Steel service centers operate as intermediaries between primary steel producers and end-users, which typically include fabricators and original equipment manufacturers, who require smaller quantities of more highly customized products delivered on a just-in-time basis.

Due to smaller purchase sizes, producers historically have not dealt directly with end-users. By purchasing large quantities of steel from producers, steel service centers are able to take advantage of producer economies of scale resulting in lower costs of materials purchased. Because steel service centers purchase steel from a number of primary producers, they can maintain a consistent supply of various types of steel used by their customers. In turn, steel service centers allow customers to lower their inventory levels, decrease the time between the placement of an order and receipt of materials and reduce internal expenses, thereby helping these customers to manage their working capital in an efficient manner.

However, unlike pure distributors that buy standard grades of steel in bulk from producers and resell them in smaller quantities to local end-users, steel service centers also engage in a variety of value-added processing operations, such as cutting, shaping or treating steel to particular customer specifications.

Purchasing magazine estimates that the combined U.S. and Canadian metal service center industry’s annual revenue was $115 billion in 2005. Metal service centers represent the largest customer group of the U.S. domestic steel industry, accounting for approximately 47% of U.S. steel shipments in 2005. The metal service center industry remains highly fragmented, with over 500 companies operating in North America. Competition is based in large part on quality, price and the ability to provide value-added services such as working capital management and just-in-time delivery.

The Company’s business is organized into two reportable segments: Long Products and Plate, or Long Products, and Flat Rolled Products, or Flat Rolled. The Company’s Long Products segment operates 16 facilities throughout the Southwest, New England, Mid-Atlantic, Midwest and Southeast regions of the United States. This segment distributes structural beams, tubing, plates, sheets, pipes, channels, angles, flats, rounds, reinforcing and merchant bar, bar grating and floor plate.

Through its Long Products segment, the Company also provides value-added steel processing capabilities that include saw-cutting, T-splitting, cambering, high speed drilling and tapping, press braking, shearing, punching, grinding, ultrasonic testing, plasma and plate burning with full computer-aided design capabilities. The Company markets these products and services under four regional brands: Infra-Metals, Delta Steel, Metals Supply Company and Smith Pipe & Steel.

The other major markets served by this segment include ship and barge building, railcar manufacturing, metal building fabrication, commercial and industrial fabricators, oil and gas, and telecommunications and utilities.

The Company’s Flat Rolled segment operates five facilities located in the Midwest, the South and California, as well as seven joint venture facilities. The Flat Rolled segment offers hot rolled, hot rolled pickled and oiled, cold rolled and galvanized and other coated coil and sheet products.

Virtually all of the steel sold by the Flat Rolled facilities receives value-added processing such as temper-passing, leveling or slitting. The Company markets these products and services under its Feralloy brand. Customers include original equipment manufacturers in the machinery and equipment, tank, railcar, agricultural and construction industries.

Cost of materials sold increased $215.9 million, or 20.6%, from $1.1 billion for the year ended December 31, 2005 to $1.3 billion for the year ended December 31, 2006.

Processing, distribution, selling, general and administrative expenses increased by $37.0 million, or 29.0%, from $127.9 million for the year ended December 31, 2005 to $164.9 million for the year ended December 31, 2006.

Interest expense increased from $5.5 million for the year ended December 31, 2005 to $27.0 million for the year ended December 31, 2006.