GIBRALTAR STEEL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The accompanying condensed consolidated financial statements as of March 31, 2002 and 2001 have been prepared by the Company without audit. In the opinion of management, all adjustments necessary to present fairly the financial position, results of operations and cash flows at March 31, 2002 and 2001 have been included.

Certain information and footnote disclosures including significant accounting policies normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements included in the Company's Annual Report to Shareholders for the year ended December 31, 2001.

The results of operations for the three month period ended March 31, 2002 are not necessarily indicative of the results to be expected for the full year.

2.   INVENTORIES

Inventories consist of the following:

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3.   SHAREHOLDERS' EQUITY

The changes in shareholders' equity consist of:

On January 1, 2001, the Company implemented the provisions of Statement of Financial Accounting Standards No. 133 Accounting for Derivative Instruments and Hedging Activities (FAS 133) and recognized the fair value of its interest rate swap agreements as other non-current liabilities. Gains or losses from changes in the fair value of the swap agreements are recorded, net of taxes, as components of Accumulated Comprehensive Loss.

Basic net income per share equals net income divided by the weighted average shares outstanding for the three months ended March 31, 2002 and 2001. The computation of diluted net income per share includes all dilutive common stock equivalents in the weighted average shares outstanding.

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Options to purchase 1,073,430 shares of the Company's common stock are outstanding as of March 31, 2002 and are exercisable at prices ranging from $10.00 to $22.50 per share. Included in diluted shares, are common stock equivalents relating to options of 171,930 and 103,461 for the three month periods ended March 31, 2002 and 2001, respectively.

The Company is organized into three reportable segments on the basis of the production process, and products and services provided by each segment, identified as follows:

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The following table illustrates certain measurements used by management to assess the performance of the segments described above as of and for the three month period ended March 31, 2002 and 200l (in thousands):

Net sales of $144.7 million for the first quarter ended March 31, 2002, decreased by $5.9 million, or 3.9%, from net sales of $150.6 million for the prior year's first quarter. This decrease was primarily due to lower sales in the building products and heat treating segments due to weaker demand resulting from general economic conditions in those segments compared to last year's first quarter.

Gross profit as a percentage of net sales of 18.8% in the first quarter of 2002 was comparable to 18.9% in the first quarter of 2001 despite slightly lower sales. This decrease was due primarily to higher direct labor, health care and fixed costs as a percentage of net sales due to lower sales volume partially offset by lower raw material costs in 2002 compared to the same period in 2001.

Selling, general and administrative expenses decreased to 12.2% of net sales for the first quarter ended March 31, 2002, in comparison to 12.4% of net sales for the same period of 2001. This decrease was due primarily to the elimination of $1.1 million of goodwill amortization due to implementation of new accounting rules in 2002 partially offset by higher labor and health care costs as a percentage of lower net sales.

As a result of the above, income from operations as a percentage of net sales for the first quarter ended March 31, 2002 increased to 6.7% from 6.5% for the prior year's first quarter.

Interest expense decreased by approximately $2.1 million for the first quarter ended March 31, 2002. This decrease was primarily due to lower interest rates and average borrowings in 2002 as a result of decreased working capital requirements, due to inventory reduction efforts to meet sales levels, and the use of the proceeds from the Company's stock offering in mid-March 2002.

As a result of the above, income before taxes increased by $2.0 million for the first quarter ended March 31, 2002 from the same periods in 2001.

Income taxes for the first quarter ended March 31, 2002 approximated $2.8 million and were based on a 40.5% effective tax rate in both periods.

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The following provides further information by segment:

Net sales of $63.0 million for the first quarter ended March 31, 2002 were comparable to net sales of $62.9 million for the prior year's first quarter. Increased volume due to increased auto production offset by selling price decreases, resulted in approximately the same net sales during both periods.

Income from operations increased to 11.9% of net sales for the first quarter ended March 31, 2001 from 10.6% for the prior year's first quarter. This increase was primarily due to lower raw material costs as a percentage of net sales, partially offset by increased direct labor, health care and fixed costs as a percentage of net sales.

Net sales of $63.2 million for the first quarter ended March 31, 2002, decreased by $5.3 million, or 7.7%, from net sales of $68.5 million for the prior year's first quarter. This decrease was primarily due to weaker demand due to general economic conditions and to fewer shipping days in the first quarter of 2002 compared to the first quarter of 2001.

Income from operations decreased to 3.9% of net sales for the first quarter ended March 31, 2002 from 5.7% for the prior year's first quarter. This decrease was primarily due to higher health care and fixed costs as a percentage of lower net sales, partially offset by lower raw material costs.

Net sales of $18.5 million for the first quarter ended March 31, 2002, decreased by approximately $700,000, or 3.9%, from net sales of $19.2 million for the prior year's first quarter. This decrease was primarily due to weaker demand due to general economic conditions and to fewer shipping days available in the first quarter of 2002 compared to the first quarter of 2001.

Income from operations decreased to 14.2% of net sales for the first quarter ended March 31, 2002 from 16.0% for the prior year's first quarter. This decrease was primarily due to higher health care, direct labor and fixed costs as a percentage of net lower sales.

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During the first quarter of 2002, the Company's shareholders equity increased by approximately $54.8 million or 25.1% primarily due to the receipt of $50.8 million in net proceeds from the Company's stock offering. The proceeds were used to repay existing debt which reduced the Company's debt to capital ratio to 37.1% from 49.4% at year end. Additionally, working capital increased by $6.4 million to $111.5 million during the quarter ended March 31, 2002.

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.

Net income of $4.1 million plus depreciation and amortization of $5.0 million, totaling $9.1 million, combined with an increase in accounts payable and accrued expenses of $5.8 million, provided cash of $14.9 million. This cash was offset by $17.5 million used for working capital purposes, primarily due to an increase in accounts receivable of $14.3 million as a result of increased sales for the last month of the first quarter of 2002 compared to the last month of the fourth quarter of 2001.

During the first quarter of 2002, net proceeds of $50.8 million from the Company's stock offering plus cash on hand at the beginning of the period were used to pay down $51.9 million of the Company's revolving credit facility, to fund operations, capital expenditures of $2.4 million and cash dividends of $.4 million.

At March 31, 2002, the Company's revolving credit facility was $310 million, with borrowings of approximately $155 million and additional availability of $155 million. In April 2002, the Company reduced the revolving credit facility by $35 million to $275 million in order to reduce charges for non-usage of the facility.

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.

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In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 Business Combinations (FAS No. 141) and Statement of Financial Accounting Standards No. 142 Goodwill and Other Intangible Assets (FAS No. 142). FAS No. 141 requires that all business combinations be accounted for under the purchase method only and that certain acquired intangible assets in a business combination be recognized as assets apart from goodwill. FAS No. 142 requires that ratable amortization of goodwill be replaced with periodic tests of the goodwill's impairment and that intangible assets other than goodwill be amortized over their useful lives. The Company implemented FAS No. 141 and FAS No. 142 on January 1, 2002 and is currently assessing the impact they will have on the Company's results of operations.

The Company wishes to take advantage of the Safe Harbor provisions included in the Private Securities Litigation Reform Act of 1995 (the "Act"). 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.

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PART II. OTHER INFORMATION

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Date: May 7, 2002

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