including consolidated debt
to cash flow (as defined). Additional borrowing, acquisition of stock of other
companies, purchase of treasury shares and payment of cash dividends are either
limited or require prior approval by the lenders.


                                       18.
<PAGE>

The capital lease is payable in monthly installments through December 2002, with
interest at various rates based upon prevailing interest rates on the due dates
of the draws.

Aggregate long-term debt matures as follows (amounts in thousands):

<TABLE>

<S>                        <C>
      2001                 $   2,158
      2002                     2,147
      2003                     2,000
      2004                     1,000
                           ---------
                            $  7,305
                           =========
</TABLE>

During 2000 and 1999, the Company had an unsecured revolving line of credit of
$10,000,000 and $11,500,000, respectively. The line is with two banks and is
used for short-term cash needs and standby letters of credit. Interest was
charged at prime or adjusted LIBOR rates on cash borrowings during both years.
The weighted average interest rate was 7.8% for fiscal 2000 and 7.4% for fiscal
1999. There was no balance outstanding against the line as of December 30, 2000
while $1,600,000 was outstanding as of January 1, 2000.

At December 30, 2000, the Company had letters of credit outstanding totaling
approximately $3,144,000 that collateralize the self-insured losses.

Effective January 3, 2001, the Company amended the revolving credit and term
loan agreement with its two banks to increase the unsecured term loan portion to
$19,000,000. The additional funds were used to purchase the capital stock of
Rocky Mountain Ready Mix Concrete, Inc., see Note 13. The amended agreement
provides for semi-annual principal repayments of $1,500,000 beginning June 15,
2001 with final payment of $2,500,000 due on December 15, 2006. Terms and
conditions of the amended agreement remain similar to those of the previous
agreement.

5. COMMITMENTS AND CONTINGENCIES

The Company is involved in litigation matters related to its continuing
business, principally product liability matters related to the gas-fired heating
products. In the Company's opinion, none of these proceedings, when concluded,
will have a material adverse effect on the Company's results of operations or
financial position.

6. SHAREHOLDERS' EQUITY

The shareholders approved an amendment to the Restated Certificate of
Incorporation at the May 26,1999 annual meeting effecting a reverse 1-for-50
stock split followed immediately by a forward 100-for-1 stock split of the
Company's Common Stock. As permitted by Delaware law, registered stockholders
whose shares of stock were converted into less than one share in the reverse
1-for-50 split received the right to receive cash equal to the fair value of
those fractional interests. Registered stockholders whose shares of Common
Stock, $.50 par value, converted into more than one share in the reverse split
received, in the forward 100-for-1 split, a number of shares of Common Stock,
$.25 par value, equal to 100 times the number of shares and fractional shares
held after the reverse split. In other words, all registered stockholders
originally holding 50 or more shares of Common Stock, $.50 par value,
immediately prior to the effective date of the transaction hold twice the number
of shares of Common Stock, $.25 par value, immediately subsequent to the
transaction. The reverse and forward stock splits, together with the related
cash payments to stockholders with small holdings, is referred to below as the
"stock split." The effective date of the stock split was June 7, 1999.

Under the Company's Stock Option Plan (the Plan), officers and key employees may
be granted options to purchase the Company's common stock at option prices
established by the


                                       19.
<PAGE>

Compensation Committee of the Board of Directors provided the option price is no
less than the fair market value at the date of the grant. The Company has
reserved 360,000 shares for distribution under the Plan. On September 26, 1995,
a total of 156,000 options were granted to five individuals at an exercise price
of $6.5625. These shares became exercisable during 1996.

During 1999, options for 22,000 shares were exercised. Per the agreement, 400
reload options were automatically granted during 1999 when one of the
individuals paid a portion of the option price by delivery of shares of the
Company's common stock. The exercise price of these reload options is $23.125,
the market price of the stock on the date the reload option was granted. The
reload options are vested and retain all terms of the original options,
including the expiration date. During 2000, options for 31,000 shares were
exercised. At December 30, 2000, there remain 79,400 options which will expire
on September 25, 2005.

The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting for its
Plan. Accordingly, no compensation expense was recognized for its stock-based
compensation Plan. Had compensation cost for the reload options been determined
based on the fair value at the grant date consistent with the methodology
proscribed under SFAS No. 123, "Accounting for Stock-Based Compensation," the
effect on the Company's net income and earnings per share would not have been
significant.

The following is the common shares and capital in excess of par value activity
during 1999 and 2000. There was no activity in either of these accounts during
1998.

<TABLE>
<CAPTION>
                                                        Common   Capital in
                                          Common        shares    excess of
                                          shares        amount    par value
<S>                                   <C>            <C>         <C>
      Balance at January 2, 1999       1,326,588      $    663    $   3,484
      Effect of reverse split           (39,456)          (20)      (1,575)
      Effect of forward split          1,287,132             -            -
      Common shares issued under the
        Stock Option Plan (from
        treasury)                              -             -         (26)
      Tax benefit from exercise of
        options                                -             -          100
                                       ---------       -------     --------
      Balance at January 1, 2000       2,574,264           643        1,983
      Common shares issued under the
        Stock Option Plan (from
        treasury)                              -             -        (172)
      Tax benefit from exercise of
         options                                                        174
                                       ---------       -------     --------
      Balance at December 30, 2000      2,574,264      $   643     $  1,985
                                        =========      =======     ========
</TABLE>

The Board of Directors of the Company has, from time to time, authorized various
amounts to be utilized in acquiring treasury shares. Treasury share activity
during 1998, 1999 and 2000 was as follows (dollars in thousands and shares
restated for the stock split):


                                       20.
<PAGE>
<TABLE>
                                            Number
                                         of shares                  Cost
<S>                                      <C>                    <C>
        Balance at January 3, 1998         492,374                $3,572
        Purchase of treasury shares         16,060                   238
                                          --------                ------
        Balance at January 2, 1999         508,434                 3,810
        Purchase of treasury shares        139,574                 2,746
        Issuance of treasury shares
        related to the Stock Option Plan   (22,000)                 (170)
                                          --------                ------
        Balance at January 1, 2000         626,008                 6,386
        Purchase of treasury shares        146,032                 2,770
        Issuance of treasury shares
        related to the Stock Option Plan   (31,000)                 (203)
                                          --------                ------
        Balance at December 30, 2000       741,040                $8,953
                                           =======                ======
</TABLE>

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

7. EARNINGS PER SHARE

The Company computes earnings per share (EPS) in accordance with SFAS No. 128,
"Earnings Per Share." The following is a reconciliation of the calculation of
basic and diluted EPS for the years-ended 2000, 1999 and 1998 (dollars in
thousands and shares restated for the stock split).

<TABLE>
<CAPTION>
                                            Weighted
                                 Net        average    Per-share
                              Income         shares      earnings
      2000

<S>                         <C>             <C>           <C>
      Basic EPS               $5,335          1,869         $2.86
      Effect of dilutive
        options                    -             32
                              ------          -----         -----
      Diluted EPS             $5,335          1,901         $2.81
                              ======          =====         =====
      1999
      Basic EPS               $6,902          2,035         $3.39
      Effect of dilutive
        options                    -             47
                              ------          -----         ------
      Diluted EPS             $6,902          2,082         $3.32
                              ======          =====         =====

      1998

      Basic EPS               $4,618          2,147         $2.15
      Effect of dilutive
        options                    -             49
                              ------          -----         ------
      Diluted EPS             $4,618          2,196         $2.10
                              ======          =====         =====
</TABLE>


8. 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
$2,727,000, $2,460,000 and $2,435,000 for 2000, 1999 and 1998, respectively.

Future minimum rental commitments under non-cancelable operating leases for 2000
and thereafter are as follows: 2001 -- $2,008,000; 2002 -- $1,974,000; 2003 --
$1,450,000; 2004 -- $1,094,000; 2005 -- $835,000 and thereafter -- $21,307,000.
Included in these amounts is $370,000 per year and approximately $18,582,000 in
the "thereafter" amount related to an aggregates lease in conjunction with the
Pueblo, Colorado operation.

The Company also receives annual rental income of $145,000 from a building it
owns. The related lease expires in January 2003 and contains renewal options.



                                       21.
<PAGE>

9. RETIREMENT PLANS

As discussed in Note 1, the Company maintains retirement benefit plans for
eligible employees. Total plan expenses charged to operations were $2,375,000,
$2,783,000 and $2,025,000 in 2000, 1999 and 1998, respectively.

10. INCOME TAXES

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

<TABLE>
<CAPTION>
                                            2000        1999         1998
                                            ----        ----         ----
<S>                                     <C>         <C>          <C>
      Federal: Current                   $ 2,156     $ 3,221      $ 2,742
                Deferred                     477          98         (634)
      State:    Current                      287         510          341
                Deferred                      55          11          (74)
                                         -------     -------      -------
                                         $ 2,975     $ 3,840      $ 2,375
                                         =======     =======      =======
</TABLE>

The difference between the tax rate on income for financial statement purposes
and the federal statutory tax rate was as follows:

<TABLE>
<CAPTION>
                                            2000        1999         1998
                                            ----        ----         ----
<S>                                       <C>         <C>          <C>
      Statutory tax rate                   34.0%       34.0%        34.0%
      Percentage depletion                 (1.4)       (1.8)        (3.2)
      State income taxes, net of
        federal benefit                      3.0         3.0          2.3
      Non-deductible expenses                 .2          .1           .3
      Other                                    -          .4           .6
                                           -----       -----        -----
                                           35.8%       35.7%        34.0%
                                           =====       =====        =====
</TABLE>

For financial statement purposes, deferred tax assets and liabilities are
recorded at a blend of the current statutory federal and states' tax rates -
38%. The principal temporary differences and their related deferred taxes are as
follows (amounts in thousands):

<TABLE>
<CAPTION>
                                            2000        1999
<S>                                     <C>         <C>
      Reserves for self-insured losses  $  1,012    $  1,087
      Deferred compensation                  469         498
      Asset valuation reserves             1,041       1,154
      Other                                   35          44
                                        --------    --------
      Total deferred tax assets            2,557       2,783
      Depreciation                         1,953       1,939
      Investment in mining partnership        14          14
      Other                                  694         402
                                        --------    --------
      Total deferred tax liabilities       2,661       2,355
                                        --------    --------

      Net deferred tax (liability) asset $ (104)     $   428
                                        ========    ========
</TABLE>

The net current deferred tax assets are $1,494 and $1,654 at year-end 2000 and
1999, respectively, and are included with "Prepaid expenses" on the Consolidated
Balance Sheets.



                                       22.
<PAGE>

11. UNAUDITED QUARTERLY FINANCIAL DATA

The following table provides summarized unaudited fiscal quarterly financial
data for 2000 and 1999 (amounts in thousands, except per share amounts; per
share data restated for the stock split):

<TABLE>
<CAPTION>
                             First       Second       Third      Fourth
                            Quarter     Quarter     Quarter      Quarter
                            -------     -------     -------      -------
<S>                         <C>         <C>         <C>          <C>
      2000
      Sales                  $25,350     $30,232     $29,186      $31,234
      Gross profit             4,715       6,057       5,955        7,331
      Depreciation,
        depletion and
         amortization          1,352       1,371       1,605        1,091
      Net income                 383       1,040         939        2,973
      Basic income per share     .20         .56         .50         1.61
      Diluted income per
        share                    .20         .55         .49         1.59

<CAPTION>
                             First       Second       Third      Fourth
                            Quarter     Quarter     Quarter      Quarter
                            -------     -------     -------      -------
<S>                         <C>         <C>         <C>          <C>
      1999
      Sales                  $25,499     $32,493     $34,831      $31,063
      Gross profit             4,950       7,655       6,768        8,624
      Depreciation,
        depletion and
         amortization          1,087       1,243       1,377        1,291
      Net income                 734       2,039       1,598        2,531
      Basic income per share     .34         .99         .80         1.29
      Diluted income per share   .33         .97         .78         1.26
</TABLE>

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. The fourth quarter results for 2000, as compared to
1999, were positively affected by adjustments to maintenance costs in the
construction materials segment.

12. INDUSTRY SEGMENT INFORMATION

The Company reports its segments in accordance with SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information." The Company is
organized along its two principal product lines. Wall furnaces, console heaters,
evaporative coolers and fan coils have been aggregated into the heating and air
conditioning segment. Ready mix concrete, construction aggregates, building
supplies and doors are combined to form the construction materials segment. The
heating and air conditioning segment produces heating and cooling equipment for
residential applications which is sold primarily to wholesale distributors and
retail home centers. Fan coils are also sold to HVAC installing contractors and
equipment manufacturers for commercial applications. A significant portion of
fan coil revenues is dependent upon new hotel construction. Sales are
nationwide, but are concentrated in the southwestern U.S. The construction
materials segment is involved in the production and sale of concrete and other
building materials and the exploration, extraction and sales of construction
aggregates. Sales of this segment are confined to the Front Range area in
Colorado.

The Company evaluates the performance of its segments and allocates resources to
them based on operating income and return on investment. Other factors are also
considered. 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


                                       23.
<PAGE>

corporate expenses, interest, income or loss from unconsolidated investees,
other income or loss or income taxes.

The following table presents information about reported segments for the fiscal
years 2000, 1999 and 1998 along with the items necessary to reconcile the
segment information to the totals reported in the financial statements (amounts
in thousands).

<TABLE>
<CAPTION>
                                   Heating and Construction         All Unallocated
                              air conditioning    materials   other (a) corporate (b)     Total
                              ----------------    ---------   -----------------------     -----
<S>                                <C>          <C>         <C>         <C>         <C>
  2000
  Revenues from external
      customers                     $   49,083   $   66,771  $      145  $        3  $  116,002
  Depreciation, depletion
      and amortization                   1,220        4,117          22          60       5,419
  Segment operating income               5,002        6,144          45     (3,001)       8,190
  Segment assets                        28,868       31,536          36       7,810      68,250
  Expenditures for segment
      assets                               651        2,586           -          69       3,306

  1999
  Revenues from external
      customers                     $   56,768   $   66,966  $      145   $       7  $  123,886
  Depreciation, depletion
      and amortization                   1,181        3,758          22          37       4,998
  Segment operating income               7,793        7,001          43     (3,542)      11,295
  Segment assets                        31,568       34,157          65       1,961      67,751
  Expenditures for segment
      assets                             2,640        6,262           -         122       9,024

  1998
  Revenues from external
      customers                     $   52,251   $   60,814  $      145  $        -  $  113,210
  Depreciation, depletion
      and amortization                   1,091        2,862          22          17       3,992
  Segment operating income               4,183        6,414          41     (2,823)       7,815
  Segment assets                        25,628       29,888         183       7,918      63,617
  Expenditures for segment
      assets                             1,352        4,994           -         118       6,464
</TABLE>

         (a) All other represents segments below the quantitative thresholds.
             The segments include a small real estate operation and the holding
             costs for certain mining interests that remain from the period the
             Company maintained significant interests in mining operations.

         (b) Corporate assets consist primarily of cash and cash equivalents.

All long-lived assets are in the United States and no customer accounts for 10%
or more of consolidated revenue.

13. SUBSEQUENT EVENT
On December 31, 2000, the Company acquired all of the stock of Rocky Mountain
Ready Mix Concrete, Inc., a ready-mix concrete producer in the metropolitan
Denver, Colorado area for approximately $12,450,000. The new company operates
three ready-mix batch plants in the Denver area and will continue to do business
under its current name.


                                       24.
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Continental Materials
Corporation

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and retained earnings and cash flows
present fairly, in all material respects, the financial position of Continental
Materials Corporation and its subsidiaries at December 30, 2000 and January 1,
2000, and the results of their operations and their cash flows for each of the
three years in the period ended December 30, 2000, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Chicago, Illinois
March 7, 2001



                                       25.
<PAGE>

Item 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
           ACCOUNTING AND FINANCIAL DISCLOSURE

There have been no changes of accountants and/or disagreements on any matter of
accounting principle or financial statement disclosure during the past 24 months
which would require a filing under Item 9.

                                    PART III

Part III (Items 10, 11, 12,and 13) has been omitted from this 10-K Report since
Registrant will file, not later than 120 days following the close of its fiscal
year ended December 30, 2000, its definitive 2001 proxy statement. The
information required by Part III will be included in that proxy statement and
such information is hereby incorporated by reference, but excluding the
information under the headings "Compensation Committee Report" and "Comparison
of Total Shareholders' Return".

                                     PART IV

Item 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
           ON FORM 8-K

(a) 1      Financial  statements  required by Item 14 are included in Item
           8 of Part II.

(a) 2      The following is a list of financial  statement schedules filed
           as part of this Report:

                   Report of Independent Accountants

                   Schedule II Valuation  and  Qualifying  Accounts & Reserves
                   For the Fiscal Years 2000, 1999 and 1998

All other schedules are omitted because they are not applicable or the
information is shown in the financial statements or notes thereto.



                                       26.
<PAGE>

 (a) 3     The  following is a list of all exhibits  filed as part of this
           Report:


Exhibit 3    1975 Restated Certificate of Incorporation dated May 28, 1975
             filed as Exhibit 5 to Form 8-K for the month of May 1975,
             incorporated herein by reference.

Exhibit 3a   Registrant's By-laws as amended September 19, 1975 filed as
             Exhibit 6 to Form 8-K for the month of September 1975, incorporated
             herein by reference.

Exhibit 3b   Registrant's Certificate of Amendment of Certificate of
             Incorporation dated May 24, 1978 filed as Exhibit 1 to Form 10-Q
             for quarter ended June 30, 1978, incorporated herein by reference.

Exhibit 3c   Registrant's Certificate of Amendment of Certificate of
             Incorporation dated May 27, 1987 filed as Exhibit 3c to Form 10-K
             for the year ended January 1, 1988, incorporated herein by
             reference.

Exhibit 3d   Registrant's Certificate of Amendment of Restated Certificate of
             Incorporation dated June 4, 1999 filed as Exhibit 1 to Form 8-K for
             the month of June 1999, incorporated herein by reference.

Exhibit 10   Continental Materials Corporation Amended and Restated 1994
             Stock Option Plan dated May 25, 1994 filed as Appendix A to the
             1994 Proxy Statement, incorporated herein by reference.*

Exhibit 10a  Revolving Credit and Term Loan Agreement between The Northern
             Trust Company, LaSalle National Bank and Continental Materials
             Corporation dated as of October 21, 1996 filed as Exhibit 2D to
             Form 8-K for the month of October 1996 and the Amendment thereto
             filed as Exhibit 2B to Form 8-K for the month of December 2000,
             incorporated herein by reference.

Exhibit 10b  Acquisition Agreement Between Valco Properties, Ltd. And
             Continental Materials Corporation filed as Exhibit 2A to Form 8-K
             for the month October 1996, incorporated herein by reference.

Exhibit 10c  Non-Competition and Non-Disclosure Agreement by Valco, Inc. And
             Thomas E. Brubaker in favor of Continental Materials Corporation
             filed as Exhibit 2B to Form 8-K for the month of October 1996,
             incorporated herein by reference.

Exhibit 10d  Fee Sand and Gravel Lease Between Valco, Inc. And Continental
             Materials Corporation filed as Exhibit 2C to Form 8-K for the month
             of October 1996, incorporated herein by reference.

Exhibit 10e  Form of Supplemental Deferred Compensation Agreement filed as
             Exhibit 10 to Form 10-Q for the quarter ended July 1, 1983,
             incorporated herein by reference.*

Exhibit 10f  Stock Purchase Agreement By and Among Continental Materials
             Corporation, Rocky Mountain Ready Mix Concrete, Inc. and The
             Shareholders of Rocky Mountain Ready Mix Concrete, Inc. Filed as
             Exhibit 2A to Form 8-K for the month of December 2000, incorporated
             herein by reference.

Exhibit 21 Subsidiaries of Registrant (filed herewith).

Exhibit 23 Consent of Independent Accountants (filed herewith).

Exhibit 99a  Continental Materials Corporation Employee Profit Sharing
             Retirement Plan Amended and Restated Generally Effective October 1,
             1997 filed as Exhibit 99a to Form 10-K for the year ended
             January 1, 2000, incorporated herein by reference.*

Exhibit 99b  Continental Materials Corporation Employees Profit Sharing
             Retirement Plan on Form 11-K for the year ended December 30, 2000
             (to be filed by amendment).

* - Compensatory plan or arrangement



                                       27.
<PAGE>

(b)        Reports on Form 8-K:

           No reports on Form 8-K were filed during the quarter ended December
           30, 2000.

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                CONTINENTAL MATERIALS CORPORATION
                                                Registrant

                              By: /s/Joseph J. Sum
                                 ------------------------------------
                                 Joseph J. Sum, Vice President, Finance

Date: March 27, 2001

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

       SIGNATURE                      CAPACITY(IES)                    DATE
-------------------------        -------------------------        --------------

/s/ James G. Gidwitz
-------------------------
   James G. Gidwitz              Chief Executive Officer
                                      And a Director              March 27, 2001

/s/ Joseph J. Sum
-------------------------
   Joseph J. Sum                      Vice President
                                      And a Director              March 27, 2001

/s/ Mark S. Nichter
-------------------------
   Mark S. Nichter               Secretary and Controller         March 27, 2001

/s/ Thomas H. Carmody
-------------------------
      Thomas H. Carmody                  Director                 March 27, 2001

/s/ Betsy R. Gidwitz
-------------------------
     Betsy R. Gidwitz                    Director                 March 27, 2001

/s/ Ralph W. Gidwitz
-------------------------
      Ralph W. Gidwitz                   Director                 March 27, 2001

/s/ Ronald J. Gidwitz
-------------------------
      Ronald J. Gidwitz                  Director                 March 27, 2001

/s/ William G. Shoemaker
-------------------------
   William G. Shoemaker                  Director                 March 27, 2001

/s/ Theodore R. Tetzlaff
-------------------------
   Theodore R. Tetzlaff                  Director                 March 27, 2001

/s/ Darrell M. Trent
-------------------------
   Darrell M. Trent                      Director                 March 27, 2001



                                       28.
<PAGE>

                      REPORT OF INDEPENDENT ACCOUNTANTS ON
                          FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Shareholders
  of Continental Materials Corporation

Our audits of the consolidated financial statements referred to in our report
dated March 7, 2001 appearing in the 2000 Annual Report to Shareholders of
Continental Materials Corporation also included an audit of the financial
statement schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion,
this financial statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.

PricewaterhouseCoopers LLP

Chicago, Illinois
March 7, 2001

                                       29.


<PAGE>






                        CONTINENTAL MATERIALS CORPORATION

     SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (c) (d)

                   for the fiscal years 2000, 1999 and 1998

<TABLE>
<CAPTION>
              COLUMN A               COLUMN B       COLUMN C(1)        COLUMN D          COLUMN E
                                                     Additions
                                     Balance at     Charged to
                                    Beginning of     Costs and       Deductions -       Balance at
             Description              Period         Expenses          Describe         End of Period
     ----------------------------  --------------  ---------------  ---------------    --------------

<S>                                  <C>             <C>              <C>                 <C>
     YEAR 2000
     Allowance for doubtful
     accounts                        $800,000        $(110,000)       $215,000     (a)    $475,000
                                   ==============  ===============  ===============    ==============
     Inventory valuation reserve     $568,000       $   14,000        $139,000     (b)    $443,000
                                   ==============  ===============  ===============    ==============
     YEAR 1999
     Allowance for doubtful
     accounts                        $775,000         $486,000        $461,000     (a)    $800,000
                                   ==============  ===============  ===============    ==============
     Inventory valuation reserve     $504,000         $127,000       $  63,000     (b)    $568,000
                                   ==============  ===============  ===============    ==============
     YEAR 1998
     Allowance for doubtful
     accounts                       $ 580,000         $304,000        $109,000     (a)    $775,000
                                   ==============  ===============  ===============    ==============
     Inventory valuation reserve    $ 233,000         $667,000        $396,000     (b)    $504,000
                                   ==============  ===============  ===============    ==============
</TABLE>


Notes:

(a)  Accounts written off,               (c)  Reserve deducted
     net of recoveries.                       in the balance sheet from the
                                              asset to which it applies.

(b)  Amounts written off                 (d)  Column C(2) has
     upon disposal of assets.                 been omitted as the answer
                                              would be "none".


                                      30