GIBRALTAR STEEL CORPORATION

Because of the nature of the Company's products and the short lead time order cycle, backlog is not a significant factor in the Company's business.  The Company believes that substantially all of its firm orders existing on December 31, 2003 will be shipped prior to the end of 2004.

Governmental Regulation

The Company's processing centers and manufacturing facilities are subject to many federal, state and local requirements relating to the protection of the environment.  The Company believes that it operates its business in material compliance with all environmental laws and regulations, does not anticipate any material expenditures in order to meet environmental requirements and does not believe that future compliance with such laws and regulations will have a material adverse effect on its financial condition or results of operations.  However, the Company could incur operating costs or capital expenditures in complying with more stringent environmental requirements in the future or with current requirements if they are applied to the Company's facilities in a way the Company does not anticipate.

The Company's operations are also governed by many other laws and regulations.  The Company believes that it is in material compliance with these laws and regulations and does not believe that future compliance with such laws and regulations will have a material adverse effect on its financial condition or results of operations.

Internet Information

Copies of the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through the Company's Web site (www.gibraltar1.com) as soon as reasonably practicable after the Company electronically files the material with, or furnishes it to, the Securities and Exchange Commission.

Item 2.                        Description of Properties

The Company maintains its corporate headquarters in Buffalo, New York and conducts business operations in facilities located throughout the United States.

The Company believes that its primary existing facilities, listed below, and their equipment are effectively utilized, well maintained, in good condition and will be able to accommodate its capacity needs through 2004.

*  Leased.  All other facilities owned.

Item 3.                        Legal Proceedings

 From time to time, the Company is named a defendant in legal actions arising out of the normal course of business.  The Company is not a party to any pending legal proceeding the resolution of which the management of the Company believes will have a material adverse effect on the Company's results of operations or financial condition or to any other pending legal proceedings other than ordinary, routine litigation incidental to its business.  The Company maintains liability insurance against risks arising out of the normal course of business.

Item 4.                        Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of the year ended December 31, 2003.

PART II

Item 5.                        Market for Common Equity and Related Stockholder Matters

As of December 31, 2003, there were 120 shareholders of record of the Company's common stock.  However, the Company believes that it has a significantly higher number of shareholders because of the number of shares that are held by nominees.

The Company's common stock is traded in the over-the-counter market and quoted on the National Association of Securities Dealers Automated Quotation System - National Market System ("NASDAQ") under the symbol "ROCK."  The following table sets forth the high and low sale prices per share for the Company's common stock for each quarter of 2003 and 2002 as reported on the NASDAQ National Market:

The Company declared dividends of $.040 per share in the first quarter of 2003 and $.045 in each of the second and third quarters of 2003.  As of the date of the Form 10-K filing, no dividend has been declared for the fourth quarter of 2003; however, the Company has no knowledge of anything that would prevent the Board of Directors from declaring a fourth quarter dividend.  The Company declared dividends of $.035 per share in the first quarter of 2002 and $.040 per share in each of the second, third and fourth quarters of 2002. 

Cash dividends are declared at the discretion of the Company's Board of Directors.  The Board of Directors reviews the dividend quarterly and establishes the dividend rate based upon such factors as the Company's earnings, financial condition, capital requirements, debt covenant requirements and/or other relevant conditions.  Although the Company expects to continue to declare and pay cash dividends on its common stock in the future if earnings are available, the Company cannot assure that either cash or stock dividends will be paid in the future or that, if paid, the dividends will be paid in the same amount or at the same frequency as paid in the past.

The following table summarizes information concerning securities authorized for issuance under the Company's stock option plans:

(1)   Consists of the Company's non-qualified stock option plan and 1993 incentive stock option plan (which expired in 2003). Note 13 of the Company's consolidated financial statements included in Item 8 herein provides additional information regarding the Company's stock option plans.

(2)   Consists of the Company's 2003 incentive stock option plan. Under this plan, 1,500,000 shares of common stock are reserved for the future granting of stock options. No options under this plan were issued as of December 31, 2003. Note 13 of the Company's consolidated financial statements included in Item 8 herein provides additional information regarding the Company's stock option plans.

Item 6.            Selected Financial Data

Item 7.  Management's Discussion and Analysis of Financial Condition  and Results  of OpFerations

 The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company's consolidated financial statements and notes thereto included in Item 8 of this Form 10-K.

Overview

The consolidated financial statements present the financial condition of the Company as of December 31, 2003 and 2002, and the consolidated results of operations and cash flows of the Company for the years ended December 31, 2003, 2002 and 2001.

The Company is organized into three reportable segments -Processed Steel Products, Building Products and Heat Treating.  The Company also held equity positions in two joint ventures as of December 31, 2003.

The Processed Steel Products segment produces a wide variety of cold-rolled strip steel products, coated sheet steel products and strapping products.  This segment primarily serves the automotive industry's leaders, such as General Motors, Ford, Chrysler, and Honda. This segment also serves the  automotive supply and commercial and residential metal building industry, as well as the power and hand tool and hardware industries.  During 2003, the Company strengthened its Processed Steel Products segment through its joint venture with Duferco Farrell Corporation, in which the Company acquired a 50% partnership interest in Gibraltar DFC Strip Steel, LLC. The automotive market is a very important part of the Company's Processed Steel segment. In 2004, the Company plans to continue its longstanding relationships with the domestic automotive manufacturers, as well as enhance its present relationships with the transplant automobile manufacturers and their suppliers.

The Building Products segment processes sheet steel to produce a wide variety of building and construction products. This segment's products are sold to major retail home centers, such as The Home Depot, Lowe's, Menards and Wal-Mart. During 2003, the Company eliminated competitors and strengthened its position in the Building Products market through the acquisitions of Construction Metals (acquired April 1, 2003) and Air Vent (acquired May 1, 2003). These strategic acquisitions enabled the Company to broaden its geographic markets, solidify product offerings and added approximately $82.4 million to the Company's consolidated net sales for 2003. In addition, in January 2004, the Company acquired Renown Specialties Company Ltd., which is a manufacturer and distributor of construction hardware products in Canada. The acquisition of Renown serves to broaden the Company's product lines and strengthen its existing customer relationships.  In 2004, the Company believes the ongoing trend of increased use of metal building products will continue because of favorable environmental characteristics, cost efficiency and architectural design enhancements.

The Heat Treating segment provides a wide array of processes which refine the metallurgical properties of customer-owned metal products for a variety of consumer and industrial applications where critical performance characteristics are required. This segment services such customers as General Motors, Ford, Eaton Corporation, Dana Corporation, and International Truck.  In 2004, the Company believes the growing trend in the outsourcing of heat treating operations will continue and that its heat treating facilities are strategically located to meet the needs of customers from a geographically diverse base of operations.

The following table sets forth the Company's net sales by reportable segment for the period ending December 31:

Results of Operations

Year Ended 2003 Compared to Year Ended 2002

Consolidated

Net sales increased by approximately $113.1 million, or 17.5%, to $758.3 million in 2003, from net sales of $645.1 million in 2002.  The increase in net sales was primarily due to the addition of net sales of B&W Heat Treating (acquired July 1, 2002), Construction Metals (acquired April 1, 2003) and Air Vent (acquired May 1, 2003), which contributed approximately $87.9 million in additional sales in 2003. The remaining increase in net sales is the result of expanded sales penetration achieved through the Company's national manufacturing, marketing and distribution capabilities, as well as through new product offerings, design enhancements on existing product lines and new market opportunities.

Cost of sales increased by approximately $92.3 million, or 17.8%, to $610.1 million in 2003, from cost of sales of $517.8 million in 2002.  The dollar-for-dollar increase in 2003 cost of sales was primarily due to higher sales volume as a result of the B&W Heat Treating, Construction Metals and Air Vent acquisitions. Cost of sales as a percentage of net sales increased to 80.5% in 2003 from 80.3% in 2002. The slight increase in cost of sales as a percentage of net sales in 2003, was the result of an increase in raw material, utility, workers compensation and transportation costs, as well as increases in fringe benefit costs as a percentage of net sales when compared to 2002.

Selling, general and administrative expenses increased by approximately $12.2 million, or 15.8%, to $89.3 million in 2003, from selling, general and administrative expenses of $77.1 million in 2002. The dollar-for-dollar increase in 2003 selling, general and administrative expenses was due primarily to the addition of costs from the 2003 acquisitions. Selling, general and administrative expenses as a percentage of net sales decreased to 11.8% in 2003 from 12.0% in 2002.  This decrease was primarily due to the impact of the Company's recent acquisitions, which have lower selling, general and administrative costs as a percentage of net sales than the Company's existing operations.   

Interest expense increased by approximately $3.8 million in 2003, primarily due to an increase in debt used to finance the 2003 acquisitions of Construction Metals and Air Vent, as well as the Company's 50% interest in Gibraltar DFC Strip Steel, LLC.  

As a result of the above, income before taxes increased by $4.8 million, or 12.1%, to $44.6 million in 2003 from income before taxes of $39.8 million in 2002.

Income taxes approximated $17.6 million in 2003, based on a 39.5% effective rate compared with a 40% effective rate in 2002.

Segment Information

Processed Steel Products -Net sales decreased by approximately $4.3 million, or 1.6%, to $268.5 million in 2003, from net sales of $272.8 million in 2002.  This decrease was primarily due to decreases in automotive production levels by the "Big Three" automotive manufacturers, as well as reduced sales in the service center business attributable to the reduction in processed steel demand for use in commercial building industry applications.

Income from operations decreased by approximately $6.9 million, or 21.1%, to $25.9 million in 2003, compared to income from operations of $32.8 million in 2002.  Operating margin decreased to 9.6% of net sales in 2003 compared to 12.0% in 2002, primarily due to higher raw material, transportation, and workers compensation costs as well as increases in fringe benefit costs as a percentage of lower net sales.

Building Products -Net sales increased by approximately $108.3 million, or 37.1%, to $400.4 million in 2003, from net sales of $292.2 million in 2002.  The increase in net sales was due primarily to the addition of net sales of Construction Metals (acquired April 1, 2003) and Air Vent (acquired May 1, 2003), which contributed approximately $82.4 million in additional net sales in 2003. The remaining increase in net sales was the result of expanded sales penetration through both new and redesigned product offerings as well as new market opportunities.

Income from operations increased by approximately $18.8 million, or 88.1%, to $40.1 million in 2003, compared to income from operations of $21.3 million in 2002.  Operating margin increased to 10.0% of net sales in 2003, compared to 7.3% in 2002 primarily due to higher income from operations of the 2003 acquisitions, and was partially offset by increases in raw material costs during 2003.

Heat Treating -Net sales increased by approximately $9.2 million, or 11.5%, to $89.3 million in 2003 from net sales of $80.2 million in 2002.  This increase was due primarily to the addition of a full year of net sales of B&W Heat Treating (acquired July 1, 2002), which contributed approximately $5.5 million in additional net sales in 2003.  The remaining increase in net sales was primarily the result of increased sales penetration by the Company's new brazing operation in Fairfield, Ohio.

Income from operations decreased by approximately $.5 million, or 5.2%, to $9.4 million in 2003, compared to income from operations of $9.9 million in 2002.  Operating margin decreased to 10.5% of net sales in 2003, compared to 12.4% of net sales in 2002 primarily due to higher material, utility and workers compensation costs, as well as increases in  fringe benefit costs.

Year Ended 2002 Compared to Year Ended 2001

Consolidated

Net sales increased by approximately $29.1 million, or 4.7%, to $645.1 million in 2002, from net sales of $616.0 million in 2001.  This increase resulted primarily from increased sales resulting from increased production levels in the automotive industry and the July 1, 2002 acquisition of B&W Heat Treating.

Cost of sales increased by approximately $17.9 million, or 3.5%, to $517.8 million in 2002 from cost of sales of $499.9 million in 2001.  Cost of sales as a percentage of net sales decreased to 80.3% in 2002 from 81.2% in 2001 primarily due to lower raw material and freight costs partially offset by increased direct labor and health care costs and general insurance expense.

Selling, general and administrative expenses decreased by approximately $1.4 million, or 1.8%, to $77.1 million in 2002 from selling, general and administrative expenses of $78.6 million in 2001. Selling, general and administrative expenses as a percentage of net sales decreased to 12.0% for 2002 from 12.8% for 2001 primarily due to the elimination of goodwill amortization as a result of the implementation of new accounting rules in 2002, partially offset by increased incentive compensation.  Additionally, in 2001 we had a non-cash charge of $1.0 million relating to the Company's E-Commerce investment.

Interest expense decreased by approximately $6.0 million in 2002 primarily due to lower average borrowings during 2002 due to the use of proceeds from the Company's stock offering in mid-March 2002 and lower interest rates.

As a result of the above, income before taxes increased by $18.7 million, or 88%, to $39.8 million in 2002, from income before taxes of $21.1 million in 2001.

Income taxes approximated $15.9 million in 2002, based on a 40% effective rate compared with a 40.5% effective rate in 2001.

Segment Information

Processed Steel Products -Net sales increased by approximately $20.4 million, or 8.1%, to $272.8 million in 2002, from net sales of $252.4 million in 2001.  This increase was due primarily to increased sales resulting from increased production levels in the automotive industry in 2002.

Income from operations increased by approximately $3.7 million, or 12.6%, to $32.8 million in 2002, compared to income from operations of $29.2 million in 2001.  Operating margin increased to 12.0% of net sales in 2002 compared to 11.6% in 2001, primarily due to lower raw material and freight costs, partially offset by increased direct labor costs and incentive-based compensation.

Building Products -Net sales for 2002 of $292.2 million were comparable to net sales of $292.4 million for 2001.  Weaker demand due to general economic conditions in this segment's industry early in the year were offset by an improvement in these conditions during the third and fourth quarters, especially through sales to major retail outlets.

Income from operations increased by approximately $3.2 million, or 17.4%, to $21.3 million in 2002, compared to income from operations of $18.2 million in 2001. Operating margin increased to 7.3% of net sales in 2002, compared to 6.2% in 2001 primarily due to lower raw material costs, partially offset by increased health care costs, general insurance expense and incentive-based compensation.

Heat Treating -Net sales increased by approximately $9.0 million, or 12.6%, to $80.2 million in 2002, from net sales of $71.2 million in 2001.  This increase was due primarily to the July 1, 2002 acquisition of B&W Heat Treating and increased sales resulting from increased production levels in the automotive industry.

Income from operations increased by approximately $1.1 million, or 12.6%, to $9.9 million in 2002, compared to income from operations of $8.8 million in 2001.  Operating margin as a percentage of net sales of 12.4% for 2002 was comparable to 2001.

 Critical Accounting Policies

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make decisions based upon estimates, assumptions, and factors it considers relevant to the circumstances.  Such decisions include the selection of applicable principles and the use of judgment in their application, the results of which could differ from those anticipated.

A summary of the Company's significant accounting policies are described in Note 1 of the Company's consolidated financial statements included in Item 8 of this Form 10-K.

The Company's most critical accounting policies include: valuation of accounts receivable, which impacts general and administrative expense; valuation of inventory, which impacts cost of sales and gross margin; and the assessment of recoverability of goodwill and other intangible and long-lived assets, which impacts write-offs of goodwill, intangibles and long-lived assets.  Management reviews the estimates, including, but not limited to, the allowance for doubtful accounts and inventory reserves on a regular basis and makes adjustments based on historical experiences, current conditions and future expectations.  The reviews are performed regularly and adjustments are made as required by current available information.  Management believes these estimates are reasonable, but actual results could differ from these estimates.

The Company's accounts receivable represent those amounts which have been billed to the Company's customers but not yet collected.  Management analyzes various factors including historical experience, credit worthiness of customers and current market and economic conditions.  The allowance for doubtful accounts balance is established based on the portion of those accounts receivable which are deemed to be potentially uncollectible.  Changes in judgments on these factors could impact the timing of costs recognized.

The Company states its inventories at lower of cost or market.  The cost basis of the Company's inventory is determined on a first-in-first-out basis using either actual costs or a standard cost methodology which approximates actual cost.

Intangible assets with estimable useful lives (which consist primarily of non-competition agreements) are amortized to their residual values over those estimated useful lives in proportion to the economic benefit consumed.

Long-lived assets with estimated useful lives are depreciated to their residual values over those useful lives in proportion to the economic value consumed.  Long-lived assets are tested for impairment when events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable and exceeds its fair market value.  This circumstance exists if the carrying amount of the asset in question exceeds the sum of the undiscounted cash flows expected to result from the use of the asset.  The impairment loss would be measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value as determined by discounted cash flow method or in the case of negative cash flow, an independent market appraisal of the asset.

Goodwill is tested annually, or sooner if indicators of impairment exist, for impairment at the reporting unit level by comparing the fair value of the reporting unit with its carrying value.  A reporting unit is either the same as, or one level below, an operating segment.  The primary valuation method for determining the fair value of the reporting unit is a discounted cash flows analysis.  If the goodwill is indicated as being impaired (the fair value of the reporting unit is less than the carrying amount), the fair value of the reporting unit would then be allocated to its assets and liabilities in a manner similar to a purchase price allocation in order to determine the implied fair value of the reporting unit goodwill.  This implied fair value of the reporting unit goodwill would then be compared with the carrying amount of the reporting unit goodwill and, if it is less, the Company would then recognize an impairment loss.

The projection of future cash flows for the goodwill impairment analysis requires significant judgments and estimates with respect to future revenues related to the assets and the future cash outlays related to those revenues.  Actual revenues and related cash flows, changes in anticipated revenues and related cash flows or use of different assumptions could result in changes in this assessment.

Liquidity and Capital Resources

The Company's principal capital requirements are to fund its operations, including working capital, the purchase and funding of improvements to its facilities, machinery and equipment and to fund acquisitions.

The Company's shareholders' equity increased by approximately $101.1 million or 34.5%, to $394.2 million, at December 31, 2003.  This increase was primarily due to the receipt of $70.0 million in net proceeds from the Company's common stock offering in December 2003, proceeds of $3.6 million from the exercise of stock options, as well as net income of $27.0 million, including earnings from the Company's 2003 acquisitions.   

During 2003, the Company's working capital increased $12.5 million, or 9.0%, to approximately $150.7 million. The increase in working capital was primarily the result of an increase in cash and cash equivalents due to the cash proceeds received from the December 2003 common stock offering. The net proceeds to the Company from the common stock offering approximated $70.0 million and approximately $45.0 million was used to pay off the Company's LIBOR debt that matured in December 2003. The remaining $25.0 million in cash proceeds received from the offering was held in cash and cash equivalents at December 31, 2003. Subsequent to year-end, the Company used this $25.0 million in cash to pay down the Company's LIBOR debt that matured in January 2004. The remaining change in working capital was primarily the result of increases in accounts receivable of $16.8 million, offset by increases in the current portion of long-term debt of $19.2 million and the aggregate increase in accounts payable and accrued expenses of $14.8 million, primarily due to the acquisitions of Construction Metals and Air Vent.

On April 1, 2003, the Company purchased all of the outstanding capital stock of Construction Metals and on May 1, 2003, the Company purchased all of the outstanding capital stock of Air Vent.  The Company paid approximately $147 million for both acquisitions, comprised of $87.2 million in cash, which included direct acquisition costs, and $59.8 million in unsecured subordinated debt payable to the former owners of the acquired companies over three to five years at annual interest rates ranging from 4.0% to 5.0%.

The Company's primary sources of liquidity are cash provided by operating activities and its revolving credit facility.  Net cash provided by operating activities for the year ended December 31, 2003 was $64.7 million and primarily represents net income plus non-cash charges for depreciation and amortization and changes in working capital positions.  Net cash provided by operating activities in 2003 was due primarily to net income of $27.0 million combined with depreciation and amortization of $22.4 million, the provision for deferred income taxes of $6.5 million, reductions in inventories of $11.1 million and increases in accounts payable and accrued expenses of $1.0 million offset by increases in accounts receivable and other current assets which aggregated $5.0 million. 

The $64.7 million of net cash provided by operating activities and the net proceeds of $70.0 million from the Company's 2003 stock offering plus cash on hand at the beginning of the period and cash generated by the exercise of stock options of $3.6 million, were used to pay down $118.1 million of the Company's long-term debt, to fund current operations, the acquisitions of Constructions Metals and Air Vent of $84.2 million (net of cash acquired), capital expenditures of $22.6 million and pay cash dividends of $2.7 million.  

In April 2003, the Company amended its revolving credit facility, which expires in June 2007, to increase the aggregate borrowing limit to $290.0 million.  Additionally, the revolving credit facility contains a $10.0 million expansion feature at the Company's option, subject to approval by participating financial institutions.  Borrowings thereunder are secured with the Company's accounts receivable, inventories and personal property and equipment.  At December 31, 2003, the Company had used approximately $125.0 million of the revolving credit facility, resulting in $165.0 million in availability.  At December 31, 2003, the Company had interest rate swap agreements outstanding which effectively converted $50 million of borrowings under its revolving credit agreement to fixed interest rates ranging from 7.72% to 8.43%.  Additional borrowings under the revolving credit facility carry interest at LIBOR plus a fixed rate.  At December 31, 2003, additional borrowings under the revolving credit facility aggregated $75.0 million.  The weighted average interest rate of these additional borrowings was 3.55% at December 31, 2003.

The Company's revolving credit facility contains various debt covenants.  At December 31, 2003 the Company was in compliance with all covenants.

In 2002, the Company entered into a $50 million private placement of debt with The Prudential Insurance Company of America, which consists of a $25 million senior secured note bearing interest at 7.35% annually, due on July 3, 2007 and a $25 million senior subordinated note, bearing interest at 8.98% annually, due on January 3, 2008.  At December 31, 2003, the total principal balance of the private placement debt aggregated $50 million, none of which is due within the next twelve months.     

In January 2004, the underwriters of the Company's December 2003 common stock offering exercised a portion of their over-allotment option, and purchased an additional 214,625 shares of the Company's common stock at $24.75 per share.  Net proceeds to the Company from the purchase of these additional shares was approximately $5.0 million and was  used to further reduce the Company's outstanding debt. 

The Company believes that availability of funds under its credit facility together with cash generated from operations will be sufficient to provide the Company with the liquidity and capital resources necessary to support its principal capital requirements, including operating activities, capital expenditures, and dividends.

Contractual Obligations

The following table summarizes the Company's contractual obligations at December 31, 2003:

 Related Party Transactions

In connection with the acquisition of Construction Metals in April 2003, the Company entered into two unsecured subordinated notes payable, each in the amount of $8.75 million (aggregate total of $17.5 million). These notes are payable to the former owners of Construction Metals and are considered related party in nature due to the former owners' current employment relationship with the Company.  These notes are payable in three equal annual principal installments of approximately $2.9 million per note, beginning on April 1, 2004, with the final principal payment due on April 1, 2006.  These notes require quarterly interest payments at an interest rate of 5.0% per annum.  Interest expense related to these notes payable aggregated approximately $660,000 in 2003.  At December 31, 2003, the current portion of these notes payable aggregated approximately $5.8 million and accrued interest aggregated approximately $221,000.

The Company has certain operating lease agreements related to operating locations and facilities with the former owners of Construction Metals (related parties) or companies controlled by these parties.  Rental expense associated with these related party operating leases aggregated approximately $512,000 in 2003.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards  No. 143, Accounting for Asset Retirement Obligations (SFAS 143). SFAS 143 requires that the fair value of an asset retirement obligation be recognized in the period in which it is incurred.  The adoption of SFAS 143 did not have a material impact on the Company's results of operations.

In June 2002, the FASB issued SFAS 146, Accounting for Exit or Disposal Activities. SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred.  The provisions of SFAS 146 are effective for exit or disposal activities that were initiated after December 31, 2002 and did not have a material impact on the Company's financial position or results of operations.

In November 2002, the FASB issued FASB Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45). FIN 45 requires the fair-value measurement and recognition of a liability for the issuance of certain guarantees issued or modified on January 1, 2003 or after.  Implementation of the fair-value measurement and recognition provisions of FIN 45 did not have a material impact on the Company's financial position or results of operations.

In December 2002, the FASB issued SFAS 148, Accounting for Stock-Based Compensation - Transition and Disclosure, an Amendment of SFAS No. 123.  SFAS 148 amends SFAS 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation.  In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require more prominent and more frequent disclosures in the financial statements regarding the effects of stock-based compensation.  SFAS 148 is effective for financial statements for fiscal years ending after December 15, 2002, including certain amendments to required disclosures related to stock-based compensation included in condensed financial statements for interim periods beginning after December 15, 2002.  Adoption of SFAS 148 did not have a material impact on the Company's financial position, results of operations or cash flows.  For further discussion of the Company's stock-based compensation arrangements, see Note 1 of the Company's consolidated financial statements included in Item 8 herein.

In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities.  This interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements, addresses consolidation of variable interest entities. FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary if the entity does not effectively disperse risks among the parties involved. The provisions of FIN 46 are effective immediately for those variable interest entities created after January 31, 2003.  The provisions are effective for financial statements issued for the first interim or annual period ending after December 15, 2003 for those variable interests held prior to February 1, 2003.  The adoption of this Interpretation did not have any effect on the Company's financial position or results of operations.

In April 2003, the FASB issued SFAS 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. SFAS 149 clarifies the accounting for derivatives, amending the previously issued SFAS 133, Accounting for Derivative Instruments and Hedging Activities.  SFAS 149 clarifies under what circumstances a contract with an initial net investment meets the characteristics of a derivative, amends the definition of any underlying contract, and clarifies when a derivative contains a financing components in order to increase the comparability of accounting practices under SFAS 133.  SFAS 149 is effective for contracts entered into or modified after June 30, 2003.  The adoption of SFAS 149 did not have a material impact on the Company's consolidated financial statements.

In May 2003, the FASB issued SFAS 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.  SFAS 150 applies specifically to a number of financial instruments that companies have historically presented within their financial statements either as equity or between the liabilities section and the equity section, rather than as liabilities.  SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003.  Implementation of SFAS 150 did not have a material impact on the Company's consolidated financial statements.

In December 2003, the FASB issued SFAS 132 (revised 2003), Employer's Disclosures About Pensions and Other Postretirement Benefits. SFAS 132 (revised 2003), revises employers' disclosures about pension plans and other postretirement benefit plans. SFAS 132 (revised 2003), does not change the measurement and recognition of those plans required by SFAS 87, Employers' Accounting for Pensions, SFAS 88, Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, and SFAS 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. SFAS 132 (revised 2003), retains the original disclosure requirements of SFAS 132 and requires additional expanded annual and interim disclosures to those in the original SFAS 132 about the assets, obligations, cash flows, and net periodic benefit costs of defined benefit pension plans and other defined benefit postretirement benefit plans. Except for certain provisions, the adoption of this Statement is required for financial statements with fiscal years ending after December 15, 2003. Implementation of SFAS 132 (revised 2003) did not have a material impact on the Company's consolidated financial statements. The revised disclosure requirements of this Statement are reflected in Notes 8 and 9 of the consolidated financial statements included in Item 8 herein.

Item 7A.          Quantitative and Qualitative Disclosures about Market Risk

In the ordinary course of business, the Company is exposed to various market risk factors, including changes in general economic conditions, competition and raw materials pricing and availability.  In addition, the Company is exposed to market risk, primarily related to its long-term debt.  To manage interest rate risk, the Company uses both fixed and variable interest rate debt.  The Company also entered into interest rate swap agreements that converted a portion of its  variable rate debt to fixed rate debt.  At December 31, 2003, the Company had $50 million of revolving credit borrowings that was fixed rate debt pursuant to these agreements.

The following table summarizes the principal cash flows and related interest rates of the Company's long-term debt at December 31, 2003 by expected maturity dates.  The weighted average interest rates are based on the actual rates that existed at December 31, 2003.  The variable rate debt consists primarily of the credit facility, of which $125 million is outstanding at December 31, 2003.  A hypothetical 1% increase or decrease in interest rates would have changed the 2003 interest expense by approximately $1.3 million.

The fair value of the Company's debt was $249.9 million at December 31, 2003.
 

Safe Harbor Statement

The Company wishes to take advantage of the Safe Harbor provisions included in the Private Securities Litigation Reform Act of 1995 (the "Act").  Certain information set forth herein contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about the Company's business, and management's beliefs about future operations, results and financial position.  These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions.  Statements by the Company, other than historical information, constitute "forward looking statements" within the meaning of the Act and may be subject to a number of risk factors.  Factors that could affect these statements include, but are not limited to, the following:  the impact of changing steel prices on the Company's results of operations; changing demand for the Company's products and services; and changes in interest or tax rates.  In addition, such forward-looking statements could also be effected by general industry and market conditions, as well as general economic and political conditions.

Report of Independent Auditors

To the Board of Directors and
Shareholders of Gibraltar Steel Corporation

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Gibraltar Steel Corporation and its subsidiaries at December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 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 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
Buffalo, New York
January 30, 2004