~~Table~~UNITED ofSTATES ~~Contents~~

~~UNITED~~SECURITIES ~~STATES~~AND EXCHANGE COMMISSION

~~SECURITIES~~Washington, ~~AND~~D.C. ~~EXCHANGE~~20549 ~~COMMISSION~~

~~Washington,~~FORM ~~D.C. 20549~~ 10-K

~~FORM~~ANNUAL ~~10-K~~REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

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

~~SECURITIES~~For ~~EXCHANGE~~the ~~ACT~~fiscal OFyear ~~1934~~ended December 31, 2011

~~For~~Commission ~~the~~File ~~fiscal~~Number ~~year~~333-132918 ~~ended December 31, 2006~~

~~Commission~~FLAG ~~File~~INTERMEDIATE ~~Number~~HOLDINGS ~~333-132918~~CORPORATION

~~FLAG~~(Exact ~~INTERMEDIATE~~name ~~HOLDINGS~~of ~~CORPORATION~~Registrant as Specified in its Charter)

(Exact name of Registrant as Specified in its Charter)


Delaware		20-3779375
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2400 E. Commercial Blvd., Suite 905 Fort Lauderdale, Florida		33308
(Address of Principal Executive Offices)		(Zip Code)

Delaware		20-3779375
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
One Riverway, Suite 1100 Houston, Texas		77056
(Address of Principal Executive Offices)		(Zip Code)

Commission File Number 1-13123

~~Commission~~METALS ~~File~~USA, ~~Number~~INC. ~~1-13123~~

~~METALS~~(Exact ~~USA,~~name ~~INC.~~of Registrant as Specified in its Charter)

(Exact name of Registrant as Specified in its Charter)


Delaware		76-0533626
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2400 E. Commercial Blvd., Suite 905 Fort Lauderdale, Florida		33308
(Address of Principal Executive Offices)		(Zip Code)

Delaware		76-0533626
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
One Riverway, Suite 1100 Houston, Texas		77056
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (954) 202-4000

~~Registrant’s~~Securities ~~telephone~~registered ~~number,~~pursuant ~~including~~to ~~area code:~~ Section 12(~~713~~b) ~~965-0990~~ of the Act: None

Securities registered pursuant to Section 12(bg) of the Act: None

~~Securities~~Indicate ~~registered~~by ~~pursuant~~check tomark ~~Section 12(g)~~if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:. Yes ¨ No x ~~None~~

Indicate by check mark if the ~~Registrant~~registrant is anot ~~well-known~~required ~~seasoned~~to ~~issuer,~~file asreports ~~defined~~pursuant into ~~Rule~~Section 13 ~~405~~or Section 15(d) of the ~~Securities~~Exchange Act. Yes ¨x No x¨

Indicate by check mark ifwhether the ~~Registrant~~registrant is(1) has ~~not~~filed all reports required to ~~file~~be ~~reports~~filed ~~pursuant~~by to Section 13 or ~~Section~~ 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 ¨ No x¨

Indicate by check mark whether the Registrant ~~(1) has~~submitted ~~filed~~electronically ~~all~~and ~~reports~~posted on its corporate Website, if any, every Interactive Data File required to be ~~filed~~submitted byand ~~Section 13~~posted orpursuant ~~15(d)~~to ofRule ~~the~~405 ~~Securities Exchange Act~~ of ~~1934~~Regulation S-T during the preceding 12 months (or for such shorter period that the ~~Registrant~~registrant was required to ~~file~~submit ~~such reports),~~ and ~~(2) has~~post ~~been subject to~~ such ~~filing requirements for the past 90 days~~files). Yes x No ¨

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

Indicate by check mark whether the ~~Registrant~~registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See ~~definition~~the definitions of “large accelerated filer,” “accelerated filer” and ~~large~~“smaller ~~accelerated~~reporting ~~filer~~company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

~~Larger~~ Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x Smaller reporting company ¨

Indicate by check mark whether the ~~Registrant~~registrant is a shell company (as defined in Rule ~~rule~~ 12b-2 of the Exchange Act). Yes ¨ No x

~~Indicate~~There byis ~~check~~no ~~mark~~market ~~whether~~for the Registrant’s ~~has~~common ~~filed~~stock. ~~all~~As ~~documents~~of ~~and reports required to be filed by Section~~March 1214, 132012, or100 ~~15(d)~~shares of the ~~Securities Exchange~~Registrant’s ~~Act~~common ofstock were ~~1934 subsequent to the distribution of securities under a plan confirmed by a court~~outstanding. ~~Yes x No ¨~~

~~Flag~~DOCUMENTS ~~Intermediate~~INCORPORATED ~~Holdings~~BY ~~Corporation~~REFERENCE is a wholly-owned subsidiary of Metals USA Holdings Corporation, and there is no market for the Registrant’s common stock. As of March 3, 2007, 100 shares of the Registrant’s common stock were outstanding.

~~DOCUMENTS~~None. ~~INCORPORATED BY REFERENCE~~

~~Not~~OMISSION ~~Applicable.~~OF CERTAIN INFORMATION

~~Table~~Flag Intermediate Holdings Corporation and Metals USA, Inc. meet the conditions set forth in General Instruction I(1)(a) and (b) of ~~Contents~~Form 10-K and are therefore filing this Form 10-K with the reduced disclosure format specified in General Instruction I(2) to Form 10-K.

TABLE OF CONTENTS

	Part I
Item 1.	Business	4	4
Item 1A.	Risk Factors	14	16
Item 2.	Properties	19
Item 1B.	Unresolved Staff Comments		23
Item 3.	Legal Proceedings	21
Item 2.	Properties		24
Item 4.	Submission of Matters to a Vote of Security Holders	21
Item 3.	Legal Proceedings		26
	Part II
Item 4.	Mine Safety Disclosures.		26
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters	22
	Part II
Item 6.	Selected Financial Data	23
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchasers of Equity Securities		27
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 6.	Selected Financial Data		28
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	48
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		29
Item 8.	Financial Statements and Supplementary Data	49
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		49
	Report of Independent Registered Public Accounting Firm	49
Item 8.	Financial Statements and Supplementary Data		51
	Consolidated Balance Sheets	50
	Report of Independent Registered Public Accounting Firm		51
	Consolidated Statements of Operations	51
	Consolidated Balance Sheets		52
	Consolidated Statements of Stockholder’s Equity	52
	Consolidated Statements of Operations		53
	Consolidated Statements of Cash Flows	53
	Consolidated Statements of Stockholder’s Equity and Comprehensive Income (Loss)		54
	Notes to Consolidated Financial Statements	54
	Consolidated Statements of Cash Flows		55
Item 9.	Changes in and Disagreements with Accountants and Accounting and Financial Disclosure	85
	Notes to Consolidated Financial Statements		56
Item 9A.	Controls and Procedures	85
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		95
Item 9B.	Other Information	85
Item 9A.	Controls and Procedures		95
	Part III
Item 9B.	Other Information
Item 10.	Executive Officers and Directors; Corporate Governance	86
	Part III
Item 11.	Executive Compensation	89
Item 10.	Directors, Executive Officers and Corporate Governance		97
Item 12.	Security Ownership of Certain Beneficial Owners and Management	104
Item 11.	Executive Compensation		97
Item 13.	Certain Relationships and Related Party Transactions; Director Independence	105
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters		97
Item 14.	Principal Accounting Fees and Services	107
Item 13.	Certain Relationships and Related Transactions, and Director Independence		97
	Part IV
Item 14.	Principal Accounting Fees and Services		97
Item 15.	Exhibits and Financial Statement Schedules	108
	Part IV
Signatures		109
Item 15.	Exhibits, Financial Statement Schedules		99
Index of Exhibits		110
Signatures			100
Index of Exhibits			102

~~Table~~1 ~~of Contents~~

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 11A.A “Risk Factors,” 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 to the following:

• our projected operating or financial results, including anticipated cash flows from operations and asset sale proceeds for ~~2007~~2012;

•

our 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; and

• 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;

•

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

• ~~operational~~adverse ~~factors~~developments ~~affecting~~in ~~the~~our ~~ongoing~~relationship ~~commercial~~with ~~operations~~both of our ~~facilities,~~key ~~including~~employees ~~catastrophic~~and ~~weather-related~~unionized ~~damage, regulatory approvals, permit issues, unscheduled blackouts, outages or repairs, unanticipated changes in fuel costs or availability of fuel emission credits or workforce issues~~employees;

• ~~our~~operational ~~ability~~factors toaffecting ~~operate~~the ongoing commercial operations of our ~~businesses~~facilities, ~~efficiently~~including catastrophic weather-related damage, ~~manage~~regulatory ~~capital~~approvals, ~~expenditures~~permit ~~and~~issues, ~~costs~~unscheduled ~~(including~~blackouts, ~~general~~outages ~~and~~or ~~administrative~~repairs, ~~expenses)~~unanticipated ~~and~~changes ~~generate~~in ~~earnings~~fuel ~~and~~costs ~~cash~~or ~~flow;~~availability ~~and~~of fuel emission credits or workforce issues;

• ~~general~~our ~~political~~ability ~~conditions~~to ~~and~~operate ~~developments~~our inbusinesses ~~the~~efficiently, ~~United~~manage ~~States~~capital expenditures and incosts ~~foreign~~(including ~~countries~~general ~~whose~~and ~~affairs~~administrative ~~affect~~expenses) ~~supply, demand~~ and ~~markets~~generate ~~for~~earnings ~~steel, metals~~ and ~~metal~~cash ~~products.~~flow;

In• ~~addition,~~restrictive ~~there~~covenants ~~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 1A, “Risk Factors,” and in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Many of these factors will be important in determining our ~~actual~~indebtedness ~~future~~that ~~results. Consequently, no forward-looking statement can be guaranteed. Our actual future results~~ may ~~vary~~adversely ~~materially~~affect ~~from~~our ~~those expressed~~operational 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. flexibility;

3• 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;

~~Table~~• ofour ~~Contents~~ability to retain key employees; and

~~PART~~• Iour expectations with respect to our acquisition activity.

~~Item 1.~~2 ~~Business~~

~~Overview~~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 1A. “Risk Factors,” and in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 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.

~~Metals USA, Inc. was incorporated in Delaware on July~~ 3, 1996, and began operations upon completion of an initial public offering on July 11, 1997. On November 14, 2001, our predecessor company filed for voluntary protection from its creditors under Chapter 11 of the United States Bankruptcy laws. We emerged from bankruptcy as a public company on October 31, 2002.

OnPART ~~May 18,~~I 2005, Metals USA Holdings Corporation (formerly named Flag Holdings Corporation), a Delaware corporation (“Metals USA Holdings”), and its wholly owned subsidiary, Flag Acquisition Corporation, a Delaware corporation (“Flag Acquisition”), entered into an agreement and plan of merger (the “Merger Agreement”) with Metals USA, Inc. (“Metals USA”). On November 30, 2005, Flag Acquisition, then a wholly owned subsidiary of Flag Intermediate Holdings Corporation (“Flag Intermediate”) merged with and into Metals USA (the “Merger”), with Metals USA being the surviving corporation. Flag Intermediate and Flag Acquisition conducted no operations during the period from May 9, 2005 (date of inception) to November 30, 2005. As a result of the Merger, all of Metals USA Inc.’s issued and outstanding common stock is held indirectly by Metals USA Holdings through Flag Intermediate, its wholly owned subsidiary. Metals USA Holdings was formed by Apollo Management V L.P., (“Apollo Management” and together with its affiliated investment entities “Apollo” or “Apollo V”). Investment funds associated with Apollo own approximately 97% of the capital stock of Metals USA Holdings (or approximately 90% on a fully-diluted basis). The remainder of the capital stock of Metals USA Holdings is held by members of our management.

~~Flag~~Item Intermediate and its wholly owned subsidiary, Metals USA, are referred to collectively herein as the “Company” or “Successor Company” and Metals USA prior to the Merger is referred to as the “Predecessor Company1.” Business

AsOverview one of the largest metal service center businesses in the United States, we are a leading provider of value-added processed carbon steel, stainless steel, aluminum, red metals and manufactured metal components. We are an important intermediary between primary metal producers that produce and sell large volumes of metals in a limited number of sizes and configurations and end-users, such as contractors and original equipment manufacturers, or OEMs, which often require smaller quantities of more customized products delivered on a just-in-time basis. We earn a margin over the cost of metal based upon value-added processing enhancements, which adds stability to our financial results and significantly reduces our earnings volatility relative to metal producers. In addition to our metal service center activities, we have a building products business, which supplies a range of manufactured products to the residential remodeling industry. In May 2006, we completed two acquisitions (the “2006 Acquisitions”) to bolster the market position and organic growth of our service center and building products businesses and have an active pipeline of additional acquisition targets. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Matters Impacting Comparability of Results—2006 Acquisitions.” We serve more than 18,500 customers annually from 77 operating locations throughout the United States and Canada. Our business is primarily divided into three operating groups: Plates and Shapes Group; Flat Rolled and Non-Ferrous Group; and Building Products Group.

~~Our~~Flag ~~Plates~~Intermediate ~~and~~Holdings ~~Shapes~~Corporation ~~and~~is ~~Flat~~a ~~Rolled~~corporation ~~and Non-Ferrous Groups perform customized, value-added processing services to unimproved~~formed ~~steel~~under ~~and~~the ~~other~~laws ~~metals~~of ~~required~~the tostate ~~meet~~of ~~specifications~~Delaware ~~provided~~(“Flag byIntermediate”). ~~our~~Flag ~~customers~~Intermediate ~~as well as offering inventory management~~ and ~~just-in-time~~its ~~delivery~~wholly ~~services.~~owned ~~These services enable our customers to reduce material costs~~subsidiary, ~~decrease~~Metals ~~capital required for raw materials inventory and processing equipment and save time~~USA, ~~labor, warehouse space and other expenses~~Inc. ~~The~~(“Metals ~~customers~~USA”), ~~of our Plates and Shapes and Flat Rolled and Non-Ferrous Groups~~ are inreferred ~~businesses~~to ~~such~~collectively herein as the ~~machining,~~“Company.” ~~furniture, transportation~~Flag ~~equipment, power~~ Intermediate and ~~process~~Metals ~~equipment,~~USA ~~industrial/commercial~~are ~~construction/fabrication,~~wholly ~~consumer~~owned ~~durables~~subsidiaries ~~and~~of ~~electrical~~Metals ~~equipment~~USA ~~industries,~~Holdings ~~as well as machinery and equipment manufacturers~~Corp. ~~Our~~(“Metals ~~Building~~USA ~~Products Group manufactures high-value finished building products for distributors and contractors engaged in the residential remodeling industry~~Holdings”).

4As one of the largest metal service center businesses in the United States, we believe that we are a leading provider of value-added processed carbon steel, stainless steel, aluminum, red metals, manufactured metal components and inventory management services. We believe that we serve an important function as an intermediary between primary metal producers that generally sell large volumes in limited sizes and configurations and end-users that generally require more services and smaller quantities of customized products. Operating 46 facilities comprising approximately 5.9 million square feet of industrial space, our metal service center business sold more than 1,396 thousand tons of metal products in 2011. We sell our products and services to a diverse customer base and broad range of end-user markets, including the aerospace, automotive industry manufacturing, defense, heavy equipment, marine transportation, commercial construction, office furniture manufacturing, and energy and oilfield service industries, among several others, throughout the United States. We strive to earn a margin over the cost of metal. Management’s strategy, manifested through organic growth initiatives and our acquisitions of metal service center businesses, focuses on maximizing the margin we earn over the cost of metal by offering additional value-added processing services and diversifying our product mix. We believe our growth and acquisition strategy, in combination with management’s demonstrated ability to manage metal purchasing and inventories to consistently meet our customers’ high expectations for service and reliability, serves as a foundation for future revenue growth and stable operating profit per ton through the economic cycle.

~~Table~~We operate in three reportable business segments: Plates and Shapes Group, Flat Rolled and Non-Ferrous Group, and Building Products Group. Our Plates and Shapes and Flat Rolled and Non-Ferrous Groups perform customized, value-added processing services to unimproved steel and other metals required to meet specifications provided by our customers in addition to offering inventory management and just-in-time delivery services, among others. 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 ~~Contents~~our Plates and Shapes and Flat Rolled and Non-Ferrous Groups are in the aerospace, automotive industry manufacturing, defense, heavy equipment, marine transportation, commercial construction, office furniture manufacturing, and energy and oilfield services industries. Our Building Products Group manufactures finished building products for distributors and contractors engaged in the residential remodeling industry.

~~Segment~~On ~~Information~~April 14, 2010, Metals USA Holdings completed its initial public offering of 11,426,315 shares of its common stock at $21.00 per share (the “IPO”), as described in Metals USA Holdings’ Registration Statement on Form S-1, as amended (File No. 333-150999). As a result of the IPO, the percentage of the Metals USA Holdings’ outstanding capital stock held by non-affiliates as of December 31, 2011 is approximately 31%. Investment funds associated with Apollo Management V L.P. (“Apollo Management” and together with its affiliated investment entities, “Apollo” or “Apollo V”) own approximately 64% of the capital stock of Metals USA Holdings, with the remainder held by members of Metals USA Holdings’ management.

~~Each~~On ofMay 18, ~~our~~2005, ~~product~~Metals ~~groups~~USA isHoldings ~~led~~and byits anwholly ~~experienced~~owned ~~executive~~subsidiary, ~~and~~Flag isAcquisition ~~supported~~Corporation, by a ~~professional~~Delaware ~~staff~~corporation (“Flag ~~in finance~~Acquisition”), ~~purchasing~~entered ~~and~~into ~~sales~~an Agreement and ~~marketing.~~Plan ~~This~~of ~~product-oriented~~Merger ~~organizational structure facilitates~~ (the ~~efficient~~ ~~advancement~~“Merger ofAgreement”) ~~our~~with ~~goals~~Metals ~~and~~USA. ~~objectives~~On toNovember 30, ~~achieve~~2005, ~~operational~~Flag ~~synergies~~Acquisition, ~~and~~then ~~focused~~a ~~capital~~wholly ~~investment.~~owned ~~For~~subsidiary ~~additional~~of ~~industry~~Flag ~~segment information~~Intermediate, ~~see~~merged ~~Item 7.~~with ~~“Management’s Discussion~~ and ~~Analysis of Financial Condition~~into ~~and~~Metals ~~Results~~USA of(the ~~Operations—Results of Operations by Segment~~“Merger”), ~~and~~with ~~Note~~Metals 12USA tobeing ~~our~~the ~~consolidated~~surviving ~~financial statements in Item 8. “Financial Statements and Supplementary Data.”~~

~~Metal~~4 ~~Processing/Service Center Businesses: Plates and Shapes and Flat Rolled and Non-Ferrous Groups~~

~~Overview~~ corporation. ~~Companies~~Flag ~~operating~~Intermediate inand ~~the~~Flag ~~metals~~Acquisition ~~industry~~conducted ~~can~~no ~~generally~~operations beduring ~~characterized~~the asperiod ~~primary~~from ~~metals producers~~May 9, ~~metals~~2005 ~~processors/service~~(date ~~centers or~~of ~~end-users.~~inception) ~~Our~~to ~~Plates~~November 30, ~~and Shapes and Flat Rolled and Non-Ferrous Groups are metals processors/service centers~~2005. As ~~such,~~a weresult ~~purchase~~of ~~carbon~~the ~~steel~~Merger, ~~stainless~~all of ~~steel,~~Metals ~~aluminum,~~USA’s ~~brass,~~issued ~~copper~~ and ~~other~~outstanding ~~metals~~common ~~from~~stock ~~producing~~is ~~mills~~held ~~and~~indirectly ~~then~~by ~~sell~~Metals ~~our metal~~USA ~~processing~~Holdings ~~services~~through ~~and~~Flag ~~the metal to our customers~~Intermediate, ~~who~~its ~~are~~wholly ~~generally~~owned ~~end-users~~subsidiary. WeMetals ~~believe~~USA ~~that~~Holdings ~~both~~was ~~primary~~formed ~~metals producers and end-users are increasingly seeking to have their metals processing and inventory management requirement met~~ by ~~value-added~~ ~~metals processors/service centers like us~~Apollo.

~~Metals~~Flag ~~service~~Intermediate ~~centers function as key intermediaries between the primary metals producers that produce~~ and ~~sell~~its ~~larger~~wholly ~~volumes~~owned ~~of metals in a limited number of sizes and configurations and end-users~~subsidiary, ~~such~~Metals ~~as contractors and OEMs~~USA, ~~that~~are ~~require~~also ~~smaller~~referred ~~quantities~~to ofcollectively ~~more~~herein ~~customized~~as ~~products~~the ~~delivered on a just-in-time basis.~~“Successor ~~End-users~~Company” ~~incorporate~~and ~~processed~~Metals ~~metals~~USA ~~into~~prior ~~finished~~to ~~products,~~the inMerger ~~some~~is ~~cases~~referred ~~with~~to ~~little~~as ~~further~~the ~~modification~~“Predecessor Company.”

InGrowth ~~our~~Through ~~Plates and Shapes~~Acquisitions and Flat Rolled and Non-Ferrous Groups, we engage in pre-production processing of carbon steel, stainless steel, red metals and aluminum. 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 and Non-Ferrous Groups contributed approximately 89% of our 2006 net sales and the substantial majority of our 2006 operating income.

~~Plates~~Strategic ~~and~~acquisitions ~~Shapes Group. We believe we are one~~ of ~~the largest distributors of~~ metal ~~plates~~service ~~and~~center ~~shapes~~businesses inthat ~~the~~complement ~~United States. We sell products such as wide-flange beams, plate, tubing, angles, bars and other structural shapes in a number of alloy grades and sizes. A substantial number of~~ our ~~products~~overall ~~undergo additional~~product ~~processing prior to being delivered to our customers, such as blasting~~ and ~~painting,~~service tee-splitting, cambering/leveling, cutting, sawing, punching, drilling, beveling, surface grinding, bending, shearing and cutting-to-length. We sell the majority of our products to a diversified customer base, ~~including a large number of small customers who purchase products in small order sizes and require just-in-time delivery. The customers of our Plates and Shapes Group~~ are ~~primarily in the~~an ~~fabrication,~~important ~~construction,~~element machinery and equipment, transportation and energy industries. We serve our customers, who generally operate in a limited geographic region, from 22 metal service centers located primarily in the southern and eastern half of the United States. Each metal service center is located in close proximity to our ~~metal~~growth ~~suppliers and our customers~~strategy. InThe ~~May~~following ~~2006,~~acquisitions weoccurred ~~completed~~over the ~~acquisition~~last ofsix all of the assets and operations of Port City Metal Services (“Port City”), a high value-added plates facility located in Tulsa, Oklahoma, that bolsters our presence in the construction and oil-field services sectoryears. ~~See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Matters Impacting Comparability of Results—2006 Acquisitions.”~~

~~Flat~~In ~~Rolled~~May ~~and~~2006, ~~Non-Ferrous~~we ~~Group. The~~bought ~~Flat~~Port ~~Rolled~~City ~~and~~Metal ~~Non-Ferrous~~Services ~~Group~~(“Port ~~sells~~City”) ain ~~number of products~~Tulsa, ~~including~~Oklahoma. ~~carbon~~Port ~~and~~City ~~stainless~~increased ~~steel,~~our ~~aluminum,~~plate ~~brass~~processing ~~and~~capabilities ~~copper~~to incustomers aserving ~~number~~the ofoil ~~alloy~~field, ~~grades~~construction equipment and ~~sizes~~refining industries. As

5In June 2007, we acquired Lynch Metals, Inc. (“Lynch Metals”) with locations in Union, New Jersey and Anaheim, California. Lynch Metals provides value-added, specialized aluminum products to customers who are predominantly manufacturers of air/heat transfer products specifically focused on aerospace equipment, industrial and automotive applications.

~~Table~~In February 2009, we acquired VR Laser Services USA, Inc., which we subsequently renamed Philadelphia Plate (“Philadelphia Plate”), which further expanded our existing processing capabilities in the northeast region of ~~Contents~~the United States focused primarily on the marine and defense industries.

~~relatively~~In ~~few~~June ~~end-user~~2010, ~~customers~~we ~~can~~acquired ~~handle~~J. ~~carbon~~Rubin & ~~steel~~Co. ~~in the form generally shipped by steel mills~~ (~~sizes~~“J. ~~less~~Rubin”), ~~than~~ a ~~quarter~~metal ofservice ancenter ~~inch~~business inthat ~~thickness~~operates in ~~continuous~~ ~~coils that typically weigh 40~~Illinois,~~000~~ toWisconsin ~~60,000 pounds), substantially all of the materials, as well as the non-ferrous materials sold by our Flat Rolled~~ and ~~Non-Ferrous~~Minnesota ~~Group,~~with ~~undergo value-added processing prior to delivery to the customer. We provide~~ a broad ~~range~~mix of ~~value-added~~products ~~processing services including precision blanking, slitting, shearing, cutting-to-length, punching, bending~~ and ~~leveling. Our customers are in the electrical manufacturing, fabrication, furniture, appliance~~processing ~~manufacturing,~~services ~~machinery and equipment and transportation industries and include many larger customers who value the high quality products~~ that weare ~~provide~~provided ~~together~~to ~~with~~a ~~our~~diverse ~~customer~~range ~~service and reliability. A number~~ of ~~our~~customer ~~large~~end ~~customers purchase through pricing arrangements or contractual agreements~~markets. We serve our customers from 12 metal service centers in the midwestern and southern regions of the United States. Each metals service center is located in close proximity to our metal suppliers and our customers.

~~Industry~~In ~~Overview.~~December ~~The metals service center industry is highly fragmented~~2010, ~~with~~we ascompleted ~~many~~the asacquisition ~~5,000~~of ~~participants~~Ohio ~~throughout~~River ~~North~~Metal ~~America~~Services (“ORMS”), ~~generating~~located in ~~excess~~Jeffersonville, ~~of $115 billion in net sales in 2006~~Indiana. ~~The~~ORMS ~~industry~~operates ~~includes both general line distributors that handle~~ a ~~wide~~flat ~~range~~rolled of metal ~~products~~service ~~and~~center ~~specialty distributors~~ that ~~specialize~~provides ~~in particular categories of~~ metal products. Weand ~~are~~processing aservices ~~general~~to ~~line~~customers ~~distributor.~~throughout ~~Metals service centers accounted for approximately one quarter or more of U.S. steel shipment in 2006 based on volume, a market share which has been relatively constant for~~ the ~~last~~Ohio ~~15 years~~Valley.

WeIn ~~believe~~March ~~that~~2011, ~~both~~we ~~primary~~completed ~~metals~~the ~~producers~~acquisition ~~and~~of ~~end-users~~The ~~are~~Richardson ~~increasingly~~Trident ~~seeking~~Company to(“Trident”). ~~have~~Trident ~~their~~is ~~metals~~a ~~processing~~general ~~and inventory~~line ~~management~~metal ~~requirements~~service ~~met~~center bywith ~~value-added~~fabricating ~~metals~~capabilities ~~service~~designed ~~centers.~~to ~~During~~service the ~~past~~oil ~~two~~and ~~decades~~gas industry, ~~primary~~and ~~metals~~is ~~producers~~also ~~have been focusing on their core competency of high-volume production of~~ a ~~limited~~wholesale ~~number~~distributor of ~~standardized metal products. As primary~~ metals ~~producers have consolidated~~, ~~they~~plastics ~~increasingly have required service centers~~ and ~~processors~~electronic ~~to perform value-added services for end-customers~~parts. AsThe aCompany ~~result,~~operates ~~most~~under ~~end-users~~The ~~cannot~~Trident ~~obtain~~Company ~~processed~~and ~~products~~The ~~directly~~Altair ~~from primary metals~~Company ~~producers~~trade ~~and therefore over 300,000 OEMs, contractors and fabricators nationwide rely on service centers~~names. ~~End-users~~Trident’s ~~have~~principal ~~also~~facility ~~recognized~~is ~~the~~in ~~economic~~Richardson, ~~advantages~~Texas ~~associated~~ with ~~outsourcing~~branch ~~their~~locations ~~customized~~in ~~metals~~Houston, ~~processing~~Austin, ~~and~~El ~~inventory~~Paso, ~~management requirements.~~Harlingen ~~Outsourcing~~and ~~permits~~Odessa, ~~end-users~~Texas; toTulsa, ~~reduce~~Oklahoma; ~~total~~Olathe, ~~production~~Kansas; ~~costs~~Los byAngeles, ~~shifting~~California; ~~the responsibility of pre-production processing to service centers~~Boston, ~~whose~~Massachusetts ~~higher efficiencies in performing these processing services make the ownership~~ and ~~operation~~ ~~of the necessary equipment more financially feasible~~Thomasville, Georgia.

~~Value-added~~Trident ~~service~~provides ~~centers,~~a ~~including~~broad ~~ourselves,~~range ~~have~~of ~~also~~metals ~~benefited from growing customer demand for inventory management~~ and ~~just-in-time~~processing ~~delivery~~ services. ~~These~~with ~~supply-chain~~a ~~services,~~product ~~which~~mix ~~are~~that ~~normally~~emphasizes ~~not~~aluminum, stainless ~~provided~~steel byand ~~primary~~nickel. ~~metals~~The ~~producers,~~majority ~~enable~~of ~~end-users~~Trident’s tocustomer ~~reduce~~base ~~input~~operates ~~costs,~~in ~~decrease~~the ~~capital~~oil ~~required for inventory~~ and ~~equipment~~gas ~~and~~services ~~save~~sector. ~~time,~~Processing ~~labor~~services ~~and~~include ~~other~~precision ~~expenses.~~sawing, ~~Some~~boring, ~~value-added~~honing, ~~service centers~~slitting, ~~including us~~sheeting, ~~have~~shearing ~~installed electronic data interchange between their computer systems~~ and ~~those~~tuning. ofTrident ~~their~~also ~~customers~~offers tosupply chain ~~facilitate~~solutions ~~order~~such ~~entry, inventory~~as ~~management,~~ just-in-time delivery and ~~billing~~value-added components required by original equipment manufacturers (“OEMs”).

InProducts ~~addition, manufacturers appear to be reducing their operating costs by limiting the number of suppliers with which they do business, often eliminating suppliers offering limited ranges of products~~ and ~~services. Customers increasingly seek larger suppliers capable of providing sophisticated processing services~~Services, ~~such~~Markets ~~as marine coatings~~ and ~~precision~~Industry ~~laser~~Information cutting. These trends have placed 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 invest in equipment. As a result, smaller metals service centers are finding it increasingly difficult to compete with larger service centers.

The ~~industry~~Company’s ~~has~~businesses ~~been~~are ~~consolidating~~managed ~~due~~on toa ~~economies~~decentralized ofbasis ~~scale~~operating ~~and other advantages that the larger metals service centers enjoy. According to industry sources, the number of metal processor and service center locations~~ in ~~the~~business ~~U.S.~~segments ~~has~~based ~~been~~on ~~reduced~~product ~~significantly~~groups. We believe ~~the~~this ~~larger~~product-oriented ~~and~~organizational ~~better~~structure ~~capitalized~~facilitates ~~companies,~~the efficient ~~like~~advancement ~~us,~~of ~~enjoy~~our ~~significant~~goals ~~advantages~~and ~~over~~objectives ~~smaller companies in areas such as obtaining higher discounts associated with volume purchases, the ability~~ to ~~service~~achieve ~~customers~~operational ~~with~~synergies ~~operations in multiple locations~~ and ~~the~~focused ~~use~~capital ~~of more sophisticated information systems~~investment. AsOperational aactivities ~~result,~~and wepolicies ~~were~~are ~~able~~managed toby ~~identify~~corporate ~~significant~~officers ~~synergies from the service center acquisition we completed in May 2006~~ and wekey ~~expect~~product togroup beexecutives ~~able~~who, toon doaverage, ~~the~~have ~~same~~over ~~in future acquisitions.~~ 29

~~Table~~ years of ~~Contents~~experience and are supported by finance, purchasing and sales and marketing staff. For additional industry segment information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations by Segment,” and Note 13 to our consolidated financial statements for the year ended December 31, 2011 included elsewhere in this report.

~~Products~~Metal ~~and~~Processing/Metal ~~Services.~~Service WeCenter ~~purchase~~Businesses: ~~our~~Plates ~~raw materials in anticipation of projected customer requirements based on interaction with~~ and ~~feedback~~Shapes ~~from customers, market conditions, historical usage~~ and ~~industry~~Flat ~~research.~~Rolled ~~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~~Non-~~added~~Ferrous ~~processes~~Groups ~~include:~~

•Industry ~~Precision~~Overview. ~~blanking—the~~Companies ~~process~~operating in ~~which~~the metals industry can generally be characterized as primary metal isproducers, metal ~~cut~~processors/metal ~~into~~service ~~precise~~centers ~~two~~or end-~~dimensional~~users. ~~shapes~~Our Plates and Shapes and Flat Rolled and Non-Ferrous Groups are metals processors/metal service centers. As such, we purchase carbon steel, stainless 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 metal producers and end-users increasingly seek to have their metals processing and inventory management requirements met by value-added oriented metal processors/metal service centers like us.

•Metal ~~Flame~~service centers ~~cutting—~~function as key intermediaries between the ~~cutting~~primary metals producers that produce and sell larger volumes of metals toin ~~produce~~a ~~various~~limited ~~shapes~~number ~~according~~of tosizes ~~customer~~and configurations and end-~~supplied~~users, ~~drawings~~such as fabricators, contractors and OEMs that require smaller quantities of more customized products delivered on a just-in-time basis. End-users incorporate processed metals into finished products, in some cases with little further modification.

•In ~~Laser~~our Plates and ~~plasma~~Shapes ~~cutting—the~~and ~~cutting~~Flat Rolled and Non-Ferrous Groups, we engage in pre-production processing of carbon steel, stainless steel, red metals and aluminum. We purchase metals from primary producers, maintain an inventory of various metals to ~~produce~~allow ~~shapes~~rapid ~~under~~fulfillment ~~strict~~of ~~tolerance~~customer ~~requirements~~orders and perform customized processing services to the specifications provided by end-users. 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 and Non-Ferrous Groups contributed approximately 95% of our 2011 net sales.

•Metal ~~Slitting—the~~service ~~cutting~~centers and processors purchase approximately 35% of ~~coiled~~all the metals toused ~~specified~~in ~~widths~~the ~~along~~U.S. and Canada and play an important intermediary role between the ~~length~~production mills and the end-users. Over the last several years primary metal producers have consolidated and focused on optimizing the throughput and operating efficiencies of their production facilities. We believe this consolidation among primary steel and aluminum producers over the ~~coil~~last several years has expanded the demand for metal distribution and service centers, and in particular those service centers capable of providing additional value-added metal processing and inventory management services. Over 300,000 end-users nationwide rely on metal service centers for their primary supply of metal products and services. End-users generally buy metal products and services from metal service centers on a margin over the cost of the metal. When customers require additional processing or inventory management services, value-added metal service centers such as ours earn an additional premium margin over the cost of metal.

•By ~~Blasting~~outsourcing their customized metal processing and ~~painting—~~inventory management needs, end-users have the ~~process~~potential ofto ~~cleaning~~realize ~~steel~~significant economic ~~plate~~benefits by ~~shot~~shifting the responsibility for pre-~~blasting~~production processing to metal service centers and leveraging service centers’ just-in-time delivery and other inventory management services. These supply-chain services, ~~then~~which ~~immediately~~are ~~applying~~not normally aprovided ~~paint~~by orprimary ~~primer~~metals producers, enable end-users to reduce input, labor and other production costs, shorten lead times, and decrease required investments in working capital, manufacturing and warehouse facilities.

•We ~~Plate~~believe ~~forming~~that long-term growth opportunities for metal service centers will continue to expand as both primary metal producers and end-users ~~rolling—the~~increasingly ~~forming~~seek to have their metal processing and ~~bending~~inventory ofmanagement ~~plates~~requirements tomet ~~cylindrical~~by orvalue-added ~~required~~metal ~~specifications~~service centers. Although the service center industry

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

• remains ~~Tee~~fragmented with approximately 1,200 companies competing in North America, we believe larger service center businesses with greater scale and financial flexibility, like ours, enjoy significant advantages over smaller companies such as the ability to obtain higher discounts associated with volume purchases, the breadth of products and value-~~splitting—~~added services to meet the ~~cutting~~diverse needs of ~~metal~~key ~~beams~~end-use ~~along~~markets, and the ~~length~~more sophisticated logistics capabilities necessary to ~~form~~serve ~~separate~~national ~~pieces~~accounts.

•Plates ~~Cambering—~~and Shapes Group. The Plates and Shapes Group processes and sells steel plates and structural beams, bars, angles and tubes. We believe we are one of the largest distributors of steel plates and structural beams in the United States. In 2011, we sold approximately 596 thousand tons of products through 19 metal service centers located primarily in the southern and eastern regions of the United States. Our metal service centers are generally equipped to provide additional value-added processing, and a substantial portion of our volume is processed prior to being delivered to the end-user. These processing services include burning, blasting and painting (the process of cleaning steel plate by shot-blasting, then immediately applying a paint or primer), tee-splitting (the cutting of metal beams along the length to form separate pieces), cambering (the bending of structural shapes to improve load-bearing capabilities), leveling (the flattening of metals to uniform tolerances for proper machining), cutting, sawing, punching, drilling, beveling, surface grinding, braking (bending), shearing and cutting-to-length (the cutting of metals into pieces and along the width of a coil to create sheets or plates). We sell our products to a diversified customer base, including a large number of small customers who purchase products in small order sizes. We believe our disciplined management and hands-on service, backed by our national network of metal service centers, enables us to effectively meet our customers’ varied product and inventory management needs.

•We ~~Sawing—~~generally earn additional margin from our customers by providing services such as product marking, item sequencing, just-in-time delivery and kitting. The customers who require these products and services are primarily in the ~~cutting~~fabrication, public and private non-residential construction, machinery and equipment, land and marine transportation, and energy industries. Because our metal service centers are generally located in close proximity to ~~length~~our metal suppliers and our customers, we are able to meet our customers’ product and service needs reliably and consistently. Over the last six years, we added two businesses to our Plates and Shapes portfolio through acquisitions. In May 2006, we completed the acquisition of ~~bars~~Port City, ~~tubular~~which ~~goods~~bolstered our presence in the construction and ~~beams~~oil-field services sectors. In February 2009, we acquired Philadelphia Plate, which has expanded our presence in the northeast region of the United States and augmented our presence in the marine and defense sectors.

•Flat ~~Leveling—~~Rolled and Non-Ferrous Group. The Flat Rolled and Non-Ferrous Group processes and sells flat rolled carbon and stainless steel, aluminum, brass and copper in a number of alloy grades and sizes through 27 metal service centers located primarily in the ~~flattening~~mid-western and southern regions of the United States. We sold approximately 812 thousand tons of these products in 2011, with our revenues split approximately 60% and 40% between ferrous products and non-ferrous products, respectively. Substantially all of the products from this group that are sold undergo value-added processing prior to shipment to our customers. These processing services include precision blanking (the process in which metal is cut into precise two-dimensional shapes), slitting (the cutting of coiled metals to ~~uniform~~specified ~~tolerances~~widths ~~for~~along ~~proper~~the ~~machining~~length of the coil), shearing and cutting-to-length, punching and leveling.

•We ~~Edge~~sell ~~trimming—a~~our ~~process~~products ~~that~~and ~~removes~~services ato ~~specified~~customers ~~portion~~in the electrical and appliance manufacturing, fabrication, furniture, machinery and equipment, transportation and aerospace industries. Many of our large customers purchase through pricing arrangements or contractual agreements that specify the ~~outside~~margin ~~edges~~over the cost of metal ~~coiled~~and we generally earn additional margin from these customers by providing services such as product marking and labeling, just-in-time delivery and kitting. We are able to provide these services reliably because our metal service centers are generally located in close proximity to ~~produce~~our ~~uniform~~metal ~~width~~suppliers and ~~round~~our orcustomers. ~~smooth~~Over ~~edges~~the last six years, we added four businesses to our Flat Rolled and Non-Ferrous portfolio through acquisitions. In July 2007, we acquired Lynch Metals, a metal service center business that provides specialized aluminum products primarily to the aerospace, industrial and automotive industries. In June 2010, we acquired J. Rubin, expanding

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

~~Our~~ the ~~additional~~scope ~~capabilities~~of ~~include~~our ~~applications~~product ~~engineering~~lines, services and ~~other~~geographic ~~value-added~~footprint ~~processes~~in ~~such~~the asupper ~~custom~~Midwest, ~~machining~~in addition to allowing us to enhance our cross-selling opportunities in existing markets. ~~Using~~In ~~these~~December 2010, we acquired ORMS, a metal service center with distinctive processing and service capabilities and a strategic location in an existing Midwest market. In March 2011, we ~~use processed~~acquired Trident, a wholesale distributor of metals, plastics and electronic parts with fabricating capabilities designed to ~~manufacture~~service ~~higher-value~~the ~~components~~oil and gas industry.

~~Once~~Product weMix. ~~receive~~We provide ana ~~order,~~wide wevariety ~~select~~of ~~the~~metal ~~appropriate~~products ~~inventory~~in different shapes and ~~schedule~~sizes itto ~~for processing~~our customers. We actively manage our inventory levels and product mix in ~~accordance~~order ~~with~~to optimize the ~~customer’s~~cost ~~requirements~~tradeoff between holding inventory and ~~specified~~incurring ~~delivery~~a ~~date~~shortage situation. ~~Orders~~We strive ~~are~~to ~~monitored~~closely bymonitor our ~~computer~~customer ~~systems,~~demand ~~including,~~forecasts inand ~~certain~~coordinate ~~locations,~~our ~~the~~inventory ~~use~~levels ofand ~~bar~~product ~~coding~~mix towith ~~aid~~our incustomers’ ~~and~~production ~~reduce~~planning ~~the~~and ~~cost~~scheduling. ofWe ~~tracking~~also ~~material.~~analyze ~~We record~~macroeconomic ~~the~~data, ~~source~~end-use ofmarket ~~all~~data ~~metal~~and ~~shipped~~historical usage to forecast ~~customers.~~the ~~This~~cyclical ~~enables~~effect usof toinventory ~~identify~~building and reduction in the ~~source~~industries ofwe ~~any~~serve, ~~metal~~adjusting ~~which~~our ~~may~~inventory ~~later~~levels beand ~~shown~~product tomix ~~not~~accordingly. ~~meet~~Our ~~industry~~product ~~standards~~mix oralso ~~that~~changes ~~fails~~as ~~during~~a orresult ~~after~~of ~~manufacture~~acquisitions. ~~This~~We ~~capability~~believe isthe ~~important~~proactive tomanagement of our ~~customers as~~inventory itlevels ~~allows~~and ~~them~~product tomix, ~~assign~~along ~~responsibility~~with ~~for~~our ~~non-conforming~~expanding orgeographic ~~defective~~footprint ~~metal~~and diverse customer segments position us to ~~the~~maintain ~~mill~~long-term ~~that~~profitability ~~produced~~throughout the ~~metal.~~various ~~Many~~stages of ~~the~~economic ~~products~~cycles. ~~and~~We ~~services~~believe wethat ~~provide~~our ~~can~~focus beon ~~ordered~~product mix ~~and~~enhancement ~~tracked~~helps ~~through~~us ato ~~web-based~~mitigate ~~electronic~~the ~~network~~effects ~~that~~of ~~directly connects~~uneven ~~our~~demand ~~computer~~associated ~~system~~with tospecific ~~those~~regions ofand ~~our~~end-user ~~customers~~industries.

WeNet ~~cooperate~~sales ~~with~~by ~~our~~product ~~customers~~line ~~and~~as ~~tailor~~a ~~our~~percent ~~deliveries to support their needs, which in many instances consist~~ of ~~short~~total ~~lead-times~~sales ~~and~~for ~~just-in-time delivery requirements. This is accomplished through~~ our ~~inventory~~metal ~~management~~service ~~programs,~~center ~~which~~businesses ~~permit~~for useach ~~to deliver processed metals from a sufficient inventory~~ of ~~raw materials to meet~~ the ~~requirements~~three ofyears ~~our~~ended December 31, ~~customers~~2011, ~~which~~2010, inand ~~many~~2009 ~~instances~~were ~~results~~as infollows: ~~orders filled within 24-48 hours.~~

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.


	Twelve Months Ended December 31,
	2011			2010			2009
Carbon Flat Rolled Products		34.7	%		35.1	%		31.5	%
Mini Mill Products		10.5	%		11.2	%		10.9	%
Non-Ferrous Products		24.4	%		21.9	%		20.0	%
Plate Products		17.6	%		18.1	%		19.6	%
Structural Products		12.8	%		13.7	%		18.0	%

		100.0	%		100.0	%		100.0	%

7Value-Added Processing Services. 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:

~~Table~~• ofPrecision ~~Contents~~blanking—the process in which metal is cut into precise two-dimensional shapes.

We• ~~have~~Flame ~~quality~~cutting—the ~~control~~cutting ~~systems~~of metals to ~~ensure~~produce ~~product~~various ~~quality~~shapes ~~and~~according ~~traceability~~to ~~throughout processing. Quality controls include periodic supplier audits,~~ customer-~~approved~~supplied ~~quality standards, inspection criteria and metals source traceability~~drawings. ~~A number of our facilities have International Standards Organization, or ISO 9002 certification.~~

~~Building~~• ~~Products~~Laser ~~Group~~and plasma cutting—the cutting of metals to produce shapes under strict tolerance requirements.

~~Overview.~~• ~~The Building Products Group provides diversification to our service center business as both its operations and~~ Slitting—the ~~end-markets~~cutting ~~that it serves are significantly different from those~~ of ~~our~~coiled ~~metal~~metals service center business. The Building Products Group manufactures and sells sunrooms, roofing products, awnings and solariums for use in residential applications and large area covered canopies, awnings and covered walkways for use in commercial applications. Approximately 95% of our Building Products Group sales are attributable to ~~the~~specified ~~residential~~widths ~~remodeling~~along ~~market with~~ the ~~remaining~~length sales attributable to commercial applications. Because our building products business is primarily focused on the residential remodeling market, demand is not directly correlated to housing starts or interest rates, nor are prices generally subject to fluctuations in the demand for or price of ~~metal. Most customers of our Building Products Group are in~~ the ~~home improvement, construction, wholesale trade and building material industries~~coil. We generally sell our products through a network of independent distributors and home improvement contractors. We believe we are one of only a few suppliers with national scale across our market segments. We operate through 18 manufacturing locations and 25 sales and distribution facilities throughout the southern and western regions of the United States and Canada. In May 2006, we completed the acquisition of all of the assets and operations of Dura-Loc Roofing Systems Limited (“Dura-Loc”), a metal roofing manufacturer and distributor with a manufacturing facility located near Toronto, Ontario, Canada that we believe solidifies our position as one of the largest stone-coated metal roofing manufacturers in North America. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Matters Impacting Comparability of Results—2006 Acquisitions.”

~~Industry~~• ~~Overview.~~Blasting ~~The residential remodeling industry has experienced significant growth over the last ten years~~ and, ~~we believe, is poised for continued growth in~~ painting—the ~~future.~~process ~~The Home Improvement Research Institute estimates that homeowners and rental property owners spend approximately $300 billion annually on remodeling their homes which accounts for over 40%~~ of ~~all~~cleaning ~~residential construction~~steel ~~and~~plate ~~improvement~~by spending. Over the last decade, the industry has experienced accelerated growth due to a number of different macroeconomic and demographic factors (many of which we expect to continue) including strong existingshot-~~home sales~~blasting, ~~rising~~then ~~disposable~~immediately ~~incomes,~~applying increased rates of home ownership and aging American houses. Existing-home sales impact the remodeling market as owners improve their homes in preparation for sale, and new-home buyers often undertake significant renovations and remodeling projects within the first few months of ownership. The increase in disposable incomes has been a ~~factor~~paint inor ~~the rise in homeownership to approximately 69% in 2005 from 55% in 1950~~primer. The aging of the domestic home supply is also expected to bolster remodeling sales as the average home in the U.S. is now over 30 years old. As Americans continue to improve and upgrade their homes, we believe an increasing number will turn to remodeling as a cost-effective alternative to new housing construction. Among the most popular remodeling projects are backyard living items, such as pool enclosures, lattices and patio covers, as well as sunrooms and roofing, all of which we manufacture and distribute.

~~According~~• toPlate ~~the~~forming ~~Joint~~and ~~Center for Housing Studies of Harvard University, between~~ rolling—the ~~rise~~forming ~~in interest rates~~ and ~~the~~bending ~~slowdown in house price appreciation, sales~~ of ~~existing~~plates homes softened in 2006. Existing home sales are an important driver of remodeling activity, with sellers of older properties typically making improvements before putting their homes on the market, and recent buyers typically making changes to ~~customize~~cylindrical ~~their~~or ~~new~~required ~~homes to their tastes~~specifications.

~~While~~• ~~signs~~Shearing ofand acutting ~~construction~~to ~~cutback~~length—the ~~have~~cutting ~~been appearing since early 2006, direct evidence~~ of ametals ~~remodeling~~into ~~slowdown~~pieces ~~is only now emerging. Retail sales at building~~ and ~~supply~~along ~~dealers~~the ~~have~~width ~~weakened~~of ~~slightly~~a ~~after~~coil ~~adjusting for inflation in product price. These businesses sell home products and supplies~~ to ~~do-it-yourself~~create ~~and buy-it-yourself~~sheets ~~homeowners,~~or ~~as well as directly to professional general contractors and the trades~~plates.

8• Tee-splitting—the cutting of metal beams along the length to form separate pieces.

~~Table~~• Cambering—the bending of ~~Contents~~structural shapes to improve load-bearing capabilities.

~~The~~8 timing of the downturn in remodeling indicators is consistent with past cycles. Key measures of improvement activity typically lag those of new construction by about six months and are less volatile. The Joint Center for Housing Studies projects a nearly 45 percent increase in homeowner spending between 2005 and 2015. As a result, spending on maintenance and improvements to both owner-occupied and rental stock is likely to make up a larger share of overall residential investment. In fact, with growth moderating on the construction side, the remodeling share of total spending in the residential sector is expected to reach a new high of 47 percent.

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

In• ~~recent years, steel, aluminum, copper and other metals production in~~ Leveling—the ~~U.S.~~flattening ~~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~~uniform totolerances 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~~proper ~~products~~machining.

We• ~~obtain~~Edge ~~the~~trimming—a ~~overwhelming~~process ~~majority~~that ofremoves ~~our~~a ~~metals from~~specified ~~domestic~~portion ~~suppliers,~~of ~~which~~the ~~include~~outside ~~Nucor~~edges ~~Corp.,~~of ~~U.S.~~coiled ~~Steel,~~metal ~~AK Steel, Gerdau Ameristeel, Mittal Steel USA, Alcoa Inc., Bayou Steel, Chaparral Steel, Arcelor-Mittal, Aleris, SDI and IPSCO Steel. Although we have historically purchased approximately 10%~~ to ~~15%~~produce ofuniform ~~our~~width ~~raw material supplies from foreign producers, domestic suppliers have always been~~ and weround ~~believe~~or ~~will~~smooth ~~continue to be our principal source of raw material~~edges.

~~Although~~• ~~most~~Metallurgy—the ~~forms~~analysis ~~of steel~~ and ~~aluminum~~testing ~~produced by mills can be obtained from a number~~ of ~~integrated~~the ~~mills~~physical ~~or mini-mills, both domestically~~ and ~~internationally,~~ ~~there~~chemical ~~are~~composition ~~a few products that are available from only a limited number~~ of ~~producers. Since most~~ metals ~~are shipped free-on-board and the transportation of metals is a significant cost factor, we generally seek to purchase metals, to the extent possible, from the nearest mill~~.

~~Ferrous~~Our ~~metal~~additional ~~producers~~capabilities ~~have~~include ~~been~~applications ~~undergoing~~engineering ~~rapid consolidation over the past four years. U.S. Steel, Nucor Corp.~~ and ~~Mittal~~other ~~Steel~~value-added ~~USA~~processes ~~have~~such ~~acquired~~as ~~several~~custom ~~of their domestic competitors, and international integrated producers have merged and consolidated operations~~machining. ~~The~~Using ~~result of this trend will be fewer integrated producers from which~~these capabilities, we ~~can~~use ~~purchase~~processed ~~our raw materials. We believe that global consolidation of the~~ metals ~~industry is beneficial~~ to ~~the~~manufacture ~~metals~~higher-value ~~industry as a whole by creating a more disciplined approach to production and pricing~~components.

~~Sales~~Once we receive an order, we select the appropriate inventory and ~~Marketing;~~schedule ~~Customers~~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.

We ~~employ~~cooperate awith ~~sales~~our ~~force~~customers ~~consisting~~and oftailor ~~inside~~our ~~and~~deliveries ~~outside~~to ~~salespeople.~~support ~~Inside~~their ~~salespeople~~needs, ~~are~~which ~~primarily~~in ~~responsible~~many ~~for~~instances ~~maintaining~~consist ~~customer~~of ~~relationships,~~short ~~receiving~~lead ~~and~~times, ~~soliciting~~multiple ~~individual~~daily ~~orders~~deliveries, ~~and~~staged ~~responding~~deliveries, toor ~~service~~deliveries ~~and~~timed ~~other~~for ~~inquiries~~immediate ~~by customers~~production. ~~Our outside~~These ~~sales~~“just-in-time” ~~force~~deliveries are isdefined ~~primarily~~by ~~responsible~~our ~~for identifying potential~~ customers and ~~calling~~are ongenerally ~~them~~intended to ~~explain~~minimize ~~our~~their ~~services.~~inventory ~~The~~investment ~~sales force is trained~~ and ~~knowledgeable~~handling ~~about the characteristics and applications of various metals, as well as the manufacturing methods employed by our customers~~requirements.

~~Our~~While ~~sales~~we ~~and~~ship ~~marketing~~products ~~focus~~throughout isthe onUnited ~~the~~States, ~~identification~~most of ~~OEMs~~our ~~and~~customers ~~other~~are ~~metals~~located ~~end-users that~~within ~~could~~a ~~achieve~~250-mile ~~significant~~radius ~~cost savings through the use~~ of our ~~inventory management~~facilities, ~~value-added~~thus enabling ~~processing,~~an ~~just-in-time~~efficient delivery ~~and~~system ~~other~~capable ~~services.~~of Wehandling ~~use~~ a ~~variety~~large ofnumber ~~methods to identify potential customers, including the use~~ of ~~databases, direct~~short ~~mail~~lead-time ~~and participation in manufacturers’ trade shows~~orders. ~~Customer~~We ~~referrals~~transport ~~and~~most ~~the knowledge~~ of our ~~sales~~products ~~force~~directly ~~about~~to ~~regional~~our ~~end-users also result in the identification of potential~~ customers. ~~Once~~either awith ~~potential customer is identified,~~ our ~~outside~~ ~~salespeople~~own ~~assume~~trucks ~~responsibility~~ for ~~visiting~~short-distance ~~the~~and/or ~~appropriate~~multi-stop ~~contact,~~deliveries ~~typically~~or ~~the~~through common ~~purchasing manager~~ or ~~manager~~contract oftrucking ~~operations~~companies.

9We 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. Twenty of our 46 metal service center facilities have International Standards for Organization, or “ISO,” certification.

~~Table~~Building ofProducts ~~Contents~~Group

~~Nearly~~The ~~all~~Building ~~sales~~Products ~~are~~Group onmanufactures aand ~~negotiated~~sells ~~price~~roofing ~~basis.~~and Inpatio ~~some~~products. ~~cases,~~We ~~sales~~generally ~~are~~sell ~~the~~these ~~result~~products ofthrough a ~~competitive~~network of ~~bid~~independent ~~process~~distributors ~~where~~and home improvement contractors. Our roofing products business manufactures and sells a ~~customer~~high ~~provides~~performance roofing product consisting of a ~~list~~pressed and stone-coated steel panel that mimics the appearance of ~~products,~~traditional ~~along~~shake and ~~with~~tile ~~requirements,~~roofing. Our roofing product is well suited for all areas subject to usthreats ~~and~~of ~~several~~high ~~competitors~~winds, fires and wehail ~~submit~~storms. aIn ~~bid~~May on2006, ~~each~~we ~~product.~~acquired WeDuraloc ~~have~~Roofing Systems, Ltd., a ~~diverse~~Canadian-based ~~customer~~company ~~base,~~which ~~with~~we nohave ~~single~~re-branded ~~customer~~as ~~accounting~~Allmet ~~for~~Roofing Products. ~~more~~This ~~than~~acquisition 3%provided ofus ~~our~~with ~~net sales~~manufacturing incapabilities ~~each~~on ofboth the ~~last~~east ~~three~~and ~~years~~west coasts of North America. ~~Less~~Our ~~than~~patio 4%products ofbusiness ~~our~~manufactures ~~sales~~and ~~are~~sells tobuilding components used primarily for the ~~automotive~~erection ~~industry~~of residential shade structures such as patio covers and weenclosures. doWith ~~not~~facilities ~~sell~~located ~~directly~~throughout tothe southern and western regions of the ~~“Big~~United ~~Three”~~States, ~~automobile~~we ~~manufacturers.~~believe ~~Our~~we ~~ten~~are ~~largest~~one ~~customers~~of ~~represented~~only ~~less~~a ~~than~~few ~~11%~~suppliers of ~~our~~patio ~~net~~products ~~sales in~~with ~~2006~~national scale.

~~Competition~~The downturn in the United States housing sector has pushed home improvement remodeling spending below its long-term trend. Falling home prices have discouraged discretionary home improvement spending and diminished the amount of equity that owners have in their homes. Prior to the downturn in the United States housing sector, the ability to borrow against equity created by rising home prices fueled remodeling activity, as

We9 are engaged in a highly fragmented and competitive industry. Competition is based on reliability, service, quality, timeliness, geographic proximity and price. 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. We also compete to a much 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 with us locally.

~~Historically, we believe that we have been able to compete~~ ~~effectively~~well ~~because~~as ofbroader ~~our~~consumer ~~high~~spending. ~~levels~~Now ofthat ~~service,~~home ~~broad-based~~prices ~~inventory,~~have ~~knowledgeable and trained sales force~~softened, ~~integrated~~owners ~~computer~~cannot ~~systems,~~finance ~~modern~~home ~~equipment,~~improvement ~~number~~projects ofas ~~locations, geographic dispersion, operational economies of scale and combined purchasing volume~~easily. ~~Furthermore,~~These wedifficult ~~believe~~end ~~our~~market ~~liquidity~~conditions ~~and~~have ~~overall~~affected ~~financial~~sales ~~position~~growth associated ~~affords us a good platform~~ with ~~which to compete with~~ our ~~peers~~Building inProducts ~~the industry~~Group.

~~Government~~We ~~Regulation~~believe a recovering economy should stabilize house prices and ~~Environmental~~consumer confidence ~~Matters~~levels, encouraging homeowners to reinvest in their homes and undertake deferred repairs, replacements and improvements. Low financing costs and a wave of previously foreclosed homes coming back on the market and in need of renovation could also contribute to growth. We believe these factors, coupled with an aging American housing stock, are generating significant pent-up demand for remodeling that should manifest itself when the housing sector rebounds (however, there can be no guarantee that demand for remodeling will increase or the timing of any such rebound).

~~Our~~Strategy 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. Among the more significant regulated activities that occur at some of our facilities are: the accumulation of scrap metal, which is sold for recycling; the generation of plant trash and other solid wastes and wastewaters, such as water from burning tables operated at some of our facilities, which wastes are disposed of in accordance with the Federal Water Pollution Control Act and the Resource Conservation and Recovery Act using third-party commercial waste handlers; the storage, handling, and use of lubricating and cutting oils and small quantities of maintenance-related products and chemicals, the health hazards of which are communicated to employees pursuant to Occupational Safety and Health Act-prescribed hazard communication efforts and the disposal or recycling of which are performed pursuant to the Resource Conservation and Recovery Act.

~~Generally~~Our ~~speaking,~~mission ~~our facilities’~~is ~~operations~~to doincrease ~~not~~our ~~involve~~position ~~the~~as ~~types~~one of ~~emissions~~the ofnation’s ~~air~~leading ~~pollutants,~~integrated ~~discharges~~metals ofprocessors ~~pollutants~~and todistributors, ~~land~~recognized orfor best ~~surface~~in ~~water,~~class orcustomer ~~treatment,~~service ~~storage,~~and oroptimal ~~disposal~~inventory ofmanagement ~~hazardous~~to ~~waste~~meet ~~which~~customer ~~would~~demands, ~~ordinarily~~and ~~require~~to ~~federal~~ensure orstrategic ~~state environmental~~use ~~permits. Some~~ of our ~~facilities~~capital ~~possess authorizations for air emissions from paints and coatings~~resources, ~~hazardous~~continuing ~~materials~~to ~~permits~~strengthen ~~under local fire codes or ordinances for~~ the ~~storage~~relationships ~~and~~we ~~use~~have ofwith ~~small~~our ~~quantities~~suppliers, ofwhile ~~combustible~~constantly ~~materials~~renewing our ~~such~~focus ason ~~oils or paints~~safety, growth and ~~state or local permits for on-site septic systems~~profitability. ~~Our~~Execution ~~cost~~ of ~~obtaining~~the ~~and~~following ~~complying~~strategies ~~with such permits has not been and~~ is ~~not~~critical ~~anticipated~~ to beour ~~material.~~success: Our operations are such that environmental regulations typically have not required us to make significant capital expenditures for environmental compliance activities, and ongoing operational costs relating to environmental compliance are limited.

We• ~~believe~~Expand ~~that~~Value-Added weServices. ~~are~~We inintend ~~substantial~~to ~~compliance~~continue ~~with~~to ~~all~~invest ~~applicable~~in ~~environmental~~capital ~~and~~projects ~~workplace~~that ~~health~~provide ~~and~~attractive ~~safety~~returns ~~laws~~ and doto ~~not~~continue ~~currently anticipate that we will be required~~ to ~~expend~~expand ~~any~~the ~~substantial~~value-added ~~amounts~~services inwe ~~the~~offer ~~foreseeable~~at ~~future~~each inof ~~order~~our toservice ~~meet~~center ~~such requirements. However~~locations, ~~some~~a ofstrategy ~~the properties~~ we ~~own~~believe orwill ~~lease~~both ~~are~~enhance ~~located~~our inrelationships ~~areas~~ with aexisting ~~history~~customers ofand ~~heavy~~help ~~industrial~~forge ~~use~~new customer relationships, ~~and~~both ~~are~~of onwhich orwe ~~near sites~~believe ~~listed~~will onresult ~~the~~in ~~CERCLA~~increased ~~National~~market share for us.

10• Increase Sales of Higher Margin Products and Services. The sale of higher margin products and services, which tend to have higher growth prospects and more stable demand, will continue to be one of our core strategies. We intend to continue executing on this strategy by increasing our core carbon offerings, non-ferrous volumes, and our sales of processed products.

~~Table~~• Execute Strategic Acquisitions to Improve Our Business. We intend to continue to pursue acquisitions and we will generally target one to two “bolt-on” acquisitions per year that will enhance our metal service center strategy. We believe that we are well positioned to take advantage of ~~Contents~~acquisition opportunities in the fragmented service center industry because of our flexible capital structure.

~~Priority~~• ~~List.~~Maintain ~~CERCLA establishes joint~~ and ~~several~~Strengthen ~~responsibility~~Our ~~for~~Strong ~~clean-up~~Relationships ~~without~~with ~~regard~~Suppliers ~~to fault for persons who have arranged for disposal of hazardous substances at sites that have become contaminated~~ and ~~for persons who own or operate contaminated facilities~~Customers. WeAs ~~have~~one ~~a number~~ of ~~properties~~the ~~located~~largest inmetal orservice ~~near~~center ~~industrial~~businesses orin ~~light~~the ~~industrial~~United ~~use areas; accordingly~~States, these properties may have been contaminated by pollutants which would have migrated from neighboring facilities or have been deposited by prior occupants. Some of our properties are affected by contamination from leaks and drips of cutting oils and similar materials and we ~~are~~intend ~~investigating and remediating such known contamination pursuant~~ to ~~applicable~~use ~~environmental~~our ~~laws.~~relationships ~~The costs of such clean-ups have not been material. We are not currently subject~~ to ~~any~~leverage ~~claims~~the oropportunities ~~notices~~presented ~~with~~by ~~respect to clean-up or remediation under CERCLA or similar laws for contamination at our leased or owned properties or at any off-site location. However, we cannot rule out~~ the ~~possibility~~consolidation ~~that we could be notified~~ of ~~such~~steel ~~claims~~producers inand the ~~future.~~changing Itneeds isof ~~also~~our ~~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~~customers.

• Continue Our Strong Focus on Inventory Management. ~~Information~~We ~~Systems~~will continue managing our inventory to maximize our returns, profitability and cash flow while maintaining sufficient inventory to respond to our customers’ demands. Constant evaluation of our inventory management framework will allow us to continue supplying our customers reliably, even during periods of tight metal supply. We expect our inventory management framework will continue generating strong earnings during periods of rising metal prices and strong cash flow during periods of declining metal prices.

~~Both~~• ~~the~~Maintain ~~Plates~~High ~~and~~Free ~~Shapes~~Cash ~~Group~~Flow Generation and ~~Flat~~Conversion. ~~Rolled~~We ~~and~~believe ~~Non-Ferrous Group~~that ~~service~~we ~~centers~~are ~~use~~ a ~~system~~reliable ~~marketed~~supplier, especially of higher margin products and ~~distributed~~services, ~~specifically~~to ~~for~~our ~~the~~customers ~~service~~even ~~center~~in ~~industry~~periods of tight supply. ~~During~~We ~~2003,~~believe wethat ~~completed~~our areliability ~~similar~~allows ~~common-platform~~us ~~initiative~~to ingenerate ~~the~~higher ~~Building~~margins ~~Products~~and ~~Group.~~more ~~Some~~stable ofoperating ~~our~~income ~~subsidiaries~~through ~~currently~~the ~~use electronic~~business ~~data~~cycle. ~~interchange~~Moreover, ~~through~~we ~~which~~believe ~~they~~our ~~offer~~inventory ~~customers~~management aframework, ~~paperless~~bolstered ~~process~~by ~~with~~our ~~respect~~relationships towith ~~order~~our ~~entry~~metals suppliers, ~~shipment~~will ~~tracking,~~stabilize ~~billing,~~earnings ~~remittance~~during ~~processing~~periods ~~and~~of ~~other~~weakness. ~~routine~~Our ~~activities~~core business also requires minimal maintenance capital investment. ~~Additionally,~~We ~~several~~believe ofthese ~~our~~strengths ~~subsidiaries~~taken ~~also~~together ~~use computer-aided~~underscore ~~drafting~~our ~~systems~~ability to ~~directly~~generate ~~interface~~high ~~with~~levels ~~computer-controlled~~of ~~metals~~free ~~processing~~cash ~~equipment~~flow, ~~resulting~~which will enable us to reinvest in ~~more~~our ~~efficient~~business, ~~use~~consummate offuture ~~material~~acquisitions, reduce debt, and ~~time.~~achieve other corporate and financial objectives.

We10 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~~ • Maintain Our Focus on Safety Throughout Our Operating Facilities. We remain committed to the belief that nothing is more important than the safety of our people and will continue our disciplined focus on constantly improving the safety performance of our operations.

WeRaw ~~employ~~Materials approximately 2,900 persons. As of December 31, 2006, approximately 290 of our employees (10%) 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~~Supply 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. Within the last five years, a single work stoppage occurred at one facility, which involved approximately 30 employees and lasted approximately 30 days. We are currently a party to nine collective bargaining agreements which expire at various times, including six of which will expire in 2007 (which covers approximately 7% of our employees). 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 and we expect to succeed in negotiating new collective bargaining agreements with respect to the agreements that expire in 2007.

~~From~~In ~~time~~recent toyears, ~~time~~steel, ~~there~~aluminum, ~~are~~copper and other metals production in the United States has fluctuated from period to period as mills attempt to match production to projected demand. Periodically, this has resulted in shortages of, ~~qualified~~or ~~operators~~increased ofordering ~~metals~~lead-times ~~processing~~for, ~~equipment.~~some Inproducts, ~~addition~~as well as fluctuations in price. Typically, ~~during~~metals ~~periods~~producers announce price changes with sufficient advance notice to allow us to order additional products prior to the effective date of ~~low~~a ~~unemployment~~price increase, ~~turnover~~or ~~among~~to ~~less-skilled~~defer ~~workers~~purchases ~~can~~until bea ~~relatively~~price ~~high~~decrease becomes effective. WeOur ~~believe~~purchasing ~~that~~decisions are based on our ~~relations~~forecast ~~with~~of the availability of metal products, ordering lead-times and pricing, as well as our ~~employees~~prediction ~~are~~of ~~satisfactory~~customer demand for specific products.

~~See~~We ~~“Risk~~obtain ~~Factors—A~~the ~~failure~~overwhelming tomajority ~~retain~~of our ~~key~~metals ~~employees~~from ~~could~~domestic ~~adversely~~suppliers, ~~affect~~which ~~our~~include ~~business”~~Nucor ~~and~~Corp., ~~“Risk~~AK Steel, Arcelor-Mittal, North ~~Factors—Adverse~~American ~~developments~~Stainless, inThyssen ~~our~~Krupp ~~relationship~~Steel ~~with~~USA, and Steel Dynamics. Although we have historically purchased approximately 10% to 15% of our ~~unionized~~raw ~~employees~~material ~~could~~supplies ~~adversely~~from ~~affect~~foreign producers, domestic suppliers have always been, and we believe will continue to be, our ~~business~~principal source of raw material.”

11Although 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 free-on-board and the transportation of metals is a significant cost factor, we generally seek to purchase metals, to the extent possible, from the nearest mill.

~~Table~~During the last decade, U.S. Steel, Nucor Corp. and Arcelor Mittal acquired several of ~~Contents~~their domestic competitors, and international integrated producers merged and consolidated operations. The result of this trend has been fewer integrated producers from which we can purchase our raw materials. We believe that global consolidation of the metals industry is beneficial to the metals industry as a whole by enhancing efficiency. However, such consolidation could result in price increases for the metal that we purchase.

~~Vehicles~~Sales and Marketing; Customers

We ~~operate~~employ a ~~fleet~~sales force consisting of ~~owned~~internal orand ~~leased~~external ~~trucks~~salespeople. ~~and~~Internal ~~trailers~~salespeople are primarily responsible for maintaining customer relationships, asreceiving ~~well~~and assoliciting ~~forklifts~~individual orders and ~~support~~responding ~~vehicles~~to service and other inquiries by customers. Our external sales force is primarily responsible for identifying potential customers and calling on them to explain our services. We believe ~~these~~that ~~vehicles~~our ~~are~~sales ~~generally~~force ~~well~~is ~~maintained~~trained and knowledgeable ~~adequate~~about ~~for~~the ~~our~~characteristics ~~current~~and ~~operations~~applications of various metals, as well as the manufacturing methods employed by our customers.

~~Risk~~Our ~~Management~~sales and ~~Insurance~~marketing focus is on the identification of end-users that could achieve significant cost savings through the use of our inventory management, value-added processing, just-in-time delivery and other services. We use a variety of methods to identify potential customers, including the use of databases, 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.

~~The~~Nearly ~~primary~~all ~~risks~~sales ~~in our~~are ~~operations~~on a negotiated price basis. In some cases, sales are ~~bodily~~the ~~injury~~result of a competitive bid process where a customer provides a list of products, ~~property~~along ~~damage~~with requirements, to us and ~~vehicle~~several ~~liability~~competitors and we submit a bid on each product. We ~~maintain~~have ~~general~~a ~~and~~diverse ~~vehicle~~customer ~~liability~~base, ~~insurance~~with ~~and~~no ~~liability~~single ~~insurance~~customer accounting for ~~bodily~~more ~~injury~~than ~~and~~4% ~~property~~of ~~damage~~our ~~and~~net ~~workers’~~sales in ~~compensation~~each ~~coverage,~~of ~~which~~the welast ~~consider sufficient~~three toyears. ~~protect~~Our usten ~~against~~largest acustomers ~~catastrophic~~represented ~~loss~~less ~~due~~than to14% ~~claims~~of ~~associated~~our ~~with~~net ~~these~~sales ~~risks~~in 2011. For the year ended December 31, 2011, the average transaction size for our metal service

~~Safety~~11

~~Our~~ centers ~~goal~~was isapproximately ~~to provide an accident-free workplace~~$3,269. We ~~are~~have ~~committed~~sought to ~~continuing~~enhance ~~and~~our ~~improving~~position ~~upon each facility’s focus and emphasis on safety~~ in ~~the~~ ~~workplace.~~stable Wegrowth ~~currently~~industries ~~have~~that ademand ~~number~~additional ofvalue-added ~~safety~~services ~~programs~~and inreduce ~~place,~~our ~~which~~exposure ~~include~~to ~~regular~~more ~~weekly~~cyclical orsectors. Through ~~monthly~~our ~~field~~organic ~~safety~~growth ~~meetings~~ and ~~training~~acquisitions, ~~sessions~~we ~~to teach proper safe work procedures. We~~ have ~~developed~~capitalized aon ~~comprehensive~~opportunities ~~“best practices”~~to ~~safety~~augment ~~program which has been implemented throughout~~ our ~~operations~~existing toproduct ~~ensure~~and ~~that~~service ~~all~~portfolio ~~employees comply~~ with ~~our~~high ~~safety~~value-added ~~standards,~~products assuch ~~well~~ as ~~those~~aluminum ~~established~~brazing ~~by our insurance carriers~~sheet, ~~and~~armor ~~federal~~plate, ~~state~~marine ~~and~~grade ~~local~~aluminum ~~laws~~plate, and ~~regulations.~~pressure ~~This~~vessel ~~program~~plate isto ~~led~~service by the ~~corporate~~aerospace, ~~office~~marine, ~~with~~defense, ~~the~~and ~~assistance~~oil ofand ~~each~~gas ofindustries. ~~our~~Our ~~product~~broad ~~group~~portfolio ~~presidents,~~of ~~executive~~high-quality ~~officers~~metal products and ~~industry~~customized ~~consultants~~value-added ~~with~~services ~~expertise~~allows inus ~~workplace~~to ~~safety.~~offer Weone-stop ~~have~~shopping ~~experienced~~to ~~improvements in~~ our ~~safety record~~customers. inWe ~~each~~believe of the breadth ~~past~~of ~~three~~our ~~years.~~portfolio ~~Furthermore,~~provides ~~our~~a ~~annual~~significant ~~bonus~~competitive ~~plan~~advantage ~~for~~over ~~our~~smaller ~~Chief~~metal ~~Executive~~service ~~Officer~~centers, ~~officers~~which ~~and~~generally ~~managers~~stock ~~are~~fewer ~~tied~~products ~~directly~~and inoffer ~~part~~fewer toservices ~~our~~than ~~safety~~we ~~record~~do.

LOGO

~~Financial~~Competition ~~Information about Segments~~

~~For~~The ~~information~~metals ~~regarding~~distribution ~~revenues~~industry ~~from~~is ~~external~~highly ~~customers, measures~~fragmented ~~of profit or loss~~ and ~~total~~competitive. ~~assets~~Service ~~for~~centers ~~the~~compete ~~last~~with ~~three~~each ~~years~~other ~~for~~on ~~each~~price, ~~segment~~service, ~~see~~quality ~~Item 7. “Management’s Discussion~~ and ~~Analysis~~availability of ~~Financial~~products. ~~Condition~~According ~~and~~to ~~Results~~Metal ofCenter ~~Operations—Results~~News, Metals ofUSA ~~Operations~~is byranked ~~Segment”~~number ~~and Note~~twelve 12among toservice ~~our~~centers ~~consolidated financial statements~~ in ~~Item 8.~~North ~~“Financial~~America ~~Statements~~based ~~and~~on ~~Supplementary~~2010 ~~Data~~revenues.”

~~Patents~~Markets are generally oriented on a regional and local basis. We have numerous competitors in each of our product lines and geographic locations. In every market we service we compete with various combinations of other large, ~~Trademarks~~value-added oriented metals processor/metal service centers some of which may have greater financial resources than we have, smaller metals processors/metal service centers and, ~~Other~~to a much lesser extent, with primary metals producers, who typically sell to very large customers requiring ~~Intellectual~~regular ~~Property~~shipments ~~Rights~~of large volumes of metals.

WeOur ~~own~~sales ~~several U.S. patents, trademarks, service marks~~ and ~~copyrights.~~services ~~Certain~~decisions ~~of the trademarks and patents~~ are ~~registered with the U.S. Patent and Trademark Office~~decentralized, ~~and,~~providing inlocal ~~some~~management the ~~cases,~~flexibility ~~with~~to ~~trademark~~quickly ~~offices~~address oflocal ~~foreign~~market ~~countries~~conditions. WeHistorically, ~~consider~~we ~~other~~believe ~~information~~we ~~owned~~have bybeen usable to becompete ~~trade~~effectively ~~secrets.~~because Weof ~~protect~~ our ~~trade~~high ~~secrets~~levels byof service, ~~among~~broad-based ~~other things~~inventory, ~~entering~~ ~~into~~knowledgeable ~~confidentiality agreements with our employees~~ and ~~implementing~~trained ~~security~~sales ~~measures~~force, tointegrated ~~restrict~~computer systems, ~~access~~modern toequipment, ~~such~~numerous ~~information.~~locations, Wegeographic ~~believe~~dispersion, ~~that~~operational ~~our~~economies ~~safeguards~~of ~~provide~~scale ~~adequate~~and ~~protection~~combined topurchasing ~~our proprietary rights~~volume. ~~While~~Furthermore, we ~~consider~~believe ~~all of~~ our ~~intellectual~~ ~~property~~liquidity toand beoverall ~~important,~~financial weposition doaffords ~~not~~us ~~consider~~a ~~any~~good ~~single~~platform ~~intellectual~~with ~~property~~which ~~right~~ to compete bewith ~~essential to~~ our ~~operations~~peers asin athe ~~whole~~industry.

~~Seasonal Aspects,~~12 ~~Renegotiation and Backlog~~

~~There~~Government isRegulation ~~a slight decrease in our business during the winter months because of inclement weather conditions~~ and ~~the~~Environmental ~~impact~~Matters 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.

~~Foreign~~Our operations are subject to a number of federal, state and local regulations relating to the protection of the environment and to ~~Operations~~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. Among the more significant regulated activities that occur at some of our facilities are: the accumulation of scrap metal, which is sold for recycling; the generation of plant trash and other solid wastes and wastewaters, such as water from burning tables operated at some of our facilities, which wastes are disposed of in accordance with the Federal Water Pollution Control Act and the Resource Conservation and Recovery Act using third-party commercial waste handlers; and the storage, handling, and use of lubricating and cutting oils and small quantities of maintenance-related products and chemicals, the health hazards of which are communicated to employees pursuant to Occupational Safety and Health Act-prescribed hazard communication efforts and the disposal or recycling of which are performed pursuant to the Resource Conservation and Recovery Act.

WeGenerally speaking, our facilities’ operations do not ~~derive~~involve ~~any~~the ~~material~~types ~~revenue~~of emissions of air pollutants, discharges of pollutants to land or surface water, or treatment, storage, or disposal of hazardous waste which would ordinarily require federal or state environmental permits. Some of our facilities possess authorizations for air emissions from ~~foreign~~paints ~~countries~~and coatings, hazardous materials permits under local fire codes or ordinances for the storage and douse ~~not~~of ~~have~~small ~~any~~quantities ~~material~~of ~~long-term~~combustible ~~assets~~materials such as oils or ~~customer~~paints, and state or local permits for on-site septic systems. ~~relationships~~Our ~~outside~~cost of ~~the~~obtaining ~~U.S.~~and Wecomplying ~~have~~with nosuch permits has not been and is not anticipated to be material. ~~foreign~~Our operations orare ~~subsidiaries~~such that environmental regulations typically have not required us to make significant capital expenditures for environmental compliance activities.

12We believe that we are in substantial compliance with all applicable environmental and workplace health and safety laws and do not currently anticipate that we will be required to expend any substantial amounts in the foreseeable future in order to meet such requirements. However, some of the properties we own or lease are located in areas with a history of heavy industrial use, and are near sites listed on the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) National Priority List. CERCLA establishes joint and several responsibility for clean-up without regard to fault for persons who have arranged for disposal of hazardous substances at sites that have become contaminated and for persons who own or operate contaminated facilities. 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. Some of our properties are affected by contamination from leaks and drips of cutting oils and similar materials. The costs of clean-ups to date have not been material. We are not currently subject to any claims or notices with respect to clean-up or remediation under CERCLA or similar laws for contamination at our leased or owned properties or at any off-site location. However, we cannot rule out the possibility that we could be notified of such claims in the future. It is also 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.

~~Table~~Management ofInformation ~~Contents~~Systems

~~Research~~Both the Plates and ~~Development~~Shapes Group and Flat Rolled and Non-Ferrous Group metal service centers use a system marketed and distributed specifically for the metal service center industry. During 2003, we completed a similar common-platform initiative in the Building Products Group. Some of our subsidiaries currently use electronic data interchange, 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 metals processing, resulting in more efficient use of material and time.

We13 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.

~~Communication~~We ~~with~~believe ~~the~~investment ~~Company~~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.

~~The~~Employees Company’s required Securities and Exchange Act filings such as annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports are available free of charge through the Company’s website, http://www.metalsusa.com., as soon as reasonably practicable after they have been filed with or furnished to the Securities and Exchange Commission (the “SEC”). All of these materials are located at the “Investor Relations” link. They can also be obtained free of charge upon request to the Company’s principal address: Metals USA Holdings Corp., One Riverway, Suite 1100, Houston, Texas 77056.

13As of December 31, 2011, we employed approximately 2,200 persons. As of December 31, 2011, approximately 176, or approximately 8% of our employees, 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; and the International Brotherhood of Teamsters. Our relationship with these unions generally has been satisfactory. Within the last five years, we have not experienced any work stoppages at any of our facilities. We are currently a party to seven collective-bargaining agreements. Six expire in 2013 and one expires in 2014. Presently, we do not anticipate any problems or issues with respect to renewing these agreements upon acceptable terms. Historically, we have succeeded in negotiating new collective bargaining agreements without a strike and we expect to succeed in negotiating new collective bargaining agreements with respect to the agreements that expire in 2013 and 2014.

~~Table~~From time to time, there are shortages of ~~Contents~~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 satisfactory.

See “Risk Factors—Our ability to retain our key employees is critical to the success of our business, and failure ~~Item 1A.~~to do so may adversely affect our revenues and as a result could materially adversely affect our business, financial condition, results of operations and cash flows” and “Risk Factors—Adverse developments in our relationship with our unionized employees could adversely affect our business.”

InVehicles addition to the factors discussed elsewhere in this report and in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the following are some of the potential risk factors that could cause our actual results to differ materially from those projected in any forward-looking statements. You should carefully consider the risk factors set forth below, as well as other information contained in this document, when evaluating your investments in our securities. Any of the following risks could materially and adversely affect our business, financial condition or results of operations.

~~Our~~We ~~business~~operate a fleet of owned or leased trucks and trailers, ~~financial~~as ~~condition~~well as forklifts and ~~results~~support ~~of operations~~vehicles. We believe these vehicles are generally ~~heavily~~well ~~impacted~~maintained byand ~~varying~~adequate ~~metals~~for ~~prices~~our current operations.

~~Metal~~Risk ~~costs~~Management ~~typically represent approximately 75% of our net sales. Metals costs can be volatile due to numerous factors beyond our control, including domestic~~ and ~~international~~Insurance 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 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 the price increase on to our customers. When raw material prices decline, customer demands for lower prices could result in lower sale prices and, to the extent we reduce existing inventory quantities, lower margins. There have been historical periods of rapid and significant movements in the prices of metal both upward and downward. Any limitation on our ability to pass through any price increases to our customers could have a material adverse effect on our business, financial condition or results of operations.

~~Changes~~The inprimary ~~metal prices~~risks ~~also~~in ~~affect~~ our ~~liquidity~~operations ~~because~~are ofbodily ~~the~~injury, ~~time~~property ~~difference~~damage ~~between our payment for our raw materials~~ and ~~our~~vehicle ~~collection of cash from our customers~~liability. We ~~sell~~maintain ~~our~~general ~~products~~ and ~~typically~~vehicle ~~collect our accounts receivable within 45 days after the~~liability ~~sale; however~~insurance, weliability ~~tend~~insurance ~~to pay~~ for ~~replacement~~bodily ~~materials~~injury ~~(which~~and ~~are~~property ~~more~~damage ~~expensive~~and ~~when~~workers’ ~~metal~~compensation ~~prices are rising) over a much shorter period~~coverage, inwhich ~~part to benefit from early-payment discounts. As a result, when metal prices are rising,~~ we ~~tend~~consider tosufficient ~~draw more on the ABL facility~~ to ~~cover~~protect ~~the~~us ~~cash~~against ~~flow~~a ~~cycle~~catastrophic ~~from~~loss ~~our~~due ~~raw material purchases~~ to ~~cash~~claims ~~collection.~~associated ~~This~~with ~~cash~~these ~~requirement for working capital is higher in periods when we are increasing inventory quantities as we did at the end of 2004~~risks. Our liquidity is thus adversely affected by rising metal prices. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Operating and Investing Activities.”

~~Our~~Safety ~~operating results could be negatively affected during economic downturns because the demand for our products is cyclical.~~

~~Many~~Our ofgoal ~~our~~is ~~products~~to provide ~~are~~an ~~used~~accident-free inworkplace. ~~businesses~~We ~~that~~ are, tocommitted ~~varying degrees, cyclical and have historically experienced periodic downturns due~~ to ~~economic conditions,~~continuing ~~energy prices, consumer demand~~ and ~~other~~improving ~~factors~~upon ~~beyond~~each ~~our~~facility’s ~~control.~~focus ~~These economic~~ and ~~industry~~emphasis ~~downturns~~on ~~have~~safety ~~been characterized by diminished product demand, excess capacity and,~~ in ~~some~~the ~~cases, lower average selling prices for our products~~workplace. ~~Therefore,~~Our ~~any~~safety ~~significant~~program ~~downturn~~includes inregular ~~one~~weekly or ~~more~~monthly offield ~~the~~safety ~~markets~~meetings ~~that~~and wetraining sessions ~~serve,~~to ~~one~~teach orproper ~~more~~safety ofprocedures. ~~the~~A ~~end-markets~~comprehensive ~~that~~“best ~~our~~practices” ~~customers~~safety ~~serve~~program orwhich inhas ~~economic~~been ~~condition~~implemented inthroughout ~~general~~our ~~could~~operations ~~result~~ensures inthat aall ~~reduction~~employees incomply ~~demand~~with ~~for~~ our ~~products~~safety ~~and~~standards, ~~could have~~as awell ~~material~~as ~~adverse~~those ~~effect~~established on by our ~~business~~insurance carriers, ~~financial~~and ~~condition or results of operations. Additionally~~federal, asstate anand ~~increasing~~local ~~amount~~laws ofand ~~our~~regulations. ~~customers~~This ~~relocate~~program ~~their~~is ~~manufacturing~~led ~~facilities~~by ~~outside of~~ the ~~United~~corporate ~~States~~office, wewith ~~may~~the ~~not~~assistance beof ~~able~~each toof ~~maintain~~ our ~~level~~product ofgroup ~~sales~~presidents, toexecutive ~~those~~officers ~~customers. As a result of the depressed economic conditions~~ and ~~reduction~~industry inconsultants ~~construction~~with inexpertise ~~the northeastern United States~~ in workplace ~~the~~safety. ~~years~~Furthermore, ~~2000 through~~ the ~~middle~~Compensation Committee of ~~2002,~~ our ~~customers~~Board inof ~~such~~Directors ~~geographic~~considers ~~areas~~workplace ~~had~~safety ~~lower demand~~as ~~for~~an ~~our~~important ~~products.~~factor ~~Concurrent reduced demand~~ in adetermining ~~number of these markets combined with~~ the ~~foreign~~annual ~~relocation~~bonus ofamounts ~~some~~awarded ofto our ~~customers~~executive ~~could have an adverse effect on our business, financial condition or results of operations~~officers.

~~Table~~Financial ofInformation ~~Contents~~About Segments

~~Our~~For ~~customers~~information ~~sell~~regarding ~~their~~revenues ~~products~~from ~~abroad~~external ~~and~~customers, ~~some~~measures of ~~our~~profit ~~suppliers~~or ~~buy~~loss ~~feedstock abroad. As a result, our business is affected by general economic conditions~~ and ~~other~~total ~~factors~~assets ~~outside~~for the ~~United~~last ~~States,~~three ~~primarily~~years infor ~~Europe and Asia. Our suppliers’ access to metal, and therefore our access to metal, is additionally affected by such conditions and~~each ~~factors. Similarly~~segment, ~~the~~see ~~demand for our customers~~“Management’s ~~products,~~Discussion and ~~therefore~~Analysis ~~our~~of ~~products,~~Financial isCondition ~~affected by such conditions~~ and ~~factors.~~Results ~~These~~of ~~conditions~~Operations—Results ~~and factors include further increased prices~~ of ~~steel,~~Operations ~~enhanced~~by ~~imbalances~~Segment” ~~in the world’s iron ore, coal~~ and ~~steel~~Note ~~industries,~~13 ato ~~downturn in world economies, increases in interest rates, unfavorable currency fluctuations, including the weak U.S. dollar, or a slowdown in the key industries served by~~ our ~~customers.~~consolidated Infinancial ~~addition,~~statements ~~demand~~ for ~~the~~ ~~products of our Building Products Group has been and is expected to continue to be adversely affected if consumer confidence falls since~~ the ~~results~~year ofended ~~that group depend on a strong residential remodeling industry~~December 31, ~~which in turn has been partially driven by relatively high consumer confidence~~2011.

WePatents, ~~rely~~Trademarks ~~on metal suppliers in our business~~ and ~~purchase~~Other aIntellectual ~~significant~~Property ~~amount~~Rights of metal from a limited number of suppliers. Termination of one or more of our relationships with any of these suppliers could have a material adverse effect on our business, financial condition or results of operations because we may be unable to obtain metal from other sources in a timely manner or at all.

We ~~use~~own aseveral ~~variety~~U.S. patents, trademarks, service marks and copyrights. Certain of ~~metals~~the intrademarks ~~our~~and ~~business~~patents are registered with the U.S. ~~Our~~Patent ~~operations~~and ~~depend~~Trademark ~~upon~~Office ~~obtaining adequate~~and, ~~supplies~~in ofsome ~~metal~~cases, onwith atrademark offices ~~timely~~of ~~basis~~foreign countries. We ~~purchase~~consider ~~most~~other ofinformation ~~our~~owned ~~metal~~by ~~from~~us ato ~~limited~~be ~~number~~trade ofsecrets. ~~metal~~We ~~suppliers.~~protect Asour oftrade ~~December 31,~~secrets ~~2006~~by, ~~the~~among ~~top~~other ~~two~~things, ~~metals~~entering ~~producers~~into ~~represent~~confidentiality aagreements ~~significant~~with ~~portion~~our ofemployees ~~our~~and ~~total~~implementing ~~metal~~security ~~purchasing~~measures ~~cost.~~to ~~Termination~~restrict ofaccess ~~one~~to orsuch ~~more~~information. ofWe believe that our ~~relationships~~safeguards ~~with~~provide ~~either~~adequate ofprotection ~~these~~to ~~suppliers~~our ~~could~~proprietary ~~have~~rights. aWhile ~~material~~we ~~adverse~~consider ~~effect~~all onof our ~~business,~~intellectual ~~financial~~property ~~condition~~to orbe ~~results~~important, ofwe ~~operations~~do ifnot weconsider ~~were~~any ~~unable~~single intellectual property right to ~~obtain~~be ~~metal~~essential ~~from~~to ~~other~~our ~~sources~~operations inas a ~~timely manner~~whole.

InSeasonal ~~addition~~Aspects, ~~the~~Renegotiation ~~domestic~~and ~~metals~~Backlog production industry has experienced consolidation in recent years. As of December 31, 2006, the top three metals producers together control over 60% of the domestic flat rolled steel market. Further consolidation could result in a decrease in the number of our major suppliers or a decrease in the number of alternative supply sources available to us, which could make it more likely that termination of one or more of our relationships with major suppliers would result in a material adverse effect on our business, financial condition or results of operations. Consolidation could also result in price increases for the metal that we purchase. Such price increases could have a material adverse effect on our business, financial condition or results of operations if we were not able to pass these price increases on to our customers.

~~Intense~~There ~~competition~~is ~~among~~a ~~many~~slight ~~competitors~~decrease ~~could~~in ~~adversely~~our ~~affect~~business during the winter months because of inclement weather conditions and the seasonality of customer end markets. No material portion of our ~~profitability~~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.

WeForeign ~~are engaged in a highly fragmented and competitive industry. We compete with a large number of other value-added metals processor/service centers on a~~Operations regional and local basis, some of which may have greater financial resources than us. We also compete, to a much lesser extent, with primary metals producers, who typically sell to very large customers requiring regular shipment of large volumes of metals. One competitive factor, particularly in the ferrous Flat Rolled business, is price. We may be required in the future to reduce sales volumes to maintain our level of profitability. Increased competition in any of our businesses could have a material adverse effect on our business, financial condition or results of operations.

AWe ~~failure~~do tonot ~~retain~~have ~~our~~any ~~key~~material ~~employees~~long-term ~~could~~assets ~~adversely~~or ~~affect~~customer relationships outside of the United States. We have no material ~~our~~foreign ~~business~~operations or subsidiaries.

WeResearch ~~are dependent on the services of our President~~ and ~~Chief~~Development Executive Officer, Mr. C. Lourenço Gonçalves, and other members of our senior management team to remain competitive in our industry. There is a risk that we will not be able to retain or replace these key employees. Our current key employees are subject to employment conditions or arrangements that permit the employees to terminate their employment without notice. Other than a life insurance policy maintained by us on Mr. Gonçalves, for which we are the beneficiary, we do not maintain any life insurance policies for our key employees. The loss of any member of our senior management team could have a material adverse effect on our business, financial condition or results of operations.

15We 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.

~~Table~~Communication ofwith ~~Contents~~the Company

~~From~~The ~~time~~Company’s torequired ~~time,~~Securities ~~there~~and ~~are~~Exchange ~~shortages~~Act offilings ~~qualified~~such ~~operators~~as ofannual ~~metals~~reports ~~processing~~on ~~equipment.~~Form In10-K, quarterly reports on ~~addition~~Form 10-Q, ~~during~~current ~~periods~~reports ofon ~~low~~Form ~~unemployment~~8-K, ~~turnover~~and ~~among~~amendments ~~less-skilled~~to ~~workers~~those ~~can~~reports beare ~~relatively~~available ~~high~~free of charge through the Company’s website, http://www.metalsusa.com, ~~Any~~as ~~failure~~soon as reasonably practicable after they have been filed with or furnished to ~~retain~~the Securities aand ~~sufficient~~Exchange ~~number~~Commission (the “SEC”). All of ~~such~~these ~~employees~~materials inare located at the ~~future~~“Investor ~~could~~Relations” ~~have~~link. aThey ~~material~~can ~~adverse~~also ~~effect~~be onobtained ~~our~~free ~~business,~~of ~~financial~~charge upon request to the Company’s principal address: Metals USA ~~condition~~Holdings orCorp., ~~results~~2400 ofE. ~~operations~~Commercial Blvd., Suite 905, Fort Lauderdale, Florida 33308.

We15 ~~are subject to litigation that could strain our resources and distract management.~~

~~From~~Item ~~time to time, we are involved in a variety of claims, lawsuits and other disputes arising in the ordinary course of business~~1A. ~~These~~Risk suits concern issues including product liability, contract disputes, employee-related matters and personal injury matters. It is not feasible to predict the outcome of all pending suits and claims, and the ultimate resolution of these matters as well as future lawsuits could have a material adverse effect on our business, financial condition, results of operations or reputation. Factors

~~Environmental~~In ~~cost~~addition to the factors discussed elsewhere in this report and in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the following are some of the potential risk factors that could cause our actual results to differ materially from those projected in any forward-looking statements. You should carefully consider the risk factors set forth below, as well as other information ~~decrease~~contained in this document, when evaluating your investments in our ~~net~~securities. ~~cash~~Any ~~flow~~of the following risks could materially and adversely affect our ~~profitability~~business, financial condition or results of operations.

Our ~~operations are subject to extensive regulations governing waste disposal~~business, ~~air~~financial ~~and water emissions~~condition, ~~the~~results ~~handling~~ of ~~hazardous~~operations ~~substances, remediation, workplace exposure~~ and ~~other~~cash ~~environmental~~flows ~~matters. Some of the properties we own or lease~~ are ~~located~~heavily inaffected ~~areas~~by ~~with~~changing ametal ~~history of heavy industrial use, and are near sites listed on the Comprehensive Environmental Response, Compensation, and Liability Act, or “CERCLA,” National Priority List~~prices. See “Business—Government Regulation and Environmental Matters.” CERCLA established joint and several responsibility for cleanup without regard to fault for persons who have arranged for disposal of hazardous substances at sites that have become contaminated and for persons who own or operate contaminated facilities. We ~~have~~believe ~~a number~~metal ofprices 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.are ~~Some~~currently ofincreasing ~~our properties are affected by contamination~~ from ~~leaks~~a ~~and~~low ~~drips~~point of cutting oils and similar materials and we are investigating and remediating such known contamination pursuant to applicable environmental laws. The costs of such clean-ups to date have not been material. It is possible that we could be notified of such claims in the ~~future.~~cycle ~~See~~toward ~~“Business—Government~~a ~~Regulation~~new ~~and~~high ~~Environmental~~point ~~Matters.”~~in ~~It is also possible that we could be identified by~~ the ~~Environmental~~ ~~Protection~~cycle ~~Agency,~~(which amay ~~state~~not ~~agency or one or more third parties as a potentially responsible party under CERCLA or under analogous state laws~~continue). ~~If so, we could incur substantial litigation costs in defense of such claims.~~

~~Adverse~~Metal ~~developments~~costs intypically represent approximately 75% of our ~~relationship~~net ~~with~~sales. Metal costs can be volatile due to numerous factors beyond our control, ~~unionized~~including ~~employees~~domestic ~~could~~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 margin and net income. Our metal service centers maintain substantial inventories of metal to accommodate the short lead-times and just-in-time delivery requirements of our customers. Accordingly, using information derived from customers, market conditions, historic usage and industry research, 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. 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 the price increase on to our customers. When raw material prices decline, customer demands for lower prices could result in lower sale prices and, to the extent we reduce existing inventory quantities, lower margins. There have been historical periods of rapid and significant movements in the prices of metal both upward and downward. These changes can make it difficult for us to accurately forecast our results, which could cause us to have higher or lower levels of inventory than required or make expenditures that may not generate expected returns. Any limitation on our ability to pass through any price increases to our customers could have a material adverse effect on our business, financial condition, results of operations or cash flows.

AsChanges ofin ~~December 31,~~metal ~~2006~~prices (which we believe are currently increasing, ~~approximately~~which ~~290~~may not continue) also affect our liquidity because of the time difference between our ~~employees~~payment ~~(10%) at~~for ~~various~~our ~~sites~~raw ~~are~~materials ~~members~~and our collection of ~~unions~~cash from our customers. We ~~are~~sell ~~currently~~our aproducts ~~party~~and totypically ~~nine collective~~collect ~~bargaining~~our ~~agreements~~accounts ~~with~~receivable ~~such~~within ~~unions,~~45 ~~which~~days ~~expire~~after atthe sale; ~~various times~~however, ~~including~~we ~~six~~tend ofto ~~which~~pay ~~will~~for ~~expire~~replacement inmaterials ~~2007~~ (which ~~cover~~are ~~approximately~~more 7%expensive ofwhen ~~our~~metal ~~employees~~prices are rising). ~~Collective~~over ~~bargaining~~a ~~agreements~~much ~~for~~shorter ~~all~~period, ofin ~~our~~part ~~union~~to ~~employees~~benefit ~~expire~~from ~~in each~~early-payment ofdiscounts. ~~the~~As ~~next~~a ~~three~~result, ~~years.~~when ~~However~~metal prices are rising, nowe ~~assurances~~tend ~~can~~to bedraw more ~~given~~on ~~that~~our we$500 ~~will~~million ~~succeed~~amended inand ~~negotiating~~restated ~~new~~senior ~~collective~~secured ~~bargaining~~asset-based ~~agreements~~credit facility due 2015 (the “ABL facility”) to ~~replace~~cover the ~~expiring~~cash ~~ones~~flow ~~without~~cycle afrom ~~strike~~our raw material purchases to cash collection. ~~Any~~This ~~strikes~~cash requirement for working capital is higher in ~~the~~periods ~~future~~when ~~could~~we ~~have~~are aincreasing ~~material~~inventory ~~adverse~~quantities. ~~effect on~~Our ~~our~~liquidity ~~business,~~is ~~financial~~thus ~~condition~~adversely oraffected ~~results~~by ofrising ~~operations~~metal prices. See “~~Business—Employees”~~Management’s ~~for~~Discussion aand ~~discussion~~Analysis of ~~our~~Financial ~~previous~~Condition ~~negotiations~~and Results of Operations—Liquidity ~~collective~~and ~~bargaining~~Capital ~~agreements~~Resources—Operating and Investing Activities.”

~~Metals~~Our ~~USA’s~~operating ~~predecessor~~results ~~company~~and ~~emerged~~liquidity could ~~from~~be ~~Chapter~~negatively 11affected ~~Reorganization~~during economic downturns because the demand for our products is cyclical. We believe demand for our product is currently in ~~2002~~the ~~and~~lower ~~may~~end ~~not~~of bethe ~~able~~cycle, toalthough ~~achieve~~conditions ~~profitability~~have onsteadily aimproved ~~consistent~~throughout ~~basis~~the latter half of 2009 through year-end 2011 (which may not continue).

~~Metals~~Many ~~USA’s predecessor company sought protection under Chapter 11~~ of ~~the~~our ~~Bankruptcy~~products ~~Code~~are used in ~~November~~businesses ~~2001.~~that ~~Metals~~are, ~~USA’s predecessor company~~to ~~incurred~~varying ~~operating~~degrees, ~~losses~~cyclical ofand ~~$2.6~~have ~~million~~historically ~~and~~experienced ~~$390.5~~periodic ~~million~~downturns ~~during~~due ~~the~~to ~~ten-month~~economic ~~period~~conditions, ~~ended~~energy ~~October 31~~prices, ~~2002~~consumer demand and ~~the~~other ~~fiscal~~factors ~~year~~beyond ~~ended~~our ~~December 31, 2001, respectively~~control. ~~Approximately~~These ~~$386.1~~economic ~~million~~and ofindustry ~~the~~downturns ~~2001~~have ~~net~~been ~~loss~~characterized ~~was attributable~~by todiminished ~~write-downs~~product ~~associated~~demand, ~~with~~excess ~~the~~capacity ~~carrying value of our predecessor company’s goodwill~~ and, ~~property~~in ~~and~~some ~~equipment~~cases, tolower ~~their~~average ~~estimated~~selling ~~recoverable~~prices ~~values.~~for ~~Metals~~our ~~USA incurred an operating loss of $0~~products.9 ~~million~~The ~~for~~recent ~~the~~economic ~~two-month period ended~~

~~Table~~ downturn and uncertainty about current global economic conditions pose risks as businesses in one or more of ~~Contents~~the markets that we serve, or consumers in one or more of the end-use markets that our customers serve, may postpone purchases in response to tighter credit, negative financial news and/or declines in asset values, which could have a material adverse effect on the demand for our products and services and on our financial condition, results of operations or cash flows. Additionally, as an increasing amount of our customers relocate their manufacturing facilities outside of the United States, we may not be able to maintain our level of sales to those customers.

~~December 31,~~The ~~2002.~~decline ~~The~~in ~~predecessor~~steel ~~company’s~~prices ~~equity~~resulting ~~ownership,~~from ~~board~~weakened demand and an oversupply of ~~directors~~steel throughout the supply chain during the latter half of 2008 and afirst ~~portion~~half of ~~its~~2009 ~~senior~~contributed ~~management~~to ~~were~~a ~~replaced~~significant decline in ~~connection~~ ~~with~~steel product shipments from metals service centers in the ~~reorganization~~United States. WeReduced ~~may~~demand ~~not~~in bea ~~able~~number toof ~~sustain~~our ~~profitability~~markets orcombined ~~achieve~~with ~~growth~~the inforeign relocation of some of our ~~operating~~customers could ~~performance~~have an adverse effect on our business, financial condition, results of operations or cash flows.

Our ~~historical~~customers sell ~~financial~~their ~~information~~products abroad, and some of our suppliers buy feedstock abroad. As a result, our business is ~~not~~affected ~~comparable~~by general economic conditions and other factors outside the United States, primarily in Europe and Asia. Our suppliers’ access to metal, and therefore our ~~current~~access ~~financial~~to ~~condition~~metal, is additionally affected by such conditions and ~~results~~factors. ofSimilarly, ~~operations~~the ~~because~~demand offor our ~~use~~customers’ ofproducts, ~~fresh~~and ~~start~~therefore ~~accounting~~our products, is affected by such conditions and factors. These conditions and factors include enhanced imbalances in ~~2002~~the world’s iron ore, coal and ~~purchase~~steel ~~accounting~~industries, a downturn in ~~connection~~world ~~with~~economies, increases in interest rates, unfavorable currency fluctuations or a slowdown in the ~~Merger~~key ~~and~~industries served by our customers. In addition, demand for the ~~2006~~products ~~Acquisitions~~of our Building Products Group has been adversely affected by the downturn in the U.S. housing market, since the results of that group depend on a strong residential remodeling industry, which in turn has been historically driven by an expansion in the broader housing market and relatively high consumer confidence.

ItWe ~~may~~rely beon ~~difficult~~metal ~~for~~suppliers in ~~you to compare both~~ our ~~historical~~business and ~~future results to our results for the fiscal year ended December 31, 2006. The Merger and the 2006 Acquisitions were accounted for utilizing~~ purchase ~~accounting, which resulted in~~ a ~~new~~significant ~~valuation~~amount ~~for the assets and liabilities~~ of ~~Metals~~metal ~~USA~~from toa ~~their~~limited ~~fair~~number ~~values. This new basis~~ of ~~accounting~~suppliers ~~began~~and ~~on November 30,~~termination ~~2005. Allocations are subject to valuations as~~ of ~~the~~one ~~closing~~or ~~date~~more of ~~the~~our ~~Merger.~~relationships Inwith ~~addition,~~any ~~the 2006 Acquisitions are, and we expect future acquisitions will be, also accounted for using purchase accounting and therefore similar limitations regarding comparability~~ of ~~historical~~them ~~and subsequent results~~ could ~~arise.~~have ~~Under~~a ~~the~~material ~~purchase~~adverse ~~method~~effect ofon ~~accounting,~~our ~~the operating results of each of the acquired businesses~~business, ~~including~~financial ~~the recent acquisitions~~condition, ~~are~~results ~~included in our financial~~of ~~statements~~operations ~~only~~or ~~from~~cash ~~the date of the acquisitions~~flows. ~~As a result, amounts presented in the consolidated financial statements and footnotes may not be comparable with those of prior periods.~~

InWe ~~addition,~~use as a ~~result~~variety of metals in our ~~emergence~~business. ~~from~~Our ~~bankruptcy~~operations ondepend ~~October 31,~~upon ~~2002,~~obtaining weadequate supplies ~~were~~of ~~subject~~metal toon ~~“Fresh-Start~~a ~~Reporting~~timely basis.” ~~Accordingly, our~~We ~~financial~~purchase ~~information~~most as of ~~any~~our ~~date~~metal orfrom ~~for~~a ~~periods~~limited ~~after~~number ~~November 1,~~of ~~2002,~~metal issuppliers. ~~not~~As ~~comparable~~of toDecember 31, 2011, our ~~historical~~top ~~financial~~three ~~information~~metals ~~before~~suppliers ~~November 1,~~represent ~~2002.~~a ~~This~~significant isportion ~~primarily~~of ~~because~~our ~~“Fresh-Start~~total ~~Reporting”~~metal ~~required~~purchasing uscost. toTermination ~~reduce~~of ~~the~~our ~~carrying~~relationship ~~value~~with any of ~~the~~these ~~property~~suppliers ~~and~~could ~~equipment~~have wea ~~owned~~material atadverse ~~November 1,~~effect ~~2002~~on toour ~~zero.~~business, ~~Accordingly~~financial condition, ~~our~~results ~~historical~~of ~~operating~~operations ~~results~~or ~~may~~cash beflows ofif ~~limited~~we ~~use~~were inunable ~~evaluating~~to ~~our~~obtain ~~historical~~metal ~~performance~~from ~~and~~other ~~comparing~~sources itin toa ~~other~~timely ~~periods~~manner.

WeIn ~~may~~addition, ~~not~~the ~~successfully~~domestic ~~implement~~metals production industry has experienced consolidation in recent years. Further consolidation could result in a decrease in the number of our ~~acquisition~~major ~~strategy~~suppliers or a decrease in the number of alternative supply sources available to us, ~~and~~which ~~acquisitions~~could make it more likely that wetermination ~~pursue~~of ~~may~~one ~~present~~or ~~unforeseen~~more ~~integration~~of ~~obstacles~~our ~~and~~relationships ~~costs,~~with major suppliers would result in a ~~increase~~material adverse effect on our ~~leverage~~business, ~~and~~financial ~~negatively~~condition, ~~impact~~results of operations or cash flows. Consolidation could also result in price increases for the metal that we purchase. Such price increases could have a material adverse effect on our business, ~~performance~~financial condition, results of operations or cash flows if we were not able to pass these price increases on to our customers.

WeIntense ~~may~~competition ~~not be able to identify suitable acquisition candidates, and the expense incurred~~ in ~~consummating acquisitions of related businesses, or~~ our ~~failure~~fragmented toindustry ~~integrate such businesses successfully into our existing businesses,~~ could adversely affect our ~~growth or result in our incurring unanticipated expenses and losses~~profitability. ~~Furthermore,~~ we may not be able to realize any anticipated benefits from acquisitions. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Matters Impacting Comparability of Results—2006 Acquisitions.” We regularly evaluate potential acquisitions and may complete one or more significant acquisitions in the future. To finance an acquisition we may incur debt or issue equity. The process of integrating acquired operations into our existing operations may result in unforeseen operating difficulties and may require significant financial resources that would otherwise be available for the ongoing development or expansion of existing operations. Some of the risks associated with our acquisition strategy, which could have an adverse effect on our business, financial condition and results of operations, include:

•We ~~potential~~are ~~disruption~~engaged in a highly fragmented and competitive industry. We compete with a large number of ~~our~~other ~~ongoing~~value-added ~~business~~oriented metals processor/metal service centers on a regional and ~~distraction~~local basis, some of ~~management;~~which may have greater financial resources than we have. Service centers compete with each other on price, service, quality and availability of products. According to Metal Center News, Metals USA is ranked number twelve among service centers in North America based on 2010 revenues. We also compete, to a much lesser extent, with primary metals producers, who typically sell to very large customers requiring regular shipments of large

•17 ~~unexpected loss of key employees or customers of the acquired company;~~

• volumes ~~conforming~~of metals. Because price, particularly in the ~~acquired~~ferrous ~~company’s~~flat ~~standards~~rolled business, ~~processes~~is a competitive factor, ~~procedures~~we ~~and~~may ~~controls~~be ~~with~~required in the future to reduce sales volumes to maintain our level of profitability. Increased competition in any of our businesses could have a material adverse effect on our business, financial condition, results of operations; or cash flows.

•Our ~~coordinating~~ability ~~new~~to ~~product~~retain our key employees is critical to the success of our business, and ~~process~~failure ~~development;~~to do so may adversely affect our revenues and as a result could materially adversely affect our business, financial condition, results of operations and cash flows.

•We ~~hiring~~are ~~additional~~dependent ~~management~~on the services of our Chief Executive Officer and other ~~critical~~members of our senior management team to remain competitive in our industry. We may not be able to retain or replace one or more of these key employees, we may suffer an extended interruption in one or more of their services or we may lose the services of one or more of these key employees entirely. Our current key employees are subject to employment conditions or arrangements that permit the employees to terminate their employment without notice. Other than a life insurance policy maintained by us on our Chief Executive Officer, for which we are the beneficiary, we do not maintain any life insurance policies for our key employees. If any of our key employees were not able to dedicate adequate time to our business, due to personal or other factors, if we lose or suffer an extended interruption in the services of any of our key employees or if any of our key employees were to terminate their employment it could have a material adverse effect on our business, financial condition, results of operations or cash flows. In addition, the market for qualified individuals may be highly competitive and we may not be able to attract and retain qualified personnel; to replace or succeed members of our senior management or other key employees, should the need arise.

•From ~~encountering~~time ~~unknown~~to ~~contingent~~time, ~~liabilities~~there ~~which~~are ~~could~~shortages of qualified operators of metals processing equipment. In addition, during periods of low unemployment, turnover among less-skilled workers can be relatively high. Any failure to retain a sufficient number of such employees in the future could have a material; adverse ~~and~~effect on our business, financial condition, results of operations or cash flows.

•We ~~increasing~~are ~~the~~subject ~~scope,~~to ~~geographic~~litigation ~~diversity~~that ~~and~~could strain ~~complexity~~our ofresources ~~our~~and ~~operations~~distract management.

~~Our~~From ~~acquisition~~time ~~strategy~~to ~~may~~time, ~~not~~we beare ~~successfully~~involved ~~received~~in bya ~~customers~~variety of claims, lawsuits and other wedisputes ~~may~~arising in the ordinary course of business. These suits concern issues including product liability, contract disputes, employee-related matters and personal injury matters. It is not ~~realize~~feasible ~~any~~to ~~anticipated~~predict ~~benefits~~the ~~from~~outcome ~~acquisitions~~of all pending suits and claims, and the ultimate resolution of these matters as well as future lawsuits could have a material adverse effect on our business, financial condition, results of operations or cash flows or reputation.

17Environmental costs could decrease our net cash flow and adversely affect our profitability.

~~Table~~Our operations are subject to extensive regulations governing waste disposal, air and water emissions, the handling of ~~Contents~~hazardous substances, remediation, workplace exposure and other environmental matters. Some of the properties we own or lease are located in areas with a history of heavy industrial use, and are near sites listed for clean up under CERCLA. See “Business—Government Regulation and Environmental Matters.” CERCLA established joint and several responsibility for clean-up without regard to fault for persons who have arranged for disposal of hazardous substances at sites that have become contaminated and for persons who own or operate contaminated facilities. 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. Some of our properties are affected by contamination from leaks and drips of cutting oils and similar materials. The costs of clean-ups to date have not been material. It is possible that we could be notified of such claims in the future. See “Business—Government Regulation and Environmental Matters.” It is also 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 costs related to such claims, which could decrease our net cash flows and adversely affect our profitability.

We18 ~~are controlled by Apollo V and its affiliates, and their interests as equity holders may conflict with yours.~~

WeAdverse ~~are~~developments an affiliate of, and are controlled by, Apollo V and its affiliates. The interest of Apollo V and its affiliates may not always be aligned with yours. For example, our equity holders may have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investment, even though these transactions might involve risks to the holders of our ~~debt~~relationship if the transactions resulted in our being more highly leveraged or significantly changed the nature of our business operations or strategy. In addition, if we encounter financial difficulties, or if we are unable to pay our debts as they mature, the interests of our equity holders might conflict with ~~those of the holders of~~ our ~~debt.~~unionized Inemployees ~~that~~could ~~situation,~~adversely ~~for~~affect ~~example, the holders of~~ our ~~debt might want us to raise additional~~ equity to reduce our leverage and pay our debts, while our equity holders might not want to increase their investment in us or have their ownership diluted and instead choose to take other actions, such as selling our assets. Furthermore, Apollo V and its affiliates have no continuing obligation to provide us with debt or equity financing. Additionally, Apollo V and certain of its affiliates are in the business ~~of making investments in businesses engaged in the metals service industry that complement or directly or indirectly compete with certain portions of our business~~.

~~Further~~As of December 31, if2011, ~~they~~approximately ~~pursue~~176 ~~such~~of ~~acquisitions~~our inemployees ~~the metals~~(approximately ~~service~~8%) at ~~industry,~~various ~~those~~sites were ~~acquisition~~members ~~opportunities~~of ~~may~~unions. ~~not~~We beare ~~available~~currently a party to ~~us.~~seven Socollective-bargaining ~~long~~agreements. asSix ~~Apollo~~expire Vin 2013 and ~~its~~one ~~affiliates~~expires ~~continue~~in to2014. ~~indirectly~~Presently ~~own~~we ado ~~significant~~not ~~amount~~anticipate ofany ~~our~~problems ~~equity,~~or ~~even~~issues ifwith ~~such~~respect ~~amount~~to isrenewing ~~less~~these ~~than~~agreements ~~50%~~upon acceptable terms. However, ~~they~~no assurances can be given that we will ~~continue~~succeed in negotiating new collective-bargaining agreements to bereplace the expiring ones without a strike. Any strikes in the future could have a material adverse effect on our business, ~~able~~financial tocondition, ~~strongly~~results ~~influence~~of operations or ~~effectively~~cash ~~control~~flows. See “Business—Employees” for a discussion of our ~~business~~previous ~~decisions~~negotiations of collective-bargaining agreements.

18We may not successfully implement our acquisition strategy, and acquisitions that we pursue may present unforeseen integration obstacles and costs, increase our leverage and negatively impact our performance.

~~Table~~We intend to continue to pursue our acquisition strategy, and we generally target one to two “bolt-on” acquisitions per year that will enhance our metal service center strategy. We may not be able to identify suitable acquisition candidates, and if we do identify suitable candidates, they may be larger than our historical targets. The expense incurred in consummating acquisitions of ~~Contents~~related businesses, or our failure to integrate such businesses successfully into our existing businesses, could affect our growth or result in our incurring unanticipated expenses and losses. Furthermore, we may not be able to realize any anticipated benefits from acquisitions. We regularly evaluate potential acquisitions and may complete one or more significant acquisitions in the future. To finance an acquisition, we may incur debt or issue equity, both of which could be materially greater amounts than in connection with prior acquisitions. The process of integrating acquired operations into our existing operations may result in unforeseen operating difficulties and may require significant financial resources that would otherwise be available for the ongoing development or expansion of existing operations. Some of the risks associated with our acquisition strategy which could have an adverse effect on our business, financial condition, results of operations and cash flows, include:

~~Item 2.~~• ~~Properties~~potential disruption of our ongoing business and distraction of management;

As• ofunexpected ~~December 31,~~loss ~~2006,~~of wekey ~~operated~~employees 22or ~~metals~~customers service centers in the Plates and Shapes Group and 12 facilities in the Flat Rolled and Non-Ferrous Group. These facilities use various metals processing and materials handling machinery and equipment. As of the same date, our Building Products Group operated 18 manufacturing locations where we process metals into various building products and 25 sales and distribution centers. During 2004, nine Building Products locations were closed and two locations were merged. During 2005, the operations of two Building Products locations were merged into other operating locations, and one Building Product location converted from processing metal to a sales and distribution center. During 2006, we acquired one location in the Plates and Shapes Group and added four locations in the Building Products Group, two of which were as a result of an acquisition and one of which was subsequently closed. Subsequent to December 31, 2006, we closed two locations—our Greenville, Kentucky facility within the Plates and Shapes Group, and our Chattanooga, Tennessee facility within the Flat Rolled and Non-Ferrous Group. 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. company;

~~Many~~• ofconforming ~~our~~the ~~facilities~~acquired ~~are~~company’s ~~capable of being used at higher capacities~~standards, ~~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~~processes, ~~sales~~procedures and ~~distribution~~controls ~~centers~~with ~~and~~our ~~administrative offices are located and described as follows:~~ operations;

~~OPERATING~~• ~~FACILITIES~~coordinating ASnew OFproduct ~~DECEMBER~~and ~~31,~~process ~~2006~~ development;

	Location	SquareFootage	Owned/Leased
Plates and Shapes Group:
Northeast Plates and Shapes	Baltimore, Maryland	65,000	Leased
	Seekonk, Massachusetts	115,000	Owned
	Newark, New Jersey	81,000	Owned
	Langhorne, Pennsylvania	235,000	Leased
	Philadelphia, Pennsylvania	85,000	Owned
	York, Pennsylvania	109,000	Owned
South Central Plates and Shapes	Enid, Oklahoma	112,000	Leased
	Tulsa, Oklahoma	533,000	Leased
	Muskogee, Oklahoma(1)	229,000	Owned
	Cedar Hill, Texas	104,000	Owned
Mid Atlantic Plates and Shapes	Ambridge, Pennsylvania	200,000	Leased
	Canton, Ohio	110,000	Owned
	Greenville, Kentucky(2)	56,000	Owned
	Greensboro, North Carolina	180,000	Owned
	Leetsdale, Pennsylvania	114,000	Leased
	Wilmington, North Carolina	178,000	Leased
Southeast Plates and Shapes	Mobile, Alabama	246,000	Owned
	Jacksonville, Florida	60,000	Owned
	Oakwood, Georgia	206,000	Owned
	Waggaman, Louisiana	295,000	Owned
	Columbus, Mississippi	45,000	Owned
Southwest Plates and Shapes	Hayward, California	64,000	Leased
Flat Rolled and Non-Ferrous Group:
	Madison, Illinois	100,000	Owned
	Jeffersonville, Indiana	90,000	Owned
	Randleman, North Carolina	150,000	Owned

•

hiring additional management and other critical personnel;

19• encountering unknown contingent liabilities that could be material; and

~~Table~~• increasing the scope, geographic diversity and complexity of ~~Contents~~our operations.

	Location	SquareFootage	Owned/Leased
	Springfield, Ohio	110,000	Owned
	Wooster, Ohio	140,000	Owned
	Chattanooga, Tennessee(2)	60,000	Owned
	Germantown, Wisconsin	102,000	Owned
	Horicon, Wisconsin	120,000	Leased
	Wichita, Kansas	43,000	Leased
	Liberty, Missouri	117,000	Leased
	Northbrook, Illinois	187,000	Owned
	Walker, Michigan	50,000	Owned
Building Products Group:
Service Centers	Phoenix, Arizona	111,000	Leased
	Brea, California	44,000	Leased
	Buena Park, California	168,000	Leased
	Corona, California	38,000	Leased
	Ontario, California	29,000	Leased
	Rancho Cordova, California	41,000	Leased
	Groveland, Florida	247,000	Leased
	Leesburg, Florida	61,000	Leased
	Pensacola, Florida	48,000	Leased
	Las Vegas, Nevada	133,000	Leased
	Irmo, South Carolina	38,000	Leased
	Nashville, Tennessee	44,000	Leased
	Houston, Texas	142,000	Owned
	Houston, Texas	155,000	Leased
	Mesquite, Texas	200,000	Leased
	Mesquite, Texas	55,000	Leased
	Kent, Washington	57,000	Leased
	Courtland, Ontario	32,000	Owned
Sales and Distribution Centers	Birmingham, Alabama	12,000	Leased
	Tucson, Arizona	9,000	Leased
	Hayward, California	25,000	Leased
	San Diego, California	9,000	Leased
	Clearwater, Florida	20,000	Leased
	Fort Myers, Florida	18,000	Leased
	Holly Hill, Florida	10,000	Leased
	Jacksonville, Florida	17,000	Leased
	Lakeland, Florida	24,000	Leased
	West Palm Beach, Florida	5,000	Leased
	West Melbourne, Florida	18,000	Leased
	Stone Mountain, Georgia	14,000	Leased
	Louisville, Kentucky	22,000	Leased
	Jackson, Mississippi	25,000	Leased
	Kansas City, Missouri	16,000	Leased
	Overland, Missouri	14,000	Leased
	Greensboro, North Carolina	15,000	Leased
	Oklahoma City, Oklahoma	40,000	Leased
	Harrisburg, Pennsylvania	12,000	Leased
	Memphis, Tennessee	20,000	Leased
	Dallas, Texas	26,000	Leased
	Longview, Texas	15,000	Leased

As a result of the foregoing, our acquisition strategy may not be successfully received by customers, and we may not realize any anticipated benefits from acquisitions.

20We may not be able to retain or expand our customer base if the North American manufacturing industry continues to erode through moving offshore or through acquisition and merger or consolidation activity in our customers’ industries.

~~Table~~Our customer base, including our Flat Rolled and Non-Ferrous Group’s customer base, primarily includes manufacturing and industrial firms. Some of ~~Contents~~these customers operate in industries that are undergoing consolidation through acquisition and merger activity; some are considering or have considered relocating production operations overseas or outsourcing particular functions overseas; and some customers have closed as they were unable to compete successfully with overseas competitors. Our facilities are predominately located in the mid-western and southern United States. To the extent that these customers cease U.S. operations, relocate or move operations overseas to regions in which we do not have a presence, we could lose their business. In addition, acquirers of manufacturing and industrial firms may have suppliers of choice that do not include us, which could affect our customer base and sales.

	Location	SquareFootage	Owned/Leased
	San Antonio, Texas	20,000	Leased
	Weslaco, Texas	21,000	Leased
	Salt Lake City, Utah	23,000	Leased
Administrative Locations:
Corporate Headquarters	Houston, Texas	13,000	Leased
Building Product Group	Houston, Texas	13,000	Leased
i-Solutions	Ft. Washington, Pennsylvania	4,000	Leased

~~(1)~~We ~~This~~may ~~facility~~face isproduct ~~subject~~liability toclaims ~~liens~~that ~~with~~are ~~respect~~costly toand ~~specific~~create ~~debt~~adverse ~~obligations, including Industrial Revenue Bonds~~publicity.

~~(2)~~If ~~These~~any ~~two~~of ~~locations~~the products that we sell cause harm to any of our customers, we could be exposed to product liability lawsuits. If we were found ~~closed~~liable ~~subsequent~~under product liability claims, we could be required to ~~December~~pay 31substantial monetary damages. Further, ~~2006~~even if we successfully defended ourselves against this type of claim, we could be forced to spend a substantial amount of money in litigation expenses, our management could be required to spend valuable time to defend against these claims and our reputation could suffer, any of which could harm our business.

~~Item 3.~~We ~~Legal~~may ~~Proceedings~~ not be able to generate sufficient cash to service all of our indebtedness.

~~From~~Our ~~time~~ability to ~~time,~~make wepayments ~~are~~on ~~involved~~our inindebtedness adepends ~~variety~~on ofour ~~claims, lawsuits~~ability ~~and~~to ~~other~~generate ~~disputes~~cash ~~arising~~ in the ~~ordinary~~future. ~~course~~Our of11 ~~business.~~1/8 WeSenior ~~believe~~Secured Notes due 2015 (the ~~resolution~~“Metals ofUSA ~~these~~Notes”), ~~matters~~the ABL facility and ~~the~~our ~~incurrence~~other ofoutstanding indebtedness ~~their~~are ~~related~~expected ~~costs~~to ~~and~~account ~~expenses~~for ~~should~~significant ~~not~~cash ~~have~~interest aexpenses ~~material~~in ~~adverse~~fiscal ~~effect~~2012 onand ~~our~~subsequent ~~consolidated~~years. ~~financial position~~Accordingly, ~~results~~we ofwill have to generate significant cash flows from operations orto ~~liquidity~~meet our debt service requirements. ~~While~~If itwe isdo not generate ~~feasible~~sufficient tocash ~~predict~~flow ~~the~~to ~~outcome~~meet ofour ~~all~~debt ~~pending~~service ~~suits~~ and ~~claims~~working capital requirements, ~~the~~we ~~ultimate~~may ~~resolution~~need ofto ~~these~~seek ~~matters~~additional asfinancing; ~~well~~however, asthis ~~future~~insufficient ~~lawsuits~~cash ~~could~~flow ~~have~~may amake ~~material~~it ~~adverse~~more ~~effect~~difficult for us to obtain financing on ~~our~~terms ~~business,~~that are ~~financial~~acceptable ~~condition~~to us, ~~results~~or ofat ~~operations~~all. Furthermore, Apollo has no obligation to provide us with debt or ~~reputation~~equity financing and we therefore may be unable to generate sufficient cash to service all of our indebtedness.

~~Item 4.~~Our ~~Submission~~use of ~~Matters~~leverage exposes us to ainterest ~~Vote~~rate ofrisk ~~Security~~and ~~Holders~~ could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from meeting our obligations under our indebtedness.

~~None~~As of December 31, 2011, our total indebtedness was $515.6 million. We also had an additional $163.8 million available for borrowing under the ABL facility as of that date.

21Our indebtedness could have important consequences for you, including:

~~Table~~• it may limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow money, dispose of ~~Contents~~assets or sell equity for our working capital, capital expenditures, dividend payments, debt service requirements, strategic initiatives or other purposes;

~~PART~~• IIit may limit our flexibility in planning for, or reacting to, changes in our operations or business;

~~Item 5.~~• ~~Market~~we ~~for~~may ~~Registrant’s~~be ~~Common~~more ~~Equity~~highly ~~and~~leveraged ~~Related~~than ~~Stockholder~~some ~~Matters~~of our competitors, which may place us at a competitive disadvantage;

~~As a~~• ~~result~~it ofmay ~~the~~make ~~Merger,~~us ~~all~~more ofvulnerable ~~Metals~~to ~~USA~~downturns ~~Inc.’s~~in ~~issued~~our ~~and~~business outstanding common stock is held indirectly by Metals USA Holdings through Flag Intermediate, its wholly owned subsidiary. Investment funds associated with Apollo own approximately 97% of the capital stock of Metals USA Holdings (or ~~approximately 90% on a fully-diluted basis). The remainder of~~ the ~~capital~~economy; ~~stock of Metals USA Holdings is held by members of our management. Accordingly, the Company’s common stock is not traded on any stock exchange~~ and ~~has no established public trading market.~~

~~Dividends~~• there would be a material adverse effect on our business, financial condition, results of operations or cash flows if we were unable to service our indebtedness or obtain additional financing, as needed.

AsOur adebt ~~result~~agreements ofimpose ~~the~~significant ~~Merger, Metals USA assumed the obligations of Flag Acquisition, including the 11 1/8 % Senior Secured Notes Due 2015 (the “Metals USA Notes”). All domestic~~ operating ~~subsidiaries of Metals USA have agreed, jointly~~ and ~~severally with Flag Intermediate (“Guarantors”), to unconditionally and irrevocably guarantee Metals USA’s obligations under the Metals USA Notes and Indenture Agreement dated November 30,~~ ~~2005.~~financial ~~Additionally~~restrictions, ~~Flag~~which ~~Intermediate~~could ~~has~~have ~~unconditionally guaranteed as~~ a ~~primary~~material ~~obligor~~adverse ~~the~~effect ~~due~~on ~~and~~our ~~punctual~~business, ~~payment~~financial ~~and~~condition, ~~performance~~results of ~~the~~operations ~~obligations~~or ~~under~~cash ~~the Indenture~~flows.

~~Metals USA Holdings is not a guarantor of the Metals USA Notes. There is a limitation on the amount of funds which can be transferred by the Guarantors to Metals USA Holdings in the form of dividends.~~ The ~~amount~~ABL offacility ~~dividends~~and ~~available for distribution to Metals USA Holdings under~~ the indenture governing the Metals USA Notes ~~was $28.7 million as of December 31, 2006. In addition, under~~ (the ~~most restrictive~~“Metals ~~covenants~~USA ofNotes ~~the~~Indenture” ~~loan~~or ~~and security agreement governing our Senior Secured Asset-Based Revolving Credit Facility (~~the “~~ABL facility~~Indenture”), ~~the~~contain ~~maximum~~various ~~amount~~covenants ~~of dividends~~ that ~~could~~limit beor ~~paid~~prohibit atour ~~December 31~~ability, ~~2006 was $48.8~~ ~~million~~among ~~(see~~other ~~Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and Note 8 to the Consolidated Financial Statements). In 2006~~things, ~~Flag Intermediate paid dividends~~ to: ~~Metals USA Holdings aggregating $25.0 million. There were no payments for the period from May 9, 2005 (date of inception) to November 30, 2005.~~

In• ~~addition,~~incur Flag Intermediate intends to pay dividends to its parent company sufficient to enable Metals USA Holdings to satisfy its obligations arising from its $150.0 million Senior Floating Rate Toggle Notes due 2012 (the “Holdings Notes”) issued in December 2006. During the second quarter of 2007, Flag Intermediate expects to pay Metals USA Holdings a $5.4 million dividend to finance the initial quarterly interest payment due April 15, 2007. For any interest period thereafter, Metals USA Holdings may elect to pay interest (1) entirely in cash or ~~(2) entirely~~guarantee byadditional ~~increasing~~indebtedness ~~the principal amount of the Holdings Notes~~ or ~~issuing~~issue ~~new~~certain ~~Holdings~~preferred ~~Notes (“PIK Interest”). See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”~~ shares;

22• pay dividends on our capital stock or redeem, repurchase, retire or make distributions in respect of our capital stock or subordinated indebtedness or make other restricted payments;

~~Table~~• ofenter ~~Contents~~into or permit certain agreements or make certain investments or loans;

~~Item 6.~~• ~~Selected~~sell ~~Financial~~certain ~~Data~~ assets;

On20 May 18, 2005, Flag Intermediate and its indirect wholly-owned subsidiary, Flag Acquisition, entered into an agreement and plan of merger with Metals USA. On November 30, 2005, Flag Acquisition merged with and into Metals USA, with Metals USA being the surviving corporation. Flag Intermediate and Flag Acquisition conducted no operations during the period May 9, 2005 (date of inception) to November 30, 2005.

We• ~~applied~~create ~~purchase~~or ~~accounting~~incur onliens; ~~the closing date of the Merger~~ and, as a result, the merger consideration was allocated to the respective values of the assets acquired and liabilities assumed from the Predecessor Company. As a result of the application of purchase accounting, the Successor Company balances and amounts presented in the consolidated financial statements and footnotes are not comparable with those of the Predecessor Company.

~~During~~• ~~2001,~~enter ~~the~~into ~~Predecessor~~certain ~~Company~~transactions ~~filed~~with ~~for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code, from which it emerged on October 31, 2002. Upon~~ our emergence from bankruptcy, the Predecessor Company adopted “Fresh-Start Reporting” accounting as contained in AICPA Statement of Position 90-7, “Financial Reporting for Entities in Reorganization under the Bankruptcy Codeaffiliates.”

The ~~consolidated~~Metals ~~financial~~USA ~~statements~~Notes ofIndenture ~~the~~contains ~~Predecessor~~covenants ~~Company~~that ~~after~~restrict ~~October 31~~our ability to take certain actions, ~~2002~~such as incurring additional debt, if we are ~~not~~unable ~~comparable~~ to ~~the~~meet ~~consolidated~~defined ~~financial~~adjusted ~~statements~~EBITDA ofto ~~the~~fixed ~~Predecessor~~charges and ~~Company~~consolidated ~~prior~~total todebt ~~November 1~~ratios (each, ~~2002~~as defined by the Indenture). The ~~principal~~covenants ~~differences~~in ~~relate~~the Indenture require us to ~~the~~have ~~exchange~~an ofadjusted ~~shares~~EBITDA ofto ~~new~~fixed ~~common~~charge ~~stock~~ratio ~~for~~(measured ~~pre~~on a trailing four-~~petition~~quarter ~~liabilities~~basis) ~~subject~~of 2.0 to ~~compromise,~~1.0 ~~issuance~~to ofincur “ratio” ~~warrants~~indebtedness inand ~~exchange~~a ~~for~~consolidated ~~the~~total ~~extinguished~~debt ~~old~~ratio ~~common~~of ~~stock,~~no ~~adjustments~~greater than 4.75 to ~~reflect~~1.0 ~~the~~to ~~fresh-start~~incur ~~impact~~“ratio” indebtedness in connection with acquisitions. Based on the ~~carrying~~calculations ~~value~~for ofthe ~~certain~~trailing ~~non-current~~four ~~assets~~quarters, we are able to satisfy these covenants and ~~elimination~~incur ofadditional ~~the~~indebtedness ~~retained~~under ~~deficit~~these ratios, including for acquisition purposes, under the Indenture.

23As of December 31, 2011, our fixed charge coverage ratio (“FCCR”), as defined by the loan and security agreement governing the ABL facility, was 2.82. As of December 31, 2011 we had $163.8 million of additional borrowing capacity under the ABL facility. Failure to comply with the FCCR covenant of the ABL facility can result in limiting our long-term growth prospects by hindering our ability to incur future indebtedness or grow through acquisitions. We do not have to maintain a minimum FCCR as long as our borrowing availability under the ABL facility is greater than or equal to the greater of (i) $45.0 million and (ii) 10% of the lesser of the borrowing base and the aggregate commitment (the “Minimum Availability”). We must maintain an FCCR of at least 1.0 to 1.0 if borrowing availability falls below the Minimum Availability.

~~Table~~Our inability to satisfy the terms of ~~Contents~~the negative covenants in our debt agreements do not, by themselves, constitute covenant violations or events of default. Rather, they are event-related restrictions that limit or prohibit the Company from taking certain corporate actions. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Covenant Compliance.”

The ~~following~~restrictions ~~table~~contained ~~sets~~in ~~forth our selected historical consolidated financial data as of~~ the ~~dates~~agreements ~~and for~~that ~~the~~govern ~~periods indicated. The selected historical consolidated financial data as of December 31, 2004 and for~~ the ~~year~~terms ~~then ended, and for the period from January 1, 2005 to November 30, 2005 for the Predecessor Company and as~~ of ~~December 31,~~ ~~2005 and for the period from May 9, 2005 to December 31, 2005, and as of December 31, 2006 and for the year then ended for the Successor Company have been derived from~~ our ~~audited~~debt ~~consolidated~~could: financial statements and related notes included in this Form 10-K. The Successor Company had no assets and conducted no operations from May 9, 2005 (date of inception) to November 30, 2005. The selected historical consolidated financial data as of December 31, 2002 and 2003 and for each of the two years ended December 31, 2003 presented in this table have been derived from our Predecessor Company’s audited consolidated financial statements not included in this Form 10-K. The historical results set forth below do not necessarily indicate results expected for any future period, and should be read in conjunction with, and are qualified by reference to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes thereto included elsewhere in this Form 10-K.

	Predecessor Company															Successor Company
	PeriodFromJanuary 1,2002 thruOctober 31,2002(1)			Period FromNovember 1,2002 thruDecember 31,2002			Year EndedDecember 31,2003			Year EndedDecember 31,2004			Period fromJanuary 1,2005 throughNovember 30,2005			Period from May 9,2005 (dateof inception)throughDecember 31,2005			Year EndedDecember 31,2006
	(in millions)
Statements of Operations Data:
Net sales	$	833.3		$	128.7		$	963.2		$	1,509.8		$	1,522.1		$	116.9		$	1,802.9
Cost of sales (exclusive of operating and delivery, and depreciation and amortization shown below in Operating expenses)(2)		639.0			98.7			731.6			1,080.1			1,189.3			92.5			1,371.8
Operating expenses(2)(3)		197.1			30.9			215.2			256.0			250.7			23.5			312.1
Asset impairments and integration		(0.2	)		—			—			—			—			—			—
Operating income (loss)		(2.6	)		(0.9	)		16.4			173.7			(82.1	)		0.9			119.0
Interest expense		15.8			1.3			5.7			8.4			12.0			4.1			54.1
Other (income) expense, net		(1.1	)		0.1			(2.0	)		(2.5	)		(0.1	)		—			(0.5	)
Fresh-start/gain on reorganization		(80.9	)		—			—			—			—			—			—
Reorganization expenses		28.3			—			—			—			—			—			—
Income (loss) before taxes and discontinued operations		35.3			(2.3	)		12.7			167.8			70.2			(3.2	)		65.4
Provision (benefit) for taxes		(15.4	)		—			5.1			63.3			26.7			(1.2	)		25.9
Income (loss) before discontinued operations		50.7			(2.3	)		7.6			104.5			43.5			(2.0	)		39.5
Discontinued operations, net		0.6			(1.0	)		(0.1	)		—			—			—			—
Net income (loss)	$	51.3		$	(3.3	)	$	7.5		$	104.5		$	43.5		$	(2.0	)	$	39.5

•

limit our ability to plan for or react to market conditions or meet capital needs or otherwise restrict our activities or business plans;

24• adversely affect our ability to finance our operations, to enter into strategic acquisitions, investments or other capital needs or to engage in other business activities that would be in our interest; and

~~Table~~• oflimit ~~Contents~~our access to the cash generated by our subsidiaries.

	Predecessor Company Years Ended December 31,						Successor Company Year Ended December 31,
	2002		2003		2004		2005(4)		2006
	(in millions)
Balance Sheet Data:
Working capital	$	318.2	$	303.4	$	565.0	$	453.3	$	572.9
Total assets		378.6		407.2		710.0		795.3		981.9
Long-term debt, less current portion		127.4		118.2		266.6		472.9		610.1
Stockholders’ equity (deficit)		189.0		200.6		328.2		132.0		147.6

Upon the occurrence of an event of default under the ABL facility, the lenders could elect to declare all amounts outstanding under the ABL facility to be immediately due and payable and terminate all commitments to extend further credit. If we were unable to repay those amounts, the lenders under the ABL facility could proceed against the collateral granted to them to secure the ABL facility on a first-priority lien basis. If the lenders under the ABL facility accelerate the repayment of borrowings, such acceleration could have a material adverse effect on our business, financial condition, results of operations or cash flows. In addition, we may not have sufficient assets to repay the Metals USA Notes upon acceleration.

~~(1)~~For Ona ~~October~~more ~~31,~~detailed ~~2002,~~description weon ~~emerged from bankruptcy. As a result of~~ the ~~application~~limitations ofon ~~“Fresh-Start Reporting,”~~ our ~~financial~~ability ~~information~~to asincur ~~of any date or for any periods after October 31~~additional indebtedness, ~~2002~~please issee ~~not~~“Management’s ~~comparable~~Discussion toand ~~our~~Analysis ~~historical~~of ~~financial~~Financial ~~information~~Condition ~~before~~and ~~November~~Results 1,of ~~2002~~Operations—Financing Activities.”

~~(2)~~Despite ~~For~~our ~~the~~current ~~one-month period ended December 31~~indebtedness, ~~2005,~~we ~~the~~may ~~Successor~~still ~~Company’s~~be ~~operating~~able ~~costs~~to ~~and~~incur ~~expenses~~significantly ~~increased~~more byindebtedness ~~$5.2~~which ~~million~~could ~~($4.1~~have million for cost of sales and $1.1 million of additional depreciation and amortization) as the inventory was sold and additional depreciation and amortization was recorded. For the year ended December 31, 2006, the Successor Company’s operating costs and expenses increased by $23.9 million ($10.8 million in the first quarter of 2006 for cost of sales as the inventory was sold and $13.1 million of additional depreciation and amortization over the entire year). As a ~~result~~material ofadverse ~~the~~effect ~~application~~on ofour ~~purchase accounting~~business, ~~the Successor Company balances and amounts presented in the consolidated~~ financial ~~statements~~condition ~~are~~or ~~not~~results ~~comparable with those~~ of ~~the Predecessor Company~~ operations.

~~(3)~~The Weterms ~~incurred~~of ~~certain non-recurring costs related to~~ the ~~Merger~~Metals ~~that~~USA ~~were~~Notes ~~charged~~Indenture ~~to the Predecessor Company’s selling, general~~ and ~~administrative expense during~~ the ~~period~~ABL ~~from~~facility ~~January~~contain 1,restrictions ~~2005 to November 30, 2005. Such expenses of $15.8 million included $14.6 million paid by us~~ on ~~the~~our ~~closing~~ability ~~date of the Merger~~ to incur ~~holders~~additional ofindebtedness. ~~1,081,270~~These ~~vested-in-the-money~~restrictions ~~options~~are ~~and~~subject ~~holders of 45,437 restricted stock grant awards related~~ to ~~the~~a ~~long-term~~number ~~incentive compensation plan~~ of ~~the~~important ~~Predecessor~~qualifications ~~Company. Additionally, we recorded expenses of $0.8 million related to severance costs~~ and ~~$0.4 million for other costs associated with the Merger.~~

~~(4)~~21 The Merger was accounted for as a purchase, with the Successor Company applying purchase accounting on the closing date of the Merger. As a result, the merger consideration was allocated to the respective fair values of the assets acquired and liabilities assumed from the Predecessor Company. The fair value of inventories, property and equipment and intangibles (customer lists) were increased by $14.9 million, $118.6 million, and $22.2 million, respectively.

25 exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. Accordingly, we or our subsidiaries could incur significant additional indebtedness in the future. As of December 31, 2011, we had approximately $163.8 million available for additional borrowing under the ABL facility, including the subfacility for letters of credit, and the covenants under our debt agreements would allow us to borrow a significant amount of additional indebtedness. In addition, the Metals USA Notes Indenture does not limit the amount of indebtedness that may be incurred by Flag Intermediate or Metals USA Holdings. Additional leverage could have a material adverse effect on our business, financial condition or results of operations and could increase the risks described in “—Our use of leverage exposes us to interest rate risk and could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from meeting our obligations under our indebtedness,” “—Our debt agreements impose significant operating and financial restrictions, which could have a material adverse effect on our business, financial condition, results of operations or cash flows” and “—Because a portion of our indebtedness bears interest at rates that fluctuate with changes in certain prevailing short-term interest rates, we are vulnerable to interest rate increases.”

~~Table~~Because a portion of ~~Contents~~our indebtedness bears interest at rates that fluctuate with changes in certain prevailing short-term interest rates, we are vulnerable to interest rate increases.

~~Item~~A portion of our indebtedness bears interest at rates that fluctuate with changes in certain short-term prevailing interest rates. As of December 731, 2011, we had approximately $240.3 ~~Management’s~~million ~~Discussion~~of floating rate debt under the ABL facility and ~~Analysis~~our Industrial Revenue Bonds (“IRBs”). We also had an additional $163.8 million available for borrowing under the ABL facility as of ~~Financial~~December 31, ~~Condition~~2011. Assuming a consistent level of debt, a 100 basis point change in the interest rate on our floating rate debt effective from the beginning of the year would increase or decrease our fiscal 2011 interest expense under the ABL facility and ~~Results~~the IRBs by approximately $2.4 million. We use derivative financial instruments to manage a portion of ~~Operations~~the potential impact of our interest rate risk. As of December 31, 2011, we had $4.1 million of IRBs that were hedged under interest rate swap agreements. To some extent, derivative financial instruments can protect against increases in interest rates, but they do not provide complete protection over the longer term. If interest rates increase dramatically, we could be unable to service our debt which could have a material adverse effect on our business, financial condition, results of operations or cash flows.

~~This~~We ~~section~~are ~~contains~~controlled ~~statements~~by ~~that~~Apollo ~~constitute~~and ~~“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. See disclosure presented on the inside of the~~its ~~front~~affiliates, ~~cover~~and oftheir ~~this~~interests ~~report~~as ~~for~~equity ~~cautionary~~holders ~~information with respect to such forward-looking statements. Readers should refer to Item 1.A “Risk Factors” for risk factors that~~ may ~~affect~~conflict ~~future performance. The following discussion should be read in conjunction~~ with ~~Item 6~~yours. ~~“Selected Financial Data” and Item 8. “Financial Statements and Supplementary Data.”~~

~~Overview~~We are an affiliate of, and are controlled by, Apollo and its affiliates. The interests of Apollo and its affiliates may not always be aligned with yours. For example, Apollo may have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investment, even though these transactions might involve risks to the non-affiliated holders of our common stock or holders of our debt if the transactions resulted in our being more highly leveraged or significantly changed the nature of our business operations or strategy. In addition, if we encounter financial difficulties, or if we are unable to pay our debts as they mature, the interests of Apollo might conflict with those of the non-affiliated holders of our common stock or the holders of our debt. In that situation, for example, the non-affiliated holders of our common stock or the holders of our debt might want us to raise additional equity to reduce our leverage and pay our debts, while Apollo might not want to increase their investment in us or have their ownership diluted and instead choose to take other actions, such as selling our assets. Furthermore, Apollo and its affiliates have no continuing obligation to provide us with debt or equity financing. Additionally, Apollo and certain of its affiliates are in the business of making investments in businesses engaged in the metals service industry that complement or directly or indirectly compete with certain portions of our business.

~~We are a leading provider of value-added processed steel~~Further, ~~aluminum~~if ~~and~~they ~~specialty~~pursue ~~metals~~such ~~and~~acquisitions ~~manufactured~~in ~~metal components.~~the ~~Approximately 93% of our operating income (excluding Corporate) is derived from our~~ metals service ~~center activities that are segmented into two groups~~industry, ~~Plates~~those ~~and~~acquisition opportunities ~~Shapes~~may ~~and~~not ~~Flat~~be ~~Rolled~~available ~~and~~to ~~Non-Ferrous~~us. ~~The~~So ~~remaining~~long 7%as ofApollo ~~our operating income (excluding Corporate) is derived from our Building Products Group that manufactures~~ and ~~sells~~its ~~products~~affiliates ~~primarily~~continue ~~related~~ to ~~the~~indirectly ~~residential~~own ~~remodeling~~a ~~industry.~~significant Weamount ~~purchase metal from primary producers that generally focus on large volume sales~~ of ~~unprocessed metals in standard configurations and sizes. In most cases, we perform~~ the ~~customized,~~equity ~~value-added~~of ~~processing~~Metals ~~services~~USA ~~required~~Holdings ~~to meet the specifications provided by end-use customers~~Corp. ~~Our Plates and Shapes Group and Flat Rolled and Non-Ferrous Group customers are in the machining~~, ~~furniture,~~our ~~transportation~~parent ~~equipment~~company, ~~power~~even ~~and~~if ~~process~~such ~~equipment,~~amount ~~industrial/commercial~~is ~~construction/fabrication,~~less ~~consumer~~than ~~durables and electrical equipment businesses~~50%, asthey ~~well~~will ascontinue ~~machinery~~to ~~and~~be ~~equipment~~able ~~manufacturers.~~to ~~Our~~strongly ~~Building~~influence ~~Products~~or ~~Group~~effectively ~~customers~~control ~~are~~our ~~distributors~~business ~~and contractors engaged in the residential remodeling industry~~decisions.

~~Matters~~22 ~~Impacting Comparability of Results~~

~~Merger~~Item ~~with~~1B. ~~Flag~~Unresolved ~~Acquisition~~Staff Comments

~~On November 30, 2005, Flag Acquisition, a wholly-owned subsidiary of Flag Intermediate, merged with and into Metals USA, with Metals USA being the surviving corporation~~None. The Merger was consummated pursuant to an agreement and plan of merger by and among Metals USA, Metals USA Holdings and Flag Acquisition. As a result of the Merger, all of the issued and outstanding capital stock of Metals USA is held indirectly by Metals USA Holdings through Flag Intermediate, its wholly owned subsidiary. Flag Intermediate has no assets other than its investment in Metals USA, conducts no operations and is a guarantor of both the ABL facility and the Metals USA Notes. Immediately prior to the closing date of the Merger, all outstanding shares of our common stock were cancelled in exchange for a cash payment of $22.00 per share of such common stock. Investment funds associated with Apollo V own approximately 97% of the capital stock of Metals USA Holdings (or approximately 90% on a fully-diluted basis). The remainder of the capital stock of Metals USA Holdings is held by members of our management.

~~Although~~23 the Merger has not affected our operations, it has significantly affected our results of operations as reported in our financial statements. In 2005, we incurred approximately $15.8 million of nonrecurring expenses relating primarily to stock option redemptions, severance packages and the amortization of certain prepaid expenses in connection with the closing of the Merger. As a result of the Merger, in 2006 and in the future, we will experience increased non-cash expenses related to purchase price adjustments and increased interest expense resulting from the larger debt component of our capital structure.

AsItem ~~a result of the Merger, the fair values of inventories, property and equipment and intangibles (customer lists) were increased by $14.9 million, $118.6 million and $22.~~2 ~~million, respectively~~. For the Successor Company for the period from May 9, 2005 (date of inception) to December 31, 2005, operating costs and expenses were increased by $5.2 million ($4.1 million for cost of sales and $1.1 million of additional depreciation and amortization) as the inventory was sold and additional depreciation and amortization was recorded. The fair value of deferred taxes and long-term liabilities were increased by $64.8 million and $3.1 Properties

26As of December 31, 2011, we operated 19 metal service centers in the Plates and Shapes Group and 27 facilities in the Flat Rolled and Non-Ferrous Group. These facilities use various metals processing and materials handling machinery and equipment. As of the same date, our Building Products Group operated four manufacturing plants where we process metals into various building products and 14 sales centers.

~~Table~~Many of ~~Contents~~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 metal service center facilities, Building Products sales centers and manufacturing plants, and administrative offices are located and described as follows:

~~million,~~OPERATING ~~respectively.~~FACILITIES ~~Our~~AS ~~intangible~~OF ~~assets~~DECEMBER ~~(customer~~31, ~~lists)~~2011 will be amortized over five years using an accelerated amortization method which approximates their useful life and economic value to us. Total acquisition costs were allocated to the acquired assets and assumed liabilities based upon estimates of their respective fair values as of the closing date of the Merger using valuation and other studies.

As a result of the items discussed below, operating income is not comparable for the periods listed below. Operating income includes charges which affect comparability between periods as follows:


	Location	Square Footage		Owned/ Leased
*Plates and Shapes Group:*
	Mobile, Alabama		246,000		Owned
	Jacksonville, Florida		60,000		Owned
	Oakwood, Georgia		206,000		Owned
	Waggaman, Louisiana		371,000		Owned
	Baltimore, Maryland		65,000		Leased
	Seekonk, Massachusetts		115,000		Owned
	Columbus, Mississippi		45,000		Owned
	Newark, New Jersey		81,000		Owned
	Greensboro, North Carolina		180,000		Owned
	Canton, Ohio		110,000		Owned
	Enid, Oklahoma		112,000		Owned
	Muskogee, Oklahoma (1)		229,000		Owned
	Tulsa, Oklahoma		533,000		Leased
	Ambridge, Pennsylvania		200,000		Leased
	Langhorne, Pennsylvania		235,000		Leased
	Philadelphia, Pennsylvania		85,000		Owned
	Philadelphia, Pennsylvania		109,000		Leased
	York, Pennsylvania		109,000		Owned
	Cedar Hill, Texas		150,000		Owned

	Predecessor Company				Successor Company
	Year EndedDecember 31, 2004		Period fromJanuary 1, 2005 toNovember 30, 2005		Period from May 9,2005 (date ofInception) toDecember 31, 2005		Year EndedDecember 31, 2006
	(in millions)
Charges Included in Operating Income:
Inventory purchase adjustments(1)	$	—	$	—	$	4.1	$	10.8
Stock options and grant expense(2)		—		15.0		0.4		1.2
Write-off of prepaid expenses as a result of the Merger(3)		—		0.3		—		—
Facilities closure(4)		5.0		—		—		1.4
Severance costs(5)		—		0.7		—		—
Management fees(6)		—		—		0.1		1.2

(1) As a result of management’s analysis and evaluation of the replacement cost of inventory as of the closing of the Merger, a purchase adjustment of $14.9 million was recorded as of December 1, 2005 with $4.1 million of that amount was charged to cost of sales in December 2005 and $10.8 million charged to cost of sales in the first quarter of 2006.


	Location	Square Footage		Owned/ Leased
*Flat Rolled and Non-Ferrous Group:*
	Thomasville, Alabama		75,000		Owned
	Anaheim, California		45,000		Leased
	Orange, California		28,000		Leased
	Thomasville, Georgia		52,000		Leased
	Madison, Illinois		100,000		Owned
	Northbrook, Illinois		187,000		Owned
	Rockford, Illinois		119,000		Owned
	Rockford, Illinois		41,000		Owned
	Jeffersonville, Indiana		90,000		Owned
	Jeffersonville, Indiana (1) (2)		270,000		Owned
	Jeffersonville, Indiana (2)		40,000		Leased
	Wichita, Kansas		43,000		Leased
	Mansfield, Massachusetts		42,000		Owned
	Walker, Michigan		50,000		Owned
	Plymouth, Minnesota		18,000		Owned
	Liberty, Missouri		117,000		Leased
	Union, New Jersey		39,000		Leased
	Randleman, North Carolina		154,000		Owned
	Springfield, Ohio		105,000		Owned
	Wooster, Ohio		140,000		Owned
	Tulsa, Oklahoma		130,000		Owned
	Houston, Texas		57,000		Owned
	Katy, Texas		212,000		Owned
	Odessa, Texas		29,000		Owned
	Richardson, Texas		192,000		Owned
	Germantown, Wisconsin		102,000		Owned
	Horicon, Wisconsin		120,000		Leased
	Horicon, Wisconsin		32,000		Leased

*Building Products Group:*
Sales Centers	Birmingham, Alabama		19,000		Leased
	Phoenix, Arizona		111,000		Leased
	Hayward, California		24,000		Leased
	Leesburg, Florida		61,000		Leased
	Pensacola, Florida		48,000		Leased
	Las Vegas, Nevada		42,000		Leased
	Oklahoma City, Oklahoma		40,000		Leased
	Irmo, South Carolina		38,000		Leased
	Nashville, Tennessee		44,000		Leased
	Houston, Texas		155,000		Leased
	Longview, Texas		15,000		Leased
	Mesquite, Texas		55,000		Leased
	Weslaco, Texas		21,000		Leased
	Kent, Washington		57,000		Leased
Manufacturing Plants	Brea, California		43,000		Owned
	Buena Park, California		168,000		Leased
	Groveland, Florida		247,000		Leased
	Courtland, Ontario		32,000		Owned

~~(2)~~25 The Predecessor Company paid $14.6 million on the closing date of the Merger to holders of 1,081,270 vested in-the-money options and holders of 45,437 restricted stock grant awards. Those amounts were recorded as an administrative expense during the period from January 1, 2005 to November 30, 2005. On January 1, 2006, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 123(R) “Share-Based Payments” (“SFAS 123(R)”). In accordance with SFAS 123(R), we recognized $1.2 million of non-cash stock-based compensation expense in 2006.

(3) These prepaid amounts were written off as a result of the Merger.


	Location	Square Footage		Owned/ Leased
*Administrative Locations:*
Corporate Headquarters	Fort Lauderdale, Florida		6,700		Leased
i-Solutions	Ft. Washington, Pennsylvania		4,000		Leased

(41) ~~This~~These ~~amount represents $5.0 million of charges in the Building Products Group for the elimination of one layer of management and closure of eleven~~ facilities inare ~~2004.~~subject Into ~~addition,~~liens aswith arespect ~~result~~to ofspecific ~~ongoing~~debt ~~comprehensive review of our business segments~~obligations, weincluding ~~closed three facilities within the Building Products Group in the fourth quarter of 2006~~IRBs.

(52) ~~This~~These ~~amount~~facilities ~~represents~~comprise ~~severance~~one ~~costs~~operating ~~of management personnel that were replaced as part of the Merger~~location.

~~(6)~~Item ~~Includes~~3. ~~accrued~~Legal ~~expenses related to the management agreement with Apollo.~~Proceedings

~~2006~~From ~~Acquisitions~~time to time, 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, liquidity or cash flows. While it is not feasible to predict the outcome of all pending suits and claims, the ultimate resolution of these matters as well as future lawsuits could have a material adverse effect on our business, financial condition, results of operations, cash flows or reputation.

OnItem ~~May 17, 2006, we purchased all of the assets and business operations of Port City, located in Tulsa, Oklahoma, for approximately $41~~4.3 ~~million,~~Mine ~~including~~Safety transaction costs and a $5.0 million contingent payout provision that may be made in 2009 or earlier, subject to certain performance criteria. The maximum amount payable has been accrued in accordance with SFAS 141. Founded in 1977, Port City is a value-added processor of steel plate. Port City uses cutting-edge technologies in laser, plasma and oxyfuel burning, braking and rolling, drilling and machining, and welding to service its customers. Port City’s range and depth of processing capabilities are highly complementary to the capital investments we have already made in the Plates and Shapes Group, and we believe this acquisition positions us to be the pre-eminent plate processor in the southern United States. Port City operates out of a 533,000 square foot facility and has approximately 100 full-time employees. Disclosures

27Not applicable.

~~Table~~26 ~~of Contents~~

~~Port~~PART ~~City’s~~II customers are predominately manufacturers of cranes and other heavy equipment, heat exchangers, and equipment specifically focused on the oil and gas industry. Port City has traditionally purchased metal from service centers and we believe we will gain immediate benefits by consolidating its metal needs into our overall purchasing process. We also expect to realize immediate benefits by selling Port City’s high-value-added products through our sales force and to our existing customer base. We believe Port City is an important strategic addition to the south-central region of our Plates and Shapes Group.

OnItem May 12, 2006, we purchased all of the assets and operations of Dura-Loc, with one manufacturing facility located near Toronto, Ontario, Canada and a sales and distribution facility located in California (which was subsequently closed) for approximately $105.4 ~~million~~Market Canadian dollars (approximately U.S. $9.4 million). Dura-Loc was established in 1984 and is one of the leading stone-coated metal roof manufacturers in North America. Dura-Loc is also the only manufacturer of such product located in the eastern half of North America, a market not yet fully developed for the high-end, stone-coated metal products we produce. We believe this acquisition gives us significant additional capacity located in a potentially high growth market. We have also determined that by transforming Dura-LocRegistrant’s ~~production~~Common ~~processes~~Equity to our methodologies, we can reduce Dura-Loc’s cost of production, further improving the benefits of the purchase. We believe the addition of Dura-Loc to our stone-coated metal roofing division, Gerard Roofing Technology, provides us with a more economic and ~~efficient~~Related ~~way~~Stockholder toMatters ~~gain access to an expanded product mix~~ and ~~leverage~~Issuer ~~the~~Purchases ~~combined sales force and research and development personnel, thereby solidifying our position as one~~ of ~~the~~Equity ~~largest stone-coated metal roofing manufacturers in North America.~~ Securities

~~Overview~~As a result of ~~Results~~the Merger, all of Metals USA Inc.’s issued and outstanding common stock is held indirectly by Metals USA Holdings through Flag Intermediate, its wholly owned subsidiary. Investment funds associated with Apollo own approximately 64% of the capital stock of Metals USA Holdings. As a result of Metals USA Holdings’ initial public offering, the aggregate percentage of Metals USA Holdings’ outstanding capital stock held by non-affiliates as of December 31, 2011 is approximately 31%. The remainder of the capital stock of Metals USA Holdings is held by members of management. Accordingly, the Company’s common stock is not traded on any stock exchange and has no established public trading market.

~~Net sales.~~Dividends We derive the net sales of our Plates and Shapes and Flat Rolled and Non-Ferrous Groups from the processing and sale of metal products to end-users including metal fabrication companies, general contractors and OEMs. Pricing is generally based upon the underlying metal cost as well as a margin associated with customized value-added services as specified by the customer. The net sales of our Building Products Group are derived from the sales of finished goods to local distributors and general contractors who are generally engaged in the residential remodeling industry.

~~Cost~~As ofa ~~sales. Our Plates and Shapes and~~result ~~Flat~~of ~~Rolled~~the ~~and~~Merger, ~~Non-Ferrous~~Metals ~~Groups~~USA ~~follow~~assumed the ~~normal~~obligations ~~industry~~of ~~practice~~Flag ~~which classifies~~Acquisition, ~~within~~including ~~cost~~the ofMetals ~~sales,~~USA ~~the~~Notes. ~~underlying~~All ~~commodity~~domestic ~~cost~~operating subsidiaries of ~~metal~~Metals ~~purchased~~USA inhave ~~mill~~agreed, ~~form~~jointly and ~~the~~severally ~~cost of inbound freight charges together~~ with ~~third-party~~Flag ~~processing cost,~~Intermediate ~~if any. Generally~~(“Guarantors”), ~~the~~to unconditionally ~~cost~~and ofirrevocably ~~metal~~guarantee ~~approximates~~Metals ~~75%~~USA’s ofobligations ~~net~~under ~~sales for~~ the ~~Plates~~Metals ~~and~~USA ~~Shapes~~Notes and ~~Flat~~Indenture ~~Rolled~~Agreement ~~and~~dated ~~Non-Ferrous~~November 30, ~~Groups~~2005. ~~Cost~~Additionally, ofFlag ~~sales~~Intermediate ~~with~~has ~~respect~~unconditionally toguaranteed ~~our~~as ~~Building~~a ~~Products~~primary ~~Group,~~obligor ~~includes~~ the ~~cost~~due ~~of raw materials, manufacturing~~and ~~labor~~punctual ~~and~~payment ~~overhead costs, together with depreciation~~ and ~~amortization~~performance ~~expense~~of ~~associated~~the ~~with~~obligations ~~property,~~under ~~buildings and equipment used in~~ the ~~manufacturing process~~Indenture. ~~Amounts included within this caption may not be comparable to similarly titled captions reported by other companies.~~

~~Operating~~Metals ~~and~~USA ~~delivery~~Holdings ~~expense.~~is ~~Our~~not ~~operating~~a ~~and~~guarantor ~~delivery~~of ~~expense reflects~~ the ~~cost incurred~~Metals byUSA ~~our~~Notes. ~~Plates~~There ~~and~~is ~~Shapes~~a ~~and~~limitation ~~Flat~~on ~~Rolled~~the ~~and~~amount ~~Non-Ferrous~~of ~~Groups~~funds ~~for~~which ~~labor~~can ~~and~~be ~~facility~~transferred ~~costs~~by ~~associated with~~ the ~~value-added~~Guarantors ~~metal processing services that we provide. With respect~~ to ~~our~~Metals ~~Building~~USA ~~Products~~Holdings ~~Group,~~in ~~operating costs are associated with~~ the ~~labor~~form ~~and~~of ~~facility~~dividends ~~costs~~(see ~~attributable~~Item 7. to“Management’s ~~the~~Discussion ~~distribution~~ and ~~warehousing~~Analysis of ~~our~~Financial ~~finished~~Condition ~~goods at our service center facilities. Delivery expense reflects labor, material handling~~ and ~~other third party costs incurred with the delivery of~~Results ~~product~~of toOperations—Liquidity ~~customers.~~and ~~Amounts~~Capital ~~included~~Resources” inand ~~this~~Note ~~caption~~9 ~~may not be comparable~~ to ~~similarly~~the ~~titled~~Consolidated ~~captions~~Financial ~~reported by other companies~~Statements).

~~Selling,~~No ~~general~~dividends were ~~and~~paid ~~administrative~~from ~~expenses.~~Flag ~~Selling,~~Intermediate ~~general~~to ~~and~~Metals ~~administrative~~USA ~~expenses~~Holdings ~~include~~during ~~sales and marketing expenses~~2009, ~~executive~~2010 ~~officers’~~or ~~compensation,~~2011. ~~office~~In ~~and administrative salaries~~2008, ~~insurance,~~Flag ~~accounting,~~Intermediate ~~legal, computer~~paid ~~systems,~~dividends ~~and~~to ~~professional~~Metals ~~services~~USA ~~and~~Holdings ~~costs~~aggregating ~~not~~$87.5 ~~directly~~million. ~~associated~~In ~~with~~2007, ~~the~~Flag ~~processing,~~Intermediate ~~manufacturing,~~paid ~~operating~~dividends orto ~~delivery~~Metals ~~costs~~USA ofHoldings aggregating ~~our~~$18.1 ~~products~~million. ~~Amounts~~In ~~included~~2006, ~~within~~Flag ~~this~~Intermediate ~~caption~~paid ~~may~~dividends ~~not be comparable~~ to ~~similarly~~Metals ~~titled~~USA ~~captions reported~~Holdings byaggregating ~~other~~$25.0 ~~companies~~million.

2827

~~Table~~Item of6. ~~Contents~~Selected Financial Data

~~Depreciation~~The following table sets forth our selected historical consolidated financial data as of the dates and ~~amortization~~for the periods indicated. ~~Depreciation~~The ~~and~~selected ~~amortization~~historical ~~expense~~consolidated ~~represents~~financial data for the ~~costs~~year ended ~~associated~~December 31, ~~with~~2009, ~~property~~and as of December 31, ~~buildings~~2010 and ~~equipment~~for ~~used~~the ~~throughout~~year ended December 31, 2010, and as of December 31, 2011, and for the ~~company~~year ~~except~~ended December 31, 2011, have been derived from our audited consolidated financial statements and related notes included in this Form 10-K. The selected historical consolidated financial data for ~~depreciation~~the year ended December 31, 2007, and ~~amortization~~as ~~expense~~of ~~associated~~December 31, ~~with~~2007, and for the ~~manufacturing~~year ~~assets~~ended ~~employed~~December 31, by2008, ~~our~~and ~~Building~~as ~~Products~~of December 31, ~~Group~~2008, ~~which~~and isas of December 31, 2009, presented in this table have been derived from the Company’s audited consolidated financial statements not included ~~within~~in ~~cost~~this ofForm ~~sales~~10-K. The historical results set forth below do not necessarily indicate results expected for any future period, and should be read in conjunction with, and are qualified by reference to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes thereto included elsewhere in this Form 10-K.

Industry Trends


	Years Ended December 31,
	2007		2008			2009			2010		2011
	(in millions)
Statements of Operations Data:
Net Sales	$	1,845.3	$	2,156.2		$	1,098.7		$	1,292.1	$	1,885.9
Cost of sales (exclusive of operating and delivery, and depreciation and amortization included in operating expenses below)		1,418.8		1,612.9			890.1			996.7		1,445.7
Operating expenses		313.0		336.3			230.7			235.1		304.9

Operating income (loss)		113.5		207.0			(22.1	)		60.3		135.3
Interest expense		57.6		54.5			44.9			37.2		42.2
Gain on extinguishment of debt		—		—			(13.6	)		—		—
Other (income) expense, net		—		(0.2	)		0.3			—		0.1

Income (loss) before income taxes		55.9		152.7			(53.7	)		23.1		93.0
Provision (benefit) for income taxes		19.3		59.3			(18.0	)		8.2		31.8

Net income (loss)	$	36.6	$	93.4		$	(35.7	)	$	14.9	$	61.2


	As of December 31,
	2007		2008			2009			2010		2011
	(in millions)
Balance Sheet Data:
Working capital	$	511.9	$	635.3		$	276.3		$	368.2	$	488.0
Total assets		951.1		1,010.9			619.2			744.1		978.6
Long-term debt, less current portion		563.1		648.9			307.1			392.4		514.6
Stockholder’s equity		167.6		175.4			141.1			158.1		220.7

~~Metals~~28 ~~Service Centers~~

~~Since~~Item ~~2000, there has been significant consolidation among the major domestic metals producers~~7. ~~The~~Management’s ~~top~~Discussion ~~three~~and ~~steel~~Analysis ~~producers now control over 60%~~ of ~~the~~Financial ~~domestic~~Condition ~~flat rolled steel market, which has created a metals pricing environment characterized by a more disciplined approach to production~~ and ~~pricing.~~Results The domestic suppliers have largely exited their non-core metals service and distribution functions to focus on reducing production costs and driving efficiencies from their core metals production activities. Increasingly, metals service centers like us have continued to capture a greater proportion of ~~these key functions once served by the major metals producers.~~ Operations

InThis ~~2004,~~section ~~increased~~contains ~~demand~~statements ~~for~~that ~~steel~~constitute in“forward-looking ~~China,~~statements” ~~shortages~~within the meaning of ~~raw~~the ~~materials~~Private ~~such~~Securities ~~as coking~~Litigation ~~coal,~~Reform ~~iron~~Act ~~ore~~of ~~and~~1995. ~~oil,~~See ~~increased~~disclosure ~~demand~~presented ~~for~~on ~~scrap,~~page ~~the~~2 ~~weak~~of ~~U.S.~~this ~~dollar~~report ~~and~~for ~~increased~~cautionary ~~freight~~information ~~rates~~with ~~all~~respect ~~contributed~~ to ~~significant~~such ~~increases~~forward-looking instatements. ~~prices~~Readers ~~for~~should ~~domestic~~refer ~~metal~~to ~~of all types, particularly steel~~Item 1A. ~~Further, improved economic conditions~~“Risk inFactors” ~~Europe,~~for ~~Asia~~risk ~~and~~factors ~~North~~that ~~America~~may ~~contributed~~affect tofuture aperformance. ~~higher~~The ~~level~~following ofdiscussion ~~demand~~should ~~for~~be ~~steel.~~read ~~During~~in ~~most~~conjunction ofwith ~~2004,~~Item 6. ~~supplies~~“Selected ofFinancial ~~many~~Data” ~~products~~and ~~were~~Item 8. ~~constrained,~~“Financial ~~which~~Statements ~~also~~and ~~led~~Supplementary ~~to price increases~~Data. ”

InOverview early 2005, the three iron ore suppliers controlling about 80% of the world market announced a 71.5% price increase to the integrated steel mills in Europe and Asia. This iron ore price increase was unprecedented, and resulted in cost increases for the European and other large integrated steel mills throughout the world. 2006 experienced a modest rising price trend with localized periods of supply and demand imbalance. Import volumes grew aggressively during the second half of the year. As a result, for the third time since the domestic mills consolidated, domestic production was scaled back to bring supply and demand back into balance. Fourth quarter pricing, while declining modestly, remained at relatively high levels when compared to pre-consolidation levels. The timing of the effect that further price increases will have on the domestic market is difficult to predict, and any number of political or general economic factors could cause prices to decline.

~~Building~~All ~~Products~~references to the “Company” include Flag Intermediate, its wholly owned subsidiary Metals USA, and the wholly owned subsidiaries of Metals USA.

~~According~~We tobelieve ~~the~~that ~~Joint~~we ~~Center~~are ~~for~~a ~~Housing~~leading ~~Studies~~provider of ~~Harvard~~value-added ~~University~~processed carbon steel, ~~between~~stainless ~~the~~steel, aluminum ~~rise~~and inspecialty ~~interest~~metals, ~~rates~~as ~~and~~well ~~the~~as ~~slowdown~~manufactured inmetal ~~house~~components. ~~price~~For ~~appreciation~~the year ended December 31, ~~sales~~ 2011, approximately 95% of ~~existing~~our ~~homes~~revenue ~~softened~~was inderived ~~2006.~~from ~~Existing~~our ~~home~~metals ~~sales~~service center and processing activities, which are ansegmented ~~important~~into ~~driver~~two groups: ofFlat ~~remodeling~~Rolled ~~activity,~~and ~~with~~Non-Ferrous ~~sellers~~Group ofand ~~older~~Plates ~~properties~~and ~~typically~~Shapes ~~making~~Group. ~~improvements~~The ~~before~~remaining ~~putting~~portion ~~their~~of ~~homes~~our onrevenue ~~the~~was ~~market~~derived from our Building Products Group, which principally manufactures and ~~recent~~sells ~~buyers~~aluminum ~~typically~~products ~~making changes~~related to ~~customize~~the ~~their~~residential remodeling ~~new~~industry. ~~homes~~We topurchase ~~their~~metal ~~tastes.~~from ~~While~~primary ~~signs~~producers that generally focus on large volume sales of aunprocessed ~~construction~~metals ~~cutback~~in ~~have~~standard ~~been~~configurations ~~appearing~~and ~~since~~sizes. ~~early~~In ~~2006~~most cases, ~~direct~~we ~~evidence~~perform ofthe acustomized, ~~remodeling~~value-added ~~slowdown~~processing isservices ~~only~~required to ~~now~~meet ~~emerging.~~the ~~Retail~~specifications ~~sales~~provided atby ~~building~~end-use customers. Our Plates and ~~supply~~Shapes ~~dealers~~Group ~~have weakened~~and ~~slightly~~Flat ~~after~~Rolled ~~adjusting~~and ~~for~~Non-Ferrous ~~inflation~~Group customers are in ~~product~~the ~~price.~~aerospace, ~~These~~automotive ~~businesses~~industry ~~sell~~manufacturing, ~~home~~defense, ~~products~~heavy ~~and~~equipment, ~~supplies~~marine totransportation, commercial ~~do-it-yourself~~construction, ~~and~~office ~~buy-it-yourself~~furniture ~~homeowners~~manufacturing, asand ~~well~~energy asand ~~directly~~oilfield toservices ~~professional~~industries. ~~general~~Our ~~contractors~~Building Products Group customers are primarily distributors and contractors engaged in the ~~trades~~residential remodeling industry.

~~Product~~Industry ~~demand~~Trends for the Company’s Building Products Group may be influenced by numerous factors such as interest rates, general economic conditions, consumer confidence and other factors beyond our control. Declines in existing home sales and remodeling expenditures due to such factors could significantly reduce the segment’s performance.

~~Critical~~Metals ~~Accounting~~Service ~~Policies~~Centers ~~and Estimates~~

~~The discussion~~U.S. ~~and~~steel ~~analysis~~consumption ofdeclined ~~our~~dramatically ~~financial~~during ~~condition~~the ~~and~~2009 ~~results~~recession. 2009 U.S. steel consumption was less than 70% of ~~operations~~2008 isU.S. ~~based~~steel ~~upon~~consumption ~~our~~and ~~consolidated~~significantly ~~financial~~outpaced ~~statements~~GDP declines. Consequently, annual ~~which~~growth ~~have~~in ~~been~~steel ~~prepared~~demand in ~~accordance~~2010 ~~with~~exceeded ~~accounting~~prior ~~principles~~year ~~generally~~figures by more than 14% as U.S. industrial production recovered slowly.

29World steel production continued to grow in 2011. Domestic steel mills produced at an average capacity utilization rate of 75% during 2011, up 8% from last year. Apparent demand began to improve in the economies of Europe and the United States at the end of 2011 and we believe it is likely that there will be further growth during 2012. Economic indicators in the U.S. have recently been rising, which we believe should mean positive growth in steel consumption in 2012.

~~Table~~China has continued to dominate global steel production and consumption, accounting for roughly half of the ~~Contents~~total global steel market. Chinese steel production levels and growth characteristics have created significant demand on iron ore and metallurgical coal which has generally outpaced global supply. Spot iron ore prices eased slightly during December 2011, but remained in a narrow range. Prices have since rebounded, and we believe this upward price trend will continue.

~~accepted~~Steel inprices ~~the~~were ~~United~~relatively ~~States~~stable ofduring ~~America.~~2011 ~~The~~when ~~preparation~~compared ~~of these consolidated financial statements requires us~~ to ~~make estimates and judgments that affect~~ the ~~reported~~significantly ~~amounts~~volatile periods of ~~assets~~2008, ~~liabilities~~2009, ~~revenues~~ and ~~expenses,~~to ~~and~~a ~~related~~lesser ~~disclosures~~degree ~~of contingent assets and liabilities~~2010. Given ~~Estimates~~current ~~are~~market ~~based~~conditions, onsteel ~~historical~~prices ~~experience and on various other assumptions that~~ are ~~believed to be reasonable under~~ ~~the~~predominately ~~circumstances.~~influenced ~~The~~by ~~result~~raw ofmaterial ~~this~~input ~~process~~costs, ~~forms~~namely ~~the~~iron ~~basis~~ore ~~for making judgments about the carrying value of assets~~ and ~~liabilities~~metallurgical ~~that are not readily apparent from other sources~~coal. We ~~review~~believe ~~our~~that ~~estimates~~in ~~and~~the ~~judgments~~absence onof aany ~~regular,~~unanticipated ~~ongoing basis.~~macro-economic ~~Actual~~disruptions, ~~results~~no ~~may~~near ~~differ~~term ~~from~~catalyst ~~these~~that ~~estimates~~would ~~due~~materially toalter ~~changed~~current ~~circumstances~~price ~~and~~trends ~~conditions~~is anticipated.

~~The~~29 following accounting policies and estimates are considered critical in light of the potentially material impact that the estimates, judgments and uncertainties affecting the application of these policies might have on our reported financial information.

~~Accounts~~Building ~~Receivable.~~Products We generally recognize revenue as product is shipped (risk of loss for our products generally 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 receivable 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 receivable 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.

~~Each~~The ~~month~~downturn wein ~~consider~~the ~~all~~housing ~~available~~and ~~information~~mortgage ~~when~~markets ~~assessing~~has ~~the~~caused ~~adequacy~~significant ofcontraction in the ~~provision~~home ~~for~~improvement ~~allowances,~~remodeling ~~claims~~industry. ~~and doubtful~~Research ~~accounts.~~indicates ~~Adjustments~~that ~~made~~remodeling activity is pro-cyclical with ~~respect~~both tonew ~~the~~residential ~~allowance~~construction ~~for~~and ~~doubtful~~the ~~accounts~~broader ~~often~~economy, ~~relate~~but toremodeling ~~improved~~lags ~~information~~homebuilding ~~not~~by ~~previously~~several ~~available~~quarters. ~~Uncertainties~~The ~~with~~high ~~respect~~cyclicality of remodeling activity appears to be driven by discretionary improvements, similar to the ~~allowance~~products ~~for~~sold ~~doubtful~~by ~~accounts~~our building products business, which are ~~inherent~~quite volatile. Improvement spending is expected to be much more cyclical and more sensitive to upturns and downturns in the ~~preparation~~general ofeconomy, ~~financial~~whereas ~~statements.~~maintenance ~~The~~and ~~rate~~repair ofspending ~~future~~is ~~credit~~expected ~~losses~~to ~~may not~~ be ~~similar~~fairly tostable ~~past~~over ~~experience~~time.

~~Inventories.~~While ~~Inventories~~the ~~are~~pace ~~stated at~~of the ~~lower~~decline ofin ~~cost~~homeowner remodeling orprojects ~~market.~~appears ~~Our~~to ~~inventories~~be ~~are~~moderating, ~~accounted~~increased ~~for~~remodeling ~~using~~activity adoes ~~variety~~not ofseem ~~methods~~likely ~~including~~to ~~specific~~materialize ~~identification,~~until ~~average~~further ~~cost~~signs ~~and~~of ~~the~~recovery ~~first-~~emerge in ~~first-out,~~the orbroader ~~“FIFO,”~~housing ~~method of accounting~~market. WeAlthough ~~regularly~~lower ~~review~~financing ~~inventory~~costs onare ~~hand and~~reducing ~~record~~the ~~provisions~~cost ~~for~~of ~~damaged~~financing home ~~and~~improvement ~~slow-moving~~projects, ~~inventory~~weak ~~based~~home onprices, ~~historical~~the ~~and~~lack ~~current~~of ~~sales~~homeowner ~~trends.~~equity, ~~Changes in product demand~~ and ~~our~~decreased ~~customer~~cost ~~base~~recovery ~~may~~for ~~affect~~most ~~the~~types ~~value~~ of ~~inventory~~remodeling onprojects ~~hand~~continue ~~which~~to ~~may~~discourage ~~require higher provisions for damaged and slow~~upper-~~moving~~end ~~inventory~~remodeling improvements.

~~Adjustments~~Product ~~made~~demand ~~with~~for ~~respect~~the toCompany’s ~~the~~Building ~~inventory~~Products ~~valuation~~Group ~~allowance~~may ~~often~~be ~~relate~~influenced toby ~~improved~~numerous ~~information~~factors ~~not previously~~such ~~available.~~as ~~Uncertainties~~interest ~~with~~rates, ~~respect~~general economic toconditions, ~~the~~consumer ~~inventory~~confidence ~~valuation~~and ~~allowance~~other ~~are~~factors ~~inherent~~beyond inour ~~the~~control. ~~preparation~~Declines ofin ~~financial~~existing ~~statements.~~home ~~The~~sales ~~rate~~and ofimprovement ~~future~~remodeling ~~losses~~expenditures ~~associated~~due ~~with~~to ~~damaged~~such orfactors ~~slow~~could ~~moving~~continue ~~inventory~~to ~~may~~limit ~~not~~the bepace ~~similar~~of tothe ~~past experience~~segment’s recovery.

30Consolidated Results of Operations

~~Table~~The offollowing ~~Contents~~financial information reflects our historical financial statements.

Combined and Consolidated Results of Operations


	Fiscal Years Ended December 31,
	2011		%			2010		%			2009			%
	(in millions, except percentages)
Net sales	$	1,885.9		100.0	%	$	1,292.1		100.0	%	$	1,098.7			100.0	%
Cost of sales (exclusive of operating and delivery, and depreciation and amortization shown below)		1,445.7		76.7	%		996.7		77.1	%		890.1			81.0	%
Operating and delivery		175.7		9.3	%		131.9		10.2	%		126.7			11.5	%
Selling, general and administrative		108.0		5.7	%		81.8		6.3	%		85.1			7.7	%
Depreciation and amortization		21.2		1.1	%		17.8		1.4	%		18.9			1.7	%
Loss on sale of property and equipment		—		—			0.3		0.0	%		—			—
Advisory agreement termination charge		—		—			3.3		0.3	%		—			—

Operating income (loss)		135.3		7.2	%		60.3		4.7	%		(22.1	)		-2.0	%
Interest expense		42.2		2.2	%		37.2		2.9	%		44.9			4.1	%
Gain on debt extinguishment		—		—			—		—			(13.6	)		-1.2	%
Other expense, net		0.1		0.0	%		—		—			0.3			0.0	%

Income (loss) before income taxes	$	93.0		4.9	%	$	23.1		1.8	%	$	(53.7	)		-4.9	%

The following financial information reflects our historical financial statements. The results of operations data for 2005 includes the Predecessor Company results for the period January 1, 2005 through November 30, 2005 and the Successor Company results for the period May 9, 2005 (date of inception) through December 31, 2005. See “Results of Operations—~~2005~~Year ~~Successor Company~~Ended ~~and Predecessor Company Results—Combined Non-GAAP” below for information on our combined results for the fiscal year ended~~ December 31, ~~2005,~~2011 ~~combining~~Compared ~~the results for the Successor Company from May 9, 2005 (date of inception)~~ to ~~December 31,~~2010 ~~2005, and the results for the Predecessor Company from January 1, 2005 to November 30, 2005.~~

	Fiscal Years Ended December 31,
	2006			%		2005			%		2004			%
	(in millions, except percentages)
Net sales	$	1,802.9		100.0	%	$	1,639.0		100.0	%	$	1,509.8		100.0	%
Cost of sales		1,371.8		76.1	%		1,281.8		78.2	%		1,080.1		71.5	%
Operating and delivery		175.5		9.7	%		151.9		9.3	%		144.4		9.6	%
Selling, general and administrative		115.2		6.4	%		117.8		7.2	%		109.6		7.3	%
Depreciation and amortization		21.4		1.2	%		4.5		0.3	%		2.0		0.1	%
Operating income (loss)		119.0		6.6	%		83.0		5.1	%		173.7		11.5	%
Interest expense		54.1		3.0	%		16.1		1.0	%		8.4		0.6	%
Other (income) expense, net		(0.5	)	—			(0.1	)	—			(2.5	)	(0.2	)%
Income before income taxes and discontinued operations	$	65.4		3.6	%	$	67.0		4.1	%	$	167.8		11.1	%

Net sales. Net sales increased $593.8 million, or 46.0%, from $1,292.1 million for the year ended December 31, 2010 to $1,885.9 million for the year ended December 31, 2011. The increase was primarily attributable to a 31.8% increase in shipments, in addition to a 12.9% increase in average realized prices for our Flat Rolled and Non-Ferrous and Plates and Shapes Product Groups. Net sales for our Building Products Group increased $2.8 million, or 3.4%, for the year ended December 31, 2011 compared to the same period of 2010. Results for the year ended December 31, 2011 include operating results from the Trident acquisition, which closed on March 11, 2011, and the ORMS acquisition, which closed on December 31, 2010. In addition, results for the year ended December 31, 2011 include a full twelve months of operating results from the J. Rubin

~~Results~~30 ~~of Operations—Year Ended December 31, 2006 Compared to 2005~~

~~Net~~ acquisition, ~~sales. Net~~which ~~sales~~closed ~~increased~~on ~~$163~~June 28, 2010.9 ~~million~~Trident, orORMS 10and J.~~0%,~~ ~~from~~Rubin contributed a combined $~~1,639~~194.07 million of incremental sales for the year ended December 31, ~~2005~~2011. toExcluding $1the Trident,~~802~~ ORMS and J.9 ~~million~~Rubin ~~for~~acquisitions, ~~the~~net ~~year~~sales ~~ended~~for ~~December 31,~~our ~~2006. The~~metal ~~2006~~service ~~Acquisitions~~center ~~accounted~~businesses ~~for~~increased $48396.13 million, ofor 33.3%, for the ~~increase.~~year ~~The~~ended ~~remaining~~December 31, ~~increase~~2011 ofversus ~~$115.8~~the ~~million~~same inperiod ~~sales~~of ~~was~~2010, which primarily ~~attributable~~resulted tofrom a 516.7% increase in shipments and a 14.2% increase in average realized prices ~~and a 3~~.0% The increase in prices and volumes ~~for~~is ~~our~~attributable ~~Flat~~to ~~Rolled~~the ~~and~~cyclical ~~Non-Ferrous~~nature ~~and~~of ~~Plates~~the metal consuming industries supported by our products and ~~Shapes~~services. ~~Product~~The ~~Groups~~economic ~~offset~~recovery bythat ~~a net~~continued through ~~sales~~2011 ~~decrease~~has ~~for~~translated ~~our~~into ~~Building~~increased ~~Products~~metal ~~group~~consumption ofas ~~$12~~industrial production continues to gradually expand.3 ~~million~~We ~~(excluding~~continue ~~the acquisition~~to ofexperience ~~Dura~~weaker demand in industries tied to non-~~Loc).~~residential construction and offshore oil and gas drilling.

~~Cost~~According ofto ~~sales. Cost~~data offrom ~~sales~~the ~~increased~~Metals ~~$90.0~~Service ~~million,~~Center ~~or 7.0%~~Institute, ~~from~~actual ~~$1,281.8~~shipments ~~million~~ for the ~~year ended~~service ~~December 31,~~center ~~2005,~~industry ~~to $1,371.8 million~~ for the year ended December 31, ~~2006. The~~2011 ~~2006~~are ~~Acquisitions~~up ~~accounted for $25~~14.02% ~~million~~over of the ~~increase~~same ~~and~~period ~~$10.8 million~~ of ~~the increase related to inventory purchase accounting~~2010. ~~The remaining~~Inventory ~~increase~~levels inhave ~~cost~~remained ofrelatively ~~sales~~stable ~~was~~throughout ~~primarily~~2011. ~~attributable~~Despite to a ~~3.3%~~cautious ~~increase~~economic inoutlook, ~~the~~business ~~average~~conditions ~~cost~~were ~~per~~generally ~~ton~~favorable ~~in addition to a 3.0% increase in volumes~~ for ~~our~~the ~~Flat~~year ~~Rolled~~ended December 31, ~~and~~2011 ~~Non-Ferrous~~compared ~~and~~to ~~Plates~~the ~~and~~same ~~Shapes~~period ~~Product Groups. Cost~~ of ~~sales as a percentage of net sales decreased from 78~~2010.2% ~~in 2005 to 76.1% for 2006.~~

~~Operating~~Cost ~~and~~of ~~delivery~~sales. ~~Operating~~Cost ~~and~~of ~~delivery expenses~~sales increased $23449.6 0 million, or 1545.50%, from $~~151~~996.97 million for the year ended December 31, ~~2005~~2010 to $~~175~~1,445.57 million for the year ended December 31, ~~2006~~2011. The ~~2006~~increase ~~Acquisitions~~was ~~accounted~~primarily attributable to a 31.8% increase in shipments for our Flat Rolled and Non-Ferrous and Plates and Shapes Product Groups, in addition to an 11.8% increase in average cost per ton. Cost of sales for our Building Products Group increased $94.2 million, or 7.2%. The Trident, ORMS and J. Rubin acquisitions added a combined $144.2 million of incremental cost of sales for the ~~increase~~year ended December 31, 2011. ~~The remaining~~Excluding ~~increase~~the ofTrident, $ORMS and J. Rubin acquisitions, shipments increased 16.7% and average cost per ton increased 13.95% ~~million~~over ~~was~~the ~~primarily~~same ~~due~~period toof 2010. ~~higher~~The ~~labor~~increase ~~costs~~in ~~and~~volumes that contributed to higher ~~freight~~cost ~~costs~~of ~~due~~sales toduring ~~rising~~2011 ~~fuel~~was ~~prices~~primarily ~~and,~~attributable to athe ~~lesser~~factors ~~extent,~~that ~~higher~~affected ~~volumes~~the increase in ~~our~~net ~~Plates~~sales ~~and~~discussed ~~Shapes Group~~above. As Cost of sales as a percentage of net sales, ~~operating~~decreased ~~and delivery expenses increased~~ from 977.31% for the year ended December 31, ~~2005~~2010 to 976.7% for the ~~year~~same ~~ended~~period ~~December 31,~~of ~~2006~~2011.

~~Selling,~~Operating ~~general~~ and ~~administrative~~delivery. ~~Selling,~~Operating ~~general~~ and delivery ~~administrative~~ expenses ~~decreased~~increased $243.68 million, or 233.2%, from $~~117~~131.8 9 million for the year ended December 31, ~~2005~~2010 to $~~115~~175.27 million for the year ended December 31, ~~2006~~2011. ~~This~~The ~~decrease~~increase was ~~primarily~~a ~~due~~result toof ~~the~~higher ~~acceleration~~variable ofcosts ~~payment~~associated with increased shipments, most notably higher labor costs of ~~stock-based~~approximately ~~compensation~~$5.7 ~~during~~million ~~2005~~and ~~totaling~~higher freight costs of approximately $148.65 million. asIn addition, Trident, ORMS and J. Rubin added a ~~result~~combined $21.2 million of incremental operating and delivery expenses for the ~~Merger~~year ended December 31, 2011. ~~The~~As ~~2006~~a ~~Acquisitions~~percentage ~~accounted~~of net sales, operating and delivery expenses decreased from 10.2% for anthe ~~increase~~year ofended December 31, 2010 to 9.3% for the year ended December 31, 2011.

Selling, general and administrative. Selling, general and administrative expenses increased $26.2 million, or 32.0%, from $81.8 million for the year ended December 31, 2010 to $108.0 million for the year ended December 31, 2011. An approximate $7.2 million increase in incentive compensation, which is aligned with the improved performance of our business, contributed to the period-over-period increase. Trident, ORMS and J. Rubin added a combined $12.0 million of incremental selling, general and administrative expenses for the year ended December 31, 2011. We also incurred costs of approximately $1.6 million during 2011 which were primarily attributable to the Trident acquisition, which closed in March 2011. As a percentage of net sales, selling, general and administrative expenses decreased from 6.3% for the year ended December 31, 2010 to 5.7% for the year ended December 31, 2011.

~~Table~~Depreciation and amortization. Depreciation and amortization expense increased $3.4 million, or 19.1%, from $17.8 million for the year ended December 31, 2010 to $21.2 million for the year ended December 31, 2011. The increase is primarily attributable to increases in fixed assets resulting from our growth through acquisitions over the past year and from increased capital spending, as our investments in new equipment have grown in line with higher business activity levels. Net property and equipment as of ~~Contents~~December 31, 2011 was $247.8 million compared to $198.8 million as of December 31, 2010. As a percentage of net sales, depreciation and amortization expenses decreased from 1.4% for the year ended December 31, 2010 to 1.1% for the year ended December 31, 2011.

$3.3 million during 2006. Other increases during 2006 were primarily due to higher salaries and incentive compensation, $3.3 million of personnel and advertising-related costs to improve the Building Products Group’s sales and service and expand its presence on a national basis, an increase in bad debt expense of $1.0 million (primarily due to an increase of $1.9 million at our Flat Rolled and Non-Ferrous Group offset by decreases of $0.9 million at our other operating segments), an increase of $1.1 million related to management fees and an increase of $1.2 million in stock-based compensation expense due to the adoption of SFAS 123(R). As a percentage of net sales, selling, general and administrative expenses decreased from 7.2% for the year ended December 31, ~~2005 to 6.4% for the year ended December 31, 2006.~~

~~Depreciation~~Operating ~~and amortization~~income. ~~Depreciation~~Operating ~~and~~income ~~amortization~~ increased $1675.90 million, ~~from~~or $124.4%, from $60.53 million for the year ended December 31, ~~2005~~ 2010 to $21135.43 million for the year ended December 31, ~~2006~~2011. OfThe ~~this~~increase was primarily a result of the increase, ~~$13.1~~in ~~million~~net ~~resulted~~sales ~~from~~discussed above, in addition to the ~~revaluation~~impact associated with the acquisitions of ~~our~~Trident, ~~long-lived~~ORMS ~~assets~~and asJ. Rubin, which contributed a ~~result~~combined $13.1 million of incremental operating income for the ~~Merger~~year ended December 31, $12011.9 ~~million~~The ~~was~~increase ~~due~~in tooperating ~~increased~~income ~~amortization~~during of2011 ~~customer~~was ~~list intangible~~also ~~assets~~partially ~~related~~attributable to the absence ~~2006~~of ~~Acquisitions,~~a $13.03 million ~~was~~charge ~~due~~ to ~~capital~~operating ~~investments~~expense infor ~~facilities~~the ~~and~~termination ~~equipment~~of ~~placed~~our advisory agreement with Apollo in ~~service~~connection ~~throughout~~with ~~2005~~our ~~and~~IPO ~~2006,~~during ~~and~~the $0second quarter of 2010.9 ~~million~~As ~~was~~a ~~due~~percentage toof net sales, operating income increased ~~depreciation~~from ~~related~~4.7% for the year ended December 31, 2010 to 7.2% for the ~~2006 Acquisitions~~year ended December 31, 2011.

~~Operating~~Interest ~~income~~expense. ~~Operating~~ Interest ~~income~~expense increased $365.0 million, or 13.4%, from $8337.02 million for the year ended December 31, ~~2005~~2010 to $~~119~~42.02 million for the year ended December 31, ~~2006~~2011. ~~This~~The increase ~~included~~was ~~$7.3~~due ~~million~~to ofhigher ~~operating~~borrowings ~~income~~and ~~from~~a ~~the~~higher ~~2006~~average ~~Acquisitions.~~facility ~~The~~rate on ~~remaining~~the ~~increase~~ABL infacility. ~~operating~~The ~~income~~weighted ~~resulted~~average ~~from~~outstanding ~~increased~~balance ~~volumes~~on ~~and~~our ~~an increase~~ABL infacility ~~average~~increased ~~realized~~from ~~prices~~$77.6 ~~that~~million ~~exceeded~~for the ~~increase~~year inended ~~average costs per ton~~December 31, in2010 ~~addition~~ to ~~lower~~$214.8 ~~selling,~~million ~~general~~for ~~and~~the ~~administrative~~year ~~expenses~~ended December 31, ~~partially offset by higher operating and delivery costs~~2011. AsBorrowings aunder ~~percentage~~the ofABL ~~net sales,~~facility ~~operating~~were ~~income~~used ~~increased~~to ~~from~~fund ~~5.1% for~~ the ~~year~~Trident ~~ended~~and ~~December 31~~ORMS acquisitions, ~~2005~~in addition to ~~6.6%~~higher ~~for~~working ~~the~~capital ~~year~~needs ~~ended~~between ~~December 31,~~the ~~2006~~two periods.

~~Interest~~Results ~~expense. Interest~~of ~~expense~~Operations—Year ~~increased~~Ended ~~$38.0 million, or 236.0% from $16.1 million for the year ended~~ December 31, ~~2005~~2010 toCompared ~~$54.1 million for the year ended December 31, 2006. This increase was primarily a function of higher debt levels and,~~ to a2009 lesser extent, higher effective interest rates. Our borrowings were significantly different between the two periods due to the Merger that occurred on November 30, 2005, the 2006 Acquisitions financed from our availability under our ABL facility and the $25.0 million dividend to paid to stockholders on May 24, 2006.

Net sales. Net sales increased $193.4 million, or 17.6%, from $1,098.7 million for the year ended December 31, 2009 to $1,292.1 million for the year ended December 31, 2010. The increase was primarily attributable to a 16.0% increase in shipments, in addition to a 3.7% increase in average realized prices for our Flat Rolled and Non-Ferrous and Plates and Shapes Product Groups. Net sales decreased $10.2 million, or 10.9%, for our Building Products Group. Results for the year ended December 31, 2010, include the results from the J. Rubin acquisition from the date of the acquisition closing, which ~~Operations—Year~~occurred ~~Ended~~on June 28, 2010. J. Rubin contributed $17.8 million of incremental sales for the year ended December 31, ~~2005~~2010. ~~Compared~~The increase in volumes for our metal service center businesses stemmed from better operating performance in an improving economy and stronger demand across most of our end-user markets, with the exception of weak non-residential construction and diminished levels of energy demand in the Gulf of Mexico. We believe that our focus on product mix enhancement during 2010 helped to ~~2004~~mitigate the effects of uneven demand associated with specific regions and end-use industries.

~~Net~~Weak demand ~~sales.~~caused ~~Net~~prices ~~sales~~for ~~increased~~many ~~$129.2~~grades ~~million,~~of orsteel ~~8.6%, from~~to ~~$1,509.8~~fall ~~million~~substantially ~~for~~during the ~~twelve~~first ~~months~~half ~~ended~~of ~~December 31~~2009, ~~2004~~as steel producers in North America reduced prices and cut production to ~~$1,639.0~~adjust ~~million~~to ~~for~~lower ~~the~~order ~~twelve~~levels. ~~months~~As ~~ended~~a ~~December 31~~result, ~~2005.~~although ~~The~~our metal service center businesses benefitted from a broader market recovery since mid-2009, the increase in net sales ~~was~~for ~~primarily~~2010 ~~attributable~~versus to2009 awas ~~13.6%~~largely ~~increase~~driven inby ~~average~~volumes. ~~realized~~Carbon steel prices ~~partially~~ ~~offset~~generally bytrended upward at a ~~4.2%~~modest ~~decrease~~rate induring ~~volumes~~the ~~for~~latter ~~our~~half ~~Flat~~of ~~Rolled~~2009, ~~and~~although we ~~Non-Ferrous~~experienced ~~and~~intermittent ~~Plates~~volatility ~~and~~in ~~Shapes~~steel ~~Product~~prices ~~Groups.~~at ~~Net~~various ~~sales~~times during 2010, mainly during the third quarter. Prices increased ~~for~~in ~~our~~late ~~Building~~2010 ~~Products~~in ~~Group~~response byto ~~$12.1~~persistent ~~million~~higher raw material costs and typical seasonal demand strength leading into the next year.

Cost of sales. Cost of sales increased $~~201~~106.76 million, or 1812.70%, from $~~1,080~~890.1 million for the ~~twelve months~~ year ended December 31, ~~2004~~2009, to $~~1,281~~996.87 million for the ~~twelve~~year ~~months~~ended December 31, ~~2005~~2010. The increase ~~in cost of sales~~ was primarily attributable to a 2516.60% increase in ~~the~~shipments ~~average~~for ~~cost~~our ~~per~~Flat ~~ton~~Rolled and Non-Ferrous and Plates and Shapes Product Groups, partially offset by a 41.29% decrease in ~~volumes~~average ~~for~~cost ~~our~~per ~~Flat~~ton. The ~~Rolled~~J. ~~and Non-Ferrous~~Rubin ~~and~~acquisition ~~Plates~~added ~~and~~$12.1 ~~Shapes~~million ~~Product~~of ~~Groups.~~incremental ~~Cost~~cost of sales asfor athe ~~percentage~~year ofended ~~net~~December 31, 2010. Cost of sales ~~increased~~for ~~from~~our ~~71.5%~~Building inProducts ~~2004~~Group todecreased 78$7.20 million, or 10.7%. The increase in ~~the~~volumes ~~same~~that ~~period~~contributed into ~~2005.~~higher ~~This~~cost ~~percentage~~of ~~increase~~sales ~~was~~during ~~primarily~~2010 ~~due~~was attributable to ~~the~~higher ~~combination~~steel ofdemand ~~higher~~as ~~average~~the ~~costs~~economy ~~per ton~~recovered ~~and~~from tothe aglobal ~~lesser~~economic ~~extent~~recession. aCost ~~decrease~~of insales ~~volumes~~as ~~for~~a ~~our~~percentage ~~Flat~~of ~~Rolled~~net ~~and~~sales ~~Non-Ferrous~~decreased from ~~and~~81.0% ~~Plates~~for ~~and~~2009 ~~Shapes~~to ~~Product~~77.1% ~~Groups~~for 2010.

Operating and delivery. Operating and delivery expenses increased $7.5 .2 million, or 54.21%, from $~~144~~126.47 million for the ~~twelve~~year ~~months~~ ended December 31, ~~2004~~2009 to $~~151~~131.9 million for the ~~twelve~~year ~~months~~ ended December 31, ~~2005~~2010. The ~~This~~ increase was ~~primarily~~ ~~due to increased labor and delivery costs. As~~ a ~~percentage~~result of ~~net~~higher ~~sales,~~variable ~~operating~~costs ~~and~~associated ~~delivery~~with ~~expenses~~increased ~~decreased from 9.6% for the twelve months ended December 31~~shipments, ~~2004~~most ~~to 9.3% for the twelve months ended December 31, 2005.~~notably ~~This~~higher ~~percentage~~freight ~~decrease was primarily due to the increased average realized sales prices in our Flat Rolled and Non-Ferrous and Plates and Shapes Product Groups.~~

~~Table~~ costs of ~~Contents~~approximately $2.9 million. The increase was partially offset by cost reduction initiatives implemented over the last eighteen months, including reductions in square footage under lease, reduction in headcount and employee benefit modifications. As a percentage of net sales, operating and delivery expenses decreased from 11.5% for the year ended December 31, 2009 to 10.2% for the year ended December 31, 2010.

Selling, general and administrative. Selling, general and administrative expenses ~~increased~~decreased $83.2 3 million, or 73.59%, from $~~109~~85.6 1 million for ~~the~~year ~~twelve months~~ ended December 31, ~~2004~~2009 to $~~117~~81.8 million for the ~~twelve~~year ~~months~~ ended December 31, ~~2005~~2010. ~~This~~Lower ~~was~~costs ~~principally~~associated ~~due~~with salaries and employee benefits, which amounted to approximately $6.2 million, achieved through personnel reductions and other cost reduction initiatives were the ~~acceleration~~primary ofcontributors ~~payment~~to ofthe ~~stock~~period-~~based~~over-period ~~compensation totaling~~decrease. The decrease also includes a decrease of $140.65 million asof aexpense ~~result~~related ofto ~~the~~potentially ~~Merger~~uncollectible customer accounts. As a percentage of net sales, selling, general and administrative expenses decreased from 7.37% for the ~~twelve~~year ~~months~~ ended December 31, ~~2004~~2009 to 76.23% for the ~~twelve~~year ~~months~~ ended December 31, ~~2005.~~ ~~This percentage decrease was primarily due to higher average realized sales prices being spread over higher net sales in our Flat Rolled and Non-Ferrous and Plates and Shapes Product Groups~~2010.

Depreciation and amortization. Depreciation and amortization ~~increased~~expense decreased $21.51 million, or ~~125~~5.8%, from $218.09 million for the ~~twelve~~year ~~months~~ ended December 31, ~~2004~~2009 to $417.58 million for the ~~twelve~~year ~~months~~ ended December 31, ~~2005~~2010. ~~The~~During ~~revaluation~~the ofyears ~~our~~ended ~~long-lived~~December 31, ~~assets~~2010 and 2009, the Company has reduced capital expenditures to ~~fair~~align ~~value~~our asinvestments ain ~~result~~new ofequipment ~~the~~with ~~Merger~~lower ~~caused~~business ~~$1.1~~activity ~~million~~levels, ofand ~~the~~also ~~increase~~to use available cash for debt reduction. ~~The~~As ~~remaining~~we ~~increase~~reduced ofcapital $1spending, our depreciation costs decreased over time.4 ~~million~~ The decrease was ~~primarily~~also due to ~~capital~~lower ~~investments~~amortization inof ~~facilities~~customer list intangible assets (which is recognized on an accelerated basis and ~~equipment~~decreases ~~made~~over ~~during~~the life of the ~~prior~~assets) ~~twelve~~recorded ~~months~~in connection with the acquisitions completed in May 2006, the acquisition of Lynch Metals in July 2007, and the Merger.

Operating income (loss). Operating income ~~decreased~~(loss) increased $9082.74 million, or 52372.29%, from an operating loss of $~~173~~22.71 million for the ~~twelve~~year ~~months~~ ended December 31, ~~2004~~2009 to operating income of $8360.03 million for the ~~twelve~~year ~~months~~ ended December 31, ~~2005~~2010. ~~This~~The ~~decrease~~increase was ~~due~~ primarily toa anresult of the increase in ~~the cost~~sales ofdiscussed ~~raw~~above, ~~materials~~as ~~and,~~well toas athe ~~lesser~~decreases ~~extent~~in selling, ageneral ~~one-time~~and ~~cost~~administrative ofexpenses, ~~$14.6~~and ~~million~~depreciation ~~associated~~and ~~with~~amortization, ~~the~~as discussed ~~acceleration~~above. ofIn ~~payment~~addition, ofthe ~~stock-based~~J. ~~compensation~~Rubin ~~and~~acquisition also contributed $51.21 million of ~~additional~~incremental ~~costs~~operating ~~related~~income tofor ~~purchase~~the ~~accounting~~period.

~~Interest~~The ~~expense.~~increase ~~Interest~~in ~~expense~~operating ~~increased~~income ~~$7.7~~during ~~million,~~2010 orwas ~~91.7%,~~partially ~~from~~offset by a $83.43 million ~~for~~charge ~~the~~to ~~twelve~~operating ~~months~~expense ~~ended~~for ~~December 31,~~the ~~2004~~termination toof ~~$16.1 million~~our ~~for~~advisory ~~the~~agreement ~~twelve~~with ~~months~~Apollo ~~ended~~in ~~December 31,~~connection ~~2005.~~with ~~This~~Metals ~~increase~~USA Holdings’ ~~was~~IPO. ~~primarily~~As ~~due~~a topercentage ~~the~~of ~~increased~~net ~~debt~~sales, weoperating ~~incurred~~income as(loss) aincreased ~~result~~from of(2.0%) for the ~~Merger~~year ~~and~~ended December 31, 2009 to a4.7% for ~~lesser~~the ~~extent,~~year ~~higher~~ended ~~interest~~December 31, ~~rates in 2005~~2010.

33Interest expense. Interest expense decreased $7.7 million, or 17.1%, from $44.9 million for the year ended December 31, 2009 to $37.2 million for the year ended December 31, 2010. The decrease was primarily a function of reduced borrowings on our ABL facility. The weighted average outstanding balance on our ABL facility decreased from $180.1 million for the year ended December 31, 2009 to $77.6 million for the year ended December 31, 2010.

~~Table~~Gain on extinguishment of debt. ~~Contents~~During the year ended December 31, 2009, we purchased $48.7 million principal amount of the Metals USA Notes in the open market, resulting in a pretax gain of $13.6 million (net of unamortized deferred financing costs) on debt extinguishment.

~~Results~~33 ~~of Operations by Segment~~

The results of operations by segment data for the fiscal year ended December 31, 2005 includes the Predecessor Company results for the period January 1, 2005 through November 30, 2005 combined with the Successor Company results for the period May 9, 2005 (date of inception) through December 31, 2005. See “Results of Operations~~—2005~~ ~~Successor~~by ~~Company~~Segment and Predecessor Company Results—Combined Non-GAAP” below for information on our combined results for the fiscal year ended December 31, 2005, combining the results for the Successor Company from May 9, 2005 (date of inception) to December 31, 2005, and the results for the Predecessor Company from January 1, 2005 to November 30, 2005.

	Fiscal Years Ended December 31,
	Net Sales			%			Operating Costs and Expenses			%			OperatingIncome(Loss)				%		Capital Expenditures			Shipments(1)
	NetSales			%				OperatingCosts andExpenses				%				OperatingIncome(Loss)			%				CapitalSpending		Tons Shipped (1)
	(in millions, except percentages)
																									Direct			Toll
2006:
2011:
Plates and Shapes	$	~~856~~765.69		~~47.5~~	%40.6	%	$	~~760.7~~$	682.9	~~45.2~~	%		$39.0	~~95.9~~%		$	8083.60	%	$	1161.13	%	~~843~~	$	6.4		567			29
Flat Rolled and Non- Ferrous		776.0		43.0	%			731.7		43.5	%			44.3			37.2	%		2.8		680
Flat Rolled and Non-Ferrous		1,046.7			55.5	%			968.6				55.3	%			78.1			57.7	%			10.5		685			127
Building Products		~~189~~85.8		~~10.5~~	%4.5	%		~~180.1~~	86.5	~~10.7~~	%		4.9	~~9.7~~%			8(0.27	%)		2-0.75	%	—		4.6		—			—
Corporate and other		(1912.5	)	~~(1.0~~	)%-0.7	%		~~11.4~~	12.6	~~0.6~~	%		0.7	~~(30.9~~%	)		(2625.01	)%		0-18.36	%	~~(18~~	)	0.3		(12	)		—
Total	$	1,~~802~~885.9		~~100.0~~	%100.0	%	$	~~1,683.9~~$	1,750.6	~~100.0~~	%		$100.0	~~119.0~~%		$	~~100~~135.03	%	$	16100.90	%	~~1,505~~	$	21.8		1,240			156
2005:
2010:
Plates and Shapes	$	~~694~~538.70		~~42.4~~	%41.6	%	$	~~626.3~~$	499.6	~~40.3~~	%		$40.6	~~68.4~~%		$	8238.4	%	$	1363.7	%	~~740~~	$	2.3		488			21
Flat Rolled and Non- Ferrous		770.9		47.0	%			735.4		47.3	%			35.5			42.8	%		2.5		723
Flat Rolled and Non-Ferrous		680.5			52.7	%			635.2				51.6	%			45.3			75.1	%			0.7		528			30
Building Products		~~195~~83.10		~~11.9~~	%6.4	%		~~178.3~~	83.6	~~11.4~~	%		6.8	~~16.8~~%			20(0.26	%)		3-1.20	%	—		—		—			—
Corporate and other		(219.74	)	~~(1.3~~	)%-0.7	%		~~16.0~~	13.4	~~1.0~~	%		1.1	~~(37.7~~%	)		(4522.48	)%		0-37.98	%	~~(24~~	)	1.0		(8	)		—
Total	$	1,~~639~~292.01		~~100.0~~	%100.0	%	$	~~1,556.0~~$	1,231.8	~~100.0~~	%		$100.0	~~83.0~~%		$	~~100~~60.03	%	$	20100.30	%	~~1,439~~	$	4.0		1,008			51
2004:
2009:
Plates and Shapes	$	~~621~~523.0		~~41.1~~	%47.6	%	$	~~517.8~~$	537.8	~~38.8~~	%		$48.0	~~103.2~~%		$	59(14.48	%)	$	1067.30	%	~~751~~	$	3.3		472			13
Flat Rolled and Non- Ferrous		723.2		47.9	%			641.4		48.0	%			81.8			47.0	%		2.3		773
Flat Rolled and Non-Ferrous		490.7			44.7	%			474.2				42.3	%			16.5			-74.7	%			0.5		409			26
Building Products		~~183~~93.02		~~12.1~~	%8.5	%		~~175.1~~	97.1	~~13.1~~	%		8.7	~~7.9~~%			4(3.59	%)		217.26	%	—		—		—			—
Corporate and other		(178.42	)	~~(1.1~~	)%-0.7	%		~~1.8~~	11.7	~~0.1~~	%		1.0	~~(19.2~~%	)		(1019.9	)%		290.60	%	~~(22~~	)	0.3		(7	)		—
Total	$	1,~~509~~098.87		~~100.0~~	%100.0	%	$	~~1,336.1~~$	1,120.8	~~100.0~~	%		$100.0	~~173.7~~%		$	~~100~~(22.01	%)	$	17100.40	%	~~1,502~~	$	4.1		874			39

(1) Shipments are expressed in thousands of tons and are not an appropriate measure ~~of volume~~ for the Building Products Group.

Segment Results—Year Ended December 31, ~~2006~~2011 Compared to ~~2005~~2010

Plates and Shapes. Net sales increased $~~161~~227.9 million, or 2342.34%, from $~~694~~538.70 million for the year ended December 31, ~~2005~~ 2010 to $~~856~~765.6 9 million for the year ended December 31, ~~2006~~2011. ~~The~~ ~~2006 Acquisition of Port City accounted for $41.1 million of the increase.~~ The ~~remaining~~ increase ~~of $120.8 million~~ was primarily ~~due~~attributable to a 521.96% increase in ~~the~~ average ~~sales~~realized ~~price~~prices, ~~per~~in ~~ton and~~addition to a 1017.81% increase in shipments for the year ended December 31, ~~2006~~2011 compared to the year ended December 31, ~~2005~~2010. While we experienced increased demand from the defense and energy services end markets during 2011, the non-residential construction sector, which has been a key metal consuming end market for us in the past, continued to experience weak demand by historical standards.

Operating costs and expenses increased $~~134~~183.43 million, or 2136.57%, from $~~626~~499.36 million for the year ended December 31, ~~2005~~2010 to $~~760~~682.79 million for the year ended December 31, ~~2006~~2011. The ~~2006~~increase ~~Acquisition~~was ofprimarily ~~Port~~attributable ~~City~~to ~~accounted~~a 20.7% increase in average cost per ton, in addition to a 17.1% increase in shipments for the year ended December 31, 2011 compared to the year ended December 31, 2010. We incurred approximately $350.16 million of facility closure and severance expenses related to the closure of a Plates and Shapes location in Hayward, California during the first quarter of 2011, which contributed to the increase in operating costs and expenses versus the prior year. ~~The~~Operating ~~remaining~~costs ~~increase~~and expenses as a percentage of ~~$99~~net sales decreased from 92.39% ~~million~~for ~~was~~the ~~primarily~~year ~~attributable~~ended December 31, 2010 to 89.2% for the year ended December 31, 2011.

34Operating income increased $44.6 million, or 116.1%, from $38.4 million for the year ended December 31, 2010 to $83.0 million for the year ended December 31, 2011. The increase primarily resulted from the increase in

~~Table~~34 ~~of Contents~~

~~the~~net ~~higher~~sales ~~volumes~~discussed ~~of 10.8%~~above, ~~higher~~in ~~cost~~addition ofto ~~raw~~lower ~~materials~~operating ofcosts ~~4.8%,~~ and ~~additional~~expenses ~~costs~~as a percentage of ~~$6.3~~net ~~million~~sales, ~~related~~as we continue to ~~purchase~~focus ~~accounting~~on cost control. Operating ~~costs and~~income ~~expenses~~ as a percentage of net sales increased ~~decreased~~ from 907.1% for the year ended December 31, ~~2005~~2010 to 8810.8% for the year ended December 31, ~~2006~~2011.

~~Operating~~Flat ~~income~~Rolled ~~increased~~and byNon-Ferrous. Net sales increased $27366.52 million, or 53.8%, from $68680.45 million for the year ended December 31, ~~2005~~2010 to $951,046.97 million for the year ended December 31, ~~2006~~2011. ~~The~~ ~~2006~~Trident, ~~Acquisition~~ORMS ofand ~~Port~~J. Rubin ~~City~~contributed ~~accounted for~~a combined $6194.07 million of incremental sales for the ~~increase~~year ended December 31, 2011. ~~Operating~~The ~~income~~remaining asincrease was primarily attributable to a ~~percentage~~16.9% ofincrease ~~net~~in ~~sales~~shipments, ~~increased~~in ~~from~~addition 9to a 7.87% increase in average realized prices for the year ended December 31, ~~2005~~2011 compared to ~~11.2% for~~ the year ended December 31, ~~2006~~2010. Our recent acquisitions caused shipments during 2011 to include a larger proportion of toll processed tonnage than our historical norm. Toll processing describes performing processing services on customer-owned material. Net sales for toll processing equates to the processing service fee charged to the customer. Sales of non-ferrous metals accounted for approximately 40% of the segment’s sales product mix for 2011, compared to approximately 38% for 2010. Our Flat Rolled and Non-Ferrous Group experienced increased demand in the automotive, heating and air conditioning equipment, lawn and garden equipment and aerospace equipment markets during 2011.

~~Flat~~Operating ~~Rolled~~costs and ~~Non-Ferrous. Net~~expenses ~~sales~~ increased $5333.14 million, or 052.65%, from $~~770~~635.92 million for the year ended December 31, ~~2005~~2010 to $~~776~~968.0 6 million for the year ended December 31, ~~2006~~2011. ~~This~~ ~~increase~~Trident, ~~was~~ORMS ~~primarily~~and ~~due~~J. toRubin contributed a 7combined $181.0%4 ~~increase~~million inof ~~the~~incremental ~~average~~operating ~~sales~~costs ~~price~~and ~~per~~expenses ~~ton,~~to ~~partially~~the ~~offset~~segment byfor ~~a 5~~2011.9% ~~decrease~~The inremaining ~~shipments.~~increase ~~Although~~was ~~prices~~primarily ~~were~~attributable ~~generally~~to ~~improving~~a 16.9% ~~throughout~~increase ~~the~~in ~~first~~shipments, ~~three~~in ~~quarters~~addition ofto ~~2006,~~a ~~the~~7.8% ~~ferrous~~increase ~~Flat~~in ~~Rolled~~average ~~business~~cost ~~remained~~per ~~competitive~~ton. ~~during~~Operating ~~the~~costs ~~fourth quarter~~ and, expenses as a ~~result,~~percentage weof ~~elected~~net ~~to reduce~~ sales ~~volume~~decreased tofrom ~~maintain our level of profitability~~93.3% ~~Sales of non-ferrous metals accounted~~ for ~~approximately 39% of~~ the ~~segment’s~~year ~~sales~~ended ~~product mix for 2006~~December 31, ~~compared~~2010 to 3292.5% for ~~2005~~the year ended December 31, 2011.

Operating ~~costs~~income ~~and~~increased ~~expenses decreased~~ $332.78 million, or 072.54%, from $~~735~~45.43 million for the year ended December 31, ~~2005~~2010 to $~~731~~78.71 million for the year ended December 31, ~~2006~~2011. ~~This~~The ~~decrease~~increase was primarily attributable to athe ~~decrease~~increase in volumes ~~of 5.9%~~, ~~offset~~combined bywith anthe increase in ~~the~~average ~~cost~~realized ofprices ~~raw~~discussed ~~materials~~above. ofTrident, 4ORMS and J.~~3%,~~ Rubin contributed a combined $613.21 million ~~cost~~of ~~related~~incremental tooperating ~~purchase~~income ~~accounting~~for ~~and~~year anended ~~increase~~December 31, ~~in bad debt expense of $1~~2011.9 ~~million.~~ Operating ~~costs~~income ~~and expenses~~ as a percentage of net sales ~~decreased~~increased from 956.47% for the year ended December 31, ~~2005~~2010 to 947.35% for the ~~year~~same ~~ended~~period ~~December 31,~~of ~~2006~~2011.

~~Operating~~Building ~~income~~Products. Net sales increased by $82.8 million, or 3.4%, from $3583.50 million for the year ended December 31, ~~2005~~2010 to $4485.38 million for the year ended December 31, ~~2006~~2011. ~~This~~ ~~increase~~Although ~~was~~the ~~primarily~~Building ~~attributable~~Products tosegment ~~larger~~experienced ~~margins~~top-line ~~due~~growth toduring an2011 ~~increase~~compared into the ~~average~~same ~~selling~~period ~~price~~of ~~per~~2010, ~~ton. Operating~~this ~~income~~segment asof aour business continues to be ~~percentage~~affected ofby ~~net~~lower ~~sales~~consumer ~~increased~~spending ~~from~~on ~~4.6%~~residential ~~for~~remodeling due to the ~~year~~effects ~~ended~~of ~~December 31~~the economic recession. Weak job growth, ~~2005~~high unemployment, declining home prices and subdued consumer confidence, in addition to ~~5.7%~~decreased access to affordable credit for ~~the~~homeowners ~~year~~and ~~ended~~residential ~~December 31~~remodeling contractors, ~~2006~~have contributed to volatility in home improvement spending.

~~Building~~Operating ~~Products. Net~~costs ~~sales~~and ~~decreased~~expenses increased $52.39 million, or 23.75%, from $~~195~~83.16 million for the year ended December 31, ~~2005~~2010 to $~~189~~86.8 5 million for the year ended December 31, ~~2006,~~2011. Operating ~~primarily~~costs ~~due~~and toexpenses ~~Florida~~as ~~markets that have not returned to normal volumes following~~ a ~~2005~~percentage ~~surge in post hurricane damage remediation. The decrease was partially offset by the 2006 Acquisition~~ of ~~Dura-Loc,~~net ~~which~~sales ~~accounted~~ for ~~$7.0~~2011 ~~million~~were ofapproximately ~~sales~~in ~~during~~line ~~the~~with ~~period~~2010.

Operating ~~costs~~loss ~~and expenses~~ increased ~~$1.8 million, or 1.0%,~~ from $~~178~~0.36 million for the year ended December 31, ~~2005~~2010 to $~~180~~0.17 million for the year ended December 31, ~~2006~~2011. ~~The~~Results ~~2006~~from ~~Acquisition~~operations ~~of Dura-Loc accounted~~ for ~~$5.7~~2011 ~~million~~include ~~of increased costs. This increase was offset by~~ a ~~decrease~~non-recurring gain of approximately $30.97 million ~~attributable~~from to a ~~decrease~~settlement inwith ~~cost~~the ofprevious ~~sales~~owners ~~due~~of tothe ~~reduced~~Dura-Loc ~~volumes,~~Roofing ~~and increased margins~~Systems, ~~offset by a $3~~Ltd.3 ~~million~~(now ~~cost~~Allmet ~~related~~Roofing ~~to purchase accounting and increased costs of $3.3 million related to personnel and advertising costs to improve the Building~~ Products) ~~Group’s~~roofing ~~sales~~business ~~and~~we ~~service~~acquired ~~and~~in ~~expand~~2006 ~~its presence on a national basis. Operating costs and expenses as a percentage of net sales increased from 91.4% for the year ended December 31, 2005~~ to ~~94.9%~~cover ~~for~~pre-acquisition ~~the~~warranty ~~year ended December 31, 2006 for the reasons discussed above~~claims.

~~Operating~~Corporate ~~income~~and ~~decreased by $7~~other.1 This ~~million,~~category ~~from~~reflects ~~$16.8~~certain ~~million~~administrative ~~for~~costs ~~the~~and ~~year~~expenses ~~ended~~management ~~December 31,~~has ~~2005~~not allocated to $9its industry segments.7 These ~~million~~costs include compensation for ~~the~~executive ~~year~~officers, ~~ended December 31~~insurance, ~~2006. The~~professional ~~2006~~fees ~~Acquisition~~for ofaudit, ~~Dura-Loc~~tax ~~accounted~~and ~~for~~legal ~~$1.3~~services ~~million~~and ofdata ~~operating~~processing ~~income~~expenses. The ~~remaining~~negative ~~decrease~~net ofsales ~~$8.4~~amount ~~million~~represents isthe ~~primarily~~elimination ~~due~~of intercompany tosales. The ~~the~~operating loss increased $32.3 million ~~cost~~for ~~related~~the toyear ~~inventory~~ended ~~purchase accounting~~December 31, ~~the~~2011 ~~additional costs~~as compared to ~~improve~~the ~~Building~~year ~~Products~~ended ~~Group’s~~December 31, ~~sales~~2010 ~~and~~due ~~services~~primarily ~~and~~to ~~expand~~higher ~~its~~professional ~~presence~~fees onand ahigher ~~national~~expenses ~~basis,~~associated inwith ~~addition~~incentive compensation ~~to lower volumes. Operating income~~ as a ~~percentage~~result of ~~net sales decreased from 8.6% for~~ the ~~year~~underlying ~~ended~~growth ~~December 31,~~and ~~2005 to~~improved ~~5.1%~~performance ~~for~~of the ~~year ended December 31, 2006~~business.

~~Table~~Segment ofResults—Year ~~Contents~~Ended December 31, 2010 Compared to 2009

~~Corporate~~Plates and ~~other~~Shapes. ~~This~~Net ~~category~~sales ~~reflects~~increased ~~certain~~$15.0 ~~administrative~~million, ~~costs~~or ~~and~~2.9%, ~~expenses management~~from ~~has~~$523.0 ~~not~~million ~~allocated~~for tothe ~~its~~year ~~industry segments.~~ended December ~~These~~31, ~~costs~~2009 ~~include~~to ~~compensation~~$538.0 million for ~~executive~~the ~~officers,~~year ~~insurance,~~ended ~~professional fees for audit~~December 31, ~~tax~~2010. ~~and~~The ~~legal~~increase ~~services~~was ~~and~~primarily ~~data~~attributable ~~processing~~to ~~expenses~~a 4. ~~The~~9% ~~negative~~increase ~~net~~in ~~sales~~shipments, ~~amount represents~~partially ~~the~~offset ~~elimination~~by ofa ~~intercompany sales~~2. ~~The~~0% ~~operating~~decrease ~~loss~~in ~~decreased~~average ~~$6.8~~realized ~~million,~~prices ~~from $37.7 million~~ for the year ended December 31, ~~2005~~2010 compared to ~~$30.9 million for~~ the year ended December 31, ~~2006~~2009. ~~This~~ ~~decrease~~Product ~~was primarily~~demand ~~due~~for to the ~~acceleration~~Plates ofand ~~payment~~Shapes ofGroup ~~stock-based~~is ~~compensation~~more ~~during~~transactional ~~2005~~in ~~totaling~~nature ~~$14.6~~and ~~million~~is astypically aassociated ~~result~~with industries and end markets that show strength during later stages of ~~the~~economic ~~Merger~~cycles. ~~Partially~~Although ~~offsetting~~we ~~this~~experienced ~~decrease~~an ~~were~~increase ~~increases~~in ~~during~~demand ~~2006~~for ~~due~~structural tosteel aduring ~~full~~2010, ~~year~~it ofwas ~~amortization~~offset ofto ~~customer~~a ~~list intangible~~large ~~assets~~extent ~~recorded~~by inthe ~~2005~~dramatic decline in ~~connection~~non-residential construction associated with the ~~Merger,~~global arecession ~~full~~that ~~year~~began ofin late ~~management~~2008 ~~fees~~and ~~incurred~~to ina ~~connection~~lesser ~~with~~extent by the ~~Merger,~~U.S. ~~and~~deepwater todrilling ~~increased~~moratorium ~~stock-based~~issued ~~compensation~~in ~~expense~~May ~~due~~2010. toIntense ~~the~~competition ~~adoption~~negatively ofimpacted ~~SFAS~~pricing ~~123(R)~~for structural steel throughout most of 2010.

~~Segment~~Operating ~~Results—Year~~costs ~~Ended~~and expenses decreased $38.2 million, or 7.1%, from $537.8 million for the year ended December 31, ~~2005~~2009 ~~Compared~~to $499.6 million for the year ended December 31, 2010. The decrease was primarily attributable to ~~2004~~a 12.2% decrease in the average cost per ton, partially offset by a 4.9% increase in shipments for the year ended December 31, 2010 compared to the year ended December 31, 2009. Operating costs and expenses as a percentage of net sales decreased from 102.8% for the year ended December 31, 2009 to 92.9% for the year ended December 31, 2010.

~~Plates~~Operating ~~and~~income ~~Shapes.~~(loss) ~~Net sales~~ increased by $7353.72 million, or 11359.95%, from an operating loss of $~~621~~14.08 million infor ~~2004~~the year ended December 31, 2009 to operating income of $~~694~~38.74 million infor ~~2005~~the year ended December 31, 2010. ~~This~~The increase is primarily ~~due~~ toresulted afrom ~~13.5%~~lower ~~increase~~operating incosts and expenses, which were primarily the ~~average~~result ~~realized~~of ~~price~~the decreases in average cost per ton discussed ~~partially~~above ~~offset~~in byaddition ato ~~1.5%~~cost ~~decrease~~reduction ininitiatives ~~volumes.~~implemented ~~The~~during ~~increase~~the inyear ~~average~~ended ~~realized~~December 31, ~~sales~~2010 ~~price~~and ~~was~~prior ~~primarily~~thereto. ~~due~~Operating toincome ~~the~~(loss) ~~industry-wide~~as ~~improvement~~a inpercentage ~~supply~~of ~~and~~net ~~demand~~sales ~~characteristics~~increased from (2.8%) for the year ended ~~our~~December 31, ~~products~~2009 to 7.1% for the year ended December 31, 2010.

~~Operating~~Flat ~~costs~~Rolled and ~~expenses~~Non-Ferrous. Net sales increased $~~108~~189.58 million, or 2138.07%, from $~~517~~490.87 million infor ~~2004~~the year ended December 31, 2009 to $~~626~~680.35 million infor ~~2005~~the year ended December 31, 2010. The ~~This increase~~J. ~~was~~Rubin ~~primarily~~acquisition ~~attributable~~contributed $17.8 million of incremental sales to ~~the~~this segment ~~higher~~for ~~costs~~the ofyear ~~raw~~ended ~~materials~~December 31, 2010. ~~Costs~~The ~~were~~remaining ~~also~~increase ~~increased~~was ~~due~~primarily attributable to a $125.63% ~~million~~increase ~~cost~~in ~~related~~shipments, in addition to ~~purchase~~a ~~accounting~~7.8% ~~Operating~~increase ~~costs~~in ~~and~~average ~~expenses~~realized asprices afor ~~percentage~~the ofyear ~~net~~ended ~~sales~~December 31, ~~increased~~2010 ~~from~~compared ~~83.4%~~to the inyear ~~2004~~ended ~~to 90~~December 31, 2009.2 Sales of non-ferrous metals accounted for approximately 38% inof ~~2005.~~the ~~This~~segment’s ~~percentage~~sales ~~increase~~product ~~was~~mix ~~primarily~~for ~~due~~2010, compared to ~~higher~~approximately ~~average~~40% ~~costs~~for ~~per~~2009. ~~ton~~Our ~~together~~Flat ~~with~~Rolled ~~fixed~~and ~~costs~~Non-Ferrous ~~being~~Group ~~spread~~experienced ~~over~~strong demand ain ~~lower~~the ~~volume~~automotive, ofaerospace ~~net~~and ~~sales~~lawn and garden equipment markets during 2010.

Operating ~~income~~costs ~~decreased~~and byexpenses increased $34161.80 million, or 3334.70%, from $~~103~~474.2 million infor ~~2004~~the year ended December 31, 2009 to $68635.42 million infor ~~2005.~~the ~~This~~year ~~decrease~~ended isDecember 31, ~~primarily~~2010. ~~attributable~~The toJ. ~~the~~Rubin ~~increase~~acquisition incontributed ~~the~~$16.7 ~~cost~~million of ~~raw~~incremental ~~materials~~operating costs and, expenses to the asegment ~~lesser extent,~~for an2010. ~~additional~~The $1remaining increase was primarily attributable to a 25.63% ~~million~~increase ofin ~~costs~~shipments, ~~related~~in addition to ~~purchase~~a ~~accounting~~6.9% increase in average cost per ton. Operating ~~income~~costs and expenses as a percentage of net sales decreased from 1696.6% infor ~~2004~~the year ended December 31, 2009 to 993.83% infor ~~2005~~the year ended December 31, 2010.

~~Flat~~Operating ~~Rolled~~income ~~and Non-Ferrous. Net sales~~ increased by $4728.7 8 million, or 6174.65%, from $~~723~~16.25 million infor ~~2004~~the year ended December 31, 2009 to $~~770~~45.93 million infor ~~2005.~~the ~~This~~year ended December 31, 2010. The increase iswas primarily ~~due~~attributable to athe ~~14.0%~~ increase in ~~the~~volumes, ~~average~~combined ~~realized~~with ~~price per~~the ~~ton~~increase ~~partially~~in average ~~offset~~realized byprices adiscussed 6above.5% ~~decrease~~Operating inincome ~~volumes.~~as ~~The~~a ~~increase~~percentage inof ~~average~~net ~~realized~~ sales ~~prices~~increased ~~was~~from ~~primarily~~3.4% for ~~due to~~ the ~~industry-wide~~year ~~improvement~~ended inDecember 31, ~~supply~~2009 ~~and~~to ~~demand~~6.7% for ~~characteristics~~the ~~for~~year ~~our~~ended ~~products~~December 31, 2010.

~~Operating~~Building ~~costs~~Products. Net ~~and~~sales ~~expenses~~decreased ~~increased~~ $9410.02 million, or 1410.79%, from $~~641~~93.42 million infor ~~2004~~the toyear ~~$735.4~~ended ~~million~~December 31, ~~in 2005. This increase was primarily~~2009 ~~attributable~~ to ~~the higher cost of raw materials, partially offset by decreased volumes. Costs also increased by~~ $183.90 million ~~related~~for tothe ~~purchase~~year ~~accounting.~~ended ~~Operating~~December 31, ~~costs~~2010. ~~and~~The ~~expenses as a percentage of net~~ sales ~~increased~~decrease ~~from~~was ~~88.7%~~driven inby ~~2004~~lower ~~to 95.4%~~consumer inspending ~~2005.~~on ~~This~~residential ~~percentage~~remodeling ~~increase was primarily~~ due to ~~higher~~the ~~average~~effects ~~costs~~of ~~per~~the ~~ton~~economic ~~together~~recession ~~with~~and ~~fixed~~the ~~costs being spread over a lower volume of net sales.~~ resulting

~~Operating~~36 income decreased by $46.3 million, or 56.6%, from $81.8 million in 2004 to $35.5 million in 2005. This decrease is primarily attributable to the increase in the cost of raw materials and to a lesser extent a $1.9 million cost related to purchase accounting. Operating income as a percentage of net sales increased from 11.3% in 2004 to 4.6% in 2005.

~~Building~~ depreciation ~~Products.~~of ~~Net sales increased $12.1 million~~homes, oras ~~6.6%,~~well ~~from~~as ~~$183.0~~decreased ~~million~~access ~~in 2004~~ to ~~$195.1~~affordable ~~million~~credit infor ~~2005.~~homeowners ~~The~~and ~~increase~~residential inremodeling ~~net~~contractors. ~~sales~~These ~~was~~factors ~~principally~~have ~~due~~led to ~~price~~significant ~~increases~~contraction ~~and~~in tothe ahome improvement ~~lesser~~remodeling ~~extent increased demand for these products~~industry.

Operating costs and expenses ~~increased~~decreased $313.25 million, or 113.89%, from $~~175~~97.1 million infor ~~2004~~the year ended December 31, 2009 to $~~178~~83.36 million infor ~~2005~~the year ended December 31, 2010. The decrease was primarily due to ~~higher~~lower sales. ~~This~~volume ~~increase~~and ~~was~~a ~~primarily~~decrease ~~driven~~in byvariable ~~higher~~costs ~~material~~related to lower market demand, and to a lesser extent due to cost reduction measures which were implemented to align the cost structure of the segment to current levels of lower market demand. Operating costs and expenses as a percentage of net sales decreased from 104.2% for the year ended December 31, 2009 to 100.7% for the year ended December 31, 2010.

36Operating loss decreased from an operating loss of $3.9 million for the year ended December 31, 2009 to an operating loss of $0.6 million for the year ended December 31, 2010. The decrease was primarily attributable to lower operating costs, which decreased at a rate that was greater than the rate of decline in sales. Operating loss as a percentage of net sales was 0.7% for the year ended December 31, 2010 versus 4.2% for the year ended December 31, 2009.

~~Table~~Corporate and other. This category reflects certain administrative costs and expenses management has not allocated to its industry segments. These costs include compensation for executive officers, insurance, professional fees for audit, tax and legal services and data processing expenses. The negative net sales amount represents the elimination of ~~Contents~~intercompany sales. The operating loss increased $2.9 million for the year ended December 31, 2010 as compared to the year ended December 31, 2009. During the second quarter of 2010, unamortized prepaid advisory fees of $3.3 million were charged to expense as a result of the termination of our advisory agreement with Apollo in connection with Metals USA Holdings’ IPO. This charge was partially offset by a decrease in salaries and employee benefits of approximately $1.0 million, in addition to lower professional and consulting fees of approximately $0.4 million for the year ended December 31, 2010 versus 2009.

~~$1.1~~Liquidity ~~million cost related to purchase accounting. Operating costs~~ and ~~expenses~~Capital asResources a percentage of net sales decreased from 95.7% in 2004 to 91.4% in 2005. Additionally, in 2004, we incurred $5.0 million of costs associated with the elimination of one layer of management and the closing of eleven redundant or unprofitable locations. These costs include $2.9 million in accrued expenses related to the disposal of real estate leases and $2.1 million in severance expense.

~~Operating~~Our ~~income~~primary ~~increased~~sources byof ~~$8.9~~short-term ~~million,~~liquidity orare ~~112.7%,~~borrowings ~~from~~under ~~$7.9 million~~the inABL ~~2004~~facility toand ~~$16.8~~our ~~million~~cash inflow ~~2005~~from operations. ~~This~~We ~~increase~~believe ~~was~~these resources ~~primarily~~will ~~due~~be sufficient to ~~price~~meet ~~increases~~our ~~partially~~working ~~offset~~capital byand acapital $1expenditure requirements for the next year.1 ~~million~~As ~~cost~~of ~~related~~December 31, to2011, ~~purchase~~we ~~accounting~~had $227.7 ~~Operating~~million ~~income~~drawn ason athe ~~percentage~~ABL offacility, ~~net~~our ~~sales~~borrowing ~~increased~~availability ~~from~~was 4$163.3%8 inmillion, ~~2004~~and towe 8had cash of $5.6%9 ~~in 2005~~million.

~~Corporate~~Our ~~and~~borrowing ~~other.~~availability ~~This~~fluctuates ~~category~~daily ~~reflects~~with ~~certain~~changes ~~administrative~~in ~~costs~~eligible ~~and~~accounts ~~expenses~~receivables ~~that we have not allocated to our~~and ~~industry segments. These costs include compensation for executive officers~~inventory, ~~insurance,~~less ~~professional~~outstanding ~~fees~~borrowings ~~for audit, tax~~ and ~~legal~~letters ~~services and data processing expenses. The negative net sales amount represents the elimination~~ of ~~intercompany sales~~credit. ~~The~~ ~~operating~~See ~~loss~~“—Financing ~~increased~~Activities” ~~$18~~below.5 ~~million~~At March 7, ~~or 96.4%~~2012, ~~from~~we ~~$19.2~~had ~~million in 2004 to~~ $37253.78 million indrawn ~~2005.~~on ~~This increase is primarily attributable to costs related with~~ the ~~completion~~ABL offacility, ~~the~~our ~~Merger,~~borrowing ~~including~~availability was $14162.68 million ~~paid~~and onwe ~~the~~had ~~closing~~cash ~~date~~ of approximately ~~the~~$6.2 ~~Merger to holders of 1,081,270 vested in-the-money options and holders of 45,437 restricted stock grant awards which was expensed in November 2005~~million.

~~Liquidity~~We generally meet long-term liquidity requirements, the repayment of debt and ~~Capital~~investment ~~Resources~~funding needs through additional borrowings under the ABL facility and the issuance of debt securities. At December 31, 2011, our long-term debt consisted of $227.7 million of outstanding borrowings on the ABL facility, $226.3 million principal amount of the Metals USA Notes, a note payable to Metals USA Holdings in the amount of $47.0 million, IRBs with $12.6 million principal amount outstanding, $1.5 million in the form of a note payable in connection with the acquisition of Trident, and $0.5 million of capital lease obligations. We believe that cash flow from operations, supplemented by cash available under the ABL facility, will be sufficient to enable us to meet our debt service and operational obligations as they come due for at least the next twelve months.

AsWith ~~discussed~~respect ~~below,~~to ~~our primary sources of short~~long-term liquidity, ~~are~~we ~~cash flows from operations and borrowings under the ABL facility. We~~ believe ~~these~~that ~~resources~~we will be ~~sufficient~~able to meet our working capital, ~~and~~ capital expenditure ~~requirements~~and ~~for~~debt ~~the~~service ~~next year~~obligations. AsOur ofability ~~December 31,~~to ~~2006,~~meet ~~our~~long-term ~~debt~~liquidity asrequirements ais ~~percentage~~subject ofto ~~total capitalization~~obtaining (additional debt ~~plus~~and/or ~~stockholders’~~ equity) ~~was 80~~financing.~~5%,~~ ~~compared~~Decisions toby ~~78.2%~~lenders asand ofinvestors ~~December 31,~~to ~~2005.~~enter into such

We37 generally meet long-term liquidity requirements, the repayment of debt and investment funding needs, through additional borrowings under the ABL facility and the issuance of debt securities. At December 31, 2006, our long-term debt consisted of $329.0 million of outstanding borrowings on the ABL facility, $275.0 million principal amount of the Metals USA Notes, an Industrial Revenue Bond (“IRB”) with $5.7 million principal amount outstanding, and $0.9 million in vendor financing and purchase money notes.

~~With respect to long-term liquidity, we believe that we will be able to meet our working capital, capital expenditures and~~ ~~debt service obligations. Our ability to meet long-term liquidity requirements is subject to obtaining additional equity and/or debt financing. Decisions by investors and lenders to enter into such~~ transactions with us will depend upon a number of factors, such as our historical and projected financial performance, compliance with the terms of our current credit agreements, industry and market trends, the availability of capital, and the relative attractiveness of alternative ~~investment~~lending or ~~lending~~ investment opportunities.

Operating and Investing Activities

Although we do not produce any metal, our financial performance is affected by changes in metal prices. ~~As a processor and distributor of metal products, we maintain a constant inventory of steel and other metals that are subject to market pricing changes.~~ When metal prices rise, wethe ~~generally~~prices at which we are able to sell our products atgenerally ~~prices~~increase ~~that are higher than~~ over their historical costs; accordingly, our working capital (which consists primarily of accounts receivable and inventory) ~~requirements~~tends ~~and our profitability tend~~ to increase in a rising price environment. ~~During 2006~~Conversely, ~~prices~~when ~~increased.~~metal Asprices ~~a consequence~~fall, our working capital tends to decrease. Our working capital (current assets less current liabilities) increased from $~~453~~368.32 million at December 31, ~~2005~~2010 to $~~572~~488.90 million at December 31, ~~2006~~2011. ~~Conversely, when metal prices fall, our working capital requirements and our profitability tend to decrease.~~

Changes in metal prices also affect our liquidity because of the time difference between our payment for our raw materials and our collection of cash from our customers. We sell our products and typically collect our accounts receivable within 45 days after the sale; however, we tend to pay for replacement materials (which are more expensive when metal prices are rising) over a much shorter period, primarily to benefit from early-payment discounts that are substantially higher than our cost of incremental debt. As a result, when metal prices are rising, we tend to draw more on the ABL facility to cover the cash flow cycle from material purchase to cash collection. When metal prices fall, we can replace our inventory at lower cost and, thus, generally the ABL facility utilization is reduced. We believe our cash flow from operations, supplemented with the cash available under the ABL facility, will provide sufficient liquidity to meet the challenges and obligations we face during the current metal price environment. Additionally, we intend to look for value-added business opportunities that we can acquire at reasonable prices. We intend to use cash flows from operations and borrowing availability under the ABL facility to fund future investments.

37Cash Flows

~~Table~~The following discussion of ~~Contents~~the principal sources and uses of cash should be read in conjunction with our Consolidated Statements of Cash Flows which are set forth under Item 8. “Financial Statements and Supplementary Data.”

~~accounts~~Year ~~receivable within 45 days after the sale; however, we tend to pay for replacement materials (which are more expensive when metal prices are rising)~~Ended ~~over a much shorter period~~December 31, ~~primarily~~2011 to benefit from early-payment discounts that are substantially higher than our cost of incremental debt. As a result, when metal prices are rising, we tend to draw more on the ABL facility to cover the cash flow cycle from material purchase to cash collection. When metal prices fall, we can replace our inventory at lower cost and, thus, generally do not need to access the ABL facility as much to cover the cash flow cycle. We believe our cash flow from operations, supplemented with the cash available under the ABL facility, will provide sufficient liquidity to meet the challenges and obligations we face during the current metal price environment. Additionally, we intend to look for value-added businesses that we can acquire at reasonable prices. We intend to use cash flows from operations and excess cash available under the ABL facility to fund future acquisitions.

~~Our~~During ~~ability to make borrowings under~~ the ~~ABL~~year ~~facility~~ended ~~(and~~December 31, ~~our~~2011, ~~ability~~net tocash ~~avoid~~used ~~paying~~in ~~down~~operating ~~borrowed~~activities ~~amounts~~was ~~under the ABL facility to increase~~$17.1 ~~availability)~~million. isOur ~~dependent~~working incapital ~~part~~increased ~~upon~~during ~~Adjusted~~2011 ~~EBITDA~~ as ~~defined~~we inexperienced ~~the~~increasing ~~ABL~~prices ~~facility~~ and ~~the~~end ~~indenture~~market ~~governing the Metals USA Notes~~demand. ~~Adjusted~~Increases ~~EBITDA is a component~~ of ~~ratios~~$48.6 ~~used~~million in our ~~credit~~accounts ~~documents~~receivable tobalance ~~measure our compliance with certain restrictive covenants,~~ and ~~to determine the interest rate charged under the ABL facility from time to time~~$93.6 ~~Adjusted~~million ~~EBITDA determines~~ in ~~part~~our ~~whether,~~inventory ~~under~~value ~~the~~were ~~ABL facility or~~ the ~~Metals~~primary ~~USA~~contributors ~~indenture, we may engage in certain transactions with~~to ~~affiliates,~~operating ~~merge,~~cash ~~consolidate~~outflows orfor ~~enter~~the ~~into any similar significant business combinations, make distributions or redeem indebtedness, or incur additional indebtedness~~period. InAccounts ~~addition,~~receivable ~~under~~increased ~~the~~due ~~Metals~~to ~~USA~~stronger ~~indenture, Adjusted EBITDA determines in part whether we may redeem certain outstanding indebtedness with proceeds from significant asset~~ sales orwhich ~~sales~~were ofprimarily ~~equity~~driven ~~securities,~~by ~~and~~sharply ~~whether~~higher weshipments ~~may~~versus ~~designate a subsidiary as unrestricted and free of certain of~~ the ~~limitations~~prior ~~under the Metals USA indenture~~year. ~~If we breach any of the covenants in our credit documents, our outstanding indebtedness could be declared immediately due and payable. See “Financing Activities” below.~~

~~Cash~~Net ~~Flows~~cash used in investing activities was $109.6 million for the year ended December 31, 2011, and consisted primarily of $88.1 million of acquisition costs, net of cash acquired, for the Trident acquisition, which closed on March 11, 2011, and capital expenditures of $21.8 million. The most significant internal capital project for 2011 was the construction of our Thomasville, Alabama Flat Rolled and Non-Ferrous service center.

~~The~~Net ~~following discussion~~cash ofprovided by financing activities was $117.4 million for the ~~principal~~year ~~sources~~ended ~~and~~December 31, ~~uses~~2011, which consisted of net ~~cash~~borrowings ~~should~~on bethe ~~read~~ABL infacility ~~conjunction~~of ~~with~~$121.7 ~~our~~million ~~Consolidated~~offset ~~Statements~~by $2.9 million of ~~Cash~~cash ~~Flows~~paid ~~which~~for ~~are~~loan ~~set~~financing ~~forth~~costs ~~under~~and ~~Item 8—“Financial~~$1.4 ~~Statements~~million ~~and~~of ~~Supplementary~~debt ~~Data~~repayments.”

~~The~~Year ~~year~~Ended ~~ended~~ December 31, ~~2005~~2010 includes the combined results for the Successor Company from May 9, 2005 (date of inception) to December 31, 2005, and the Predecessor Company from January 1, 2005 to November 30, 2005. See “Results of Operations—2005 Successor Company and Predecessor Company Results—Combined Non-GAAP” below for information on our combined results for the fiscal year ended December 31, 2005, combining the results for the Successor Company from May 9, 2005 (date of inception) to December 31, 2005, and the results for the Predecessor Company from January 1, 2005 to November 30, 2005.

During the year ended December 31, ~~2006~~2010, net cash used in operating activities was ~~$46.4~~ ~~million. This amount represents net income, adjusted for costs that did not involve cash flows for the period, of~~ $6330.42 million~~, offset by changes in operating assets and liabilities that resulted in a cash outflow of $109~~.8 ~~million~~This ~~for the period, an~~ amount ~~that~~ was primarily attributable to increases in accounts receivable and inventories~~, partially offset by a decrease in prepaid expenses and increases in accounts payable and accrued liabilities~~. ~~During~~Changes ~~the year ended December 31, 2005, net cash provided by operating activities was $177.4 million. We had operating income of $83.0 million~~ in ~~2005,~~working ~~and $116.5 million of cash was provided by the sale of inventory and collection of accounts receivable.~~

~~Net~~38 cash used in investing activities was $61.0 million for the year ended December 31, 2006, and consisted of $1.6 million of proceeds from the sale of assets, offset by $16.9 million of purchases of assets and the $45.7 million for the purchase of Port City and Dura-Loc. These purchases were strategic acquisitions in our Plates and Shapes and Building products segments. For the year ended December 31, 2006, the most significant internal capital projects included the expansion of our non-ferrous Germantown, Wisconsin facility and the installation of new processing equipment in our New Orleans facility. Net cash used by investing activities for the year ended December 31, 2005 was $450.3 million and consisted of Flag Intermediate’s acquisition of Metals USA pursuant

38 capital during 2010 reflected improving business conditions as commodity prices and demand continued to increase. We increased inventory tonnage on hand commensurate with increased levels of shipments to our customers, while prices increased moderately throughout the year, despite some intermittent volatility. Our accounts receivable increased due to higher sales levels in 2010.

~~Table~~Net cash used in investing activities was $31.3 million for the year ended December 31, 2010, and consisted primarily of ~~Contents~~$28.0 million for the acquisition of J. Rubin and ORMS in June and December, respectively. Capital expenditures amounted to $4.0 million for the year ended December 31, 2010. There were no material individual capital investment projects specific to any facilities during 2010.

toNet ~~the~~cash ~~Merger~~provided ~~for~~by ~~$430.1~~financing ~~million,~~activities ~~the purchase of assets of $20.3 million, which~~ was ~~partially offset by the sales of assets of~~ $071.12 million. ~~The~~for ~~most significant capital investments during~~ the year ~~included~~ended anDecember 31, 2010, ~~acquisition of new laser cutting equipment at our Plates~~ and ~~Shapes~~consisted ~~facility~~primarily inof ~~the~~borrowings ~~New~~on ~~Orleans area,~~ the ~~expansion~~intercompany ofloan ~~our Plates and Shapes~~ facility ~~in Greensboro, North Carolina, and the purchase~~ of ~~previously~~$47.0 ~~leased~~million ~~Plates~~in ~~and~~addition ~~Shapes~~to ~~facilities~~net inborrowings ~~Newark,~~under ~~New~~the ~~Jersey~~ABL ~~and~~facility ~~York,~~of ~~Pennsylvania~~$31.0 million.

~~Net~~Year ~~cash~~Ended ~~provided by financing activities was $110.3 million for the year ended~~ December 31, ~~2006~~2009 and consisted primarily of net borrowings on the ABL facility of $137.6 million, offset by the $25.0 million payment of a cash dividend. Net cash provided by financing activities was $317.8 million for year ended December 31, 2005 and consisted primarily of the proceeds from the issuance of the Metals USA Notes of $275.0 million, $191.4 million of borrowings under our ABL facility, and the net capital contribution from Apollo V and certain members of management of $134.0 million. These were partially offset by payments of $107.7 million under our previous credit facility and the final payment of $145.3 million to payoff and terminate that facility as a result of the Merger.

~~Financing~~During ~~Activities~~the year ended December 31, 2009, net cash provided by operating activities was $248.9 million. This amount was primarily attributable to decreases in accounts receivable and inventories. Changes in working capital during 2009 reflect the change in the business environment that began during the fourth quarter of 2008, when we began reducing inventory purchases as a result of weaker demand and declining prices. Our accounts receivable decreased due to lower sales levels in 2009.

~~The~~Net ~~ABL~~cash ~~Facility~~used in investing activities was $7.8 million for the year ended December 31, 2009, and consisted of proceeds from sales of assets of $0.5 million offset by $4.1 million of capital expenditures and $4.2 million for the acquisition of VR Laser. For the year ended December 31, 2009, the most significant internal capital projects were expansion of our plate processing machinery and equipment at our Tulsa, Oklahoma and York, Pennsylvania Plates and Shapes facilities.

~~Overview.~~Net ~~The~~cash ~~ABL~~used ~~provides for borrowings, subject to a borrowing~~in ~~base~~financing ~~calculation,~~activities ofwas ~~up to~~ $~~450~~328.06 million, ~~which~~for ~~may~~the beyear ~~repaid~~ended ~~and~~December 31, ~~reborrowed~~2009, ~~subject~~and toconsisted ~~certain~~primarily ~~terms~~of ~~and~~net ~~conditions.~~repayments ~~The~~on the ABL facility ~~was initially comprised~~ of $~~415~~293.0 million ~~of Tranche A Commitments and $35.0 million of Tranche A-1 Commitments. While the Tranche A-1 Commitments are outstanding~~, ~~the borrowing base is subject to greater advance rates than would otherwise be~~ in ~~effect.~~addition ~~Subject~~ to ~~certain~~repayments ~~conditions,~~of ~~the~~other ~~Tranche A~~long-1term ~~Commitments~~debt ~~may be reduced or terminated at any time and, upon the reduction or termination~~ of the Tranche A-1 Commitments, the Tranche A Commitments will be increased on a dollar-for-dollar basis in an amount equal to such reduction or termination. On June 1, 2006, the Tranche A-1 Commitments were reduced to $2535.06 million ~~(with a corresponding increase in the Tranche A Commitments)~~.

~~Borrowing~~Covenant ~~Base.~~Compliance The maximum availability under the ABL facility is based on eligible receivables and eligible inventory, subject to certain reserves. Our borrowing availability fluctuates daily with changes in eligible receivables and inventory, less outstanding borrowings and letters of credit. The borrowing base is equal to the lesser of (a) the aggregate amount of the Tranche A Commitments and the Tranche A-1 Commitments and (b) the sum of:

•Adjusted ~~85%~~EBITDA ~~of the net amount of eligible accounts receivable;~~

•Adjusted EBITDA (as defined by the ~~lesser~~loan ofand ~~(x)~~security ~~70%~~agreement ofgoverning the ~~lesser~~ABL offacility and the ~~original~~Metals ~~cost~~USA orNotes ~~market~~Indenture) ~~value~~is ofdefined as ~~eligible~~EBITDA ~~inventory~~further adjusted to exclude certain non-cash and ~~(y)~~non-recurring ~~90%~~items. ofAdjusted ~~the~~EBITDA is not a defined term under GAAP and should not be used as an alternative to net ~~orderly~~income ~~liquidation~~as ~~value~~an indicator of ~~eligible~~operating ~~inventory;~~performance ~~and~~or to cash flow as a measure of liquidity.

•Fixed atCharge ~~all~~Coverage ~~times~~Ratio ~~prior to the termination of the Tranche A-1 Commitments, the sum of 5% of the net amount of eligible accounts receivable and 5% of the net orderly liquidation value of eligible inventory.~~

~~Initial~~Under ~~borrowings under~~ the ABL facility, ~~were~~the ~~used~~FCCR tois ~~repay~~determined ~~the~~on ~~outstanding amounts~~a ~~drawn~~rolling ~~under~~four-quarter ~~our~~period, ~~existing~~often ~~revolving~~referred ~~credit~~to ~~facility~~as ~~and~~a tolast-twelve ~~fund~~month ~~other~~period, ~~costs~~by ~~and~~dividing ~~expenses~~(1) the ~~related~~sum toof ~~the~~Adjusted ~~Merger.~~EBITDA ~~The~~of ~~loan~~Metals ~~and~~USA ~~security~~minus ~~agreement~~income taxes ~~governing~~paid ~~the~~in ~~ABL~~cash ~~facility~~minus ~~provides~~non-financed ~~for~~capital upexpenditures toby ~~$15.0~~(2) the ~~million~~sum of ~~swing-line~~certain ~~loans~~distributions paid in cash, cash interest expense and upscheduled toprincipal ~~$100~~reductions on debt paid by Metals USA.~~0 million~~ ~~for~~Should borrowing availability under the ~~issuance~~ABL facility offall ~~letters~~below ofMinimum ~~credit.~~Availability, ~~Both~~we ~~the~~must ~~face~~maintain ~~amount~~a FCCR of ~~any~~at ~~outstanding~~least ~~letters~~1.0 ofto ~~credit~~1.0, ~~and~~measured ~~any~~on ~~swing~~a trailing four-~~line~~quarter ~~loans~~basis. ~~will~~As ~~reduce~~of ~~revolving~~December 31, ~~credit~~2011, our borrowing availability under the ABL facility onwas a$163.8 ~~dollar-for-dollar~~million. ~~basis~~In addition, the FCCR also is an important measure of our liquidity and affects our ability to take certain actions, including paying dividends to stockholders and making acquisitions.

As39 of December 30, 2006, we had eligible collateral of $482.1 million, borrowing base of $450.0 million, $329.0 million in outstanding advances, $17.7 million in open letters of credit and $103.3 million in additional borrowing capacity.

WeAlthough ~~used~~the ~~$36.3~~Metals ~~million~~USA Notes Indenture also contains covenants that restrict our ability to incur indebtedness and ~~$9.4~~pay ~~million~~dividends based on our FCCR, the definition and application of ~~funds~~ the FCCR contained in the Indenture differs from the definition and application of the FCCR in the ABL facility toin ~~acquire~~that the ~~net~~numerator ~~assets~~of the FCCR as defined in the Indenture does not include cash income taxes or non-financed capital expenditures and the denominator of ~~Port~~the ~~City~~FCCR as defined in the Indenture does not include the sum of certain distributions paid in cash and ~~Dura-Loc,~~scheduled ~~respectively.~~principal Onreductions ~~May 23~~on debt, ~~2006,~~and ~~Flag~~separate ~~Intermediate~~FCCRs ~~declared~~are arequired ~~$25~~under certain circumstances.0 ~~million~~See ~~dividend~~“—Financing toActivities” ~~Metals~~below.

39Because access to debt capital is currently and in the future will continue to be important to us, we believe that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA are appropriate to provide additional information to investors to demonstrate compliance with the covenants in our debt agreements. Failure to comply with the FCCR covenant of the ABL facility can result in limiting our long-term growth prospects by hindering our ability to incur future indebtedness or grow through acquisitions. As of December 31, 2011, our FCCR was 2.82. As of December 31, 2011, we had $163.8 million of additional borrowing capacity under the ABL facility.

~~Table~~The Metals USA Notes Indenture contains covenants that restrict our ability to take certain actions, such as incurring additional debt and making certain acquisitions, if we are unable to meet defined Adjusted EBITDA to fixed charge coverage ratios (as defined). The covenants in the Indenture require us to have an Adjusted EBITDA to fixed charge coverage ratio (measured on a trailing four-quarter basis and calculated differently from the fixed charge coverage ratio as defined by the ABL facility) of ~~Contents~~2.0 to 1.0 to incur “ratio” indebtedness. Based on the calculations for the trailing four quarters, we are able to satisfy these covenants and incur additional indebtedness under these ratios, including for acquisition purposes, under the Indenture.

~~USA~~Our ~~Holdings,~~inability ~~which~~to ~~was~~satisfy ~~paid~~the onterms ~~May 24,~~of ~~2006~~the ~~and~~negative ~~which~~covenants ~~was~~in ~~funded~~our bydebt ~~the~~agreements ~~ABL~~do ~~facility.~~not, ~~Metals~~by ~~USA~~themselves, ~~Holdings~~constitute ~~used~~covenant ~~the~~violations ~~proceeds~~or events of ~~the dividend to pay a $25~~default.0 ~~million~~Rather, ~~dividend~~they ~~(the~~are ~~“May~~event-related ~~2006~~restrictions that ~~dividend”)~~may tolimit ~~its~~or ~~stockholders~~prohibit ofthe ~~record~~Company asfrom oftaking ~~that~~certain ~~date~~corporate actions.

~~Guarantees~~Limitations ~~and Security. Substantially all~~ of ~~our~~Adjusted ~~subsidiaries~~EBITDA are defined as “borrowers” under such agreement. The obligations under the ABL facility are guaranteed by the Company and certain of our present and future domestic subsidiaries and are secured (i) on a first-priority lien basis by accounts receivable, inventory, cash and proceeds and products of the foregoing and certain assets related thereto and (ii) on a second-priority lien basis by substantially all other assets, subject to certain exceptions and permitted liens.

~~Interest~~There ~~Rate~~are ~~and~~material ~~Fees.~~limitations ~~Interest~~associated ~~is calculated based upon a margin (established within a specific pricing grid for loans utilizing Tranche A Commitments) over reference rates. The marginal rates vary~~ with ~~our~~making ~~financial performance as measured by~~ the ~~fixed~~adjustments ~~charge~~to ~~coverage~~our ~~ratio.~~earnings ~~The~~to ~~fixed~~calculate ~~charge coverage ratio is determined by dividing (i) the sum of~~ Adjusted EBITDA ~~(as defined by the loan~~ and ~~security~~using ~~agreement~~such ~~governing the ABL facility) minus income taxes paid in cash minus~~ a non-~~financed~~GAAP ~~capital~~financial ~~expenditures~~measure byas ~~(ii) the~~compared ~~sum~~to ofthe ~~certain~~most ~~distributions~~directly ~~paid~~comparable inGAAP ~~cash,~~financial ~~cash interest~~measures. ~~expense~~For ~~and~~instance, ~~scheduled~~Adjusted ~~principal~~EBITDA ~~reductions~~does onnot ~~debt.~~include:

~~The~~• interest ~~rates with respect to loans utilizing the Tranche A Commitments are~~expense, ~~at our option, (i) the higher of (a) the prime rate of Credit Suisse in effect at its principal office in New York City~~ and ~~(b) the federal funds effective rate plus 0.5%; minus~~, inbecause ~~each~~we ~~case,~~have anborrowed ~~applicable~~money ~~margin ranging between 0.25% and 0.00% as determined~~ in ~~accordance~~order ~~with the loan agreement governing the ABL facility or (ii) the rate (as adjusted for statutory reserves) at which Eurodollar deposits for one, two, three, six or, if agreed~~ to, ~~nine~~finance orour ~~twelve months~~operations, as selected by us, by reference to the British Bankers’ Association Interest Settlement Rates for deposits in dollars, plus an applicable margin ranging between 1.25% and 2.00% as determined in accordance with the loan agreement governing the ABL facility. The interest ~~rates~~expense ~~with~~is ~~respect to loans utilizing the Tranche A-1 Commitments are, at our option, (i) the higher of (~~a~~) the~~ ~~prime~~necessary ~~rate~~element of ~~Credit~~our ~~Suisse~~costs ~~in effect at its principal office in New York City~~ and ~~(b) the federal~~ability ~~funds effective rate plus 0.5%; in each case plus an applicable margin of 1.50% or (ii) the rate (as adjusted) at which Eurodollar deposits for one, two, three, six or, if agreed~~ to, ~~nine~~generate ~~or twelve months, as selected by us, by reference to the British Bankers’ Association Interest Settlement Rates for deposits in dollars, plus an applicable margin of 3.50%.~~ revenue;

A• ~~commitment~~income ~~fee~~tax ofexpense, ~~0.25% per~~and ~~annum~~because isthe ~~payable~~payment onof ~~any~~taxes ~~unused~~is ~~commitments~~part ~~under~~of ~~the~~our ~~ABL~~operations, ~~facility.~~income ~~The~~tax ~~applicable~~expense ~~base~~is ~~rate~~a ~~and~~necessary ~~the~~element ~~effective~~of ~~LIBOR~~our ~~rate~~costs ~~were 8.25%~~ and ~~5.36%~~ability asto ofoperate; ~~December 31, 2006.~~ and

~~Certain~~• ~~Covenants.~~depreciation ~~The ABL facility contains customary representations, warranties~~ and ~~covenants~~amortization ~~as a precondition to lending~~expense, ~~including a material adverse change in the business,~~ and ~~limitations on the borrowers’ and the guarantors’ ability to incur or guarantee additional debt~~, ~~subject~~because towe ~~certain~~use ~~exceptions, pay dividends, or make redemptions and repurchases, with respect to~~ capital ~~stock~~assets, ~~create~~depreciation ~~or incur certain liens, make certain loans or investments, make acquisitions, engage in mergers, assets sales~~ and ~~sale~~amortization ~~lease-back~~expense ~~transactions,~~is ~~and engage in certain transactions with affiliates. In addition, the ABL facility requires~~ a ~~lock-box~~necessary ~~arrangement~~element ~~which, in the absence~~ of ~~default, is controlled by Metals USA. As long as~~ our ~~borrowing~~costs ~~availability~~and isability ~~$45.0 million or greater, we do not have~~ to ~~maintain~~generate ~~a minimum fixed charge coverage ratio~~revenue. ~~Should borrowing availability fall below $45.0 million, we must maintain a fixed charge coverage ratio of 1.0 to 1.0.~~

~~Additionally,~~In ~~certain payments to affiliates are limited to the greater of $3.0 million or 3% of Adjusted EBITDA (as defined in the loan and security agreement governing the ABL facility)~~addition, ~~provided~~fixed ~~borrowing~~charges ~~availability~~should ~~equals at least $25.0 million. Further, distributions in respect of capital stock are limited to the payment of up to $25.0 million, plus $5.0 million for each full fiscal quarter (with any amount~~ not ~~used in any fiscal quarter being permitted to~~ be ~~used~~considered inan ~~succeeding~~alternative ~~fiscal quarters),~~to ~~plus~~interest 50% of cumulative consolidated net income, or if a loss, minus 100% of the amount thereof, plus 100% of the aggregate net proceeds received by us from certain sales and issuances of capital stock or from certain capital contributions, provided that borrowing availability is greater than $50expense.0 ~~million.~~

~~Table~~Below is a reconciliation of ~~Contents~~net income (loss) to EBITDA, Adjusted EBITDA and net cash provided by (used in) operating activities:

Metals USA Notes


	Years Ended December 31,
	2011			2010			2009
	(in millions, except ratios)
Net income (loss)	$	61.2		$	14.9		$	(35.7	)
Depreciation and amortization (1)		23.3			19.8			21.2
Interest expense		42.2			37.2			44.9
Gain on extinguishment of debt		—			—			(13.6	)
Provision (benefit) for income taxes		31.8			8.2			(18.0	)
Other expense		0.1			—			0.3

EBITDA		158.6			80.1			(0.9	)
Covenant defined adjustments:
Stock options and grant expense (2)		2.4			1.2			0.4
Facilities closure (3)		0.6			—			2.1
Advisory agreement fees and other costs (4)		—			3.8			1.2
Acquisition expenses (5)		1.6			—			—

Adjusted EBITDA		163.2			85.1			2.8
Loss on sale of property and equipment		—			0.3			—
Provision for bad debts		2.9			2.4			2.9
Amortization of debt issuance costs		2.9			4.0			3.5
Deferred income taxes		15.4			1.6			4.2
Excess tax benefit from stock-based compensation		—			(0.1	)		—
Advisory agreement termination charge		—			3.3			—
Interest expense		(42.2	)		(37.2	)		(44.9	)
Provision for income taxes		(31.8	)		(8.2	)		18.0
Other expense		(1.0	)		—			(0.3	)
Facilities closure		(0.6	)		—			(2.1	)
Advisory agreement fees and other costs		—			(3.8	)		(1.2	)
Acquisition expenses (5)		(1.6	)		—			—
Changes in assets and liabilities		(124.3	)		(77.6	)		266.0

Net cash (used in) provided by operating activities	$	(17.1	)	$	(30.2	)	$	248.9

Net cash used in investing activities	$	(109.6	)	$	(31.3	)	$	(7.8	)

Net cash provided by (used in) financing activities	$	117.4		$	71.2		$	(328.6	)

Fixed charge coverage ratio numerator (6)	$	119.9		$	88.5		$	15.8
Fixed charge coverage ratio denominator (6)	$	42.5		$	36.3		$	37.6
FCCR (6)		2.82			2.44			0.42

On(1) ~~the~~Includes ~~closing~~depreciation date of the Merger, we received approximately $268.0 million of net cash proceeds from the sale of the Metals USA Notes, after deducting discounts and estimated expenses of the offering. An exchange offer was completed in September 2006 to exchange the privately placed notes for ~~substantially~~Building ~~identical~~Products ~~notes~~that ~~registered~~is ~~with~~included ~~the SEC. We will pay interest on overdue principal at 1% per annum~~ in ~~excess~~cost of ~~the above rate and will pay interest on overdue installments of interest at such higher rates to the extent lawful~~sales. ~~The indenture governing the Metals USA Notes contains the covenants described under “Covenant Compliance” below.~~

~~Holdings~~(2) ~~Notes~~Primarily stock-based compensation expense.

~~During~~(3) ~~December~~This ~~2006, Metals USA Holdings issued $150.0 initial aggregate principal~~ amount ofrepresents ~~Senior~~charges ~~Floating~~for ~~Rate Toggle Notes due 2012 (~~the ~~“Holdings~~closure ~~Notes”).~~of ~~The~~nine ~~Holdings~~facilities ~~Notes~~in ~~are~~our ~~senior~~Building ~~unsecured obligations~~Products ~~that~~Group ~~are~~and ~~not~~one ~~guaranteed~~facility byin ~~any~~our ofPlates ~~Metals~~and ~~USA~~Shapes ~~Holdings’~~Group ~~subsidiaries.~~during ~~As such~~2009, ~~the~~in ~~Holdings~~addition ~~Notes~~to ~~are~~one ~~structurally~~facility ~~subordinated~~in toour ~~all~~Plates ~~indebtedness~~ and ~~other~~Shapes ~~liabilities~~Group ~~(including~~during ~~trade payables) of Metals USA Holdings’ subsidiaries~~2011.

~~The initial interest payment on the Holdings Notes is payable in cash. For any interest period thereafter, Metals USA Holdings may elect to pay interest~~ (14) ~~entirely~~ inPrimarily ~~cash~~represents orexpenses ~~(2) entirely~~related ~~by increasing the principal amount of the Holdings Notes or issuing new Holdings Notes (“PIK Interest”). Cash interest on the Holdings Notes will accrue at a rate per annum, reset quarterly, equal~~ to ~~LIBOR plus a spread of 6.00%, which increases by 0.25% to 6.25% in year 2 and by 0.50% to 6.50% in year 3. In~~ the ~~event~~advisory ~~PIK~~agreement ~~Interest~~we ishad ~~paid~~with ~~on the Holdings Notes after the first interest period, the then-applicable margin over LIBOR on the Holdings Notes would increase by 0~~Apollo.75% for each period in which PIK Interest is paid. If Metals USA Holdings elects to pay any PIK Interest, Metals USA Holdings will increase the principal amount on the Holdings Notes or issue new Holdings Notes in an amount equal to the amount of PIK Interest for the applicable interest payment period to holders of the Holdings Notes on the relevant record date.

~~Because~~(5) ~~Metals~~Primarily ~~USA~~related ~~Holdings’ principal asset is its investment in Flag Intermediate, Flag Intermediate plans~~ to ~~provide funds to service this indebtedness through payment of quarterly dividends to Metals USA Holdings. During~~ the ~~second~~acquisition ~~quarter~~ of ~~2007~~Trident, ~~Flag~~which ~~Intermediate~~closed ~~expects~~in toMarch ~~pay Metals USA Holdings a $5~~2011.~~4 million dividend to finance the initial quarterly interest payment due April 15, 2007.~~

~~Covenant~~(6) ~~Compliance~~These amounts represent the FCCR numerator, the FCCR denominator, and the FCCR, each as defined by the ABL facility.

~~Our~~41 fixed charge coverage ratio as defined by the ABL facility is calculated based on a numerator consisting of Adjusted EBITDA less cash taxes and non-financial capital expenditures, and a denominator consisting of interest expense, certain distributions paid in cash and scheduled principal reductions on debt. As of December 31, 2006, our fixed charge coverage ratio was 1.51 as compared to a required fixed charge coverage ratio of 1.00. As of December 31, 2006, we had $103.3 million of additional borrowing capacity under the ABL facility. Failure to comply with the fixed charge coverage ratio covenant of the ABL facility, at a time when availability thereunder is less than $45.0 million, would result in an event of default thereunder and could result in limiting our long-term growth prospects by hindering our ability to incur future indebtedness or grow through acquisitions.

~~The~~Financing ~~indenture~~Activities governing the Metals USA Notes contain covenants that restrict our ability to take certain actions, such as incurring additional debt and making certain acquisitions, if we are unable to meet defined Adjusted EBITDA to Fixed Charges and consolidated total debt ratios (each, as defined). The covenants in the indentures require us to have an Adjusted EBITDA to Fixed Charge ratio (measured on a trailing four-quarter basis and calculated differently from the fixed charge coverage ratio as defined by the ABL facility) of 2.0 to 1.0 to incur “ratio” indebtedness and a consolidated total debt ratio of no greater than 4.75 to 1.0 to incur “ratio” indebtedness in connection with acquisitions. Based on the calculations for the trailing four quarters, we are able to satisfy these covenants and incur additional indebtedness under these ratios, including to make acquisitions, under our indentures. The most restrictive of the covenants in all of our debt agreements is the fixed charge coverage ratio in our ABL facility; accordingly, we have presented our covenant compliance on that basis.

41The ABL Facility

~~Table~~On December 17, 2010, Flag Intermediate, Metals USA, and certain subsidiaries of ~~Contents~~Metals USA entered into an amended and restated loan and security agreement (the “ABL Credit Agreement”) with the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent.

~~Fixed~~The ~~charges~~ABL ~~are~~Credit ~~defined~~Agreement asprovides ~~interest~~for ~~expense~~borrowings ~~excluding~~of ~~the~~up ~~amortization~~to or$500.0 ~~write-off~~million of ~~deferred financing~~Tranche ~~costs,~~A ~~plus~~commitments ~~certain distributions made in cash~~ and ~~scheduled reductions in debt~~$35.0 million ~~Adjusted~~of ~~EBITDA is defined as EBITDA further adjusted to exclude certain non~~first-~~cash~~in, ~~non~~first-~~recurring~~out ~~and~~(“FILO”) ~~realized~~Tranche orA-1 ~~expected~~commitments ~~future~~(which ~~cost~~may ~~savings~~be ~~directly~~increased ~~related~~ up to ~~prior acquisitions~~$750.0 Wemillion ~~believe~~at ~~that~~ the ~~inclusion~~option of ~~the~~Metals ~~supplemental~~USA, ~~adjustments~~including ~~applied~~$35.0 inmillion ~~calculating~~under ~~Adjusted EBITDA is appropriate to provide additional information to investors to demonstrate compliance with our financial covenants and assess our ability to incur additional indebtedness in~~ the ~~future.~~FILO ~~Adjusted~~tranche), ~~EBITDA and fixed charges are not defined terms~~ under ~~GAAP.~~the ~~Adjusted~~5-year, ~~EBITDA~~senior ~~should~~secured ~~not~~ABL befacility ~~considered an alternative to operating income or net income as a measure of~~that ~~operating~~amended ~~results~~and orrestated anMetals ~~alternative~~USA’s tothen-existing ~~cash flows as a measure of liquidity~~$625.0 ~~Fixed~~million ~~charges~~senior ~~should~~secured ~~not~~asset-based becredit ~~considered~~facility ~~an alternative to interest expense. Because we are highly leveraged, we believe~~ that ~~the~~was ~~inclusion~~scheduled ~~of supplementary adjustments~~ to ~~EBITDA~~ ~~applied~~mature inon ~~presenting~~November 30, ~~Adjusted EBITDA are appropriate to provide additional information to investors to demonstrate compliance with the covenants in our debt agreements~~2011.

AsOn ~~of December~~March 319, ~~2006~~2011, we ~~were~~activated in$25.0 ~~compliance~~million ~~with all~~ of the ~~debt~~FILO ~~covenants,~~tranche. ~~including~~The ~~those~~ABL offacility ~~the~~permits ~~loan~~us ~~and~~to ~~security~~borrow ~~agreement~~on ~~governing~~a ~~the~~revolving ~~ABL facility~~basis ~~and~~through the ~~indenture~~earlier ~~governing~~of ~~the~~November 30, ~~Metals~~2015 ~~USA~~and ~~Notes.~~60 ~~Both~~days ~~the~~prior ~~loan~~to ~~and~~the scheduled ~~security~~maturity ~~agreement~~of ~~governing~~ the ~~ABL~~Metals ~~facility~~USA ~~and~~Notes, ~~the~~unless ~~indenture governing~~ the Metals USA Notes ~~contain~~are ~~restrictions~~refinanced as to ~~the~~a ~~payment~~date ofmore ~~dividends.~~than As5 ofyears ~~December 31, 2006,~~and ~~under~~60 days after the ~~most~~closing ~~restrictive~~date of ~~these covenants~~ the ~~maximum~~ABL ~~amount~~facility ofand/or ~~dividends~~repaid ~~that~~prior ~~could~~to besuch ~~paid was $48~~date.8 ~~million~~Substantially ~~under~~all ~~the~~of ~~loan~~our ~~and~~subsidiaries ~~security~~are borrowers ~~agreement~~under ~~governing~~ the ABL facility ~~and $28~~.7 ~~million under the indenture governing the Metals USA Notes.~~

WeOn ~~believe~~August 10, 2011, we amended the ~~cash~~ABL ~~flow~~facility ~~from~~by ~~operations,~~reducing ~~supplemented~~the borrowing costs on the Tranche A commitments by 75 basis points and reducing the ~~cash~~borrowing ~~available~~costs ~~under~~on the FILO tranche by 62.5 basis points. Under the amendment, the maturity date of the ABL facility was extended to the earlier of August 10, ~~will~~2016 beor ~~sufficient~~60 days prior to ~~enable us~~the scheduled maturity of the Metals USA Notes, unless the Metals USA Notes are refinanced to ~~meet~~a ~~our~~date ~~debt~~more ~~service~~than 5 years and ~~operational~~60 ~~obligations~~days asafter ~~they~~the ~~come~~closing ~~due~~date ~~for~~of atthe ~~least~~ABL facility and/or repaid prior to such date. The ABL facility remains subject to the ~~next~~same 12acceleration ~~months~~provision with respect to the maturity of the Metals USA Notes described above.

42Borrowing Base. The maximum availability under the ABL facility is based on eligible receivables and eligible inventory, subject to certain reserves. Our borrowing availability fluctuates daily with changes in eligible receivables and inventory, less outstanding borrowings and letters of credit. The borrowing base is equal to:

~~Table~~• 85% of ~~Contents~~the net amount of eligible accounts receivable, plus

~~Results~~• the lesser of ~~Operations—2005~~(x) ~~Successor~~80% ~~Company~~of the lesser of the original cost or market value of eligible inventory and ~~Predecessor~~(y) ~~Company~~90% ~~Results—Combined~~of ~~Non-GAAP~~ the net orderly liquidation value of eligible inventory, plus

~~The~~• ~~following~~an ~~tables~~incremental ~~present~~amount ~~our~~of ~~combined~~the ~~results~~lesser ~~for~~of (x) the ~~fiscal~~maximum ~~year~~commitments ~~ended~~under ~~December 31,~~the ~~2005,~~FILO ~~combining~~tranche and (y) the ~~results~~sum ~~for~~of ~~the Successor~~(i) ~~Company~~5% ~~from~~of ~~May 9,~~the ~~2005~~net ~~(date~~amount of ~~inception)~~eligible toaccounts ~~December 31,~~receivable ~~2005,~~ and ~~the~~(ii) ~~results~~5% ~~for~~of the ~~Predecessor~~net ~~Company~~orderly ~~from~~liquidation ~~January 1,~~value ~~2005~~of toeligible ~~November 30,~~inventory ~~2005.~~during the effectiveness of any FILO tranche, less

~~GAAP~~• does not allow for such combination of the Predecessor Company’s and the Successor Company’s financial results; however, we believe the combined results provide information that is useful in evaluating our financial performancereserves. The combined information is the result of merely adding the two columns and does not include any pro forma assumptions or adjustments. The Successor Company had no assets and conducted no operations from May 9, 2005 (date of inception) to November 30, 2005. We believe the Predecessor/Successor split of our results for the fiscal year ended December 31, 2005 would make it difficult for an investor to compare historical and future results. The Merger did not affect the operational activities of Metals USA and combining Predecessor and Successor results puts our operational performance into a meaningful format for comparative purposes.

AsThe aABL ~~result~~facility ofprovides ~~the~~sub-limits ~~Merger,~~for ~~the~~up ~~fair~~to ~~value of inventories, property and equipment and intangibles (customer lists) were increased by~~ $1425.~~9 million,~~0 ~~$118.6~~ million ~~and $22.2 million, respectively. For the Successor Company for the period from May 9, 2005 (date~~ of ~~inception)~~swingline toloans ~~December 31, 2005, operating costs~~ and ~~expenses~~up ~~were~~to ~~increased by~~ $5100.20 million ~~($4.1 million~~ for ~~cost of sales and $1.1 million of additional depreciation and amortization) as~~ the ~~inventory~~issuance ~~was sold and additional depreciation and amortization was recorded. The fair value~~ of ~~deferred~~letters ~~taxes and long-term liabilities were increased by $64.8 million~~of ~~and $3~~credit.1 ~~million.~~Both Our intangible assets (customer lists) will be amortized over five years using an accelerated amortization method which approximates its useful life and value to us. Total acquisition costs were allocated to the ~~acquired~~face ~~assets~~amount ~~and assumed~~of ~~liabilities~~any ~~based~~outstanding ~~upon~~letters ~~estimates~~ of ~~their~~credit ~~respective~~and ~~fair~~any ~~values~~swingline asloans ofwill ~~the~~reduce ~~closing~~borrowing ~~date~~availability ofunder the ~~Merger~~ABL ~~using~~facility ~~valuation~~on ~~and~~a ~~other~~dollar-for-dollar ~~studies~~basis.

	PredecessorCompany			SuccessorCompany			CombinedNon-GAAP
	Period fromJanuary 1, 2005 toNovember 30, 2005			Period from May 9,2005 (Date ofInception) toDecember 31, 2005			Year EndedDecember 31, 2005
	(in millions)
Net sales	$	1,522.1		$	116.9		$	1,639.0
Cost of sales(1)		1,189.3			92.5			1,281.8
Operating and delivery		139.1			12.8			151.9
Selling, general and administrative		108.5			9.3			117.8
Depreciation and amortization(1)		3.1			1.4			4.5
Operating income		82.1			0.9			83.0
Interest expense		12.0			4.1			16.1
Other (income) expense, net		(0.1	)		—			(0.1	)
Income (loss) before income taxes and discontinued operations	$	70.2		$	(3.2	)	$	67.0

As of December 31, 2011, we had $415.4 million of eligible collateral, $227.7 million in outstanding advances, $23.9 million in open letters of credit and $163.8 million of additional borrowing capacity. As of December 31, 2011, we had $5.9 million of cash.

43At March 7, 2012, we had $439.3 million of eligible collateral, $253.8 million in outstanding advances, $22.7 million in open letters of credit and $162.8 million of additional borrowing capacity. As of March 7, 2011, we had approximately $6.2 million of cash.

~~Table~~Guarantees and Security. Substantially all of ~~Contents~~our subsidiaries are defined as “borrowers” under the ABL Credit Agreement. The obligations under the ABL facility are guaranteed by Flag Intermediate and certain of our

~~The~~42 period from May 9, 2005 (date of inception) to December 31, 2005 includes one month of operations, the month of December, of Metals USA. There is a slight decrease in our business during the winter months because of the impact of inclement weather conditions on the construction industry. This decrease in business, as well as the increase in costs that were associated with purchase accounting of $5.2 million, resulted in a net loss of $3.2 million.

	2005 Combined—By Segment
	Net Sales			%		OperatingIncome(Loss)			%		CapitalExpenditures		Shipments(2)
	(in millions, except percentages)
Combined Non-GAAP 2005:
Plates and Shapes	$	694.7		42.4	%	$	68.4		82.4	%	$	13.7	740
Flat Rolled and Non-Ferrous		770.9		47.0	%		35.5		42.8	%		2.5	723
Building Products		195.1		11.9	%		16.8		20.2	%		3.2	—
Corporate and Other		(21.7	)	(1.3	)%		(37.7	)	(45.4	)%		0.9	(24	)
Total	$	1,639.0		100.0	%	$	83.0		100.0	%	$	20.3	1,439
Successor Company:
Plates and Shapes	$	54.5		46.6	%	$	4.0		444.4	%	$	4.1	57
Flat Rolled and Non-Ferrous		51.0		43.6	%		0.6		66.7	%		0.2	52
Building Products		13.2		11.3	%		(0.7	)	(77.8	)%		0.1	—
Corporate and Other		(1.8	)	(1.5	)%		(3.0	)	(333.3	)%		—	(2	)
Total	$	116.9		100.0	%	$	0.9		100.0	%	$	4.4	107
Predecessor Company:
Plates and Shapes	$	640.2		42.1	%	$	64.4		78.4	%	$	9.6	683
Flat Rolled and Non-Ferrous		719.9		47.3	%		34.9		42.5	%		2.3	671
Building Products		181.9		12.0	%		17.5		21.3	%		3.1	—
Corporate and Other		(19.9	)	(1.4	)%		(34.7	)	(42.2	)%		0.9	(22	)
Total	$	1,522.1		100.0	%	$	82.1		100.0	%	$	15.9	1,332

domestic subsidiaries and are secured by a first-priority lien and security interest in, among other things, accounts receivable, inventory and deposit accounts of Flag Intermediate, Metals USA and the subsidiaries of Metals USA party to the ABL Credit Agreement and a second-priority lien and security interest in, among other things, substantially all other tangible and intangible personal and real property owned by such companies, subject to certain exceptions.

~~(1)~~Interest AsRate aand ~~result~~Fees. ofAt ~~the~~Metals ~~Merger~~USA’s option, interest accrues on the ~~fair~~loans ~~value~~made ofunder the ~~inventories,~~ABL ~~property~~facility ~~and~~at ~~equipment~~either ~~and~~LIBOR ~~intangibles~~plus ~~(customer~~a ~~lists)~~specified ~~were~~margin ~~increased~~(set byat ~~$14~~1.975% ~~million, $118~~(3.625% ~~million~~for ~~and~~the ~~$22.2~~FILO ~~million~~tranche) as of December 31, ~~respectively.~~2011), ~~For~~or the ~~Successor~~base ~~Company~~rate ~~for~~(which is based off of the ~~period~~federal ~~from~~funds ~~May~~rate 9plus 0.50%, ~~2005~~Bank ~~(date~~ of ~~inception)~~America’s toprime ~~December~~rate ~~31,~~or ~~2005~~LIBOR plus 1.00%), ~~operating~~plus ~~costs~~a ~~and~~specified ~~expenses~~margin ~~were~~(set ~~increased~~at ~~by $5~~0.275% ~~million~~ ($42.125% ~~million~~ for ~~cost~~the ofFILO ~~sales~~tranche) ~~and~~as $1of December 31, 2011).1 ~~million~~Under ofthe ~~additional~~ABL ~~depreciation~~facility ~~and~~amendment ~~amortization)~~that aswas executed on August 10, 2011, the ~~inventory~~specified ~~was~~margins ~~sold~~over ~~and~~LIBOR ~~additional~~were ~~depreciation~~reduced ~~and~~by ~~amortization~~75 ~~was~~basis points ~~recorded.~~for Onthe aTranche ~~segment~~A ~~basis,~~commitments $and 62.5 basis points for the FILO tranche.2 ~~million~~The ~~additional~~marginal ~~operating~~rates ~~cost~~vary ~~and~~based ~~expense~~on ~~was~~our ~~allocated~~average monthly excess availability (as ~~follows:~~defined ~~Building~~in ~~Products~~the $1ABL Credit Agreement).1 ~~million,~~The ~~Flat~~applicable ~~Rolled~~base rate and ~~Non-Ferrous~~the ~~$1.9~~effective ~~million,~~LIBOR ~~Plates~~rate for ~~and~~the ~~Shapes~~loans ~~$1.6~~made ~~million,~~under ~~and~~the ~~Corporate~~ABL $facility were 3.25% and 0.655%, ~~million~~respectively, as of December 31, 2011.

~~(2)~~A ~~Shipments~~commitment ~~are~~fee is ~~expressed~~payable inon ~~thousands~~any unused commitment equal to 0.25% per annum to the lenders under the ABL facility if utilization under the facility exceeds 40.0% of ~~tons~~the total commitments under the facility and ~~are~~a ~~not~~commitment anfee ~~appropriate~~equal ~~measure~~to 0.375% per annum if utilization under the facility is less than or equal to 40.0% of ~~volume~~the ~~for~~total commitments under the ~~Building~~facility. ~~Products~~Customary ~~Group~~letter of credit fees are also payable, as necessary.

	PredecessorCompany			Successor Company			Combined Non-GAAP
	Period from January 1, 2005 to November 30,2005			Period from May 9, 2005 (Date of Inception) to December 31,2005			Year Ended December 31,2005
				(in millions)
Cash Flow Data:
Cash flows provided by (used in) operating activities	$	170.1		$	7.3		$	177.4
Cash flows used in investing activities		(15.8	)		(434.5	)		(450.3	)
Cash flows provided by (used in) financing activities		(120.7	)		438.5			317.8

Certain Conditions Precedent and Covenants. As a condition precedent to any borrowing or issuance of a letter of credit, a material adverse effect shall not have occurred or exist. The ABL facility contains customary representations, warranties and covenants, including limitations on our ability to incur or guarantee additional debt, subject to certain exceptions, pay dividends, or make redemptions and repurchases, with respect to capital stock, repay debt, create or incur certain liens, make certain loans or investments, make acquisitions or investments, engage in mergers, acquisitions, asset sales, and engage in certain transactions with affiliates. The ABL facility requires a lock-box arrangement for collection of accounts receivable and proceeds from sales of inventory. Metals USA may make withdrawals from the lock-box unless an event of default exists or borrowing availability is less than the greater of (i) $50.0 million and (ii) 12.5% of the lesser of (A) the borrowing base (not to exceed $62.5 million) and (B) the aggregate commitment. We do not have to maintain a minimum FCCR as long as our borrowing availability is greater than or equal to the Minimum Availability, defined as the greater of (i) $45.0 million and (ii) 10% of the lesser of the borrowing base and the aggregate commitment. We must maintain an FCCR of at least 1.0 to 1.0 if borrowing availability falls below the Minimum Availability. For purposes of determining covenant compliance, the FCCR is determined by dividing (i) the sum of Adjusted EBITDA (as defined in the ABL Credit Agreement) minus income taxes paid in cash (excluding certain specified deferred taxes) minus non-financed capital expenditures by (ii) the sum of certain distributions paid in cash, cash interest expense and scheduled principal reductions on debt, and is calculated based on such amounts for the most recent period of four consecutive fiscal quarters for which financial statements are available. FCCR and Adjusted EBITDA are each calculated on a pro forma basis. As of December 31, 2011, our FCCR was 2.82.

44Certain Events of Default and Remedies. The ABL facility contains events of default with respect to: default in payment of principal when due, default in the payment of interest, fees or other amounts after a specified grace period, material breach of the representations or warranties, default in the performance of covenants, a default that causes or permits acceleration under any indebtedness with a principal amount in excess of a specified amount, certain bankruptcy events, certain ERISA violations, invalidity of certain security agreements or guarantees, material judgments, or a change of control. In the event of default, the ABL Credit Agreement may permit a majority of the lenders to: (i) restrict the amount of or refuse to make revolving loans; (ii) cause customer receipts to be applied against borrowings under the ABL facility which would cause Metals USA to suffer a rapid loss of liquidity and restrict the ability to operate on a day-to-day basis; (iii) restrict or refuse to provide letters of credit; or ultimately: (iv) terminate the commitments and the agreement; or (v) declare any or all obligations to be immediately due and payable if such default is not cured in the specified period required.

~~Table~~43 ~~of Contents~~

~~Reconciliation~~ Any payment default or acceleration under the ABL facility would also result in a default under the Metals USA Notes that would provide the holders of ~~Net~~the ~~Income~~Metals ~~(Loss)~~USA toNotes ~~EBITDA~~with ~~and~~the ~~Adjusted~~right ~~EBITDA~~to demand immediate repayment.

	Predecessor Company						Successor Company
	Year EndedDecember 31, 2004			Period fromJanuary 1,2005 toNovember 30,2005			Period fromMay 9, 2005(Date ofInception) toDecember 31,2005			Year EndedDecember 31,2005			Year EndedDecember 31, 2006
	(in millions)
Net income (loss)	$	104.5		$	43.5		$	(2.0	)	$	41.5		$	39.5
Depreciation and amortization(1)		2.0			3.5			1.5			5.0			22.6
Interest expense		8.4			12.0			4.1			16.1			54.1
Provision (benefit) for income taxes		63.3			26.7			(1.2	)		25.5			25.9
Other (income) expense		(2.5	)		(0.1	)		—			(0.1	)		(0.5	)
EBITDA		175.7			85.6			2.4			88.0			141.6
Covenant defined adjustments:
Inventory purchase adjustments(2)		—			—			4.1			4.1			10.8
Stock options and grant expense(3)		—			15.0			0.4			15.4			1.2
Write-off prepaid expenses as result of Merger(4)		—			0.3			—			0.3			—
Facilities closure(5)		5.0			—			—			—			1.4
Severance costs(6)		—			0.7			—			0.7			—
Management fees(7)		—			—			0.1			0.1			1.2
Adjusted EBITDA	$	180.7		$	101.6		$	7.0		$	108.6		$	156.2
Fixed charge coverage ratio(8)		N/A			N/A			N/A			N/A			1.51

Interest Rate Swaps. In February 2008, $250.0 million notional amount of outstanding borrowings under the ABL facility were swapped from a floating LIBOR-based rate to a fixed rate. The swaps entitled us to receive quarterly payments of interest at a floating rate indexed to three-month LIBOR and pay a fixed rate that ranged from 2.686% to 2.997%, converting a portion of the outstanding borrowings on our ABL facility from a floating rate obligation to a fixed rate obligation. Pretax realized gains and losses from the Company’s ABL facility interest rate swaps which were recognized in earnings during the year ended December 31, 2011 amounted to $0.1 million of additional interest expense, consisting of $1.8 million of settlements, offset by $1.7 million of changes in the fair value of derivatives. The Company’s ABL facility interest rate swaps expired during the second quarter of 2011.

~~(1)~~The ~~Includes~~Metals ~~depreciation~~USA ~~for Building Products that is included in cost of sales.~~Notes

~~(2)~~On Asthe aclosing ~~result~~date of ~~management’s~~the ~~analysis~~Merger, ~~and~~we ~~evaluation~~received approximately $268.0 million of ~~the~~net ~~replacement~~cash ~~cost~~proceeds from the sale of ~~inventory~~$275.0 asmillion ofin ~~the~~aggregate ~~closing~~principal amount of the ~~Transactions~~Metals USA Notes, aafter ~~purchase~~deducting ~~accounting~~expenses ~~increase~~of inthe offering. Interest on the ~~fair~~Metals ~~value~~USA ofNotes ~~inventory~~accrues at the rate of ~~$14.9~~11 1/8% per ~~million~~annum ~~was~~and ~~recorded~~is aspayable ofsemiannually in arrears on June 1 and December 1 and commenced on June 1, ~~2005~~2006. ~~with~~The ~~$4.~~Metals USA Notes will mature on December 1, ~~million~~2015. ofWe ~~that~~may ~~amount~~redeem ~~charged~~some toor ~~cost~~all of ~~sales~~the inMetals USA Notes at any time on or after December 1, ~~2005~~2010, at a predetermined redemption price plus accrued and ~~$10.8~~unpaid ~~million~~interest ~~charged~~and additional interest, if any, to ~~cost~~the applicable redemption date. If we experience a change of ~~sales~~control inand we do not redeem the ~~first~~Metals ~~quarter~~USA Notes, we will be required to make an offer to repurchase the Metals USA Notes at a price equal to 101% of ~~2006~~the principal amount, plus accrued and unpaid interest and additional interest, if any, to the date of repurchase.

~~(3)~~Under ~~The~~the ~~Predecessor~~Metals ~~Company~~USA ~~paid~~Notes ~~$14.6~~Indenture, ~~million~~we onare ~~the~~required ~~closing~~to ~~date~~pay ofinterest ~~the~~on ~~Merger~~overdue toprincipal ~~holders~~at of 1~~,081,270~~% per ~~vested~~annum in~~-the-money~~ ~~options~~excess ~~and holders~~ of ~~45,437~~the ~~restricted~~above ~~stock~~rate ~~grant~~and ~~awards.~~are ~~Those~~required ~~amounts~~to ~~were~~pay ~~recorded~~interest ason anoverdue ~~administrative~~installments ~~expense~~of interest ~~during~~at ~~the~~such ~~period~~higher ~~from~~rate ~~January 1, 2005~~ to ~~November~~the ~~30,~~extent ~~2005~~lawful. The ~~remaining~~Metals ~~stock~~USA ~~options~~Notes ~~and~~Indenture ~~grant~~contains ~~expense~~the ~~represented~~covenants ~~non-cash~~described ~~charges~~under to“—Covenant ~~expense~~Compliance” above.

The Metals USA Notes Indenture contains certain customary events of default, including (subject, in some cases, to customary cure period thresholds) defaults based on (1) the failure to make payments under the Metals USA Notes Indenture when due, (2) breach of covenants, (3) cross-defaults to other material indebtedness, (4) bankruptcy ~~These~~events ~~prepaid~~and ~~amounts~~(5) material judgments. We were ~~written~~in ~~off~~compliance aswith aall ~~result~~covenants as of December 31, ~~the Merger~~2011.

~~(5)~~Industrial ~~This~~Revenue ~~amount~~Bonds for 2004 represents $5.0 million of charges in the Building Products Group for the elimination of one layer of management and closure of eleven facilities. The amount for 2006 represents $1.4 million of charges in connection with the closure of three facilities within the Building Products Group and one facility within each of the Plates and Shapes and Flat Rolled and Non-Ferrous Groups, respectively.

(Metals USA is a conduit bond obligor on IRBs issued by the municipalities of Muskogee, Oklahoma and Jeffersonville, Indiana. As of December 31, 2011, our total indebtedness under the IRBs was $12.6) ~~This~~million. ~~amount~~The ~~represents~~IRBs ~~severance~~are ~~costs~~secured by certain real estate, leasehold improvements and equipment acquired with proceeds from the IRBs. The Muskogee IRB is due in one lump sum of ~~management~~$5.7 million ~~personnel~~on ~~that~~May 1, ~~were~~2023. ~~replaced~~The Jeffersonville IRBs had principal amounts outstanding of $4.0 million and $2.9 million as ~~part~~of December 31, 2011, and are being redeemed in varying amounts annually through August 2021 and December 2027, respectively. The interest rates assessed on the IRBs vary from month to month. As of December 31, 2011, the ~~Merger~~weighted average interest rate on the IRBs was 0.26%. The IRBs place various restrictions on certain of our subsidiaries, including but not limited to maintenance of required insurance coverage, maintenance of certain financial ratios, limits on capital expenditures and maintenance of tangible net worth and are supported by letters of credit. We were in compliance with all covenants as of December 31, 2011.

~~(7)~~Interest ~~Includes~~Rate ~~accrued~~Swaps. ~~expenses~~In ~~related~~November to2004 ~~the~~and ~~management~~December ~~agreement~~2007, ORMS, which we ~~have~~acquired ~~with~~on December 31, ~~Apollo~~2010, ~~pursuant~~entered tointo ~~which~~two ~~Apollo~~separate ~~provides~~interest usrate swap agreements in connection with ~~management~~the ~~services.~~Jeffersonville IRBs

~~(8)~~44 This amount represents the FCCR, as defined by the ABL facility, which is not applicable for the Predecessor Company which operated under a different revolving credit facility, or for the period from May 9, 2005 (date of inception) to December 31, 2005 of the Successor Company because the FCCR is based on a rolling four quarter period.

~~Off~~ discussed above. The notional amounts under these swaps correspond to the principal amounts of the IRBs. The first swap agreement matured in December 2011. The second swap agreement matures in December 2017, and had notional value of $4.0 million as of December 31, 2011, an amount that is reduced on an annual basis as the IRB is redeemed. Under the swaps, the notional amounts under the Jeffersonville IRBs were swapped from a floating rate based on a rate established by the Securities Industry and Financial Market Association (“SIFMA”) to fixed rates of 4.00% and 3.75%, converting the outstanding borrowings on the Jeffersonville IRBs from floating rate obligations to fixed rate obligations. Pretax realized gains and losses from these derivatives are recognized in earnings as an addition or reduction to interest expense, consisting of cash settlements and changes in the fair value of derivatives. The fair value of the ORMS interest rate swap was $0.6 million at December 31, 2011, which was classified as other long-~~Balance~~term ~~Sheet~~liabilities ~~Arrangements~~in the consolidated balance sheet.

WeIntercompany ~~were~~Loan ~~not~~Agreement ~~engaged in off-balance sheet arrangements through any unconsolidated, limited purpose entities and no material guarantees of debt or other commitments to third parties existed at December 31, 2006.~~

45Metals USA Holdings has made advances to Metals USA through an intercompany loan agreement, as amended, (the “Loan Agreement”), which totaled $47.0 million as of December 31, 2011 and 2010. The advances have been primarily to accommodate working capital expansion and the J. Rubin acquisition discussed in Note 2 to our Consolidated Financial Statements. In June 2011, the Loan Agreement was amended to extend the maturity date to June 15, 2017, and to modify the rate at which borrowings under the Loan Agreement bear interest to LIBOR plus 6.00% per annum. The aggregate amount of Metals USA Holdings’ commitment under the Loan Agreement is $50.0 million. For the years ended December 31, 2011 and 2010, Metals USA recognized $5.6 million and $1.8 million, respectively, of interest expense related to the Loan Agreement.

~~Table~~Restricted ofPayments ~~Contents~~

~~Contractual~~Both ~~Obligations~~the ABL facility and the Metals USA Notes Indenture contain restrictions as to the payment of dividends. Under the ABL Credit Agreement, general distributions are unlimited if the FCCR is at least 1.1:1.0 and availability (including a 30 day lookback) exceeds the greater of (i) $50.0 million and (ii) 15% of the lesser of the borrowing base (not to exceed $75.0 million) and the aggregate commitments. As of December 31, 2011, our FCCR was 2.82, and our borrowing availability was $163.8 million.

WeAs ~~enter into operating leases for many~~ of ~~our~~December 31, ~~facility~~2011, ~~vehicle and equipment needs~~$28.9 ~~These~~million ~~leases~~was ~~allow~~available usfor togeneral ~~conserve~~distribution ~~cash~~under bythe ~~paying~~restricted apayment ~~monthly~~covenant ~~lease rental~~contained ~~fee~~in ~~for~~ the ~~use~~Metals ~~of,~~USA ~~rather~~Notes ~~than purchasing, facilities, vehicles and equipment~~Indenture. AtAs ~~the end~~ of ~~the~~December 31, ~~lease~~2011, ~~we have no further obligation to the lessor. We have varying amounts of open purchase orders that are subject to~~Flag ~~renegotiation/cancellation~~Intermediate byand ~~either~~its ~~party~~wholly asowned tosubsidiary, ~~quantity~~Metals ~~or price. Generally~~USA, ~~the~~had ~~amounts~~$220.7 ~~outstanding~~million ~~relate to delivery periods~~ of uptotal tostockholder’s ~~12 weeks from the date of the purchase order~~equity.

~~Our~~We ~~future~~believe that ~~contractual~~cash flow from operations, supplemented by cash available under the ABL facility, will be sufficient to enable us to meet our debt service and operational obligations ~~include~~as they come due for at least the ~~following:~~next twelve months.

			For the Fiscal Years Ended December 31,
	Total		2007		2008		2009		2010		2011		Beyond
			(in millions)
ABL facility(1)	$	329.0	$	—	$	—	$	—	$	—	$	329.0	$	—
Purchase Orders		209.0		209.0		—		—		—		—		—
11 1/8% Senior Secured Notes Due 2015		550.4		30.6		30.6		30.6		30.6		30.6		397.4
IRB(2)		5.7		—		—		—		—		—		5.7
Other obligations		0.9		0.5		0.1		0.1		0.1		0.1		—
Operating lease obligations		76.3		17.2		15.1		11.0		9.8		8.7		14.5
Total	$	1,171.3	$	257.3	$	45.8	$	41.7	$	40.5	$	368.4	$	417.6

Commitments and Contingencies

~~(1)~~From ~~The~~time ~~amounts~~to ~~stated~~time, dowe ~~not~~are ~~include~~involved ~~interest~~in ~~costs.~~a ~~The~~variety ~~ABL~~of ~~facility~~claims, ~~bears~~lawsuits ~~interest~~and ~~based~~other ~~upon~~disputes aarising ~~margin~~in ~~over~~the ~~reference~~ordinary ~~rates~~course ~~established~~of ~~within a specific pricing grid~~business. ~~The~~We ~~marginal~~believe ~~rates~~the ~~will~~resolution ~~vary~~of ~~with~~these ~~our~~matters ~~financial~~and ~~performance~~the asincurrence ~~measured~~of bytheir related ~~the~~costs ~~fixed~~and ~~charge~~expenses ~~coverage~~should ~~ratio.~~not ~~The~~have ~~applicable~~a ~~base~~material ~~rate~~adverse ~~and~~effect ~~the~~on ~~effective~~our ~~LIBOR~~consolidated ~~rate~~financial ~~were~~position, ~~8.25%~~results ~~and~~of ~~5.36%~~operations, ~~respectively,~~liquidity onor ~~the~~cash ~~December 31, 2006~~flows.

~~(2)~~Off-Balance ~~The~~Sheet ~~amounts~~Arrangements ~~stated do not include interest costs. The interest rate assessed on the IRB varies from month to month based on an index of mutual bonds, which was 4.02% on December 31, 2006.~~

~~New~~We ~~Accounting~~were ~~Pronouncements~~not engaged in off-balance sheet arrangements through any unconsolidated, limited purpose entities and no material guarantees of debt or other commitments to third parties existed at December 31, 2011.

InLetters ~~June~~of ~~2006,~~credit ~~the~~outstanding ~~Financial~~at ~~Accounting Standards Board (“FASB”) issued FASB Interpretation No.~~December 4831, ~~“Accounting~~2011 ~~for~~consist ~~Uncertainty~~of inletters ~~Income~~of ~~Taxes”~~credit ~~(“FIN~~in ~~48”),~~the ~~which~~amount ~~clarifies~~of ~~the accounting~~$14.0 ~~for~~million ~~uncertainty~~ in ~~income~~conjunction ~~taxes~~with ~~recognized in~~ the ~~financial~~IRBs ~~statements~~and inother ~~accordance~~letters ~~with~~of ~~FASB~~credit ~~Statement~~aggregating No$9. ~~109~~9 ~~“Accounting~~million ~~for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the~~(total ~~financial~~letters ~~statement~~of ~~recognition~~credit ~~and measurement~~ of a tax position taken or expected to be taken in a tax return and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition$23.9 ~~FIN~~million 48at ~~is effective for fiscal years beginning after~~ December 1531, ~~2006~~2011). ~~The~~Other ~~Company~~letters ~~will adopt FIN 48 as~~ of ~~January 1,~~credit ~~2007,~~consist asprimarily ~~required. The cumulative effect~~ of ~~adopting~~collateral ~~FIN~~support 48for ~~will~~our beproperty ~~recorded~~and ascasualty ainsurance ~~change to opening retained earnings in the first quarter of 2007~~program. ~~The~~All ~~Company~~letters ~~expects that the adoption~~ of ~~FIN~~credit 48reduce ~~will not have a significant impact on~~ the ~~Company’s~~amount ~~consolidated~~available ~~financial position, results of operations and effective tax rate. The Company will record an adjustment~~ to ~~reduce~~borrow ~~opening~~under ~~retained~~the ~~earnings for approximately $2 million to $4 million~~ABL facility. ~~See Note 9 to our Consolidated Financial Statements for further discussion of our tax reserves.~~

In45 September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which enhances existing guidance for measuring assets and liabilities using fair value. SFAS 157 provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities. SFAS 157 also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets out a fair value hierarchy with the highest priority being quoted market prices in active markets. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. SFAS 157 is effective for financial statements issued for fiscal

46Contractual Obligations

~~Table~~We enter into operating leases for many of ~~Contents~~our facility, vehicle and equipment needs. These leases allow us to conserve cash by paying a monthly lease rental fee for the use of, rather than purchase of, facilities, vehicles and equipment. At the end of the lease, we have no further obligation to the lessor. We have varying amounts of open purchase orders that are subject to renegotiation/cancellation by either party as to quantity or price. Generally, the amounts outstanding relate to delivery periods of up to 12 weeks from the date of the purchase order.

Our ~~years~~future ~~beginning~~contractual ~~after~~obligations ~~November 15,~~as ~~2007,~~of ~~and interim periods within those fiscal years. The Company is currently assessing the impact~~December 31, if2011 ~~any,~~include ~~that~~ the ~~adoption~~ offollowing: ~~SFAS 157 will have on the Company’s financial statements.~~

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (“SFAS 158”), which requires the recognition of the funded status of benefit plans in the balance sheet. SFAS 158 also requires certain gains and losses that are deferred under current pension accounting rules to be recognized in accumulated other comprehensive income, net of tax effects. These deferred costs (or income) will continue to be recognized as a component of net periodic pension cost, consistent with current recognition rules. For entities with no publicly traded equity securities, the effective date for the recognition of the funded status is for fiscal years ending after June 15, 2007. In addition, the ability to measure the plans’ benefit obligations, assets and net period cost at a date prior to the fiscal year-end date is eliminated for fiscal years ending after December 15, 2008. The Company is currently evaluating the provisions SFAS 158 and the potential impact that adoption may have on our financial statements.


			For the Fiscal Years Ended December 31,
	Total		2012		2013		2014		2015		2016		Beyond
							(in millions)
ABL facility (1)	$	227.7	$	—	$	—	$	—	$	227.7	$	—	$	—
Purchase obligations		292.3		292.3		—		—		—		—		—
Metals USA Notes		327.1		25.2		25.2		25.2		251.5		—		—
IRBs (2)		12.6		0.4		0.4		0.4		0.4		0.5		10.5
Due to Parent		47.0		—		—		—		—		—		47.0
Other obligations (3)		8.0		1.2		1.3		1.2		0.7		0.6		3.0
Operating lease obligations		37.1		11.5		8.3		6.2		5.4		2.6		3.1

Total (4)	$	951.8	$	330.6	$	35.2	$	33.0	$	485.7	$	3.7	$	63.6

~~In September 2006, the SEC issued Staff Accounting Bulletin No. 108~~ (~~“SAB 108”~~1) ~~regarding~~The ~~the~~amounts ~~process~~stated ofdo ~~quantifying~~not ~~financial~~include ~~statement~~interest ~~misstatements~~costs. ~~SAB~~The ~~108~~ABL ~~states~~facility ~~that~~bears ~~registrants~~interest ~~should~~based ~~use~~upon ~~both~~ a ~~balance~~ ~~sheet~~margin ~~approach~~over ~~and~~reference anrates ~~income~~established ~~statement~~within ~~approach~~a ~~when~~specific ~~quantifying~~pricing ~~and evaluating the materiality of a misstatement~~grid. The ~~interpretations~~marginal inrates ~~SAB~~will ~~108~~vary ~~contain~~based ~~guidance~~ on ~~correcting errors under the dual approach as well as provide transition guidance for correcting errors~~availability. ~~SAB~~The ~~108~~applicable isbase ~~effective~~rate ~~for~~and ~~annual financial statements covering~~ the ~~first~~effective ~~fiscal~~LIBOR ~~year~~rate ~~ending~~were ~~after~~3.25% ~~November 15,~~and ~~2006~~0.55%, ~~SAB~~respectively, ~~108 did not have a material effect~~ on ~~the~~December ~~Company’s~~31, ~~current or previously issued financial statements~~2011.

47(2) The amounts do not include interest costs. The interest rates assessed on the IRBs vary from month to month based on an index of mutual bonds. The weighted average IRB rate was 0.26% as of December 31, 2011.

~~Table~~(3) Consists of ~~Contents~~(i) note payable in connection with the Trident acquisition of approximately $1.5 million, (ii) capital lease of approximately $0.5 million, and (iii) a multiemployer pension fund withdrawal liability of approximately $6.0 million.

~~Item 7A~~(4) Excludes payments for unrecognized tax benefits. ~~Quantitative~~We believe it is reasonably possible that a decrease of up to $1.0 million in the consolidated liability for unrecognized tax benefits related to federal and ~~Qualitative~~state ~~Disclosures~~tax ~~About~~uncertainties ~~Market~~may ~~Risk~~occur within the next twelve months. In addition, we believe that it is reasonably possible that approximately $1.5 million of other remaining unrecognized tax benefits, each of which is individually insignificant, may be recognized within the next twelve months as a result of a lapse in the statute of limitations. For additional information see Note 10 to the consolidated financial statements in Item 8 of this Form 10-K.

InCritical ~~the~~Accounting ~~normal course~~Policies ~~of business, we are exposed to market risk, primarily from changes in interest rates~~ and ~~the~~Estimates cost of metal we hold in inventory. We continually monitor exposure to market risk and develop appropriate strategies to manage this risk. With respect to our metal purchases, there is no recognized market to purchase derivative financial instruments to reduce the inventory exposure risks. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for a discussion of market risk relative to steel prices.

~~Our~~The ~~exposure~~discussion toand ~~market risk~~analysis ~~for~~of ~~changes~~our infinancial ~~interest~~condition ~~rates~~and ~~will~~results ~~relate~~of ~~primarily~~operations tois ~~the~~based ~~ABL~~upon ~~facility~~our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The ~~ABL~~preparation ~~facility~~of ~~was~~these ~~subject~~consolidated financial statements requires us to ~~variable~~make ~~interest~~estimates ~~rates~~and asjudgments that affect the reported amounts of ~~December 31~~assets, ~~2006.~~liabilities, ~~Accordingly~~revenues and expenses, weand ~~are~~related disclosures ~~subject~~of tocontingent ~~interest~~assets ~~rate~~and ~~risks~~liabilities. Estimates are based on ~~the~~historical ~~revolving~~experience ~~credit~~and ~~facility. Outstanding~~on ~~borrowings~~various ~~under~~other ~~the~~assumptions ~~ABL~~that ~~facility~~are ~~were~~believed ~~$329.0~~to ~~million~~be asreasonable ofunder ~~December 31,~~the ~~2006~~circumstances. ~~Assuming~~The aresult 1%of ~~increase~~this inprocess forms the ~~interest~~basis ~~rate~~for onmaking judgments about the ~~revolving~~carrying ~~credit~~value ~~facility,~~of ~~our~~assets ~~annual~~and ~~interest~~liabilities ~~expense~~that ~~would~~are ~~increase~~not byreadily ~~$3.3~~apparent ~~million~~from other sources. ~~At December 31,~~We ~~2006,~~review ~~the~~our ~~Metals~~estimates ~~USA~~and ~~Notes~~judgments ~~were~~on ~~traded~~a atregular, ~~approximately~~ongoing ~~110%~~basis. ofActual ~~face~~results ~~value,~~may ~~based~~differ onfrom ~~quoted~~these ~~market~~estimates ~~prices~~due to changed circumstances and conditions.

4846

~~Table~~The following accounting policies and estimates are considered critical in light of ~~Contents~~the potentially material impact that the estimates, judgments and uncertainties affecting the application of these policies might have on our reported financial information.

~~Item 8.~~Accounts ~~Financial~~Receivable ~~Statements and Supplementary Data~~

We generally recognize revenue as product is ~~REPORT~~shipped OF(risk ~~INDEPENDENT~~of ~~REGISTERED~~loss ~~PUBLIC~~for ~~ACCOUNTING~~our ~~FIRM~~products generally 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 receivable 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 receivable 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.

ToEach month we consider all available information when assessing the ~~Board~~adequacy of ~~Directors~~the provision for allowances, claims and ~~Stockholder~~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. The rate of future credit losses may not be similar to past experience.

~~Flag~~Inventories ~~Intermediate Holdings Corporation~~

WeAs ~~have audited the accompanying consolidated balance sheet~~ of ~~Flag Intermediate Holdings Corporation and subsidiary (the “Successor Company”) as of~~ December 31, ~~2006~~2011 ~~and~~we ~~2005,~~had ~~and~~inventories ~~the~~of ~~related~~$402.5 ~~consolidated~~million. ~~statements~~Inventories ofare ~~operations,~~stated ~~stockholder’s equity~~at ~~and~~the ~~cash~~lower ~~flows~~of ~~for~~cost ~~the~~or ~~year~~market ~~ended~~(“LCM”). ~~December 31,~~Our ~~2006~~inventories ~~and~~are ~~the~~accounted ~~period~~for ~~from~~using ~~May 9,~~a ~~2005~~variety ~~(date~~ of ~~inception)~~methods including tospecific ~~December 31~~identification, ~~2005. We~~average ~~have~~cost ~~also~~and ~~audited~~ the ~~related consolidated statements of operations~~first-in, ~~stockholders’ equity~~first-out ~~and~~method ~~cash flows~~ of ~~Metals USA, Inc~~accounting. ~~and~~Under ~~subsidiaries (~~the ~~“Predecessor~~LCM ~~Company”)~~concept, ~~for~~ the ~~period~~Company ~~from~~is ~~January 1,~~required ~~2005~~ to ~~November 30,~~recognize ~~2005~~an ~~and~~additional ~~the~~expense ~~year~~in ~~ended~~cost ~~December 31,~~of ~~2004.~~sales ~~These~~in ~~financial statements are~~ the ~~responsibility~~ ofcurrent ~~the~~period ~~Company’s~~for ~~management.~~any ~~Our~~inventory ~~responsibility~~whose replacement iscost tohas ~~express~~declined anbelow ~~opinion~~its oncarrying ~~these financial statements based on our audits~~cost.

We ~~conducted~~conduct ~~our~~an ~~audits~~LCM ininventory ~~accordance~~valuation ~~with~~annually ~~the~~as ~~standards~~ of ~~the~~December 31 or ~~Public~~more ~~Company~~frequently ~~Accounting~~if ~~Oversight~~circumstances ~~Board~~indicate ~~(United~~potential ~~States)~~write-downs. ~~Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.~~ The ~~Company~~LCM isvaluation ~~not~~requires ~~required~~us to ~~have,~~review ~~nor~~product ~~were~~specific wefacts ~~engaged~~and ~~to perform~~circumstances, anincluding ~~audit~~current ofselling its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstancesprices, ~~but~~estimated ~~not~~costs ~~for~~to ~~the~~complete ~~purpose~~and ofdeliver ~~expressing an opinion on~~ the ~~effectiveness of the Company’s internal control over financial reporting. Accordingly~~product, weexpectations ~~express~~for nonormal ~~such~~profit ~~opinion. An audit also includes examining~~margins, oncosts acurrently ~~test basis, evidence supporting the amounts and disclosures~~ in ~~the financial statements~~inventory, ~~assessing the accounting principles used and significant estimates made by management,~~ as well as ~~evaluating~~current ~~the~~replacement ~~overall financial statement presentation~~costs. ~~We believe that our audits provide a reasonable basis for our opinion.~~

In ~~our opinion,~~addition ~~such~~to ~~consolidated~~making ~~financial~~an assessment ~~statements present fairly, in all material respects, the financial position~~ of ~~the~~current ~~Successor~~selling ~~Company~~prices asrelative ofto ~~December 31,~~product ~~2006 and 2005~~cost, ~~and~~we ~~the~~also ~~results~~review ofcustomer ~~its~~purchasing ~~operations~~trends and ~~its~~take ~~cash~~into ~~flows~~consideration ~~for~~ the ~~year~~current ~~ended December 31,~~economic ~~2006~~conditions ~~and~~as ~~the~~they ~~period~~relate ~~from May 9, 2005 (date of inception)~~ to ~~December 31,~~our ~~2005,~~industry and the ~~results~~end-use ofindustries the Predecessor Company operations and its cash flows for the period from January 1, 2005 to November 30, 2005 and the year ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of ~~America.~~our customers.

AsDuring 2008 and 2009, the global financial crisis caused significant contraction in industrial production world-wide. The ~~discussed~~reduction in ~~Note~~demand 1for tometals ~~the~~was ~~consolidated~~driven ~~financial~~by ~~statements,~~widespread inventory destocking throughout the ~~Successor~~supply ~~Company~~chain ~~acquired~~as ~~the~~industry ~~Predecessor~~participants ~~Company~~looked onto ~~December 1,~~preserve ~~2005~~liquidity by reducing their investment in working capital. As a ~~transaction~~direct ~~accounted~~consequence ~~for~~of the rapid and unprecedented decline in ~~accordance~~metals ~~with~~prices ~~Statement~~we experienced as a result of ~~Financial~~the ~~Accounting~~economic ~~Standards~~recession Nodiscussed above, we recorded $53.4 million of write-downs during the year ended December ~~141~~31, 2009, as compared to $6.8 million of write-downs during the ~~“Business~~year ~~Combinations~~ended December 31, 2008, for inventory LCM adjustments in our metal service center businesses.”

~~/s/~~We ~~DELOITTE &~~have ~~TOUCHE~~not ~~LLP~~recorded any LCM adjustments since 2009, as metal selling prices relative to metal costs have been more favorable since approximately the second quarter of 2009. We continue to manage our inventory by working to optimize the tradeoff between holding inventory and forgoing incremental sales.

~~Houston,~~47 ~~Texas~~

~~February 23~~We regularly review inventory on hand and may periodically record provisions for damaged and slow-moving inventory based on the factors discussed above. Adjustments made with respect to inventory valuation often relate to improved information not previously available. Uncertainties with respect to inventory valuation are inherent in the preparation of financial statements. The rate of future losses associated with damaged or slow moving inventory, ~~2007~~or LCM write-downs, may not be similar to past experience.

49Goodwill

~~Table~~The acquisition method of ~~Contents~~accounting for business combinations requires the Company to make use of estimates and judgments to allocate the purchase price paid for acquisitions to the fair value of the net tangible and identifiable intangible assets. We perform a goodwill impairment test annually as of October 31. In addition, goodwill would be tested more frequently if changes in circumstances or the occurrence of events indicates that a potential impairment exists.

We test for impairment of goodwill by first making a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying ~~FLAG~~the ~~INTERMEDIATE~~two-step ~~HOLDINGS~~goodwill ~~CORPORATION~~impairment ~~AND~~test. ~~SUBSIDIARY~~If we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we proceed to the two-step approach as prescribed in Accounting Standards Codification (“ASC”) Topic 350—“Intangibles—Goodwill and Other” (“ASC 350”). The first step of the impairment test compares the fair value of a reporting unit with its carrying value including assigned goodwill. The second step of the impairment test is required only in situations where the carrying value of the reporting unit exceeds its fair value as determined in the first step. In such instances, we compare the implied fair value of goodwill to its carrying value. The implied fair value of goodwill is determined by allocating the fair value of a reporting unit to all of the assets and liabilities of that unit as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the price paid to acquire the reporting unit. The excess of the fair value of a reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill. An impairment loss is recorded to the extent that the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill.

~~CONSOLIDATED~~We ~~BALANCE~~use ~~SHEETS~~the present value of future cash flows to determine fair value in combination with the market approach. While we believe that our keys assumptions and estimates are consistent with those a hypothetical market participant would use given circumstances that are present at the time the estimates are made, future operating results could reasonably differ from our estimates and could require a provision for impairment in a future period.

~~(In~~New ~~millions)~~Accounting Pronouncements

	December 31,
	2006			2005
Assets
Current assets:
Cash	$	14.2		$	11.3
Accounts receivable, net of allowance of $8.4 and $7.8, respectively		212.2			172.9
Inventories		447.3			350.7
Deferred tax asset		15.0			8.3
Prepaid expenses and other		14.9			25.2
Total current assets		703.6			568.4
Property and equipment, net		194.6			171.6
Intangible assets, net		19.9			21.5
Goodwill		47.1			15.8
Other assets, net		16.7			18.0
Total assets	$	981.9		$	795.3
Liabilities and Stockholder’s Equity
Current liabilities:
Accounts payable	$	71.2		$	68.2
Accrued liabilities		59.0			46.3
Current portion of long-term debt		0.5			0.6
Total current liabilities		130.7			115.1
Long-term debt, less current portion		610.1			472.9
Deferred income tax liability		67.6			60.0
Other long-term liabilities		25.9			15.3
Total liabilities		834.3			663.3
Commitments and contingencies
Stockholder’s equity:
Common stock, $.01 par value, 100 shares authorized, issued and outstanding at December 31, 2006 and 2005		—			—
Additional paid-in capital		118.0			134.0
Retained earnings (deficit)		30.2			(2.0	)
Accumulated other comprehensive loss		(0.6	)		—
Total stockholder’s equity		147.6			132.0
Total liabilities and stockholder’s equity	$	981.9		$	795.3

In December 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-29 “Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations” (“ASU 2010-29”) which amended ASC Topic 805 “Business Combinations” to specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during the year had occurred as of the beginning of the comparable prior annual reporting period only. The ASU also expands the supplemental pro forma disclosures under ASC Topic 805 to include a description of the nature and the amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The ASU is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. We have disclosed the required information in accordance with ASU 2010-29 as it relates to the Trident acquisition described in Note 2 to our consolidated financial statements.

~~The~~In ~~accompanying~~June ~~notes~~2011, ~~are~~the anFASB ~~integral~~issued ~~part~~ASU ofNo. 2011-05 ~~these~~Comprehensive ~~consolidated~~Income ~~financial~~(Topic ~~statements.~~220): Presentation of Comprehensive Income (“ASU 2011-05”) which will amend some of the guidance in ASC Topic 220

5048

~~Table~~ “Comprehensive Income” regarding how companies must present comprehensive income. The main provisions of ~~Contents~~ASU 2011-05 provide that an entity that reports items of other comprehensive income has the option to present comprehensive income in either a single statement or two separate statements. A single statement would contain the components of net income and total net income, the components of other comprehensive income and total other comprehensive income, and a total for all comprehensive income. In a two-statement approach, an entity must present the components of net income and total net income in the first statement. That statement must be immediately followed by a financial statement that presents the components of other comprehensive income, a total for other comprehensive income, and a total for all comprehensive income. The ASU is intended to increase the prominence of other comprehensive income in financial statements and to facilitate convergence of U.S. GAAP and International Financial Reporting Standards. The amendments in ASU 2011-05 are to be applied retrospectively. For public entities, the ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2011. The Company expects to include the expanded disclosures about comprehensive income within its financial statements beginning in the first quarter of 2012. ASU 2011-05 impacts presentation only and will have no effect on the Company’s financial condition, results of operations, or cash flows.

In ~~FLAG~~September ~~INTERMEDIATE~~2011, ~~HOLDINGS~~the ~~CORPORATION~~FASB ~~AND~~issued ~~SUBSIDIARY~~ASU No. 2011-08 Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment (“ASU 2011-08”) which amends the guidance in ASC Topic 350 “Intangibles—Goodwill and Other” on testing goodwill for impairment. ASU 2011-08 permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test. If an entity concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it would not be required to perform the two-step impairment test for that reporting unit. The ASU’s objective is to simplify how an entity tests goodwill for impairment. ASU 2008-11 is effective for annual and interim goodwill impairment tests performed in fiscal years beginning after December 15, 2011. Early adoption is permitted. The Company elected to adopt ASU 2011-08 in the fourth quarter of 2011, coinciding with its 2011 annual goodwill impairment test. The adoption of ASU 2011-08 did not have a material impact on our financial statements.

~~CONSOLIDATED~~Item ~~STATEMENTS~~7A. OFQuantitative ~~OPERATIONS~~and Qualitative Disclosures About Market Risk

(In ~~millions)~~the normal course of our business, we are exposed to market risk, primarily from changes in interest rates and the cost of metal we hold in inventory. We continually monitor exposure to market risk and develop appropriate strategies to manage this risk. With respect to our metal purchases, there is no recognized market to purchase derivative financial instruments to reduce the inventory exposure risks. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for a discussion of market risk relative to steel prices.

	Successor Company						Predecessor Company
	Year EndedDecember 31,2006			Period fromMay 9, 2005(date ofinception) to December 31,2005			Period fromJanuary 1,2005 toNovember 30,2005			Year EndedDecember 31,2004
Net sales	$	1,802.9		$	116.9		$	1,522.1		$	1,509.8
Operating costs and expenses:
Cost of sales (exclusive of operating and delivery, and depreciation and amortization shown below)		1,371.8			92.5			1,189.3			1,080.1
Operating and delivery		175.5			12.8			139.1			144.4
Selling, general and administrative		115.2			9.3			108.5			109.6
Depreciation and amortization		21.4			1.4			3.1			2.0
Operating income		119.0			0.9			82.1			173.7
Other (income) expense:
Interest expense		54.1			4.1			12.0			8.4
Other (income) expense, net		(0.5	)		—			(0.1	)		(2.5	)
Income (loss) before income taxes		65.4			(3.2	)		70.2			167.8
Provision (benefit) for income taxes		25.9			(1.2	)		26.7			63.3
Net income (loss)	$	39.5		$	(2.0	)	$	43.5		$	104.5

Our exposure to market risk for changes in interest rates relates primarily to the ABL facility, which is subject to variable interest rates. As of December 31, 2011, outstanding borrowings under the ABL facility were $227.7 million. Based on the weighted average borrowings outstanding on the ABL facility during the year ended December 31, 2011, a one percent increase or decrease in the weighted average facility rate would have resulted in a change to pretax interest expense of approximately $2.2 million for the period.

In November 2004 and December 2007, ORMS, which we acquired on December 31, 2010, entered into two separate interest rate swap agreements in connection with the Jeffersonville IRBs discussed above. The ~~accompanying~~notional ~~notes~~amounts ~~are~~under these swaps correspond to the principal amounts of the IRBs. The first swap agreement matured in December 2011. The second swap agreement matures in December 2017, and had notional value of $4.0 million as of December 31, 2011, an ~~integral~~amount ~~part~~that is reduced on an annual basis as the IRB is redeemed. Under the swaps, the notional amounts under the Jeffersonville IRBs were swapped from a floating rate based on a rate established by SIFMA to fixed rates of 4.00% ~~these~~and ~~consolidated~~3.75%, ~~financial~~converting ~~statements~~the outstanding borrowings on the Jeffersonville IRBs from floating rate obligations to fixed rate obligations. Pretax realized gains and losses from these derivatives are recognized in earnings as an addition or reduction to interest expense, consisting of cash

5149

~~Table~~ settlements and changes in the fair value of ~~Contents~~derivatives. The fair value of the ORMS interest rate swap was $0.6 million at December 31, 2011, which was classified as other long-term liabilities in the consolidated balance sheet.

At December 31, 2011, $226.3 million aggregate ~~FLAG~~principal ~~INTERMEDIATE~~amount ~~HOLDINGS~~of ~~CORPORATION~~Metals ~~AND~~USA ~~SUBSIDIARY~~Notes were outstanding with a fixed interest rate of 11 1/8%. Changes in market interest rates will not impact cash interest payable on the Metals USA Notes. At March 2, 2012, the Metals USA Notes were traded at approximately 103.88% of face value, based on quoted market prices.

~~CONSOLIDATED~~50 ~~STATEMENTS OF STOCKHOLDER’S EQUITY~~

~~(In~~Item ~~millions)~~8. Financial Statements and Supplementary Data

	Successor Company						Predecessor Company
	Year EndedDecember 31,2006			Period fromMay 9, 2005(date ofinception) to December 31,2005			Period fromJanuary 1,2005 toNovember 30,2005			Year EndedDecember 31,2004
Common Stock ($.01 Par)
Balance at beginning and end of period shown below)	$	—		$	—		$	0.2		$	0.2
Additional Capital
Balance at beginning of period	$	134.0		$	—		$	219.5		$	196.2
Tax benefit realized from tax attribute carry forwards		—			—			2.4			21.2
Stock option exercises, grants and other adjustments		—			—			0.6			2.1
Capital contribution		—			134.0			—			—
Stock-based compensation		1.2			—			—			—
Dividends paid		(17.7	)		—			—			—
Other		0.5			—			—			—
Balance at end of period	$	118.0		$	134.0		$	222.5		$	219.5
Deferred Compensation
Balance at beginning of period	$	—		$	—		$	(0.2	)	$	—
Stock option exercises, grants and other adjustments		—			—			0.2			(0.2	)
Balance at end of period	$	—		$	—		$	—		$	(0.2	)
Retained Earnings (Deficit)
Balance at beginning of period	$	(2.0	)	$	—		$	108.7		$	4.2
Net income (loss)		39.5			(2.0	)		43.5			104.5
Dividends paid		(7.3	)		—			—			—
Balance at end of period	$	30.2		$	(2.0	)	$	152.2		$	108.7
Accumulated Other Comprehensive Loss
Foreign currency translation adjustments	$	(0.6	)	$	—		$	—		$	—
Other comprehensive loss		(0.6	)		—			—			—
Accumulated other comprehensive loss at beginning of period		—			—			—			—
Accumulated other comprehensive loss at end of period	$	(0.6	)	$	—		$	—		$	—
Comprehensive Income (Loss)
Net income (loss)	$	39.5		$	(2.0	)	$	43.5		$	104.5
Other comprehensive loss		(0.6	)		—			—			—
Total comprehensive income (loss)	$	38.9		$	(2.0	)	$	43.5		$	104.5

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

~~The~~To ~~accompanying~~the ~~notes~~Board ~~are~~of anDirectors ~~integral~~and ~~part~~Stockholder of ~~these consolidated financial statements.~~

52Flag Intermediate Holdings Corporation

~~Table~~Fort Lauderdale, ofFlorida ~~Contents~~

We have audited the accompanying consolidated balance sheets of Flag Intermediate Holdings Corporation and subsidiaries ~~FLAG~~(the ~~INTERMEDIATE~~“Company”) ~~HOLDINGS~~as ~~CORPORATION~~of ~~AND~~December 31, ~~SUBSIDIARY~~2011 and 2010, and the related consolidated statements of operations, stockholder’s equity and comprehensive income (loss), and cash flows for each of the three years in the period ended December 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

~~CONSOLIDATED~~We ~~STATEMENTS~~conducted OFour ~~CASH~~audits ~~FLOWS~~in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

(In ~~millions)~~our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Flag Intermediate Holdings Corporation and subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

	Successor Company						Predecessor Company
	Year Ended December 31,2006			Period fromMay 9, 2005(date ofinception) to December 31,2005			Period fromJanuary 1,2005 toNovember 30,2005			Year EndedDecember 31,2004
Cash flows from operating activities:
Net income (loss)	$	39.5		$	(2.0	)	$	43.5		$	104.5
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities— (Gain) loss on sale of property and equipment		0.1			—			(0.1	)		(0.5	)
Provision for bad debts		4.1			8.5			2.9			4.0
Depreciation and amortization		22.6			1.5			3.5			2.0
Amortization of deferred debt issuance costs		2.5			—			—			—
Deferred income taxes		(6.6	)		(1.6	)		—			—
Non-cash stock-based compensation expense		1.2			—			—			—
Adjustment to Predecessor Company tax attribute valuation allowance		—			—			2.4			12.5
Changes in operating assets and liabilities, net of effects of acquisitions— Accounts receivable		(35.6	)		8.1			(18.8	)		(52.5	)
Inventories		(91.2	)		(13.4	)		140.6			(222.9	)
Prepaid expenses and other		9.3			(6.6	)		(0.7	)		1.5
Accounts payable and accrued liabilities		11.3			12.2			(2.3	)		23.3
Other operating, net		(3.6	)		0.6			(0.9	)		(0.5	)
Net cash provided by (used in) operations		(46.4	)		7.3			170.1			(128.6	)
Cash flows from investing activities:
Sale of assets		1.6			—			0.1			1.4
Purchase of assets		(16.9	)		(4.4	)		(15.9	)		(17.4	)
Acquisition costs, net of cash acquired		(45.7	)		(430.1	)		—			—
Net cash used in investing activities		(61.0	)		(434.5	)		(15.8	)		(16.0	)
Cash flows from financing activities:
Borrowings on revolving credit facilities		—			—			1,426.0			1,639.2
Repayments on revolving credit facilities		—			(145.3	)		(1,533.7	)		(1,491.4	)
Borrowings on the ABL		441.6			247.4			—			—
Repayments on the ABL		(304.0	)		(56.0	)		—			—
Proceeds from issuance of Senior Secured Notes		—			275.0			—			—
Repayments of other long-term debt		(0.5	)		—			(10.4	)		(0.6	)
Capital contributions, net		—			134.0			—			—
Issuance of common stock		—			—			0.1			0.4
Dividends paid		(25.0	)		—			—			—
Deferred financing costs and other		(1.8	)		(16.6	)		(2.7	)		(1.8	)
Net cash provided by (used in) investing activities		110.3			438.5			(120.7	)		145.8
Net increase in cash		2.9			11.3			33.6			1.2
Cash, beginning of period		11.3			—			12.6			11.4
Cash, end of period	$	14.2		$	11.3		$	46.2		$	12.6
Supplemental Cash Flow Information:
Cash paid for interest	$	49.8		$	0.5		$	10.5		$	7.2
Cash paid for income taxes	$	23.2		$	7.0		$	27.6		$	54.5
Non-cash acquisitions of property and equipment	$	—		$	—		$	—		$	4.8

/s/ DELOITTE & TOUCHE LLP

~~The~~Certified ~~accompanying~~Public ~~notes~~Accountants ~~are an integral part of these consolidated financial statements.~~

53Boca Raton, Florida

~~Table~~March of14, ~~Contents~~2012

~~FLAG~~51 ~~INTERMEDIATE HOLDINGS CORPORATION AND SUBSIDIARY~~

~~NOTES~~FLAG TOINTERMEDIATE ~~CONSOLIDATED~~HOLDINGS ~~FINANCIAL~~CORPORATION ~~STATEMENTS~~ AND SUBSIDIARIES

~~(In~~CONSOLIDATED ~~millions)~~BALANCE SHEETS

1.(in ~~Organization and~~millions, ~~Significant~~except ~~Accounting~~share ~~Policies~~amounts)

Description of the Business


	December 31,
	2011		2010
Assets
Current assets:
Cash	$	5.9	$	15.2
Accounts receivable, net of allowance of $6.9 and $5.9, respectively		212.2		149.3
Inventories		402.5		290.8
Deferred income tax asset		7.9		12.0
Prepayments and other		9.4		9.8

Total current a

Filing Compare · FLAG INTERMEDIATE HOLDINGS Corp