Metals service centers function as key intermediaries between the metals producers that desire to sell large volumes to few customers and the end-users that need specific products in smaller quantities. Primary metals producers, which manufacture and sell large volumes of steel, aluminum and specialty metals in standard sizes and configurations, generally sell only to large end-users and metals service centers that do not require processing of the products and who can order in large quantities and tolerate relatively long lead times. It is believed that the role of the primary metals producers will not change in the foreseeable future and that these producers will continue to focus on providing efficient and volume-driven production of a limited number of standardized metal products. The metals distribution industry is fragmented, with approximately 1,300 participants throughout North America, the largest of which represented less than 5% of estimated industry sales in North America of $50 billion in 2003. Based on 2003 data on the North American industry, approximately $27.0 billion of sales were attributable to the 50 largest metals service centers in North America.

The industry includes both general-line distributors that handle a wide range of metal products and specialty distributors that specialize in particular categories of metal products. Most of the companies in the metals distribution industry have a product mix more heavily weighted toward flat products, such as sheet and plate. The bar and tubular products tend to be sold in smaller quantities, with shorter lead times and at higher gross margins than flat products, such as sheet and plate. Geographic coverage by metals service centers is influenced by their national, regional and local representation.

Carbon steel bar products (hot-rolled and cold-finished) and carbon plate and sheet are used in a wide range of products and applications, including construction equipment, agricultural equipment, automotive and truck manufacturing and oil exploration. Stainless steel bar and plate are used widely in the chemical, petrochemical, and oil refining and biomedical industries where resistance to corrosion is important. Aluminum bar and plate are frequently used in aircraft and aerospace applications where weight is a factor.

Different tubular products are appropriate for particular uses based on different characteristics of the tubular materials, including strength, weight, resistance to corrosion and cost. Carbon steel tubing and pipe are used in general manufacturing. Alloy tubing is used frequently in the manufacturing of oil field equipment and farm equipment. Stainless steel tubing and pipe are used in applications requiring a high resistance to corrosion, such as food processing. Aluminum tubing and pipe are used in applications that put a premium on lightweight, such as aerospace manufacturing.

The majority of the Company’s procurement activities are conducted by a centralized merchandising office in the Company’s Chicago facility. Specialists in major product lines make the majority of inventory purchases on behalf of the Company’s service centers. Because of this centralized coordination and the total volume of purchases made by the Company, the Company is recognized distributor for major metals suppliers.

Gross profit for the first quarter of fiscal 2005 increased 57.8% to $105.6 million, from $66.9 million for the same period in fiscal 2004.

Total operating expenses for the first quarter of fiscal 2005 increased 30.2% to $65.9 million, from $50.6 million for the same period in fiscal 2004.

Selling expenses for the first quarter of fiscal 2005 increased 59.5% to $13.4 million, from $8.4 million for the same period in fiscal 2004.