Washington, D.C.  20549

FORM 10-K/A

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

For the fiscal year ended December 31, 2004

Commission File Number 1-13123

METALS USA, INC.

(Exact name of Registrant as Specified in its Charter)

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 ý No o

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 this Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).  Yes ý No o

Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes ý No o

Based on the NASDAQ closing price of $17.88 per share on June 30, 2004, the aggregate market value of the Registrant’s outstanding common stock held by non-affiliates, of approximately 13.4 million shares, on such date was $310.8 million.  Based on the NASDAQ closing price of $24.18 per share on March 1, 2005, the aggregate market value of the Registrant’s outstanding common stock held by non-affiliates, of approximately 16.8 million shares, on such date was $406.2 million. The common stock held by the Registrant’s directors, executive officers and persons beneficially owning 10% or more of the shares of common stock, who are the only persons known to the Registrant who may be considered to be its “affiliates” as defined under Rule 12b-2, is excluded from the figures in this paragraph.  There were 20,279,280 shares of outstanding common stock, $.01 par value, of the Registrant as of March 1, 2005.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the Registrant’s definitive proxy statement, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the close of the Registrant’s fiscal year, are incorporated by reference under Part III.

Explanatory Note:

This Amendment No. 2 to Form 10-K for the period ended December 31, 2004 (this “Amendment”), originally filed with the Securities and Exchange Commission (the “SEC”) on April 28, 2005 (the “Original Filing”), reflects corrections to the Report of Independent Registered Public Accounting Firm contained on Page F-1 in the Amended Filing. This Amendment does not amend or restate our previously reported financial statements.

The EDGAR version of the Form 10-K/A contained a typographical error, which appeared on page F-1, the Report of Independent Registered Public Accounting Firm. The Report that was filed was erroneously replaced with a Report of Independent Registered Public Accounting Firm regarding a separate issue intended for a different section of the document. The Company is filing this amendment to correct this typographical error which occurred when the Form 10-K/A was formatted for EDGAR. For presentation purposes, the Company is including the entire contents of the Form 10-K/A in this amendment, though the only change from the original filing is the correction of this typographical error.

Except as expressly stated herein, this Amendment does not update any of the disclosures contained in the Original Filing to reflect any events that occurred after the date of the Original Filing. In addition, as stated above this Amendment does not amend or restate our previously reported financial statements. The filing of this Amendment shall not be deemed an admission that the Original Filing when made, included any untrue statement of a material fact or omitted to state a material fact necessary to make a statement not misleading.

EXPLANATORY NOTE

This Amendment No. 1 to Metals USA, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, which was initially filed on March 9, 2005 (the “Original Filing”) is being filed pursuant to an exemptive order issued by the Securities and Exchange Commission (SEC Release No. 34-50754). In accordance with the exemptive order, the Company may include management’s annual report on internal control over financial reporting and the related report of the Company’s independent registered public accounting firm in an amendment to its Annual Report on Form 10-K not later than forty five days after the prescribed period for filing such Annual Report, which in our case extended the deadline for filing the internal control report until April 30, 2005. In compliance with the exemptive order, the Company is filing this Amendment to update Item 9A — Controls and Procedures to include:

•                   Management’s annual report on internal control over financial reporting; and

•                   the Report of our Independent Registered Public Accounting Firm relating to the Company’s assessment of internal control over financial reporting and the effectiveness of internal control over financial reporting.

As a result of this Amendment, (1) the certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002, filed and furnished, respectively, as exhibits to the original filing, have been re-executed and re-filed as of the date of this Amendment; and (2) a Consent of our Independent Registered Public Accounting Firm dated April 28, 2005 to cover their report related to our internal control over financial reporting is being filed.

The other Items of the Original Filing are unaffected by the changes described above and have not been amended in this Amendment. All information in this Amendment is as of the date of the Original Filing and does not reflect any subsequent information or events occurring after the date of the Original Filing. Accordingly, this Amendment should be read in conjunction with the Company’s filings made with the Securities and Exchange Commission subsequent to the filing of the Original Filing, including any amendments to those filings.

FRESH START ACCOUNTING

We applied “Fresh-Start Reporting” to our consolidated balance sheet as of October 31, 2002 in accordance with Statement of Position No. 90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code” as promulgated by the American Institute of Certified Public Accountants (“SOP 90-7”).  Under “Fresh-Start Reporting”, a new reporting entity is considered to be created and the recorded amounts of assets and liabilities are adjusted to reflect their estimated fair values at the date “Fresh-Start Reporting” is applied.  On October 31, 2002, we emerged from bankruptcy.  As a result of the application of “Fresh-Start Reporting,” our financial information of any date or for periods after November 1, 2002 is not comparable to our historical financial information before November 1, 2002. As a result of the emergence from bankruptcy and for the purpose of presentation, activities subsequent to October 31, 2002 relate to the “Successor Company” and activities prior to November 1, 2002 relate to the “Predecessor Company.”

SAFE HARBOR STATEMENT—FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements included or incorporated by reference in this Annual Report, other than statements of historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements.  These statements appear in a number of places, including Item 1. “Business,” Item 3. “Legal Proceedings” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  These statements represent our reasonable judgment on the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual results and financial position to differ materially from those contemplated by the statements.  You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “may,” “will,” “should,” “plan,” “project” and other words of similar meaning.  In particular, these include, but are not limited to, statements relating to the following:

•                  projected operating or financial results, include anticipated cash flows from operations and asset sale proceeds for 2005;

•                  expectations regarding capital expenditures, interest expense and other payments;

•                  our beliefs and assumptions relating to our liquidity position, including our ability to adapt to changing market conditions;

•                  our ability to compete effectively for market share with industry participants;

Any or all of our forward-looking statements may turn out to be wrong.  They can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors including, among others:

•                  supply, demand, prices and other market conditions for steel and other commodities;

•                  the timing and extent of changes in commodity prices;

•                  the effects of competition in our business lines;

•                  the condition of the steel and metal  markets generally, which will be affected by interest rates, foreign currency fluctuations and general economic conditions;

•                  the ability of our counterparties to satisfy their financial commitments;

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•                  tariffs and other government regulations relating to our products and services;

•                  operational factors affecting the ongoing commercial operations of our facilities, including catastrophic weather-related damage, regulatory approvals, permit issues, unscheduled blackouts, outages or repairs, unanticipated changes in fuel costs or availability of fuel emission credits or workforce issues;

•                  our ability to operate our businesses efficiently, manage capital expenditures and costs (including general and administrative expenses) tightly and generate earnings and cash flow; and

•                  general political conditions and developments in the United States and in foreign countries whose affairs affect supply, demand and markets for steel, metals and metal products.

In addition, there may be other factors that could cause our actual results to be materially different from the results referenced in the forward-looking statements, some of which are included elsewhere in this Form 10-K, including in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Factors Which May Affect Future Operating Results” for risk factors that may affect future performance.  Many of these factors will be important in determining our actual future results.  Consequently, no forward-looking statement can be guaranteed.  Our actual future results may vary materially from those expressed or implied in any forward-looking statements. All forward-looking statements contained in this Form 10-K are qualified in their entirety by this cautionary statement.  Forward-looking statements speak only as of the date they are made, and we disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of this Form 10-K, except as otherwise required by applicable law.

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METALS USA, INC.

PART I

Item 1.    Business

Unless otherwise indicated, all references to “we,” “us,” “our” or other similar terms herein are intended to refer to Metals USA, Inc. and all of its subsidiaries. Readers should refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Factors Which May Affect Future Operating Results” for risk factors that may affect future performance.

Overview

We are a leading provider of value-added processed steel, stainless steel, aluminum, red metals and manufactured metal components.  Approximately 88% of our revenues are derived from our metal service center and distribution activities and the remaining portion of our revenues are derived from our Building Products Group that manufactures and distributes products primarily related to the residential home improvement industry.  The Predecessor Company was organized as a Delaware corporation on July 3, 1996, and began operations upon completion of an initial public offering on July 11, 1997.  On November 14, 2001, the Predecessor Company filed for voluntary protection from its creditors under Chapter 11 of the United States bankruptcy laws.  For more information about the bankruptcy filing and the subsequent reorganization, please see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Predecessor Company Chapter 11 Proceedings and Reorganization.”  We began operating the reorganized company in November 2002.  Beginning in March 2004, our common stock and warrants are quoted on the NASDAQ National Market under the ticker symbols “MUSA” and “MUSAW,” respectively.  From June 2003 to March 2004, our common stock and warrants were traded on the American Stock Exchange under the ticker symbols “MLT” and “MLT.WS,” respectively.

We have three segments, which are identified by their product groups — the Flat Rolled, Plates and Shapes and Building Products Groups.  Each of our segments purchases metal from primary producers who generally focus on large volume sales of unprocessed metals in standard configurations and sizes.

Our Flat Rolled and Plates and Shapes Groups perform customized, value-added processing services to unimproved steel and other metals required to meet specifications provided by our customers, as well as offering inventory management and just-in-time delivery services.  These services enable our customers to reduce material costs, decrease capital required for raw materials inventory and processing equipment and save time, labor, warehouse space and other expenses.  The customers of our Flat Rolled and Plates and Shapes Groups are in businesses such as the machining, furniture, transportation equipment, power and process equipment, industrial/commercial construction/fabrication, consumer durables and electrical equipment industries, as well as machinery and equipment manufacturers.  Our Building Products Group manufactures higher-value finished building products for distributors and contractors engaged in residential and commercial building products.

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Strategy

We are one of the leading providers of higher-value components from processed metals.  We have invested substantial capital integrating our operations to maximize operating margins and accelerate sales growth.  We are committed to becoming a premier company in both the metals processor/service center and building products industries in the U.S.  Our strategy is simply one of providing the best service to our customers, diligent inventory management and prudent risk assessment.  Although no longer the central focus of our business plan, we will consider acquisitions that are accretive to earnings and are complementary to our existing mix of products and services.

Segment Information

Each of our product groups is led by an experienced executive and is supported by a professional staff in finance, purchasing and sales and marketing.  This product-oriented organizational structure facilitates the efficient advancement of our goals and objectives to achieve operational synergies and focused capital investment.  For additional industry segment information, see Item 7.  “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations by Segment” and Note 9 to our consolidated financial statements in Item 8.  “Financial Statements and Supplementary Data.”

Metal Processing/Service Center Businesses: Plates and Shapes and Flat Rolled Groups

Overview.  Companies operating in the metals industry can be generally characterized as primary metals producers, metals processors/service centers or end-users.  Our Plates and Shapes and Flat Rolled Groups are metals processor/service centers.  As such, we purchase steel, aluminum, brass, copper and other metals from producing mills and then sell our metal processing services and the metal to our customers, who are generally end-users.  We believe that both primary metals producers and end-users are increasingly seeking to have their metals processing and inventory management requirements met by value-added metals processors/service centers like us.

Primary metals producers, which manufacture and sell large volumes of metals in standard sizes and configurations, generally sell only to those large end-users and metals processors/service centers who do not require processing of the products and who can tolerate relatively long lead times.  Metal processors/service centers offer services ranging from precision value-added pre-production processing, in accordance with specific customer specifications, to storage and distribution of unprocessed metal products.  Generally service centers function as intermediaries between end-users and primary metals producers.  End-users, such as contractors and original equipment manufacturers, or OEMs, incorporate the processed metal into a finished product, in some cases with little further modification.

In our Plates and Shapes and Flat Rolled Groups, we engage in pre-production processing of steel, stainless steel, red metals and aluminum and act as an intermediary between primary metals producers and end-users.  We purchase metals from primary producers, maintain an inventory of various metals to allow rapid fulfillment of customer orders and perform customized processing services to the specifications provided by end-users and other customers.  By providing these services, as well as offering inventory management and just-in-time delivery services, we enable our customers to reduce overall production costs and decrease capital required for raw materials inventory and metals processing equipment.  The Plates and Shapes and Flat Rolled Groups contributed approximately 88% of our 2004 net sales and the substantial majority of our 2004 net income.

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Plates and Shapes Group.  Plates and Shapes consists of 21 facilities throughout the U.S. that maintain an inventory focusing on carbon steel products.  With net sales of $621.0 million in 2004, the Plates and Shapes Group sells carbon steel products such as wide-flange beams, plate, tubing, angles, bars and other structural shapes.  These products are available in a number of alloy grades and sizes and generally undergo additional processing prior to customer delivery.  This group provides processing services, including cutting, sawing, cambering/leveling, punching, drilling, beveling, surface grinding, bending, shearing, blast and paint, cut-to-length and tee-splitting.  Plates and Shapes customers are primarily in the fabrication, construction, machinery and equipment, transportation and energy industries.

Flat Rolled Group.  Flat Rolled consists of 12 facilities in the Midwest and southern regions of the U.S. that maintain an inventory of cold rolled and hot rolled steel products and various nonferrous flat rolled products.  With net sales of $723.2 million in 2004, the Flat Rolled Group sells a number of products, including carbon and stainless steel, aluminum, brass and copper in a variety of alloy grades and sizes.  Because few end-user customers can handle carbon steel in the form generally shipped by steel mills (sizes less than a quarter of an inch in thickness in continuous coils that typically weigh 40 to 60 thousand pounds each), substantially all of the carbon steel material as well as the nonferrous materials sold by the Flat Rolled Group undergo additional processing prior to customer delivery.  Processing services include slitting, precision blanking, leveling, cut-to-length, punching, bending and shearing.  Flat Rolled customers are in the electrical manufacturing, fabrication, furniture, appliance manufacturing, machinery and equipment and transportation industries.

Industry Overview.  Historically, metal service centers provided few value-added services and were little more than distribution centers, linking metals producers with all but the largest end-users.  In the past two decades, however, the metals service center business has evolved significantly, and the most successful metals service centers have added a significant number of, and more sophisticated, processing capabilities, thereby offering an increasingly broad range of value-added services and products both to primary metals producers and end-users.  This evolution has resulted from changing trends in the primary metals industry as well as among end-users.

During the past two decades, the trend among primary metals producers has been to focus on their core competency of high-volume production of a relatively limited number of standardized metal products.  This change in focus has been driven by metal producers’ need to develop and improve efficient, volume-driven production techniques in order to remain competitive.  As a result, most of the primary producers have sold their service centers.

Because metal producers generally have left the service center business, most end-users are no longer able to obtain processed products directly from primary metals producers and have recognized the economic advantages associated with outsourcing their customized metals processing and inventory management requirements.  Outsourcing permits end-users to reduce total production cost by shifting the responsibility for pre-production processing to value-added metals processors/service centers, whose higher efficiencies in performing these processing services make the ownership and operation of the necessary equipment more financially feasible.

Value-added metals processors/service centers have also benefited from growing customer demand for inventory management and just-in-time delivery services.  These supply-chain services, which are not normally available from primary metals producers, enable end-users to reduce input costs, decrease capital required for inventory and equipment and save time, labor and other expenses.  In response to customer expectations, the more sophisticated value-added metals processors/service centers have acquired specialized and expensive equipment to perform customized processing and have installed

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sophisticated computer systems to automate order entry, inventory tracking, management sourcing and work-order scheduling.  Additionally, some value-added metals processors/service centers have installed electronic data interchange, or EDI, between their computer systems and those of their customers to facilitate order entry, timely delivery and billing.  We have EDI capability.

These trends have resulted in value-added metals processors/service centers playing an increasingly important role in all segments of the metals industry.  Metals processors/service centers now serve the needs of over 300,000 OEMs, contractors and fabricators nationwide.  The necessity for value-added metals processors/service centers to add specialized processing equipment, manage inventory on behalf of their customers and use sophisticated computer systems is requiring industry participants to make substantial capital investments in order to remain competitive.  In addition, many customers are seeking to reduce their operating costs by limiting the number of suppliers with whom they do business, often eliminating those suppliers offering limited ranges of products and services.  These trends have placed the substantial number of small, owner-operated businesses at a competitive disadvantage because they have limited access to the capital resources necessary to increase their capabilities, or they may be unwilling to justify the investment in equipment.  As a result, smaller companies are finding it increasingly difficult to compete as current industry trends continue.  Using 2003 industry data, we believe that the metals processor/service center industry is highly fragmented, with as many as 3,000 participants generating about $50 billion in annual net sales.  Due to the present level of metal prices, the size of the industry’s net sales would have been significantly higher in 2004, however; comparable industry data is not currently available.

Products and Services.  We purchase our raw materials in anticipation of projected customer requirements based on interaction with and feedback from customers, market conditions, historical usage and industry research.  Primary producers typically find it more cost effective to focus on large volume production and sale of metals in standard sizes and configurations to large volume purchasers.  We process the metals to the precise length, width, shape and surface quality specified by our customers.  Our value-added processes include:

•                  Slitting — the cutting of coiled metals to specified widths along the length of the coil.

•                  Shearing and cutting to length — the cutting of metals into pieces and along the width of a coil to create sheets or plates.

•                  Precision blanking — the process in which flat rolled metal is cut into precise two-dimensional shapes.

•                  Laser, flame and plasma cutting — the cutting of metals to produce various shapes according to customer-supplied drawings.

•                  Leveling — the flattening of metals to uniform tolerances for proper machining.

•                  Sawing — the cutting to length of bars, tubular goods and beams.

•                  Tee-splitting — the splitting of metal beams.

•                  Plate forming and rolling — the forming and bending of plates to cylindrical or required specifications.

•                  Edge trimming — a process that removes a specified portion of the outside edges of coiled metal to produce uniform width and round or smooth edges.

•                  Cambering — the bending of structural steel to improve load-bearing capabilities.

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•                  Metallurgy — the analysis and testing of the physical and chemical composition of metals.

•                  Blast and Paint — the process of cleaning steel by shot-blasting, then immediately applying a paint or primer.

Our additional capabilities include applications engineering and other value-added processes such as custom machining.  Using these capabilities, we use processed metals to manufacture higher-value components.

Once we receive an order, we select the appropriate inventory and schedule it for processing in accordance with the customer’s requirements and specified delivery date.  Orders are monitored by our computer systems, including, in certain locations, the use of bar coding to aid in and reduce the cost of tracking material.  We record the source of all metal shipped to customers.  This enables us to identify the source of any metal which may later be shown to not meet industry standards or that fails during or after manufacture.  This capability is important to our customers as it allows them to assign responsibility for non-conforming or defective metal to the mill that produced the metal.  Many of the products and services we provide can be ordered and tracked through a web-based electronic network that directly connects our computer system to those of our customers.

The substantial portion of our orders are filled within 24-48 hours.  This is accomplished through our inventory management programs, which permit us to deliver processed metals in accordance with the just-in-time inventory programs of our customers.  We are required to carry sufficient inventory of raw materials to meet the short lead-time and just-in-time delivery requirements of our customers.

While we ship products throughout the U.S., most of our customers are located within a 250-mile radius of our facilities, thus enabling an efficient delivery system capable of handling a large number of short lead-time orders.  We transport most of our products directly to our customers either with our own trucks for short-distance and/or multi-stop deliveries or through common or contract trucking companies.

We have quality control systems to ensure product quality and traceability throughout processing.  Quality controls include periodic supplier audits, customer approved quality standards, inspection criteria and metals source traceability.  A total of 20 of our metal processing/service center facilities have International Standards Organization, or ISO, 9002 certification.  In addition to our metal processing/service center facilities that are ISO certified, one location in our Building Products Group is ISO certified.

Building Products Group

Recent Developments. On August 13, 2004, E. L. (“Tom”) Thompson retired from the company as president of the Building Products Group.  Robert C. McPherson III was appointed to replace Mr.  Thompson as Senior Vice President and President, Building Products Group.  Mr. McPherson has been with Metals USA since March 2003, in the capacity of Senior Vice President, Business Development. Prior to that, Mr. McPherson worked for California Steel Industries, Inc. in Fontana, CA for 13 years, in a number of executive positions.

Although historically profitable, we are working diligently to improve the overall level of profitability of the Building Products business.  We have reduced our ongoing costs of operations by about $2.0 million dollars annually, through a combination of reducing one whole layer of management and the elimination of eleven redundant or unprofitable sales locations.  As a result of these actions, we

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expensed approximately $5.0 million during the third and fourth quarters of 2004.  These actions were the last major cost element of our 2004 initiative to improve the Building Products Group’s profitability in 2005.

Overview.  Building Products had net sales of $183.0 million in 2004 and currently has 18 operating locations and 26 sales and distribution centers throughout the southeast, southwest and western regions of the U.S.  The Building Products Group sells a number of finished products that are both inexpensive and energy efficient, including sunrooms, roofing products, awnings and solariums for use in residential applications and large area covered canopies, awnings and covered walkways for commercial uses.  Approximately 95% of the Building Products Group sales are attributable to the residential home markets; the remaining sales are attributable to commercial applications.  Building Products customers are predominantly in the construction, wholesale trade and building material industries.  The Building Products Group contributed approximately 12% of our 2004 net sales and a disproportionately smaller percentage of our 2004 net income.

Industry Overview.  The residential remodeling industry is estimated to be $170 billion annually by the National Association of the Remodeling Industry, or NARI.  Over the last ten years, the industry has experienced accelerated growth due to a number of different factors, including demographic changes, rising disposable incomes, aging American homes and increased rates of home ownership.  The increase in disposable incomes has been reflected in the increase in home ownership since the middle of the century.  In 1990, over 64% of the population had built some type of home equity as opposed to 55% in 1950.  The increase in home ownership among middle-aged Americans is extremely important for the building products industry, as this generation spends twice as much on remodeling projects as any other.  Industry sources, such as the NARI, believe that by the time Americans enter their peak earning years, they have grown comfortable with their neighborhoods and their children’s schools and would rather remodel their current home than purchase a new home.  Among the most popular remodeling projects are windows and doors, siding, kitchens, bathrooms, sunrooms and roofing.  Our Building Products Group manufactures and distributes windows and doors, sunrooms and roofing products through a network of independent distributors and home improvement contractors.

The aging of the domestic home supply is also expected to bolster remodeling sales in the near future.  It is estimated that 85 million American homes are over 20 years old and are prime candidates for reconstruction and remodeling.  Although new housing trends have grown steadily over the past few years, new homes generally account for less than 2% of the domestic home supply in any given year.  As Americans look to improve and add value to their homes, more and more will turn to remodeling as a cost-efficient alternative to new housing construction.  The NARI reports that new homeowners tend to remodel their homes within the first 16-24 months of moving in, but more importantly, as the younger population reaches middle age, they are likely to make more expensive purchases.  Individuals age 35-44 spend twice as much on remodeling than any other age group in the country.  Further, advancements in quality and a broader range of price-offerings in home improvement products are making consumers feel more comfortable about making significant remodeling decisions as opposed to purchasing a new home.  All of these demographic trends are expected to benefit the continued growth of the building products industry.

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Sources of Supply

In recent years, steel, aluminum, copper and other metals production in the U.S. has fluctuated from period to period as mills attempt to match production to projected demand.  Periodically, this has resulted in shortages of, or increased ordering lead times for, some products, as well as fluctuations in price.  Typically, metals producers announce price changes with sufficient advance notice to allow us to order additional products prior to the effective date of a price increase, or to defer purchases until a price decrease becomes effective.  Our purchasing decisions are based on our forecast of the availability of metal products, ordering lead times and pricing, as well as our prediction of customer demand for specific products.

We obtain the overwhelming majority of our raw materials from domestic suppliers, which include Nucor Corp., U.S. Steel, AK Steel, Gerdau Ameristeel, International Steel Group, Alcoa Inc., Bayou Steel, Chaparral Steel and IPSCO Steel.  Although we have historically purchased approximately 10% to 15% of our raw material supplies from foreign producers, domestic suppliers have always been and we believe will continue to be our principal source of raw material.

Although most forms of steel and aluminum produced by mills can be obtained from a number of integrated mills or mini-mills, both domestically and internationally, there are a few products that are available from only a limited number of producers.  Since most metals are shipped freight-on-board and the transportation of metals is a significant cost factor, we seek to purchase metals, to the extent possible, from the nearest mill, but will use a more distant mill when it offers a lower delivered price.

Ferrous metal producers have been undergoing rapid consolidation over the past three years.  U.S. Steel, Nucor Corp. and International Steel Group have acquired several of their domestic competitors, and international integrated producers have merged and consolidated operations.  Furthermore, it has been announced that Mittal Steel has agreed to purchase International Steel Group, which would create the largest steel producer in the world.  The result of this trend will be fewer integrated producers from which we can purchase our raw materials. While we believe that global consolidation of the steel industry is beneficial to the steel industry as a whole, we are unable to predict what impact this consolidation may have on our operations.

Sales and Marketing; Customers

Our sales and marketing focus is on the identification of OEMs and other metals end-users that could achieve significant cost savings through the use of our inventory management, processing, just- in-time delivery and other services.  We use a variety of methods to identify potential customers, including the use of databases, telemarketing, direct mail and participation in manufacturers’ trade shows.  Customer referrals and the knowledge of our sales force about regional end-users also result in the identification of potential customers.  Once a potential customer is identified, our “outside” salespeople assume responsibility for visiting the appropriate contact, typically the purchasing manager or manager of operations.

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We employ a sales force consisting of “inside” and “outside” salespeople.  “Inside” salespeople are primarily responsible for maintaining customer relationships, receiving and soliciting individual orders and responding to service and other inquiries by customers.  Increasingly, these “inside” salespeople have been given responsibility for telemarketing to potential customers.  Our “outside” sales force is primarily responsible for identifying potential customers and calling on them to explain our services.  The sales force is trained and knowledgeable about the characteristics and applications of various metals, as well as the manufacturing methods employed by our customers.

Nearly all sales are on a negotiated price basis.  In some cases, sales are the result of a competitive bid process where a customer provides a list of products, along with requirements, to us and several competitors and we submit a bid on each product.  We have a diverse customer base, with no single customer accounting for more than 2% of our revenues in 2004 and 2003, and 1% in 2002.

Competition

We are engaged in a highly fragmented and competitive industry.  Competition is based on price, product quality, service, and timeliness of delivery and geographic proximity.  We compete with a large number of other metals processors/service centers on a national, regional and local basis, some of which may have greater financial resources.  Principal national competitors include Ryerson Tull, Inc. (NYSE:RT) and Reliance Steel & Aluminum Co, (NYSE:RS).  We also compete to a lesser extent with primary metals producers, who typically sell directly to very large customers requiring regular shipments of large volumes of metals.  Numerous smaller metals processors/service centers compete locally.

Historically, we believe that we have been able to compete effectively because of our significant number of locations, geographic dispersion, knowledgeable and trained sales force, integrated computer systems, modern equipment, broad-based inventory, combined purchasing volume and operational economies of scale.  Furthermore, we believe our liquidity and overall financial position affords us a good platform with which to compete with our peers in the industry.

Government Regulation and Environmental Matters

Our operations are subject to a number of federal, state and local regulations relating to the protection of the environment and to workplace health and safety.  In particular, our operations are subject to extensive federal, state and local laws and regulations governing waste disposal, air and water emissions, the handling of hazardous substances, environmental protection, remediation, workplace exposure and other matters.  Hazardous materials we use in our operations include general commercial lubricants and cleaning solvents.

We believe that we are in substantial compliance with all such laws and do not currently anticipate that we will be required to expend any substantial amounts in the foreseeable future in order to meet current environmental or workplace health and safety requirements.  However, some of the properties we own or lease are located in areas with a history of heavy industrial use, and are on or near sites listed on the Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA, National Priority List.  We have a number of properties located in or near industrial or light industrial use areas; accordingly, these properties may have been contaminated by pollutants which would have migrated from neighboring facilities or have been deposited by prior occupants.  Furthermore, we are not aware of any notices from authoritative agencies with respect to clean-up/remediation claims for contamination at the leased properties.  However, we may be notified of such claims with respect to our existing leased or owned properties in the future.

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Although no environmental claims have been made against us and we have not been named as a potentially responsible party by the Environmental Protection Agency or any other party, it is possible that we could be identified by the Environmental Protection Agency, a state agency or one or more third parties as a potentially responsible party under CERCLA or under analogous state laws.  If so, we could incur substantial litigation costs to prove that we are not responsible for the environmental damage.

Management Information Systems

Both the Plates and Shapes Group and Flat Rolled Group service centers use a system marketed and distributed specifically for the service center industry.  During 2003, we completed a similar common-platform initiative in the Building Products Group.  Some of our subsidiaries currently use EDI, through which they offer customers a paperless process with respect to order entry, shipment tracking, billing, remittance processing and other routine activities.  Additionally, several of our subsidiaries also use computer-aided drafting systems to directly interface with computer-controlled metal processing equipment, resulting in more efficient use of material and time.

We believe investment in uniform management information systems and computer-aided manufacturing technology permits us to respond quickly and proactively to our customers’ needs and service expectations.  These systems are able to share data regarding inventory status, order backlog, and other critical operational information on a real-time basis.

Employees

We employ approximately 2,500 persons.  As of December 31, 2004, approximately 300 employees (12%) at various sites were members of unions: the United Steelworkers of America; the Sheet Metals Workers Union; the International Association of Bridge, Structural, and Ornamental Ironworkers of America; the International Brotherhood of Teamsters; and the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers.  Our relationship with these unions generally has been satisfactory, but occasional work stoppages have occurred.  Within the last five years, one work stoppage occurred at one facility, which involved approximately 30 employees and lasted approximately 30 days.  We are currently a party to 9 collective bargaining agreements, which expire at various times.  Collective bargaining agreements for all of our union employees expire in each of the next three years.  Historically, we have succeeded in negotiating new collective bargaining agreements without a strike.

From time to time, there are shortages of qualified operators of metals processing equipment.  In addition, during periods of low unemployment, turnover among less-skilled workers can be relatively high.  We believe that our relations with our employees are good.

Vehicles

We operate a fleet of owned or leased trucks and trailers, as well as forklifts and support vehicles.  We believe these vehicles are generally well maintained and adequate for our current operations.

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Risk Management and Insurance

The primary risks in our operations are bodily injury, property damage and vehicle liability.  We maintain general and vehicle liability insurance and liability insurance for bodily injury and property damage and workers’ compensation coverage, which we consider sufficient to protect us against a catastrophic loss due to claims associated with these risks.

Safety

Our goal is to provide an accident-free workplace.  We are committed to continuing and improving upon each facility’s focus and emphasis on safety in the workplace.  We currently have a number of safety programs in place, which include regular weekly or monthly field safety meetings and training sessions to teach proper safe work procedures.  We have developed a comprehensive “best practices” safety program to be implemented throughout our operations to ensure that all employees comply with our safety standards, as well as those established by our insurance carriers, and federal, state and local laws and regulations.  This program is led by the corporate office, with the assistance of each of our product group presidents, executive officers and industry consultants with expertise in workplace safety.  Furthermore, we pay bonuses based on an employee’s or a team’s safety record.

Financial Information about Segments

For information regarding revenues from external customers, measures of profit or loss and total assets for the last three years for each segment, see Item 7.  “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations by Segment” and Note 9 to our consolidated financial statements in Item 8.  “Financial Statements and Supplementary Data.”

Patents and Trademarks

We own several U.S. patents, trademarks, service marks and copyrights.  Certain of the trademarks and patents are registered with the U.S. Patent and Trademark Office, and, in some cases, with trademark offices of foreign countries.  We consider other information owned by us to be trade secrets.  We protect our trade secrets by, among other things, entering into confidentiality agreements with our employees and implementing security measures to restrict access to such information.  We believe that our safeguards provide adequate protection to our proprietary rights.  While we consider all of our intellectual property to be important, we do not consider any single intellectual property right to be essential to our operations as a whole.

Seasonal Aspects, Renegotiation and Backlog

There is a slight decrease in our business during the winter months because of inclement weather conditions and the impact on the construction industry.  No material portion of our business is subject to renegotiation of profits or termination of contracts at the election of the government.  Because of the just-in-time delivery policy and the short lead-time nature of our business, we do not believe the information on backlog of orders is material to an understanding of our business.

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Foreign Operations

Substantially all of our business is domestic.  We do not derive any material revenue from foreign countries and do not have long-term assets or customer relationships outside of the U.S.  We have no foreign operations.

Research and Development

We do not incur material expenses in research and development activities but do participate in various research and development programs.  We address research and development requirements and product enhancement by maintaining a staff of technical support, quality assurance and engineering personnel.

Predecessor Company Chapter 11 Proceedings and Reorganization

In November 2001, the Predecessor Company sought protection under the U.S. bankruptcy laws.  We emerged from bankruptcy on October 31, 2002.  Under the reorganization plan approved by the bankruptcy court, the Predecessor Company divested certain assets resulting in proceeds of approximately $90.1 million during 2002, re-valued its remaining assets, cancelled old common stock, issued new common stock and warrants, and entered into our current revolving credit facility.  For more information about the Predecessor Company’s bankruptcy filing and our subsequent reorganization, please see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Predecessor Company Chapter 11 Proceedings and Reorganization” as well as the notes to our consolidated financial statements in Item 8.  “Financial Statements and Supplementary Data.”

Certain Relationships

Three of our nine directors (including our chairman) are directors of Metal Management, Inc. (NASDAQ: MTLM).  Moreover, our chairman is also the chief executive officer of Metal Management.  Metal Management purchases scrap metal from us at one of our metals processing/service centers.  This relationship with Metal Management began with the Predecessor Company well before the two companies shared common directors.  However, as a result of the director overlap, our board of directors decided to implement specified procedures to avoid the appearance of, and to protect against, conflicts of interest relating to business transactions involving Metal Management.  Sales of scrap to Metal Management for the years ended December 31, 2004 and 2003, the periods from November 1, 2002 through December 31, 2002 and from January 1, 2002 through October 31, 2002 were $2.0 million, $0.9 million, $0.2 million, and $0.5 million, respectively, and were transacted at prevailing market rates.

Available Information

Our internet address is www.metalsusa.com.  On our internet website we make available, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after we electronically file such information with, or furnish it to, the SEC.  Our SEC reports can be accessed through the investor relations section of our internet website.  The information found on our internet website is not a part of this or any other report we file with or furnish to the SEC.

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Item 2.    Properties

As of December 31, 2004, we operated twenty-one (21) metals processing facilities in the Plates and Shapes Group and twelve (12) facilities in the Flat Rolled Group.  These facilities are used to receive, warehouse, process and ship metals.  These facilities use various metals processing and materials handling machinery and equipment.  Our Building Products Group operates eighteen (18) facilities where we process metals into various building products and twenty-six (26) sales and distribution centers.  During 2004, nine (9) Building Products locations were closed and two (2) locations were merged.  We continue to serve the marketing areas of the closed facilities with our existing sales force by expanding the responsible territories of our other facilities, and through the use of common carrier for product delivery.

Many of our facilities are capable of being used at higher capacities, if necessary.  We believe that our facilities will be adequate for the expected needs of our existing businesses over the next several years.  Our facilities, sales and distribution centers and administrative offices are located and described as follows:

OPERATING FACILITIES AS OF DECEMBER 31, 2004

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(1)         These facilities are subject to liens with respect to specific debt obligations, including Industrial Revenue Bonds.

(2)         We are under contract to purchase these facilities.

Item 3.    Legal Proceedings

This section contains statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  See disclosure presented on the inside of the front cover of this report for cautionary information with respect to such forward-looking statements.

We are involved in a variety of claims, lawsuits and other disputes arising in the ordinary course of business.  We believe the resolution of these matters and the incurrence of their related costs and expenses should not have a material adverse effect on our consolidated financial position, results of operations or liquidity.

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

None.

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PART II

Item 5.    Market for Registrant’s Common Equity and Related Stockholder Matters

Beginning in March 2004, our common stock and warrants are quoted on the NASDAQ National Market under the ticker symbols “MUSA” and “MUSAW,” respectively.  From June 2003 to March 2004, our common stock and warrants were traded on the American Stock Exchange under the ticker symbols “MLT” and “MLT.WS,” respectively.  From March 2003 until June 2003, our common stock traded on the OTC Bulletin Board under the symbol “MTLS.”  From November 1, 2002 until March 2003, our common stock traded on a “when issued basis” under the symbol “MTLSV.”

The following table sets forth the high and low prices for our common stock and warrants as reported by the NASDAQ, AMEX or by the OTC Bulletin Board, as applicable for each calendar quarter during the periods indicated.

(1)         On October 31, 2002, pursuant to the reorganization plan approved by the court in our bankruptcy proceedings, all shares of the Predecessor Company’s common stock were cancelled and we issued 20,000,000 shares of new common stock.  Accordingly, information relating to the Predecessor Company’s old common stock is not comparable to, or meaningful with respect to, the performance or trading history of our new common stock. See Item 7.  “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Predecessor Company Chapter 11 Proceedings and Reorganization” as well as the notes to our consolidated financial statements in Item 8.  “Financial Statements and Supplementary Data.”

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As of March 1, 2005, there were 20,279,280 outstanding shares of our common stock, held by approximately 2,000 shareholders of record.  We currently do not anticipate paying dividends on our common stock.  Our revolving credit facility currently restricts our ability to pay dividends.  For information regarding these restrictions, see Item 7.  “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Financing Activities” and Note 5 to our consolidated financial statements in Item 8.  “Financial Statements and Supplementary Data.”  Any determination to declare or pay dividends out of funds legally available for that purpose will be at the discretion of our board of directors and will depend on future earnings, results of operations, financial condition, capital requirements and other factors the board of directors deems relevant, as well as the restrictions in our revolving credit facility and any other applicable contractual restrictions.

Item 6.    Selected Financial Data

The following selected financial data is derived from our consolidated financial statements for the years ended December 31, 2004 and 2003, and for the periods before and after our emergence from bankruptcy proceedings on October 31, 2002.  As a result of our emergence from bankruptcy and for the purpose of presentation, activities subsequent to October 31, 2002 relate to the “Successor Company” and activities prior to November 1, 2002 relate to the “Predecessor Company.”  With respect to periods relating to the Predecessor Company, the consolidated financial statements and related selected financial data have been reclassified for the effects of Statement of Financial Accounting Standards No. 144 (“SFAS No. 144”), “Accounting for Impairment or Disposal of Long-Lived Assets” which requires divestitures be excluded from results of operations for all periods presented.

In addition, the consolidated financial statements for 2001 and 2002 were prepared in accordance with the AICPA’s SOP 90-7.  The consolidated statements of operations information for the period from November 1, 2002 through December 31, 2002 and the consolidated balance sheet information at December 31, 2002 reflect our financial position and operating results after application of our Reorganization Plan and the application of the principles of “Fresh-Start Reporting” in accordance with the provisions of SOP 90-7.  Accordingly, such financial information is not comparable to our historical financial information prior to November 1, 2002.

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This financial data should be read in conjunction with Item 7.  “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this report.  The selected financial data for the fiscal years ended 2000 through 2001 reflects our historical consolidated financial statements reclassified for the effects of SFAS No. 144.

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(1)         The balance as of December 31, 2001 includes all pre-petition current liabilities that are not subject to compromise and $38.3 million of pre-petition liabilities subject to compromise included in operations held for sale.  Including non-current pre-petition liabilities subject to compromise of $325.7 million, our working capital would have been a deficit of $142.5 million as of December 31, 2001.

(2)         Because of the Predecessor Company’s Chapter 11 filing, $301.9 million of long-term debt was reclassified as a current pre-petition liability not subject to compromise and $200.0 million was reclassified as a non-current pre-petition liability subject to compromise as of December 31, 2001.

(3)         The Predecessor Company declared dividends with respect to its common stock as follows:  Four quarterly dividends of $0.03 per share during the year ended December 31, 2000 and one dividend of $0.03 per share during the quarter ended March 31, 2001.  There have been no dividends declared by the Successor Company in respect of any period.

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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

This section contains statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  See disclosure presented on the inside of the front cover of this report for cautionary information with respect to such forward-looking statements.  Readers should refer to “Factors Which May Affect Future Operating Results” for risk factors that may affect future performance. The following discussion should be read in conjunction with Item 6. “Selected Financial Data” and Item 8.  “Financial Statements and Supplementary Data.”

Overview

We are a leading provider of value-added processed steel, aluminum and specialty metals, as well as manufactured metal components.  We sell to customers in businesses such as the machining, furniture, transportation equipment, power and process equipment, industrial/commercial construction/fabrication, consumer durables and electrical equipment industries, as well as machinery and equipment manufacturers.

We do not produce or manufacture any metal.  We are primarily a service center company, and as such, we purchase steel, aluminum, brass, copper and other metal from the producing mills.  We then sell our metal processing services and the metal to our customers.  The primary factors management follows with respect to the Flat Rolled and Plates and Shapes Product Groups are volume and operating margin, defined as net sales less operating costs and expenses.  Our Building Products Group manufactures and distributes windows and doors, sunrooms and roofing products through a network of independent distributors and home improvement contractors.  The primary factors management follows in the Building Products Group are net sales and operating margin, defined as net sales less operating costs and expenses. See Part I, Item 1.  Business, included in this report, for a more complete discussion of our business and product groups.

Recent Events/ Industry Trends

In 2004, increased demand for steel in China, shortages of raw material such as coking coal, iron ore, energy (oil), increased demand for scrap, and the weak U.S. dollar all contributed to significant increases in prices for domestic metal of all types, particularly steel.  Further, improved economic conditions in Europe, Asia and in North America contributed to a higher level of demand for steel.  During most of 2004 supplies of many products were constrained, which also led to price increases.

During 2004, the significance of China as the dominant factor in our business became apparent. Producing over 270 million metric tons of steel, which is more steel than the entire production of the United States, Japan and Russia combined; and consuming even more than their domestic production, China has brought serious imbalances to the iron ore, coal and steel businesses all over the world.  We do not believe that China’s ultimate goal is to be the primary producer and therefore the principal exporter of steel for the entire world.  Rather, China appears to be executing a well thought-out, long-term plan, aimed to develop their country and to give their people access to goods citizens of western economies take for granted, like cars, appliances, and homeownership.  Currently, they are actively expanding their commercial infrastructure, such as roads, rail, and hydroelectric dams.  All these things need steel.  As a consequence, the shortages in coal, iron ore and steel may stay in place for several years.  During these years, we believe China may be a net importer of steel, even considering that they could be exporting some steel during limited periods of time.  It is also important to keep in mind that China needs to import iron ore because they don’t have sufficient domestic reserves to meet their current consumption

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requirements.  We believe this reliance on imported iron ore supports our view that China’s goal is not to become the world’s largest supplier of steel.  Nevertheless, their appetite for iron ore, coal and other raw materials is enough to influence world wide steel prices.

In early 2005, the three iron ore suppliers controlling about 80% of the world market announced their intention to seek significant price increases from the integrated steel mills in Europe and Asia.  These three companies are located in Brazil and Australia.  This action merely compounds the global factors impacting raw material prices during 2004.  On February 22, 2005, Companhia Vale do Rio Doce (“CVRD,” a Brazilian company and the largest iron ore producer in the world), announced the settlement of an unprecedented 71% year-over-year price increase with Nippon Steel for 2005.  Nippon Steel is the largest Japanese steel mill.  We believe this price point will be the reference price for all other Japanese mills, as well as for the Korean, Taiwanese and Chinese mills.  Iron ore price increases in double digits were unusual until last year, when the Brazilian and the Australian companies were able to get a little less than 20%.  The 2005 increase is unprecedented, and we believe will set the stage for a cost increase for the European and other large integrated steel mills throughout the world.  As a consequence, we anticipate that both foreign and domestic mills will continue the disciplined practice they implemented in 2004 of passing along such added costs, in the form of both price increases and surcharges.  Just when the higher worldwide prices will begin to affect the domestic market is difficult to predict, but we believe prices will increase in 2005.  Currently the global factors driving raw material prices are in place to keep metal prices — particularly steel — at high levels (compared to the prevailing price levels in 2000 through 2003) for at least the next year.  However, any number of factors could cause metal prices to decline.  With good demand from the domestic economy, and adequate supply of metal, we expect 2005 to be another good year for our business.

It is important to understand that we do not produce any steel; however, historically metal service centers generally benefit from rising steel prices, although in the short term rapidly rising prices create an equal demand on our cash.  This is because, during the initial period in which prices are rising, we will have to fund the purchase of higher cost material as the lower cost material is sold.  This will have a negative impact on cash flow until prices for material stabilize and the normal lag from collections of accounts receivable passes.  From our middle-man position in the supply chain, we will continue to pass-on any price increases and surcharges to our customers, in a predictable and disciplined way, exactly as we have been doing since the inception of the surcharge mechanism to carbon steel sales by the steel mills in January 2004.  We are not willing to accept unprofitable or marginally profitable orders, and we see no reason to change our behavior now.  We believe our cash flow from operations, supplemented with the cash availability afforded us by our revolving credit facility, will provide sufficient liquidity to meet anticipated challenges we face due to the rising steel price environment.  See the separate section “Liquidity and Capital Resources” in Item 7 for further information about cash flows from operations and liquidity.

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Factors Which May Affect Future Operating Results

The provisions of the Private Securities Litigation Reform Act of 1995 provide companies with a “safe harbor” when making forward-looking statements. This “safe harbor” encourages companies to provide prospective information about their companies without fear of litigation. We wish to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 and are including this section in our Annual Report on Form 10-K in order to do so. Factors that could cause our actual results to differ materially from management’s projections, forecasts, estimates and expectations include, but are not limited to, the following:

Substantial debt obligations. Our long-term debt was $266.6 million as of December 31, 2004, including $253.0 million under our revolving credit facility.  Because we may be more leveraged than some of our competitors, our level of indebtedness may place us at a competitive disadvantage.  In addition, the revolving credit facility contains restrictive operating and financial covenants that may limit our ability to obtain additional debt financing or to engage in other business activities that otherwise may be in our interest.  Those limits may restrict our ability to service our debt obligations or finance our future activities (whether operations, potential acquisitions or other capital needs) through additional debt financing if cash flow from operations is insufficient to service our existing debt obligations.  If we cannot achieve the financial results necessary to maintain compliance with our revolving credit facility’s covenants, we could be declared in default and be required to sell or liquidate our assets to repay outstanding debt.

Limited liquidity.  We are currently funding our liquidity needs out of operating cash flow and from borrowings under the revolving credit facility.  We believe our current liquidity is sufficient to meet our operating and capital expenditure requirements during 2005; however, our existing sources of liquidity may not be adequate to fund future liquidity needs and additional sources of liquidity may not be available to us or adequate.  Any liquidity shortages would likely have a material adverse effect on our business and financial condition.

Historical financial information not comparable to current financial condition and results of operations. As a result of our emergence from bankruptcy on October 31, 2002, we were subject to “Fresh-Start Reporting.”  Accordingly, our financial information as of any date or for periods after November 1, 2002 is not comparable to our historical financial information before November 1, 2002.  This is primarily because the “Fresh-Start Reporting” required us to reduce the carrying value of our property and equipment to zero.

Susceptible to economic downturn. Any downturn in the U.S. economy can cause demand by our customers to decline, which could cause volumes and pricing to remain low, reducing our sales.  Likewise, our Building Products Group could be adversely affected if mortgage rates rise or consumer confidence falls, since the results for that group have been at least in part due to the strong housing market, which in turn has been driven by low mortgage rates and relatively high consumer confidence.

Possible impact on varying metals prices. We principally use steel, aluminum and various specialty metals as feedstock.  The metals industry as a whole is highly cyclical and at times pricing and availability of our feedstock can be extremely volatile due to numerous factors beyond our control, including domestic and international economic conditions, labor costs, production levels, competition, import duties and tariffs and currency exchange rates.  This volatility can significantly affect the availability and cost of raw materials for us, and may, therefore, adversely affect our net sales, operating

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margin and net income.  Our service centers maintain substantial inventories of metal to accommodate the short lead times and just-in-time delivery requirements of our customers.  Accordingly, we purchase metal in an effort to maintain our inventory at levels that we believe to be appropriate to satisfy the anticipated needs of our customers, which we base on information derived from customers, market conditions, historic usage and industry research.  Our commitments for metal purchases are generally at prevailing market prices in effect at the time we place our orders.  We have no substantial long-term, fixed-price purchase contracts.  When raw material prices rise, we may not be able to pass any portion of the price increase on to customers.  When raw material prices decline, customer demands for lower prices could result in lower sale prices and, to the extent we liquidate existing inventory quantities, lower margins.

Fluctuations in demand. Many of our products are sold to industries that experience significant fluctuations in demand based on economic conditions, energy prices, consumer demand and other factors beyond our control.  We may not be able to increase or maintain our level of sales in periods of economic stagnation or downturn.  Additionally, as more domestic manufacturers move their manufacturing facilities out of the United States, we may not be able to maintain our level of sales to those customers.

Competition. We are engaged in a highly fragmented and competitive industry.  We compete with a large number of other value-added metals processors/service centers on a regional and local basis, some of which may have greater financial resources than us.  We also compete, to a lesser extent, with primary metals producers, who typically sell to very large customers requiring regular shipments of large volumes of metals.  Increased competition could have a material adverse effect on our net sales and profitability.

Environmental regulation. Our operations are subject to extensive federal, state and local laws and regulations governing waste disposal, air and water emissions, the handling of hazardous substances, environmental protection, remediation, workplace exposure and other matters.  We believe that we are in substantial compliance with all such laws and do not currently anticipate that we will be required to expend any substantial amounts in the foreseeable future in order to meet current environmental or workplace health and safety requirements.  However, some of the properties we own or lease are located in areas with a history of heavy industrial use and are on or near sites listed on the CERCLA National Priority List.  We have a number of properties located in or near industrial or light industrial use areas; accordingly, these properties may have been contaminated by pollutants which would have migrated from neighboring facilities or have been deposited by prior occupants.  Furthermore, we are not aware of any notices from authoritative agencies with respect to clean-up/remediation claims for contamination at the leased properties.  However, we may be notified of such claims with respect to our existing leased or owned properties in the future.

Although no environmental claims have been made against us and we have not been named as a potentially responsible party by the Environmental Protection Agency or any other party, it is possible that we could be identified by the Environmental Protection Agency, a state agency or one or more third parties as a potentially responsible party under CERCLA or under analogous state laws.  If so, we could incur substantial litigation costs to prove that we are not responsible for the environmental damage.  We have obtained limited indemnities from the former stockholders of the acquired companies whose facilities are located at or near contaminated sites.  Those limited indemnities are subject to certain deductible amounts, however, and may not protect us fully, if at all.

Emergence from Chapter 11 Reorganization in 2002. The Predecessor Company sought protection under Chapter 11 of the Bankruptcy Code in November 2001.  Exclusive of the “Fresh-Start Reporting” and reorganization adjustments, the Predecessor Company incurred net losses of $29.6 million and $409.1

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million during the ten-month period ended October 31, 2002 and the fiscal year ended December 31, 2001, respectively.  Approximately $384.0 million of the 2001 net loss was attributable to write downs associated with the carrying value of the Predecessor Company’s goodwill and property and equipment to their then estimated recoverable values.  We incurred a net loss of $3.3 million for the two-month period ended December 31, 2002.  The Predecessor Company’s equity ownership, board of directors and a portion of its senior management was replaced in connection with our reorganization.  While our current senior management has concentrated on improving our profitability, we may not attain sustained profitability or achieve growth in our operating performance.

Critical Accounting Policies

We have identified the following critical accounting policies based upon the significance of the policy to and the potential impact of estimates and subjective assessments on our overall financial statement presentation.  During the past three years we have not changed our critical accounting policies.  We have concluded our critical accounting policies are as follows:

Accounts Receivable. We recognize revenue as product is shipped (risk of loss for our products passes at time of shipment), net of provisions for estimated returns.  Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of trade accounts and notes receivable.  Collections on our accounts receivables are made through several lockboxes maintained by our lenders.  Credit risk associated with concentration of cash deposits is low as we have the right of offset with our lenders for the substantial portion of our cash balances.  Concentrations of credit risk with respect to trade accounts are within several industries.  Generally, credit is extended once appropriate credit history and references have been obtained.  We perform ongoing credit evaluations of customers and set credit limits based upon reviews of customers’ current credit information and payment history.  We monitor customer payments and maintain a provision for estimated credit losses based on historical experience and specific customer collection issues that we have identified.  Provisions to the allowance for doubtful accounts are made monthly and adjustments are made periodically based upon our expected ability to collect all such accounts.  Generally we do not require collateral for the extension of credit.

We record the effect of any necessary adjustments prior to the publication of our consolidated financial statements.  Each quarter we consider all available information when assessing the adequacy of the provision for allowances, claims and doubtful accounts.  Adjustments made with respect to the allowance for doubtful accounts often relate to improved information not previously available.  Uncertainties with respect to the allowance for doubtful accounts are inherent in the preparation of financial statements. At December 31, 2004 and 2003, the reserve was $7.7 million and $6.9 million, respectively.  The rate of future credit losses may not be similar to past experience.

Inventories — Inventories are stated at the lower of cost or market.  Our inventories are accounted for using a variety of methods including specific identification, average cost and the first-in first-out, or FIFO, method of accounting.  Through December 31, 2002, certain of our subsidiaries used the last-in, first-out, or LIFO, method of accounting for inventories.  We have changed the method of accounting for inventories for these subsidiaries to conform to the method (FIFO) used by similar businesses within our product groups effective January 1, 2003.  The effect of this change in accounting method was immaterial.  Accordingly, prior period information has not been restated.  We regularly review inventory on hand and record provisions for damaged and slow-moving inventory based on historical and current sales trends.  Changes in product demand and our customer base may affect the value of inventory on hand which may require higher provisions for damaged and slow-moving inventory.

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We record the effect of any necessary adjustments prior to the publication of our consolidated financial statements each quarterly reporting period.  Adjustments made with respect to the inventory valuation allowance often relate to improved information not previously available.  Uncertainties with respect to the inventory valuation allowance are inherent in the preparation of financial statements.  At December 31, 2004 and 2003, the reserve was $5.2 million and $5.3 million, respectively.  The rate of future losses associated with damaged or slow moving inventory may not be similar to past experience.

Consolidated Results of Operations

The following financial information reflects our historical financial statements and divested operations as of their respective divestiture dates.  The results of operations data for 2002 includes the Predecessor Company results for the period January 1, 2002 through October 31, 2002 and the Successor Company results for the period November 1, 2002 through December 31, 2002.  See the Supplementary table presented after the Results of Operations discussion below for the 2002 Successor Company and Predecessor Company results.

Results of Operations – Year Ended December 31, 2004 Compared to 2003

Net sales. Net sales increased $546.6 million, or 56.7%, from $963.2 million in 2003 to $1,509.8 million in 2004.  The increase in sales was primarily attributable to a 42.6% increase in average realized prices and a 16.6% increase in volumes for our Flat Rolled and Plates and Shapes Product Groups.  Net sales increased for our Building Products Group by $17.8 million.

Cost of sales.  Cost of sales increased $348.5 million, or 47.6%, from $731.6 million in 2003 to $1,080.1 million in 2004.  The increase in cost of sales was primarily attributable to a 31.6% increase in the average cost per ton and a 16.6% increase in volumes for our Flat Rolled and Plates and Shapes Product Groups.  Cost of sales as a percentage of net sales decreased from 76.0% in 2003 to 71.5% in 2004.  This percentage decrease was due to higher average realized sales prices.

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Operating and delivery. Operating and delivery expenses increased $16.7 million, or 13.1%, from $127.7 million in 2003 to $144.4 million in 2004.  This increase is primarily due to the increase in shipments.  As a percentage of net sales, operating and delivery expenses decreased from 13.3% in 2003 to 9.6% in 2004.  This percentage decrease was primarily due to higher average realized sales prices together with fixed costs being spread over a higher volume of net sales.

Selling, general and administrative.  Selling, general and administrative expenses increased $22.6 million, or 26.0%, from $87.0 million in 2003 to $109.6 million in 2004.  This increase was principally due to higher incentive compensation resulting from increased sales and gross margins, along with $5.0 million of costs associated with the elimination of one layer of management and the closing of eleven redundant or unprofitable locations in our Building Products Group.  As a percentage of net sales, selling, general and administrative expenses decreased from 9.0% in 2003 to 7.3% in 2004.  This percentage decrease was primarily due to higher average realized sales prices together with fixed costs being spread over a higher volume of net sales.

Depreciation and amortization. Depreciation and amortization increased $1.5 million, from $0.5 million in 2003 to $2.0 million in 2004, due to capital investment in facilities and equipment made during the prior twelve months.

Operating income. Operating income increased by $157.3 million, from $16.4 million in 2003 to $173.7 million in 2004.  This increase is due to the improved margins and increased shipments in our Flat Rolled and Plates and Shapes Product Groups.

Interest expense. Interest expense increased $2.7 million, or 47.4%, from $5.7 million in 2003 to $8.4 million in 2004, primarily as a result of increased borrowings, and to a lesser extent higher interest rates, on our revolving credit facility to support the increased working capital requirements in 2004.

Other (income) expense, net. Other income increased $0.5 million, or 25.0%, from $2.0 million in 2003 to $2.5 million in 2004.  These credits relate to settlements or adjustments attributable to the Predecessor Company claims and accruals.

Results of Operations – Year Ended December 31, 2003 Compared to 2002

Net sales. Net sales increased $1.2 million, or 0.1%, from $962.0 million in 2002 to $963.2 million in 2003.  Exclusive of the operations that were accounted for under SFAS 121 and sold during 2002 (see Note 15 of our consolidated financial statements in Item 8, “Financial Statements and Supplementary Data”), net sales increased $32.4 million due to increased volumes in the Plates and Shapes and Building Products Groups and increased average realized prices in the Flat Rolled Group.  With respect to the Flat Rolled and Plates and Shapes operations, exclusive of the operations that were sold, the benefit of a 3.3% increase in average realized prices was partially offset by a 0.3% decline in material shipments for steel products.

Cost of sales.  Cost of sales decreased $6.1 million, or 0.8%, from $737.7 million in 2002 to $731.6 million in 2003.  Exclusive of the operations that were sold during 2002, cost of sales increased $17.4 million due to increased volumes in the Plates and Shapes and Building Products Groups.  With respect to the Flat Rolled and Plates and Shapes operations, exclusive of the operations that were sold, the average cost per ton increased by 2.4%, which was partially offset by a 0.3% volume decrease.  As a percentage of net sales, cost of sales decreased from 76.7% in 2002 to 76.0% in 2003 as average realized prices increased more than costs.

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Operating and delivery. Operating and delivery expenses decreased $0.7 million, or 0.5%, from $128.4 million in 2002 to $127.7 million in 2003.  Exclusive of the operations that were sold during 2002, operating and delivery expenses increased $3.8 million, principally due to increased volumes in the Plates and Shapes and Building Products operations.  As a percentage of net sales, operating and delivery expenses remained stable at 13.3% for both years.

Selling, general and administrative.  Selling, general and administrative expenses decreased $5.3 million, or 5.7%, from $92.3 million in 2002 to $87.0 million in 2003.  Exclusive of the operations that were sold during 2002, selling, general and administrative expenses increased $0.6 million, primarily due to increased employee benefit costs.  As a percentage of net sales, selling, general and administrative expenses decreased from 9.6% in 2002 to 9.0% in 2003.

Depreciation and amortization. Depreciation and amortization decreased $6.8 million or 93.2%, from $7.3 million in 2002 to $0.5 million in 2003.  This decrease was due to the application of “Fresh-Start Reporting” that resulted in the reduction in carrying values of all property and equipment to zero as of October 31, 2002, the effective date of our emergence from bankruptcy, offset by depreciation and amortization expense on capital expenditures since October 31, 2002.

Operating income (loss).  Operating income increased by $19.9 million, or 568.6%, from an operating loss of $3.5 million in 2002 to operating income of $16.4 million in 2003.  The increase in operating income was primarily attributable to increased margins in the Plates and Shapes and Building Products operations and the decrease in selling, general and administrative expenses and depreciation and amortization discussed above.  This was somewhat offset by the sales of certain Plates and Shapes operations that generated an operating loss of $2.7 million during the twelve months ended December 31, 2002.  As a percentage of net sales, operating income increased from (0.4%) in 2002 to 1.7% in 2003.

Interest expense.  Interest expense decreased $11.4 million, or 66.7%, from $17.1 million in 2002 to $5.7 million in 2003.  This decrease was primarily due to decreased debt levels and lower interest rates.  The decrease in debt was a result of debt forgiveness resulting from our reorganization and proceeds generated from asset sales of $90.1 million during 2002.

Other (income) expense, net.  Other income increased $1.0 million, or 100.0%, from $1.0 million in 2002 to $2.0 million in 2003.  This increase is primarily due to a credit of $1.6 million recorded in 2003 resulting from the final adjustments for restructuring expenses.

Reorganization expenses.  Reorganization expenses in the amount of $28.3 million in 2002 consisted of $18.8 million of professional and trustee fees associated with Chapter 11 proceedings, $8.1 million of key employee retention expenses and obligations associated with employment agreements and $1.4 million associated with the write-off of debt issuance costs incurred on the Predecessor Company’s debtor-in-possession financing.  The Company has not incurred any reorganization expenses since the emergence from bankruptcy on October 31, 2002.

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Results of Operations – 2002 Successor Company and Predecessor Company Results

The following table presents the results for the Successor Company from November 1, 2002 through December 31, 2002, results for the Predecessor Company from January 1, 2002 through October 31, 2002, and combined results for the full-year 2002.