Edgar Filing: Metals USA Holdings Corp.

Form S-1

As filed with the Securities and Exchange Commission on May 26, 2006

Registration No. 333-

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

METALS USA HOLDINGS CORP.

(Exact name of registrant as specified in its charter)


Delaware	5051	20-3779274
(State or other jurisdiction of Incorporation)	(Primary Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

One Riverway, Suite 1100

Houston, Texas 77056

(713) 965-0990

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

John A. Hageman

Senior Vice President and Chief Legal Officer

One Riverway, Suite 1100

Houston, Texas 77056

(713) 965-0990

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:


Andrew J. Nussbaum		LizabethAnn R. Eisen
Wachtell, Lipton, Rosen & Katz		Cravath, Swaine & Moore LLP
51 West 52nd Street		825 Eighth Avenue
New York, New York 10019		New York, New York 10019
(212) 403-1000		(212) 474-1000

Approximate date of commencement of proposed sale of securities to the public: As promptly as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

CALCULATION OF REGISTRATION FEE



Title of Each Class of Securities to Be Registered	Proposed Maximum Aggregate Offering Price(1)	Amount Of Registration Fee
Common Stock, $0.01 par value(2)	$200,000,000	$21,400.00

(1)	Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2)	Includes shares of Common Stock subject to the underwriters’ over-allotment option.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to completion. Dated May 26, 2006

LOGO

Metals USA Holdings Corp.

Common Stock

This is an initial public offering of shares of common stock of Metals USA Holdings Corp., which was formerly named Flag Holdings Corporation. All of the shares of common stock are being sold by the company.

We intend to use approximately $ million of the net proceeds from the shares being sold in this offering to pay a cash dividend of approximately $ million to our existing stockholders, and approximately $ million of the net proceeds to repay a portion of the amounts drawn under the six-year $450.0 million senior secured asset-based revolving credit facility of Metals USA, Inc., our indirect subsidiary.

Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price per share will be between $ and $ . We intend to apply to list our common stock on The New York Stock Exchange under the symbol “MUX.”

To the extent that the underwriters sell more than shares of common stock, the underwriters have the option to purchase up to an additional shares from us at the initial public offering price less the underwriting discount. We intend to use the net proceeds from any shares of our common stock sold pursuant to the underwriters’ over-allotment option for general corporate purposes.

Investing in our common stock involves risks. See “ Risk Factors” on page 19.


	Price to Public	Underwriting Discounts and Commissions	Proceeds to Metals USA Holdings Corp.
Per Share	$	$	$
Total	$	$	$

The underwriters expect to deliver the shares against payment in New York, New York on , 2006.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.


Goldman, Sachs & Co.		Credit Suisse		CIBC World Markets

The date of this prospectus is , 2006.

TABLE OF CONTENTS


		Page
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS		i
PROSPECTUS SUMMARY		1
SUMMARY HISTORICAL CONSOLIDATED AND PRO FORMA CONDENSED COMBINED FINANCIAL DATA		13
RISK FACTORS		19
USE OF PROCEEDS		31
DIVIDEND POLICY		32
CAPITALIZATION		33
DILUTION		35
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION		37
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA		46
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		50
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		74
BUSINESS		75
ORGANIZATIONAL STRUCTURE; DESCRIPTION OF THE TRANSACTIONS		91


		Page
MANAGEMENT		93
PRINCIPAL STOCKHOLDERS AND BENEFICIAL OWNERS		107
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS		109
DESCRIPTION OF CERTAIN INDEBTEDNESS		110
DESCRIPTION OF CAPITAL STOCK		114
SHARES ELIGIBLE FOR FUTURE SALE		119
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES FOR NON-U.S. HOLDERS		121
UNDERWRITING		124
INTERNAL CONTROL OVER FINANCIAL REPORTING		129
LEGAL MATTERS		129
EXPERTS		129
AVAILABLE INFORMATION		130
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1

You should rely only on the information contained in this document or to which we have referred you. We have not authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document.

Dealer Prospectus Delivery Obligation

Until , 2006 (25 days after commencement of the offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This prospectus contains “forward-looking statements” which involve risks and uncertainties. You can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” or “anticipates” or similar expressions that relate to our strategy, plans or intentions. All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results or to our expectations regarding future industry trends are forward-looking statements. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements are based upon information available to us on the date of this prospectus.

Important factors that could cause actual results to differ materially from our expectations (“cautionary statements”) are disclosed under “Risk Factors” and elsewhere in this prospectus, including, without limitation, in conjunction with the forward-looking statements included in this prospectus. All forward-looking information in this prospectus and subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Some of the factors that we believe could affect our results include:

our expectations with respect to our acquisition activity;

our substantial indebtedness described in this prospectus;

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

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

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

We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters

referred to in the forward-looking statements contained in this prospectus may not in fact occur. Accordingly, investors should not place undue reliance on those statements. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

INDUSTRY AND MARKET DATA

This prospectus includes industry data that we obtained from periodic industry publications and internal company surveys. Industry publications and surveys generally state that the information contained therein has been obtained from sources believed to be reliable. In addition, this prospectus includes market share and industry data that we prepared primarily based on our knowledge of the industry and industry data. We have not independently verified any of the data from third-party sources nor have we ascertained the underlying economic assumptions relied upon therein. Statements as to our market position relative to our competitors are approximated and based on the above-mentioned third-party data and internal analysis and estimates and have not been verified by independent sources. Unless otherwise noted, all information regarding our market share is based on the latest available data, which in some cases may be several years old, and all references to market shares refer to both revenue and volume.

PROSPECTUS SUMMARY

This summary highlights all material information appearing elsewhere in this prospectus. Because this is a summary, it may not contain all of the information that you should consider before investing in our common stock and you should carefully read the entire prospectus, including the financial data and related notes and the information presented under the caption “Risk Factors.”

Except as otherwise indicated herein or as the context otherwise requires, references in this prospectus to (a) “Metals USA Holdings,” the “company,” “we,” “our,” and “us” refer collectively to (1) Metals USA, Inc. and its subsidiaries on a consolidated basis prior to the consummation of the Merger described below and (2) Metals USA Holdings Corp., which was formerly named Flag Holdings Corporation, Flag Intermediate Holdings Corporation, Metals USA, Inc. and Metals USA, Inc.’s subsidiaries on a consolidated basis after the consummation of the Apollo Transaction described below, and (b) “Metals USA” refers collectively to Metals USA, Inc. and its subsidiaries.

Our Company

As one of the largest metals service center businesses in the United States, we are a leading provider and distributor of value-added processed carbon steel, stainless steel, aluminum, red metals and manufactured metal components. We are an important intermediary between primary metals producers, which 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, which we refer to in this prospectus as “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 metals producers. In addition to our metals service center and distribution activities, we have a building products business, which supplies a range of products to the residential remodeling industry. We recently completed two 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 “—Recent Developments.” As of the date of this prospectus, we served more than 30,000 customers annually from 80 operating locations throughout the United States and Canada.

Our business is divided into three primary operating groups: Plates and Shapes Group; Flat Rolled Group; and Building Products Group:

Plates and Shapes Group (42% of 2005 net sales). We believe we are one of the largest distributors of metal plates and shapes in the United States. The products we sell include wide-flange beams, plate, tubing, angles, bars and other structural shapes in a number of alloy grades and sizes. Additional processing we provide includes blasting and painting, tee-splitting, cambering, leveling, cutting, sawing, punching, drilling, beveling, surface grinding, bending and shearing. The majority of our products are sold to a diversified customer base, including a number of small customers who purchase products in small order sizes and require just-in-time delivery. Our Plates and Shapes customers generally operate in a limited geographic region and are primarily in the fabrication, construction, machinery and equipment, transportation and energy industries. In May 2006, we completed the acquisition of Port City Metal Services, Inc., which we refer to in this prospectus as “Port City,” a high-value-added plates processing facility located in Tulsa, Oklahoma, that bolsters our presence in the construction and oil-field services sector. See “—Recent Developments.” We serve our customers from 22 metals

service centers located primarily in the southern and eastern half of the United States with each center close to its metal suppliers and customers.

Flat Rolled Group (46% of 2005 net sales). The Flat Rolled Group’s products include carbon and stainless steel, aluminum, brass and copper in a number of alloy grades and sizes. As relatively few end-users can handle metal in the form shipped by mills (sizes less than a quarter of an inch in thickness in continuous coils that typically weigh 40,000 to 60,000 pounds), substantially all materials sold by our Flat Rolled Group undergo value-added processing including precision blanking, slitting, shearing, punching, bending and leveling. Our customers are primarily in the electrical manufacturing, fabrication, furniture, appliance manufacturing, machinery and equipment and transportation industries and include many larger customers (a number of whom purchase through pricing agreements or contractual arrangements) who value the high-quality products that we provide together with our customer service and reliability. We serve our customers from 12 metals service centers in the midwestern and southern regions of the United States, that are located near our metal suppliers and our customers.

Building Products Group (12% of 2005 net sales). The Building Products Group’s operations and end-markets significantly differ from those of our metals service center business. Approximately 95% of our Building Products Group sales are attributable to the residential remodeling industry. The Building Products Group primarily manufactures and sells sunrooms, roofing products, awnings and solariums for use in residential applications. Because these products are used in residential remodeling, their demand is not correlated to housing starts or interest rates, nor are their prices subject to fluctuations in the demand or price of metal. Most customers of this group are in the home improvement, construction, wholesale trade and building material industries. We believe we are one of only a few suppliers with national scale in the products we manufacture and distribute. We generally distribute our products through a network of independent distributors and home improvement contractors, and as of the date of this prospectus, we operate through 19 manufacturing locations and 27 sales and distribution facilities throughout the southern and western regions of the United States and Canada. In May 2006, we completed the acquisition of Dura-Loc Roofing System, Ltd, which we refer to in this prospectus as “Dura-Loc,” a metal roofing manufacturer and distributor headquartered near Toronto, Ontario, Canada that we believe broadens our footprint and solidifies our position as one of the largest stone-coated metal roofing manufacturers in North America. See “—Recent Developments.”

Industry Overview

Our operations focus on two industry segments: the metals service center business, which includes the Plates and Shapes Group and the Flat Rolled Group, and the buildings products segment, which includes our Buildings Products Group.

Metals Service Centers. In contrast to primary metals producers, who generally produce and sell a limited number of products in large volumes, metals service centers provide customization of metals in a wide range of products and volumes as well as assist in just-in-time delivery to our customers, who are end-users, such as contractors and OEMs. End-users incorporate processed metals into finished products, in some cases with little further modification. The service center industry is highly fragmented, with as many as 5,000 participants throughout North America, and generated more than $115 billion in net sales in 2005. Metals service centers accounted for approximately one quarter of U.S. steel shipments in 2005 based on volume, a market share which has been relatively constant for the last 15 years.

We believe that both primary metals producers and end-users are increasingly seeking to have their metals processing and inventory management requirements met by value-added metals service centers. Primary metals producers, as they have consolidated, increasingly require service centers and processors to perform value-added services for end customers. As a result, most end-users cannot obtain processed products directly from primary metals producers which results in over 300,000 OEMs, contractors and fabricators nationwide often relying on service centers. End-users have recognized that outsourcing their customized metals processing and inventory requirements has economic advantages as it allows them to reduce total production costs by shifting the responsibility for pre-production processing to service centers, which have greater efficiencies in performing these processing services.

Value-added service centers, including ourselves, have benefited from growing customer demand for inventory management and just-in-time delivery services. These supply-chain services, which are normally not provided by primary metals producers, enable end-users to reduce input costs, decrease capital required for inventory and equipment and save time, labor and other expenses.

The metals services industry has been consolidating due to the economies of scale and other advantages that the larger metals service centers enjoy. For example, primary metals producers appear to be reducing their operating costs by limiting the number of service centers with which they do business and end-users increasingly are seeking larger service centers capable of providing sophisticated processing services. We believe larger and better capitalized companies, like us, enjoy significant advantages over smaller companies in areas such as obtaining higher discounts associated with volume purchases, the ability to service customers with operations in multiple locations and the use of more sophisticated information systems.

Building Products. The residential remodeling industry has experienced strong and steady growth over the last ten years and, we believe, is poised for continued growth in the future. The Home Improvement Research Institute estimates that homeowners and rental property owners spend approximately $290 billion annually on remodeling their homes, which accounts for over 40% of all residential construction and improvement spending. Industry growth has been due to a number of macroeconomic and demographic factors (many of which we expect to continue), including rising disposable incomes, increased rates of house ownership and the aging of the domestic home supply. As Americans continue to improve and upgrade their homes, we believe an increasing number will turn to remodeling as a cost-effective alternative, including the installation or replacement of popular products such as pool enclosures, lattices, patio covers, sunrooms and roofing, all of which we manufacture and distribute.

Our Competitive Strengths

Our competitive strengths include:

Leading Market Position Provides Platform for Growth. We are one of the leading participants in most of the markets we serve, which gives us an excellent platform to make strategic acquisitions that will further enhance our strong market position. We have 80 operating facilities in total, which are focused by group on specific regions, giving us leading positions in each market in which we participate. The service center and building products industries are both highly fragmented, which we believe will provide us with opportunities to generate meaningful synergies through add-on acquisitions. In late-2005, we established and trained a dedicated acquisitions team that is responsible for identifying, evaluating, executing, integrating and monitoring acquisitions. We completed two acquisitions of companies focusing on higher

margin plates and shapes processing and building products in our Plates and Shapes Group and Building Products Group, respectively, in the second quarter of this year and have an active pipeline of additional acquisition opportunities that we continue to explore. See “—Recent Developments” and “Risk Factors—Risks Related to Our Business—We 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.”

Margin Over Metal Creates Financial Stability. Our metals service centers are an important intermediary between large metals producers and smaller end-users, which allows us to utilize a “cost plus” business model. Our cost plus business model allows us to earn a margin over the cost of metal for the value-added processing enhancements we add to our products. As a result, over time, we are able to pass along changes in metal prices to our customers. Given that metal costs typically and currently represent approximately 75% of our net sales, our ability to pass through changes in pricing and our cost plus business model significantly reduce the volatility of our earnings and free cash flow relative to metals producers.

Diversified Customer Base and End-Markets. Our three groups supply a broad range of products to a large, diversified customer base (over 30,000 customers per year) which serves a variety of end-markets and industries (as set forth in the chart below), including fabricated metal products, industry machinery & equipment, home improvement and electrical equipment, among others. The automotive sector, where we sell only to primary and secondary parts suppliers, represented less than 4% of our net sales in 2005. No single customer accounted for more than 3% of our net sales in 2005, while our ten largest customers represented less than 12% of our net sales in 2005. We are also diversified on a geographic market basis, with each of our groups focusing on distinct geographic regions, protecting us against regional fluctuations in demand.

LOGO

Broad Product Offering with Superior Customer Service. Our broad range of high-quality products and customized value-added services allows us to offer one-stop shopping to our customers, which we believe provides a significant competitive advantage over smaller service centers (which generally stock fewer products than we do). We seek strong relationships with our customers through regular interaction between our field sales force and our customers, allowing us to better assess their supply chain requirements, offer just-in-time delivery and respond to short lead-time orders. Our ability to provide leading customer service is enhanced

by the breadth of our geographic footprint, as a substantial portion of our customers are located within 250 miles of a facility, allowing us to provide critical value-added services with short turnaround times. We believe the quality of our products and timeliness and reliability of our service have resulted in increased customer loyalty and have significantly enhanced our marketing efforts to new customers.

State-of-the-Art Processing Facilities. Our state-of-the-art processing facilities provide a significant advantage over smaller metals service centers that do not have the capital resources to invest in value-added equipment. We recently increased our laser and plasma cutting, painting and other value-added capabilities at select locations, further increasing our ability to quickly and efficiently process metals to customer specified requirements. Our new Port City facility further increases our ability to provide high-value-added and technologically advanced plates and shapes processing. Our value-added services enable our customers to improve their manufacturing processes while also reducing their total cost of manufacturing.

Strong Relationships with Key Suppliers. We have established strong relationships with large domestic and international metal suppliers. Because we are a significant customer of our major suppliers, we obtain volume discounts and can obtain metal materials in periods of tight supply. For instance, our strong relationships and large purchasing volumes enabled us to maintain ample access to metal when supply became constrained during 2004. Our negotiation of purchase agreements with suppliers is centralized to leverage our buying power and global market insights.

Skilled Inventory Management. We manage our inventory to minimize our investment in working capital while maintaining sufficient stock to respond quickly to customer orders. Our inventory and processing services are tailored to the needs of the market where a particular service center is located and our service centers share inventory with each other, thereby improving inventory management and customer service. All of our groups utilize management information systems and computer-aided manufacturing technology to track and allocate inventory on a real-time basis. These advanced information systems combined with our strong regional footprint allow our service centers to lower their overall inventories without limiting our ability to meet our customers’ needs through the sharing of inventory. We believe that our decentralized inventory management processes, monitored by senior leadership with their global market insights, and our recently improved capital structure flexibility have allowed us to react more quickly than most of our competitors to changing metals prices and customer needs, thereby optimizing our use of working capital. Also, due to the countercyclical nature of cash flows in our business, by proactively managing inventory, we have been able to generate significant earnings during rising metal price environments and generate significant free cash flow in declining metal price environments.

Experienced and Proven Management Team. We have a seasoned senior management team which, on average, has over 20 years of experience in the metals industry and has a deep understanding of the dynamics between the various levels of the supply chain. Our President, Chief Executive Officer and Chairman, C. Lourenço Gonçalves, has 25 years of experience in the metals industry, including as Chief Executive Officer of California Steel Industries (the largest U.S. steel slab re-roller, which we refer to in this prospectus as “CSI”) which had many of the same value chain dynamics as a service center. Under his leadership, we have implemented a number of operational improvements that have significantly improved our performance. In the last year, we have continued to attract, add and promote quality management talent. Robert McPherson became Chief Financial Officer in December 2005 and Joe Longo, David Martens and Gerard Papazian assumed their new responsibilities as the presidents of the Plates and Shapes Group East, Plates and Shapes Group West and the Building Products Group, respectively. See “Management.”

Our Strategy

Our business strategy includes focusing on the following:

Increase Our Market Share of Higher Margin Products. We will maintain our focus on selling higher margin products such as non-ferrous metals as well as products that require significant value-added processing or that are highly customized. This focus will enable us to further leverage our state-of-the-art processing facilities and provide higher margin value-added processing functions such as precision blanking, laser and plasma cutting and painting. We believe this will also enable us to fulfill a greater proportion of our customers’ processing requirements and lead to an increased stability in the demand for our products and services. Both acquisitions completed in May 2006 further this goal.

Expand Value-Added Services Provided to Customers. We are focused on expanding the range of our value-added services to enhance our relationships with existing customers and to build new customer relationships. We believe customers recognize the benefit from our ability to provide value-added services, including our new supply chain solutions, and that there are significant opportunities to expand the range of such services in areas such as processing equipment, inventory management and logistics systems. We believe that our size, organizational structure and operating expertise enable us to better provide these value-added services and further differentiate ourselves from smaller metals service centers.

Execute Strategic Acquisitions to Improve Market Position. We will continue to look for value-added businesses that we can acquire at reasonable prices. To drive this effort, in late-2005, we combined experienced metals industry veterans and deal professionals to form a dedicated acquisitions team. The team has identified and closed two acquisitions to date in 2006, which have bolstered our position in the Plates and Shapes market in the south-central United States and the Building Products market in the northeastern United States. We believe that we were able to acquire these two businesses at reasonable prices and that they will generate meaningful strategic and financial synergies. Our acquisitions team is currently evaluating several additional transactions that complement the higher margin and fastest growing portions of our business. See “—Recent Developments” and “Risk Factors—Risks Related to Our Business—We 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.”

Capitalize on Changing Market Dynamics and Increasing Demands. As one of the largest metals service centers in the U.S., we intend to use our significant resources to exploit the opportunities presented by the consolidation of steel producers and the fragmentation of our customer base. Steel producers continue to seek long-term relationships with metals service centers that have access to numerous customers, while customers are seeking relationships with metals service centers that can provide a reliable source of high-quality products combined with value-added services. In light of current economic conditions, we believe that demand for products manufactured by our customers will be robust. This increase in end-market demand will drive increased sales of our products and, when combined with the initiatives we have proactively taken to increase the value-added nature of our product mix, is expected to further enhance our profitability and free cash flow.

Maintain Strong Focus on Inventory Management. We will continue managing our inventory to maximize our profitability and cash flow while maintaining sufficient inventory to respond quickly to customer orders. In addition, we intend to further integrate our salespeople and operating employees into the operations of our customers to enhance our visibility into in-process orders and allow us to further improve our just-in-time delivery and customer service.

Continue to Focus on Improving the Performance of Our Building Products Group. In August 2004, we undertook a restructuring to focus the Building Products Group on the steadily growing residential remodeling industry. As part of this restructuring, we closed 11 underperforming locations, expanded our production capabilities and reduced the operating cost structure of the group. Since that time, the financial performance of the group has improved significantly. We expect it to become an increasingly larger part of our business as we continue to capitalize on the benefits resulting from the restructuring and take advantage of the attractive fundamentals of the residential remodeling industry.

Risk Factors

Despite our competitive strengths discussed elsewhere in this prospectus, investing in our common stock involves substantial risk. Among others, we are exposed to risks relating to the demand for our goods and services, our supply of raw materials, the competitive and fragmented industry in which we operate and the debt component in our capital structure.

Demand for our goods and services can be adversely affected by many factors, including:

competition;

downturns in economic cycles, which are difficult to predict and to manage, in the numerous industries we service;

significant increases or decreases in the prices for the goods and services we provide to our customers; and

impediments to our ability to provide goods and services in a timely manner.

A material interruption in our supply of raw materials could damage our customer relationships. Supply interruptions could result from, among other things, increases in demand for (or reductions in supplies of) a particular raw material or changes in our relationships with our suppliers.

We are in a highly competitive industry. Some of our competitors’ financial resources are more significant than ours, which can enhance our competitors’ ability to access reliable supplies of raw materials, offer customers lower prices and hire and maintain an effective work force.

Our business strategy contemplates a capital structure with leverage, which may be substantial from time to time. The more debt we incur, the more vulnerable we may become to economic cycles, competition and other risks related to our business and our strategy. Increases in debt result in increases in interest costs, exposure to liquidity concerns and limitations on our activities. In addition to providing for scheduled and unscheduled principal repayments, credit agreements, indentures and other credit arrangements impose restrictions on our activities, including our ability to acquire or dispose of assets, repay or incur debt, issue equity, or declare or pay dividends.

The risks described under the heading “Risk Factors” immediately following this summary may cause us not to realize the full benefits of our strengths or may cause us to be unable to successfully execute all or part of our strategy. Before you invest in our common stock, you should carefully consider all the information in this prospectus, including matters set forth under the heading “Risk Factors.”

The Apollo Transaction

On November 30, 2005, Flag Acquisition Corporation, a Delaware corporation, which in turn was a wholly-owned subsidiary of Metals USA Holdings Corp., merged with and into Metals USA, with Metals USA as the surviving company. This merger is referred to in this prospectus as the “Merger.” Metals USA is wholly-owned by Flag Intermediate Holdings Corporation, a Delaware corporation, which we refer to in this prospectus as “Flag Intermediate,” and which is our wholly-owned subsidiary. Metals USA Holdings was formed by Apollo Management V, L.P. (which we refer to in this prospectus as “Apollo Management” and, together with its affiliated investment management entities, “Apollo”) solely for the purpose of consummating the Merger, and it has no assets, obligations, employees or operations other than those resulting from the Merger and this offering. All of our operations are conducted by Metals USA.

In connection with the Merger, (a) Metals USA entered into a six-year $450.0 million senior secured asset-based revolving credit facility at the effective time of the Merger, which we refer to in this prospectus as the “ABL facility,” and (b) Flag Acquisition Corporation completed a private placement of $275.0 million aggregate principal amount of its 11¹/8% senior secured notes due 2015, which we refer to in this prospectus as the “old notes,” and Metals USA, pursuant to the Merger, assumed all liabilities of Flag Acquisition pursuant to the old notes. By means of a separate prospectus, Metals USA intends to offer to exchange up to $275.0 million aggregate principal amount of 11¹/8% senior secured notes due 2015, that will have been registered under the Securities Act of 1933, which we refer to in this prospectus as the “exchange notes” and, together with the old notes, the “notes,” for an equal principal amount of the old notes. This prospectus shall not be deemed to be an offer to exchange the old notes. See “Description of Certain Indebtedness—11¹/8% Senior Secured Notes of Metals USA.”

In addition, at the effective time of the Merger, Apollo and certain members of management of Metals USA contributed $140.0 million to Metals USA Holdings in exchange for common stock of Metals USA Holdings. The proceeds from the issuance of the old notes, borrowings under the ABL facility, and the equity investment by Apollo and our management members were used to pay the Merger consideration to the previous equity holders of Metals USA, to paydown certain existing debt of Metals USA, and to pay transaction expenses related to the Merger, including $6.0 million of transaction fees paid to Apollo. The issuance of the old notes, the borrowings under the ABL facility on the date of the Merger, the equity investment by Apollo and our management members, the Merger and other related transactions are collectively referred to in this prospectus as the “Apollo Transaction.”

Ownership and Organizational Structure

The following diagram sets forth our ownership and organizational structure as of immediately following the completion of this offering (ownership percentages are given assuming the underwriters do not exercise their option to purchase additional shares). The diagram below does not display all of our subsidiaries.

LOGO

Recent Developments

On May 17, 2006, Metals USA purchased all of the assets and business operations of Port City, located in Tulsa, Oklahoma, for approximately $41.3 million, which includes a $5.0 million contingent payout that may be made in 2009 or earlier, subject to certain performance criteria. Founded in 1977, Port City is a value-added processor of steel plate. Port City has experienced very strong sales growth over the past few years with sales in excess of $47 million in 2005. 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 positions us to be the pre-eminent plate processor in the southern United States. Port City operates out of a 486,000 square foot facility and has over 110 full-time employees. Port City’s 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 addition to the south-central region of our Plates and Shapes Group.

On May 12, 2006, Metals USA purchased all of the assets and operations of Dura-Loc, which has one manufacturing facility located near Toronto, Ontario, Canada and a sales and distribution facility

located in California, for approximately $10.4 million Canadian dollars (or approximately U.S. $9.4 million). Dura-Loc, which was established in 1984, is one of the leading stone-coated metal roof manufacturers in North America, and Dura-Loc is also the only manufacturer of such products located in the southern and eastern half of North America, a market not yet fully developed for the high-end, stone-coated metal products we produce. Dura-Loc had sales of $12.8 million Canadian dollars (or approximately U.S. $11.3 million) during calendar year 2005 utilizing only one product crew. We believe this acquisition gives us significant additional capacity located in a potentially high growth market and that, by transforming Dura-Loc’s production processes 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 way to gain access to an expanded product mix and leverages the combined sales force and research and development personnel, thereby solidifying our position as one of the largest stone-coated metal roofing manufacturers in North America.

We refer to the acquisitions of Port City and Dura-Loc together as the “recent acquisitions.”

On May 23, 2006, we declared a $25 million dividend to our stockholders of record as of that date, which we paid on May 24, 2006, which we refer to in this prospectus as the “May 2006 dividend.”

Principal Stockholder

Apollo was founded in 1990 and is among the most active and successful private equity investment firms in the United States in terms of both number of investment transactions completed and aggregate dollars invested. Since its inception, Apollo has managed investments in excess of $13 billion in capital in corporate transactions in a wide variety of industries, both domestically and internationally. Companies owned or controlled by Apollo or in which Apollo has a significant equity investment include, among others, Educate, Inc., Goodman Global, Inc., Hexion Specialty Chemicals, Inc., Nalco Company and United Agri Products.

Metals USA Holdings

Metals USA Holdings Corp., which was formerly named Flag Holdings Corporation, was incorporated in Delaware on May 9, 2005 in connection with the Apollo Transaction. The principal executive offices of Metals USA Holdings Corp. are at One Riverway, Suite 1100, Houston, Texas 77056, and the telephone number is (713) 965-0990.

We also maintain an internet site at http://www.metalsusa.com. Our website and the information contained therein or connected thereto shall not be deemed to be incorporated into this prospectus or the registration statement of which this prospectus forms a part, and you should not rely on any such information in making your decision whether to purchase our securities.

Metals USA 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, Metals USA filed for voluntary protection from its creditors under Chapter 11 of the United States Bankruptcy laws. It emerged from bankruptcy as a public company on October 31, 2002. Metals USA Holdings acquired Metals USA on November 30, 2005.

The Offering

Common stock offered by us

Shares of our common stock to be outstanding immediately following this offering

shares (including shares that will be sold to the underwriters if they exercise their over-allotment option in full)

Use of Proceeds

We estimate that we will receive net proceeds from this offering of approximately $ million after deducting the estimated underwriting discounts and commissions and expenses, assuming the shares are offered at $ per share, which represents the mid-point of the range set forth on the cover page of this prospectus.

As described in “Use of Proceeds” and “Dividend Policy,” we intend to use:

approximately $ million to pay a special dividend to our existing stockholders, which include Apollo and certain members of our management;

approximately $ million to repay a portion of the outstanding amounts drawn under the ABL facility, plus accrued and unpaid interest to the date of repayment (which accrued interest we estimate to be approximately $ million at the time of the closing of this offering); and

approximately $ million for estimated fees and expenses, with any balance to be used for general corporate purposes, including to pay $ million to Apollo in connection with the termination of the current management agreement we have with Apollo and the related transaction fee. See “Certain Relationships and Related Party Transactions—Apollo Management Agreements.”

We intend to use net proceeds from any shares of our common stock sold pursuant to the underwriters’ over-allotment option for general corporate purposes. For sensitivity analyses as to the offering price and other information, see “Use of Proceeds” and “Dividend Policy.”

Dividends

We intend to declare and pay to our existing stockholders two special dividends described in “Use of Proceeds” and “Dividend Policy.” Other than the special dividends, we do not anticipate paying any dividends on our common stock in the foreseeable future. See “Dividend Policy.”

Listing

We intend to apply to list our common stock on The New York Stock Exchange under the trading symbol “MUX.”

Other Information About This Prospectus

The information in this prospectus, unless otherwise indicated:

assumes that we will issue a stock dividend of shares of common stock to our existing stockholders prior to the consummation of this offering;

does not take into account the exercise by the underwriters of their over-allotment option; and

does not give effect to the issuance of the following:

1,002,311 shares of our common stock issuable upon the exercise of options that will be outstanding, under our Amended and Restated 2005 Stock Incentive Plan, upon consummation of this offering, 561,156 of which we expect will likely vest upon consummation of this offering, at an exercise price of approximately $ per share; or

397,689 shares of our common stock which may be issued upon the exercise of options reserved for future issuance under our Amended and Restated 2005 Stock Incentive Plan.

SUMMARY HISTORICAL CONSOLIDATED AND

PRO FORMA CONDENSED COMBINED FINANCIAL DATA

Set forth below is summary historical consolidated financial data and summary unaudited pro forma condensed combined financial data of our business, as of the dates and for the periods indicated. The summary historical consolidated financial data as of December 31, 2004 and for each of the two years in the period ended December 31, 2004 and for the period from January 1, 2005 to November 30, 2005 for the Predecessor Company discussed below and as of December 31, 2005 and for the period from May 9, 2005 to December 31, 2005 for the Successor Company discussed below have been derived from our audited consolidated financial statements and related notes included elsewhere in this prospectus. The Successor Company had no assets and conducted no operations from May 9, 2005 (date of inception) to November 30, 2005. The summary historical consolidated financial data as of December 31, 2003 presented in this table have been derived from our audited consolidated financial statements not included in this prospectus. The summary historical consolidated financial data for the three months ended March 31, 2005 and 2006 have been derived from our unaudited consolidated financial statements, which are included elsewhere in this prospectus. The March 31, 2005 and 2006 financial statements have been prepared on a basis consistent with our audited consolidated financial statements and reflect all adjustments, consisting of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented. The results of any interim period are not necessarily indicative of the results that may be expected for any other interim period or for the full fiscal year, and the historical results set forth below do not necessarily indicate results expected for any future period.

The summary unaudited pro forma condensed combined statements of operations and other financial data for the year ended December 31, 2005 and the three month period ended March 31, 2006, give effect to the Apollo Transaction, the May 2006 dividend, the stock dividend and this offering, including the application of the net proceeds hereof, in each case, as if they had occurred on January 1, 2005. The summary unaudited pro forma condensed combined balance sheet as of March 31, 2006 gives effect to the Apollo Transaction, the May 2006 dividend, the stock dividend and this offering, including the application of the net proceeds hereof, in each case, as if they had occurred on March 31, 2006. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable.

The summary unaudited pro forma condensed combined financial data are for informational purposes only and do not purport to represent what our results of operations or financial position actually would have been if the Apollo Transaction, the May 2006 dividend, the stock dividend and this offering, including the application of the net proceeds hereof, had occurred at any date, and such data do not purport to project the results of operations for any future period.

After the consummation of the Apollo Transaction, Metals USA Holdings, along with its consolidated subsidiaries, are referred to collectively in this prospectus as the “Successor Company.” Prior to the consummation of the Apollo Transaction, Metals USA, along with its consolidated subsidiaries, are referred to collectively in this prospectus as the “Predecessor Company.” We applied Statement of Financial Accounting Standards No. 141, “Business Combinations” (“SFAS 141”) on November 30, 2005, or the closing date of the Merger, and as a result, the Merger consideration was allocated to the respective fair 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.

As a result of purchase accounting for the Apollo Transaction, 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. For the one-month period ended December 31, 2005, the Successor Company’s operating costs and expenses 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. For the three-month period ended March 31, 2006, the Successor Company’s operating costs and expenses increased by $14.0 million ($10.8 million for cost of sales and $3.2 million of additional depreciation and amortization) as the inventory was sold and additional depreciation and amortization was recorded.

The pro forma adjustments relating to the Apollo Transaction are based on preliminary estimates of the fair value of the consideration provided, estimates of the fair values of assets acquired and liabilities assumed and available information and assumptions. The final determination of fair value could result in changes to the pro forma adjustments and the pro forma data included herein.

The summary historical consolidated and unaudited pro forma condensed combined financial data should be read in conjunction with “Unaudited Pro Forma Condensed Combined Financial Information,” “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors” and our consolidated financial statements and related notes included elsewhere in this prospectus.


	Historical												Pro Forma		Historical						Pro Forma
	Predecessor Company									Successor Company					Predecessor Company			Successor Company
	Year Ended December 31,						Period from January 1, 2005 to November 30,			Period from May 9, 2005 (Date of Inception) to December 31,			Year Ended December 31,		Three Months Ended March 31,
	2003			2004			2005			2005			2005		2005			2006			2006
	(in millions, except per share data and shipments)
Operations Data:
Net sales(a)	$	963.2		$	1,509.8		$	1,522.1		$	116.9		$		$	427.6		$	429.6		$
Costs and expenses:
Cost of sales (exclusive of operating and delivery, and depreciation and amortization shown below)		731.6			1,080.1			1,189.3			92.5					333.8			341.0
Operating and delivery		127.7			144.4			139.1			12.8					37.8			41.7
Selling, general and administrative		87.0			109.6			108.5			9.3					24.3			27.2
Depreciation and amortization(b)		0.5			2.0			3.1			1.4					0.7			4.2

Operating income (loss)		16.4			173.7			82.1			0.9					31.0			15.5
Interest expense		5.7			8.4			12.0			4.1					3.2			12.0
Other (income) expense		(2.0	)		(2.5	)		(0.1	)		—					(0.2	)		(0.1	)

Income (loss) before taxes and discontinued operations		12.7			167.8			70.2			(3.2	)				28.0			3.6
Provision (benefit) for income taxes		5.1			63.3			26.7			(1.2	)				10.7			1.5

Net income (loss) before discontinued operations		7.6			104.5			43.5			(2.0	)				17.3			2.1
Income (loss) from discontinued operations, net of taxes		(0.1	)		—			—			—					—			—

Net income (loss)	$	7.5		$	104.5		$	43.5		$	(2.0	)	$		$	17.3		$	2.1		$

Income (loss) per share(c):
Income (loss) per share—basic:
From continuing operations	$	0.38		$	5.17		$	2.14		$	(0.14	)			$	0.85		$	0.15
From discontinued operations		(0.01	)		—			—			—					—			—

Total	$	0.37		$	5.17		$	2.14		$	(0.14	)			$	0.85		$	0.15
Income (loss) per share:
Income (loss) per share—diluted:	$	0.37		$	5.05		$	2.05		$	(0.14	)			$	0.83		$	0.15
From continuing operations		—			—			—			—					—			—

From discontinued operations	$	0.37		$	5.05		$	2.05		$	(0.14	)	$		$	0.83		$	0.15		$

Total
Number of common shares used in the per share calculations:
Basic		20.2			20.2			20.3			14.0					20.3			14.0
Diluted		20.3			20.7			21.2			14.0					20.9			14.0
Cash Flow Data:
Cash flows provided by (used in) operating activities	$	26.9		$	(128.6	)	$	170.1		$	7.3			N/A	$	(3.3	)	$	(0.1	)		N/A
Cash flows provided by (used in) investing activities		(11.8	)		(16.0	)		(15.8	)		(434.5	)		N/A		(2.8	)		(3.7	)		N/A
Cash flows provided by (used in) financing activities		(10.0	)		145.8			(120.7	)		438.5			N/A		7.8			10.4			N/A
Other Operating Data:
Shipments (in thousands of tons)		1,288			1,502			1,332			107					365			385
Capital expenditures		17.5			17.4			15.9			4.4					2.8			3.7
Other Financial Data:
Deficiency of earnings to fixed charges		—			—			—			—					—			—
Ratio of earnings to fixed charges		2.2	x		13.3	x		5.1	x		0.3	x				7.1	x		1.3	x
Debt Covenant Compliance:
EBITDA(d)	$	16.9		$	175.7		$	85.6		$	2.4		$		$	31.8		$	19.9		$

Adjusted EBITDA(d)	$	16.9		$	180.7		$	101.6		$	7.0		$		$	31.8		$	31.3		$


	Predecessor Company				Successor Company		Successor Company		Pro Forma
	As of December 31,						As of March 31,
	2003		2004		2005		2006		2006
	(in millions)
Balance Sheet Data:
Cash	$	11.4	$	12.6	$	11.3	$	17.9
Total assets		407.2		710.0		795.3		823.0
Total debt(e)		118.7		270.6		473.5		483.9
Total liabilities(e)		206.6		381.8		662.9		687.9
Stockholders’ equity		200.6		328.2		132.4		135.1

(a)

Pro forma net sales does not reflect the net sales of Port City or Dura-Loc for the year ended December 31, 2005 or the three-months ended March 31, 2006, which were $47.9 million and $14.2 million for Port City and $11.3 million and $2.3 million for Dura-Loc, respectively. The financial information from the recent acquisitions is based on unaudited financial statements for each of Port City and Dura-Loc.

(b)	Excludes depreciation expense reflected in cost of sales for the Building Products Group.

(c)

As a result of the Merger, as discussed in Note 2 to our audited consolidated financial statements included elsewhere in this prospectus, all outstanding common stock and options of the Predecessor Company were cancelled. On November 30, 2005, the Successor Company issued 14,000,000 shares of common stock. Pro forma and historical basic and diluted income (loss) per share are computed by dividing net income (loss) by the weighted average number of shares outstanding during the period. Pro forma weighted average shares have been adjusted to reflect the stock dividend of shares and the sale of shares in connection with this offering. There were no antidilutive securities during the periods shown.

(d)

EBITDA is defined as net income (loss) before interest, taxes, depreciation and amortization and is used by management, together with Adjusted EBITDA, as a measure for certain performance-based bonus plans. Adjusted EBITDA, as contemplated by our credit documents, is used by our lenders for debt covenant compliance purposes. Adjusted EBITDA is EBITDA adjusted to eliminate management fees to related parties, one-time, non-recurring charges related to the use of purchase accounting, and other non-cash income or expenses, which are more particularly defined in our credit documents and the indenture governing the notes. Our credit documents and the indenture governing the notes require us to meet or exceed specified minimum financial measures before we will be permitted to consummate certain acts, such as complete acquisitions, declare or pay dividends and incur additional indebtedness, and one of the more significant measures contained in our credit documents and the indenture governing the notes is Adjusted EBITDA. We have presented EBITDA and Adjusted EBITDA on a pro forma basis since management plans on using EBITDA and Adjusted EBITDA as a benchmark for developing its ongoing measures for performance-based bonus plans and because our lenders plan on using EBITDA and Adjusted EBITDA in the manner described above. We believe that EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry. EBITDA and Adjusted EBITDA are not recognized terms under generally accepted accounting principles, which we refer to in this prospectus as “GAAP,” should not be viewed in isolation and do not purport to be an alternative to net income as an indicator of operating performance or cash flows from operating activities as a measure of liquidity. There are material limitations associated with making the adjustments to our earnings to calculate EBITDA and Adjusted EBITDA and using these non-GAAP financial measures as compared to the most directly comparable U.S. GAAP financial measures. For instance, EBITDA and Adjusted EBITDA do not include:

interest expense, and because we have borrowed money in order to finance our operations, interest expense is a necessary element of our costs and ability to generate revenue;

depreciation and amortization expense, and because we use capital assets, depreciation and amortization expense is a necessary element of our costs and ability to generate revenue; and

tax expense, and because the payment of taxes is part of our operations, tax expense is a necessary element of our costs and ability to operate.

Additionally, neither EBITDA nor Adjusted EBITDA are intended to be a measure of free cash flow for management’s discretionary use, as neither considers certain cash requirements such as capital expenditures, contractual commitments, interest payments, tax payments and debt service requirements. Because not all companies use identical calculations, this presentation of EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures for other companies.

Below is a reconciliation of net income (loss) to EBITDA and Adjusted EBITDA.

Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA


	Historical												Pro Forma	Historical						Pro Forma
	Predecessor Company									Successor Company				Predecessor Company			Successor Company
	Year Ended December 31,						Period from January 1, 2005 to November 30,			Period from May 9, 2005 (Date of Inception) to December 31,			Year Ended December 31,	Three Months Ended March 31,
	2003			2004			2005			2005			2005	2005			2006			2006
										(in millions)
Net income (loss)	$	7.5		$	104.5		$	43.5		$	(2.0	)	$	$	17.3		$	2.1		$
Depreciation and amortization		0.5			2.0			3.5			1.5				0.8			4.4
Interest expense		5.7			8.4			12.0			4.1				3.2			12.0
Provision (benefit) for income taxes		5.1			63.3			26.7			(1.2	)			10.7			1.5
Other (income) expense		(2.0	)		(2.5	)		(0.1	)		—				(0.2	)		(0.1	)
Net income (loss) from discontinued operations, net of taxes		0.1			—			—			—				—			—

EBITDA		16.9			175.7			85.6			2.4				31.8			19.9
Covenant defined adjustments:
Inventory purchase adjustments(1)		—			—			—			4.1				—			10.8
Stock options and grant expense(2)		—			—			15.0			0.4				—			0.3
Write-off prepaid expenses as result of Merger(3)		—			—			0.3			—				—			—
Effect of recent acquisitions(4)		—			—			—			—				—			—
Facilities closure(5)		—			5.0			—			—				—			—
Severance costs(6)		—			—			0.7			—				—			—
Management fees(7)		—			—			—			0.1				—			0.3

Adjusted EBITDA	$	16.9		$	180.7		$	101.6		$	7.0		$	$	31.8		$	31.3		$

Fixed charge coverage ratios(8)		N/A			N/A			N/A			N/A				N/A			1.69

(1)

As a result of management’s analysis and evaluation of the replacement cost of inventory as of the closing of the Apollo Transaction, a purchase accounting increase in the fair value of inventory of $14.9 million was recorded as of December 1, 2005, with $4.1 million of that amount charged to cost of sales in December 2005 and $10.8 million charged to cost of sales in the first quarter of 2006.

(2)

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. The remaining stock options and grant expense represented non-cash charges to expense.

(3)

These prepaid amounts were written off as a result of the Apollo Transaction.

(4)

Amount represents incremental EBITDA from the recent acquisitions as if they had taken place on January 1, 2005. The financial information from the recent acquisitions is based on unaudited financial statements for each of Port City and Dura-Loc. The recent acquisitions closed after December 31, 2005 and are included in our calculation of pro forma Adjusted EBITDA as permitted by the indenture governing the notes and the credit documents governing the ABL facility. Included in such incremental EBITDA are estimated cost savings and other synergies specifically identified in connection with the recent acquisitions of $ million for the year ended December 31, 2005 and $ million for the three month period ended March 31, 2006. We expect to achieve these synergies during the first year of operation under Metals USA. These estimated synergies include lower feedstock costs due to leveraged purchasing and operational process improvements, lower selling expenses due to better geographic sales coverage and elimination of redundant sales positions, and improved operating results by the impact of additional value-added processing equipment that Port City recently added to its facility. EBITDA for the recent acquisitions has been added to the EBITDA targets for the annual 2006 performance-based bonus plan for our senior officers.

(5)

This 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 in 2004.

(6)

This amount represents severance costs of management personnel that were replaced as part of the Apollo Transaction.

(7)

Includes accrued expenses related to the management agreement we have with Apollo, pursuant to which Apollo or its affiliates provide us with management services. See “Certain Relationships and Related Party Transactions—Apollo Management Agreements” for a discussion of Apollo’s intention to terminate the management agreement upon the consummation of this offering.

(8)

This amount represents the fixed charge coverage ratio, which we refer to in this prospectus as 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.

(e)	Pro forma total debt and total liabilities do not reflect $45.7 million of funds from our ABL facility used to acquire the net assets of Port City and Dura-Loc.

RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risk factors set forth below as well as the other information contained in this prospectus before investing in our common stock, or deciding whether you will or will not participate in this offering. Any of the following risks could materially and adversely affect our business, financial condition or results of operations. In such a case, you may lose all or part of your original investment.

Risks Related to Our Business

Our business, financial condition and results of operations are heavily impacted by varying metals prices.

We principally use steel, aluminum and various specialty metals as feedstock. The metals industry as a whole is cyclical and at times pricing and availability of our feedstock can be volatile due to numerous factors beyond our control, including domestic and international economic conditions, labor costs, production levels, competition, import duties and tariffs and currency exchange rates. This volatility can significantly affect the availability and cost of raw materials for us, and may, therefore, adversely affect our net sales, operating margin and net income. Metal costs typically represent approximately 75% of our net sales. 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 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, in part to benefit from early-payment discounts. As a result, when metal prices are rising, we tend to draw more on the ABL facility to cover the cash flow cycle from our raw material purchases to cash collection. This cash requirement for working capital is higher in periods when we are increasing inventory quantities as we did at the end of 2004. 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 operating results could be negatively affected during economic downturns.

The businesses of many of our customers are, to varying degrees, cyclical and have historically experienced periodic downturns due to economic conditions, energy prices, consumer demand and other factors beyond our control. These economic and industry downturns have been characterized by diminished product demand, excess capacity and, in some cases, lower average selling prices. Therefore, any significant downturn in one or more of the markets that we serve, one or more of the end-markets that our customers serve or in economic conditions in general could result in a reduction

in demand for our products and could have a material adverse effect on our business, financial condition or results of operations. 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. As a result of the depressed economic conditions and reduction in construction in the northeastern United States in the years 2000 through the middle of 2002, our customers in such geographic areas had lower demand for our products. While we supply a broad range of products to a large diversified customer base which serves a diverse set of end-markets, concurrent reduced demand in a number of these markets combined with the foreign relocation of some of our customers could have an adverse effect on our business, financial condition or results of operations.

Although we do not generally sell any of our products directly to customers abroad, a large part of our financial performance is dependent upon a healthy economy beyond the United States. Our customers sell their products abroad and some of our suppliers buy feedstock abroad. As a result, our business is affected by general economic conditions and other factors outside the United States, primarily in Europe and Asia. Our suppliers’ access to metal, and therefore our access to metal, is additionally affected by such conditions and factors. Similarly, the demand for our customers’ products, and therefore our products, is affected by such conditions and factors. These conditions and factors include further increased prices of steel, enhanced imbalances in the world’s iron ore, coal and steel industries, a 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. In addition, demand for the products of our Building Products Group could be adversely affected if consumer confidence falls since the results for that group depend on a strong residential remodeling industry, which in turn has been partially driven by relatively high consumer confidence.

We rely on metal suppliers in our business and purchase a significant amount of metal from a limited number of suppliers. Termination of one or more of our relationships with any of those 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 a variety of metals in our business. Our operations depend upon obtaining adequate supplies of metal on a timely basis. We purchase most of our metal from a limited number of metal suppliers. As of March 31, 2006, the top three metals producers represent a significant portion of our total metal purchasing cost. Termination of one or more of our relationships with any of these major suppliers could have a material adverse effect on our business, financial condition or results of operations if we were unable to obtain metal from other sources in a timely manner or at all.

In addition, the domestic metals production industry has experienced consolidation in recent years. As of March 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 competition among many competitors could adversely affect our profitability.

We are engaged in a highly fragmented and competitive industry. We compete with a large number of other value-added metals processors/service centers on a regional and local basis, some of

which may have greater financial resources than us. We also compete, to a much lesser extent, with primary metals producers, who typically sell to very large customers requiring regular shipments 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.

A failure to retain our key employees could adversely affect our business.

We are dependent on the services of our President, Chief Executive Officer and Chairman, 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. While our current key employees are subject to employment conditions or arrangements that contain post-employment non-competition provisions, these arrangements permit the employees to terminate their employment without notice. 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.

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

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

We are a defendant in numerous lawsuits. These suits concern issues including product liability, contract disputes, employee-related matters and personal injury matters. 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 or reputation.

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

Our operations are subject to extensive regulations governing waste disposal, air and water emissions, the handling of hazardous substances, remediation, workplace exposure and other environmental matters. We believe that we are in substantial compliance with all such laws and do not currently anticipate that we will be required to expend any substantial amounts in the foreseeable future in order to meet current environmental or workplace health and safety requirements. However, some of the properties we own or lease are located in areas with a history of heavy industrial use, and are near sites listed on the Comprehensive Environmental Response, Compensation, and Liability Act, or “CERCLA,” National Priority List. CERCLA establishes 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 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 used in our business and we have removed and restored such known impacted soils pursuant to applicable environmental laws. The costs of such clean-ups to date have not been material. We are not currently subject to any claims and have not received any notices with respect to cleanup or remediation under CERCLA or similar laws for contamination at our leased or owned properties or at any off-site location. However, it is possible 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. If so, we could incur substantial litigation costs in defense of such claims.

Adverse developments in our relationship with our unionized employees could adversely affect our business.

As of the date of this prospectus, approximately 300 of our employees (11%) at various sites are members of unions. 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. Any work stoppages in the future could have a material adverse effect on our business, financial condition or results of operations.

We are currently a party to nine collective bargaining agreements with such unions, which expire at various times, including one of which that will expire in 2006 (which covers approximately 1% 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. However, no assurances can be given that we will succeed in negotiating new collective bargaining agreements to replace the expiring ones without a strike. Any strikes in the future could have a material adverse effect on our business, financial condition or results of operations. See “Business—Employees.”

Metals USA’s predecessor company emerged from Chapter 11 Reorganization in 2002 and may not be able to achieve profitability on a consistent basis.

Metals USA’s predecessor company sought protection under Chapter 11 of the Bankruptcy Code in November 2001. Metals USA’s predecessor company incurred operating losses of $2.6 million and $390.5 million during the ten-month period ended October 31, 2002 and the fiscal year ended December 31, 2001, respectively. Approximately $386.0 million of the 2001 net loss was attributable to write-downs associated with the carrying value of the predecessor company’s goodwill and property and equipment to their then estimated recoverable values. Metals USA incurred an operating loss of $0.9 million for the two-month period ended December 31, 2002. The predecessor company’s equity ownership, board of directors and a portion of its senior management was replaced in connection with the reorganization. While our current senior management has concentrated on improving our profitability, we may not be able to sustain profitability or achieve growth in our operating performance.

Our historical financial information is not comparable to our current financial condition and results of operations because of our use of fresh start accounting in 2002 and purchase accounting in connection with the Apollo Transaction and the recent acquisitions.

It may be difficult for you to compare both our historical and future results to our results for the fiscal year ended December 31, 2005. The Apollo Transaction was accounted for utilizing purchase accounting, which resulted in a new valuation for the assets and liabilities of Metals USA to their fair values. This new basis of accounting began on November 30, 2005. Allocations are subject to valuations as of the closing date of the Merger. The allocation of the excess purchase price over the book value of the net assets acquired in the Apollo Transaction has been based, in part, on preliminary information which continues to be subject to adjustment upon obtaining complete valuation information. While, in order to facilitate comparison of our results, we have presented, in certain places in this prospectus, combined 2005 Predecessor and Successor statements of operations, such a presentation is not permitted by GAAP. In addition, the recent acquisitions are, and we expect future acquisitions will be, also accounted for using purchase accounting and therefore similar limitations regarding comparability of historical and future results could arise. Under the purchase method of accounting the operating results of each of the acquired businesses, including the recent acquisitions, are included in our financial statements only from the date of the acquisitions.

In addition, as a result of our emergence from bankruptcy on October 31, 2002, we were subject to “Fresh-Start Reporting.” Accordingly, our financial information as of any date or for periods after

November 1, 2002 is not comparable to our historical financial information before November 1, 2002. This is primarily because the “Fresh-Start Reporting” purchase price allocations required us to reduce the carrying value of the property and equipment we owned at November 1, 2002 to zero. Accordingly, our historical operating results may be of limited use in evaluating our historical performance and comparing it to other periods.

We 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.

We recently completed two acquisitions to bolster the market position and organic growth of our service center and building products businesses. See “Prospectus Summary—Recent Developments.” It is our intention to make additional acquisitions in our core markets that will improve our market share of higher margin products and increase the growth of our business.

We may not be able to identify suitable acquisition candidates, and the expense incurred in consummating acquisitions of 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. 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:

potential disruption of our ongoing business and distraction of management;

unexpected loss of key employees or customers of the acquired company;

conforming the acquired company’s standards, processes, procedures and controls with our operations;

coordinating new product and process development;

hiring additional management and other critical personnel;

encountering unknown contingent liabilities which could be material; and

increasing the scope, geographic diversity and complexity of our operations.

Risks Related to an Investment in Our Common Stock and This Offering

There is no existing market for our common stock and we do not know if one will develop, which could impede your ability to sell your shares and depress the market price of our common stock.

Prior to this offering, there has not been a public market for our common stock. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market on The New York Stock Exchange or otherwise or how liquid that market might become. If an active trading market does not develop, you may have difficulty selling any of our common stock that you buy. The initial public offering price for the common stock will be determined by negotiations between us and the representatives of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. See “Underwriting.” Consequently, you may not be able to sell our common stock at prices equal to or greater than the price you paid in this offering.

Our equity sponsor controls us and its interests may conflict with or differ from your interests as a stockholder.

After the consummation of this offering, our equity sponsor, Apollo, will beneficially own approximately % of our common stock, assuming the underwriters do not exercise their over-allotment option. If the underwriters exercise in full their over-allotment option, Apollo will beneficially own approximately % of our common stock. As a result, Apollo has the power to elect all of our directors. Therefore, Apollo will have the ability to prevent any transaction that requires the approval of our board of directors or stockholder approval, including the approval of significant corporate transactions such as mergers and the sale of substantially all of our assets. In addition, under the amended investors rights agreement that we intend to enter into with Apollo and each of our management members, except as otherwise required by applicable law, as long as Apollo owns (including shares of common stock issuable under the terms of any exchangeable securities issued by us) (a) at least 30% but less than 50% of our outstanding common stock, (b) at least 20% but less than 30% of our outstanding common stock and (c) at least 10% but less than 20% of our outstanding common stock, our board of directors will include at least (x) three (3) Apollo designees to the board of directors, (y) two (2) Apollo designees to the board of directors or (z) one (1) Apollo designee to the board of directors, respectively. Thus, Apollo will continue to be able to significantly influence or effectively control our decisions. See “Certain Relationships and Related Party Transactions—Amended Investors Rights Agreement” and “Description of Capital Stock—Composition of Board of Directors; Election and Removal of Directors.” The interests of Apollo could conflict with or differ from your interests as a holder of our common stock. For example, the concentration of ownership held by our equity sponsor could delay, defer or prevent a change of control of our company or impede a merger, takeover or other business combination which you as a stockholder may otherwise view favorably. Our equity sponsor may also pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. A sale of a substantial number of shares of stock in the future by funds affiliated with our equity sponsor could cause our stock price to decline.

We are a “controlled company” within the meaning of The New York Stock Exchange rules and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements.

Upon the closing of this offering, affiliates of Apollo, as a group, will continue to control a majority of our voting common stock. As a result, we are a “controlled company” within the meaning of The New York Stock Exchange corporate governance standards. Under The New York Stock Exchange rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain New York Stock Exchange corporate governance requirements, including:

the requirement that a majority of the board of directors consists of independent directors;

the requirement that we have a nominating/corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

the requirement for an annual performance evaluation of the nominating/corporate governance and compensation committees.

Following this offering, we intend to utilize these exemptions. As a result, we will not have a majority of independent directors nor will our nominating/corporate governance and compensation

committees consist entirely of independent directors and we will not be required to have an annual performance evaluation of the nominating/corporate governance and compensation committees. See “Management.” Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of The New York Stock Exchange corporate governance requirements.

The price of our common stock may fluctuate significantly and you could lose all or part of your investment.

Volatility in the market price of our common stock price may prevent you from being able to sell your common stock at or above the price you paid for your common stock. The market price for our common stock could fluctuate significantly for various reasons, including:

our operating and financial performance and prospects;

our quarterly or annual earnings or those of other companies in our industry;

conditions that impact demand for our products and services;

future announcements concerning our business;

changes in financial estimates and recommendations by securities analysts;

market and industry perception of our success, or lack thereof, in pursuing our growth strategy;

strategic actions by us or our competitors, such as acquisitions or restructurings;

changes in government and environmental regulation;

general market, economic and political conditions;

changes in accounting standards, policies, guidance, interpretations or principles;

arrival and departure of key personnel;

the number of shares to be publicly traded after this offering;

sales of common stock by us or members of our management team; and

natural disasters, terrorist attacks and acts of war.

See “—Risks Related to Our Business.”

In addition, in recent years, the stock market has experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies, including companies in our industry. The changes frequently appear to occur without regard to the operating performance of the affected companies. Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with our company, and these fluctuations could materially reduce our share price.

We have no plans to pay regular dividends on our common stock, so you may not receive funds without selling your common stock.

We have no plans to pay regular dividends on our common stock. Other than the special dividends described in “Dividend Policy,” any payment of future dividends will be at the discretion of our board of directors and will depend on, among other things, our earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends, and other considerations that our board of directors deems relevant. The ABL facility and the indenture governing the notes also include limitations on the ability of our subsidiaries to pay dividends to us. Accordingly, you may have to sell some or all of your common stock in order to generate cash flow from your investment.

Future sales or the possibility of future sales of a substantial amount of our common stock may depress the price of shares of our common stock.

Future sales or the availability for sale of substantial amounts of our common stock in the public market could adversely affect the prevailing market price of our common stock and could impair our ability to raise capital through future sales of equity securities.

Upon consummation of this offering, there will be shares of our common stock outstanding. All shares of our common stock sold in this offering will be freely transferable without restriction or further registration under the Securities Act of 1933, as amended, or the “Securities Act.” The remaining shares of our common stock outstanding, including the shares of common stock owned by Apollo and certain of our management members, will be restricted securities within the meaning of Rule 144 under the Securities Act, but will be eligible for resale subject to applicable volume, manner of sale, holding period and other limitations of Rule 144. We and our existing stockholders have agreed to a “lock-up,” pursuant to which neither we nor they will sell any shares of our common stock without the prior consent of Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC for 180 days after the date of this prospectus. See “Underwriting.” Following the expiration of the applicable lock-up period, all these shares of our common stock will be eligible for future sale, subject to the applicable volume, manner of sale, holding period and other limitations of Rule 144. In addition, Apollo will have the ability to cause us to register the resale of their shares, and our management members who hold shares will have the ability to include their shares in the registration. See “Shares Eligible for Future Sale” for a discussion of the shares of our common stock that may be sold into the public market in the future.

We may issue shares of our common stock or other securities from time to time as consideration for future acquisitions and investments. If any such acquisition or investment is significant, the number of shares of our common stock, or the number or aggregate principal amount, as the case may be, of other securities that we may issue may in turn be substantial. We may also grant registration rights covering those shares of our common stock or other securities in connection with any such acquisitions and investments.

Upon consummation of this offering, options to purchase 1,002,311 shares of our common stock issuable upon the exercise of options will be outstanding, under our Amended and Restated 2005 Stock Incentive Plan, 561,156 of which we expect will likely vest upon consummation of this offering, including 401,156 Tranche B options that will vest upon consummation of this offering if, as we expect, such consummation causes the realized Investor Internal Rate of Return, which we refer to in this prospectus as “IRR,” to equal or exceed 25% and 160,000 options held by our non-employee directors that will vest as a result of the consummation of this offering. In addition, immediately following this offering, we intend to file a registration statement registering shares of our common stock reserved for issuance under Metals USA Holdings’ Amended and Restated 2005 Stock Incentive Plan and Metals USA Holdings’ 2006 Long-Term Incentive Plan, which we intend to adopt prior to the consummation of this offering, under the Securities Act. See “Description of Capital Stock.”

We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances and sales of our common stock will have on the market price of our common stock. Sales of substantial amounts of our common stock (including shares of our common stock issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock.

Delaware law and our organizational documents may impede or discourage a takeover, which could deprive our investors of the opportunity to receive a premium for their shares.

We are a Delaware corporation, and the anti-takeover provisions of the Delaware law impose various impediments to the ability of a third party to acquire control of us, even if a change of control

would be beneficial to our existing stockholders. In addition, provisions of our amended and restated certificate of incorporation and bylaws may make it more difficult for, or prevent a third party from, acquiring control of us without the approval of our board of directors. These provisions include:

a classified board of directors;

the sole power of a majority of the board of directors to fix the number of directors;

limitations on the removal of directors;

the ability of our board of directors to designate one or more series of preferred stock and issue shares of preferred stock without stockholder approval;

the sole power of our board of directors to fill any vacancy on our board, whether such vacancy occurs as a result of an increase in the number of directors or otherwise; and

advance notice requirements for nominating directors or introducing other business to be conducted at stockholder meetings.

The foregoing factors, as well as the significant common stock ownership by our equity sponsor, could impede a merger, takeover or other business combination or discourage a potential investor from making a tender offer for our common stock, which, under certain circumstances, could reduce the market value of our common stock. See “Description of Capital Stock.”

Because a significant portion of the proceeds from this offering of our common stock will be used to pay the special dividends and to repay amounts drawn under the ABL facility, very little or none of such proceeds will be used to further invest in our business.

We estimate that the net proceeds from this offering of our common stock (based on an initial public offering price of $ per share of common stock), after deducting the estimated underwriting discounts and offering expenses, will be approximately $ million (or approximately $ million, if the underwriters exercise their over-allotment option in full). We expect to use approximately $ million of the net proceeds to pay a special cash dividend of approximately $ million to our existing stockholders, and approximately $ million to repay a portion of the amounts drawn under the ABL facility. In addition, we expect to use approximately $ million of the net proceeds for estimated fees and expenses, with any balance to be used for general corporate purposes, including to pay $ million to Apollo in connection with the termination of the current management agreement we have with Apollo and the related transaction fee. See “Certain Relationships and Related Party Transactions—Apollo Management Agreements.” As a result, very little or none of such proceeds will be used to further invest in our business. See “Use of Proceeds” and “Dividend Policy.”

You will suffer an immediate and substantial dilution in the net tangible book value of the common stock you purchase.

Prior investors have paid substantially less per share than the price in this offering. The initial offering price is substantially higher than the net tangible book value per share of the outstanding common stock immediately after this offering. Accordingly, based on an assumed initial public offering price of $ per share (the midpoint of the range set forth on the cover page of this prospectus), purchasers of common stock in this offering will experience immediate and substantial dilution of approximately $ per share in net tangible book value of the common stock. In addition, as of March 31, 2006, there were options outstanding to purchase 1,002,311 shares of our common stock, each at an exercise price of approximately $ per share, 561,156 of which we expect will likely vest upon consummation of this offering. If all these options were exercised on the date of the closing of this offering, investors purchasing shares of our common stock in this offering would suffer total dilution of $ per share. See “Dilution,” including the discussion of the effects on dilution from a change in the price of this offering.

The requirements of being a public company may strain our resources and distract management.

After the consummation of this offering, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, or the “Exchange Act,” and the Sarbanes-Oxley Act of 2002, or the “Sarbanes-Oxley Act.” The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal control for financial reporting. These requirements may place a strain on our systems and resources. Under Section 302 of the Sarbanes-Oxley Act, as part of our periodic reports, our Chief Executive Officer and our Chief Financial Officer will be required to evaluate the effectiveness of, and to report their conclusions regarding the effectiveness of our disclosure controls and procedures, and to certify that they have done so. In addition, under Section 404 of the Sarbanes-Oxley Act, we will be required to include a report of management on our internal control over financial reporting in our Annual Reports on Form 10-K and our independent registered public accounting firm auditing our financial statements must attest to and report on management’s assessment of the effectiveness of our internal control over financial reporting. This requirement will first apply to our Annual Report on Form 10-K for our fiscal year ending December 31, 2007. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, significant resources and management oversight will be required. This may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. If we are unable to conclude that our disclosure controls and procedures and internal control over financial reporting are effective, or if our independent registered public accounting firm is unable to provide us with an unqualified report as to the effectiveness of our internal control over financial reporting in future years, investors may lose confidence in our financial reports and our stock price may decline.

Metals USA Holdings is a holding company and relies on dividends and other payments, advances and transfers of funds from its subsidiaries to meet its dividend and other obligations.

Metals USA Holdings has no direct operations and no significant assets other than ownership of 100% of the stock of Flag Intermediate, and its indirect ownership of 100% of Metals USA. Because Metals USA Holdings conducts its operations through its subsidiaries, Metals USA Holdings depends on those entities for dividends and other payments to generate the funds necessary to meet its financial obligations, and to pay any dividends with respect to our common stock. Legal and contractual restrictions in the ABL facility, the indenture governing the notes and other agreements governing current and future indebtedness of Metals USA Holdings’ subsidiaries, as well as the financial condition and operating requirements of Metals USA Holdings’ subsidiaries, may limit Metals USA Holdings’ ability to obtain cash from its subsidiaries. The earnings from, or other available assets of, Metals USA Holdings’ subsidiaries may not be sufficient to pay dividends or make distributions or loans to enable Metals USA Holdings to pay any dividends on our common stock.

Our substantial leverage 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, expose us to interest rate risk and prevent Metals USA from meeting its obligations under its indebtedness.

We are highly leveraged. As of May 24, 2006, our total indebtedness was $554.9 million. We also had an additional $143.8 million available for borrowing under the ABL facility as of that date. As of March 31, 2006, we had $482.6 million of senior indebtedness outstanding, consisting of borrowings under the ABL facility, the notes and an Industrial Revenue Bond, which we refer to in this prospectus as an “IRB,” and $1.3 million of junior indebtedness outstanding. As of the completion of this offering, after the use of a portion of the proceeds in this offering to repay approximately $ million of the outstanding amounts drawn under the ABL facility, we expect to have $ million of floating rate debt outstanding under the ABL facility.

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

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

it may limit our flexibility in planning for, or reacting to, changes in our operations or business;

we will be more highly leveraged than some of our competitors, which may place us at a competitive disadvantage;

it may make us more vulnerable to downturns in our business or the economy; and

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

Our debt agreements contain restrictions that limit our flexibility in operating our business and, we may not be able to make payments on our indebtedness, which would have a material adverse effect on our business, financial condition or results of operations.

The ABL facility and the indenture governing the notes contains various covenants that limit our ability to engage in specified types of transactions. These covenants generally limit Flag Intermediate, Metals USA and Metals USA’s restricted subsidiaries’ ability to, among other things:

incur or guarantee additional indebtedness or issue certain preferred shares;

pay dividends on, repurchase or make distributions in respect of their capital stock or make other restricted payments;

make certain loans, acquisitions, capital expenditures or investments;

sell certain assets and subsidiary stock;

enter into sale and leaseback transactions;

create or incur liens;

consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and

enter into certain transactions with our affiliates.

In addition, under the ABL facility, if the borrowing availability falls below a specified threshold, Metals USA is required to satisfy and maintain a minimum fixed charge coverage ratio. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Financing Activities—Covenant Compliance.”

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 or results of operations, and, in addition, we may not have sufficient assets to repay the notes upon acceleration.

For a more detailed description on the limitations on our ability to incur additional indebtedness, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Financing Activities” and “Description of Certain Indebtedness.”

Despite our substantial indebtedness, we may still be able to incur significantly more debt. This could intensify some of the risks described above.

The terms of the indenture governing the notes and the ABL facility contain restrictions on our ability to incur additional indebtedness. These restrictions are subject to a number of important qualifications and 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 March 31, 2006, we had approximately $203.1 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 indenture governing the notes does not limit the amount of indebtedness that may be incurred by Flag Intermediate or Metals USA Holdings. The more leveraged we become, the more we, and in turn our security holders, become exposed to the risks described above.

Because a substantial 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.

A substantial portion of our indebtedness bears interest at rates that fluctuate with changes in certain short-term prevailing interest rates. As of March 31, 2006, we had $201.9 million of floating rate debt under the ABL facility. Additionally, we also had an additional $203.1 million available for borrowing under the ABL facility as of that date. A 1% increase in the interest rate on our floating rate debt would increase our fiscal 2006 interest expense under the ABL facility by approximately $2.0 million. 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 or results of operations.

We may not be able to generate sufficient cash to service all of our indebtedness.

Our ability to make payments on our indebtedness depends on our ability to generate cash in the future. The notes, the ABL facility and our other outstanding indebtedness are expected to account for cash interest expense in fiscal 2006 of approximately $ million. Accordingly, we will have to generate significant cash flows from operations to meet our debt service requirements. If we do not generate sufficient cash flow to meet our debt service and working capital requirements, we may need to seek additional financing; however, this insufficient cash flow may make it more difficult for us to obtain financing on terms that are acceptable to us, or at all. Furthermore, Apollo has no obligation to provide us with debt or equity financing and we therefore may be unable to generate sufficient cash to service all of our indebtedness.

USE OF PROCEEDS

Assuming an initial public offering price of $ per share, which represents the mid-point of the range set forth on the cover page of this prospectus, our net proceeds from this offering are estimated to be approximately $ million after deducting the estimated underwriting discounts and commissions and offering expenses. We intend to use the net proceeds from the shares being sold by us in this offering as follows:

approximately $ million to pay a special dividend to our existing stockholders, which include Apollo and certain members of our management;

approximately $ million to repay a portion of the outstanding amounts drawn under the ABL facility, plus accrued and unpaid interest to the date of repayment (which interest rate fluctuates with changes in certain short-term prevailing interest rates, as described below, and which accrued interest we estimate to be approximately $ million at the time of the closing of this offering); and

An affiliate of Credit Suisse Securities (USA) LLC, an underwriter for this offering, will receive a portion of the proceeds from this offering in its capacity as a lender under the ABL facility. See “Underwriting.”

The ABL facility is available to us on a revolving basis during the period beginning on December 1, 2005 and ending on November 30, 2011. Interest on amounts drawn under the ABL facility is calculated based upon a margin (established within a specific pricing grid for loans utilizing Tranche A Commitments) over reference rates. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Financing Activities—The ABL Facility.”

We intend to use net proceeds from any shares sold pursuant to the underwriters’ over-allotment option for general corporate purposes.

DIVIDEND POLICY

Prior to the consummation of this offering, we intend to declare two special dividends, which will be payable to our existing stockholders on the record date to be set for each of these dividends:

the first dividend will be a dividend of shares of our common stock and will be issued prior to the consummation of this offering, which we refer to in this prospectus as the “stock dividend”; and

the second dividend will be a cash dividend of approximately $ million, which we will pay from the net proceeds from this offering immediately following consummation of this offering. See “Use of Proceeds.”

On May 23, 2006, we declared the May 2006 dividend of $25 million to our stockholders of record as of that date, which we paid on May 24, 2006.

In connection with the payment of the May 2006 dividend, the outstanding employee stock options under the Amended and Restated 2005 Stock Incentive Plan were equitably adjusted by decreasing the exercise price of such options in an amount equal to the per share amount of the May 2006 dividend. In addition, in connection with the payment of the special dividends, it is anticipated that outstanding employee stock options under the Amended and Restated 2005 Stock Incentive Plan will be equitably adjusted by decreasing the exercise price of such options and increasing the number of shares subject to such options to maintain the intrinsic value of such options. See “Management—Stock Options.”

Other than the special dividends described above, we do not anticipate paying any dividends on our common stock in the foreseeable future. Any future determination as to our dividend policy will be made at the discretion of our board of directors and will depend upon many factors, including our financial condition, earnings, legal requirements, restrictions in our debt agreements and other factors our board of directors deems relevant. The terms of the indebtedness of Metals USA, our subsidiary, may also restrict it from paying cash dividends to us under some circumstances. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Commitments, Contingencies and Contractual Obligations,” “Description of Certain Indebtedness,” and “Description of Capital Stock—Common Stock.”

CAPITALIZATION

The following table sets forth cash and cash equivalents and capitalization as of March 31, 2006:

on a historical basis; and

to give effect to the following pro forma adjustments:

the $25 million dividend we declared and paid on May 23, 2006 to our stockholders of record as of that date;

the issuance of shares of our common stock to our existing stockholders immediately prior to the consummation of this offering;

the sale of approximately shares of our common stock in this offering at the initial public offering price of $ per share, which represents the mid-point of the range set forth on the cover page of this prospectus, providing net proceeds to us from this offering (after deducting the estimated underwriting discounts and commissions) of approximately $ million; and

the application of the net proceeds as described in “Use of Proceeds.”

This table should be read together with “Use of Proceeds,” “Selected Historical Consolidated Financial Data,” “Unaudited Pro Forma Condensed Combined Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the combined financial statements and notes to those statements, in each case, included elsewhere in this prospectus.


	As of March 31, 2006
	Historical		Pro Forma for May 2006 Dividend		Pro Forma for this Offering(1)
	(in millions)
Cash and cash equivalents	$	17.9	$	17.9	$

Total long-term debt:
ABL facility(2)(3)	$	201.9	$	226.9	$
Notes		275.0		275.0
Other long-term debt(4)		7.0		7.0

Total long-term debt		483.9		508.9
Stockholders’ equity:
Common stock(5)		0.1		0.1		—
Additional paid-in-capital		134.9		110.0
Retained earnings		0.1		—
Accumulated other comprehensive income		—		—

Total stockholders’ equity	$	135.1	$	110.1	$

Total capitalization	$	619.0	$	619.0	$

(1)

Assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us in connection with the offering, a $1.00 increase (decrease) in the assumed public offering price of $ per share would increase (decrease) cash and cash equivalents by $ million, additional paid-in capital by $ million, total stockholders’ equity by $ million and total capitalization by $ million.

(2)

The ABL facility provides for up to $450.0 million of senior secured revolving credit borrowings and letters of credit, subject to a borrowing base determined primarily by the value of our eligible receivables and eligible inventory, subject to certain reserves. Metals USA’s borrowing base under the ABL facility was approximately $423.5 million on March 31, 2006, of which $201.9 million was drawn and $18.5 million reserved for letters of credit, leaving $203.1 million of borrowing availability.

(3)	We used $36.3 million and $9.4 million of funds from the ABL facility to acquire the net assets of Port City and Dura-Loc, respectively, which is not reflected herein.

(4)	Consists of an IRB with $5.7 million principal amount outstanding as of March 31, 2006, which is payable on May 1, 2016 in one lump sum payment and $1.3 million in vendor financing and purchase money notes.

(5)	Common stock, $0.01 par value per share; shares authorized; shares issued and outstanding, pro forma.

(6)	Upon consummation of this offering, there will be options to purchase 1,002,311 shares of our common stock issuable upon the exercise of options outstanding under our Amended and Restated 2005 Stock Incentive Plan, 561,156 of which we expect will likely vest upon consummation of this offering.

DILUTION

Dilution is the amount by which the offering price paid by the purchasers of the common stock to be sold in this offering will exceed the pro forma net tangible book value per share of common stock after this offering. Our net tangible book deficit as of March 31, 2006 was $ million, or $ per share of common stock. We have calculated this amount by:

subtracting our total liabilities from our total tangible assets; and

dividing the difference by the number of shares of our common stock outstanding.

If we give effect to the sale of shares of our common stock by us in this offering at the assumed public offering price of $ per share, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us in connection with this offering, our pro forma net tangible book deficit as of March 31, 2006 would have been $ million, or $ per share. This amount represents an immediate dilution of $ per share to new investors. The following table illustrates this dilution per share:


		Per Share
Initial public offering price per share
Net tangible book deficit as of March 31, 2006	$
Increase in net tangible book value attributable to this offering(1)

Pro forma net tangible book deficit after this offering

Dilution to new investors		$

(1)	Net tangible book deficit is calculated by subtracting goodwill, identifiable intangibles, deferred tax assets and deferred financing costs from total net assets.

Assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us in connection with the offering, a $1.00 increase (decrease) in the assumed public offering price of $ per share would increase (decrease) the net tangible book value attributable to this offering by $ per share and the dilution to new investors by $ per share and decrease (increase) the pro forma net tangible book deficit after this offering by $ per share.

The following table summarizes, as of March 31, 2006, as adjusted to give effect to this offering and the exercise of all outstanding options upon consummation of this offering, the difference between the number of shares of our common stock purchased from us, the total consideration paid to us, and the average price per share paid by existing stockholders, existing option holders and by new investors, at the initial public offering price of $ per share, before deducting the estimated underwriting discounts and commissions and offering expenses payable by us in connection with this offering:


	Shares Purchased		Total Consideration		Average Price per Share
	Number	Percent	Amount	Percent	Average Price per Share
	(in millions)

Existing stockholders

Existing option holders

New investors

Total

Assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us in connection with the offering, a $1.00 increase (decrease) in the assumed public offering price of $ per share would increase (decrease) the total consideration paid by new investors by $ million, the total consideration paid by all stockholders by $ million and the average price per share by $ per share.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial statements have been developed by applying pro forma adjustments to our historical audited and unaudited consolidated statements of operations and our historical unaudited consolidated balance sheet included elsewhere in this prospectus. Each of the unaudited pro forma adjustments and their underlying assumptions are described more fully in the notes to our unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed consolidated balance sheet as of March 31, 2006 gives effect to the May 2006 dividend, the stock dividend and this offering, including the applications of the net proceeds herefrom, as if they had occurred on such date. The unaudited pro forma condensed consolidated statements of operations for the fiscal year ended December 31, 2005 and for the three-month period ended March 31, 2006 each give effect to the Apollo Transaction, the May 2006 dividend, the stock dividend and this offering, including the application of the net proceeds herefrom, in each case as if they occurred on January 1, 2005.

The summary unaudited pro forma condensed combined financial information are for informational purposes only and do not purport to represent what our results of operations or financial position actually would have been if the Apollo Transaction, the May 2006 dividend, the stock dividend and this offering, including the application of the net proceeds herefrom, had occurred at any date, and such data do not purport to project the results of operations for any future period.

The historical financial results included in the following pro forma condensed combined financial statements are derived from the Predecessor Company consolidated statement of operations for the period from January 1, 2005 to November 30, 2005, the Successor Company consolidated statement of operations for the period from May 9, 2005 (date of inception) to December 31, 2005, the Successor Company unaudited consolidated statement of operations for the period ending March 31, 2006 and the Successor Company unaudited consolidated balance sheet as of March 31, 2006.

For the following unaudited pro forma condensed consolidated statement of operations for the fiscal year ended December 31, 2005, we have combined into one column the 2005 Predecessor and Successor consolidated statements of operations merely by adding the two columns without any pro forma assumptions. We believe the Predecessor/Successor split of our results for the fiscal year ended December 31, 2005 make it difficult for an investor to compare our historical and future results. 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 performance since the Apollo Transaction did not affect the operational activities of Metals USA.

The Apollo Transaction 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. For the one-month period ended December 31, 2005, the Successor Company’s operating costs and expenses 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. As a result of the application of purchase accounting, the Successor Company balances and amounts presented in the consolidated financial statements are not comparable with those of the Predecessor Company.

The unaudited pro forma condensed combined financial data should be read in conjunction with “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors” and our consolidated financial statements and related notes included elsewhere in this prospectus.

METALS USA HOLDINGS CORP.

Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of March 31, 2006


	Historical Metals USA Holdings Corp			Adjustments for May 2006 Dividend			Pro Forma for May 2006 Dividend			Adjustments for this Offering and Special Dividends(a)			Pro Forma
	(in millions)
Cash	$	17.9		$	—		$	17.9		$			$
Accounts receivable		204.2						204.2
Inventories		347.9						347.9
Prepaid expenses and other		29.8						29.8			(b	)

Total current assets		599.8						599.8
Property, plant and equipment		172.9						172.9
Goodwill		13.3	(c)					13.3
Other assets, net		37.0						37.0

Total assets	$	823.0		$	—		$	823.0		$			$	—


Accounts payable	$	81.2		$	—		$	81.2		$			$
Accrued liabilities		49.3						49.3			(b	)
Current maturities of long term debt		0.6						0.6

Total current liabilities		131.1						131.1
Revolving credit facility		201.9			25.0	(d)		226.9			(e	)
Senior secured notes		275.0						275.0
Other long term debt		6.4						6.4
Other non-current liabilities		73.5						73.5

Total liabilities		687.9						712.9
Common stock		0.1						0.1
Paid-in-capital		134.9			(24.9	)(d)		110.0			(e	)
Retained earnings		0.1			(0.1	)(d)		(0.0	)		(b	)

Total equity		135.1			(25.0	)		110.1

Total liabilities and equity	$	823.0		$	—		$	823.0		$			$

See notes to unaudited pro forma condensed consolidated financial data.

METALS USA HOLDINGS CORP.

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Twelve-Month Period Ended December 31, 2005


	Historical
	Predecessor Company			Successor Company
	Period from January 1, 2005 to Novem- ber 30, 2005			Period from May 9, 2005 (Date of Inception) to Decem- ber 31, 2005			Com- bined 2005			Adjust- ments for Apollo Transaction			Pro Forma for Apollo Trans- action			Adjust- ments for May 2006 Dividend			Pro Forma for May 2006 Dividend			Adjust- ments for this Offering and Special Dividends(a)			Pro Forma
	(in millions, except per share data)
Net sales	$	1,522.1		$	116.9		$	1,639.0		$	—		$	1,639.0		$	—		$	1,639.0		$			$
Costs and expenses:
Cost of sales		1,189.3			92.5			1,281.8			(4.1	)(f)		1,277.7						1,277.7
Operating and delivery		139.1			12.8			151.9			—			151.9						151.9
Selling, general and administrative(g)		108.5	(h)		9.3			117.8			1.1	(i)		118.9						118.9			(j	)
Depreciation and amortization		3.1			1.4			4.5			11.7	(k)(l)		16.2						16.2

Operating income (loss)		82.1			0.9			83.0			(8.7	)		74.3			—			74.3
Interest expense		12.0			4.1			16.1			31.8	(m)		47.9			1.4	(n)		49.3			(j	)(o)
Other (income) expense		(0.1	)		—			(0.1	)		—			(0.1	)					(0.1	)

Income (loss) before taxes		70.2			(3.2	)		67.0			(40.5	)		26.5			(1.4	)		25.1
Provision (benefit) for income taxes		26.7			(1.2	)		25.5			(14.9	)(p)		10.6			(0.6	)(p)		10.0			(p	)

Net income	$	43.5		$	(2.0	)	$	41.5		$	(25.6	)	$	15.9		$	(0.8	)	$	15.1		$			$

Number of Weighted Average Shares Outstanding—basic(q)		20.3			14.0									14.0						14.0
Income (loss) per share—basic	$	2.14		$	(0.14	)							$	1.13					$	1.08					$
Number of Weighted Average Shares Outstanding—diluted(q)		21.2			14.0									14.0						14.0
Income (loss) per share—diluted	$	2.05		$	(0.14	)							$	1.13					$	1.08					$

See notes to unaudited pro forma condensed consolidated financial data.

METALS USA HOLDINGS CORP.

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Three-Month Period Ended March 31, 2006


	Historical
	Period from January 1, 2006 to March 31, 2006			Adjustments for May 2006 Dividend			Pro Forma for May 2006 Dividend			Adjustments for this Offering and Special Dividends(a)			Pro Forma
	(in millions, except per share data)
Net sales	$	429.6		$	—		$	429.6					$
Costs and expenses:
Cost of sales		341.0						341.0
Operating and delivery		41.7						41.7
Selling, general and administrative(g)		27.2						27.2			(j	)
Depreciation and amortization		4.2						4.2


Operating income (loss)		15.5			—			15.5
Interest expense		12.0			0.4	(n)		12.4				(o)(j)
Other (income) expense		(0.1	)					(0.1	)

Income (loss) before taxes		3.6			(0.4	)		3.2
Provision (benefit) for income taxes		1.5			(0.2	)(p)		1.3				(p)

Net income	$	2.1		$	(0.2	)	$	1.9		$			$

Number of Weighted Average Shares Outstanding—basic(q)		14.0						14.0
Income (loss) per share —basic	$	0.15					$	0.14					$
Number of Weighted Average Shares Outstanding—diluted(q)		14.0						14.0
Income (loss) per share—diluted	$	0.15					$	0.14					$

See notes to unaudited pro forma condensed consolidated financial data.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA

(dollars in millions)

(a)

Assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us in connection with the offering, a $1.00 increase (decrease) in the assumed public offering price of $ per share would increase (decrease) paid-in capital by $ , total equity by $ , total liabilities and equity by $ and the total amount of proceeds from this offering by $ with a corresponding increase (decrease) in the balance of our ABL facility. Each $1.00 increase (decrease) in the assumed public offering price of $ per share would increase (decrease) pro forma interest expense by $ on an annual basis.

(b)

Upon completion of the Apollo Transaction, we entered into a management agreement with Apollo pursuant to which Apollo provides us with management services and receives an annual management fee equal to $2.0, payable on March 15 of every year, starting on March 15, 2006. Apollo elected to waive $0.5 of the annual management fee, subject to revocation. In addition, Apollo is entitled to receive a transaction fee in connection with certain subsequent financing, acquisition, disposition and change of control transactions with a value of $25.0 or more, equal to 1% of the gross transaction value of any such transaction, including this offering. Deferred management fees of $8.6 were recorded as a current asset, and have been amortized monthly using the straight-line method over the term of the management agreement. The payment obligation under the agreement had been recorded as a current liability of $8.6, at the present value of minimum future annual payments of $1.5.

Upon completion of this offering, the management agreement will be terminated. The cash settlement cost of the management agreement is estimated to be $ , which is $ more than the carrying value of the current liability. A non-recurring expense of $ (calculated as $8.2 for accelerated amortization, plus the $ liability settlement) will be recorded in our statement of operations upon termination of the management agreement, which is reflected as an adjustment to retained earnings herein.

(c)

The Apollo Transaction was consummated on November 30, 2005. The total acquisition costs were allocated to the acquired assets and assumed liabilities of Metals USA based upon estimates of their respective fair values as of the closing date of the merger using valuation and other studies. Below is a summary of the Apollo Transaction:


Historical net assets acquired			$	326.2
Purchase price adjustments:
Inventories	14.9
Land	10.8
Machinery and equipment	107.8
Intangibles (customer lists)	22.2
Deferred tax liability	(64.8	)
Other long-term liabilities	(3.1	)

Total purchase price adjustments	87.8			87.8

Fair value of net assets acquired				414.0
Acquisition costs, net of cash acquired				430.1

Goodwill			$	16.1

Recognition of certain tax benefits for the period from December 1, 2005 through March 31, 2006, along with other adjustments, resulted in the reduction of goodwill to $13.3.

(d)	Represents the May 2006 dividend of $25.0, funded by the ABL facility on May 24, 2006.

(e)	Represents the net increase in equity from the proceeds of this offering, assuming no exercise by the underwriters of their over-allotment option, less the application of net proceeds as follows:


Proceeds received in this offering		$
Less:
Underwriting fees and expenses
Transaction fee to Apollo (see note (b))
Other offering fees and expenses

Net proceeds received in this offering as paid-in capital
Less special dividend

Paid-in capital from this offering
Less cash paid to Apollo in connection with termination of the management agreement (see note (b))

Net proceeds available to reduce ABL facility loan balance		$

(f)

As a result of management’s analysis and evaluation of the replacement cost of inventory as of the closing date of the Merger, a purchase price adjustment of $14.9 (see note (c) above) was recorded with $4.1 of that amount charged to cost of sales in December 2005. This credit reflects the elimination of the $4.1 non-recurring charge from the pro forma results.

(g)

On January 1, 2006, we adopted the provisions of Statement of Financial Accounting Standards No. 123 (revised), “Share Based Payments” and are now required to measure the cost of employee services received in exchange for equity instruments based upon the grant-date fair value. That cost will be recognized over the period during which an employee will be required to provide services. In connection with the closing of the Apollo Transaction, certain members of management received awards for stock options in Metals USA Holdings. The unaudited pro forma condensed consolidated statement of operations for the fiscal year ended December 31, 2005 does not include any adjustments to reflect the cost of the options. Had we been required to record a stock option expense during fiscal year 2005, our selling, general, and administrative costs would have been $0.8 higher than reported. The historical unaudited condensed consolidated statement of operations for the three month period ended March 31, 2006 reflects an expense of $0.3 for equity instruments.

(h)

We incurred certain non-recurring costs related to the Apollo Transaction that were charged to the Predecessor Company’s selling, general and administrative expense during the period from January 1, 2005 to November 30, 2005. Such expenses of $15.8 included $14.6 paid by us on the closing date of Apollo Transaction to holders of 1,081,270 vested in-the-money options and holders of 45,437 restricted stock grant awards related to the long-term incentive compensation plan of the Predecessor Company. Additionally, we recorded expenses of $0.8 related to severance costs and $0.4 for other costs associated with Apollo Transaction.

(i)

As described in note (b) above, we entered into a management agreement with Apollo pursuant to which Apollo provides us with management services. This adjustment reflects the management fee expense for the period January 1, 2005 through November 30, 2005, the periods in which the management fee is not reflected in the historical information. The related adjustment to interest expense is reflected in note (m).

(j)	Upon completion of this offering, our management agreement with Apollo will be terminated as described in note (b). This adjustment eliminates the annual management fee expense of $1.2

and interest expense of $0.3 associated with the agreement. As a result of the termination of the agreement, we will record a non-recurring expense of $ , representing the present value of the remaining payments. This non-recurring expense has not been reflected in the pro forma condensed consolidated statement of operations.

(k)

Represents $4.4 of additional depreciation as a result of the purchase price adjustments of $107.8 recorded for buildings and machinery and equipment as described in note (c) above. The increase in depreciation expense is calculated using an estimated useful life of 30 years for buildings and 10 years for machinery and equipment.

(l)	Represents $7.3 of additional amortization as a result of the purchase price adjustments of $22.2 allocated to customer lists as described in note (c) above. Customer lists are amortized over periods ranging from three to five years.

(m)	Represents an increase in the interest expense as a result of the notes, the ABL facility, related issuance costs, and the elimination of interest costs attributable to the old revolving credit facility as follows:


	Year Ended December 31, 2005
Interest on the notes	$	28.0
Amortization of deferred financing costs on the notes		0.6
Interest on the ABL facility, offset by reduction in interest on the old revolving credit facility		3.9
Amortization of deferred financing costs for the ABL facility, net of amortization costs on the old revolving credit facility		(1.0	)
Interest on management fee obligation to Apollo (see note(b))		0.3

	$	31.8

The interest expense on the ABL facility is primarily based on a spread over LIBOR. For purposes of calculating pro forma interest expense, average historical LIBOR rates during the respective periods were used, and the spread above LIBOR was from 1.75% to 3.50% to arrive at an interest rate of 5.5%. Each one-quarter percent change in the interest rate would increase pro forma interest expense by $0.5 on an annual basis.

(n)	Represents increased interest expense related to increased borrowings on the ABL facility used to pay the May 2006 dividend. Interest rates of 5.7% and 6.7% were used as explained in note (o).

(o)

Represents a decrease in interest expense due to the $ reduction in the balance of the ABL facility as a result of this offering and the special dividend as shown in note (e). For purposes of calculating pro forma interest expense, average historical LIBOR rates during the respective periods were used, and the spread above LIBOR was from 2.00% to 3.50% to arrive at interest rates of 5.7% for fiscal year 2005 and 6.7% for the three month period ending March 31, 2006.

(p)	Reflects an estimated 40% effective tax rate on a pro forma basis. The effective tax rate on a pro forma basis is higher than the effective historical rate because permanent differences represent a higher percentage of income before taxes.

(q)

Pro forma basic and diluted income (loss) per share are computed by dividing net income (loss) by the weighted average number of shares outstanding during the period. Since we had a net loss for the period from May 9, 2005 (date of inception) to December 31, 2005, shares issuable upon the exercise of employee stock options have an antidilutive effect. Therefore, the pro forma diluted loss per share for the Apollo Transaction and the May 2006 dividend is the same as the pro forma basic loss per share for such period. On January 1, 2006, we adopted the provisions of Statement of Financial Accounting Standards No. 123 (revised) “Share Based Payments,” and for the three month period ended March 31, 2006, our stock options had an antidilutive effect. Pro forma weighted average shares have been adjusted to reflect the special stock dividend of shares and the sale of shares in connection with this offering.

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

On May 18, 2005, Metals USA Holdings and its indirect wholly-owned subsidiary, Flag Acquisition Corporation, 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. Metals USA Holdings, Flag Intermediate and Flag Acquisition conducted no operations during the period May 9, 2005 (date of inception) to November 30, 2005.

We applied purchase accounting on 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, the Predecessor Company filed 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 Code”.

The consolidated financial statements of the Predecessor Company after October 31, 2002 are not comparable to the consolidated financial statements of the Predecessor Company prior to November 1, 2002. The principal differences relate to the exchange of shares of new common stock for pre-petition liabilities subject to compromise, issuance of warrants in exchange for the extinguished old common stock, adjustments to reflect the fresh-start impact on the carrying value of certain non-current assets and elimination of the retained deficit.

The following table sets forth our selected historical consolidated financial data as of the dates and for the periods indicated. The selected historical consolidated financial data as of December 31, 2004 and for each of the two years in the period ended December 31, 2004, 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 for the Successor Company have been derived from our audited consolidated financial statements and related notes included elsewhere in this prospectus. 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, 2001, 2002 and 2003 and for each of the two years in the period ended December 31, 2002 presented in this table have been derived from our Predecessor Company’s audited consolidated financial statements not included in this prospectus. The historical consolidated financial data for the three months ended March 31, 2005 and 2006 have been derived from our unaudited consolidated financial statements, included elsewhere in this prospectus. The March 31, 2005 and 2006 financial statements have been prepared on a basis consistent with our audited consolidated financial statements and reflect all adjustments, consisting of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented. The historical financial statements for the periods not presented herein have been reclassified to give effect to discontinued operations identified during 2002. The results of any interim period are not necessarily indicative of the results that may be expected for any other interim period or for the full fiscal year, and the historical results set forth below do not necessarily indicate results expected for any future period. The selected historical consolidated financial data set forth below 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 prospectus.


	Predecessor Company(1)																		Successor Company(2)			Predecessor Company			Successor Company(2)
				Period from January 1,			Period from November 1,									Period from January 1,			Period from May 9, 2005 (Date of
	Year Ended December 31,			2002 to October 31,			2002 to December 31,			Year Ended December 31,						2005 to November 30,			Inception) to December 31,			Three Months Ended March 31,
	2001			2002(1)			2002			2003			2004			2005			2005			2005			2006
	(dollars in millions, except per share data)
Operation Data:
Net sales	$	1,243.0		$	833.3		$	128.7		$	963.2		$	1,509.8		$	1,522.1		$	116.9		$	427.6		$	429.6
Costs and expenses:
Cost of sales (exclusive of operating and delivery, and depreciation and amortization shown below)		953.3			639.0			98.7			731.6			1,080.1			1,189.3			92.5			333.8			341.0
Operating and delivery		156.8			110.1			18.3			127.7			144.4			139.1			12.8			37.8			41.7
Selling, general and administrative(3)		118.1			79.5			12.6			87.0			109.6			108.5			9.3			24.3			27.2
Depreciation and amortization(4)		21.3			7.5			—			0.5			2.0			3.1			1.4			0.7			4.2
Integration credits(5)		(2.1	)		(3.2	)		—			—			—			—			—			—			—
Asset impairment(6)		386.1			3.0			—			—			—			—			—			—			—

Operating income (loss)		(390.5	)		(2.6	)		(0.9	)		16.4			173.7			82.1			0.9			31.0			15.5
Interest expense		49.6			15.8			1.3			5.7			8.4			12.0			4.1			3.2			12.0
Other (income) expense		1.8			(1.1	)		0.1			(2.0	)		(2.5	)		(0.1	)		—			(0.2	)		(0.1	)
Fresh-start adjustments		—			109.7			—			—			—			—			—			—			—
Gain on reorganization		—			(190.6	)		—			—			—			—			—			—			—
Reorganization expenses		19.4			28.3			—			—			—			—			—			—			—

Income (loss) before taxes and discontinued operations		(461.3	)		35.3			(2.3	)		12.7			167.8			70.2			(3.2	)		28.0			3.6
Provision (benefit) for income taxes		(52.9	)		(15.4	)		—			5.1			63.3			26.7			(1.2	)		10.7			1.5

Net income (loss) before discontinued operations		(408.4	)		50.7			(2.3	)		7.6			104.5			43.5			(2.0	)		17.3			2.1
Income (loss) from discontinued operations, net of taxes		(0.7	)		0.6			(1.0	)		(0.1	)		—			—			—			—			—

Net income (loss)	$	(409.1	)	$	51.3		$	(3.3	)	$	7.5		$	104.5		$	43.5		$	(2.0	)	$	17.3		$	2.1

Income (loss) per share:
Income (loss) per share—basic(7):
From continuing operations	$	(11.19	)	$	1.39		$	(0.11	)	$	0.38		$	5.17		$	2.14		$	(0.14	)	$	0.85		$	0.15
From discontinued operations		(0.02	)		0.02			(0.05	)		(0.01	)		—			—			—			—			—

Total	$	(11.21	)	$	1.41		$	(0.16	)	$	0.37		$	5.17		$	2.14		$	(0.14	)	$	0.85		$	0.15
Income (loss) per share—diluted(9):
From continuing operations	$	(11.19	)	$	1.39		$	(0.11	)	$	0.37		$	5.05		$	2.05		$	(0.14	)	$	0.83		$	0.15
From discontinued operations		(0.02	)		0.02			(0.05	)		—			—			—			—			—			—

Total	$	(11.21	)	$	1.41		$	(0.16	)	$	0.37		$	5.05		$	2.05		$	(0.14	)	$	0.83		$	0.15
Number of common shares used in the per share calculation:
Basic		36.5			36.5			20.2			20.2			20.2			20.3			14.0			20.3			14.0
Diluted		36.5			36.5			20.2			20.3			20.7			21.2			14.0			20.9			14.0


	Predecessor Company(1)									Successor Company(2)
	As of December 31,									As of December 31,		As of March 31,
	2001			2002		2003		2004		2005		2006
	(in millions)
Balance Sheet Data:
Cash	$	72.4		$	6.3	$	11.4	$	12.6	$	11.3	$	17.9
Working capital		183.2			318.2		303.4		565.0		453.7		468.7
Total assets		690.1			378.6		407.2		710.0		795.3		823.0
Total debt		501.9			128.7		118.7		270.6		473.5		483.9
Total liabilities		725.2			189.6		206.6		381.8		662.9		687.9
Stockholders’ equity		(35.1	)		189.0		200.6		328.2		132.4		135.1
Dividends declared		1.1			—		—		—		—		—


	Predecessor Company(1)																		Successor Company(2)			Predecessor Company			Successor Company(2)
	Year Ended December 31, 2001			Period from January 1, 2002 to October 31, 2002(1)			Period from November 1, 2002 to December 31, 2002			Year Ended December 31,						Period from January 1, 2005 through November 30, 2005			Period from May 9, 2005 (Date of Inception) to December 31, 2005			Three Months Ended March 31,
	Year Ended December 31, 2001			Period from January 1, 2002 to October 31, 2002(1)			Period from November 1, 2002 to December 31, 2002			2003			2004			Period from January 1, 2005 through November 30, 2005						2005			2006
													(dollars in millions)
Cash Flow Data:
Cash flows provided by (used in) operating activities	$	180.5		$	8.4		$	14.5		$	26.9		$	(128.6	)	$	170.1		$	7.3		$	(3.3	)	$	(0.1	)
Cash flows provided by (used in) investing activities		(109.3	)		80.2			6.4			(11.8	)		(16.0	)		(15.8	)		(434.5	)		(2.8	)		(3.7	)
Cash flows provided by (used in) financing activities		(2.6	)		(141.9	)		(33.7	)		(10.0	)		145.8			(120.7	)		438.5			7.8			10.4
Other Operating Data:
Shipments (in thousands of tons)(8)		1,653			1,126			171			1,288			1,502			1,332			107			365			385
Capital expenditures		16.3			3.0			0.5			17.5			17.4			15.9			4.4			2.8			3.7
Other Financial Data:
Deficiency of earnings to fixed charges	$	461.3			—		$	2.3			—			—			—			—			—			—
Ratio of earnings to fixed charges(9)		—			2.7	x		—			2.2	x		13.3	x		5.1	x		0.3	x		7.1	x		1.3	x

(1)	On October 31, 2002, we emerged from bankruptcy. As a result of the application of “Fresh-Start Reporting,” our financial information as of any date or for any periods after October 31, 2002 is not comparable to our historical financial information before November 1, 2002.

(2)

The Apollo Transaction 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. For the one-month period ended December 31, 2005, the Successor Company’s operating costs and expenses 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. For the three months ended March 31, 2006, the Successor Company’s operating costs and expenses increased by $14.0 million ($10.8 million for cost of sales and $3.2 million of additional deprecation and amortization) as the inventory was sold and additional depreciation and amortization was recorded. As a result of the application of purchase accounting, the Successor Company balances and amounts presented in the consolidated financial statements are not comparable with those of the Predecessor Company.

(3)

We incurred certain non-recurring costs related to Apollo Transaction that were charged to the Predecessor Company’s selling, general and administrative expense during the period from January 1, 2005 to November 30, 2005. Such expenses of $15.8 million included $14.6 paid by us 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

related to the long-term incentive compensation plan of the Predecessor Company. Additionally, we recorded expenses of $0.8 million related to severance costs and $0.4 million for other costs associated with Apollo Transaction.

(4)	Excludes depreciation expense reflected in cost of sales for the Building Products Group.

(5)	Reflects unexpended amounts associated with integration accruals made in 1999 and 2001.

(6)	Of the total impairment charges, $288.7 million related to goodwill, $90.3 million related to property and equipment and a $10.1 million charge related to future reserves for personnel and facility costs associated with the disposition of certain properties.

(7)

As a result of the Merger, as discussed in Note 2 to our audited consolidated financial statements included elsewhere in this prospectus, all outstanding common stock and options of the Predecessor Company were cancelled. On November 30, 2005, the Successor Company issued 14,000,000 shares of common stock. Basic and diluted income (loss) per share are computed by dividing net income (loss) by the weighted average number of shares outstanding during the period. Since the Predecessor Company had net losses for the year ended December 31, 2001 and the period from November 1, 2002 through December 31, 2002, and we had a loss for the period from May 9, 2005 (date of inception) to December 31, 2005, shares issuable upon the exercise of employee stock options had an antidilutive effect. Therefore, the diluted loss per share is the same as the basic loss per share for such periods.

(8)	Expressed in thousands of tons, for our Plates and Shapes and Flat Rolled Groups combined. Shipments in tons is not an appropriate measure for our Building Products Group.

(9)

For the purposes of calculating the ratio of earnings to fixed charges, earnings represent income (loss) before income taxes and discontinued operations plus fixed charges. Fixed charges consist of financing costs and the portion of operational rental expense which management believes is representative of interest within rent expense.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The following discussion and analysis of our results of operations and financial condition covers periods prior to the consummation of the Apollo Transaction and this offering. Accordingly, except where indicated, the discussion and analysis of historical periods does not reflect the significant impact that the Apollo Transaction and this offering will have on us, including significantly increased leverage and liquidity requirements. You should read the following discussion of our results of operations and financial condition with the “Unaudited Pro Forma Condensed Combined Financial Information,” “Selected Historical Consolidated Financial Data” and the audited and unaudited historical consolidated financial statements and related notes included elsewhere in this prospectus. In addition, the following discussion and analysis does not take into account the impact on us of the recent acquisitions. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section of this prospectus. Actual results may differ materially from those contained in any forward-looking statements. In addition, certain of the descriptions of our operating and financial measures may not be directly comparable to similar classifications used by other companies.

Overview

We are a leading provider of value-added processed steel, aluminum and specialty metals and manufactured metal components. Approximately 86.1% of our operating income (excluding Corporate) is derived from our metals service center and distribution activities that are segmented into two groups, Plates and Shapes and Flat Rolled. The remaining 13.9% of our operating income (excluding Corporate) is derived from our Building Products Group that manufactures and distributes products primarily related to the residential remodeling industry. We 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, value-added processing services required to meet the specifications provided by end-use customers. Our Plates and Shapes Group and Flat Rolled Group customers are in the machining, furniture, transportation equipment, power and process equipment, industrial/commercial construction/fabrication, consumer durables and electrical equipment businesses, as well as machinery and equipment manufacturers. Our Building Products Group customers are distributors and contractors engaged in the residential remodeling industry.

Matters Impacting Comparability of Results

The Merger with Flag Acquisition. 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. The Merger was consummated pursuant to an agreement and plan of merger by and among Metals USA, Metal 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 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 Management 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 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 closing the Merger. As a result of the

Merger, in the immediate future, we will experience increased non-cash expenses related to the purchase price adjustment and increased interest expense resulting from the larger debt component of our capital structure.

As a result of the Merger, 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. 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 million. Our intangible assets (customer lists) will be amortized over five years using an accelerated amortization method which approximates their useful life and 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:


	Predecessor Company				Successor Company		Predecessor Company		Successor Company
			Period from January 1,		Period from May 9, 2005 (Date of
	Year Ended December 31,		2005 to November 30,		Inception) to December 31,		Three Months Ended March 31,
	2004		2005		2005		2005		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		—		0.3
Write-off prepaid expenses as result of Merger(3)		—		0.3		—		—		—
Facilities closure(4)		5.0		—		—		—		—
Severance costs(5)		—		0.7		—		—		—
Management fees(6)		—		—		0.1		—		0.3

(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 charged to cost of sales in December 2005 and $10.8 million charged to cost of sales in the first quarter of 2006.

(2)

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

(4)	This 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 in 2004.

(5)	This amount represents severance costs of management personnel that were replaced as part of the Merger.

(6)	Includes accrued expenses related to the management agreement with Apollo. See “Certain Relationships and Related Party Transactions—Apollo Management Agreements” for a discussion of Apollo’s intention to terminate the management agreement upon the consummation of this offering.

Recent Acquisitions. On May 17, 2006, Metals USA purchased all of the assets and business operations of Port City, located in Tulsa, Oklahoma, for approximately $41.3 million, which includes a $5.0 million contingent payout that may be made in 2009 or earlier, subject to certain performance criteria. Founded in 1977, Port City is a value-added processor of steel plate. Port City has experienced very strong sales growth over the past few years with sales in excess of $47 million in 2005. 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 positions us to be the pre-eminent plate processor in the southern United States. Port City operates out of a 486,000 square foot facility and has over 110 full-time employees. Port City’s 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 addition to the south-central region of our Plates and Shapes Group.

On May 12, 2006, Metals USA 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 for approximately $10.4 million Canadian dollars (or 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. Dura-Loc had sales of $12.8 million Canadian dollars (or approximately U.S.$11.3 million) during calendar year 2005 utilizing only one product crew. We believe this acquisition gives us significant additional capacity located in a potentially high growth market. We have also determined that by transforming Dura-Loc’s production processes 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 way to gain access to an expanded product mix and leverage the combined sales force and research and development personnel, thereby solidifying our position as one of the largest stone-coated metal roofing manufacturers in North America.

Overview of Results

Net sales. We derive the net sales of our Plates and Shapes and Flat Rolled 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 of sales. Our Plates and Shapes and Flat Rolled Groups follow the normal industry practice which classifies, within cost of sales, the underlying commodity cost of metal purchased in mill form and the cost of inbound freight charges together with third-party processing cost, if any. Generally, the cost of metal approximates 75% of net sales for the Plates and Shapes and Flat Rolled Groups. Cost of sales with respect to our Building Products Group includes the cost of raw materials, manufacturing labor and overhead costs, together with depreciation and amortization expense associated with property, buildings and equipment used in the manufacturing process. Amounts included within this caption may not be comparable to similarly titled captions reported by other companies.

Operating and delivery expense. Our operating and delivery expense reflects the cost incurred by our Plates and Shapes and Flat Rolled Groups for labor and facility costs associated with the value-added metal processing services that we provide. With respect to our Building Products Group, operating costs are associated with the labor and facility costs attributable to the distribution and warehousing of our finished goods at our service center facilities. Delivery expense reflects labor, material handling and other third party costs incurred with the delivery of product to customers. Amounts included within this caption may not be comparable to similarly titled captions reported by other companies.

Selling, general and administrative expenses. Selling, general and administrative expenses include sales and marketing expenses, executive officers’ compensation, office and administrative salaries, insurance, accounting, legal, computer systems, and professional services and costs not directly associated with the processing, manufacturing, operating or delivery costs of our products. Amounts included within this caption may not be comparable to similarly titled captions reported by other companies.

Depreciation and amortization. Depreciation and amortization expense represents the costs associated with property, buildings and equipment used throughout the company except for depreciation and amortization expense associated with the manufacturing assets employed by our Building Products Group, which is included within cost of sales.

Inventories. Our inventories are stated at the lower of cost or market and accounted for using a variety of methods including specific identification, average cost and the first-in first-out method of accounting. Rising steel prices result in inventory holding gains, as demonstrated in 2004, and declining prices result in inventory holding losses. Investors are cautioned that our historical inventory gain and loss experience is not necessarily a reliable indicator of our future inventory gains and losses.

Industry Trends

Since 2000, there has been significant consolidation among the major domestic steel producers. The top three steel producers now control over 60% of the domestic flat rolled steel market, up significantly since 2000, which has created a pricing environment characterized by a more disciplined approach to production and pricing. 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 portion of these key functions once served by the major metals producers. Additionally, over the last several quarters the metals service center industry has been exercising better discipline over inventory control. Since mid-2005, the metals service center industry has reduced inventories to multi-year lows while increasing shipment volumes. As a result, the service center element of the industry is well positioned to respond to changing market conditions.

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

In early 2005, the three iron ore suppliers controlling about 80% of the world merchant ore 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. We anticipate both foreign and domestic mills will have to

continue the disciplined practice they implemented in 2004 of passing along such added costs, in the form of both price increases and surcharges. Although the domestic steel producers have demonstrated restraint in curbing manufacturing capacity, earlier in 2005, the decline in automotive build rates in the United States increased the amount of steel available to the domestic manufacturing industries. We believe this excess of supply adversely affected the market price of flat rolled steel which declined through the first eight months of 2005; however, this supply imbalance was resolved. As a result, the mills raised prices in the domestic market in September and October 2005. Demand for steel products remained firm during the fourth quarter of 2005 and into the first quarter of 2006. Pricing for steel products remained relatively steady during this period as market concerns about future increases in imports caused most steel producers to keep prices level in what would otherwise be an ideal opportunity to raise domestic prices. During March and April of 2006, domestic steel producers have announced further price increases as it became apparent that market concerns over imports were exaggerated. 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 metal prices to decline.

Critical Accounting Policies

We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Because of the uncertainty inherent in these matters, actual results could differ from the estimates we used in applying critical accounting policies. Within the context of these critical accounting policies, we are not currently aware of any reasonably likely event that would result in materially different amounts being reported.

Accounts Receivable. We recognize revenue as product is shipped (risk of loss for our products passes at time of shipment), net of provisions for estimated returns. Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of trade accounts and notes receivable. Collections on our accounts receivable are made through several lockboxes maintained by our lenders. The ABL facility requires a lockbox arrangement, which in the absence of default, is controlled by Metals USA. 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 quarter we consider all available information when assessing the adequacy of the provision for allowances, claims and doubtful accounts. Adjustments made with respect to the allowance for doubtful accounts often relate to improved information not previously available. Uncertainties with respect to the allowance for doubtful accounts are inherent in the preparation of financial statements. The rate of future credit losses may not be similar to past experience.

Inventories. Inventories are stated at the lower of cost or market. Our inventories are accounted for using a variety of methods including specific identification, average cost and the first-in first-out, or “FIFO,” method of accounting. We regularly review inventory on hand and record provisions for damaged and slow-moving inventory based on historical and current sales trends. Changes in product demand and our customer base may affect the value of inventory on hand which may require higher provisions for damaged and slow-moving inventory.

Adjustments made with respect to the inventory valuation allowance often relate to improved information not previously available. Uncertainties with respect to the inventory valuation allowance are inherent in the preparation of financial statements. The rate of future losses associated with damaged or slow moving inventory may not be similar to past experience.

Results of Operations—2005 Successor Company and Predecessor Company Results—Combined Non-GAAP

The following tables present our combined unaudited 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.

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 performance. 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 quarter and 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.

As a result of the Merger, 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. 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 million. 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 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.


	Predecessor Company			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)
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

The 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			%		Operating Income (Loss)			%		Capital Expendi- tures		Ship- ments(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		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		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		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

(1)

As a result of the Merger, 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. 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. On a segment basis, $5.2 million additional operating cost and expense was allocated as follows: Building Products $1.1 million, Flat Rolled $1.9 million, Plates and Shapes $1.6 million, and Corporate $0.6 million.

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

Combined and Consolidated Results

The table below presents our results of operations for the fiscal years ending December 31, 2005, 2004 and 2003 and the three months ended March 31, 2006 and 2005. The results for the fiscal year ended December 31, 2005 are combined, as described above, and do not conform to GAAP.


	Fiscal Years Ended December 31,												Three Months Ended March 31,
	Combined Non- GAAP 2005			%	Predecessor Company 2004			%	Predecessor Company 2003			%	Successor Company 2006			%	Predecessor Company 2005			%
	(in millions, except percentages)
Net sales	$	1,639.0		100.0%	$	1,509.8		100.0%	$	963.2		100.0%	$	429.6		100.0%	$	427.6		100.0%
Cost of sales		1,281.8		78.2%		1,080.1		71.5%		731.6		76.0%		341.0		79.4%		333.8		78.1%
Operating and delivery		151.9		9.3%		144.4		9.6%		127.7		13.3%		41.7		9.7%		37.8		8.8%
Selling, general and administrative		117.8		7.2%		109.6		7.3%		87.0		9.0%		27.2		6.3%		24.3		5.7%
Depreciation and amortization		4.5		0.3%		2.0		0.1%		0.5		0.1%		4.2		1.0%		0.7		0.2%

Operating income (loss)		83.0		5.1%		173.7		11.5%		16.4		1.7%		15.5		3.6%		31.0		7.2%
Interest expense		16.1		1.0%		8.4		0.6%		5.7		0.6%		12.0		2.8%		3.2		0.7%
Other (income) expense, net		(0.1	)	—		(2.5	)	(0.2)%		(2.0	)	(0.2)%		(0.1	)	—		(0.2	)	—

Income before income taxes and discontinued operations	$	67.0		4.1%	$	167.8		11.1%	$	12.7		1.3%	$	3.6		0.8%	$	28.0		6.5%

Results of Operations by Period

Results of Operations—Three Months Ended March 31, 2006 Compared to March 31, 2005

The following unaudited consolidated financial information reflects our historical financial statements.


	Successor Company					Predecessor Company
	Three Months Ended March 31,
	2006			%		2005			%
	(in millions, except percentages)
Net sales	$	429.6		100.0	%	$	427.6		100.0	%
Cost of sales		341.0		79.4	%		333.8		78.1	%
Operating and delivery		41.7		9.7	%		37.8		8.8	%
Selling, general and administrative		27.2		6.3	%		24.3		5.7	%
Depreciation and amortization		4.2		1.0	%		0.7		0.2	%

Operating income		15.5		3.6	%		31.0		7.2	%
Interest expense		12.0		2.8	%		3.2		0.7	%
Other (income) expense, net		(0.1	)	—			(0.2	)	—

Income before income taxes	$	3.6		0.8	%	$	28.0		6.5	%

Net sales. Net sales increased $2.0 million, or 0.5%, from $427.6 million for the three months ended March 31, 2005 to $429.6 million for the three months ended March 31, 2006. The increase in sales was primarily attributable to a 5.5% increase in volumes partially offset by a 5.0% decrease in average realized prices for our Flat Rolled and Plates and Shapes Product Groups. Net sales increased for our Building Products Group by $1.1 million due primarily to higher sales prices.

Cost of sales. Cost of sales increased $7.2 million, or 2.2%, from $333.8 million for the three months ended March 31, 2005, to $341.0 million for the three months ended March 31, 2006. The increase in cost of sales was primarily attributable to a 5.5% increase in volumes and an increase in the average cost per ton, primarily related to a $10.8 million cost related to inventory purchase accounting for our Flat Rolled and Plates and Shapes Product Groups. Cost of sales as a percentage of sales increased from 78.1% in 2005 to 79.4% in the same period in 2006. This percentage increase was primarily due to a larger increase in average costs per ton than in realized sales price per ton.

Operating and delivery. Operating and delivery expenses increased $3.9 million, or 10.3%, from $37.8 million for the three months ended March 31, 2005 to $41.7 million for the three months ended March 31, 2006. Higher labor costs and higher freight costs due to rising fuel prices accounted for over one half of the increase. As a percentage of net sales, operating and delivery expenses increased from 8.8% for the three months ended March 31, 2005 to 9.7% for the three months ended March 31, 2006. This percentage increase was primarily due to a larger growth in operating and delivery expenses as compared to net sales growth.

Selling, general and administrative. Selling, general and administrative expenses increased $2.9 million, or 11.9%, from $24.3 million for the three months ended March 31, 2005 to $27.2 million for the three months ended March 31, 2006. Higher salaries, incentive compensation and, to a lesser extent, $0.3 million in compensation expense related to the outstanding options under Statement of Financial Accounting Standards No. 123-Revised 2004 (“SFAS 123(R)”), “Share-Based Payment,” accounted for a significant portion of the increase. As a percentage of net sales, selling, general and administrative expenses increased from 5.7% for the three months ended March 31, 2005 to 6.3% for the three months ended March 31, 2006. This percentage increase was primarily due to a larger growth in selling, general and administrative expenses as compared to net sales growth.

Depreciation and amortization. Depreciation and amortization increased from $0.7 million for the three months ended March 31, 2005 to $4.2 million for the three months ended March 31, 2006. The revaluation of our long-lived assets to fair value as a result of the Merger caused $3.2 million of the increase. The remaining increase of $0.3 million was due to capital investments in facilities and equipment made during the prior twelve months.

Operating income. Operating income decreased $15.5 million, or 50.0%, from $31.0 million for the three months ended March 31, 2005 to $15.5 million for the three months ended March 31, 2006. The decrease in operating income is primarily due to a $10.8 million increase to cost of sales related to inventory purchase accounting and $3.2 million additional depreciation and amortization on our long-lived assets. Additionally, selling, general and administrative costs increased due to increases in compensation expense. As a percentage of net sales, operating income decreased from 7.2% for the three months ended March 31, 2005 to 3.6% for the three months ended March 31, 2006.

Interest expense. Interest expense increased $8.8 million, from $3.2 million for the three months ended March 31, 2005 to $12.0 million for the three months ended March 31, 2006. This increase was primarily a function of higher debt levels and, to a lesser extent, higher effective interest rates. Our capital structure was significantly different between the two periods due to the Merger that occurred on November 30, 2005. At March 31, 2005, our debt consisted of a revolving credit agreement with an outstanding balance of $261.0 million and other debt totaling $17.4 million. At March 31, 2006, our debt consisted of $275.0 million in outstanding 11¹/8% Senior Secured Notes, $201.9 million in outstanding advances under our ABL facility, and $7.0 million in other debt.

Results of Operations—Combined Year Ended December 31, 2005 Compared to 2004

Net sales. Net sales increased $129.2 million, or 8.6%, from $1,509.8 million for the twelve months ended December 31, 2004 to $1,639.0 million for the twelve months ended December 31,

2005. The increase in sales was primarily attributable to a 13.6% increase in average realized price per ton partially offset by a 4.2% decrease in volumes for our Flat Rolled and Plates and Shapes Product Groups. Net sales increased for our Building Products Group by $12.1 million.

Cost of sales. Cost of sales increased $201.7 million, or 18.7%, from $1,080.1 million for the twelve months ended December 31, 2004, to $1,281.8 million for the twelve months ended December 31, 2005. The increase in cost of sales was primarily attributable a 25.6% increase in the average cost per ton partially offset by a 4.2% decrease in volumes for our Flat Rolled and Plates and Shapes Product Groups. The increase in the average cost per ton was primarily due to an increase in the cost of raw materials and, to a lesser extent, a $4.1 million increase in costs related to purchase accounting. Cost of sales as a percentage of net sales increased from 71.5% in 2004 to 78.2% in 2005. This percentage increase was primarily due to the combination of higher average costs per ton and to a lesser extent a decrease in volumes for our Flat Rolled and Plates and Shapes Product Groups.

Operating and delivery. Operating and delivery expenses increased $7.5 million, or 5.2%, from $144.4 million for the twelve months ended December 31, 2004 to $151.9 million for the twelve months ended December 31, 2005. This increase was primarily due to increased labor and delivery costs. As a percentage of net sales, operating and delivery expenses decreased from 9.6% for the twelve months ended December 31, 2004 to 9.3% for the twelve 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 Plates and Shapes Product Groups.

Selling, general and administrative. Selling, general and administrative expenses increased $8.2 million, or 7.5%, from $109.6 million for the twelve months ended December 31, 2004 to $117.8 million for the twelve months ended December 31, 2005. This was principally due to the acceleration of payment of stock based compensation totaling $14.6 million as a result of the Merger. As a percentage of net sales, selling, general and administrative expenses decreased from 7.3% for the twelve months ended December 31, 2004 to 7.2% for the twelve 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 Plates and Shapes Product Groups.

Depreciation and amortization. Depreciation and amortization increased $2.5 million, or 125%, from $2.0 million for the twelve months ended December 31, 2004 to $4.5 million for the twelve months ended December 31, 2005. The revaluation of our long-lived assets to fair value as a result of the Merger caused $1.1 million of the increase. The remaining increase of $1.4 million was primarily due to capital investments in facilities and equipment made during the prior twelve months.

Operating income. Operating income decreased $90.7 million, or 52.2%, from $173.7 million for the twelve months ended December 31, 2004 to $83.0 million for the twelve months ended December 31, 2005. This decrease was due primarily to an increase in the cost of raw materials and, to a lesser extent, a one-time cost of $14.6 million associated with the acceleration of payment of stock-based compensation and $5.2 million of additional costs related to purchase accounting.

Interest expense. Interest expense increased $7.7 million, or 91.7%, from $8.4 million for the twelve months ended December 31, 2004 to $16.1 million for the twelve months ended December 31, 2005. This increase was primarily due to the increased debt we incurred as a result of the Merger and, to a lesser extent, on higher interest rates in 2005.

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

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

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

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

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

Depreciation and amortization. Depreciation and amortization increased $1.5 million, or 300.0%, from $0.5 million in 2003 to $2.0 million in 2004, due to capital investment in facilities and equipment made during the prior twelve months.

Operating income. Operating income increased by $157.3 million, or 959.1%, from $16.4 million in 2003 to $173.7 million in 2004. This increase is due to the improved margins and increased shipments in our Flat Rolled and Plates and Shapes Groups.

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

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

Results of Operations 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 the supplementary table presented after the “—Results of Operations—2005 Successor Company and Predecessor Company Results—Combined Non-GAAP.”


	Net Sales		%		Operating Costs and Expenses		%		Operating Income (Loss)		%		Capital Expendi- tures		Ship- ments(1)
	(in millions, except percentages)
Fiscal Years Ended December 31,
2005 (Combined Non-GAAP):
Plates and Shapes	$	694.7	42.4	%	$	626.3	40.3	%	$	68.4	82.4	%	$	13.7	740
Flat Rolled		770.9	47.0	%		735.4	47.3	%		35.5	42.8	%		2.5	723
Building Products		195.1	11.9	%		178.3	11.4	%		16.8	20.2	%		3.2	—