UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549


___________________________________




FORM
10-K




(Mark
One)


x ANNUAL REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the
fiscal year ended: November 29, 2008





o TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the
transition period from --- to ---




Commission
File Number: 001-33342





Barzel
Industries Inc.


(Exact
name of registrant as specified in its charter)


___________________________________







Delaware
            20-4790836(State
      or Other Jurisdiction of Incorporation or Organization)
            (I.R.S.
      Employer Identification No.)320
      Norwood Park South – 2nd
      Floor, Norwood, MA  02062
            (781)
      762-0123(Address
      of principal executive offices)
            (Registrant's
      telephone number, including area
code)





SECURITIES
REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:





Title
      of each class
            Name
      of each exchange on which registeredCommon
      stock, par value $0.001 per share
            The
      Nasdaq Stock Market LLCWarrants
            The
      Nasdaq Stock Market LLC





SECURITIES
REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:


None





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


Yes  ̈ No x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.


Yes  ̈ No x





Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.    Yes x No o





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





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definitions of "large accelerated filer," "accelerated
filer" and "smaller reporting company" in Rule 12b-2 of the Exchange
Act





Large
      accelerated filer o
            Accelerated
      filer oNon-accelerated
      filer x (Do
      not check if a smaller reporting company)
            Smaller
      reporting company o











The
aggregate market value of our outstanding common stock held by non-affiliates,
computed by reference to the closing price of our common stock on May 28, 2008,
was approximately $51,856,726.  On January 31, 2009, 26,564,607 shares
of our common stock were outstanding.





DOCUMENTS
INCORPORATED BY REFERENCE





The
information required under Part III is incorporated by reference from Barzel
Industries Inc.'s Proxy Statement for the Annual Meeting of Stockholders to be
held on May 12, 2009, which will be filed on or about March 30,
2009.





TABLE
OF CONTENTS





PagePRELIMINARY
      NOTES
            1PART
      IITEM
      1.
            Business
            4ITEM
      1A.
            Risk
      Factors
            11ITEM
      1B.
            Unresolved
      Staff Comments
            23ITEM
      2.
            Property
            23ITEM
      3.
            Legal
      Proceedings
            25ITEM
      4.
            Submission
      of Matters to a Vote of Shareholders
            26PART
      IIITEM
      5.
            Market
      for Common Equity, Related Shareholder Matters and Issuer Purchases of
      Equity Securities
            26ITEM
      6.
            Selected
      Financial Data
            28ITEM
      7.
            Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
            29ITEM
      7A.
            Quantitative
      and Qualitative Disclosures About Market Risk
            51ITEM
      8.
            Consolidated
      Financial Statements
            52ITEM
      9.
            Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
            53ITEM
      9A(T).
            Controls
      and Procedures
            53ITEM
      9B.
            Other
      Information
            54PART
      IIIITEM
      10.
            Directors,
      Executive Officers and Control Persons; Compliance with Section 16(A) of
      the Exchange Act
            54ITEM
      11.
            Executive
      Compensation
            54ITEM
      12.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Shareholder Matters
            54ITEM
      13.
            Certain
      Relationships and Related Transactions, and Director
      Independence
            54ITEM
      14.
            Principal
      Accountant Fees and Services
            54ITEM
      15.
            Exhibits
            54SIGNATURES
            58








PRELIMINARY
NOTES





Important
Terms and Information





“Acquisition” refers to the acquisition
of Acquired Company under an arrangement agreement pursuant to which (i)
Symmetry acquired all of the outstanding common shares of Acquired Company and
(ii) certain of Acquired Company’s wholly owned Canadian subsidiaries were
wound-up, amalgamated or otherwise combined with Acquired Company to form Barzel
Canada, in each case in accordance with the terms of a court-approved statutory
plan of arrangement under the Canada Business Corporations Act.




“Acquired Company” refers to
Novamerican Steel Inc., a corporation incorporated under the laws of Canada, and
its subsidiaries before consummation of the Acquisition.  Upon
consummation of the Acquisition, Acquired Company became an indirect, wholly
owned subsidiary of Barzel.  On December 5, 2007, Acquired Company
changed its name to Novamerican Steel Canada Inc.  On February 13,
2009, Acquired Company changed its name to Barzel Industries Canada
Inc.




“Barzel” refers to Barzel Industries
Inc., formerly Novamerican Steel Inc., and before that Symmetry, a corporation
incorporated under the laws of Delaware, and its subsidiaries after consummation
of the Acquisition.  Barzel is the public parent company of Barzel
Finco and Barzel Holdings. Barzel guarantees the 11.5% Senior Secured Notes due
November 15, 2015 issued by Barzel Finco in private placements in November 2007
(the “Notes”). On December 5, 2007, Symmetry changed its name to Novamerican
Steel Inc. On February 13, 2009, Novamerican Steel Inc. changed its name to
Barzel Industries Inc.




“Barzel Canada” refers to Barzel
Industries Canada Inc. only and not to any of its subsidiaries after the
Acquisition.  Barzel Canada is a direct wholly owned subsidiary of
Barzel Finco and the entity through which we conduct all of our Canadian
operations. A portion of the proceeds from the Notes was loaned by Barzel Finco
to a subsidiary that was amalgamated into Barzel Canada in exchange for
intercompany demand promissory notes, secured by substantially all of the assets
of Barzel Canada. Barzel Canada is a borrower under that certain $175.0 million,
five year, asset based revolving credit facility entered into on November 15,
2007 (the “ABL Credit Facility”).




“Barzel Finco” or the “issuer” refers
to Barzel Finco Inc. only and not to any of its subsidiaries. Barzel Finco
is a Delaware corporation and a direct wholly owned subsidiary of Barzel
Holdings, and the direct holding company for all of our operating
subsidiaries.  Barzel Finco issued the Notes and is a borrower under
the ABL Credit Facility.  On February 13, 2009, Novamerican Steel
Finco Inc. changed its name to Barzel Finco Inc.




“Barzel Holdings” refers to Barzel
Holdings Inc. only and not to any of its subsidiaries. Barzel Holdings is a
Delaware corporation, a direct wholly owned subsidiary of Barzel and the parent
company of the issuer.  Barzel Holdings guarantees the
Notes.  On February 13, 2009, Novamerican Steel Holdings Inc. changed
its name to Barzel Holdings Inc.




“Barzel U.S.” refers to Barzel
Industries U.S. Inc. only and not to any of its subsidiaries.  Barzel
U.S. is a Delaware corporation, a direct wholly owned subsidiary of Barzel Finco
and a parent company of certain of our U.S. operating subsidiaries. Barzel U.S.
guarantees the Notes.  On December 21, 2007, Barzel U.S. changed its
name from Integrated Steel Industries, Inc. to Novamerican Steel U.S.
Inc.  On February 13, 2009, Novamerican Steel U.S. Inc. changed its
name to Barzel Industries U.S. Inc.




“Symmetry” refers to Symmetry Holdings
Inc., a corporation incorporated in Delaware.  On December 5, 2007,
Symmetry changed its name to Novamerican Steel Inc.  On February 13,
2009, Novamerican Steel Inc. changed its name to Barzel Industries
Inc.




“We,” “us,” “our” and the
“Company” refer collectively to Barzel
and its subsidiaries after the consummation of the Acquisition and to Acquired
Company before the consummation of the Acquisition, unless the context otherwise
requires.  Unless otherwise noted, when we refer to "dollars" or "$,"
we mean U.S. dollars.




Financial
presentation


As a result of the consummation of the
Acquisition ten days before the end of Acquired Company’s fiscal year end, this
report contains audited and unaudited financial information for Barzel as well
as certain historical financial information for Acquired
Company.  Specifically, this report includes:





•
              Audited
      financial statements for:•
              Barzel
      for the year ended November 29, 2008 (“fiscal year
  2008”);•
              Acquired
      Company for the period from November 26, 2006 to November 14,
      2007


1





(“Acquired
      Company fiscal year 2007”);•
            Acquired
      Company for the year ended November 25, 2006 (“Acquired Company fiscal
      year 2006”); and•
            Unaudited
      pro forma condensed financial information that combines the historical
      statements of operations of Acquired Company for the period from November
      26, 2006 to November 24, 2007 and Barzel for the period from January 1,
      2007 to November 24, 2007, giving effect to the Acquisition as if it had
      occurred on January 1, 2007.





This report also includes other
selected 2008 unaudited financial and other information of Barzel, including
sales, market and employee data.




Industry
and Market Data





We obtained the industry, market and
competitive position data used throughout this report from our own internal
estimates and research as well as from industry publications and research,
surveys and studies conducted by third parties. Industry publications, studies
and surveys generally state that they have been obtained from sources believed
to be reliable, although they do not guarantee the accuracy or completeness of
such information. While we believe that each of these publications, studies and
surveys is reliable, we have not independently verified industry, market and
competitive position data from third-party sources. While we believe our
internal business research is reliable and the market definitions are
appropriate, neither such research nor these definitions have been verified by
any independent source.  None of the sources mentioned above has
consented to the disclosure or use of data in this report.  Our
estimates involve risks and uncertainties and are subject to change based on
various factors, including those discussed under "Forward-Looking Statements"
and "Risk Factors" in this report.





Forward-Looking
Statements





This report contains forward-looking
statements.  All statements, other than statements of historical
facts, included in this report, are forward-looking statements.  In
addition, we or our representatives have made or may make forward-looking
statements on telephone or conference calls, by webcasts or e-mails, in person,
in presentations or written materials, or otherwise.  Forward-looking
statements include statements about matters such as: growth rates for, future
prices and sales of, and demand for our products and our customers’ products;
production capacity in our operations and our customers' operations; costs of
materials and production; productivity, business process and operational
initiatives, and their impact on us; industry market conditions and our position
in markets we serve; employment and contributions of personnel; employee
relations and collective bargaining agreements; tax rates; capital expenditures
and their impact on us; nature and timing of restructuring charges and the
impact thereof; interest rate management activities; currency rate management
activities; deleveraging activities; rationalization, restructuring,
realignment, strategic alliance, raw material and supply chain, investment,
acquisition, venture, consulting, operational, tax, financial and capital
projects; legal proceedings, contingencies, and environmental compliance;
potential offerings, sales and other actions regarding debt or equity securities
of us or our subsidiaries; and future asset sales, costs, working capital,
revenues, business opportunities, debt levels, cash flows, cost savings and
reductions, margins, earnings and growth.  The words "believe,"
"expect," "anticipate," "estimate," "project," "plan," "should," "intend,"
"may," "will," "would," "potential" and similar expressions identify
forward-looking statements, but are not the exclusive means of doing
so.





These statements are based on
assumptions and assessments made by our management in light of their experience
and their perception of historical trends, current conditions, future
developments and other factors they believe to be appropriate. Forward-looking
statements are not guarantees of our future performance and are subject to risks
and uncertainties that could cause actual results, developments and business
decisions to differ materially from those contemplated by such forward-looking
statements. Some of those risks and uncertainties include the risk factors
discussed under the heading "Risk Factors" and the following:





·
            the
      current global economic downturn;




·
            the
      current weakness in the automotive, transportation, manufacturing and
      construction industries in the United States and
  Canada;




·
            our
      substantial indebtedness;




·
            our
      ability to service our outstanding indebtedness and the impact such
      indebtedness may have on the way we operate our
  business;




2


·
            the
      possibility that challenging conditions in capital markets will limit our
      ability to obtain financing or refinancing on acceptable terms, or not at
      all;




·
            our
      ability to continue to comply with government
  regulations;




·
            adoption
      of or changes in legislation or regulations adversely affecting our
      businesses;




·
            changes
      in the United States or other monetary or fiscal policies or regulations
      in response to the recent capital markets and economic
    crisis;




·
            changes
      in the financial stability of our major customers or in demand for our
      products and services;




·
            interruptions
      in our production capabilities due to unexpected equipment
      failures;




·
            fluctuation
      of prices for steel and other raw materials or a shortage of
      supply;




·
            changes
      in generally accepted accounting
principles;




·
            geopolitical
      events;




·
            competition
      in the industry;




·
            industry
      consolidation;




·
            our
      ability to implement our business
strategies;




·
            currency
      risks;




·
            our
      ability to meet our objective of growing revenues
    organically;




·
            our
      ability to attract and retain key sales, marketing and operations
      management professionals;




·
            successful
      consummation and integration of
acquisitions;




·
            assertion
      of claims, lawsuits and proceedings against
us;




·
            our
      ability to maintain an effective system of internal controls over
      financial reporting;




·
            geographic
      concentration of our business;




·
            work
      stoppages or our inability to renegotiate labor contracts when they
      expire; and




·
            outsourcing
      by our customers to overseas
facilities.




Occurrence of any of the events or
circumstances described above could have a material adverse effect on our
business, financial condition, results of operations or cash flows or the market
price of our securities.





All subsequent written and oral
forward-looking statements by or attributable to us or persons acting on our
behalf are expressly qualified in their entirety by these factors.





All forward-looking statements in this
report are based upon information available to us on the date of this
report.  We undertake no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future
events, changed circumstances or otherwise.





Trademarks





The DecalogueTM is a trademark of Dr.
Domenico Lepore, our President, and is licensed to us pursuant to an agreement
dated September 15, 2006. All other trademarks or service marks used herein are
trademarks or service marks of the companies that use them.


3


PART
I





ITEM
      1.
            BUSINESS





The
Company





In 2006, a group of organizational
scientists and industrialists decided to elevate their work of implementing the
Decalogue methodology, a systemic management methodology.  They
embarked on a radical idea – one that would see them acquire Acquired Company
with the aim of fully implementing the Decalogue methodology, thereby
transforming Acquired Company from one that operated with a traditional business
model in an ultra-conservative, slower paced industry to one that is a bastion
for quality, speed and the diversity of people and ideas.The
Company was incorporated as Symmetry Holdings Inc. in Delaware on April 26, 2006
as a development stage company formed for the purpose of acquiring one or more
operating businesses. On March 12, 2007, our initial public offering of
18,750,000 units was consummated, generating aggregate gross proceeds of $150.0
million. Each unit consisted of one share of common stock and one warrant. Each
warrant entitles the holder to purchase from us one share of our common stock at
an exercise price of $5.50. Our common stock and warrants started trading
separately as of April 4, 2007.  On June 21, 2007, Symmetry and a
wholly owned subsidiary entered into an arrangement agreement pursuant to which
the wholly owned subsidiary acquired all of Acquired Company’s outstanding stock
on November 15, 2007, as described in “The Acquisition” below.  In
connection with the Acquisition, Barzel Finco issued the Notes.





On December 5, 2007, Symmetry changed
its name to Novamerican Steel Inc. On February 13, 2009, the Company changed its
name to Barzel Industries Inc.  Archaeologists consider ancient
civilizations that could forge metals “advanced” or “highly
evolved.”  The Industrial Revolution took this long-established art
form and turned it into a mass-market industry.  We see our efforts to
implement the Decalogue methodology in this industry as the next step of
evolution for organizations and their relationship with
metals.  Therefore, we chose a name that honors the ancient roots of
our industry.  “Barzel” means “steel” in many variations and
languages. Its origins stem from the iron meteorites smelted by Sumerian
artisans and the word migrated to fursil through ancient
Akkadian and Semitic languages.  Similar sounding words are also found
in modern Latin (ferrous), Arabic and
Indian-derivative languages, representing various metals and the art of
metalworking.







Our new
logo, a steel ribbon in the form of a Möbius strip, pays homage to a basic
building block of human understanding – mathematics.  A Möbius strip
is a mathematical curiosity that has no beginning or end and no “correct”
orientation (i.e., there is no “right side up”).  It represents our
organizational model, which is a fully interdependent system, meaningful only in
its entirety, and where no hierarchy exists.  The logo also reflects
our capabilities in shaping and forging metals.







Today, 30
years after the birth of our business, we are shedding the final vestiges of its
out-dated past and marking the start of a new journey.  It is a
journey to show the industry that reliability and quality of goods does not
necessarily come at the expense of speed of delivery.  It is a journey
to show the industry that traditional management models are incomplete at
best.  It is a journey to show that the decisions of our sophisticated
employee network have a collective and positive impact on our
industry.





The
Acquisition





On November 15, 2007, Barzel completed
the Acquisition.  The Acquisition had been approved by Barzel’s
stockholders on October 25, 2007 and by Acquired Company’s shareholders on
October 31, 2007. The Acquisition was carried out pursuant to an arrangement
agreement, pursuant to which (i) Barzel indirectly acquired all of the
outstanding stock of Acquired Company and (ii) certain of Acquired
Company’s wholly-owned Canadian subsidiaries were wound-up, amalgamated or
otherwise combined with Acquired Company to form Barzel Canada, in each case in
accordance with the terms of a court-approved statutory plan of arrangement
under the Canada Business Corporations Act.  Barzel’s stockholders who
properly exercised their conversion rights received $7.84 in cash per
share.  A total of 3,860,196 shares were converted for an aggregate of
$30.3 million in cash. Under the terms of the arrangement agreement, the
shareholders of Acquired Company received $56.00 in cash per share ($585.2
million in cash in the aggregate) for all of the outstanding shares of Acquired
Company.





Funding for the Acquisition purchase
price and related expenses was provided by (i) debt financing, including
borrowings under the ABL Credit Facility and proceeds from the sale in private
placements of $315.0 million aggregate principal amount of the Notes, (ii) the
sale in a private placement of 1,875,000 units of Barzel for $15.0 million, or
$8.00 per unit, to certain of the Company’s affiliates, with each unit
consisting of one share of common stock and one warrant to purchase one share of
common stock at a price of $5.50, exercisable from March 7, 2008 until
expiration on November 15, 2011, and (iii) approximately $112.0 million of cash
held in trust by Barzel that was raised in its initial public offering in March
2007.  Of the gross proceeds from the issuance of the Notes, $125.0
million was loaned by Barzel Finco to Barzel Canada in accordance
with


4


the plan
of arrangement, in exchange for intercompany demand promissory notes totaling
$125.0 million.  Such intercompany notes were pledged, subject to
certain limitations, as first-priority collateral to the trustee for the Notes
for the benefit of the holders of the Notes (“Noteholders”).





Business
Overview





Headquartered in Norwood,
Massachusetts, with an operational hub in Ontario, Canada, we operate a network
of 18 metal processing, manufacturing and distribution facilities throughout the
provinces of Ontario and Québec and in the Northeastern, Mid-Atlantic and
Mid-Western United States.  We operate these strategically located
facilities as one integrated system.  Through an innovative management
system that includes close statistical monitoring and analysis of our plant
capabilities, we service our customers with speed, quality and
reliability.





We are a well-diversified,
multi-process provider of value-added services and offer a wide range of metal
processing solutions to a variety of industries, from construction and
industrial manufacturing to finished commercial racking products.  We
believe we are one of only two independent continuous process picklers in
Canada.  We also believe our in-line temper mill makes us the only
provider of this high-precision service in Canada that is not integrated with a
primary steel producer.





We process, manufacture and distribute
carbon steel, stainless steel and aluminum products and operate as an
intermediary between primary metal producers and the manufacturers that require
processed metal, often with a short lead time delivery basis.  We
produce steel tubing in various sizes primarily for the structural
markets.  We also produce roll formed steel sections and manufacture
heavy equipment parts and accessories.  Our flat rolled processing
capabilities include pickling, slitting, blanking, leveling, temper-rolling and
cutting-to-length to precise customer specifications.  Additionally,
we perform many of these processing services for customers who provide their own
steel, referred to in the industry as toll processing.  For a detailed
description of our steel processing services, see "Business Products and
Services."





Business
Strategy





Our
company operates as one system, governed by the Decalogue
methodology:





Our operating methodology, the
Decalogue, was developed by our President, Dr. Domenico Lepore, and a member of
our Board of Directors, Oded Cohen.  The Decalogue methodology brings
together the ideas of Dr. W. Edwards Deming's Theory of Profound Knowledge and
Dr. Eli Goldratt's Theory of Constraints, and facilitates their application
through a set of logical thinking tools and statistical methods. Through these
methods, we thoroughly map our processes and identify, measure and address the
constraint in our system, which is defined as the process that most hinders the
generation of throughput.





Throughput is the speed at which a
system can generate cash through sales.  In our case, it begins with
the speed at which we can move metal through the system, starting from our
suppliers’ ability to provide us with the raw materials, to the delivery of the
final product to our customer and our receipt of payment for the work
done.





As the generation of throughput takes
into account supplier capabilities and customer feedback, it is critical that a
holistic approach is used to understand our business.  To do that, we
use a systemic organizational design to replace traditional hierarchical
organizational charts.  What the Decalogue methodology acknowledges,
that other management systems do not, is the systemic nature of an organization,
meaning that the effectiveness of the manufacturing processes in the system can
be profoundly impacted by other processes, like human resources or
marketing.  Thus, the same tools that are used to monitor and manage
variations in manufacturing are also used to monitor and manage variations in
other processes within our system.  The aim is to have a totally
synchronized system that is moving, in its entirety, towards the same
goal.





We have significantly progressed our
project plans for implementing the Decalogue operating methodology at the
Company.  This transformation allows us to operate as one system
instead of 18 separate facilities, and has already enabled (a) the system to
operate at much faster cycle times, enabling us to maximize the throughput from
the sale of our enhanced capacity, (b) a permanent cash inventory reduction of
$88.4 million primarily from this faster replenishment and operating cycle, and
(c) the implementation of organizational changes, especially in our
replenishment, processing, distribution and sales processes, which we believe
will result in a reduction of operating expenses of over $20.0 million in 2009
as compared to 2008.





Through February 2009, we have
implemented organizational changes resulting in the reduction of approximately
392 employees, primarily in the areas of administration and general management,
purchasing, inside sales, accounting and plant operating
personnel.  These reductions have been offset by the addition of
approximately 82 new employees of substantially different competencies,
educational backgrounds and cultural diversities.  To date, we have
hired professionals in the areas of


5


statistical
studies, quality, technical services, new product development, marketing,
logistics, safety, process engineering, synchronized manufacturing, human
development, information services and sales, among others, of which over 30 have
post-graduate degrees, including seven PhDs.  We are becoming a
Decalogue company, that is, a knowledge-based organization.





We intend to accelerate our growth by
identifying and pursuing additional market segments in which we can sell our
production capacity. We have identified numerous end markets and we intend to
incrementally exploit these market segments to fully utilize our existing
capacity. For example, we intend to expand our sales end markets to
transportation, non-residential construction, energy, aerospace and defense,
railroad manufacturing and mining machinery. We have also identified additional
opportunities in certain export market segments.





Industry
Overview





Steel suppliers typically fall into
three categories of business: primary producers, intermediate processors and
service centers. Primary producers typically sell in bulk, with intermediate
processors and service centers comprising a large part of their customer base.
However, high-volume downstream customers will at times purchase from steel
companies in each of the three categories. Intermediate processors are typically
positioned in the value chain between primary producers and major industrial
customers of processed steel, which include furniture and appliance
manufacturers, and industrial and construction companies. Our business model
includes activities of both the processor and service center categories but we
also utilize these capabilities for our own downstream industrial manufacturing
facilities producing metal-based components and end products.





Steel processors and service centers
play a key role in the industry supply chain, from precision steel and alloy
processing to order aggregation, warehousing and distribution of unprocessed
metal products. They respond directly to customers' needs to meet precise
specifications regarding length, width, shape and surface characteristics on
relatively small orders. Specialized equipment is used to perform processing
operations such as cutting-to-length, slitting, shearing, roll forming, shape
correction, surface improvement, blanking, temper rolling, plate burning and
stamping. The consolidation of steel producers and the increasing prevalence of
modern supply chain management practices by downstream steel customers have
increased the importance in the supply chain of larger scale steel processors
and service centers with the operational resources to efficiently perform value
added processing and manage large, diverse inventory bases. Downstream steel
buyers have increasingly sought to purchase steel on shorter lead times and with
more frequent, flexible and reliable deliveries. During 2008, we entered into
new supply agreements with our key steel and aluminum suppliers based primarily
on their speed and reliability for replenishing our system.  This has
resulted in a faster, more reliable delivery time for our customers and a
significant reduction in the amount of inventory dollars required in our system
to achieve this capability.





Carbon steel production in North
America has consolidated significantly over the last few years. Steel prices
more than doubled during the first half of 2008, as a resurgence of global
economic growth led to a sharp increase in demand for steel and the raw
materials used to make it. In particular, steel demand in China grew by
double-digit growth rates annually between 2003 and 2008, due to the country's
increasingly rapid development. Consolidation was also a factor, as increasingly
global producers began to exercise better management practices with respect to
capacity management, production scheduling and marketing.  Steel
prices declined dramatically in the latter part of 2008 and into 2009, following
an unprecedented spike through August of 2008. Despite the magnitude of the
decline, prices have remained elevated relative to the decade preceding 2004. We
believe steel prices have stabilized for the foreseeable future at levels higher
than those experienced earlier this decade albeit at a much lower than those
experienced in the first eight months of 2008. Although we expect global
hot-rolled coil prices to remain in the $500-550 per ton range over the
medium-to-long term, this assumes continuing growth in per-capita steel
consumption rates in developing regions (including China and India), tighter
global raw material supply (due in part to a consolidated base of mining
companies) and limited greenfield and brownfield development of new steelmaking
capacity.  Currently, the global economic outlook does not anticipate
this type of continued global demand growth, indicating a possibility for
continued weakening in steel prices.





Products
and Services





Our manufacturing capabilities are
primarily operated in five facilities in Quebec.  We produce roll
formed steel sections, parts and products and manufacture heavy equipment parts
and accessories and lighter metal-based products.




Our tubular capabilities are
represented by five mills, of which three are located in Canada and two are
located in the United States. One of our tube mills, Delta Tube Inc., is a joint
venture with ArcelorMittal Tubular Products Montreal Inc. Tubing is a process by
which flat rolled coils are slit and formed into circular, oval, square or
rectangular shapes and the seams are welded through an electrical resistance
process.  We produce steel tubing in various sizes for use in the
structural, mechanical and, to a lesser extent, the automotive
markets.  Our tubing operations are presently structured as
follows:


6





·
            a
      majority of our tube production is hollow structural sections ("HSS")
      tubing used largely in construction, energy, agricultural, infrastructure,
      transportation and industrial applications;
and




·
            our
      tube mills in Mississauga, Ontario, and Jeffersonville, Indiana primarily
      produce high pressure, hydroform quality tubes for the automotive industry
      and include in-line precision cutting, finishing, testing and packaging
      capabilities and currently have limited capability for producing HSS
      tubing.




Our services also include the following
traditional service center processes:





·
            slitting:
      the cutting of steel to specified widths along the length of steel
      coil;




·
            leveling:
      a process used to flatten shape deficiencies in steel coil;
      and




·
            cutting-to-length:
      cutting steel across the width of steel
coil.




Our services also include higher,
value-added processes, which process and transform steel to specified lengths,
widths and shapes pursuant to specific customer orders, including the
following:





·
            roll
      forming: flat rolled coils can be pre-punched, in-line welded and formed
      into sophisticated shapes for specific
purposes;




·
            blanking:
      the cutting of steel into specific shapes with close
      tolerances;




·
            plate
      burning: the process of cutting steel, typically in excess of one inch
      thick, into specific shapes and
sizes;




·
            temper
      rolling: an in-line process that improves the surface finish and flatness
      of cut-to-length sheet and plate and that eliminates coil memory or
      springback; and




·
            pickling:
      an in-line process for cleaning hot-rolled steel coils of rust, scale and
      dirt.




Our distribution business operates out
of five facilities in the Northeastern and Mid-Atlantic United States,
strategically located in close proximity to our major customers and
transportation routes and distributes steel, aluminum and stainless products,
including hot and cold rolled carbon, aluminum, stainless, alloys and coated
products in sheet, coil, bar, shapes, tubular and plate forms.





Raw
Materials





The principal raw material used in our
operations is flat rolled carbon steel, which we purchase directly from steel
producers. The steel industry as a whole is cyclical. At times, pricing and
availability of steel can be volatile due to numerous factors beyond our
control, including general, regional and international economic conditions,
production levels, competition, import duties and tariffs and currency exchange
rates.





During most of 2008 and prior, we
maintained our inventory at levels we believed appropriate to satisfy the
anticipated needs of customers based upon historical buying practices, contracts
with customers and market conditions.  By the end of 2008, we began
purchasing steel on a system-wide usage-based replenishment model. We place the
highest value on the quality, speed and reliability of our steel suppliers. We
believe our replenishment model provides highly reliable supply with the
shortest possible lead time.  The simplification of our steel coil
base and the aggregation of inventory at fewer points in our system have also
allowed us to significantly decrease the amount of inventory required for
meeting customer needs.





We generally purchase steel at
prevailing market prices in effect at the time we place our orders. In recent
years, our steel suppliers have been significantly impacted by the shortage of
raw materials resulting in cost increases affecting scrap, coke, iron ore and
energy. This, together with a number of additional factors, including the
strength of the general economy, the increased consolidation of North American
steel producers and the demands for steel from the Asian markets has affected
the availability and prices of flat rolled carbon steel. During periods of
rising prices for steel, we may be negatively impacted by delays between the
time of increases in the cost of metals to us and increases in the prices that
we can charge for our products. In addition, when metal prices decline, customer
demand for lower prices could result in lower sale prices for our products and,
as we use existing inventory that we purchased at higher metal prices, lower
margins. Consequently, during periods in which we use


7


this
existing inventory, the effects of changing metal prices could adversely affect
our operating results. Shorter lead times significantly mitigate this
effect.





Suppliers





We purchase flat rolled carbon steel
for processing from a number of North American steel producers in quantities
that we believe are efficient for such producers. We concentrate on developing
process-based working relationships with high-quality North American integrated
steel mills and mini-mills and on becoming a valued customer of such producers.
We are a major customer of flat rolled coil for some of our principal
suppliers.





On November 28, 2008, we entered into a
Replenishment Agreement (“Replenishment Agreement”) with ArcelorDofasco Mittal
Inc. (“Arcelor”), as supplier, providing for the supply to us of certain grades
of hot rolled steel coils.  The Replenishment Agreement commenced on
January 1, 2009 and will remain in effect until terminated pursuant to the
provisions of the Replenishment Agreement.  Under the Replenishment
Agreement, we agreed to purchase, on a weekly basis, an amount of steel based
upon the prior week’s actual quantity and type of steel used.  We have
agreed to purchase a statistically derived minimum quantity of steel per
calendar quarter based upon our actual aggregate usage of
steel.  Arcelor has agreed to deliver the steel coils reliably, every
two weeks.  The price for each steel coil purchased under the
Replenishment Agreement is based on then-current independent, published steel
pricing data.





The steel industry has experienced
consolidation in recent years. Further consolidation could result in a decrease
in the number of major suppliers or a decrease in the number of alternative
supply sources available, which could make it more likely that an inability to
obtain steel and other metal products from our traditional 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 steel that we purchase. Such price increases could adversely affect our
results of operations if we were not able to pass these price increases on to
our customers.





We are operating under and/or migrating
toward similar replenishment-based agreements with other suppliers for the
purchase of other hot rolled steel and cold rolled steel, aluminum and stainless
steel products. This enables us to maintain continued sources of supply at what
we believe are competitive prices. We believe that our agreements and the
resulting predictability of our usage, better process integration and proximity
of our facilities to these major steel trading partners represent important
factors in our ability to sustain reliable supply.





Sales
and Marketing





During 2008, we established new sales,
marketing, product development, technical and customer service processes and
capabilities.  In addition to dedicated Directors for each process, we
also hired technical engineers and experienced sales and marketing
professionals. As of February 20, 2009, our combined sales force consisted of 32
salaried sales and marketing professionals, 21 dedicated customer service
professionals and eight dedicated product development and technical service
professionals. In 2008, our sales efforts were focused primarily on direct
customer contact. We believe that management selling is essential to our sales
and marketing success. Consequently, our managers, including our chief executive
officer and president, are active in marketing the development of unique offers
for our customers and potential customers and in external sales. We feel that
our commitment to quality, service and speed of product development and delivery
has enhanced our ability to differentiate our market offerings.





Customers
and Distribution





We serve over 3,800 customers in the
United States and Canada. Our diversified customer and geographic base serves to
reduce our exposure to fluctuations in business and economic cycles in
particular industries and regions. In fiscal year 2008, our top 20 customers
accounted for less than 27.0% of total net sales and no one customer accounted
for more than 10.0% of sales.  Our major customers in 2008 included
automotive parts manufacturers and stampers, other steel service centers,
general fabricators and manufacturers of transportation equipment, material
handling equipment, electrical components, appliances, storage tanks, ship
building material, construction and heavy equipment and agricultural equipment.
During 2008, we also concluded and effectively exited a significant amount of
inventory-intensive business in the automotive segment.  We do not
anticipate that any single customer in 2009 will account for more than 10% of
our total net sales.





Our facilities are strategically
located to serve our broad customer base, which is largely located in Central
Canada and the Northeastern, Mid-Atlantic and Mid-Western United States.
Operating these facilities as one system allows us to operate
an


8


efficient
delivery system capable of handling short lead-time orders. We transport most of
our products directly to customers via our own fleet of trucks and through
independent trucking and logistics firms.





The following table sets forth the net
sales of Barzel and Acquired Company for the past three fiscal
years:





Barzel
              
              
              Acquired
      Company
              
              
              Acquired
      CompanyNovember
      29,
                2008
              
              
              November
      24,
                2007
      (pro forma)
              
              
              November
      25,
                2006(In
      thousands of U.S. dollars)Canadian
      subsidiaries
              
              $
              423,671
              
              
              $
              455,518
              
              
              $
              481,278U.S.
      subsidiaries
              
              
              377,387
              
              
              
              345,830
              
              
              
              359,520Total
              
              $
              801,058
              
              
              $
              801,348
              
              
              $
              840,798





Management
Information Systems





We maintain management information
systems, including bar coding systems, which monitor inventory throughout our
operations. In particular, the inventory system provides information to our
sales and management personnel on a real time basis which enables us to offer
our wide range of products to our customers on a timely basis without the need
for maintaining inventory of the full product line at all locations.
Furthermore, our systems generally provide information with respect to the
buying patterns of our customers. We are currently enhancing our systems to
enable better synchronization of our replenishment and manufacturing operations
and enhance our ability to deliver with shorter lead times and respond faster to
our customers' needs.





Quality
Standards





Our quality system, internally called
The Playbook, is a comprehensive quality system defining our processes,
procedures, measurements and established controls covering all material aspects
of our system. This includes, but is not limited to, the replenishment of our
materials, development of new products, manufacturing of existing products,
receipt and management of customer orders, logistics, technical services and
related transaction processing. We have a Director of Quality and a dedicated
team of professionals ensuring quality through the use of statistical
methods.  We have a Director of Statistical Studies who oversees the
integration of all of these processes, the development of the appropriate
statistical methods and measurements and operating effectiveness.  The
Playbook and the related processes effectively support periodic supplier audits,
inspection criteria, traceability and certification. From time to time, we have
successfully undergone quality audits by certain of our larger
customers.





Backlog





Because of the short lead-time nature
of our business, we do not believe the information on backlog of orders is
material to an understanding of our steel processing, manufacturing and
distribution businesses.





Competition





The principal markets we serve are
highly competitive. Our industry is highly fragmented, consisting of numerous
small and mid-sized companies, as well as a few larger publicly traded
companies. We have different competitors for each of our products and within
each geographic region. Our core geographic market encompasses the Canadian
provinces of Québec and Ontario and the Northeastern, Mid-Atlantic and
Mid-Western United States. Within this geographic market, we compete with other
regional and national steel service centers, single location service centers
and, to a certain degree, primary steel producers and intermediate steel
processors on a regional basis. Our manufactured and tubular products can span
broader selling markets, including in some cases Western United States and
Canada, and in some instances, exports to Europe.





We compete on the basis of quality,
speed and timely delivery, product selection and availability, customer service,
quality processing capabilities and price. Our competitors may foresee the
course of market development more accurately than we do, produce similar
products at a lower cost than we can or adapt more quickly to new technologies
or industry and customer requirements. In addition, certain of our competitors
have financial and operating resources in excess of our financial and operating
resources and may have less financial leverage than we do. As a result, these
competitors may be better positioned to respond to downward pricing pressures or
other adverse economic or industry conditions or to identify and acquire
companies or product lines compatible with their business.


9





In addition, our marketplace,
particularly in structural tubing, is becoming increasingly global and lower
cost imports may adversely affect our sales and profit margins.





Although we have been able to
successfully compete in the past, we may not be able to continue to do so.
Increased domestic and foreign competition could harm our net sales and
operating results in the future.





Environmental
Regulation





Our operations and facilities are
subject to comprehensive and frequently changing federal, state, provincial and
local laws and regulations in the United States and Canada relating to the
protection of the environment, including those related to air emissions,
wastewater discharges, treatment, storage and disposal of hazardous substances
and other materials and wastes, and in general, the emissions of pollutants into
the environment.  Our Stoney Creek, Ontario processing facility and
our St. Hubert, Quebec manufacturing facility have obtained ISO 14000
certification.





We believe that we are in material
compliance with all currently applicable environmental laws and regulations. We
do not anticipate any material expenditure to meet environmental requirements
and do not believe that continued compliance with such existing laws and
regulations will have a material adverse effect on our operations or financial
condition. However, we cannot predict the environmental laws or regulations that
may be enacted in the future or how existing or future laws and regulations will
be administered or interpreted. Compliance with more stringent laws or
regulations, as well as more vigorous enforcement policies of the regulatory
agencies or stricter interpretations of existing laws and regulations, may
require significant additional expenditures by us which could vary substantially
from those currently anticipated.





In October 2001, our subsidiary,
American Steel and Aluminum Corporation (“ASA”), was named as one of 57
defendants in an action brought in the United States District Court for the
District of Rhode Island by two private parties under the Comprehensive
Environmental Response Compensation and Liability Act, or CERCLA, to recover
costs incurred and to be incurred in connection with a waste disposal facility
in Cumberland, Rhode Island which has been categorized as a Superfund site by
federal authorities.  During 2006, ASA entered into a settlement with
the plaintiffs, with the approval of the United States Environmental Protection
Agency, or EPA, resolving its alleged liability for all claims for past and
future response and oversight costs in connection with the Remedial
Investigation/Feasibility Study for the site.  The litigation remains
pending against the non-settling defendants.  The settlement does not
address future remediation costs and we do not believe it is currently possible
to estimate its share, if any, of such costs should claims for their recovery be
pursued against ASA.  As part of the rationalization of our
distribution facilities, on February 13, 2009, we sold the facility in
Cumberland, Rhode Island.  The sale of this facility does not relieve
us of potential future liability relating to this Superfund site.





Certain of the facilities that we
occupy have been in operation for many years and, over such time, we and the
prior owners or operators of such properties may have generated and disposed of
wastes which are or may be in the future considered hazardous. Although we are
not aware of any such sites as to which material outstanding obligations exist,
it is possible that the discovery of additional contamination at these or other
sites could result in additional environmental liabilities.





Governmental
Regulation





In addition to environmental laws and
regulations, our operations are governed by many other laws and regulations,
including, without limitation, those relating to workplace safety and employee
health. For example, our subsidiaries and affiliates own and lease trucks for
transporting products at various facilities. The operation and maintenance of
these vehicles is governed by various safety regulations. We believe that we are
in compliance with these laws and regulations in all material respects and we do
not believe that continued compliance with such laws and regulations will have a
material adverse effect on our business, results of operations or financial
condition.





Hedging





We do not use derivative commodity
instruments to hedge our exposure to the impact of price fluctuations on our
principal raw materials. We have in the past and may in the future utilize
forward contracts, from time to time, to hedge our exposure to exchange rate
fluctuations in connection with future sales and purchases denominated in
Canadian dollars.  Forward contracts are entered into with reputable
financial institutions and we do not enter or hold foreign exchange forward
contracts for trading purposes. There were no forward foreign exchange contracts
entered into during 2008 or outstanding at November 29, 2008.


10





Employees





As of November 25, 2007 the Company had
approximately 954 employees.  During fiscal year 2008, 189 employees
were terminated, offset by the addition of approximately 82 new employees of
substantially different competencies, educational backgrounds and cultural
diversities. In the first quarter of 2009, we further simplified the design of
the network, including a reduction in U.S. and Canadian workforce, and
rationalized our distribution facilities in the U.S.  The
implementation of the reduction in workforce and rationalization of our
distribution facilities in the U.S. resulted in a total reduction of 203
employees in the U.S. and Canada in the first quarter of 2009.  It
also included the exit of four redundant distribution facilities located in
Connecticut, Massachusetts, Rhode Island and New York in the first quarter of
2009.  As of February 20, 2009, the Company had approximately 644
employees.





Of the 644 employees, approximately
22.0% of our total employees, representing certain employees at nine of our 18
facilities, are organized by the United Steelworkers, the Teamsters, the Sheet
Metal Workers and independent employee associations. We are currently party to
nine collective bargaining agreements. Our labor contracts expire on staggered
dates beginning in December 2009. Specifically, the labor contract with the
Teamsters covering 32 employees at our Harrisburg facility will expire on
December 31, 2009.  We do not presently anticipate that any work
stoppages will occur prior to renegotiation of these contracts. We believe that
our relations with our employees are satisfactory.  We have not
experienced a work stoppage by any of our unions or employee associations in
over 20 years.





Seasonality





Due to the impact of seasons and
climate in the regions we predominantly serve and the related seasonality of the
businesses of our customers, demand for certain of our products fluctuates
during the winter months.





ITEM
1A.  RISK FACTORS


You should carefully consider all
information that has been included in this report. Our business, results of
operations and financial condition may be materially adversely affected due to
any of the following risks.  In that case, the market price of our
securities could decline, and you could lose part or all of your
investment.




We are affected by international,
national and regional economic conditions. Continuation of the current capital
markets crisis and economic downturn will materially adversely affect
us.





Financial markets in the United
Statesand
elsewherehave been
experiencing extreme disruption in recent months, including extreme volatility
in securities prices, severely diminished liquidity and credit availability,
ratings downgrades and declining asset values. The United States and Canadian
economies have entered into recessions. There are growing concerns that other
economies will enter recessions.  Slowing or declining economic growth
in the United States, Canada and elsewhere may cause our current or potential
customers to delay or reduce purchases which could, in turn, result in
reductions in sales of our products, longer sales cycles and increased price
competition, materially and adversely affecting our financial position and
results of operations.




Our business may be affected by the
general economic conditions of the industries that purchase our products.
Reduced demand from any one of these industries could result in lower operating
results.




Certain of our products are sold to
industries, including automotive, transportation and manufacturing that
experience significant fluctuations in demand based on general economic
conditions, energy prices, seasonality, consumer demand and other factors beyond
our control.  The automotive, transportation and manufacturing
industries are being severely affected by the current economic downturn and
delaying purchases, extending seasonal shutdowns, discontinuing operations at
certain of their manufacturing facilities and otherwise reducing production
levels, which is impacting demand for our products.  Due to the
widespread nature of the downturn, diverting sales of our products to customers
in other industries is challenging. These events are adversely affecting our
operating results and cash flows.




Sales of our products for use in the
automotive industry accounted for approximately 22% of our net sales for fiscal
year 2008.  Such sales include sales directly to the automobile
manufacturers and to their components and parts suppliers, as well as to
manufacturers supplying the automotive “after market” components and parts. Our
automotive customers are also subject, from time to time, to labor problems,
which may result in reduced demand for our products.




11


In addition, although we do not
generally sell our products directly to customers outside of North America, our
financial performance is nonetheless dependent on a healthy economy outside
North America. Our customers sell their products abroad and some of our
suppliers buy their raw materials outside North America. As a result, our
business is affected by general economic conditions and other factors outside
North America.




Our
substantial indebtedness may adversely affect our cash flow and our ability to
operate our business, remain in compliance with debt covenants, and react to
changes in the economy or our industry.




We
are highly leveraged, particularly in comparison to some of our
competitors.  As of November 29, 2008, we had total indebtedness of
approximately $348.8 million, including $33.8 million of indebtedness under the
ABL Credit Facility (excluding approximately $0.9 million of outstanding
undrawn letters of credit thereunder) and $315.0 million of
Notes.  Our expected debt service obligation is approximately
$37.8 million in interest payments per annum.  The ABL Credit
Facility bears interest at variable rates, based on LIBOR, U.S. base rate or
Canadian base rate.  If interest rates increase, our debt service
obligations on such variable rate indebtedness would increase even though the
amount borrowed remained the same.




Our substantial indebtedness could have
important consequences, including the following:




•
            it
      limits our ability to dispose of assets or borrow money for working
      capital, capital expenditures, acquisitions, debt service requirements and
      general corporate or other purposes;•
            a
      substantial portion of our cash flows from operations will be dedicated to
      the payment of principal and interest on our indebtedness and will not be
      available for other purposes, including operations, business opportunities
      and other general corporate purposes;•
            it
      may limit our flexibility in planning for, or reacting to, changes in our
      business and the industry in which we operate;•
            we
      are more highly leveraged than some of our competitors, which may place us
      at a competitive disadvantage;•
            it
      makes us more vulnerable to downturns in general economic or industry
      conditions or in our business;•
            it
      may restrict us from making strategic acquisitions, making capital
      improvements, investing in technology infrastructure or exploiting
      business opportunities; and•
            our
      suppliers and customers may react adversely to our significant debt
      level.





In addition, the ABL Credit Facility is
a five-year facility with no amortizing payments prior to the maturity date, but
repayments are required if, at any time, amounts outstanding exceed the then
applicable borrowing base. The Notes mature in eight years with no amortizing
payments prior to the maturity date.  Thus, substantial payment
obligations could come due prior to, and will come due at, the maturity date,
and there can be no assurance that we will be able to fund such payment
obligations at that time out of our cash flow or current assets.




If we are unable to meet our debt
service obligations, we may need to obtain additional indebtedness, refinance or
restructure all or a portion of our indebtedness, sell assets or raise
equity.  The current global economic downturn and capital markets
crisis would make it very difficult to do so on acceptable terms or at all. If
we default on our obligations, it would have a material adverse effect on our
business, financial condition and results of operations.




Despite our substantial indebtedness,
we may still incur significantly more indebtedness, which could further
exacerbate the debt- related risks described in this report.




We may be able to incur substantial
additional indebtedness in the future. Although covenants under the Indenture
relating to the Notes (the “Notes Indenture”) and the credit agreement relating
to the ABL Credit Facility (the “ABL Credit Agreement”) limit our ability to
incur certain additional indebtedness, these restrictions are subject to a
number of qualifications and exceptions, and the indebtedness incurred in
compliance with these restrictions could be substantial. In addition, neither
the Notes Indenture nor the ABL Credit Agreement prevents us from incurring
obligations that do not constitute indebtedness as




12


defined
in those documents. If new debt is added to our existing debt levels, the risks
associated with debt that we currently face, including our possible inability to
service our indebtedness would increase.




If we do not generate sufficient cash
flow from operations, we may have to take financing, capital-raising or other
actions that may not be available to us on acceptable terms or at
all.




Our ability to make required payments
on or to refinance our indebtedness will depend on our ability to generate cash
flow from operations in the future. To a certain extent, our cash flow is
subject to general economic, industry, financial, competitive, operating,
legislative, regulatory and other factors, many of which are beyond our
control.




If we do not generate sufficient cash
flow from operations, we may have to take actions, such as obtaining additional
indebtedness, refinancing or restructuring our indebtedness, selling assets,
reducing or delaying capital expenditures or seeking to raise additional
capital.  We may not be able to affect any of these actions on
acceptable terms or at all. The ABL Credit Agreement and the Notes Indenture
restrict our ability to dispose of assets, obtain additional debt or refinance
debt and use the proceeds therefrom or from additional capital.  Those
proceeds may not be adequate to meet our needs.  Further, our ability
to restructure or refinance our indebtedness, including the ABL Credit Facility
and the Notes, or raise additional debt or capital or sell assets will depend on
the condition of the capital markets and our financial condition at such
time.  In addition, our failure to make scheduled payments of interest
and principal on our indebtedness would likely result in a reduction of our
credit rating, which could harm our ability to take such actions.  Any
refinancing of our indebtedness could be at higher interest rates and may
require us to comply with more onerous covenants.  Accordingly, our
inability to generate sufficient cash flow to satisfy our debt service
obligations would have a material adverse effect on our financial condition and
results of operations.




A default under the covenants contained
in the ABL Credit Agreement or Notes Indenture (including on our obligations to
pay our indebtedness) that is not cured or waived could have a material adverse
effect on our financial condition and results of operations and our
securities.




We currently are in compliance with the
covenants contained in the ABL Credit Agreement and the Notes
Indenture.  However, our ability to continue to comply may be affected
by events beyond our control.  The breach of any of the covenants
contained in the ABL Credit Agreement, unless waived by the lenders, would be a
default under the ABL Credit Agreement.  This would permit, under
certain circumstances, the lenders to accelerate the maturity of the ABL Credit
Agreement and elect to terminate their commitments thereunder.  This
would have an immediate material adverse effect on our liquidity.  An
acceleration of maturity of the ABL Credit Facility would permit, unless our ABL
indebtedness is less than $10.0 million, the holders of the Notes to accelerate
the maturity of the Notes.  A breach of the covenants in the Notes
Indenture also will permit, under certain circumstances, the Noteholders to
accelerate the maturity of the Notes.  Acceleration of maturity of the
Notes would permit the lenders to accelerate the maturity of the ABL Credit
Facility and elect to terminate their commitments thereunder.  If we
were unable to repay our debt to the lenders and holders or otherwise obtain a
waiver from the lenders and Noteholders, we could be forced to take the actions
described in the preceding risk factor and the lenders and Noteholders could
proceed against the collateral securing the ABL Credit Facility and the Notes,
which are substantially all of our assets, and exercise all other rights
available to them.  We cannot assure you that we will have sufficient
funds to make these accelerated payments and we may not be able to obtain any
such waiver on acceptable terms or at all.  Any of such actions could
adversely affect the market price of our common stock and warrants, and could
force us into bankruptcy.




Limits on our borrowing capacity under
the ABL Credit Facility may affect our ability to finance our
operations.




While the ABL Credit Facility provides
for $175.0 million of commitments, our ability to borrow funds thereunder
is subject to, among other things, the amount of eligible accounts receivable
and eligible inventory in our borrowing base. Our ability to make borrowings
under the ABL Credit Facility also is conditioned upon our compliance with other
covenants in the ABL Credit Agreement, including a financial covenant that will
apply when excess availability – the amount of eligible assets included in our
borrowing base minus the amounts outstanding under the ABL Credit Facility (but
not deducting the $15.0 million availability block) - is less than $20.0
million.  Because of these limitations, we may not be able to borrow
the full amount committed in the ABL Credit Facility and as a result may not be
able to meet our cash requirements with funds borrowed under the ABL Credit
Facility.




Covenants in the ABL Credit Agreement
and the Notes Indenture may restrict our ability to pursue our business
strategies.




The ABL Credit Agreement and the Notes
Indenture contain, and the agreements governing our future indebtedness may
contain, restrictive covenants that may adversely affect our ability to finance
future operations or capital needs or to engage in other business activities.
The ABL Credit Agreement and the Notes Indenture limit our ability, among other
things, to:


13





•
              incur
      or guarantee additional indebtedness (including preferred
      stock);•
              pay
      dividends and distributions on, or repurchase or redeem, equity interests
      and make other similar payments;•
              create
      or incur liens;•
              enter
      into sale leaseback transactions;•
              make
      loans, investments, advances or acquisitions;•
              sell
      or otherwise dispose of assets;•
              repay
      indebtedness;•
              enter
      into transactions with affiliates;•
              permit
      our subsidiaries to pay dividends or make
distributions;•
              transfer
      all or substantially all of our assets or enter into merger or
      consolidation transactions;•
              engage
      in hedging; and•
              change
      our lines of business.





In addition, the ABL Credit Agreement
includes a financial covenant under which we must maintain a 1.0 to 1.0 fixed
charge coverage ratio whenever excess availability – the amount of eligible
assets included in our borrowing base minus the amounts outstanding under the
ABL Credit Facility (but not deducting the $15.0 million availability block) –
is less than $20.0 million. Our ability to comply with this ratio may be
affected by events beyond our control. In addition, at any time when excess
availability under the ABL Credit Facility is less than $20.0 million for
five consecutive business days or there is an event of default under the ABL
Credit Agreement, the lenders are entitled to sweep cash from certain of our
U.S. and Canadian bank accounts to repay or, in the case of outstanding letters
of credit, cash collateralize, any credit extensions outstanding under the ABL
Credit Facility. Such cash sweep would terminate when excess availability under
the ABL Credit Facility is greater than $20.0 million for 30 consecutive
days or such event of default has been cured.




The prices we pay for steel and the
prices we are able to charge our customers for our products may fluctuate due to
a number of factors beyond our control, which could reduce our operating results
and weaken our financial condition.




The principal raw material used in our
operations is flat rolled carbon steel, which we purchase directly from steel
producers. The steel industry as a whole is cyclical. At times, pricing and
availability of steel can be volatile due to numerous factors beyond our
control, including general, regional and international economic conditions,
production levels, competition, import duties and tariffs, and currency exchange
rates. This volatility can affect the availability and costs of raw materials
for us, and may therefore adversely affect our net sales, operating margin and
net income.




The cost of steel and other raw
materials represented 82.6% of our total net sales in fiscal year
2008.  During 2008 and prior we maintained our steel inventory at
levels that we believed appropriate to satisfy the anticipated needs of our
customers based upon historical buying practices, contracts with customers,
customer indications and market conditions.  Failure to have
sufficient steel supplies and inventory would adversely affect our
business.




We generally purchase steel at
prevailing market prices in effect at the time we place our orders. During
periods of rising prices for steel, our margins may be negatively affected by
delays between the time of increases in the cost of steel to us and increases in
the prices that we charge for our products. In addition, when steel prices
decline, customer demand for lower prices could result in lower sale prices for
our products and, as we use existing inventory that we purchased at higher
prices, lower margins. These impacts on our operating margins may be
material.




An interruption in sources of steel
supply could have a material adverse effect on our results of
operations.




14


We purchase our raw materials,
including flat rolled carbon steel and a variety of other metals, on a frequent
basis from a number of North American metals producers.  In fiscal
year 2008, our top three steel suppliers represented approximately 24% of our
total steel purchasing cost. If we are unable to obtain sufficient amounts of
steel and other metal products at competitive prices or on a timely basis from
our traditional suppliers (including by reason of the termination of one or more
of our relationships with our major suppliers), we may not be able to obtain
such products from alternative sources at competitive prices to satisfy our
customers’ delivery schedules, which could materially adversely affect our
business, financial condition, results of operations and cash flow.




The global steel industry has
experienced significant consolidation in recent years. Further consolidation
could result in a decrease in the number of major suppliers or a decrease in the
number of alternative supply sources available to us, which could make it more
likely that an inability to obtain steel and other metal products from our
traditional suppliers would result in a material adverse effect on our business,
financial condition, results of operations and cash flow.




Rapidly growing
supply of steel products in China and otherdeveloping
economies, which may increase faster than increases in demand, may result in
additional excessworldwidecapacity and
falling steel prices.




Over the last several years, steel
consumption in China and other developing economies has increased rapidly. Steel
companies have responded by developing steel production capabilities in these
countries. Steel production, especially in China, has been expanding
significantly and China is now the largest worldwide steel producer by a
significant margin. Significant Chinese exports of steel exert downward pressure
on steel prices in the Canadian and American markets which could materially and
adversely affect our business, results of operations, financial condition and
cash flow.





We may be subject to product liability
and other damage claims with respect to the products we produce.




We are exposed to product liability
claims with respect to defects in our products, including claims by consumers of
the products made by our customers, such as our customers in the automotive and
construction industries. In addition, we may be subject to liability to our
customers for damages incurred by them in the event that a defect or other
nonconformity in one of our products results in a recall of, or delay or other
disruption in the production of, their products. Any such claims or liabilities
for which we are ultimately determined to be responsible could materially
adversely affect our financial condition and results of operations, and could
materially affect our reputation and relationships with our
customers.




We extend trade credit to certain of
our customers in the ordinary course of business.  The current general
economic downturn increases the risk that customers may be unable to repay this
credit.




We extend trade credit to our customers
in the ordinary course of our business, in some cases for large purchases and
for extended periods of time. We are therefore exposed to the risk that some of
our customers may be unable to repay us.  This risk has increased
significantly in light of the current general economic downturn. Significant
defaults by our customers could adversely affect our business, results of
operations, financial condition and cash flow.




We
may not be able to grow our business in the future or to manage our growth
effectively.




We intend to grow our business
internally and through selective acquisitions, and we periodically review
acquisition and expansion opportunities. Acquisitions involve risks that the
businesses acquired will not perform in accordance with expectations and that
business judgments concerning the value, strengths and weaknesses of businesses
acquired will prove incorrect. Any new facility or operation or any future
acquisitions may adversely affect our operating results by creating operating
inefficiencies that could disproportionately increase our operating expenses. In
addition, any new facility or operation could adversely affect our results of
operations due to start-up costs and the potential for underutilization in the
start-up phase. Acquisitions could also result in unforeseen integration
difficulties and could result in increased costs and divert a disproportionate
amount of management time and attention which could decrease the time that they
have to service and attract customers and develop new products and services. We
may not be able to retain the management, key employees or significant customers
of an acquired business.




Restrictions contained in the ABL
Credit Facility and the Notes Indenture limit our ability to make certain
investments, including acquisitions and participation in joint ventures. Future
acquisitions may result in the incurrence of additional indebtedness and
contingent liabilities, an increase in interest expense and impairment charges
related to goodwill and other intangible assets as well as significant
integration costs.




Our results of operations for any
fiscal quarter are not necessarily indicative of our results of operations for a
full fiscal year.




15


Certain of our products are sold to
industries that experience significant fluctuations in demand, including
fluctuations from quarter to quarter, due to such factors as changes in general
economic conditions, energy prices, seasonality and consumer
demand.  We have experienced, and expect to continue to experience,
volatility with respect to demand for and prices of our
products.  Accordingly, results of operations for any fiscal quarter
are not necessarily indicative of the results of operations for a full fiscal
year.




Our Canadian operations subject us to
currency translation risk which could cause our reported results to fluctuate
significantly from period to period.




We receive a material portion of our
revenue from our Canadian operations in Canadian dollars. For each reporting
period, we translate the results of operations and financial condition from our
Canadian operations into U.S. dollars. Therefore, our reported results of
operations and financial condition are subject to changes in the exchange
relationship between the two currencies. For example, as the Canadian dollar has
recently weakened against the U.S. dollar, our revenue, as reported, has been
unfavorably affected and, conversely, expenses have been favorably affected.
However, if the Canadian dollar strengthens against the U.S. dollar in the
future, our revenue, as reported, will be favorably affected and, conversely,
expenses will be unfavorably affected. Fluctuations in the relative values of
the U.S. dollar and the Canadian dollar could negatively affect our results of
operations and assets and liabilities as reported in our financial
statements.




We could incur substantial costs in
order to comply with, or to address any violations or liabilities under,
environmental and occupational health and safety laws, significantly increasing
our operating expenses and reducing our operating income.




Our operations and facilities,
primarily our processing centers and manufacturing facilities, are subject to
comprehensive and frequently changing federal, state, provincial and local laws
and regulations in the United States and Canada relating to the protection of
the environment, including those related to air emissions, wastewater
discharges, treatment, storage and disposal of hazardous substances and other
materials and wastes, and, in general, the emissions of pollutants into the
environment. We are also subject to occupational health and safety laws and
regulations. We have made, and will continue to make, significant expenditures
to comply with such laws and regulations. Adoption of more stringent laws or
regulations, as well as more vigorous enforcement policies of the regulatory
agencies or stricter interpretations of existing laws and regulations, may
require significant additional expenditures by us which could vary substantially
from those currently anticipated.




We also could incur substantial costs,
including cleanup costs, fines and civil and criminal sanctions and third-party
claims for property damage and personal injury, as a result of violations of or
liabilities under environmental laws and regulations. For example, our U.S.
subsidiary, ASA, is one of the defendants in an action brought in 2001 by two
private parties under the Comprehensive Environmental Response Compensation and
Liability Act, or CERCLA, to recover costs incurred and to be incurred in
connection with a waste disposal facility in Cumberland, Rhode Island, which has
been categorized as a Superfund site by federal authorities. There are a total
of 57 defendants. The plaintiffs claim that ASA is liable based upon alleged
shipments to the site by it. The plaintiffs have identified over 100 potentially
responsible parties, or PRPs, and the Environmental Protection Agency, or EPA,
has issued claim notice letters to 63 parties, some of which are defendants in
the lawsuit. In 2003, ASA received an EPA claim letter seeking reimbursement of
costs incurred and to be incurred at the site. During 2006, American Steel and
Aluminum Corporation and approximately 25 other defendants entered into a
settlement resolving their alleged liability for all claims for past and future
response and oversight costs in connection with the Remedial
Investigation/Feasibility Study for the site. The litigation remains pending
against the non-settling defendants.  The settlement does not address
future remediation costs, and we do not believe it is currently possible to
estimate our share, if any, of such costs, should claims for their recovery be
pursued against us. We believe that we have meritorious defenses against any
such claims, and we intend to defend our position vigorously should they be
pursued against us.  However, we may not prevail in such event, and
any significant loss could have an adverse effect on our financial
results.  As part of the redesign of our distribution facilities, on
February 13, 2009 we sold the facility in Cumberland, Rhode
Island.  The sale of this facility does not relieve us of our
potential liability for such environmental claims.




Certain of the facilities that we
occupy have been in operation for many years and, over such time, we and the
prior owners or operators of such properties may have generated and disposed of
wastes which are or may be in the future considered hazardous. Although we are
not aware of any such sites as to which material outstanding obligations exist,
it is possible that the discovery of contamination at these or other sites could
result in future environmental liabilities.




Unexpected equipment failures may lead
to production curtailments or shutdowns.




Our manufacturing processes are
dependent upon critical pieces of steel processing and manufacturing equipment,
such as an in-line temper mill, cut-to-length line, slitting line, pickling
line, tube mill and roll forming and stamping equipment, and




16


this
equipment may, on occasion, incur downtime as a result of unanticipated
failures. We do not have redundant capabilities with respect to the output of
our hydroform tubing lines in Mississauga, Ontario and Jeffersonville, Indiana,
or our pickling line in Stoney Creek, Ontario. In addition to periodic equipment
failures, our facilities are also subject to the risk of catastrophic loss due
to unanticipated events such as fires, explosions or violent weather conditions.
Unexpected interruptions in our production would adversely affect our
productivity and results of operations.  Moreover, any interruption in
production capability may require us to make significant capital expenditures to
remedy the problem. Our insurance may not cover our losses.  In
addition, long-term business disruption could harm our reputation and result in
a loss of customers, which could adversely affect our business, results of
operations and financial condition.




We operate in a highly fragmented and
competitive industry and increased competition could reduce our sales and
operating results.




The principal markets that we serve are
highly competitive. Our industry is highly fragmented, consisting of numerous
small and mid-sized companies, as well as a few larger publicly-traded
companies. Our geographic market encompasses the Northeastern, Mid-Atlantic and
Mid-Western United States and the Canadian provinces of Québec and Ontario.
Within this geographic market, we compete with other regional and national steel
service centers, single location service centers and, to a certain degree,
primary steel producers and intermediate steel processors on a regional basis.
We have different competitors for each of our products and within each
geographic region.




We compete on the basis of quality,
speed and timely delivering, product selection, customer service, quality
processing capabilities and price.  Our competitors may foresee the
course of market development more accurately than we do, produce similar
products at a lower cost than we can or adapt more quickly to new technologies
or industry and customer requirements. In addition, certain of our competitors
have financial and operating resources in excess of our financial and operating
resources and may have less financial leverage than we do. As a result, these
competitors may be better positioned to respond to downward pricing pressures or
other adverse economic or industry conditions or to identify and acquire
companies or product lines compatible with their business.




In addition, our marketplace,
particularly in structural tubing, is becoming increasingly global, and lower
cost imports may adversely affect our sales and operating margins.




Although we have been able to
successfully compete in the past, we may not be able to continue to do so.
Increased competition could harm our net sales and operating results in the
future.




If our customers, which are primarily
North American manufacturing and industrial companies, relocate operations or
outsource functions overseas, we could lose their business.




Our customer base is located in the
United States and Canada and consists primarily of manufacturing and industrial
companies. Some of our customers operate in industries that are undergoing
consolidation. In addition, some of our customers operate in industries that are
considering or have begun relocating production operations overseas or
outsourcing particular functions overseas. We do not currently operate
facilities outside of North America. To the extent our customers cease North
American operations, relocate their production operations or outsource
particular functions overseas, we could lose their business. Acquirers of
manufacturing and industrial companies may have suppliers of choice that do not
include us. These events could have an adverse effect on our results of
operations and financial condition.




Our operations may be impacted by
future labor negotiations or work stoppages and our inability to renegotiate
labor contracts when they expire.




As of February 20, 2009, we employed
approximately 644 persons.  Of the 644 employees, approximately 22.0%
of our total employees as of February 20, 2009, representing certain employees
at nine of our 18 facilities, are organized by the United Steelworkers, the
Teamsters, and independent employee associations.  We are currently
party to nine collective bargaining agreements. Our labor contracts expire on
staggered dates beginning in December 2009.  The labor contract with
the Teamsters covering 32 employees at our Harrisburg facility will expire in
December 2009.  We may not be able to successfully negotiate
extensions of these agreements or new labor contracts for these employees
without any labor disruption. Work stoppages could have a direct negative impact
on our ability to conduct business and continue production and on our results of
operations.




17


We depend on our operating management
team and the loss of a number of the members of our management team could
prevent us from implementing our operating methodology.




The success of our business is
dependent upon the management and leadership of our operating management team.
With the consummation of the Acquisition, we have begun to implement the
Decalogue operating methodology.  The loss of a number of qualified
team members or our inability to attract additional qualified personnel could
adversely affect our ability to conduct, manage and grow our
business.




Failure to successfully implement the
Decalogue operating methodology, may impede our plans to increase revenues and
cash flow.




Our revenues and cash flows will not
increase as planned if we fail to successfully implement the key elements of the
Decalogue operating methodology.  For example, in that case, we may
not be able to achieve and maintain higher operating capacities, faster cycle
times and related inventory management objectives and lower fixed operating
expenses. Also, if we are unable to identify and pursue new market segments for
our products, we may not be able fully utilize our production capacity and
increase our sales.




Damage to our information technology
infrastructure could harm our business.




The unavailability of any of our
management information systems for any significant period of time could have a
material adverse effect on our operations. We use management information systems
to track inventory information at individual facilities and manage inventory
levels successfully, communicate customer information and aggregate daily sales,
margin and promotional information. These systems are vulnerable to, among other
things, damage or interruption from fire, flood, tornado and other natural
disasters, power loss, computer system and network failures, operator
negligence, physical and electronic loss of data, or security breaches and
computer viruses.




The unaudited pro forma condensed
financial statements are not an indication of the combined company’s financial
condition or results of operations following the Acquisition.




The unaudited pro forma condensed
financial statements contained in this report have been derived from the
historical financial statements of Symmetry and Acquired Company to reflect what
combined results might have been during those periods, and many adjustments and
assumptions have been made regarding the combined company after giving effect to
the Acquisition. As a result, the actual future financial condition and results
of operations of the Company may not be consistent with, or evident from, the
unaudited pro forma condensed financial statements.




The price of our equity securities is
subject to fluctuation that may not be related to our performance.




The stock market in general has been
highly volatile and has experienced extreme price and volume fluctuations. These
broad market movements may adversely affect the market price of our common stock
and warrants, and investors in these securities may experience a decrease in the
value of their securities, including decreases unrelated to our operating
performance or prospects.





If the market price of our common stock
does not increase, we may not be able to maintain our listing on the NASDAQ
Capital Market (“NASDAQ”), which may impair our financial flexibility and
restrict our business significantly.




Our common stock is listed on
NASDAQ.  We cannot assure you that NASDAQ will continue its suspension
of the continued listing requirement relating to minimum bid prices of
securities, currently scheduled to expire on April 20, 2009.  If
NASDAQ discontinues such suspension and our common stock continues to trade at
current prices, we cannot assure you that we will meet the criteria for
continued listing on NASDAQ and our common stock could become
delisted.





If NASDAQ delists our common stock, we
could face significant material adverse consequences, including:





•
              a
      limited availability of market quotations for our
    securities;•
              a
      determination that our common stock is a “penny stock”, which would
      require brokers trading in our common stock to adhere to more stringent
      rules, possibly resulting in a reduced level of trading activity in the
      secondary trading market for our common
stock;


18





•
              a
      reduced amount of news and analyst coverage for us;•
              a
      decreased ability to issue additional securities or obtain additional
      financing in the future; and•
              a
      decreased ability of our equity security holders to sell their securities
      or our warrant holders to exercise their warrants because of state
      securities law restrictions.





If the common stock is delisted from
NASDAQ and we are no longer subject to the reporting requirements of the
Securities Exchange Act of 1934, our Notes Indenture requires us to continue
making public filings with the SEC, with its attendant costs.





The liquidity of our securities is
uncertain. The limited trading volume of our securities may depress the price of
such securities or cause it to fluctuate significantly.





Although our common stock and warrants
are listed on NASDAQ, there has been a limited public market for such securities
and there can be no assurance that an active trading market for such securities
will develop.  As a result, you may not be able to sell our common
stock and warrants in short time periods, or possibly at all. Furthermore, there
is no established trading market for the Notes. We do not intend to list the
Notes on a national securities exchange or include the Notes in any automated
quotation system. If an active trading market for the Notes were to develop, it
could be discontinued at any time. Moreover, the Notes could trade at prices
that may be higher or lower than their principal amount or purchase price,
depending on factors including prevailing interest rates, the market for similar
notes and our financial performance. The absence of an active trading market for
our securities may cause the price per share of our common stock and the price
per warrant to fluctuate significantly and limit the ability of Noteholders to
transfer the Notes.





You may not receive a return on
investment through dividend payments or stock repurchases or upon the sale of
our securities.





We do not anticipate paying any
dividends to our stockholders or repurchasing any of our securities in the near
term. You also may not realize a return on your investment upon selling our
securities.





Provisions in some of our important
documents, as well as Section 203 of the Delaware General Corporation Law (the
“DGCL”), could make it more difficult for a third party to acquire us, even if
doing so might be beneficial to our security holders.





Our
amended and restated certificate of incorporation and by-laws contain certain
provisions concerning stockholder proposals, voting, issuance of preferred
stock, removal of directors and other matters that may make it more difficult or
expensive to complete or otherwise discourage a tender offer or a change in
control or takeover attempt by a third party, even if such a transaction would
be beneficial to our security holders. The existence of these provisions may
have a negative impact on the price of our common stock, warrants and Notes and
the rights of the holders of our securities.  The issuance of
preferred stock could be utilized as a method of discouraging, delaying or
preventing a change of control.  Further, the Notes Indenture and ABL
Credit Agreement provide that certain events that would constitute a change of
control also would constitute an event of default, and in the case of the Notes
Indenture would require us to pay the purchase price of outstanding
Notes.  We cannot assure you that we will have the financial resources
necessary to pay the purchase price of the outstanding Notes or repay any
accelerated ABL indebtedness upon the occurrence of such an event of
default.





Under Section 203 of the DGCL, Delaware
corporations whose securities are listed on a national securities exchange, like
NASDAQ, may not engage in business combinations such as mergers or acquisitions
with any interested stockholders, defined as an entity or person beneficially
owning 15% or more of our outstanding common stock, without obtaining certain
prior approvals.  As a result, potential acquirers may be discouraged
from attempting to effect an acquisition transaction with us, thereby depriving
holders of our securities of opportunities to sell or otherwise dispose of the
securities at prices above prevailing market prices.





We
may not be able to repurchase the Notes upon a change of control as required by
the Notes Indenture.




Upon the occurrence of certain
specified kinds of change of control events, Noteholders may require Barzel
Finco to make an offer to purchase the outstanding Notes at a purchase price
equal to 101% of the principal amount thereof, plus accrued and unpaid interest,
if any, to the purchase date.  If such event were to occur, we may not
have sufficient funds to pay the


19


purchase
price of the outstanding Notes, and we expect that we would require third party
financing to do so.  We cannot assure you that we would be able to
obtain this financing on favorable terms or at all.  The ABL Credit
Agreement also provides that a change of control event, as defined in such
agreement, is an event of default that permits the lenders thereunder to
accelerate the maturity of any outstanding borrowings thereunder and to
terminate the commitments.  If such ABL indebtedness is not paid or a
waiver of that event of default is not obtained, the ABL lenders may enforce
their security interest in the collateral securing the ABL Credit Facility,
thereby limiting our ability to raise cash to purchase the Notes and reducing
the practical benefit of the offer-to-purchase provisions to
Noteholders.  Even if a waiver of the event of default of the ABL
Credit Agreement for the change of control were obtained, covenants in the ABL
Credit Agreement could restrict Barzel Finco from purchasing the
Notes.  Barzel Finco’s failure to purchase tendered Notes would result
in an event of default under the Notes Indenture and a cross-default under the
agreements governing certain of our other indebtedness (including the ABL Credit
Agreement), which may result in the acceleration of such indebtedness requiring
Barzel Finco to repay that indebtedness immediately.  We cannot assure
you that we will have sufficient funds to purchase outstanding Notes and repay
such accelerated indebtedness on the occurrence of any such
event.  Any of our future debt may contain similar
provisions.





In addition, the change of control
provisions in the Notes Indenture may not protect Noteholders from certain
important corporate events, such as a leveraged recapitalization (which would
increase the level of our indebtedness), reorganization, restructuring or other
similar transaction, unless such transaction constitutes a “Change of Control”
under the Notes Indenture. If an event occurs that does not constitute a “Change
of Control” as defined in the Notes Indenture, we will not be required to make
an offer to repurchase the Notes and Noteholders may be required to continue to
hold their Notes despite the event.




Because Barzel, Barzel Holdings and
Barzel Finco are holding companies, Barzel Finco’s ability to repay its
indebtedness is dependent on cash flow generated by its subsidiaries and their
ability to make distributions to it, and Noteholders should not place undue
reliance on the guarantees provided by Barzel and Barzel
Holdings.  The Notes are structurally subordinated in right of payment
to the indebtedness of most of our subsidiaries that have not guaranteed the
Notes, and the intercompany demand promissory notes are structurally
subordinated in right of payment to the indebtedness of Barzel Canada’s
subsidiaries.





Barzel Finco is a holding company with
no significant operations or assets other than the equity interests it holds in
its subsidiaries and intercompany demand promissory notes issued by Barzel
Canada to Barzel Finco totaling $125.0 million. Its ability to pay
principal and interest on its indebtedness (including the Notes) is dependent on
the generation of cash flow by its subsidiaries (including its subsidiaries that
are not guarantors) and their ability to make such cash available to Barzel
Finco, by dividend, debt repayment or otherwise.  Unless they are Note
guarantors, Barzel Finco’s subsidiaries (other than Barzel Canada, to the extent
of the value of the intercompany demand promissory notes) do not have any
obligations to pay amounts due on the Notes or to make funds available for that
purpose. While we and our existing domestic subsidiaries (other than Barzel
Finco) initially guaranteed the Notes on a senior secured basis, such guarantees
and the related security interests could be rendered unenforceable, in which
case Noteholders would lose their direct claim against the entities holding
substantially all of our operating assets.  In addition, in the event
of insolvency, liquidation, reorganization, dissolution or other winding up of
any of Barzel Finco’s subsidiaries who are not guarantors (other than Barzel
Canada, to the extent of the value of the intercompany demand promissory notes),
all of such subsidiary’s creditors would be entitled to payment in full out of
such subsidiary’s assets before Noteholders would be entitled to any payment.
Any payments of dividends, distributions, loans or advances to Barzel Finco by
its subsidiaries could also be subject to taxes or restrictions on dividends or
transfers under applicable local law in the jurisdictions in which its
subsidiaries operate.  If Barzel Finco does not receive distributions
from its subsidiaries, or to the extent that the earnings from (or other
available assets of) its subsidiaries are insufficient, Barzel Finco may be
unable to make required principal and interest payments on its indebtedness,
including the Notes.





Barzel and Barzel Holdings also are
holding companies whose entire operating income and cash flow are derived from
their subsidiaries and whose only material assets are, in the case of Barzel,
the capital stock of Barzel Holdings, and, in the case of Barzel Holdings, the
capital stock of Barzel Finco. Therefore, undue reliance should not be placed by
Noteholders on the guarantees of the Notes provided by Barzel and Barzel
Holdings.





The Notes are structurally subordinated
in right of payment to the indebtedness of our subsidiaries that have not
guaranteed the Notes (other than Barzel Canada, to the extent of the value of
the intercompany demand promissory notes that may be enforced by the Notes
trustee, and Barzel Finco), and the intercompany demand promissory notes are
structurally subordinated in right of payment to the indebtedness of Barzel
Canada’s subsidiaries.  Our subsidiaries that are not Note guarantors
(other than Barzel Finco) have no obligation to pay any amounts due on the Notes
or the related guarantees or to provide Barzel Finco or the Note guarantors with
funds for payment obligations with respect to such indebtedness (and Barzel
Canada’s subsidiaries have no obligation to pay any amounts due on the
intercompany demand promissory notes or to provide Barzel Canada with funds for
payment obligations with respect to the intercompany demand promissory notes),
whether by dividend, distribution, loan or other payment.  In
addition, the Notes Indenture, subject to certain limitations, permits the
non-guarantor subsidiaries and Barzel


20


Canada’s
subsidiaries to incur additional indebtedness and permits us to make unlimited
amounts of investments in the non-guarantor restricted subsidiaries and Barzel
Canada to make unlimited amounts of investments in its subsidiaries that are
restricted subsidiaries.





Barzel Canada’s obligation to provide
Barzel Finco with funds for payment of the Notes will be limited to the value of
the intercompany demand promissory notes, and the ability of the Notes trustee
to enforce payment due under the intercompany demand promissory notes is limited
by the provisions set forth in an intercreditor agreement among us, the Notes
trustee and the ABL collateral agent.  Other than as provided in the
preceding sentence, our Noteholders will not have any claims as creditors
against any of the non-guarantor subsidiaries.  Indebtedness and other
liabilities, including trade payables, whether secured or unsecured, of the
non-guarantor subsidiaries (other than Barzel Canada, to the extent of the value
of the intercompany demand promissory notes that may be enforced by the Notes
trustee) are effectively senior to Noteholders’ claims against those
subsidiaries as Noteholders.  Neither Barzel Finco nor any Noteholder
has any claim as a creditor against any of Barzel Canada’s subsidiaries.
Indebtedness and other liabilities, including trade payables, whether secured or
unsecured, of Barzel Canada’s subsidiaries is effectively senior to Barzel
Finco’s claims against those subsidiaries or Noteholders’ claims against those
subsidiaries as Noteholders.





For the fiscal year ended November 29,
2008, our non-guarantor subsidiaries (including Barzel Canada) generated total
revenues of $436.3 million and operating loss (including intercompany
transactions) of $53.0 million.  Our non-guarantor subsidiaries had
$54.2 million of total liabilities (including trade payables, but excluding
intercompany liabilities) and $214.1 million of total assets as of November 29,
2008.




The pledge to the Notes trustee of the
capital stock, intercompany demand promissory notes and other securities
securing the Notes automatically will be limited to the extent it would require
the filing with the SEC of separate financial statements for any of our
subsidiaries.




The Notes Indenture provides that, to
the extent that separate financial statements of any of our subsidiaries would
be required by SEC rules due to the fact that such subsidiary’s capital stock,
intercompany demand promissory notes or other securities secure the Notes, the
pledge of such capital stock, intercompany demand promissory notes or other
securities of such subsidiary automatically will be limited such that the value
of the portion of such capital stock, intercompany demand promissory notes and
other securities of such subsidiary pledged to the Notes trustee will, in the
aggregate, at no time exceed 19.999% of the aggregate principal amount of the
then outstanding Notes.




Statutes may allow courts, under
specific circumstances, to void the Notes and the related guarantees, or the
intercompany demand promissory notes and security granted in connection with
such notes, and require Noteholders or Barzel Finco, as applicable, to return
payments received thereon.




The issuance of the Notes and the
related guarantees may be subject to review under federal and state fraudulent
transfer and conveyance statutes, and the intercompany demand promissory notes
may be subject to review under such statutes as well as similar Canadian federal
and provincial statutes, if Barzel Finco, Barzel Canada or any guarantor becomes
a debtor in a case under any bankruptcy law. A court may void or otherwise
decline to enforce the Notes or the related guarantee or the intercompany demand
promissory notes, as applicable.  A court might do so if it found that
when Barzel Finco issued the Notes or the guarantor entered into its guarantee,
or when Barzel Canada issued the intercompany demand promissory notes or when
payments became due thereunder (or, in some states, when payments became due
under the Notes or the related guarantee), the issuer or guarantor received less
than reasonably equivalent value or fair consideration and either:





•
            was
      or was rendered insolvent by reason of such
  transactions;•
            was
      engaged in a business or transaction for which Barzel Finco’s, Barzel
      Canada’s or such guarantor’s remaining assets constituted unreasonably
      small capital; or•
            intended
      to incur, or believed that it would incur, debts beyond its ability to
      repay such debts as they matured.





The court
also might void the issuance of the Notes or a related guarantee, or the
intercompany demand promissory notes, without regard to the above factors, if
the court found that the issuer issued the relevant notes or the guarantor
entered into its guarantee with actual intent to hinder, delay or defraud its
creditors.




Certain provisions of
the intercompany demand promissory notes can be changed, and the intercompany
demand promissory notes can be prepaid in whole or in part, without the consent
of Noteholders. Prepayment would increase the


21


structural
subordination of the Notes. Prepayment or changes in such provisions could
reduce or eliminate the ability of Noteholders to seek recovery directly from
Barzel Canada upon a default under the Notes.




In general, the intercompany demand
promissory notes cannot be changed or, in the case of the intercompany demand
promissory notes issued on the Acquisition date, prepaid or otherwise
discharged, without the consent of Noteholders. However, without the consent of
Noteholders:





•
              the
      interest rate, interest payment dates, currency of payment of principal
      and currency in which any intercompany demand promissory note is
      denominated (subject to certain limitations) can be amended and the
      payment of interest may be deferred; and•
              any
      intercompany demand promissory note can be prepaid or repaid in whole or
      in part; provided that, in the case of the intercompany demand promissory
      notes issued on the Acquisition date, the proceeds are applied to an offer
      to purchase Notes at a purchase price equal to 100% of the principal
      amount of the Notes plus accrued and unpaid interest, if any, or to redeem
      the Notes in accordance with the Notes
  Indenture.





To the extent we change the currency of
any intercompany demand promissory notes to Canadian dollars, the principal
amount (expressed in U.S. dollars) of such intercompany demand promissory
note could increase or decrease at any time due to changes in currency exchange
rates. A reduction in the principal amount of any intercompany demand promissory
note would decrease the secured debt claim against Barzel Canada and therefore
would increase the structural subordination of the Notes, and reduce the ability
of Noteholders to realize upon the assets of Barzel Canada upon a default under
the Notes Indenture.




Rights of Noteholders in the collateral
may be adversely affected by the failure to create or perfect security interests
in certain collateral, and rights of Barzel Finco in the intercompany note
collateral may be adversely affected by the failure to create or perfect
security interests in certain intercompany note collateral.




The collateral securing the Notes
consists of assets, both tangible and intangible, whether now owned or acquired
or arising in the future, of Barzel Finco and the guarantors.  Barzel
Finco’s security interests in the intercompany note collateral include assets,
both tangible and intangible, whether now owned or acquired or arising in the
future, of Barzel Canada.  Applicable law requires that certain
property and rights acquired after the grant of a general security interest can
only be perfected at the time such property and rights are acquired and
identified. There can be no assurance that all necessary action will be taken to
properly create and perfect the security interest in such after acquired
collateral or intercompany note collateral. Such failure may result in the loss
of the security interest therein or the priority of the security interest in
favor of the Notes or the intercompany demand promissory notes against third
parties.




In addition, the Notes Indenture
contains exceptions for the creation or perfection of security interests in
specific assets.  Thus, if security interests are not created or
perfected in such assets, Noteholders may be unable to realize thereon in the
event of a default.




There may not be sufficient collateral
to pay all or any of the Notes or the intercompany demand promissory notes, and
our Noteholders will not control certain decisions regarding second-priority
collateral.




There may not be sufficient collateral
to pay all or any of the amounts due on the Notes or sufficient intercompany
note collateral to pay all or any of the amounts due on the intercompany demand
promissory notes. Noteholders will not control decisions regarding the
second-priority collateral or the intercompany note collateral and may not be
able to do so for the first-priority collateral.




Indebtedness outstanding under the ABL
Credit Facility, certain interest rate protection and other hedging agreements,
certain obligations in respect of cash management services and certain other
indebtedness permitted to be incurred by us in the future under the Notes
Indenture are (or, in the case of such future indebtedness, may be) secured on a
first-priority basis by the second-priority collateral. The second-priority
collateral consists of (i) accounts receivable and related records, chattel
paper, deposit accounts, cash, checks and other negotiable instruments, funds
and other evidences of payment, (ii) inventory, (iii) documents,
general intangibles, instruments, investment property and letter of credit
rights, in each case to the extent evidencing, governing, securing or otherwise
related to the items referred to in clause (i) or (ii) above,
(iv) books and records related to the foregoing, (v) collateral
security and guarantees given by any person with respect to any of the
foregoing, and (vi) proceeds, including insurance proceeds, of any and all
of the foregoing, in each case of Barzel Finco and each guarantor, whether owned
on the issue date of the Notes or thereafter acquired, and subject to certain
exceptions and permitted liens. In the event of a bankruptcy, liquidation,
dissolution, reorganization or similar proceeding against Barzel Finco or any
guarantor, the




22


second-priority
collateral must be used to pay in full indebtedness incurred under the ABL
Credit Facility before any payment may be made on the Notes. In addition,
because a portion of the first-priority collateral consists of pledges of 66% of
the capital stock of certain of our foreign subsidiaries, the validity of those
pledges under local law, if applicable, and the ability of Noteholders to
realize upon that collateral under local law, to the extent applicable, may be
limited by such local law, which limitations may affect the first-priority liens
securing the Notes.




Subject to the first-priority security
interest in the Canadian ABL assets securing the Canadian ABL obligations, to
the extent other indebtedness has a first-priority security interest in the
intercompany note collateral, Noteholders will have to share the value of the
assets comprising such collateral with the holders of such other indebtedness on
a pari passu basis in the event of bankruptcy, liquidation, dissolution,
reorganization or similar proceeding against Barzel Canada. As of November 29,
2008, there was $158.8 million of indebtedness outstanding secured by the
Canadian ABL assets on a first-priority basis, including $125.0 million of
indebtedness under the intercompany demand promissory notes issued on the
Acquisition date and $33.8 million of indebtedness under the ABL Credit Facility
(excluding approximately $0.9 million in undrawn outstanding letters of credit
issued thereunder).




In addition, the Notes trustee’s right
to repossess and dispose of the collateral securing the Notes upon acceleration
is likely to be significantly impaired by federal bankruptcy or other insolvency
law if such proceedings are commenced by or against us.




A downgrade, suspension or withdrawal
of the rating assigned by a rating agency to the Notes, if any, could cause the
liquidity or market value of the Notes to decline.




The Notes have been rated by nationally
recognized statistical rating agencies. The Notes may in the future be rated by
additional rating agencies. We cannot assure you that any rating assigned will
remain for any given period of time or that a rating will not be lowered or
withdrawn entirely. A rating is not a recommendation to purchase, hold or sell
securities. Any lowering or withdrawal of a rating by a rating agency could
reduce the liquidity or market value of the Notes.




Noteholders may be required to include
certain amounts into income before interest is actually paid on the
Notes.




Although not completely clear, we
believe the Notes were not issued with original issue discount.  If a
Noteholder purchases a Note for an amount that is less than its stated
redemption price at maturity, the amount of the difference will be treated as
"market discount," unless such difference is less than a specified de minimis
amount. Under the market discount rules, a Noteholder will be required to treat
any principal payment on, or any gain on the sale, exchange, retirement or other
disposition of a Note as ordinary income to the extent of any accrued market
discount that has not previously been included in income, unless such Noteholder
elects to include market discount in income currently as it
accrues.  A Noteholder may be required to defer a portion of its
interest deductions for a taxable year attributable to any indebtedness incurred
or continued to purchase or carry a Note purchased with market
discount.  Any such deferred interest expense would not exceed the
market discount that accrues during such taxable year and is, in general,
allowed as a deduction not later than the year in which such market discount is
includible in income.  A Noteholder that elects to include market
discount in income currently as it accrues (which election is applicable to all
market discount instruments acquired by the Noteholder thereafter and is
terminable only with the consent of the Internal Revenue Service) is not subject
to the foregoing interest expense deferral rule.




ITEM 1B.
            UNRESOLVED
      STAFF COMMENTS





None.





ITEM
      2.
            PROPERTY





The following chart describes each of
our Canadian facilities:





Subsidiary/location
              Description
      of operations and products
              TitleBarzel
      Canada
                LaSalle,
      Québec
              •
                •
                •
                •
              160,000
      sq. ft.
                Temper
      mill
                Two
      cut-to-length lines
                Two
      slitting lines
              •
              Hot-rolled,
      hot-rolled
                pickled
      and oiled and
                tubing
              Leased
      to November 2019


23





Delta
      Tube Inc.
              LaSalle,
      Québec (60% Owned)
            •
              •
            100,000
      sq. ft.
              HSS
      tube mill, up to
              5"  ́ 5"  ́ 1¤4"
            •
            Toll
      rolling of HSS tubing for Barzel and pipe for ArcelorMittal Tubular
      Products Montreal Inc.
            OwnedBarzel
      Canada
              Baie
      d'Urfé, Québec
            •
              •
            47,100
      sq. ft.
              Hot-rolled
      tube mill up to
              3"
      O.D.
            •
            Toll
      rolling of tubing for the structural market
            Leased
      to May 31, 2013Barzel
      Canada
              Mississauga,
      Ontario
            •
              •
            90,000
      sq. ft.
              Cold-rolled
      tube mill up to
              4"
      O.D.
            •
            High
      quality mechanical
              tubing
      targeting
              hydroformed
      automobile
              components
      and other
              automotive
      and general
              manufacturing
              applications
            Leased
      to April 30, 2012Barzel
      Canada
              Stoney
      Creek, Ontario
            •
              •
              •
            171,000
      sq. ft.
              Pickling
      line
              Two
      slitting lines
            •
            Pickling
      and slitting of
              coils
      on a toll rolling basis
            OwnedBarzel
      Canada
              Dorval,
      Québec
            •
              •
              •
            75,500
      sq. ft.
              Slitting
      line
              Two
      precision
              multi-blanking
      cut-to-
              length
      lines
            •
            Hot-rolled,
      cold-rolled and
              galvanized
      products for
              general
      manufacturing
              applications
            Leased
      to November 30,
              2009Barzel
      Canada
              Granby,
      Québec
            •
              •
              •
              •
            71,600
      sq. ft.
              15
      roll forming lines
              Seven
      punch presses
              Stamping
      and
              manufacturing
            •
            Variety
      of sophisticated
              roll
      formed sections on
              customer
      demand
            Owned•
            In-line
      weldingBarzel
      Canada
              Granby,
      Québec
            •
              •
            72,500
      sq. ft.
              Electrostatic
      powder
              coating
            •
            Pallet
      racking
            OwnedBarzel
      Canada
              St.
      Hubert, Québec
            •
              •
            118,300
      sq. ft.
              Manufacturing
            •
            Front
      loader buckets
            Leased
      to December 31,
              2011Barzel
      Canada
              Shawinigan,
      Québec
            •
              •
              •
              •
            19,322
      sq. ft.
              Five
      punch presses
              Stamping
              Assembly
            •
            Hardwood
      flooring nails,
              nailers
      and accessories
            Leased
      to February 28,
              2009Barzel
      Canada
              Bromont,
      Québec
            •
            7,500
      sq. ft.
            •
            Hardwood
      flooring nails
            Leased
      to April 30, 2010





The following chart describes our two
tubing facilities in the United States:





Subsidiary/location
            Description
      of operations and products
            TitleNova
      Tube and Steel, Inc.
              Morrisville,
      PA
            •
              •
              
              •
              •
            163,300
      sq. ft.
              HSS
      tube mill up to
              6"  ́ 6"  ́ 3¤8"
              Heavy
      gauge slitter
              Heavy
      gauge cut-to-length
              line
            •
              
              •
            Hot-rolled
      HSS tubing up
              to
      6" square
              Hot-rolled
      sheet and plate
              coil
            OwnedNova
      Tube Indiana, LLC
              Jeffersonville,
      IN
            •
              •
            108,000
      sq. ft.
              Mechanical
      tube mill up to
              7"
      O.D.
            •
            High
      quality mechanical
              tubing
      targeting
              hydroformed
      automobile
              and
      truck frame
              components
            Owned





The following chart describes each of
our other such facilities in the United States:





Subsidiary/location
            Description
      of operations and products
            Title


24





ASA
              Ashland,
      VA
            •
              •
            45,000
      sq. ft.
              Shearing
            •
            All
      carbon steel products
              and
      galvanized sheet
            Owned•
            Bar
      sawing
            •
            Stainless
      steel and
              aluminum
      products•
            Tubing
      and pipeASA
              Auburn,
      MA
            •
              •
              •
            105,000
      sq. ft.
              Four
      slitting lines
              Leveling
      and cut-to-length line
            •
            Supplier
      of cold-rolled
              and
      high carbon strip
              steel
            Owned•
            Blanking
      line
            •
            Processing
      of coated
              sheets
      and bright finished
              materials•
            Processing
      of cold-rolled,
              galvanized,
      aluminum
              and
      stainless coils to
              supply
      sheets to all
              American
      Steel divisionsASA
              Harrisburg,
      PA
            •
              •
            104,000
      sq. ft.
              Shearing
            •
            All
      carbon steel products
              and
      galvanized sheet
            Owned•
            Bar
      sawing
            •
            Stainless
      steel and
              aluminum
      products•
            Tubing
      and pipeASA
              Hartford,
      CT
            •
              •
            36,000
      sq. ft.
              Shearing
            •
            All
      carbon steel products
              and
      galvanized sheet
            Owned•
            Bar
      sawing
            •
            Stainless
      steel and
              aluminum
      products
            To
      be closed in February/early•
            Tubing
      and pipe
            March
      2009ASA
              Norwood,
      MA1
            •
              •
            55,000
      sq. ft.
              Shearing
            •
            All
      carbon steel products
              and
      galvanized sheet
            Owned•
            Bar
      sawing
            •
            Stainless
      steel and
              aluminum
      products
            To
      be closed in February/early•
            Tubing
      and pipe
            March
      2009ASA
              Portland,
      ME
            •
              •
            59,000
      sq. ft.
              Shearing
            •
            All
      carbon steel products
              and
      galvanized sheet
            Owned•
            Bar
      sawing
            •
            Stainless
      steel and aluminum productsTubing
      and pipeASA
              Syracuse,
      NY
            •
              •
            53,000
      sq. ft.
              Shearing
            •
            All
      carbon steel products
              and
      galvanized sheet
            Owned•
            Bar
      sawing
            •
            Stainless
      steel and
              aluminum
      products•
            Tubing
      and pipe





ITEM
      3.
            LEGAL
      PROCEEDINGS




In
addition to the claims mentioned in the "Environmental Regulation" section of
"Item 1. Business," we are a party to various legal actions that we believe are
ordinary in nature and incidental to the operation of our business. In our
opinion, the outcome of these additional proceedings is not likely to have a
material adverse effect upon our business, results of operations or financial
condition.







1           In
the first quarter of 2009, we further simplified the design of the network,
including a reduction in U.S. and Canadian workforce, and rationalized our
distribution facilities in the U.S.  The implementation of the
reduction in workforce and rationalization of our distribution facilities in the
U.S. resulted in a total reduction of 203 employees in the U.S. and Canada in
the first quarter of 2009.  It also included the exit of four
redundant distribution facilities located in Connecticut, Massachusetts, Rhode
Island and New York in the first quarter of 2009.


25


ITEM
      4.
            SUBMISSION
      OF MATTERS TO A VOTE OF
SHAREHOLDERS





None.





PART
II





ITEM
      5.
            MARKET
      FOR COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF
      EQUITY SECURITIES





Common
Stock





On March 12, 2007, our initial public
offering of 18,750,000 units was consummated.  Each unit consisted of
one share of common stock and one warrant. Each warrant entitles the holder to
purchase from us one share of our common stock.  On April 4, 2007 our
common stock began trading separately from the warrants on the American Stock
Exchange ("AMEX"). Our common stock, warrants and units traded publicly on AMEX
under the trading symbols "SHJ," "SHJ.WS" and "SHJ.U," respectively, until the
close of business on December 28, 2007, at which time each of the common stock,
warrants and units were delisted.  Effective December 31, 2007, the
Company's common stock and warrants began trading publicly on NASDAQ, under the
trading symbols "TONS" and "TONSW," respectively. The Company's units which had
traded as a separate class of security, ceased to trade as such and all
outstanding units were automatically separated into common stock and warrants.
Effective February 17, 2009, the Company’s common stock and warrants began
trading publicly on NASDAQ under the trading symbol’s “TPUT” and “TPUTW”,
respectively.  The following table shows the high and low sales prices
per share of our common stock, per warrant and per unit as reported by the AMEX
and NASDAQ, as applicable, for the periods indicated:





Common
      Stock
                
                
                Warrants
                
                
                UnitsQuarter
      Ended
                
                HIGH
                
                
                LOW
                
                
                HIGH
                
                
                LOW
                
                
                HIGH
                
                
                LOWMarch
      31, 2007
                
                
                n/a
                
                
                
                n/a
                
                
                
                n/a
                
                
                
                n/a
                
                
                $
                8.10
                
                
                $
                7.82June
      30, 2007
                
                $
                7.70
                
                
                $
                7.05
                
                
                $
                1.50
                
                
                $
                0.86
                
                
                $
                9.10
                
                
                $
                7.89September
      30, 2007
                
                $
                7.67
                
                
                $
                7.40
                
                
                $
                1.51
                
                
                $
                0.85
                
                
                $
                9.10
                
                
                $
                8.70November
      24, 2007
                
                $
                8.10
                
                
                $
                6.80
                
                
                $
                2.30
                
                
                $
                1.30
                
                
                $
                9.68
                
                
                $
                8.60February
      23, 2008
                
                $
                3.15
                
                
                $
                3.00
                
                
                $
                0.95
                
                
                $
                0.63
                
                
                
                N/A
                
                
                
                N/AMay
      31, 2008
                
                $
                3.50
                
                
                $
                3.36
                
                
                $
                0.78
                
                
                $
                0.65
                
                
                
                N/A
                
                
                
                N/AAugust
      30, 2008
                
                $
                3.00
                
                
                $
                2.82
                
                
                $
                0.00
                
                
                $
                0.00
                
                
                
                N/A
                
                
                
                N/ANovember
      29, 2008
                
                $
                1.70
                
                
                $
                0.99
                
                
                $
                0.44
                
                
                $
                0.36
                
                
                $
                N/A
                
                
                $
                N/A





The last reported closing price per
share of our common stock as reported by NASDAQ on January 30, 2009 was $0.65
per share.  As of January 31, 2009, there were 15 holders of record of
our common stock and one holder of record of our warrants.





Dividend
Policy and Restrictions





It is the current policy of our Board
of Directors to retain earnings to repay debt and other obligations, finance
strategic plans, conduct business operations and fund
acquisitions.  Any declaration and payment of cash dividends or
repurchases of common stock will be subject to the discretion of our Board of
Directors, the limitations contained in the ABL Credit Facility and the Notes,
and will be dependent upon our financial condition, results of operations, cash
requirements, future prospects and other factors deemed relevant by our Board of
Directors.  Barzel did not pay any cash dividends or purchase common
shares in the fiscal year ended November 29, 2008.  Subject to the
restrictions set forth below, we may from time to time use our liquidity or cash
flow to repurchase our debt or equity securities.





Under the ABL Credit Facility, in
general, we are permitted to pay dividends and repurchase common stock so long
as after paying such dividend or repurchasing the common stock, at least $65.0
million is available to be drawn by our subsidiary borrowers under the ABL
Credit Facility and we would be able to meet certain fixed charge coverage ratio
requirements.  In addition, we are permitted to make payments not to
exceed $275,000 to redeem the outstanding warrants.





Under the Notes Indenture, in general,
we are permitted to pay dividends and repurchase common stock if certain
consolidated interest coverage ratio requirements are satisfied plus, regardless
of compliance with such ratio requirements, an amount of up to the sum of 50.0%
of certain consolidated net income (cumulative from the commencement of fiscal
year 2008),


26


100.0% of
net cash proceeds from certain sales of common stock (subsequent to November 14,
2007) and certain investment returns may be used to pay dividends and repurchase
common stock.  In addition, we are permitted to make payments not to
exceed $275,000 to redeem the outstanding warrants.





Performance
Graph





The following graph compares the total
return provided to shareholders of our common stock since inception to the AMEX
Composite Index, Russell Microcap Index and NASDAQ Composite
Index.  An investment of $100 is assumed to be made in our stock and
each index at inception on April 4, 2007 and its relative performance is tracked
through November 28, 2008, the last trading day of fiscal year
2008.













Issuances
of Our Securities





On November 3, 2008, pursuant to
privately negotiated exchange agreements between the Company and certain holders
of the Company's warrants, the Company issued an aggregate of 201,717 shares of
common stock in exchange for an aggregate of 706,010 outstanding warrants to
purchase common stock. The holders consisted of certain non-affiliates of the
Company. The issuance of the 201,717 shares of common stock was exempt from
registration under Section 3(a)(9) of the Securities Act of 1933, as amended, as
the exchanges were between the Company and existing security holders and no
commission or other remuneration was paid or given directly or indirectly for
soliciting such exchanges.





The Company has not issued any
securities during the fiscal year ended November 29, 2008, other than those
issuances disclosed above and in the Company’s Current Reports on Form 8-K,
filed with the SEC on July 28, 2008, July 30, 2008, August 11, 2008 and October
28, 2008.


27





ITEM
      6.
            SELECTED
      FINANCIAL DATA





The data set forth below should be read
in conjunction with “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and the Consolidated Financial Statements
and Notes thereto.  We maintain our records on the basis of a
fiscal year ending on the last Saturday in November.  Results for
fiscal 2003, fiscal 2004, fiscal 2005 and fiscal 2006 represent the operating
results of Acquired Company and its subsidiaries as reflected in their
consolidated financial statements.  The consolidated financial statements
for the period April 26, 2006 to December 31, 2006 include only the financial
results of Symmetry commencing with its inception.  The consolidated
financial statements for the period January 1, 2007 through November 24, 2007
include the financial results of Barzel, its wholly-owned subsidiaries Barzel
Holdings and Barzel Finco, and ten days of Acquired Company (the period from
November 15, 2007 until November 24, 2007).  The consolidated
financial statements for the fiscal year ended November 29, 2008, include the
financial results of Barzel, its wholly-owned subsidiaries Barzel Holdings,
Barzel Finco, Barzel Canada (including Acquired Company), and Barzel
U.S.








Acquired
      Company
                  
                  
                  BarzelYear ended
      November 25, 2003
                  
                  
                  Year ended
      November 27, 2004
                  
                  
                  Year ended
      November 26, 2005
                  
                  
                  Year ended
      November 25, 2006
                  
                  
                  Period
      From November 26, 2006 to November 14, 2007
                  
                  
                  Period
      from April 26, 2006 to December 31, 2006
                  
                  
                  Period
      from January 1, 2007 to November 24, 2007
                  
                  
                  Year ended
      November 29, 2008(in
      thousands of U.S. dollars, except share and per share
  data)Consolidated
      Statements of Operations:Net
      sales(a)
                  
                  $
                  507,067
                  
                  
                  $
                  768,627
                  
                  
                  $
                  834,689
                  
                  
                  $
                  840,798
                  
                  
                  $
                  785,045
                  
                  
                  $
                  -
                  
                  
                  $
                  16,304
                  
                  
                  $
                  801,058Net
      income (loss)(b)
                  
                  
                  13,082
                  
                  
                  
                  72,911
                  
                  
                  
                  36,938
                  
                  
                  
                  44,298
                  
                  
                  
                  20,405
                  
                  
                  
                  (148
                  )
                  
                  
                  (3,799
                  )
                  
                  
                  (54,599
                  )Net
      income (loss) per shareBasic
                  
                  
                  1.35
                  
                  
                  
                  7.51
                  
                  
                  
                  3.70
                  
                  
                  
                  4.26
                  
                  
                  
                  1.95
                  
                  
                  
                  (0.03
                  )
                  
                  
                  (0.20
                  )
                  
                  
                  (2.39
                  )Diluted(c)
                  
                  
                  1.35
                  
                  
                  
                  7.35
                  
                  
                  
                  3.58
                  
                  
                  
                  4.25
                  
                  
                  
                  1.95
                  
                  
                  
                  (0.03
                  )
                  
                  
                  (0.20
                  )
                  
                  
                  (2.39
                  )Weighted
      average number of common stock outstanding (c)
                  
                  
                  9,700,000
                  
                  
                  
                  9,707,270
                  
                  
                  
                  9,993,337
                  
                  
                  
                  10,391,891
                  
                  
                  
                  10,450,000
                  
                  
                  
                  4,687,500
                  
                  
                  
                  19,375,451
                  
                  
                  
                  22,872,867Weighted
      average number of diluted common stock outstanding (c)
                  
                  
                  9,700,000
                  
                  
                  
                  9,921,725
                  
                  
                  
                  10,319,629
                  
                  
                  
                  10,450,000
                  
                  
                  
                  10,450,000
                  
                  
                  
                  4,687,500
                  
                  
                  
                  19,375,451
                  
                  
                  
                  22,872,867Balance
      Sheet Data (at period end):Total
      assets(d)
                  
                  
                  312,656
                  
                  
                  
                  434,880
                  
                  
                  
                  441,583
                  
                  
                  
                  469,047
                  
                  
                  
                  487,562
                  
                  
                  
                  714
                  
                  
                  
                  678,220
                  
                  
                  
                  476,940Total
      debt(e)
                  
                  
                  76,525
                  
                  
                  
                  65,063
                  
                  
                  
                  47,536
                  
                  
                  
                  41,800
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  390,588
                  
                  
                  
                  348,814





(a)
              For
      Barzel’s fiscal year 2006, includes only the financial results of Symmetry
      commencing with its inception on April 26, 2006.  For Barzel
      fiscal year 2007, includes net sales for ten days of Acquired
      Company.(b)
              For
      Barzel’s fiscal year 2007, includes $2.3 million of formation and
      operating costs and $4.4 million of transaction expenses associated with
      the Acquisition.  For 2008, includes $25.6 million for a trade
      name impairment charge $0.4 for a goodwill impairment charge and $13.3
      million for restructuring charges.(c)
              For
      Barzel’s fiscal year 2007, weighted average shares outstanding include
      4,687,500 shares issued to the founding stockholders, initial public
      offering of 18,750,000 shares on March 12, 2007, the subsequent exercise
      of conversion rights for 3,860,196 shares on November 15, 2007 and the
      private placement of 1,875,000 units, consisting of one share of common
      stock and one warrant, also occurring on November 15, 2007.  As
      a result of the net loss reported for Barzel’s fiscal year 2007,
      25,579,069 of potential common shares underlying dilutive securities have
      been excluded from the calculation.  As a result of the net loss
      reported for 2008, 6,352,847 of potential common shares underlying
      dilutive securities have been excluded from the
    calculation.(d)
              At
      the end of Barzel’s fiscal year 2007, includes assets of Acquired
      Company.  Financial information for the business


28





acquisition
      is provided in “Item 8 - Consolidated Financial Statements - Notes to
      Consolidated Financial Statements - Note 3 - Business Acquisition” of this
      report.  That financial information is incorporated herein by
      reference.(e)
            At
      the end of Barzel’s fiscal year 2007, includes $75.6 million outstanding
      on the Company’s $175.0 million, five year ABL Credit Facility and the
      Notes in an aggregate principal amount of $315.0 million.  For
      Fiscal year 2008, includes $33.8 million outstanding on the ABL Credit
      Facility and the Notes.  Financial information for long-term
      debt is provided in “Item 8 - Consolidated Financial Statements - Notes to
      Consolidated Financial Statements - Note 11 - Long-Term Debt” of this
      report.  That financial information is incorporated herein by
      reference.








2007
                
                
                2008First
                  Quarter
                
                
                Second
                  Quarter
                
                
                Third
                  Quarter
                
                
                Fourth
                  Quarter
                
                
                First
                  Quarter
                
                
                Second
                  Quarter
                
                
                Third
                  Quarter
                
                
                Fourth
                  Quarter(in
      thousands of U.S. dollars, except per share data)Net
      sales (a)
                
                $
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                16,304
                
                
                $
                195,629
                
                
                $
                241,336
                
                
                $
                230,919
                
                
                $
                133,174Net
      income (loss) (b)
                
                
                185
                
                
                
                932
                
                
                
                941
                
                
                
                (5,857
                )
                
                
                (7,889
                )
                
                
                (4,361
                )
                
                
                (1,804
                )
                
                
                (40,545
                )Net
      income (loss) per shareBasic
                
                $
                0.02
                
                
                $
                0.04
                
                
                $
                0.04
                
                
                $
                (0.25
                )
                
                $
                (0.37
                )
                
                $
                (0.20
                )
                
                $
                (0.08
                )
                
                $
                (1.56
                )Diluted
                
                $
                0.02
                
                
                $
                0.03
                
                
                $
                0.03
                
                
                $
                (0.25
                )
                
                $
                (0.37
                )
                
                $
                (0.20
                )
                
                $
                (0.08
                )
                
                $
                (1.56
                )








(a) The
2007 fourth quarter includes net sales for ten days of Acquired
Company.





(b) The
2007 first, second and third quarters include formation and operating costs of
$0.1 million, $0.5 million and $0.4 million, respectively and interest income,
net, of $0.4 million, $1.9 million and $1.9 million,
respectively.  Interest income, net, was earned on the net proceeds
from Symmetry's initial public offering held in trust until the closing of the
Acquisition of Acquired Company on November 15, 2007.  The 2007 fourth
quarter includes 10 days of Acquired Company.  The 2007 fourth quarter
also includes $1.4 million of formation and operating costs, $4.4 million of
transaction expenses and $0.5 million of interest income, net.  The
2008 fourth quarter, includes $25.6 million for a trade name impairment charge,
$0.4 million for the goodwill impairment charge and $4.5 million for
restructuring charges.





ITEM
      7.
            MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





You should read the following
discussion and analysis of our consolidated financial condition and results of
operations together with "Item 6. Selected Financial Data," "Unaudited Pro Forma
Condensed Financial Information" and our consolidated financial statements and
notes thereto that appear elsewhere in this Report. This discussion and analysis
contains forward looking statements that involve risks, uncertainties and
assumptions. Actual results may differ materially from those anticipated in
these forward looking statements.





Corporate
Overview





The
Company





In 2006, a group of organizational
scientists and industrialists decided to elevate their work of implementing the
Decalogue methodology, a systemic management methodology.  They
embarked on a radical idea – one that would see them acquire Acquired Company
with the aim of fully implementing the Decalogue methodology, thereby
transforming Acquired Company from one that operated with a traditional business
model in an ultra-conservative, slower paced industry to one that is a bastion
for quality, speed and the diversity of people and ideas.The
Company was incorporated as Symmetry Holdings Inc. in Delaware on April 26, 2006
as a development stage company formed for the purpose of acquiring one or more
operating businesses. On March 12, 2007, our initial public offering of
18,750,000 units was consummated, generating aggregate gross proceeds of $150.0
million. Each unit consisted of one share of common stock and one warrant. Each
warrant entitles the holder to purchase from us one share of our common stock at
an exercise price of $5.50. Our common stock and warrants started trading
separately as of April 4, 2007.  On June 21, 2007, Symmetry and a
wholly owned subsidiary entered into an arrangement agreement pursuant to which
the wholly owned subsidiary acquired all of Acquired Company’s outstanding stock
on November 15, 2007, as described in “The Acquisition” below.  In
connection with the Acquisition, Barzel Finco issued the notes.


29







On December 5, 2007, Symmetry changed
its name to Novamerican Steel Inc. On February 13, 2009, the Company changed its
name to Barzel Industries Inc. Archaeologists consider ancient civilizations
that could forge metals “advanced” or “highly evolved.”  The
Industrial Revolution took this long-established art form and turned it into a
mass-market industry.  We see our efforts to implement the Decalogue
methodology in this industry as the next step of evolution for organizations and
their relationship with metals.  Therefore, we chose a name that
honors the ancient roots of our industry.  “Barzel” means “steel” in
many variations and languages. Its origins stem from the iron meteorites smelted
by Sumerian artisans and the word migrated to fursil through ancient
Akkadian and Semitic languages.  Similar sounding words are also found
in modern Latin (ferrous), Arabic and
Indian-derivative languages, representing various metals and the art of
metalworking.





Our new logo, a steel ribbon in the
form of a Möbius strip, pays homage to a basic building block of human
understanding – mathematics.  A Möbius strip is a mathematical
curiosity that has no beginning or end and no “correct” orientation (i.e., there
is no “right side up”).  It represents our organizational model, which
is a fully interdependent system, meaningful only in its entirety, and where no
hierarchy exists.  The logo also reflects our capabilities in shaping
and forging metals.





Today, 30 years after the birth of our
business, we are shedding the vestiges of its out-dated past and marking the
start of a new journey.  It is a journey to show the industry that
reliability and quality of goods does not necessarily come at the expense of
speed of delivery.  It is a journey to show the industry that
traditional management models are incomplete at best.  It is a journey
to show that the decisions of our sophisticated employee network have a
collective and positive impact on our industry.





The
Acquisition





On November 15, 2007, Barzel completed
the Acquisition.  The Acquisition had been approved by Barzel’s
stockholders on October 25, 2007 and by Acquired Company’s shareholders on
October 31, 2007. The Acquisition was carried out pursuant to an arrangement
agreement, pursuant to which (i) Barzel indirectly acquired all of the
outstanding stock of Acquired Company and (ii) Certain of Acquired
Company’s wholly owned Canadian subsidiaries were wound-up, amalgamated or
otherwise combined with Acquired Company to form Barzel Canada, in each case in
accordance with the terms of a court-approved statutory plan of arrangement
under the Canada Business Corporations Act.  Barzel’s stockholders who
properly exercised their conversion rights received $7.84 in cash per
share.  A total of 3,860,196 shares were converted for an aggregate of
$30.3 million in cash. Under the terms of the arrangement agreement, the
shareholders of Acquired Company received $56.00 in cash per share ($585.2
million in cash in the aggregate) for all of the outstanding shares of Acquired
Company.





Funding for the Acquisition purchase
price and related expenses was provided by (i) debt financing, including
borrowings under the ABL Credit Facility and proceeds from the sale in private
placements of $315.0 million aggregate principal amount of the Notes, (ii) the
sale in a private placement of 1,875,000 units of Barzel for $15.0 million, or
$8.00 per unit, to certain of the Company’s affiliates, with each unit
consisting of one share of common stock and one warrant to purchase one share of
common stock at a price of $5.50, exercisable from March 7, 2008 until
expiration on November 15, 2011, and (iii) approximately $112.0 million of cash
held in trust by Barzel that was raised in its initial public offering in March
2007.  Of the gross proceeds from the issuance of the Notes, $125.0
million was loaned by Barzel Finco to Barzel Canada in accordance with the plan
of arrangement, in exchange for intercompany demand promissory notes totaling
$125.0 million.  Such intercompany notes were pledged, subject to
certain limitations as first-priority collateral to the trustee for the Notes
for the benefit of the holders of the Notes.





Business
Overview





Headquartered in Norwood,
Massachusetts, with an operational hub in Ontario, Canada, we operate a network
of 18 metal processing, manufacturing and distribution facilities throughout the
provinces of Ontario and Québec and in the Northeastern, Mid-Atlantic and
Mid-Western United States.  We operate these strategically located
facilities as one integrated system.  Through an innovative management
system that includes close statistical monitoring and analysis of our plant
capabilities, we service our customers with speed, quality and
reliability.





We are a well-diversified,
multi-process provider of value-added services and offer a wide range of metal
processing solutions to a variety of industries, from construction and
industrial manufacturing to finished commercial racking products.  We
believe we are one of only two independent continuous process picklers in
Canada.  We also believe our in-line temper mill makes us the only
provider of this high-precision service in Canada that is not integrated with a
primary steel producer.




We process, manufacture and distribute
carbon steel, stainless steel and aluminum products and operate as an
intermediary between primary metal producers and the manufacturers that require
processed metal, often with a short lead time delivery basis.  We
produce steel tubing in various sizes primarily for the structural
markets.  We also produce roll formed steel


30


sections
and manufacture heavy equipment parts and accessories.  Our flat
rolled processing capabilities include pickling, slitting, blanking, leveling,
temper-rolling and cutting-to-length to precise customer
specifications.  Additionally, we perform many of these processing
services for customers who provide their own steel, referred to in the industry
as toll processing.  For a detailed description of our steel
processing services, see "Business Products and Services."





Business
Strategy





Our
company operates as one system, governed by The Decalogue
methodology:





Our operating methodology, the
Decalogue, was developed by our President, Dr. Domenico Lepore, and a member of
our Board of Directors, Oded Cohen.  The Decalogue methodology brings
together the ideas of Dr. W. Edwards Deming's Theory of Profound Knowledge and
Dr. Eli Goldratt's Theory of Constraints, and facilitates their application
through a set of logical thinking tools and statistical methods. Through these
methods, we thoroughly map our processes and identify, measure and address the
constraint in our system, which is defined as the process that most hinders the
generation of throughput.





Throughput is the speed at which a
system can generate cash through sales.  In our case, it’s the speed
at which we can move metal through the system, starting from our suppliers’
ability to provide us with the raw materials, to the delivery of the final
product to our customer and our receipt of payment for the work
done.





As generations of throughput takes into
account supplier capabilities and customer feedback, it is critical that a
holistic approach is used to understand our business.  To do that, we
use a systemic organizational design to replace traditional hierarchal
organizational charts.  What the Decalogue methodology acknowledges,
that other management systems do not, is the systemic nature of an organization,
meaning that the effectiveness of the manufacturing processes in the system can
be profoundly impacted by other processes, like human resources or
marketing.  Thus, the same tools that are used to monitor and manage
variations in manufacturing are also used to monitor and manage variations in
other processes within our system.  The aim is to have a totally
synchronized system that is moving, in its entirety, towards the same
goal.





We have significantly progressed our
project plans for implementing the Decalogue operating methodology at the
Company.  This transformation allows us to operate as one system
instead of 18 separate facilities, and has enabled (a) the system to operate at
much faster cycle times, enabling us to maximize the throughput from the sale of
our enhanced capacity, (b) a permanent cash inventory reduction of $88.4 million
primarily from this faster replenishment and operating cycle, and (c) the
implementation of organizational changes, especially in our replenishment,
processing, distribution and sales processes, which we believe will result in a
reduction of operating expenses of over $20.0 million in 2009 as compared to
2008.





Through February of 2009, we have
implemented organizational changes resulting in the reduction of approximately
392 employees, primarily in the areas of administration and general management,
purchasing, inside sales, accounting and plant operating
personnel.  These reductions have been offset by the addition of
approximately 82 new employees of substantially different competencies,
educational backgrounds and cultural diversities.  To date, we have
hired professionals in the areas of statistical studies, quality, technical
services, new product development, marketing, logistics, safety, process
engineering, synchronized manufacturing, human development, information services
and sales, among others, of which over 30 have post-graduate degrees, including
seven PhDs.  We are becoming a Decalogue methodology company, that is,
a knowledge-based organization.





We intend to accelerate our growth by
identifying and pursuing additional market segments in which we can sell our
production capacity. We have identified numerous end markets and we intend to
incrementally exploit these market segments to fully utilize our existing
capacity. For example, we intend to expand our sales end markets to
transportation, non-residential construction, energy, aerospace and defense,
railroad manufacturing and mining machinery. We have also identified additional
opportunities in certain export market segments.





Industry
Overview





Steel suppliers typically fall into
three categories of business: primary producers, intermediate processors and
service centers. Primary producers typically sell in bulk, with intermediate
processors and service centers comprising a large part of their customer base.
However, high-volume downstream customers will at times purchase from steel
companies in each of the three categories. Intermediate processors are typically
positioned in the value chain between primary producers and major industrial
customers of processed steel, which include furniture and appliance
manufacturers, and industrial and construction companies. Our business model
includes activities of both the processor and service center categories but we
also utilize these capabilities for our own downstream industrial manufacturing
facilities producing metal-based components and end products.


31




Steel processors and service centers
play a key role in the industry supply chain, from precision steel and alloy
processing to order aggregation, warehousing and distribution of unprocessed
metal products. They respond directly to customers' needs to meet precise
specifications regarding length, width, shape and surface characteristics on
relatively small orders. Specialized equipment is used to perform processing
operations such as cutting-to-length, slitting, shearing, roll forming, shape
correction, surface improvement, blanking, temper rolling, plate burning and
stamping. The consolidation of steel producers and the increasing prevalence of
modern supply chain management practices by downstream steel customers have
increased the importance in the supply chain of larger scale steel processors
and service centers with the operational resources to efficiently perform value
added processing and manage large, diverse inventory bases. Downstream steel
buyers have increasingly sought to purchase steel on shorter lead times and with
more frequent, flexible and reliable deliveries. During 2008, we entered into
new supply agreements with our key steel and aluminum suppliers based primarily
on their speed and reliability for replenishing our system.  This has
resulted in a faster, more reliable delivery time for our customers and a
significant reduction in the amount of inventory dollars required in our system
to achieve this capability.





Carbon steel production in North
America has consolidated significantly over the last few years. Steel prices
more than doubled during the first half of 2008, as a resurgence of global
economic growth led to a sharp increase in demand for steel and the raw
materials used to make it. In particular, steel demand in China grew by
double-digit growth rates annually between 2003 and 2008, due to the country's
increasingly rapid development. Consolidation was also a factor, as increasingly
global producers began to exercise better management practices with respect to
capacity management, production scheduling and marketing.  Steel
prices declined dramatically in the latter part of 2008 and into 2009, following
an unprecedented spike through August of 2008. Despite the magnitude of the
decline, prices have remained elevated relative to the decade preceding 2004. We
believe steel prices have stabilized for the foreseeable future at levels higher
than those experienced earlier this decade albeit at a much lower than those
experienced in the first eight months of 2008. Although we expect global
hot-rolled coil prices to remain in the $500-550 per ton range over the
medium-to-long term, this assumes continuing growth in per-capita steel
consumption rates in developing regions (including China and India), tighter
global raw material supply (due in part to a consolidated base of mining
companies) and limited greenfield and brownfield development of new steelmaking
capacity.  Currently, the global economic outlook does not anticipate
this type of continued global demand growth, indicating a possibility for
continued weakening in steel prices.





Products
and Services





Our manufacturing capabilities are
primarily operated in five facilities in Quebec.  We produce roll
formed steel sections, parts and products and manufacture heavy equipment parts
and accessories and lighter metal based products.




Our tubular capabilities are
represented by five mills, of which three are located in Canada and two are
located in the United States. One of our Tube Mills, Delta Tube Inc., is a joint
venture with ArcelorMittal Tubular Products Montreal Inc.  Tubing is a
process by which flat rolled coils are slit and formed into circular, oval,
square or rectangular shapes and the seams are welded through an electrical
resistance process.  We produce steel tubing in various sizes for use
in the structural, mechanical and, to a lesser extent, the automotive
markets.  Our tubing operations are presently structured as
follows:





·
            a
      majority of our tube production is hollow structural sections ("HSS")
      tubing used largely in construction, energy, agricultural, infrastructure,
      transportation and industrial applications;
and




·
            our
      tube mills, in Mississauga, Ontario and Jeffersonville, Indiana, primarily
      produce high pressure, hydroform quality tubes for the automotive industry
      and include in-line precision cutting, finishing, testing and packaging
      capabilities and currently have limited capability for producing HSS
      tubing.




Our services also include the following
traditional service center processes:





·
            slitting:
      the cutting of steel to specified widths along the length of steel
      coil;




·
            leveling:
      a process used to flatten shape deficiencies in steel coil;
      and




·
            cutting-to-length:
      cutting steel across the width of steel
coil.




Our services also include higher,
value-added processes, which process and transform steel to specified lengths,
widths and shapes pursuant to specific customer orders, including the
following:


32





·
            roll
      forming: flat rolled coils can be pre-punched, in-line welded and formed
      into sophisticated shapes for specific
purposes;




·
            blanking:
      the cutting of steel into specific shapes with close
      tolerances;




·
            plate
      burning: the process of cutting steel, typically in excess of one inch
      thick, into specific shapes and
sizes;




·
            temper
      rolling: an in-line process that improves the surface finish and flatness
      of cut-to-length sheet and plate and that eliminates coil memory or
      springback; and




·
            pickling:
      an in-line process for cleaning hot-rolled steel coils of rust, scale and
      dirt.




Our distribution business operates out
of five facilities in the Northeast and Mid-Atlantic United States,
strategically located in close proximity to our major customers and
transportation routes and distributes steel, aluminum and stainless products,
including hot and cold rolled carbon, aluminum, stainless, alloys and coated
products in sheet, coil, bar, shapes, tubular and plate forms.





Drivers
of our results of operations





End-user
market demand





Our results of operations depend in
part on the varying economic and other conditions of the end-user markets we
serve. All of the end-user markets we serve, particularly the general
manufacturing and non-residential construction in North America, are subject to
volatility and, as a result, our customers' demand for our products may change
due to changes in general and regional economic conditions, consumer confidence,
fuel and energy prices, employment and income growth trends and interest rates,
each of which are beyond our control. These factors cause a significant increase
or decrease in the demand for our products, which would impact our shipment
volume and our results of operations. While no single end-user market drives our
overall performance, individual end-user markets are influenced by conditions in
their respective industries.  Demand for our products in the end
markets we serve generally correlates positively with the overall economy and
particularly the overall steel industry.  For example, during the
downturn in the North American steel industry from 2000 to 2001, manufacturers
of steel experienced significant volatility in demand and market prices for
their products. In the period of increased worldwide demand for steel that began
in fiscal year 2004, we experienced an over 400% increase in our operating
income from fiscal year 2003.  Demand for our products in the general
manufacturing and non-residential construction end-user markets is driven by
overall economic conditions and new non-residential construction activity, which
are impacted by interest rate levels and overall economic
conditions.





Carbon steel production in North
America has consolidated significantly over the last few years. Steel prices
more than doubled during the first half of 2008, as a resurgence of global
economic growth led to a sharp increase in demand for steel and the raw
materials used to make it. In particular, steel demand in China grew by
double-digit growth rates annually between 2003 and 2008, due to the country's
increasingly rapid development. Consolidation was also a factor, as global
producers began to exercise better management practices with respect to capacity
management, production scheduling and marketing.  Steel prices
declined dramatically in the latter part of 2008 and into 2009, following an
unprecedented spike through August of 2008. Despite the magnitude of the
decline, prices have remained elevated relative to the decade preceding 2004. We
believe steel prices have stabilized for the foreseeable future at levels higher
than those experienced earlier this decade albeit at a much lower than those
experienced in the first eight months of 2008. Although we expect global
hot-rolled coil prices to remain in the $500-550 per ton range over the
medium-to-long term, this assumes continuing growth in per-capita steel
consumption rates in developing regions (including China and India), tighter
global raw material supply (due in part to a consolidated base of mining
companies) and limited greenfield and brownfield development of new steelmaking
capacity.  Currently, the global economic outlook does not anticipate
this type of continued global demand growth, indicating a possibility for
continued weakening in steel prices.





Competition





The principal markets we serve are
highly competitive. Our industry is highly fragmented, consisting of numerous
small and mid-sized companies, as well as a few larger publicly traded
companies. We have different competitors for each of our products and within
each geographic region. Our core geographic market encompasses the Canadian
provinces of Québec and Ontario and the Northeastern, Mid-Atlantic and
Mid-Western United States. Within this geographic market, we compete with other
regional and national steel service centers, single location service centers
and, to a certain degree, primary steel producers and intermediate steel
processors on a regional basis. Our manufactured and tubular products can span
broader selling markets, including in some cases Western United States and
Canada, and in some instances, exports to Europe.


33





We compete on the basis of quality,
speed and timely delivery, product selection and availability, customer service,
quality processing capabilities and price. In addition, our marketplace,
particularly in structural tubing, is becoming increasingly global and lower
cost imports may adversely affect our sales and operating margins. Although we
have been able to successfully compete in the past, we may not be able to
continue to do so. Increased domestic and foreign competition could harm our net
sales and operating results in the future.





Steel
pricing





The principal raw material used in our
operations is flat rolled carbon steel, which we purchase directly from steel
producers. The steel industry as a whole is cyclical. At times, pricing and
availability of steel can be volatile due to numerous factors beyond our
control, including general, regional and international economic conditions,
production levels, competition, import duties and tariffs and currency exchange
rates.





During most of 2008 and earlier, we
maintained our inventory at levels we believed appropriate to satisfy the
anticipated needs of customers based upon historical buying practices, contracts
with customers and market conditions.  By the end of 2008, we began
purchasing steel on a system-wide, usage-based replenishment model. We place the
highest value on the quality, speed and reliability of our steel suppliers. We
believe our replenishment based model provides highly reliable supply with the
shortest possible lead time. The simplification of our steel coil base and the
aggregation of inventory at fewer points in the system have also allowed us to
significantly decrease the amount of inventory required for meeting customer
needs.





We generally purchase steel at
prevailing market prices in effect at the time we place our orders. In recent
years, our steel suppliers have been significantly impacted by the shortage of
raw materials resulting in cost increases affecting scrap, coke, iron ore and
energy. This, together with a number of additional factors, including the
strength of the general economy, the increased consolidation of North American
steel producers and the demands for steel from the Asian markets has affected
the availability and prices of flat rolled carbon steel. During periods of
rising prices for steel, we may be negatively impacted by delays between the
time of increases in the cost of metals to us and increases in the prices that
we can charge for our products. In addition, when metal prices decline, customer
demand for lower prices could result in lower sale prices for our products and,
as we use existing inventory that we purchased at higher metal prices, lower
margins. Consequently, during periods in which we use this existing inventory,
the effects of changing metal prices could adversely affect our operating
results. Shorter lead times significantly mitigate this effect.





Transportation
costs





The cost to transport our products to
our customers was 3.3% of our net sales and represented approximately 14.9% of
our total operating expenses in fiscal year 2008 and is affected by fluctuations
in energy costs. These transportation costs are mitigated by the distribution of
our 18 facilities throughout the Canadian provinces of Ontario and Québec and
the Northeastern, Mid-Atlantic and Mid-Western United States, which gives us a
presence near many of our customers.





Labor
costs





As of November 25, 2007 the Company had
approximately 954 employees.  During fiscal year 2008, 189 employees
were terminated, offset by the addition of approximately 82 new employees of
substantially different competencies, educational backgrounds and cultural
diversities.  In the first quarter of 2009, we further simplified the
design of the network, including a reduction in U.S. and Canadian workforce, and
rationalized our distribution facilities in the U.S.  The
implementation of the reduction in workforce and rationalization of our
distribution facilities in the U.S. resulted in a total reduction of 203
employees in the U.S. and Canada in the first quarter of 2009.  It
also included the exit of four redundant distribution facilities located in
Connecticut, Massachusetts, Rhode Island and New York in the first quarter of
2009.  As of February 20, 2009, the Company had approximately 644
employees.





Of the 644 employees, approximately
22.0% of our total employees, representing certain employees at nine of our 18
facilities, are organized by the United Steelworkers, the Teamsters, the Sheet
Metal Workers and independent employee associations. We are currently party to
nine collective bargaining agreements. Our labor contracts expire on staggered
dates beginning in December 2009.  Specifically, the labor contract
with the Teamsters covering 32 employees at our Harrisburg facility
will expire on December 31, 2009.  We do not presently anticipate that
any work stoppages will occur prior to renegotiation of these contracts. We
believe that our relations with our employees are satisfactory.  We
have not experienced a work stoppage by any of our unions or employee
associations in over 20 years.


34





Outlook





U.S. steel service center hot-rolled
inventories rose sharply in the fourth quarter of 2008 as demand slowed
dramatically in September through January. U.S. steel service center hot-rolled
inventories were approximately 3.6 months on hand at December
2008.  We believe that underlying consumption in the U.S. and Canada
accelerated its weakening from the already sluggish pace of the past year, with
an unprecedentedly weak automotive outlook and the financial crisis pushing the
broader economies into protracted recessions.  In the U.S., the
automotive, residential construction and related sectors are in a deepening
recession and have been over the last 18 months.  Canadian
manufacturing, including automotive, has also experienced
shrinkage.  Globally, demand and pricing in markets outside of North
America has weakened and, along with some strengthening in the U.S. currency,
has increased imports for our market as demonstrated in recent month-to-month
comparisons; however, imports remain below year-ago levels.  The
combination of a dramatic drop in demand in both the U.S. and Canada and
relatively higher service center inventory levels has increased North American
supply and, when combined with lower raw material costs for our suppliers,
particularly much lower scrap prices, has resulted in unprecedented declines in
pricing over the last four months of 2008.





Flat rolled carbon steel sheet prices
continued their upward trend during 2008 until July, although price gains in
July were more disparate among the steel mills and were relatively weaker than
prior increases during this upward pricing cycle.  North American
steel suppliers had pushed prices for hot rolled coil to about $1,100 per ton,
with world spot export market prices as high as about $1,175 per
ton.  In September 2008, there was a reduction from these historically
high levels, with flat rolled carbon steel sheet prices decreasing to about $940
per ton and with some smaller mills offering even more aggressive
pricing.  Demand and prices then began dropping rapidly with January
2009 hot rolled coil prices averaging $520 per ton.  The rate and
magnitude of the decline was unprecedented and had a significant negative impact
on our fourth quarter results. While mill costs remain high, easing scrap and
freight costs further facilitated these decreases. We believe that weak demand
and persistently low operating levels throughout the supply chain, with the
mills in particular, will result in sustained lower prices for the foreseeable
future. The outlook for the U.S. dollar, freight rates and other world steel
sheet markets indicate that import pressures are likely to increase, providing
for potentially lower prices in the near term. We experienced price increases
peaking in July 2008, mainly in our structural tubing, steel sheet and
distribution channels. We have experienced price declines through January 2009,
with an exceptionally weak demand during these declines.





We experienced a softening in demand in
our structural tubing and distributed products toward the end of the third
fiscal quarter that continued weakening through the end of the fiscal year. The
global financial crisis, tighter consumer credit conditions and overall broader
economic weakness have weakened an already low demand outlook for steel sheet
and tubular products used in large truck and SUV vehicles.





We have significantly progressed our
project plans for implementing the Decalogue operating methodology, at the
Company. This transformation allows us to operate as one system instead of 18
separate facilities, and has already enabled (a) the system to operate at much
faster cycle times, enabling us to maximize the throughput from the sale of our
enhanced capacity, (b) a permanent cash inventory reduction of $88.4 million
primarily from this faster replenishment and operating cycle, and (c) the
implementation organizational changes, especially in our replenishment,
processing, distribution and sales processes, which we believe will result in a
reduction of operating expenses of over $20.0 million in 2009 as compared to
2008.





Through February 2009, we have
implemented organizational changes resulting in the reduction of approximately
392 employees, primarily in the areas of administration and general management,
purchasing, inside sales, accounting and plant operating personnel, offset by
the addition of approximately 82 new employees of substantially different
competencies, educational backgrounds and cultural diversities.  To
date, we have hired professionals in the areas of statistical studies, quality,
technical services, new product development, marketing, logistics, safety,
process engineering, synchronized manufacturing, human development, information
services and sales, among others, of which over 30 have post-graduate degrees
including seven PhDs.  We are becoming a Decalogue company, that is, a
knowledge-based organization.





We expect our volumes in the first
fiscal quarter of 2009 to be lower than the fourth fiscal quarter of 2008,
including continued softening demand from our distribution and structural tubing
customers. Our automotive business will be down substantially in the first
quarter of 2009 based both on the industries pervasive weakness and our decision
to exit most of the inventory-based automotive segment. We continue toll
processing for certain automotive customers and their suppliers. Overall, our
first fiscal quarter of 2009 is expected to result in weaker revenue, lower
operating expenses and lower operating profit when compared to our fourth fiscal
quarter of 2008. Cash flows from operations, however, will remain positive,
resulting primarily from
higher sources of cash from the liquidation of non-replenishable inventories and
overall improved working capital cycle times. We expect our revolver to be
undrawn at the end of the first fiscal quarter of 2009.


35





Results
of operations




The following table presents selected
historical financial data for the year ended November 29, 2008, and for the
periods ended November 24, 2007 and December 31, 2006, and was derived from the
audited consolidated financial statements.





Year
      ended November 29,
                          2008
                        
                        
                        Period
      from
                          January
      1, 2007 to
                          November
      24, 2007
                        
                        
                        Period
      from
                          April
      26, 2006 to
                          December
      31, 2006(In
      thousands of U.S. dollars)Net
      sales
                        
                        $
                        801,058
                        
                        
                        $
                        16,304
                        
                        
                        $
                        —Cost
      of sales
                        
                        
                        661,286
                        
                        
                        
                        14,792
                        
                        
                        
                        —Gross
      margin
                        
                        
                        139,772
                        
                        
                        
                        1,512
                        
                        
                        
                        —Operating
      expenses
                        
                        
                        178,197
                        
                        
                        
                        6,665
                        
                        
                        
                        145Operating
      loss
                        
                        
                        (38,425
                        )
                        
                        
                        (5,153
                        )
                        
                        
                        (145
                        )Transaction
      expenses
                        
                        
                        —
                        
                        
                        
                        4,438
                        
                        
                        
                        —Interest
      (income) expense, net
                        
                        
                        41,334
                        
                        
                        
                        (3,507
                        )
                        
                        
                        3Share
      in income of joint venture
                        
                        
                        (289
                        )
                        
                        
                        (12
                        )
                        
                        
                        —Loss
      before income taxes
                        
                        
                        (79,470
                        )
                        
                        
                        (6,072
                        )
                        
                        
                        (148
                        )Income
      taxes
                        
                        
                        (24,871
                        )
                        
                        
                        (2,273
                        )
                        
                        
                        —Net
      loss
                        
                        $
                        (54,599
                        )
                        
                        $
                        (3,799
                        )
                        
                        $
                        (148
                        )








Fiscal
year 2008 compared to fiscal year 2007




The consolidated financial statements
for the fiscal year ended November 29, 2008, include the financial results of
Barzel, its wholly-owned subsidiaries Barzel Holdings, Barzel Finco, Barzel
Canada (including Acquired Company), and Barzel U.S.  The financial
statements for the period January 1, 2007 through November 24, 2007, include the
financial results of Barzel, its wholly-owned subsidiaries Barzel Holdings,
Barzel Finco and Acquired Company for the period from the date of the
Acquisition to the fiscal year end, that is, the ten-day period from November
15, 2007 until November 24, 2007. However, the ten-day results of operations
that have been included for Acquired Company may not be indicative of results
for a full quarter of a full fiscal year.  All intercompany balances
and transactions have been eliminated in the consolidated financial
statements.




Net sales for fiscal year 2008
increased by $784.8 to $801.1 million from $16.3 million for fiscal year
2007. Net sales include direct sales and toll processing
revenues.  For fiscal year 2008, direct sales and toll processing
revenues were approximately $789.3 million and $11.8 million,
respectively.  For fiscal year 2007, direct sales and toll processing
revenues were approximately $14.4 million and $1.9 million,
respectively.  Fiscal year 2007 represents the sales of Acquired
Company for the ten-day period following the Acquisition. The impact of changes
in the exchange rate of the Canadian dollar on net sales for fiscal 2008 was an
increase of $0.4 million.  Excluding the impact of exchange rates, net
sales would have increased by $784.4 million compared with fiscal year
2007.





Total tons directly sold and toll
processed for fiscal year 2008 increased to 1,442,699 tons from 36,825 tons for
fiscal year 2007.  Total tons in fiscal year 2008 included 733,036
tons from direct sales and 709,663 tons from toll processing.  Total
tons in fiscal year 2007 included 21,073 tons from direct sales and 15,752 tons
from toll processing.





Cost of sales for fiscal year 2008
increased by $646.5 million to $661.3 million, from $14.8 million for fiscal
year 2007.    See “Consolidated Financial Statements - Notes
to Consolidated Financial Statements - Note 2 - Accounting Policies,” of our
Notes to Consolidated Financial Statements for the period ended November 29,
2008 for a complete description of what is included in cost of
sales.  The cost of sales of $14.8 million for fiscal year 2007
includes $1.1 million of additional costs associated with the amortization for
the ten-day period and approximately $7.8 million of purchase price that was
allocated to inventory to increase certain acquired inventories up to their fair
market value on the date of the Acquisition.  The remainder of the
$7.8 million of purchase price that was allocated to inventory was amortized to
cost of sales in the first quarter of 2008.  The Company’s direct
expenses associated with providing processing services was approximately $5.0
million for fiscal year 2008 and $0.1 million for fiscal year 2007.







36


17.4% of
sales and included amortization of $6.7 million for the purchase price that was
allocated to inventory to increase certain acquired inventories to their fair
market value at the date of acquisition and $2.1 million for inventory write
downs, primarily due to lower market prices for stainless steel inventories at
fiscal year end 2008.




Operating expenses increased to $178.2
million for fiscal year 2008 compared to $6.7 million in fiscal year 2007 to
22.2% from 41.1% as a percentage of net sales as compared to fiscal year
2007.  Fiscal year 2008 includes activity for the full fiscal year
whereas fiscal year 2007 includes expenses for the ten-day period following the
Acquisition. Operating expenses in fiscal 2008 included plant expenses of $54.4
million, or 6.8% of net sales, delivery expenses of $26.5 million, or 3.2% of
net sales, selling expenses of $11.8 million, or 1.5% of net sales, and general
and administrative expenses of $37.0 million, or 4.6% of net sales. Operating
expenses included a trade name impairment charge of $25.6 million, or 3.2% of
net sales, goodwill impairment charge of $0.4 million and restructuring charges
of $13.3 million, or 1.7% of net sales, associated with the closure of the
Cambridge facility and the implementation of organizational changes. Operating
expenses included approximately $2.4 million in higher depreciation expense
associated with the purchase price allocation to property, plant and equipment
and $0.5 million for accelerated depreciation on assets at our Cambridge
facility.  Operating expenses also included $9.1 million of
amortization associated with the purchase price allocation to intangible assets
other than goodwill. General and administrative expenses included $4.4 million
for hiring, training and development during fiscal year 2008 for more than 200
employees associated with our organizational transformation. The impact of
exchange rates on operating expenses for fiscal year 2008 was an increase of
$2.9 million. The impact of an extra week in fiscal year 2008 as compared to
fiscal year 2007 was an increase of $2.5 million. Excluding the impact of
exchange rates, additional depreciation and amortization, training and
development expenses, the trade name impairment, goodwill impairment and
restructuring charge, and after adjusting for the extra week in fiscal year 2008
compared to fiscal year 2007, operating expenses would have been $117.1
million.




Operating expenses in fiscal year 2007
included $4.4 million in transaction expenses associated with the Acquisition of
Acquired Company and formation and operating costs of $2.3 million associated
with Barzel for the ten-day period following the Acquisition.  The
transaction expenses were primarily for legal, banking and other advisory
services associated with due diligence, regulatory reporting and capital
structure planning and financing requirements for the
Acquisition.  The formation and operating costs consist primarily of
compensation for the corporate officers, travel, legal, accounting and other
costs associated with the formation and administration of the corporate
activities.




In fiscal year 2008, interest expense
was $42.2 million while interest income was $0.9 million.  Interest
expense on our Notes and the ABL Credit Facility was $36.2 million and $3.8
million, respectively, in fiscal year 2008.  Interest on the Notes
during such period included $0.3 million in additional interest expense
resulting from the delayed registration of the Notes.  The remaining
$2.2 million of interest expense primarily represented the amortization of
deferred financing charges.  The average balance of debt outstanding
on the ABL Credit Facility for fiscal year 2008 was $63.8 million with an
average interest rate of 5.83%.  The Notes outstanding are $315.0
million with a fixed interest rate of 11.5%. In fiscal year 2007, the Company
recorded interest income, net of interest expense, of $3.5
million.  Interest income was $4.8 million, substantially all of which
was interest income earned on the offering proceeds held in trust from March 12,
2007 until November 14, 2007.  Interest expense was $1.3 million.
Interest expense on the Notes and the ABL Credit Facility was $1.0 million and
$0.2 million, respectively, for the ten-day period following the
Acquisition.  The remaining $0.1 million of interest expense
represents the amortization of deferred financing charges for the ten-day period
following the Acquisition.




Loss before income taxes increased by
$73.4 million to $79.5 million for fiscal year 2008 compared to $6.1 million in
fiscal year 2007. The fiscal year 2008 loss before income taxes includes $25.6
million for the trade name impairment charge, $0.4 million for the goodwill
impairment charge, $13.3 million for restructuring charges, $9.1 million for the
amortization associated with the purchase price allocation to intangible assets
other than goodwill, $2.4 million in higher depreciation expense associated with
the purchase price allocation to property, plant and equipment and $0.5 million
for accelerated depreciation on assets at our Cambridge facility. Loss before
income taxes of $6.1 million in fiscal year 2007 resulted primarily from
formation, operating and transactional expenses associated with the start up of
the Company and the acquisition of Acquired Company.





Income taxes were a benefit of $24.9
million and $2.3 million in fiscal year 2008 and 2007, respectively, and reflect
an estimated annual effective income tax rate of approximately 31.3% and 37.4%,
respectively. The decrease in the fiscal year 2008 rate is primarily due to the
tax non-deductibility of the goodwill impairment a portion of incentive
compensation and certain interest expense.  The Company has an income
taxes receivable of $1.3 million at November 29, 2008, resulting from the income
tax benefit for fiscal year 2007 and overpayment of income taxes during fiscal
year 2007 related thereto.  The Company also has deferred income tax
assets associated with prior net operating losses of Acquired Company of $3.9
million.







37





2008
includes activity for the full fiscal year whereas fiscal year 2007 includes
activity for the ten-day period following the Acquisition.





Fiscal
year 2007 compared to fiscal year 2006




The consolidated financial statements
for fiscal year 2006 include only the financial results of Symmetry. The
financial statements for fiscal year 2007 include the financial results of
Barzel and its wholly-owned subsidiaries, Barzel Holdings, Barzel Finco and
Acquired Company for the period from the date of the Acquisition to the fiscal
year end, that is, the ten-day period from November 15, 2007 until November 24,
2007. However, the ten-day results of operations that have been included for
Acquired Company may not be indicative of results for a full quarter of a full
fiscal year.  All intercompany balances and transactions have been
eliminated in the consolidated financial statements.




In fiscal year 2007, net sales
increased by $16.3 million, representing the sales of Acquired Company for
the ten-day period following the Acquisition. Net sales include direct sales and
toll processing revenues.  For the period from January 1, 2007 to
November 24, 2007, direct sales and toll processing revenues were approximately
$14.4 million and $1.9 million, respectively.  These sales represent a
lower than average level of shipments for a typical 10-day period primarily due
to lower direct processing primarily in Canada and in part due to continued
cautious inventory management by our steel distributor customers and lower
automotive production in late 2007.




Cost of sales was $14.8 million, or
90.7% of total sales for the same ten-day period.  See “Consolidated
Financial Statements - Notes to Consolidated Financial Statements - Note 2 -
Accounting Policies,” of our Notes to Consolidated Financial Statements for the
period ended November 29, 2008 for a complete description of what is included in
cost of sales.  The cost of sales includes $1.1 million of additional
costs associated with the amortization for the ten-day period of approximately
$7.8 million of purchase price that was allocated to inventory to increase
certain acquired inventories up to their fair market value on the date of the
Acquisition.  Excluding the amortization for the ten-day period, cost
of sales represented 84.0% of total sales.  The Company’s amount of
direct expenses associated with providing processing services was approximately
$0.1 million for fiscal year 2007 and nil for the period from April 26, 2006 to
December 31, 2006.




Gross margin was $1.5 million,
representing the ten-day period following the Acquisition.  Our gross
margins may not be comparable to those of other entities, since some entities
include all of the costs related to their distribution network in cost of sales,
and others (like us) exclude a portion of such costs from gross
margins.  Gross margin dollars were reduced by the $1.1 million of
additional costs associated with the amortization for the ten-day
period.  The remaining $6.7 million of purchase price that was
allocated to inventory to increase certain inventories up to their fair market
value on the date of the Acquisition will be amortized as these inventories are
sold, substantially all of which should occur in the 2008 first
quarter.




Operating expenses, in absolute
dollars, increased by $6.6 million, from $0.1 million in fiscal year 2006
to $6.7 million in fiscal year 2007.  For fiscal year 2007, operating
expenses included $4.3 million in plant, distribution, selling and general and
administrative expenses for the ten-day period following the
Acquisition.  The operating expenses also included formation and
operating costs of $2.4 million associated with Barzel.  These costs
consist primarily of compensation for the corporate officers, travel, legal,
accounting and other costs associated with the formation and administration of
the corporate activities.  The Company also incurred transaction
expenses of $4.4 million associated with the Acquisition of Acquired
Company.  These expenses were primarily for legal, banking and other
advisory services associated with due diligence, regulatory reporting and
capital structure planning and financing requirements for the
Acquisition.




In fiscal year 2007, the Company
recorded interest income, net of interest expense, of $3.5
million.  Interest income was $4.8 million, substantially all of which
was interest income earned on the offering proceeds held in trust from March 12,
2007 until November 14, 2007.  Interest expense was $1.3
million.  Interest expense on the Notes and the ABL Credit Facility
was $1.0 million and $0.2 million, respectively, for the ten-day period
following the Acquisition.  The remaining $0.1 million of interest
expense represents the amortization of deferred financing charges for the
ten-day period following the Acquisition.




Loss before income taxes in fiscal year
2007 was $6.1 million, an increase of $6.0 million over 2006.  The
loss resulted primarily due to formation, operating and transactional expenses
associated with the start up of the Company and the Acquisition of Acquired
Company.




Income taxes in fiscal year 2007 were a
benefit of $2.3 million and represent 37.4% of loss before income
taxes.  The Company recorded income taxes receivable of $2.8 million
at November 24, 2007, resulting from this income tax benefit for fiscal year
2007 and overpayment of income taxes during fiscal 2007 related
thereto.  The Company also has deferred income tax assets associated
with prior net operating losses of Acquired Company of $6.1
million.


38




Net loss was $3.8 million in fiscal
year 2007, or a net loss of $0.20 per basic and diluted share outstanding, as
compared to $0.1 million in fiscal 2006, or a net loss of $0.03 per basic and
diluted share outstanding.




Unaudited
Pro Forma Condensed Financial Information




The following unaudited pro forma
condensed financial information combines the historical statements of operations
of Acquired Company for the period from November 26, 2006 to November 24, 2007
and Barzel for the period from January 1, 2007 to November 24, 2007, giving
effect to the Acquisition as if it had occurred on January 1, 2007 ("2007 pro
formas").




The unaudited pro forma condensed
financial statements have been derived from the historical financial statements
of Barzel and Acquired Company, and many adjustments and assumptions have been
made regarding the combined company after giving effect to the
Acquisition.  The pro forma information includes certain adjustments,
including depreciation expense, interest expense and certain other adjustments,
together with related income tax effects.  The pro forma amounts may
not be indicative of the results that actually would have been achieved had the
Acquisition occurred as of the beginning of the periods and are not an
indication of our financial condition or results of operations following the
consummation of the Acquisition.  Our actual financial condition and
results of operations following the consummation of the Acquisition may not be
consistent with, or evident from, the unaudited pro forma condensed financial
statements. The unaudited pro forma condensed financial information has been
prepared in accordance with Article 11 of Regulation S-X of the
SEC.




The following unaudited pro forma
condensed financial information is only a summary and should be read together
with “Selected Financial Data,” “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” and our historical consolidated
financial statements and notes thereto, as well as the historical financial
statements and notes of Acquired Company, including certain historical
consolidated financial statements of Acquired Company that appear elsewhere in
this report.  The pro forma information is included in this report for
both consistency and relevance.









Unaudited
Pro Forma Condensed Consolidated Statement of


Operations
for the Fiscal Year Ended November 24, 2007


(in
thousands of U.S. dollars, except for per share data)





Barzel
                  11/24/07
                
                
                Acquired
                  Company
                  11/24/07
                
                
                Pro
      Forma
                  Adjustments
                
                
                Pro
      Forma
                  Combined
                
                
                NotesNet
      sales
                
                $
                —
                
                
                $
                801,348
                
                
                $
                —
                
                
                $
                801,348Cost
      of sales
                
                
                —
                
                
                
                652,540
                
                
                
                —
                
                
                
                652,540Gross
      margin
                
                
                —
                
                
                
                148,808
                
                
                
                —
                
                
                
                148,808Operating
      expensesPlant
                
                
                —
                
                
                
                43,023
                
                
                
                1,351
                
                
                
                44,374
                
                
                
                (1
                )Delivery
                
                
                —
                
                
                
                24,689
                
                
                
                —
                
                
                
                24,689Selling
                
                
                —
                
                
                
                13,893
                
                
                
                —
                
                
                
                13,893Formation
      and operating costs
                
                
                2,110
                
                
                
                —
                
                
                
                —
                
                
                
                2,110Amortization
      of intangibles
                
                
                —
                
                
                
                —
                
                
                
                9,550
                
                
                
                9,550
                
                
                
                (1
                )Administrative
      and general
                
                
                1,650
                
                
                
                39,896
                
                
                
                (24,208
                )
                
                
                17,338
                
                
                
                (1
                )(2)(6
      )3,760
                
                
                
                121,501
                
                
                
                (13,307
                )
                
                
                111,954Operating
      income (loss)
                
                
                (3,760
                )
                
                
                27,307
                
                
                
                13,307
                
                
                
                36,854Interest
      income, net
                
                
                (5,105
                )
                
                
                —
                
                
                
                5,105
                
                
                
                —
                
                
                
                (3
                )Interest
      expense, net
                
                
                —
                
                
                
                (1,671
                )
                
                
                45,217
                
                
                
                43,546
                
                
                
                (4
                )Share
      in income of joint venture
                
                
                —
                
                
                
                (251
                )
                
                
                —
                
                
                
                (251
                )(5,105
                )
                
                
                (1,922
                )
                
                
                50,322
                
                
                
                43,295


39





Income
      (loss) before income taxes
                
                
                1,345
                
                
                
                29,229
                
                
                
                (37,015
                )
                
                
                (6,441
                )Income
      taxes (benefit)
                
                
                451
                
                
                
                11,430
                
                
                
                (13,819
                )
                
                
                (1,938
                )
                
                
                (5
                )Net
      income (loss)
                
                $
                894
                
                
                $
                17,799
                
                
                $
                (23,196
                )
                
                $
                (4,503
                )Weighted
      average number of shares:Basic
                
                
                21,452,304
                
                
                
                10,450,000
                
                
                
                (10,450,000
                )
                
                
                21,452,304
                
                
                
                (7
                )Diluted
                
                
                21,452,304
                
                
                
                10,450,000
                
                
                
                (10,450,000
                )
                
                
                21,452,304
                
                
                
                (8
                )Earnings
      (loss) per shareBasic
                
                $
                0.04
                
                
                $
                1.70
                
                
                
                
                
                
                $
                (0.21
                )Diluted
                
                $
                0.04
                
                
                $
                1.70
                
                
                
                
                
                
                $
                (0.21
                )





Note
1


Represents
the change in depreciation and amortization from final purchase accounting
adjustments, assuming the Acquisition occurred on January 1, 2007. The
depreciation and amortization are calculated on a straight-line basis assuming a
useful life of 30 years, 12 years, 4 years, 1.5 years and 15 years for
buildings, customer relationships, leasehold interest, non-compete agreements,
and all other property, plant and equipment, respectively.





Property,
      plant and equipment depreciation
                    
                    $
                    1,351Intangible
      assets—amortization
                    
                    
                    9,550Intangible
      assets—admin and general
                    
                    
                    139Total
                    
                    $
                    11,040





Based on
a final valuation of acquired property, plant and equipment, the incremental
value over net book value of the assets placed into service and the increased
depreciation has been calculated as follows:




Step-Up in
                                            Value
                                          
                                          
                                          Depreciable
                                            Life
                                          
                                          Increased
                                            DepreciationAnnual
                                          
                                          QuarterlyBuildings
                                          
                                          $
                                          3,803
                                          
                                          
                                          
                                          30
                                          
                                          
                                          $
                                          127
                                          
                                          
                                          $
                                          32Machinery
      and equipment
                                          
                                          
                                          18,366
                                          
                                          
                                          
                                          15
                                          
                                          
                                          
                                          1,224
                                          
                                          
                                          
                                          306$
                                          1,351
                                          
                                          
                                          $
                                          338
 Based on
a final valuation of the acquired intangible assets, intangible assets and the
related amortization have been calculated as follows:




Step-Up in
                                      Value
                                    
                                    
                                    Amortizable
                                      Life
                                    
                                    
                                    AmortizationAnnual
                                    
                                    
                                    QuarterlyTrade
      name
                                    
                                    $
                                    27,900
                                    
                                    
                                    indefinite
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $Customer
      relationships
                                    
                                    
                                    73,800
                                    
                                    
                                    
                                    12
                                    
                                    
                                    
                                    6,150
                                    
                                    
                                    
                                    1,538Non-compete
      agreements
                                    
                                    
                                    5,100
                                    
                                    
                                    
                                    1.5
                                    
                                    
                                    
                                    3,400
                                    
                                    
                                    
                                    850Total
      expensed to amortization
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    $
                                    9,550
                                    
                                    
                                    $
                                    2,388Leasehold
      interest
                                    
                                    
                                    556
                                    
                                    
                                    
                                    4
                                    
                                    
                                    $
                                    139
                                    
                                    
                                    $
                                    35Total
      expensed to administrative and general
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    $
                                    139
                                    
                                    
                                    $
                                    35


Note
2







40





eliminate
$3.358 million in transaction and consulting fees incurred and expensed by
Barzel and (e) eliminate $12.782 million in legal, accounting and appraisal fees
incurred and expensed by Acquired Company.





Administrative
      and general expenses—compensation
              
              $
              (2,244
              )
              (a)Administrative
      and general expenses—Barzel actual costs
              
              
              (1,650
              )
              (b)Administrative
      and general expenses—Barzel projected costs
              
              
              2,000
              
              (b)Administrative
      and general expenses—operating expenses for assets sold,
    net
              
              
              (1,943
              )
              (c)Administrative
      and general expenses—Barzel incurred transaction costs (not
      capitalized)
              
              
              (3,358
              )
              (d)Administrative
      and general expenses—Acquired Company incurred transaction costs (not
      capitalized)
              
              
              (12,782
              )
              (e)Total
              
              $
              (19,977
              )








(a)
            Salary
      amounts represent actual costs recorded during the period obtained
      directly from the payroll system.  Bonus amounts reflect
      accruals during the fiscal year.(b)
            The
      $1.65 million of Barzel’s actual costs represent initial compensation
      payments of $0.95 million and $0.7 million made to Messrs. De Gasperis and
      Lepore, respectively, in respect of fiscal 2007 that was paid during the
      first quarter of 2008.  These amounts were approved by the
      independent directors of the Board of Directors on December 26, 2007 and
      are outlined in their three-year employment agreements, which became
      effective as of January 1, 2008.  The independent directors
      determined that, absent extraordinary circumstances, no stock options,
      restricted stock or other equity incentive awards would be made to either
      executive during the three-year period ending on December 31,
      2010.  Pro forma adjustments were made to remove the $1.65
      million of Barzel actual costs and replace them with an estimate of $2.0
      million annual compensation for the salary and benefit costs of the new
      Barzel executive team, comprised of Messrs. De Gasperis and
      Lepore.  The annual compensation estimate of $2.0 million, or
      $0.5 million per quarter, for salary and benefit costs is based upon
      (i) a $0.8 million base salary and $0.4 million bonus for Mr. De
      Gasperis and (ii) a $0.55 million base salary and $0.275 million bonus for
      Mr. Lepore, which estimates were prepared before their employment
      agreements were entered into.(c)
            Operating
      expenses for assets sold, net of $1.943 million, is comprised of the
      following:  (i) LaSalle leaseback $1.425 million, (ii) plane
      $2.037 million, (iii) Stoney Creek land $46,000 and (iv) net of $1.565
      million in lease payments associated with the leaseback of the
      building.  The LaSalle office building was sold back to the
      Jones family and leased back by Barzel.  The pro forma
      statements were adjusted for the cost of operating this building and
      replaced by the associated amount of lease payments.  The
      corporate plane (an asset of Novamerican Tube Holdings, Inc. in the U.S.)
      was sold for cash, the sale of which occurred prior to the acquisition.
      Since the plane was not acquired, pro forma adjustments were made to
      remove its operating expenses.  The Stoney Creek land was sold
      prior to the acquisition.(d)
            The
      transaction and consulting fees incurred and expensed by Barzel represent
      actual costs recorded during the period.(e)
            The
      legal, accounting and appraisal fees incurred and expensed by Acquired
      Company represent actual costs recorded during the
  period.





Note
3





To
eliminate interest income earned on cash accounts and the trust account through
November 15, 2007, which would have been applied to the Acquisition as of
January 1, 2007.





Interest
      income—Trust and Cash Accounts
              
              $
              5,105


Total
                
                $
                5,105
 
 Note
4
 
 Adjustments
to (a) reflect interest expense on the amounts borrowed under the ABL Credit
Facility which would have been applied to the financing of the Acquisition as of
January 1, 2007 and the fees on the undrawn portion of the ABL Credit Facility
as if obtained at January 1, 2007, (b) reflect interest expense on the Notes,
(c) reflect amortization of deferred financing fees into




41


interest
expense as if the Acquisition occurred January 1, 2007 and (d) reverse Acquired
Company’s interest (income) expense on debt, which would have been repaid upon
the closing of the Acquisition as of January 1, 2007.




Interest
      expense— ABL Credit Facility
                  
                  $
                  4,836
                  
                  (a)ABL
      Credit Facility fee
                  
                  
                  321
                  
                  (a)Interest
      expense—Notes
                  
                  
                  36,225
                  
                  (b)Financing
      fees
                  
                  
                  2,164
                  
                  (c)Interest
      income, net—historical Acquired Company
                  
                  
                  1,671
                  
                  (d)Total
                  
                  $
                  45,217





(a)
            The
      $4.8 million pro forma interest expense on the ABL Credit Facility was
      calculated as the $68.1 million assumed borrowed for the transaction times
      the daily average LIBOR rate in effect at that time (ranging from 5.36% in
      December 2006 to 4.96% in November 2007) plus 175 basis
      points.  In addition, the $175.0 million ABL Credit Facility has
      a facility fee of $0.3 million calculated as 30 basis points of the
      undrawn portion of $106.9 million (the undrawn portion is the difference
      between the $175.0 million ABL Credit Facility minus the $68.1 million
      assumed borrowed for the transaction).(b)
            The
      $26.2 million pro forma interest expense on the Notes was calculated as
      the $315.0 million assumed borrowed for the transaction times the 11.5%
      interest rate on the Notes.(c)
            Deferred
      financing costs were 1.0% of the total availability under the ABL Credit
      Facility ($175.0 million) and 2.5% of the Notes ($315.0
      million).(d)
            Acquired
      Company chose a net presentation for interest (income) expense for the
      fiscal year ended November 24, 2007.  For that period, interest
      expense was $0.5 million and interest income was $2.2 million, resulting
      in interest income (net) of $1.7 million for Acquired
    Company.A
      1/8% increase in the interest rate would have correspondingly increased
      pro forma interest expense by approximately $85,000, and a 1/8% decrease
      in the interest rate would have correspondingly decreased pro forma
      interest expense by approximately
$85,000.





Note
5





To
eliminate the provision for income taxes on interest income described in Note 3
and to adjust the provision for income taxes for the effect of pro forma income
for the twelve months ended November 24, 2007.





As a
condition to the closing of the Acquisition, the aircraft owned by Acquired
Company was required to be disposed of. The sale of the aircraft resulted in a
book loss of $159,000 and a tax gain of $10,050. The book loss was included in
the pro forma adjustment to eliminate the operating costs associated with
ownership of the aircraft. The tax expense associated with the taxable gain was
eliminated in this pro forma adjustment, since the aircraft was presumed to be
sold prior to the earliest date presented. After the elimination of this
discrete item within the tax provision, the pro forma effective tax rate is
estimated to be 33%.





Income
      tax expense on sale of aircraft
                  
                  $
                  (3,699
                  )Income
      tax expense
                  
                  
                  (10,120
                  )Total
                  
                  $
                  (13,819
                  )





Note
6


To
eliminate foreign exchange loss from the liquidation of the Annaco legal entity
in conjunction with the creation of the new legal structure of the
Company.
 
 The
arrangement agreement relating to the Acquisition provided for specific legal
steps regarding the corporate structure of Acquired Company, including the
dissolution/liquidation of Annaco.  As such, the foreign exchange loss
incurred by Annaco was specific to the Acquisition and would not have occurred
except for the Acquisition, so that the foreign exchange loss has been included
as a pro forma adjustment for the fiscal year ended November 24,
2007.


42





Foreign
      exchange loss
                    
                    $
                    (4,370
                    )Total
                    
                    $
                    (4,370
                    )





Note
7





The pro
forma combined weighted average number of common shares outstanding is based on
the weighted average number of shares of common stock of Barzel as of November
15, 2007.  Reflects the elimination of Acquired Company's shares and
presentation of Barzel shares as if they were outstanding at the beginning of
the period presented, January 1, 2007.  There were no subsequent
equity transactions beyond the Acquisition and therefore the shares outstanding
on the acquisition date are the shares outstanding at each quarter end for pro
forma purposes.





Barzel
              
              
              Acquired Company
              
              
              Pro Forma CombinedCombined
      weighted average shares outstanding before pro forma
      adjustments
              
              
              21,452,304
              
              
              
              10,450,000
              
              
              
              31,902,304Pro
      forma adjustments (assumed January 1, 2007):Retirement
      of Acquired Company shares
              
              
              -
              
              
              
              (10,450,000
              )
              
              
              (10,450,000
              )Total
      pro forma adjustments
              
              
              -
              
              
              
              (10,450,000
              )
              
              
              (10,450,000
              )Balance
      at November 24, 2007
              
              
              21,452,304
              
              
              
              -
              
              
              
              21,452,304





Note
8





Reflects
the elimination of Acquired Company's shares and exclusion of the potentially
dilutive impact of 25,579,069 Barzel warrants convertible into common stock as
they would be anti-dilutive on a pro forma basis as a result of the pro forma
loss per share.





Barzel
              
              
              Acquired Company
              
              
              Pro Forma CombinedCombined
      weighted average shares outstanding, assuming dilution before pro forma
      adjustments
              
              
              21,452,304
              
              
              
              10,450,000
              
              
              
              31,902,304Pro
      forma adjustments (assumed January 1, 2007):Retirement
      of Acquired Company shares
              
              
              -
              
              
              
              (10,450,000
              )
              
              
              (10,450,000
              )Total
      pro forma adjustments
              
              
              -
              
              
              
              (10,450,000
              )
              
              
              (10,450,000
              )Balance
      at November 24, 2007
              
              
              21,452,304
              
              
              
              -
              
              
              
              21,452,304





Company's
actual fiscal year 2008 compared to Pro forma fiscal year 2007




Net sales for fiscal year 2008 remained
essentially flat at $801.1 million, a decrease of $0.2 million from $801.3
million for the pro forma fiscal year 2007.  The impact of changes in
the exchange rate of the Canadian dollar on sales was an increase of $18.0
million.  Excluding the impact of exchange rates, net sales would have
decreased by $18.2 million, or 2.3%, compared with the pro
forma fiscal year 2007.  Decreased sales were primarily due to a
greater percentage of toll processed versus direct sale tons and due to a
dramatic decline in the price and volume of our products in the fourth fiscal
quarter of 2008, driven primarily from weaker global economic conditions,
particularly in industrial manufacturing and automotive segments, resulting in
lower demand for steel. 
 Total tons directly sold and toll
processed for fiscal year 2008 decreased by 7,643 tons, or 0.5%, to 1,442,699
tons from 1,450,342 tons for the pro forma fiscal year 2007. Total tons in
fiscal year 2008 included 733,036 tons from direct sales and 709,663 tons from
toll processing.  Total tons in pro forma fiscal year 2007 included
845,713 tons from direct sales and 604,629


43


tons from
toll processing.  Direct sale tons decreased by 13.3% to 733,036 tons
in fiscal year 2008 from 845,713 tons for the pro forma fiscal year
2007.  The decrease in direct sale tons resulted from lower automotive
sheet and tubular products stemming from the sustained decline in steel demand,
particularly in the automotive, transportation and construction industries. Toll
processed tons increased by 17.4% to 709,663 tons in fiscal year 2008 from
604,629 in fiscal year 2007. The increase in tons toll processed in fiscal year
2008 was primarily driven by increased market share with certain major
customers, somewhat offset by weaker processing for steel mills and processing
centers, primarily resulting from weaker Canadian automotive and manufacturing
sectors





Gross margin for fiscal year 2008
decreased by $9.0 million, or 6.0%, to $139.8 million, from $148.8 million for
the pro forma fiscal year 2007.  Our gross margins may not be
comparable to those of other entities, since some entities include all of the
costs related to their distribution network in cost of sales, and others (like
us) exclude a portion of such costs from gross margins.  As a
percentage of sales, gross margin decreased to 17.4% in fiscal year 2008 from
18.6% in the pro forma fiscal year 2007.  Changes in exchange rates
resulted in an increase of $3.1 million in gross margin.  In addition,
gross margin for fiscal 2008 was reduced by $6.7 million of additional costs
associated with the purchase price allocation to inventory.  Excluding
the impact of exchange rates and the purchase price allocation to inventory,
gross margin would have decreased by $5.4 million to $143.4 million, or 17.9% as
a percentage of net sales.





Operating expenses for fiscal year 2008
increased by $66.3 million, or 59.2%, to $178.2 million, from $112.0 million for
the pro forma fiscal year 2007. As a percentage of net sales, operating expenses
increased to 22.2% in fiscal year 2008 from 14.0% compared to the pro forma
fiscal year 2007.  Operating expenses included a trade name impairment
charge of $25.6 million, or 3.2% of net sales, a goodwill impairment charge of
$0.4 million, or 0.5% of net sales and restructuring charges of $13.3 million,
or 1.7% of net sales, associated with the closure of the Cambridge facility and
the implementation of organizational changes. The remaining increase in
operating expenses from fiscal year 2008 compared to pro forma fiscal year 2007
was primarily attributed to plant operating expenses of $54.4 million in fiscal
year 2008, or 6.8% of net sales, as compared to $44.4 million in pro forma
fiscal year 2007, or 5.5% of net sales and general and administrative expenses
of $37.0 million in fiscal 2008, or 4.6% of net sales, as compared to $17.3
million in pro forma fiscal year 2007, or 2.2% of net sales. Operating expenses
for fiscal year 2008 included approximately $2.4 million in higher depreciation
expense associated with the purchase price allocation to property, plant and
equipment and $0.5 million for accelerated depreciation on assets at our
Cambridge facility. Operating expenses for fiscal year 2008 also included $9.1
million of amortization associated with the purchase price allocation to
intangible assets other than goodwill. General and administrative expenses
included $4.4 million for hiring, training and development during fiscal year
2008 for more than 200 employees associated with our organizational
transformation. The impact of exchange rates on operating expenses for fiscal
year 2008 was an increase of $2.9 million.  The impact of an extra
week in fiscal year 2008 as compared to pro forma fiscal year 2007 was an
increase of $2.5 million. Excluding the impact of exchange rates, additional
depreciation and amortization, training and development expenses, the trade name
impairment, goodwill impairment and restructuring charge, and after adjusting
for the extra week in fiscal year 2008 compared to pro forma fiscal year 2007,
operating expenses would have been $117.1 million as compared to $111.9 million
for the pro forma fiscal year 2007.





Pro forma adjustments resulted in the
exclusion from administrative costs actually incurred in the pro forma fiscal
year 2007, of the following: $2.2 million in compensation for the former
officers of Acquired Company, $1.9 million in operating costs associated with
the disposed assets, including the aircraft, and $12.8 million in transaction
related costs incurred by Acquired Company before the acquisition, including
investment banking, legal and accounting services and change in control and
related termination benefits. The pro forma adjustments also exclude $3.4
million of transaction costs incurred by Symmetry that were not capitalized but
include $2.0 million of ongoing costs for Symmetry's principal executive
officers.





Interest income for fiscal year 2008
was $0.9 million as compared to nil for pro forma year 2007.  Interest
expense for fiscal year 2008 decreased $1.3 million, or 3.0%, to $42.2 million,
from $43.5 million for pro forma fiscal 2007.  Interest expense on the
Notes and ABL Credit Facility was $36.2 million and $3.8 million, respectively,
in fiscal year 2008 and $36.2 million and $4.8 million, respectively, in pro
forma fiscal year 2007. Interest on the Notes in fiscal year 2008 included $0.3
million in additional interest expense resulting from the delayed registration
of the Notes. The remaining $2.2 million of interest expense for fiscal year
2008 and pro forma fiscal year 2007, respectively, primarily represents the
amortization of deferred financing charges.  The
average balance of debt outstanding on the ABL Credit Facility for fiscal year
2008 was $63.8 million with an average interest rate of 5.83%.  The
Notes outstanding were $315.0 million with a fixed interest rate of
11.5%. 
 Loss before income taxes for fiscal
year 2008 was $79.5 million, as compared to loss before income taxes for pro
forma fiscal year 2007 of $6.4 million. The fiscal year 2008 loss before income
taxes includes $25.6 million for the trade name impairment charge, $0.4 million
for the goodwill impairment charge, $13.3 million for restructuring charges,
$9.1 million for the amortization associated with the purchase price allocation
to intangible assets other than goodwill, $2.4 million in higher depreciation
expense associated with the purchase price allocation to property, plant and
equipment and $0.5 million for


44


accelerated
depreciation on assets at our Cambridge facility. Loss before income taxes of
$6.4 million in pro forma fiscal year 2007 resulted primarily from formation,
operating and transactional expenses associated with the start up of the Company
and the acquisition of Acquired Company.





Income taxes were a benefit of $24.9
million in fiscal year 2008 and $1.9 million in the pro forma fiscal year 2007
and reflect an estimated annual effective income tax rate of approximately 31.3%
and 30.1%, respectively.  The decrease in the fiscal year 2008 rate is
primarily due to the tax non-deductibility of the goodwill impairment, a portion
of incentive compensation and certain interest expense.





Net loss was $54.6 million for fiscal
year 2008, or net loss of $2.39 per basic and diluted share outstanding, as
compared to net loss of $4.5 million for pro forma fiscal year 2007, or net loss
of $0.21 per basic and diluted share outstanding.





EBITDA





The following unaudited pro forma
condensed financial information presents EBITDA, a non-GAAP financial measure,
and reconciles EBITDA to GAAP financial information, on a combined basis, for
Acquired Company for the period from November 26, 2006 to November 24, 2007 and
Barzel for the period from January 1, 2007 to November 24, 2007, giving effect
to the Acquisition as if it had occurred on January 1, 2007.





This unaudited pro forma condensed
financial information has been derived from the historical financial statements
of Barzel and Acquired Company, and many adjustments and assumptions have been
made regarding the combined company after giving effect to the
Acquisition.  The pro forma amounts may not be indicative of the
results that actually would have been achieved had the Acquisition occurred as
of the beginning of the relevant period and are not an indication of our
financial condition or results of operations following the consummation of the
Acquisition.  Our actual financial condition and results of operations
following the consummation of the Acquisition may not be consistent with, or
evident from, this unaudited pro forma condensed financial
information.  This unaudited pro forma condensed financial information
should be read together with “Selected Financial Data” and our historical
consolidated financial statements and notes thereto, as well as the historical
financial statements and notes of Acquired Company, including certain historical
consolidated financial statements of Acquired Company that appear elsewhere in
this report.





EBITDA is a non-GAAP financial measure
that we calculate according to the tables set forth below, using the GAAP
amounts.  We believe that this non-GAAP financial measure is generally
accepted as providing useful information regarding a company’s credit facilities
and certain financial-based covenants and, accordingly, its ability to incur
debt and maintain adequate liquidity.  Such a non-GAAP financial
measure should not be considered in isolation or as a substitute for net income
(loss), cash flows from continuing operations or other consolidated income or
cash flow data prepared in accordance with GAAP.  Our method for
calculating this non-GAAP financial measure may not be comparable to methods
used by other companies and is not the same as the method for calculating EBITDA
under our ABL Credit Facility or the indenture relating to the
Notes.





Unaudited
Pro Forma EBITDA


For
the Period Ended November 24, 2007


(in
thousands of U.S. dollars)





Barzel
                11/24/07
              
              
              Acquired
                Company
                11/24/07
              
              
              Pro
      Forma
                Adjustments
              
              
              Pro
      Forma
                CombinedNet
      income (loss)
              
              $
              894
              
              
              $
              17,799
              
              
              $
              (22,627
              )
              
              $
              (3,934
              )Interest
      expense (income)
              
              
              (5,105
              )
              
              
              (1,671
              )
              
              
              50,322
              
              
              
              43,546Depreciation
      and amortization
              
              
              7
              
              
              
              10,695
              
              
              
              9,137
              
              
              
              19,839Income
      tax
              
              
              451
              
              
              
              11,430
              
              
              
              (13,819
              )
              
              
              (1,938
              )EBITDA
              
              $
              (3,753
              )
              
              $
              38,253
              
              
              $
              23,013
              
              
              $
              57,513





Liquidity
and capital resources
  Overview
of Cash Flow and Plans to Manage Liquidity.
  We rely on cash generated from our
internal operations as a primary source of liquidity, as well as available
credit facilities, and the issuance of long-term debt.  We believe
that the funds available from operations will be sufficient to provide us


45




with the
liquidity necessary for anticipated working capital requirements, capital
expenditure requirements and interest payments associated with our ABL Credit
Facility and Notes. Our ability to continue to fund these items may, however, be
affected by general economic, financial, competitive, legislative and regulatory
factors beyond our control. Typically, our cash flow from operations fluctuates
significantly between quarters due to various factors. These factors include
customer and seasonal order patterns, fluctuations in working capital
requirements, interest payments, timing of capital investments and other
factors.  For a further discussion of risks that can impact our
liquidity, see Item 1A. “Risk Factors,” beginning on page 11.




On November 29, 2008, our total
long-term debt was $348.8 million (representing $315.0 million of Notes and
$33.8 million drawn on the ABL Credit Facility) and we had $25.3 million of cash
and cash equivalents (or a net debt of $323.5 million).  On January
30, 2009, our total long-term debt was $315.0 million (representing $315.0
million of Notes and nil drawn on the ABL Credit Facility) and we had
approximately $12.7 million of cash and cash equivalents (or a net debt of
approximately $302.3 million). Our high leverage and other substantial
obligations could have a material impact on our liquidity. Cash flow from
operations services payment of our debt.  Our leverage makes us more
vulnerable to economic downturns.





As of November 29, 2008, the aggregate
eligible assets in our borrowing base totaled $66.4 million (representing the
sum of the U.S. borrowing base and the Canadian borrowing base) that is subject
to a $15.0 million availability block), of which $0.9 million was utilized for
letter of credit obligations and approximately $33.8 million was outstanding
under the ABL Credit Facility.  Since the borrowing base under the ABL
Credit Facility consists of certain eligible accounts receivable and inventory,
some of which are denominated in Canadian dollars, a change in the exchange rate
could affect our borrowing base.  At November 29, 2008, our liquidity
totaled $42.0 million representing cash on hand and availability under the ABL
Credit Facility.  For the fiscal year ended November 29, 2008, the
weighted-average interest rate of borrowed ABL Credit Facility funds was
5.83%.  On January 30, 2009, the aggregate eligible assets in our
borrowing base was $35.5 million (representing the sum of the U.S. borrowing
base and the Canadian borrowing base that is subject to a $15.0 million
availability block), of which $0.9 million was utilized for letter of credit
obligations.  There were no borrowings outstanding under the ABL
Credit Facility as of January 30, 2009.  At January 30, 2009, our
liquidity totaled $32.3 million representing cash on hand and availability under
the ABL Credit Facility.





In fiscal year 2008, we recorded a
restructuring charge of $13.3 million for the organizational redesign related to
our implementation of the Decalogue operating methodology at the
Company.  The restructuring charges are primarily for severance and
related costs for 189 terminated employees.  In fiscal year 2008, we
made cash restructuring payments of $4.9 million.  We expect to record
an additional $0.2 million of restructuring changes in the first quarter of 2009
related to the redesigned rationalization of our distribution and processing
facilities.  Our interest payments on the Notes total $36.2 million
per annum with installments of $18.1 million paid on each of May 15th and
November 15th.  In fiscal year 2009, we expect cash restructuring
payments of approximately $7.8 million to be paid as
follows:  approximately $3.1 million, $2.2 million, $1.6 million and
$0.9 million in the fiscal first, second, third and fourth quarters of 2009,
respectively.





Our organizational redesign also
includes increasing resources in certain areas such as replenishment, production
scheduling, statistical process control, sales, marketing and human
resources.  These organizational changes will increase the speed of
our cycle time improvements and resultant inventory reductions.  The
cost of these resources is included in our estimated net operating expense
reductions. We incurred approximately $4.4 million in the fiscal year 2008 for
operating expenses associated with hiring, training and development required for
these changes and certain other redundant organizational expenses resulting from
increasing certain resources in advance of other reductions.





We expect cash interest payments to be
approximately $37.8 million in fiscal year 2009 with approximately $18.1 million
expected in the second fiscal quarter of 2009 (less than $1.0 million in the
first fiscal quarter of 2009).  We spent $10.6 million in capital
expenditures in fiscal year 2008, including $8.0 million for our Morrisville,
Pennsylvania structural tubing facility expansion.  We expect capital
expenditures of approximately $6.0 million in fiscal year 2009, including $2.5
million for the completion of the expansion at the Morrisville, Pennsylvania
tubing facility.




In order to seek to minimize our credit
risks, we reduced our sales of steel to some customers and potential customers
in the U.S. and Canada (except for cash on delivery). We cannot assure you that
we will not be materially adversely affected by accounts receivable losses in
the future.
 
 We may from time to time and at any
time, as allowed under the ABL Credit Facility and Notes, repurchase our debt or
equity securities, for cash, common stock or other securities or a combination
thereof, in open market or privately negotiated transactions, opportunistically
and on terms that we believe to be favorable.


46




Overview
of Cash Flow Activities for the Years Ended November 29, 2008 and November 24,
2007




Operating
Activities




Cash provided by operating activities
was $51.9 million in fiscal year 2008 compared to cash used by operating
activities of $5.4 million in fiscal year 2007. Net loss, after deducting a net
deferred tax benefit of $25.6 million and adding back the net effect from
non-cash items amounted to $30.3 million. Cash used by operations included $51.3
million related to accounts payable and accrued liabilities.  Such
uses were offset by cash provided by operating activities resulting from a
decrease in accounts receivable of $46.0 million, a decrease of income taxes
receivable of $1.3 million and a decrease in inventories of $88.4
million.  The decrease in accounts receivable is a result of an
overall economic decline in the market coupled with a specific reduction of
customers that do not fit into the new replenishment model that management has
implemented.  During the course of fiscal year 2008, the Company
reduced its carrying inventory in anticipation of its implementation of its
replenishment model.




Investing
Activities




Cash flow used in investing activities
was $10.5 million in fiscal year 2008, primarily for $10.6 million in additions
to property, plant and equipment, including $8.0 million for expansion of our
Morrisville, Pennsylvania structural tubing facility, partially offset by $0.1
million in proceeds on disposal of property and equipment.





Cash used in investing activities was
$478.6 million in fiscal year 2007 for the investment in Acquired Company of
$491.1 million, net, representing a gross purchase price of $585.2 million net
against cash provided by the acquisition that was on hand at November 15, 2007
of $94.1 million.  Additional cash was provided by the disposal of
acquired property, plant and equipment, primarily the sale of the aircraft and
certain non-productive land totaling $15.4 million.  This cash was
partially offset by the payment of acquisition costs totaling $2.9
million.





Financing
Activities




Cash
used in financing activities was $32.9 million in fiscal year
2008.  We received proceeds from borrowings of $43.7 million and
repaid $76.6 million of borrowings under the ABL Credit Facility during fiscal
year 2008.




Cash provided by financing activities
was $503.6 million in fiscal year 2007.  During fiscal year 2007, we
received gross proceeds of $150.0 million (less offering costs of $11.2 million)
from the issuance and sale of units through an initial public offering and gross
proceeds of $19.8 million from two private placements of common stock and
warrants. On November 15, 2007, we paid $30.3 million to common stockholders who
exercised their conversion right and returned their common shares to
us.  On November 15, 2007, we also received gross proceeds of $383.1
million (less offering costs of $15.1 million) from the issuance and sale of the
Notes ($315.0 million) and under the ABL Credit Facility ($68.2 million). We
used these proceeds, along with our remaining $112.0 million of equity, to fund
the Acquisition.  We borrowed an additional $7.6 million under the ABL
Credit Facility during fiscal year 2007.




Debt
and commitments




As of November 29, 2008, we had two
separate debt arrangements:




·
            $315.0 million in 11.5% Notes due
      2015; and




·
            $175.0 million under the ABL
      Credit Facility.




On November 15, 2007, the Company,
through Barzel Finco, issued the Notes.  Interest on the Notes accrues
at the rate of 11.5% per annum and is payable semi-annually in arrears on May 15
and November 15.  The Notes mature on November 15, 2015




On November 15, 2007, the Company and
its affiliates entered into the ABL Credit Facility.  The $175.0
million available under the ABL Credit Facility is subject to a borrowing base
consisting of certain eligible accounts receivable and inventory and a permanent
$15.0 million availability block. The ABL Credit Facility includes borrowing
capacity available for letters of credit and for short-term borrowings referred
to as swingline borrowings. In addition, the Company has the option, subject to
certain conditions, to increase the commitments under the ABL Credit Facility in
an aggregate principal amount of up to $50.0 million.


47




As of November 29, 2008, amounts
outstanding under the Notes were $315.0 million and amounts outstanding under
the ABL Credit Facility were $33.8 million. We had an additional $16.7 million
of borrowing availability under the ABL Credit Facility, net of
$0.9 million of outstanding and undrawn letters of credit, which reduces
availability under the ABL Credit Facility. As of January 30, 2009, amounts
outstanding under the Notes were $315.0 million and amounts outstanding under
the ABL Credit Facility were nil.  We had an additional $19.6 million
of borrowing availability under the ABL Credit Facility, net of $0.9 million of
outstanding and undrawn letters of credit, which reduces availability under the
ABL Credit Facility.  Our liquidity requirements are significant,
primarily due to debt service requirements and the cyclicality of our business.
We anticipate cash interest payments in fiscal year 2009 to be approximately
$37.8 million.  Prior to maturity, to the extent permitted by the
terms of the ABL Credit Facility and permitted or required by the terms of the
Notes, we may redeem a portion of the Notes with the proceeds of the issuance of
capital stock, may offer to purchase Notes from the proceeds of certain asset
dispositions and may acquire Notes in market transactions or, subject to
limitations, redeem Notes with cash from operations. We expect to repay the
principal amount of the Notes outstanding at maturity from cash generated from
operations and/or the proceeds of equity or debt financing.





The ABL Credit Facility and the Notes
Indenture contain covenants which restrict our ability to incur additional
indebtedness, although we are not restricted from engaging in common equity
financing.





Capital
expenditures




Our capital requirements are subject to
change as business conditions fluctuate and opportunities arise. We anticipate
spending approximately $6.0 million on certain projects in fiscal year
2009, including approximately $2.5 million for the completion of the expansion
at the Morrisville, Pennsylvania tubing facility.





Restructuring




We anticipate spending approximately
$8.0 million for restructuring payments associated with the organizational
changes effected in 2008 and early 2009, primarily for severance and related
employee exit costs. We anticipate spending approximately $2.5 million of the
$8.0 million in the first fiscal quarter of 2009.





Off-balance
sheet arrangements





As of, and for the fiscal year 2008, we
had no off-balance sheet arrangements that had, or are reasonably likely to
have, a material current or future effect on our financial condition, revenues
or expenses, liquidity, capital expenditures or capital resources.





Contractual
Obligations and Commercial Commitments





The following table summarizes our
long-term contractual obligations and commercial commitments at
November 29, 2008. The table excludes commitments that are contingent based
upon events or factors that are uncertain at this time.





Payments
      due by periodTotal
              
              
              Less
      than
                1
      year
              
              
              1
      to
                3
      years
              
              
              3
      to
                5
      years
              
              
              More
      than
                5
      years(In
      thousands of U.S. dollars)Notes
      (1)
              
              $
              315,000
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              $
              315,000ABL
      Credit Facility (1)
              
              
              33,814
              
              
              
              —
              
              
              
              —
              
              
              
              33,814
              
              
              
              —Interest
      expense (2)
              
              
              259,517
              
              
              
              37,754
              
              
              
              75,392
              
              
              
              73,921
              
              
              
              72,450Operating
      leases
              
              
              20,030
              
              
              
              4,718
              
              
              
              6,832
              
              
              
              3,237
              
              
              
              5,243Purchase
      obligations
              
              
              282
              
              
              
              282
              
              
              
              —
              
              
              
              —
              
              
              
              —$
              628,643
              
              
              $
              42,754
              
              
              $
              82,224
              
              
              $
              110,972
              
              
              $
              392,693








(1)
            Principal
      payments only.





(2)
            Based
      on current indebtedness and interest rates at November 29, 2008, which was
      $315.0 million for the Notes at an interest rate of 11.5%, $26.3 million
      for Canadian borrowings under our ABL Credit Facility at an interest rate
      of 4.8%, and $7.5 million for U.S. borrowings under our ABL Credit
      Facility at an interest rate of 3.9%.  An increase of 1/8%
      in


48


interest
      rates would cause an increase in interest expense of approximately $44,000
      per annum, and a decrease of 1/8% in interest rates would cause a decrease
      in interest expense of approximately $44,000 per
  annum.


The amount of purchase obligations
included in the above table reflects our estimate of steel on order, in
production and unshipped with respect to which we believe we would have an
obligation to pay. Most of our purchase orders may be cancelled without penalty
upon giving sufficient notice. In the normal course of business, we purchased
approximately $625.9 million of steel for the fiscal year 2008. At November
29, 2008, there were no firm purchase orders outstanding.





We have no defined benefit or other
post-retirement employee benefit obligations.





Current
and pending accounting changes





Current





Effective November 25, 2007, we adopted
SFAS No. 157, Fair Value Measurements, issued by the FASB in September 2006,
only for its financial assets and liabilities required or permitted to be stated
or disclosed at fair value.  This statement defines fair value,
establishes a framework for measuring fair value, and expands disclosures about
fair value measurements.  SFAS No. 157 applies under other accounting
pronouncements that require or permit fair value measurements. Accordingly, SFAS
No. 157 does not require any new fair value measurements.





As of November 29, 2008, we did not
carry any of its assets or liabilities at fair value on a recurring basis and
did not recognize any unrealized amounts in earnings related to changes in fair
value for the year ended November 29, 2008.  Our fair value
measurement disclosure requirements are currently limited to annual fair value
disclosure of our financial instruments.





We did not adopt SFAS 157 with respect
to its non-financial assets and liabilities that do not required to be stated at
fair value on a recurring basis.  Under FASB Staff Position (FSP) SFAS
157-2, the Effective Date of SFAS 157 fair value requirements for non-financial
assets and liabilities not required to be stated at fair value on a recurring
basis are deferred until the year beginning November 30,
2008.  Primarily this deferral impacts assets such as property, plant
and equipment, intangible assets, goodwill upon non-recurring events such as
business combinations, asset impairments and goodwill impairment, among
others.





Effective November 25, 2007, we adopted
SFAS No. 159, Fair Value Option for Financial Assets and Financial Liabilities,
issued by the FASB in April 2007.  This statement’s objective is to
improve financial reporting by allowing entities to mitigate volatility in
reported earnings caused by the measurement of related assets and liabilities
using different attributes, without having to apply complex hedge accounting
provisions. Under SFAS No. 159, entities that elect the fair value option will
report unrealized gains and losses in earnings at each subsequent reporting
date. Additionally, the new statement establishes presentation and disclosure
requirements to help financial statement users understand the effect of the
entity’s election on its earnings.  Additionally the statement
establishes presentation and disclosure requirements to help financial statement
users understand the effect of the entity’s election on its
earnings.  Currently, we have not elected to treat any of our
financial assets or liabilities under the fair value option.





In May 2008, the FASB issued SFAS No.
162, TheHierarchy of
Generally Accepted Accounting Principles.  SFAS No. 162 identifies the
sources of accounting principles and the framework for selecting principles to
be used in the preparation of financial statements of nongovernmental entities
that are presented in conformity with generally accepted accounting principles
in the United States. This statement became effective November 15,
2008.  The adoption of this pronouncement did not have a material
impact on its financial position, results of operations or cash
flows.





Pending





In December 2007, the FASB issued SFAS
No. 141(R), Business Combinations. This statement replaces SFAS No. 141,
Business Combinations. This statement retains the fundamental requirements in
SFAS No. 141 that the acquisition method of accounting (which SFAS No. 141
called the purchase method) be used for all business combinations and for an
acquirer to be identified
for each business combination. This statement also establishes principles and
requirements for how the acquirer: a) recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree; b) recognizes and measures the goodwill
acquired in the business combination or a gain from a bargain purchase; and c)
determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. SFAS No. 141(R) will apply prospectively to business combinations
for which the acquisition date is on or after our year beginning November 29,
2009. While we have not yet evaluated this statement for the


49





In December 2007, the FASB issued SFAS
No. 160, Noncontrolling Interests in Consolidated Financial Statements. This
statement amends Accounting Research Bulletin 51 to establish accounting and
reporting standards for the noncontrolling (minority) interest in a subsidiary
and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling
interest in a subsidiary is an ownership interest in the consolidated entity
that should be reported as equity in the consolidated financial statements. We
have not yet determined the impact, if any, that SFAS No. 160 will have on our
consolidated financial statements. SFAS No. 160 is effective for our year
beginning November 29, 2009.





In February 2008, the FASB issued FSP
SFAS 157-2.  This statement defers fair value requirements for
non-financial assets and liabilities not required to be stated at fair value on
a recurring basis until the year beginning November 30, 2008. This deferral
primarily impacts assets such as property, plant and equipment, intangible
assets and goodwill upon non-recurring events such as business combinations,
asset impairments and goodwill impairment, among others. We are currently
evaluating the impact of FSP SFAS 157-2, but do not expect the adoption of this
pronouncement to have a material impact on its financial position, results of
operations or cash flows.





In March 2008, the FASB issued SFAS No.
161, Disclosures about Derivatives and Hedging Activities.  This
statement amends Statement of Financial Accounting Standards (“SFAS”) No. 133 to
require enhanced disclosures about an entity’s derivative and hedging activities
and thereby improves the transparency of financial reporting.  This
statement requires entities to provide enhanced disclosures about (a) how and
why an entity uses derivative instruments, (b) how derivative instruments and
related hedging items are accounted for under SFAS No. 133 and its related
interpretations, and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance and cash
flows.  SFAS No. 161 is effective for our year beginning November 30,
2008.  We are currently evaluating the impact of SFAS No. 161, but do
not expect the adoption of this pronouncement to have a material impact on our
financial position, results of operations or cash flows as we have historically
not used these instruments.





In April 2008, the FASB issued FASB
Staff Position (FSP) FAS No. 142-3, Determination of the Useful Life of
Intangible Assets.  This FSP amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under FASB Statement No. 142,
Goodwill and Other Intangible Assets.  The intent of this FSP is to improve
the consistency between the useful life of a recognized intangible asset under
Statement 142 and the period of expected cash flows used to measure the fair
value of the asset under FASB Statement No. 141 (Revised 2007), Business
Combinations, and other U.S. generally accepted accounting principles
(GAAP).  This FSP is effective for financial statements issued for
years beginning after December 15, 2008, and interim periods within those
years.  Early adoption is prohibited.  We do not expect the
adoption of FSP No. 142-3 to have a material effect on our results of operations
and financial condition.





Application
of critical accounting policies





The preparation of our consolidated
financial statements in conformity with accounting principles generally accepted
in the United States of America requires us to make estimates and assumptions
that affect the amounts reported in the financial statements. The estimates are
based on our historical experience and past performance. Actual results could
differ from those estimates under different assumptions or conditions. On an
ongoing basis, we review our estimates based on currently available information.
The following critical accounting policies are those that we believe require our
most difficult, subjective or complex judgments:





Revenue
recognition.  Revenue from product sales is recognized when
there is persuasive evidence of an arrangement, the amount is fixed or
determinable, delivery of the product to the customer has occurred, there are no
uncertainties surrounding product acceptance and collection of the amount is
considered probable. Title to the product generally passes and revenue is
recognized upon delivery of the product at the customer's destination for direct
sales or at the time services are performed for processing services where the
Company is adding value to its customer’s inventory. Direct costs associated
with direct sales are recognized in costs of sales upon shipment of the product
and direct costs associated with processing services are recognized as part of
plant expense when services are complete. Sales returns and allowances are
treated as reductions to sales and are provided for based on historical
experience and current estimates. 
 The customer is invoiced for the
complete product delivered to the customer’s designated location and shipping
and handling charges are not invoiced separately. Shipping and handling costs
are recorded under the "Delivery" caption on the consolidated statement of
operations and comprehensive loss.


50





Goodwill, Intangibles and Other
Long-Lived Assets.  The accounting policies and estimates
related to goodwill and other intangibles are considered critical because of the
significant impact that impairment could have on our operating results. We
record all assets and liabilities acquired in purchase acquisitions, including
goodwill, indefinite-lived intangibles, and other intangibles, at fair value as
required by SFAS No. 141, Business Combinations. Goodwill, which was
$133.5 million at November 29, 2008, is not amortized but is subject to
tests for impairment annually or more often if events or circumstances indicate
it may be impaired. The initial recording of goodwill and other intangibles
requires subjective judgments concerning estimates of the fair value of the
acquired assets. An impairment loss is recorded to the extent that the carrying
amount of goodwill exceeds its implied fair value. Other identifiable intangible
assets, net of accumulated amortization, were $63.6 million at November 29,
2008. These are amortized over their estimated useful lives and are evaluated
for impairment if events and circumstances indicate a possible impairment. Such
evaluation of other intangible assets is based on undiscounted cash flow
projections. Estimated cash flows may extend far into the future and, by their
nature, are difficult to determine over an extended timeframe. Factors that may
significantly affect the estimates include, among others, competitive forces,
customer behaviors and attrition, changes in revenue growth trends, cost
structures and technology, and changes in discount rates and specific industry
or market sector conditions. Other key judgments in accounting for intangibles
include useful life and classification between goodwill and indefinite-lived
intangibles or other intangibles which require amortization. See “Intangibles
and Goodwill” in the Notes to Consolidated Financial Statements for additional
information regarding intangible assets.





Allowance for doubtful
accounts.  We maintain an allowance for doubtful accounts for
estimated losses resulting from the inability of its customers to make required
payments. If the financial condition of customers were to deteriorate, resulting
in an impairment of their ability to make payments, increases to the allowance
would be required.





Income taxes.  The
provision for income taxes is computed on the pretax income of the consolidated
subsidiaries located within each taxing jurisdiction based on the current income
tax laws. Deferred income taxes are provided, based upon currently enacted
income tax rates, for temporary differences in the recognition of assets and
liabilities on the financial statements and for income tax
purposes.





Deferred income taxes include the
benefit of losses carried forward when it is reasonably likely that future
profits will result. Should the opportunity to realize the benefit of these
losses expire, such amounts would result in additional deferred income tax
expense.





ITEM
      7A.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Effect of Exchange
Rates.  We incur costs in U.S. dollars and Canadian dollars,
the currency of our manufacturing and distribution facilities, and we sell our
products in both U.S. dollars and Canadian dollars.  In general, our
results of operations, cash flows and financial condition are affected by
changes in the Canadian dollar relative to the U.S. dollar.  We cannot
predict changes in currency exchange rates in the future or whether those
changes will have net positive or negative impacts on our net sales, cost of
sales or net income.  We cannot assure you that we would be able to
mitigate any adverse effects of such changes.  During fiscal year
2008, the average exchange rate of the Canadian dollar versus the U.S. dollar
was 1.0454 compared to 1.0859 for fiscal year 2007.  The impact of
these events in fiscal year 2008 was an increase of $16.3 million in net sales,
$14.3 million in cost of goods sold and $4.1 million in operating
expenses.





We have Canadian dollar denominated
long term debt under the ABL Credit Facility.  At November 29, 2008,
$26.3 million in principal outstanding under the ABL Credit Facility was
denominated in Canadian dollars.  In fiscal year 2008, we had a net
total of $3.3 million in currency losses.  In fiscal year 2007,
currency losses were $46,000.





Exchange rate fluctuations are beyond
our control, and there can be no assurance that changes in the rate of exchange
between the Canadian dollar and the U.S. dollar will not adversely affect our
business, results of operations, financial condition or cash flows.




We are exposed to market risk from
changes in interest rates and exchange rates.  From time to time, we
may enter into financial contracts in the ordinary course of business in order
to hedge these exposures.  We do not use financial instruments for
trading or speculative purposes.
 
 Interest rate risk.  Our
exposure to interest rate risk is as follows, indicated in thousands of U.S.
dollars:
 51




November
      29, 2008Debt
                    outstanding
                  
                  
                  Weighted
                    average
      effective
                    interest
      rateABL
      Credit Facility
                  
                  $
                  33,814
                  
                  
                  
                  5.8
                  %Notes
                  
                  
                  315,000
                  
                  
                  
                  11.5
                  %$
                  348,814





November
      29, 2008Carrying
                  Amount
                
                Fair
                  ValueABL
      Credit
      Facility
                
                $
                33,814
                
                
                $
                33,814Notes
                
                
                315,000
                
                
                
                207,270$
                348,814
                
                
                $
                241,084





A 100 basis point movement in the
Canadian prime rate or LIBOR would result in an approximate $0.3 million,
annualized, for the period ended November 29, 2008, increase or decrease in
interest expense and cash flows.





Exchange rate
risk.  At November 29, 2008 and November 24, 2007, we had no
forward foreign currency exchange contracts outstanding.





We estimate that a 10 percent movement
in the value of the Canadian dollar would affect our net sales by approximately
$44.1 million annually, based on our 2008 Canadian dollar net
sales.  The modeling technique used was to determine the difference
between the conversions of our net sales in Canadian dollars for the year ended
November 29, 2008 using the average exchange rate for the year and the what-if
exchange rate. During fiscal year 2008, the average exchange rate was $1.0454
Canadian.





Commodity price
risk.  We do not use derivative commodity instruments to hedge
our exposure to the impact of price fluctuations on our principal raw
materials.





ITEM
      8.
            CONSOLIDATED
      FINANCIAL STATEMENTS





(Unless
otherwise noted, all dollars are presented in thousands)


52


CONSOLIDATED FINANCIAL
      STATEMENTS
                
                INDEX TO CONSOLIDATED FINANCIAL
      STATEMENTS
                (Unless
      otherwise noted, all dollars are presented in
  thousands)





Barzel
      Industries Inc. f/k/a Novamerican Steel Inc. and
    Subsidiaries
            PageConsolidated
      Financial StatementsReports
      of independent registered public accounting firms
            F-2
      – F-3Consolidated
      balance sheets as of November 29, 2008 and November 24,
    2007
            F-4Consolidated
      statements of operations and comprehensive loss for the year ended
      November 29, 2008, and for the periods ended November 24, 2007 and
      December 31, 2006
            F-5Consolidated
      statements of stockholders’ equity for the periods from April 26, 2006 to
      December 31, 2006, January 1, 2007 to November 24, 2007 and November 25,
      2007 to November 29, 2008
            F-6Consolidated
      statements of cash flows for the year ended November 29, 2008, and for the
      periods ended November 24, 2007 and December 31, 2006
            F-7Notes
      to consolidated financial statements
            F-8Acquired
      Company and SubsidiariesConsolidated
      Financial StatementsReport
      of independent registered public accounting firm
            F-37Consolidated
      statement of operations and comprehensive income for the period from
      November 26, 2006 to November 14, 2007
            F-38Consolidated
      statement of shareholders’ equity for the period from November 26, 2006 to
      November 14, 2007
            F-39Consolidated
      statement of cash flows for the period from November 26, 2006 to November
      14, 2007
            F-40Consolidated
      balance sheet as of November 14, 2007
            F-41Notes
      to consolidated financial statements
            F-42Report
      of independent registered public accounting firm
            F-53Consolidated
      statement of operations and comprehensive income for the year ended
      November 25, 2006
            F-54Consolidated
      statement of cash flows for the year ended November 25,
    2006
            F-55Notes
      to consolidated financial statements
            F-56





F-1


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




Board of
Directors and Stockholders


Barzel
Industries Inc. (formerly Novamerican Steel Inc.)






We have
audited the accompanying consolidated balance sheets of Barzel Industries Inc.
(a Delaware Corporation) and Subsidiaries (the “Company”) as of November 29,
2008 and November 24, 2007 and the related consolidated statements of
operations and comprehensive loss, stockholders’ equity and cash flows for the
year ended November 29, 2008 and for the period from January 1, 2007 to
November 24, 2007. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these
financial statements based on our audits.




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




In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Barzel Industries Inc. and
Subsidiaries as of November 29, 2008 and November 24, 2007, and the
results of their operations and their cash flows for the year ended November 29,
2008 and for the period from January 1, 2007 to November 24, 2007 in
conformity with accounting principles generally accepted in the United States of
America.




/s/
Raymond Chabot Grant Thornton LLP1
  
  Montreal,
Canada
 February
25, 2009
 
 1           Chartered
accountant auditor permit no. 6981
   F-2


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








Board of
Directors and Stockholders:





We have audited the accompanying
statements of operations, stockholders' deficit and cash flows for the period
from April 26, 2006 (date of inception) through December 31, 2006 of Barzel
Industries Inc. (formerly Symmetry Holdings Inc.) (the “Company”). These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.




We conducted our audit in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.




In our opinion, the financial
statements referred to above present fairly, in all material respects, the
results of the Company’s operations and cash flows for the period from April 26,
2006 (date of inception) through December 31, 2006 in conformity with U.S.
generally accepted accounting principles.




/s/Miller, Ellin &
Company LLP


New York,
New York


January
3, 2007





F-3


Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)


Consolidated
Balance Sheets


(In
thousands of U.S. dollars, except share and per share data)





November
      29, 2008
                
                
                November
      24, 2007ASSETSCurrent
      assets:Cash
      and cash equivalents
                
                $
                25,298
                
                
                $
                19,638Trade
      accounts receivable, net (Note 7)
                
                
                53,940
                
                
                
                111,546Income
      taxes receivable
                
                
                1,262
                
                
                
                2,822Inventories
      (Note 8)
                
                
                53,171
                
                
                
                149,894Prepaid
      expenses and other assets
                
                
                3,832
                
                
                
                1,666Deferred
      income taxes (Note 5)
                
                
                2,234
                
                
                
                7,130Total
      current assets
                
                
                139,737
                
                
                
                292,696Investment
      in a joint venture (Note 18)
                
                
                2,288
                
                
                
                1,999Property,
      plant and equipment, net (Note 9)
                
                
                124,922
                
                
                
                150,436Goodwill
      (Note 4)
                
                
                133,511
                
                
                
                149,360Intangibles,
      net (Note 4)
                
                
                63,625
                
                
                
                68,431Deferred
      financing charges
                
                
                12,798
                
                
                
                14,998Other
      assets
                
                
                59
                
                
                
                257Deferred
      income taxes (Note 5)
                
                
                —
                
                
                
                43Total
      assets
                
                $
                476,940
                
                
                $
                678,220LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable
                
                $
                20,173
                
                
                $
                81,401Accounts
      payable to a joint venture (Note 18)
                
                
                1,523
                
                
                
                1,639Accrued
      liabilities (Note 10)
                
                
                13,172
                
                
                
                18,028Restructuring
      charges (Note 22)
                
                
                7,207
                
                
                
                —Income
      taxes payable
                
                
                299
                
                
                
                —Deferred
      income taxes (Note 5)
                
                
                —
                
                
                
                2,921Total
      current liabilities
                
                
                42,374
                
                
                
                103,989Long-term
      debt (Note 11)
                
                
                348,814
                
                
                
                390,588Restructuring
      charges (Note 22)
                
                
                358
                
                
                
                —Deferred
      income taxes (Note 5)
                
                
                37,070
                
                
                
                58,588Other
      long term liabilities (Note 5)
                
                
                3,127
                
                
                
                3,410Total
      liabilities
                
                
                431,743
                
                
                
                556,575Contingencies
      and commitments (Notes 19 and 20)Stockholders’
      equity:Preferred
      stock:  $0.001 par value; authorized 10,000,000 shares; none
      issuedCommon
      stock:  $0.001 par value; authorized 100,000,000 shares; issued
      and outstanding  26,564,607 at November 29, 2008 and 21,452,304
      at November 24, 2007 (Note 14)
                
                
                26
                
                
                
                21Additional
      paid-in capital
                
                
                128,311
                
                
                
                128,316Accumulated
      deficit
                
                
                (58,546
                )
                
                
                (3,947
                )Accumulated
      other comprehensive loss
                
                
                (24,594
                )
                
                
                (2,745
                )Total
      stockholders’ equity
                
                
                45,197
                
                
                
                121,645Total
      liabilities and stockholder’s equity
                
                $
                476,940
                
                
                $
                678,220





The
accompanying notes are an integral part of the consolidated financial
statements.


F-4


Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)


Consolidated
Statements of Operations and Comprehensive Loss


(In
thousands of U.S. dollars, except per share data)








Year
                  ended
                  November
      29, 2008
                
                
                Period
      from
                  January
      1, 2007 to
                  November
      24, 2007
                
                
                Period
      from
                  April
      26, 2006 to
                  December
      31, 2006Net
      sales
                
                $
                801,058
                
                
                $
                16,304
                
                
                $
                —Cost
      of sales
                
                
                661,286
                
                
                
                14,792
                
                
                
                —Gross
      margin
                
                
                139,772
                
                
                
                1,512
                
                
                
                —Operating
      expensesPlant
                
                
                54,359
                
                
                
                1,355
                
                
                
                —Delivery
                
                
                26,544
                
                
                
                574
                
                
                
                —Selling
                
                
                11,827
                
                
                
                263
                
                
                
                —Administrative
      and general
                
                
                36,966
                
                
                
                2,139
                
                
                
                145Amortization
      of intangibles
                
                
                9,100
                
                
                
                —
                
                
                
                —Trade
      name impairment (Note 4)
                
                
                25,639
                
                
                
                —
                
                
                
                —Goodwill
      impairment (Note 4)
                
                
                414
                
                
                
                —
                
                
                
                —Restructuring
      costs (Note 22)
                
                
                13,348
                
                
                
                —
                
                
                
                —Formation
      and operating costs
                
                
                —
                
                
                
                2,334
                
                
                
                —178,197
                
                
                
                6,665
                
                
                
                145Operating
      loss
                
                
                (38,425
                )
                
                
                (5,153
                )
                
                
                (145
                )Transaction
      expenses (Note 3)
                
                
                —
                
                
                
                4,438
                
                
                
                —Interest
      expense
                
                
                42,226
                
                
                
                1,290
                
                
                
                13Interest
      income
                
                
                (892
                )
                
                
                (4,797
                )
                
                
                (10
                )Share
      in income of a joint venture
                
                
                (289
                )
                
                
                (12
                )
                
                
                —41,045
                
                
                
                919
                
                
                
                3Loss
      before income taxes
                
                
                (79,470
                )
                
                
                (6,072
                )
                
                
                (148
                )Income
      tax benefits  (Note 5)
                
                
                (24,871
                )
                
                
                (2,273
                )
                
                
                —Net
      loss
                
                $
                (54,599
                )
                
                $
                (3,799
                )
                
                $
                (148
                )Net
      loss per share (Note 6)Basic
                
                $
                (2.39
                )
                
                $
                (0.20
                )
                
                $
                (0.03
                )Diluted
                
                $
                (2.39
                )
                
                $
                (0.20
                )
                
                $
                (0.03
                )Comprehensive
      lossNet
      loss
                
                $
                (54,599
                )
                
                $
                (3,799
                )
                
                $
                (148
                )Changes
      in cumulative translation adjustment
                
                
                (21,849
                )
                
                
                (2,745
                )
                
                
                —$
                (76,448
                )
                
                $
                (6,544
                )
                
                $
                (148
                )





The
accompanying notes are an integral part of the consolidated financial
statements.


F-5


Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)


Consolidated
Statements of Stockholders' Equity


(In
thousands of U.S. dollars, except share data)








Common
      stock
                
                
                Additional
                
                
                
                
                
                Accumulated
                  other
                
                
                TotalNumber
                
                
                Amount
                
                
                paid-in
                  capital
                
                
                Accumulated
                  deficit
                
                
                comprehensive
                  loss
                
                
                stockholders'
                  equityBalance
      at April 26, 2006
                  (date of
    inception)Issuance
      of common stock
                
                
                4,687,500
                
                
                $
                5
                
                
                $
                —
                
                
                $
                —
                
                
                
                —
                
                
                $
                5Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (148
                )
                
                
                —
                
                
                
                (148
                )Balance
      at December 31, 2006
                
                
                4,687,500
                
                
                
                5
                
                
                
                
                
                
                
                (148
                )
                
                
                
                
                
                
                (143
                )Issuance
      of warrants on March 5,
                  2007
                
                
                —
                
                
                
                —
                
                
                
                3,750
                
                
                
                —
                
                
                
                —
                
                
                
                3,750Issuance
      of common stock and
                  warrants on March 12,
      2007,
                  net of offering
      expenses
                
                
                18,750,000
                
                
                
                18
                
                
                
                138,827
                
                
                
                —
                
                
                
                —
                
                
                
                138,845Issuance
      of warrants on June 21,
                  2007
                
                
                —
                
                
                
                —
                
                
                
                1,000
                
                
                
                —
                
                
                
                —
                
                
                
                1,000Conversion
      of common stock by
                  public stockholders to cash
      on
                  November 15, 2007
                
                
                (3,860,196
                )
                
                
                (4
                )
                
                
                (30,259
                )
                
                
                —
                
                
                
                —
                
                
                
                (30,263
                )Issuance
      of common stock and
                  warrants on November
      15,
                  2007
                
                
                1,875,000
                
                
                
                2
                
                
                
                14,998
                
                
                
                —
                
                
                
                —
                
                
                
                15,000Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (3,799
                )
                
                
                —
                
                
                
                (3,799
                )Changes
      in cumulative translation
                  adjustment
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (2,745
                )
                
                
                (2,745
                )Balance
      at November 24, 2007
                
                
                21,452,304
                
                
                
                21
                
                
                
                128,316
                
                
                
                (3,947
                )
                
                
                (2,745
                )
                
                
                121,645Net
      loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (54,599
                )
                
                
                
                
                
                
                (54,599
                )Changes
      in cumulative translation
                  adjustment
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (21,849
                )
                
                
                (21,849
                )Conversion
      of warrants to common
                  stock by public
      stockholders
                
                
                5,112,303
                
                
                
                5
                
                
                
                (5
                )
                
                
                —
                
                
                
                —
                
                
                
                —Balance
      at November 29, 2008
                
                
                26,564,607
                
                
                $
                26
                
                
                $
                128,311
                
                
                $
                (58,546
                )
                
                $
                (24,594
                )
                
                $
                45,197








The
accompanying notes are an integral part of the consolidated financial
statements.


F-6


Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)


Consolidated
Statements of Cash Flows


(In
thousands of U.S. dollars)








Year
                  ended
                  November
      29, 2008
                
                
                Period
      from
                  January
      1, 2007
                  to
      November 24, 2007
                
                
                Period
      from
                  April
      26, 2006 to
                  December
      31, 2006CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                
                $
                (54,599
                )
                
                $
                (3,799
                )
                
                $
                (148
                )Adjustments
      to reconcile net income to net cash from operating
    activitiesDepreciation
                
                
                12,044
                
                
                
                374Amortization
                
                
                9,100
                
                
                
                211
                
                
                
                —Loss
      on disposal and impairment of assets
                
                
                25,931
                
                
                
                (108
                )
                
                
                —Deferred
      financing fees amortization
                
                
                2,200
                
                
                
                59
                
                
                
                —Deferred
      income taxes
                
                
                (25,596
                )
                
                
                (3,114
                )
                
                
                —Share
      in income of a joint venture
                
                
                (289
                )
                
                
                (12
                )
                
                
                —Unrealized
      loss on foreign exchange
                
                
                490
                
                
                
                —
                
                
                
                —Other
      non cash charges
                
                
                397
                
                
                
                —
                
                
                
                —Changes
      in working capital itemsTrade
      accounts receivable
                
                
                46,029
                
                
                
                3,724
                
                
                
                —Income
      taxes receivable
                
                
                1,316
                
                
                
                (480
                )
                
                
                —Inventories
                
                
                88,404
                
                
                
                2,566
                
                
                
                —Prepaid
      expenses and other assets
                
                
                (2,589
                )
                
                
                1,224
                
                
                
                —Accounts
      payable
                
                
                (40,030
                )
                
                
                (309
                )
                
                
                —Accrued
      liabilities
                
                
                (11,224
                )
                
                
                (356
                )
                
                
                8Income
      taxes payable
                
                
                299
                
                
                
                (5,425
                )
                
                
                —Net
      cash provided by (used for) operating activities
                
                
                51,883
                
                
                
                (5,445
                )
                
                
                (140
                )CASH
      FLOWS FROM INVESTING ACTIVITIESBusiness
      acquisition, net (Note 3)
                
                
                —
                
                
                
                (491,110
                )
                
                
                —Proceeds
      from disposal of property, plant and equipment
                
                
                128
                
                
                
                15,423
                
                
                
                —Payment
      of acquisition costs
                
                
                —
                
                
                
                (2,889
                )
                
                
                —Additions
      to property, plant and equipment
                
                
                (10,599
                )
                
                
                (72
                )
                
                
                —Net
      cash used for investing activities
                
                
                (10,471
                )
                
                
                (478,648
                )
                
                
                —CASH
      FLOWS FROM FINANCING ACTIVITIESIssuance
      of common stock
                
                
                —
                
                
                
                —
                
                
                
                5Gross
      proceeds from public offering – common stock and warrants
                
                
                —
                
                
                
                150,000
                
                
                
                —Gross
      proceeds from private placements – warrants
                
                
                —
                
                
                
                4,750
                
                
                
                —Gross
      proceeds from private placement – common stock and
warrants
                
                
                —
                
                
                
                15,000
                
                
                
                —Conversion
      of shares into cash
                
                
                —
                
                
                
                (30,263
                )
                
                
                —Payment
      of offering costs
                
                
                —
                
                
                
                (11,159
                )
                
                
                (103
                )Borrowings
      from senior secured notes
                
                
                —
                
                
                
                315,000
                
                
                
                —Borrowings
      from revolving credit agreement
                
                
                —
                
                
                
                75,807
                
                
                
                —Proceeds
      from note payable to a related party
                
                
                —
                
                
                
                —
                
                
                
                500Payment
      of debt financing costs
                
                
                —
                
                
                
                (15,057
                )
                
                
                —Repayment
      of note payable to a related party
                
                
                —
                
                
                
                (500
                )
                
                
                —Proceeds
      from revolving credit facility
                
                
                43,688
                
                
                
                —Repayment
      of revolving credit facility
                
                
                (76,632
                )
                
                
                —
                
                
                
                —Net
      cash provided by (used for) financing activities
                
                
                (32,944
                )
                
                
                503,578
                
                
                
                402Effect
      of exchange rate changes on cash and cash equivalents
                
                
                (2,808
                )
                
                
                (109
                )
                
                
                —Net
      increase in cash and cash equivalents
                
                
                5,660
                
                
                
                19,376
                
                
                
                262Cash
      and cash equivalents, beginning of year
                
                
                19,638
                
                
                
                262
                
                
                
                —Cash
      and cash equivalents, end of year
                
                $
                25,298
                
                
                $
                19,638
                
                
                $
                262SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATIONInterest
      paid
                
                $
                40,464
                
                
                $
                17
                
                
                $
                —Income
      taxes paid
                
                $
                3,481
                
                
                $
                7,522
                
                
                $
                —





The
accompanying notes are an integral part of the consolidated financial
statements.


F-7
 Barzel Industries Inc. and Subsidiaries (Formerly Novamerican
Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)




1
- ORGANIZATION AND NATURE OF OPERATIONS





Symmetry
Holdings Inc. ("Symmetry") was incorporated in Delaware on April 26, 2006, as a
development stage company formed for the purpose of acquiring, through a merger,
capital stock exchange, asset acquisition, stock purchase or other similar
business combination, one or more operating businesses. On November 15, 2007,
Symmetry completed the acquisition of Novamerican Steel Inc. and its
subsidiaries (the "Acquired Company"), a corporation incorporated under the laws
of Canada.  Symmetry's activities from April 26, 2006 (inception)
through November 15, 2007, were limited to organizational activities, Symmetry's
initial public offering, identifying and evaluating prospective acquisition
candidates, general corporate matters and, since April 21, 2007, discussions and
negotiations with Acquired Company regarding an initial business combination.
Until November 15, 2007, Symmetry did not engage in any operations and did not
generate any revenues, other than interest income earned on the proceeds from
its initial public offering (as described in Note 12) and two private placements
(as described in Note 13).




The
registration statement for Symmetry's initial public offering of units (the
"Offering") was declared effective on March 6, 2007.  On March 7,
2007, the units began trading on the American Stock Exchange ("AMEX") under the
symbol SHJ.U. Each unit consisted of one share of common stock and one warrant
to purchase one share of common stock.  On March 12, 2007, the
Offering of 18,750,000 units was consummated, generating aggregate gross
proceeds of $150,000,000.  Net proceeds of $143,700,000, inclusive of
deferred underwriting costs were held in a trust account at JPMorgan Chase Bank,
N.A. maintained by Continental Stock Transfer & Trust Company, as trustee,
until the closing of the acquisition of Acquired Company on November 15, 2007.
On April 4, 2007, Symmetry's common stock and warrants began to trade separately
on AMEX under the symbols SHJ and SHJ.WS, respectively.




On June
21, 2007, Symmetry and its wholly owned indirect subsidiary, 632422 N.B. LTD., a
corporation existing under the laws of the Canadian province of New Brunswick,
entered into an arrangement agreement with Acquired Company to acquire all of
its outstanding common shares in exchange for cash by way of a court-approved
statutory plan of arrangement under the Canada Business Corporations Act (the
"Acquisition").




On
November 15, 2007, Symmetry completed the Acquisition and the other transactions
contemplated by the arrangement agreement after receiving the approval of the
stockholders of Acquired Company holding at least 66 2/3% of votes cast at the
special meeting of stockholders, the approval of the stockholders of Symmetry
pursuant to its amended and restated certificate of incorporation, the approval
of the Acquisition pursuant to the Investment Canada Act, the approval of the
Acquisition under the Competition Act (Canada), and the expiration of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
Following completion of the Acquisition on November 15, 2007, Acquired Company
became a wholly owned indirect subsidiary of Symmetry.





On
December 5, 2007, Symmetry changed its name to Novamerican Steel Inc.
("Novamerican Steel" or the "Company") and changed Acquired Company's name to
Novamerican Steel Canada Inc. ("Novamerican Canada"). On December 7, 2007, the
Company's Board of Directors approved the change of its fiscal year end from
December 31 to the last Saturday of November.  On December 28, 2007,
the Company's common stock, warrants and units ceased trading on the Amex and,
on December 31, 2007, its common stock and warrants commenced trading on The
NASDAQ Capital Market ("NASDAQ") under the symbols “TONS” and “TONSW,”
respectively. The Company's units, which had traded as a separate class of
security, ceased to trade as such and all outstanding units were automatically
separated into common stock and warrants.





On
February 13, 2009, Novamerican Steel Inc. changed its name to Barzel Industries
Inc. (“Barzel”).  Effective February 17, 2009, the Company’s common
stock and warrants commenced trading on NASDAQ under the symbols “TPUT” and
“TPUTW,” respectively.





F-8
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


1
- ORGANIZATION AND NATURE OF OPERATIONS (Continued)





Headquartered
in Norwood, Massachusetts, with an operational hub in Ontario, Canada, the
Company operates a network of 18 metal processing, manufacturing, and
distribution facilities throughout the Canadian provinces of Ontario and Quebec
and in the Northeastern, Mid-Atlantic and Mid-Western United
States.  The Company operates these strategically located facilities
as one integrated system.  Through an innovative management system
that includes close statistical monitoring and analysis of its plant
capabilities, the Company services its customers with speed, quality and
reliability.





The
Company is a well-diversified, multi-process provider of value-added services
and offers a wide range of metal processing solutions to a variety of
industries, from construction and industrial manufacturing to finished
commercial racking products.





2
- ACCOUNTING POLICIES





The
accompanying consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of
America.





A summary
of significant accounting policies consistently applied in the preparation of
the accompanying consolidated financial statements follows.





Fiscal
period




On
December 7, 2007, the Company changed its fiscal year end from December 31 to
the last Saturday of November.  The 2008 fiscal year ended November
29, 2008 includes financial results from November 25, 2007.  The 2007
fiscal period ended November 24, 2007 includes financial results from January 1,
2007.  The 2006 fiscal period ended December 31, 2006 includes
financial results from April 26, 2006 (the date of inception of the
Company).





Basis
of consolidation




The
consolidated financial statements for the year ended November 29, 2008, include
the financial results of Barzel, its wholly-owned subsidiaries Barzel Holdings
Inc. ("Barzel Holdings"), Barzel Finco Inc. ("Barzel Finco"), Barzel Industries
Canada Inc. (including the former Novamerican Steel Inc. (“Acquired Company” or
“Barzel Canada”)), and Barzel Industries U.S. Inc. (“Barzel
U.S.”).  The financial statements for the period January 1, 2007
through November 24, 2007, include the financial results of Barzel, its
wholly-owned subsidiaries Barzel Holdings, Barzel Finco and ten days of Acquired
Company (the period from the date of the Acquisition to the fiscal year end).
The ten-day results of Acquired Company may not be indicative of results of a
full fiscal year. The consolidated financial statements for the year ended
December 31, 2006 include only the financial results of Symmetry. All
significant intercompany balances and transactions have been eliminated in the
consolidated financial statements.





Joint
venture




The
Company's interest in a joint venture is accounted for by the equity method.
Accordingly, the Company's share in income of the joint venture is included in
consolidated net income (loss).





Translation
of foreign currencies




The
non-consolidated financial statements of the Company and its subsidiaries are
prepared using their respective functional currencies, which are the U.S. dollar
for U.S. operations and the Canadian dollar for Canadian
operations.  As a result, in the Company's consolidated financial
statements, the financial statements of the Canadian operations are translated
into U.S. dollars using the current rate method.  Under this method,
assets and liabilities are translated using the exchange rate in effect at the
balance sheet date.  Revenues and expenses are translated at the
average rates in effect during the year.  Gains and losses arising
from translation are included in accumulated other comprehensive
loss.


F-9
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


2
- ACCOUNTING POLICIES (Continued)





Transactions
conducted in foreign currencies by the Company are translated into their
respective functional currency as follows: monetary assets and liabilities are
translated at the exchange rate in effect at year-end and revenues and expenses
are translated at the average exchange rate for the month in which they occur.
Exchange gains and losses arising from transactions denominated in foreign
currencies are included in the consolidated statements of operations and
comprehensive income. Losses amounted to $3,340,000, $46,000 and nil for the
year ended November 29, 2008, and for the periods ended November 24, 2007 and
December 31, 2006, respectively.





Accounting
estimates




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. On an ongoing basis, management reviews its
estimates based on currently available information. Management believes the most
sensitive estimates include the allowance for doubtful accounts, the
recoverability of goodwill and other intangibles, and the provision for income
taxes. Actual results could differ from these estimates.





Revenue
recognition




Revenue
from product sales is recognized when there is persuasive evidence of an
arrangement, the amount is fixed or determinable, delivery of the product to the
customer has occurred, there are no uncertainties surrounding product acceptance
and collection of the amount is considered probable. Title to the product
generally passes and revenue is recognized upon delivery of the product at the
customer’s destination for direct sales or at the time services are performed
for processing services where the Company is adding value to its customer’s
inventory.  Direct cost associated with direct sales are recognized in
cost of sales upon shipment of the product and direct costs associated with
processing services are recognized as part of plant expense when services are
complete. Sales returns and allowances are treated as reductions to sales and
are provided for based on historical experience and current
estimates.





The
customer is invoiced for the complete product delivered to the customer's
designated location and shipping and handling charges are not invoiced
separately. Shipping and handling costs are recorded under the "Delivery"
caption on the consolidated statements of operations and comprehensive
loss.





Cost
of sales





Cost of
sales includes direct and indirect costs associated with the Company’s
manufactured products.  Direct costs include material, while indirect
costs include, but are not limited to, inbound freight charges, purchasing and
receiving costs, inspection costs, warehousing costs, internal transfer costs
and other costs of the Company’s distribution network.





Plant
expenses





Plant
expenses include the cost of maintaining the Company’s operating facilities,
including but not limited to building rent, insurance and other occupancy costs,
depreciation, equipment rental, and office expenses. Plant expenses also
includes direct labor costs associated with the Company’s processing
operations.





Delivery
expenses





Delivery
expenses reflect labor, material handling, and other third party costs
(including but not limited to the costs of renting and maintaining trucks and
trailers) incurred for the delivery of the Company’s products to
customers.


F-10
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


2
- ACCOUNTING POLICIES (Continued)





Selling
expenses





Selling
expenses include payroll, commissions, employee benefits and other costs
associated with sales and marketing personnel, promotion, travel and auto
related expenses, office expenses, and professional services costs not directly
associated with the processing, manufacturing, operating or delivery costs of
the Company’s products.





Cash
and cash equivalents




The
Company considers all highly liquid instruments with an original maturity of
three months or less when purchased to be cash equivalents.





Trade
accounts receivable




Credit is
extended based on evaluation of a customer's financial condition and, generally,
collateral is not required. Trade accounts receivable are stated at amounts due
from customers based on agreed upon payment terms net of an allowance for
doubtful accounts. Accounts outstanding longer than the agreed upon payment
terms are considered past due. The Company determines its allowance by
considering a number of factors, including the length of time trade accounts
receivable are past due, the customer's current ability to pay its obligation to
the Company and the condition of the general economy and the industry as a
whole. The Company writes off trade accounts receivable when they are determined
to be uncollectible and any payments subsequently received on such receivables
are credited to the bad debt expense.





Inventories




Inventories
are stated in the lower of cost or market and include the cost of purchased
steel and freight.  Cost is determined using the specific
identification method or the moving average cost method.  The
Company’s processing facilities apply the specific identification cost method to
inventory purchased.  The tube mills apply the specific identification
method to purchased inventory then applying a moving average cost to the tubing
produced at the facility.  The distribution locations apply a moving
average cost method to any inventory received.  The Company regularly
reviews inventory quantities on hand and writes down to its net realizable value
any inventory believed to be impaired.  If actual demand or market
conditions are less favorable than projected demand, additional inventory
write-downs may be required that could adversely impact financial results for
the period in which the additional excess or obsolete inventory is
identified.





Property,
plant and equipment




Property,
plant and equipment are stated at cost and are reviewed for possible impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. If changes in circumstances indicate that the carrying
amount of an asset that the Company expects to hold and use may not be
recoverable, future cash flows expected to result from the use of the asset and
its disposition are estimated. If the undiscounted value of the future cash
flows is less than the carrying amount of the asset, impairment is recognized.
Management believes that there has been no impairment of the Company's property,
plant and equipment at November 29, 2008.





Property,
plant and equipment are depreciated over their estimated useful lives using the
following methods:





Buildings
      and building improvements
            Straight-line
            10
      to 40 yearsMachinery
      and equipment – light gauge
            Straight-line
            5
      to 10 yearsMachinery
      and equipment – heavy gauge
            Straight-line
            10
      to 20 yearsFurniture
      and fixtures
            Straight-line
            5
      to 15 yearsTransportation
      equipment
            Straight-line
            3
      to 7 yearsComputer
      equipment
            Straight-line
            3
      to 5 yearsLeasehold
      improvements
            Straight-line
            5
      to 10 years





No
depreciation is recorded on assets under construction.


F-11
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


2
- ACCOUNTING POLICIES (Continued)





Machinery
and equipment have useful lives over a broad range of useful lives because they
include equipment with a broad range of productive uses.  In general,
the equipment with a 5 to 10 year useful life is of a lighter gauge (and
typically used in the Company’s service centers) and consequently has a shorter
useful life; and the equipment with a 10 to 20 year useful life is of a heavier
gauge (and typically used in the Company’s processing and manufacturing centers)
and consequently has a longer useful life.





Goodwill,
intangibles and other long-lived assets





Goodwill
represents the excess of the purchase price over the fair value of the tangible
and identifiable intangible net assets acquired. As required under Statement of
Financial Accounting Standards (‘‘SFAS’’) No. 142, Goodwill and Other Intangible
Assets, goodwill and other intangible assets with indefinite lives are
not amortized but are tested for impairment in the fourth quarter of each year
or more frequently when an event occurs or circumstances change such that it is
reasonably possible that an impairment may exist.





The
Company as a whole is considered one reporting unit.  The Company
estimates the value of its reporting unit based on its  market
capitalization.  Based on the Company’s market capitalization, using
the average stock price, per share, for the week of November 24-28, 2008, the
Company’s carrying value exceeded its fair value.  As a result, the
Company conducted the second step of the goodwill impairment
test.  The second step compares the implied fair value of the goodwill
(determined as the excess fair value over the fair value assigned to other
assets and liabilities) to the carrying amount of the goodwill.  The
implied fair value of the second step of the impairment test resulted in the
recognition of an impairment charge of $413,545 during the fourth quarter of
2008.





The
intangible assets consist of a trade name, customer relationships and a
non-compete agreement acquired in a business acquisition.  Intangible
assets having definite lives are capitalized and amortized based on their
estimated useful lives according to the following methods and
rates:





Customer
      relationships
            Straight-line
      over a period not exceeding 12 yearsNon-compete
      agreement
            Straight-line
      over a period not exceeding 18
months





Intangible
assets having an indefinite life, including trade name, are tested for
impairment through comparison of the fair value of the intangible asset with its
carrying amount. During the fourth quarter of 2008, certain changes in
circumstances occurred which led the Company to conclude that the fair value of
the Novamerican Steel Inc. trade name was lower than its carrying
amount.  The primary factor triggering the Company’s decision to
reassess the reasonableness of the carrying value of the trade name was the
decision to change the Company’s name from Novamerican Steel Inc. to Barzel
Industries Inc.  The Company performed its impairment assessment and
determined a $25,639,000 impairment charge be recognized during the fourth
quarter of 2008. The Company used an income approach to estimate fair value
and to determine the extent of the impairment resulting from no longer using the
Novamerican name.





On a
quarterly basis, the useful lives of customer relationships and the non-compete
agreement are evaluated to determine whether events or circumstances warrant a
revision to the remaining period of amortization.  If an estimate of
an intangible’s useful life is changed, the remaining carrying amount of the
asset will be amortized prospectively over the revised remaining useful
life.





See Note
3 for the purchase price allocation and Note 4 for the roll forward of
intangible assets and goodwill.





F-12
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


2
- ACCOUNTING POLICIES (Continued)





Deferred
financing charges




Deferred
financing charges are recorded at cost, are related to the issuance of debt and
are deferred and amortized over the term of the related
debt.  Amortization of deferred financing costs is included in
interest expense and totaled $2,200,000 and $109,000 for the years ended
November 29, 2008 and November 24, 2007, respectively.  Deferred
financing charges, net of accumulated amortization, totaled $12,798,000 and
$14,998,000 at November 29, 2008 and November 24, 2007,
respectively.





Financial
instruments





SFAS
No. 107,Disclosures
about Fair Value of Financial Instruments, requires disclosure for
estimates of the fair value of financial instruments, which are included in Note
17.





Accrued
liabilities





As part
of the process of preparing its financial statements, the Company is required to
estimate accrued liabilities. This process involves identifying services that
third parties have performed and estimating the level of service performed and
the associated cost incurred on these services as of each balance sheet date in
the financial statements. Examples of estimated accrued liabilities include
freight, utilities, salaries and benefits, workers’ compensation claims and
professional service fees, such as attorneys and accountants. In the event that
the Company does not identify certain costs that have been incurred or it under
or over-estimates the level of services or the costs of such services, reported
expenses for a reporting period could be overstated or understated. The date on
which certain services commence, the level of services performed on or before a
given date, and the cost of services is often subject to the Company’s judgment.
The Company makes these judgments and estimates based upon known facts and
circumstances.





Restructuring




In April
2008, the Company announced a restructuring plan to close its Cambridge, Ontario
facility and implement organizational changes, especially in the replenishment,
processing, distribution and sales processes. As a result of this plan, the
Company has recorded restructuring charges comprised principally of severance
and associated employee termination costs related to the reduction of its
workforce, plant closure, and contract termination costs related to facility
lease obligations. These activities have been accounted in accordance with
Statement of Financial Accounting Standards (“SFAS”) No. 146, Accounting for Costs Associated with
Exit or Disposal Activities. SFAS No. 146 requires that a liability for
costs associated with an exit or disposal activity be recognized when the
liability is incurred, as opposed to when management commits to an exit plan.
SFAS No. 146 also requires that: (i) liabilities associated with exit
and disposal activities be measured at fair value; (ii) one-time
termination benefits be expensed at the date the entity notifies the employee,
unless the employee must provide future service, in which case the benefits are
expensed ratably over the future service period; and (iii) costs to
terminate a contract (specifically an operating lease) before the end of its
term be recognized at the cease use date.  See Note 22 for further
information.





Net
loss per share




In
accordance with SFAS No. 128,Earnings Per Share, basic
net loss per share is computed by dividing net loss by the weighted-average
number of common shares outstanding during the period. Diluted net loss per
share is computed by dividing net loss by the weighted-average number of
dilutive common shares outstanding during the period. The diluted loss per share
is computed using the treasury method, which assumes that all warrants are
exercised at the beginning of the period and that the funds obtained are used to
purchase common stock of the Company at the average trading price of the common
stock during the period.  As a result of the net losses incurred for
the year ended November 29, 2008 and the period ended November 24, 2007, the
calculation of diluted weighted average shares outstanding for the year ended
November 29, 2008 and the period ended November 24, 2007 exclude potential
common shares related to 6,352,847 and 25,579,069 dilutive securities,
respectively. There were no potential dilutive securities for the period from
April 26, 2006 to December 31, 2006.


F-13
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


2-
ACCOUNTING POLICIES (Continued)




Income
taxes




The
provision for income taxes is computed on the pre-tax income of the consolidated
subsidiaries located within each taxing country based on the current income tax
laws. Deferred income taxes are provided based upon currently enacted income tax
rates for temporary differences in the recognition of assets and liabilities on
the financial statements and for income tax purposes.





Deferred
income taxes include the benefit of losses carried forward when it is more
likely than not that future profits will result. Should the opportunity to
realize the benefit of these losses expire, such amounts would result in
additional deferred income tax expense.





Taxes
have not been provided on undistributed earnings of foreign subsidiaries because
our intention is to reinvest these undistributed earnings
indefinitely.  To the extent that the Company’s circumstances change
or future earnings are repatriated, the Company will provide for income tax on
the earnings of the affected foreign subsidiaries.





In July
2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. ("FIN") 48, Accounting for Uncertainty in Income
Taxes.  FIN 48 is an interpretation of Statement of Financial
Accounting Standard ("SFAS") No. 109, Accounting for Income Taxes.
FIN 48 provides interpretive guidance for the financial statement recognition
and measurement of a tax position taken, or expected to be taken, in a tax
return. FIN 48 requires the affirmative evaluation that it is more likely than
not, based on the technical merits of a tax position, that an enterprise is
entitled to economic benefits resulting from positions taken in income tax
returns. If a tax position does not meet the "more-likely-than-not" recognition
threshold, the benefit of that position is not recognized in the financial
statements. FIN 48 also requires companies to disclose additional quantitative
and qualitative information in their financial statements about uncertain tax
positions.





Comprehensive
loss




Comprehensive
loss is comprised of net loss and other comprehensive (loss) income. Other
comprehensive (loss) income includes certain changes in equity that are excluded
from net loss such as foreign currency translation adjustments.





Current
and pending accounting changes




Current




Effective
November 25, 2007, the Company adopted SFAS No. 157, Fair Value Measurements,
issued by the FASB in September 2006, only for its financial assets and
liabilities required or permitted to be stated or disclosed at fair value. This
statement defines fair value, establishes a framework for measuring fair value,
and expands disclosures about fair value measurements.  Accordingly,
SFAS No. 157 does not require any new fair value measurements.





As of
November 29, 2008, the Company did not carry any of its assets or liabilities at
fair value on a recurring basis and did not recognize any unrealized amounts in
earnings related to changes in fair value for the year ended November 29,
2008.  The Company’s fair value measurement disclosure requirements
are currently limited to annual fair value disclosure of its financial
instruments.





The
Company did not adopt SFAS 157 with respect to its non-financial assets and
liabilities that do not require fair value statement on a recurring
basis.  Under FASB Staff Position (FSP) SFAS 157-2, the Effective Date of SFAS 157
fair value requirements for non-financial assets and liabilities not required to
be stated at fair value on a recurring basis are deferred until the year
beginning November 30, 2008.  Primarily this deferral impacts assets
such as property, plant and equipment, intangible assets, goodwill upon
non-recurring events such as business combinations, asset impairments and
goodwill impairment, among others.


F-14
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


2-
ACCOUNTING POLICIES (Continued)





Effective
November 25, 2007, the Company adopted SFAS No. 159, Fair Value Option for Financial
Assets and Financial Liabilities, issued by the FASB in April 2007. This
statement’s objective is to improve financial reporting by allowing entities to
mitigate volatility in reported earnings caused by the measurement of related
assets and liabilities using different attributes, without having to apply
complex hedge accounting provisions. Under SFAS No. 159, entities that elect the
fair value option will report unrealized gains and losses in earnings at each
subsequent reporting date. Additionally, the statement establishes presentation
and disclosure requirements to help financial statement users understand the
effect of the entity’s election on its earnings. Currently, the Company has not
elected to treat any of its financial assets or liabilities under the fair value
option.





In May
2008, the FASB issued SFAS No. 162, The Hierarchy of
Generally Accepted
Accounting Principles.  SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting principles to be used in
the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States. This statement became effective November 15, 2008.  The
adoption of this pronouncement did not have a material impact on its financial
position, results of operations or cash flows.





Pending




In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations. This
statement replaces SFAS No. 141, Business Combinations. This
statement retains the fundamental requirements in SFAS No. 141 that the
acquisition method of accounting (which SFAS No. 141 called the purchase method)
be used for all business combinations and for an acquirer to be identified for
each business combination. This statement also establishes principles and
requirements for how the acquirer: a) recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed,
and any noncontrolling interest in the acquiree; b) recognizes and measures the
goodwill acquired in the business combination or a gain from a bargain purchase;
and c) determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. SFAS No. 141(R) will apply prospectively to business combinations
for which the acquisition date is on or after the Company’s year beginning
November 29, 2009. While the Company has not yet evaluated this statement for
the impact, if any, that SFAS No. 141(R) will have on its consolidated financial
statements, the Company will be required to expense costs related to any
acquisitions after November 29, 2009.





In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements. This statement amends Accounting
Research Bulletin 51 to establish accounting and reporting standards for the
noncontrolling minority) interest in a subsidiary and for the deconsolidation of
a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. The Company has not yet determined the
impact, if any, that SFAS No. 160 will have on its consolidated financial
statements. SFAS No. 160 is effective for the Company’s year beginning November
29, 2009.





In
February 2008, the FASB issued FSP SFAS 157-2.  This statement defers
fair value requirements for non-financial assets and liabilities not required to
be stated at fair value on a recurring basis until the year beginning November
30, 2008. This deferral primarily impacts assets such as property, plant and
equipment, intangible assets and goodwill upon non-recurring events such as
business combinations, asset impairments and goodwill impairment, among others.
The Company is currently evaluating the impact of FSP SFAS 157-2, but does not
expect the adoption of this pronouncement to have a material impact on its
financial position, results of operations or cash flows.





In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivatives and
Hedging Activities.  This statement
amends SFAS No. 133 to require enhanced disclosures about an entity’s derivative
and hedging activities and thereby improves the transparency of financial
reporting.  This statement requires entities to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedging items are accounted for under SFAS
No. 133 and its related interpretations, and (c) how derivative instruments and
related hedged items affect an entity’s financial position, financial
performance and cash flows.  SFAS No. 161 is effective for the
Company’s year beginning November 30, 2008.  The Company is currently
evaluating the impact of SFAS No. 161, but does not expect the adoption of this
pronouncement to have a material impact on its financial position, results of
operations or cash flows as the Company has historically not used these
instruments.


F-15
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


2-
ACCOUNTING POLICIES (Continued)





In April
2008, the FASB issued FASB Staff Position (FSP) FAS No. 142-3, Determination of the Useful Life of
Intangible Assets.  This FSP amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under FASB Statement No. 142,
"Goodwill and Other Intangible Assets." The intent of this FSP is to
improve  the  consistency  between  the
useful  life of a  recognized intangible  asset
under Statement 142 and the period of expected cash flows used to measure the
fair value of the asset under FASB Statement No. 141  (Revised
2007), "Business  Combinations," and other U.S. generally
accepted  accounting principles  (GAAP).  This FSP
is effective for financial statements issued for years beginning after December
15, 2008, and interim periods within those years.  Early adoption is
prohibited.  The Company does not expect the adoption of FSP No. 142-3
to have a material effect on its results of operations and financial
condition.





3
- BUSINESS ACQUISITION





On
November 15, 2007, the Company acquired all of the outstanding common stock of
Acquired Company for $56.00 per share. The purchase consideration for the
Acquisition was $585,200,000. In addition, the Company incurred acquisition
costs of approximately $7,327,000 of which approximately $2,889,000 were direct
costs capitalized as part of the purchase price consideration and $4,438,000
were indirect and general costs expensed as incurred.  The $1,080,000
severance payment described below relates to an employment relationship that
terminated prior to the closing of the business combination.  The
resulting contractual obligation required monthly payments over a 36-month
period, and did not require a lump-sum payment.  Because the Company
received no future benefit from the employee’s services, it considered the
obligation a transactional expense that, pursuant to implementation guidance
found in SFAS 141, could not be capitalized, and included the payment as a
non-operating cost as described below.





The
nature of the non-operating costs is listed below.





Severance
      payment
                  
                  $
                  1,080Bridge
      Financing Facility commitment fee
                  
                  
                  1,575Accounting
      consulting fees
                  
                  
                  26Rating
      agency fees
                  
                  
                  156Legal
      advisory fees
                  
                  
                  389Other
                  
                  
                  151Symmetry
      consulting fees
                  
                  
                  1,061Total
                  
                  $
                  4,438





The
purchase price was allocated to the assets acquired and liabilities assumed
based upon a final valuation of their respective fair values. The final
valuation analysis included analyses of historical operating results of the
Company, research on the industry in which the Company operates, benchmarking
data of prior merger and acquisition activity in the same general industry as
the Company, research on publicly traded guideline companies and other economic
and financial analyses, where applicable.





The
identifiable intangible assets consisted of a trade name with a value of
$27,900,000 (indefinite useful life), customer relationships with a value of
$73,800,000 (12 year estimated useful life), a non-compete agreement with a
value of $5,100,000 (18 months useful life) and a leasehold interest with a
value of $556,000 (4 year useful life).  The excess consideration over
fair value recorded as goodwill aggregated to approximately $133,317,000, which
is not deductible for tax purposes.





F-16
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


3
- BUSINESS ACQUISITION (Continued)





The
following table compares the final purchase price allocation to the preliminary
purchase price allocation.  The table summarizes the fair values of
the assets acquired and the liabilities assumed:





Final
      Valuation
                  November
      15, 2007
                
                
                Preliminary
      Valuation
                  November
      15, 2007Tangible
      assets acquiredCash
                
                $
                94,090
                
                
                $
                94,090Accounts
      receivable
                
                
                117,440
                
                
                
                117,440Inventories
                
                
                154,636
                
                
                
                154,636Property,
      plant and equipment
                
                
                156,400
                
                
                
                168,338Other
                
                
                7,329
                
                
                
                7,329529,895
                
                
                
                541,833Liabilities
      assumedAccounts
      payable and accrued liabilities
                
                
                106,181
                
                
                
                106,181Deferred
      income tax credits and other liabilities
                
                
                76,298
                
                
                
                66,981182,479
                
                
                
                173,162Net
      tangible assets acquired
                
                
                347,416
                
                
                
                368,671Goodwill
                
                
                133,317
                
                
                
                149,360Customer
      relationships
                
                
                73,800
                
                
                
                43,600Trade
      name
                
                
                27,900
                
                
                
                17,500Non-compete
      agreement
                
                
                5,100
                
                
                
                8,700Leasehold
      interest
                
                
                556
                
                
                
                —Other
                
                
                —
                
                
                
                258Total
      consideration paid including direct acquisition costs
                
                $
                588,089
                
                
                $
                588,089





During
the fourth quarter of 2008, certain changes in circumstances occurred that led
the Company to conclude that the fair value of the Novamerican Steel Inc. trade
name was lower than its carrying amount.  The primary factor
triggering the Company’s decision to reassess the reasonableness of the carrying
value of the trade name was the decision to change the Company’s name from
Novamerican Steel Inc. to Barzel Industries Inc.  The Company
performed its impairment assessment and determined the $25,639,000 impairment
charge the Company recognized during the fourth quarter of 2008. The Company
used an income approach to estimate fair value and to determine the extent of
the impairment resulting from no longer using the Novamerican name.





The
following unaudited pro forma financial information for 2007 presents the
combined results of operations as if the acquisition had occurred at January 1,
2007. The pro forma information includes certain adjustments, including
depreciation expense, interest expense and certain other adjustments, together
with related income tax effects.  The pro forma amounts may not be
indicative of the results that actually would have been achieved had the
Acquisition occurred as of the beginning of the period and are not necessarily
indicative of future results of the combined companies:





Period
      from
                      January
      1,
                      2007
      to
                      November
      24,
                      2007(Unaudited)Net
      sales
                    
                    $
                    801,348Net
      income (loss)
                    
                    $
                    (4,503
                    )Earnings
      per share – Basic and Diluted
                    
                    $
                    (0.21
                    )





F-17
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)





4
– INTANGIBLES AND GOODWILL





The final
purchase price allocation (Note 3) identified intangible assets consisting of
customer relationships with a value of $73,800,000  (12 year estimated
useful life), a trade name with a value of $27,900,000 (indefinite useful life),
a non-compete agreement with a value of $5,100,000 (18 months useful life) and a
leasehold interest with a value of $556,000 (4 year useful life).





During
the fourth quarter of 2008, certain changes in circumstances occurred that led
the Company to conclude that the fair value of the Novamerican Steel Inc. trade
name was lower than its carrying amount.  The primary factor
triggering the Company’s decision to reassess the reasonableness of the carrying
value of the trade name was the decision to change the Company’s name from
Novamerican Steel Inc. to Barzel Industries Inc.  The Company
performed its impairment assessment and determined a $25,639,000 impairment
charge recognized during the fourth quarter of 2008.





Total
amortization expense, included in operating expenses, for intangible assets for
the year ended November 29, 2008, and for the periods ended November 24, 2007
and December 31, 2006 was $9,100,000, $211,000 and nil,
respectively.  It is estimated that amortization expense will be
$7,004,000 for fiscal 2009, $5,777,000 for fiscal 2010, $5,777,000 for fiscal
2011, $5,669,000 for fiscal 2012 and $5,669,000 for fiscal 2013.





The
Company as a whole is considered as one reporting unit.  The Company
estimates the value of its reporting unit based on its  market
capitalization.  Based on the Company’s market capitalization, using
the average stock price per share, for the week of November 24-28, 2008, the
Company’s carrying value exceeded its fair value.  As a result, the
Company conducted the second step of the goodwill impairment
test.  The second step compares the implied fair value of the goodwill
(determined as the excess fair value over the fair value assigned to other
assets and liabilities) to the carrying amount of the goodwill.  The
implied fair value of the second step of the impairment test resulted in the
recognition of an impairment charge of $413,545.





The
following table shows the activity and changes in the carrying amount of the
trade name intangible asset for the year ended November 29, 2008 and for the
period ended November 24, 2007:





Balance
      at December 31, 2006
                      
                      $
                      —Acquisition
                      
                      
                      17,500Foreign
      exchange
                      
                      
                      (490
                      )Balance
      at November 24, 2007
                      
                      
                      17,010Final
      purchase price allocation
                      
                      
                      10,400Impairment
                      
                      
                      (25,639
                      )Foreign
      exchange
                      
                      
                      (1,771
                      )Balance
      at November 29, 2008
                      
                      $
                      —





F-18
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


4
– INTANGIBLES AND GOODWILL (Continued)




The
following table shows the activity and changes in the carrying amount of the
customer relationships intangible asset for the year ended November 29, 2008 and
for the period ended November 24, 2007:





Balance
      at December 31, 2006
                  
                  $
                  —Acquisition
                  
                  
                  43,600Amortization
                  
                  
                  (91
                  )Foreign
      exchange
                  
                  
                  (428
                  )Balance
      at November 24, 2007
                  
                  
                  43,081Final
      purchase price allocation
                  
                  
                  30,200Amortization
                  
                  
                  (5,976
                  )Foreign
      exchange
                  
                  
                  (5,031
                  )Balance
      at November 29, 2008
                  
                  $
                  62,274








The
following table shows the activity and changes in the carrying amount of other
intangible assets for the year ended November 29, 2008 and for the period ended
November 24, 2007:





Balance
      at December 31, 2006
                  
                  $
                  —Acquisition
                  
                  
                  8,700Amortization
                  
                  
                  (116
                  )Foreign
      exchange
                  
                  
                  (244
                  )Balance
      at November 24, 2007
                  
                  
                  8,340Final
      purchase price allocation
                  
                  
                  (3,302
                  )Amortization
                  
                  
                  (3,125
                  )Rent
      expense on leasehold interest
                  
                  
                  (128
                  )Foreign
      exchange
                  
                  
                  (434
                  )Balance
      at November 29, 2008
                  
                  $
                  1,351





The
following table shows the activity and changes in the carrying amount of
goodwill for the year ended November 29, 2008 and for the period ended November
24, 2007:





Balance
      at December 31, 2006
                  
                  $
                  —Acquisitions
      and investments
                  
                  
                  149,360Balance
      at November 24, 2007
                  
                  
                  149,360Final
      purchase price allocation
                  
                  
                  (16,171
                  )Other
      adjustments
                  
                  
                  736Goodwill
      impairment
                  
                  
                  (414
                  )Balance
      at November 29, 2008
                  
                  $
                  133,511





F-19
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


5
- INCOME TAXES





The
following summarizes the Company's income taxes on the earnings of its Canadian
and U.S. operations.





Loss
before income taxes by local jurisdiction:





Year
                  ended
                  November
      29, 2008
                
                
                Period
      from
                  January
      1,
                  2007
      to
                  November
      24,
                  2007
                
                
                Period
      from
                  April
      26,
                  2006
      to
                  December
      31,
                  2006United
      States
                
                $
                (18,465
                )
                
                $
                (1,639
                )
                
                $
                (148
                )Canada
                
                
                (61,005
                )
                
                
                (4,433
                )
                
                
                —$
                (79,470
                )
                
                $
                (6,072
                )
                
                $
                (148
                )





The
income tax provision is composed of the following:





Year
                  ended
                  November
      29,
                  2008
                
                
                Period
      from
                  January
      1,
                  2007
      to
                  November
      24,
                  2007
                
                
                Period
      from
                  April
      26,
                  2006
      to
                  December
      31,
                  2006CurrentUnited
      States
                
                $
                259
                
                
                $
                511
                
                
                $
                —Canada
                
                
                466
                
                
                
                330
                
                
                
                —725
                
                
                
                841
                
                
                
                —DeferredUnited
      States
                
                
                (7,039
                )
                
                
                (1,276
                )
                
                
                —Canada
                
                
                (18,557
                )
                
                
                (1,838
                )
                
                
                —(25,596
                )
                
                
                (3,114
                )
                
                
                —$
                (24,871
                )
                
                $
                (2,273
                )
                
                $
                —





The
significant components of deferred income tax expense are set forth in the
following table:





Year
                  ended
                  November
      29,
                  2008
                
                
                Period
      from
                  January
      1,
                  2007
      to
                  November
      24,
                  2007
                
                
                Period
      from
                  April
      26,
                  2006
      to
                  December
      31,
                  2006Deferred
      tax benefit for other
                
                $
                (1,898
                )
                
                $
                (339
                )
                
                $
                (60
                )Expense/(benefit)
      for change to valuation allowance
                
                
                —
                
                
                
                (60
                )
                
                
                60Benefit
      for net operating losses
                
                
                (8,443
                )
                
                
                (2,365
                )
                
                
                —Expense/(benefit)
      for statutory rate change
                
                
                (1,312
                )
                
                
                166
                
                
                
                —Benefit
      for reduction of deferred taxes related to non-
                  current intangible
      assets
                
                
                (13,943
                )
                
                
                (516
                )
                
                
                —$
                (25,596
                )
                
                $
                (3,114
                )
                
                $
                —





F-20
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


5
- INCOME TAXES (Continued)





The
components of the Company's net deferred income tax liability are as
follows:





November
      29,
                  2008
                
                
                November
      24,
                  2007AssetsCurrent
      deferred income taxesInventories
                
                $
                381
                
                
                $
                592Trade
      accounts receivable
                
                
                536
                
                
                
                93Net
      operating losses
                
                
                —
                
                
                
                6,067Restructurings
                
                
                1,082
                
                
                
                —Other
      items
                
                
                489
                
                
                
                3782,488
                
                
                
                7,130Long-term
      deferred income taxesNet
      operating losses
                
                
                11,068
                
                
                
                —Restructurings
                
                
                483
                
                
                
                —Other
      items
                
                
                459
                
                
                
                4312,010
                
                
                
                43Deferred
      income tax assets
                
                $
                14,498
                
                
                $
                7,173LiabilitiesCurrent
      deferred income taxesInventories
                
                $
                —
                
                
                $
                2,606Other
                
                
                254
                
                
                
                315254
                
                
                
                2,921Long-term
      deferred income taxesProperty,
      plant and equipment
                
                
                11,677
                
                
                
                13,505Property,
      plant and equipment – Step up
                
                
                14,117
                
                
                
                21,300Intangibles
      – Step up
                
                
                23,286
                
                
                
                23,753Other
                
                
                —
                
                
                
                3049,080
                
                
                
                58,588Total
      deferred income tax liabilities
                
                $
                49,334
                
                
                $
                61,509Net
      deferred income tax liability
                
                $
                (34,836
                )
                
                $
                (54,336
                )





The
Company had total foreign and federal net operating loss carryforwards on a
tax-affected basis of $9,595,000 at November 29, 2008, which expire in 2018 and
beyond.  In addition, the Company has state loss carryforwards, on a
tax-affected basis of $1,473,000.  Of these net operating loss
carryforwards, $882,000 expire in 2013 and $591,000 expire in 2018 and
beyond.





F-21
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


5
- INCOME TAXES (Continued)





Income
tax benefit attributable to income from continuing operations differed from the
amounts computed by applying the federal income tax rate of 35% to pre-tax loss
from operations as set forth in the following table:





Year
                  ended
                  November
      29,
                  2008
                
                
                Period
      from
                  January
      1,
                  2007
      to
                  November
      24,
                  2007
                
                
                Period
      from
                  April
      26,
                  2006
      to
                  December
      31,
                  2006U.S.
      federal statutory income tax
                
                $
                (27,815
                )
                
                $
                (2,125
                )
                
                $
                (52
                )Impact
      of rate change on deferred taxes
                
                
                (1,312
                )
                
                
                166
                
                
                
                —Jurisdictional
      and state rate differential
                
                
                1,643
                
                
                
                (80
                )
                
                
                (8
                )Tax
      effects of permanent items
                
                
                2,169
                
                
                
                (171
                )
                
                
                —Tax
      effects of goodwill impairment
                
                
                145
                
                
                
                —
                
                
                
                —Adjustments
      to deferred income tax asset valuation allowance
                
                
                —
                
                
                
                (60
                )
                
                
                60Other
      items
                
                
                299
                
                
                
                (3
                )
                
                
                —$
                (24,871
                )
                
                $
                (2,273
                )
                
                $
                —





On
January 1, 2007, the Company adopted the provisions of FIN 48. There were
no significant uncertain income tax positions requiring recognition in the
financial statements as of January 1, 2007.  As a result of the
business acquisition, the Company increased its liability for unrecognized
income tax benefits by approximately $3,410,000, which was accounted for as an
adjustment to goodwill.





Unrecognized
income tax benefits are as follows:





November
      29,
                  2008
                
                
                November
      24,
                  2007Balance
      at November 25, 2007
                
                $
                3,410
                
                
                $
                —Tax
      positions related to prior years
                
                
                —
                
                
                
                —Tax
      positions related to the current year
                
                
                —
                
                
                
                3,410Lapse
      of applicable statute of limitations
                
                
                —
                
                
                
                —Current
      year interest
                
                
                144
                
                
                
                —Prior
      year interest, through goodwill
                
                
                408
                
                
                
                —Foreign
      exchange rate impact
                
                
                (835
                )
                
                
                —Balance
      at November 29, 2008
                
                $
                3,127
                
                
                $
                3,410








The total
liabilities associated with unrecognized income tax benefits that, if
recognized, would impact the effective income tax rates were nil at November 24,
2007 and November 29, 2008.




The
Company accrues interest and penalties associated with unrecognized tax benefits
in income tax expense in the Consolidated Statements of Operations and in Other
Long Term Liabilities in the Consolidated Balance Sheets. The expense for
interest and penalties reflected in the Consolidated Statements of Operations
(interest net of related income tax benefits) was $144,000 and nil for the year
ended November 29, 2008 and for the period ended November 24, 2007,
respectively. The corresponding liabilities in the Consolidated Balance Sheets
were $3,127,000 and $3,410,000 at November 29, 2008 and November 24, 2007,
respectively, which are included within Other Long-Term Liabilities in the
Consolidated Balance Sheets.







F-22
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


5
      - INCOME TAXES (Continued)




The
Company and its subsidiaries file income tax returns in the U.S. federal
jurisdiction, various state jurisdictions, Canadian federal jurisdiction and
various provincial jurisdictions. The Company is subject to U.S. federal income
tax examination for tax years 2003 through 2007. The Company is subject to
various state income tax examinations for tax years 2002 through 2007. The
Company is subject to Canadian federal income tax examination for tax years 2002
through 2007. The Company is subject to various provincial income tax
examinations for tax years 2001 through 2007.





During
the year ended November 29, 2008, the Company’s Canadian subsidiary was notified
of a Canada Revenue Agency audit for the periods 2003-2007.  Fieldwork
was conducted during the year.  A reassessment proposal, primarily
related to intercompany transactions, was received in December
2008.  The Company’s Canadian subsidiary requested and received an
extension of time until April 14, 2009 to file a letter of representation
disputing the reassessment proposal and intends to vigorously support positions
taken on previously filed tax returns.  In the event that Revenue
Canada prevails in its reassessment proposal, or any part thereof, the Company’s
Canadian subsidiary would seek competent authority relief from the United States
in order to avoid double taxation.  This is a lengthy process and it
is common for the competent authorities to take years to reach an agreement
between jurisdictions.





6
- EARNINGS PER SHARE





The
following table provides the reconciliation between basic and diluted income per
share:





Year
                  ended
                  November
      29,
                  2008
                
                
                Period
      from
                  January
      1,
                  2007
      to
                  November
      24,
                  2007
                
                
                Period
      from
                  April
      26,
                  2006
      to
                  December
      31,
                  2006Net
      loss
                
                $
                (54,599
                )
                
                $
                (3,799
                )
                
                $
                (148
                )Weighted
      average number of common stock outstanding
                
                
                22,872,867
                
                
                
                19,375,451
                
                
                
                4,687,500Effect
      of dilutive warrants
                
                
                —
                
                
                
                —
                
                
                
                —Weighted
      average number of diluted common stock outstanding
                
                
                22,872,867
                
                
                
                19,375,451
                
                
                
                4,687,500Net
      loss per shareBasic
                
                $
                (2.39
                )
                
                $
                (0.20
                )
                
                $
                (0.03
                )Diluted
                
                $
                (2.39
                )
                
                $
                (0.20
                )
                
                $
                (0.03
                )





F-23
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


7
- TRADE ACCOUNTS RECEIVABLE





Trade
accounts receivable consist of the following:





November
      29,
                  2008
                
                
                November
      24,
                  2007Trade
      accounts receivable
                
                $
                56,880
                
                
                $
                112,442Allowance
      for doubtful accounts
                
                
                (2,940
                )
                
                
                (896
                )$
                53,940
                
                
                $
                111,546





Changes
in the allowance for doubtful accounts are as follows:





November
      29,
                      2008Balance
      at beginning of year
                    
                    $
                    896Bad
      debt expense
                    
                    
                    2,584Accounts
      written off
                    
                    
                    (480
                    )Recoveries
                    
                    
                    (60
                    )Balance
      at end of year
                    
                    $
                    2,940





The
allowance for doubtful accounts for Acquired Company was $896,000 on acquisition
and remained unchanged at November 24, 2007.





8
- INVENTORIES





Inventories
consist of the following:





November
      29,
                  2008
              
              
              November
      24,
                  2007Raw
      materials
              
              $
              32,450
              
              
              $
              82,095Finished
      goods
              
              
              20,721
              
              
              
              67,799$
              53,171
              
              
              $
              149,894





9
- PROPERTY, PLANT AND EQUIPMENT





Property,
plant and equipment consist of the following:





November
      29,
                  2008
                
                
                November
      24,
                  2007Land
                
                $
                10,722
                
                
                $
                7,757Buildings
      and building improvements
                
                
                43,659
                
                
                
                44,641Machinery
      and equipment – light gauge
                
                
                12,970
                
                
                
                12,428Machinery
      and equipment – heavy gauge
                
                
                55,556
                
                
                
                78,740Furniture
      and fixtures
                
                
                1,188
                
                
                
                711Transportation
      equipment
                
                
                860
                
                
                
                958Computer
      equipment
                
                
                465
                
                
                
                848Leasehold
      improvements
                
                
                1,055
                
                
                
                897Assets
      under construction
                
                
                9,685
                
                
                
                3,862136,160
                
                
                
                150,842Accumulated
      depreciation
                
                
                11,238
                
                
                
                406$
                124,922
                
                
                $
                150,436





F-24
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


9
- PROPERTY, PLANT AND EQUIPMENT (Continued)





Depreciation
expense related to property, plant and equipment was $12,044,000, $374,000 and
nil for the year ended November 29, 2008, and for the periods ended November 24,
2007 and December 31, 2006, respectively.  Gains on disposal of
property, plant and equipment were $122,000, $108,000 and nil for the year ended
November 29, 2008, and for the periods ended November 24, 2007 and December 31,
2006, respectively.





10
- ACCRUED LIABILITIES





Accrued
liabilities consist of the following:





November
      29,
                    2008
                  
                  
                  November
      24,
                    2007Accrued
      freight, utilities and other general expenses
                  
                  $
                  3,097
                  
                  
                  $
                  5,059Accrued
      salaries and benefits
                  
                  
                  4,804
                  
                  
                  
                  7,488Accrued
      interest
                  
                  
                  1,805
                  
                  
                  
                  3,395Sales
      taxes payable
                  
                  
                  1,016
                  
                  
                  
                  759Accrued
      workers’ compensation claims
                  
                  
                  1,009
                  
                  
                  
                  789Accrued
      professional, accounting and auditing fees
                  
                  
                  1,004
                  
                  
                  
                  479Other
                  
                  
                  437
                  
                  
                  
                  59$
                  13,172
                  
                  
                  $
                  18,028





11
- LONG-TERM DEBT





Long-term
debt obligations consist of the following:





Maturity
                
                November
      29,
                  2008
                
                
                November
      24,
                  2007Notes
                2015
                
                $
                315,000
                
                
                $
                315,000ABL
      Credit Facility
                2012
                
                
                33,814
                
                
                
                75,588$
                348,814
                
                
                $
                390,588





Notes





On
November 15, 2007, the Company, through Barzel Finco, issued the Notes in an
aggregate principal amount of $315,000,000. Interest on the Notes accrues at the
rate of 11.5% per annum and is payable semi-annually in arrears on May 15 and
November 15.  The Notes mature on November 15, 2015.





The Notes
are guaranteed on a senior secured basis by Barzel and by each U.S. subsidiary
of Barzel other than certain inactive subsidiaries and, in the future, with
certain exceptions, by subsidiaries which guarantee the obligations under the
ABL Credit  Facility (other than foreign subsidiaries which guarantee
only the obligations of other foreign subsidiaries) and by foreign subsidiaries
which guarantee the debt of Barzel or any of its U.S. subsidiaries.





The
obligations under the Notes are secured by a second priority lien on the cash,
deposit accounts, accounts receivable and inventory of Barzel, Barzel Finco and
the U.S. subsidiary guarantors and a first priority lien on the remaining assets
of each guarantor, including, subject to certain limitations, intercompany
demand promissory notes issued by Barzel Canada to Barzel Finco which is secured
by a second priority lien on the cash, deposit accounts, accounts receivable and
inventory of Barzel Canada and by a first priority lien on substantially all of
its remaining assets.


F-25
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


11
- LONG-TERM DEBT (Continued)





Under the
indenture for the Notes, in general, the Company is permitted to pay dividends
and repurchase common stock if certain consolidated interest coverage ratio
requirements are satisfied plus, regardless of compliance with such ratio
requirements, an amount of up to the sum of 50% of certain consolidated net
income (cumulative from the beginning of fiscal year 2008), plus 100% of net
cash proceeds from certain sales of common stock and certain investment returns
may be used to pay dividends and repurchase Common Stock.  In
addition, the Company is permitted to make payments not to exceed $275,000 to
redeem outstanding warrants.





The Notes
contain a cross-default provision whereby an event of default under the ABL
Credit Facility constitutes an event of default under the Notes.





On and
after November 15, 2011, the Company will be entitled, at its option, to redeem
all or a portion of the Notes upon not less than 30 and not more than 60 days'
notice, at 105.750% if redeemed during the 12-month period commencing on
November 15, 2011, at 102.875% if redeemed during the 12-month period commencing
on November 15, 2012, and at par if redeemed during the 12-month period
commencing on November 15, 2013 and thereafter, plus accrued and unpaid interest
on such Notes to the redemption date. In addition, any time prior to November
15, 2010, the Company will be entitled, at its option, on one or more occasions,
to redeem Notes in an aggregate principal amount not to exceed 35% of the
aggregate principal amount of the Notes originally issued at a redemption price
of 111.5%, plus accrued and unpaid interest on such Notes to the redemption
date.





In
connection with the sale of the Notes, the Company entered into a registration
rights agreement, dated as of November 15, 2007, with the initial purchasers of
the Notes (the “Registration Rights Agreement”). Under the Registration Rights
Agreement, the Company agreed to, among other things, use reasonable best
efforts to file a shelf registration statement prior to May 15,
2008.  Because the shelf registration statement was not declared
effective by the SEC prior to May 15, 2008, the Company experienced a
registration penalty for the delay.  The Company incurred $630,000 in
interest expense related to the delay in registration for the year ended
November 29, 2008.





On
November 25, 2008, the Company filed with the Securities and Exchange Commission
a request to withdraw its Registration Statement on Form S-1 (originally filed
on June 11, 2008 and amended on August 29, 2008 and October 30, 2008) on Form
SB-2 in accordance with Rule 477 of the Security Act of 1933.  The
Company requested the withdrawal of this registration statement because the
selling Noteholders elected not to proceed with the resale under the
Registration Statement due to current market conditions.  The
Registration Statement was not declared effective by the Securities and Exchange
Commission and no securities were sold thereunder.  Effective November
20, 2008, the Notes became eligible for resale without registration under Rule
144 of the Securities Act of 1933, as amended.





ABL
Credit Facility





On
November 15, 2007, Barzel, Barzel Finco and Barzel Canada entered into the ABL
Credit Facility. Subject to a U.S. borrowing base consisting of certain eligible
accounts receivable and inventory, an amount up to $175,000,000 is available to
Barzel Finco, as U.S. borrower, in U.S. dollars, and, subject to a U.S. and a
Canadian borrowing base consisting of certain eligible accounts receivable and
inventory of the Company’s Canadian subsidiaries. An amount up to $125,000,000
is available to Barzel Canada, as Canadian borrower, in U.S. dollars or Canadian
dollars. The $175,000,000 available under the ABL Credit Facility is subject to
a $15,000,000 availability block. The ABL Credit Facility includes borrowing
capacity available for letters of credit and for short-term borrowings referred
to as swingline borrowings. In addition, the Company has the option, subject to
certain conditions, to increase the commitments under the ABL Credit Facility in
aggregate principal amount of up to $50,000,000.





U.S.
dollar borrowings will bear interest, at the Company’s option, at a rate equal
to a margin over either LIBOR (2.22% at November 29, 2008) or the U.S. base rate
(4.00% at November 29, 2008). The applicable margins for borrowings may be
reduced or increased depending upon the excess availability under the ABL Credit
Facility. Canadian dollar borrowings will bear interest, at the Company’s
option, at a rate equal to a margin over either the Canadian prime rate (4.00%
at November 29, 2008) or, in case of borrowings in the form of bankers’
acceptances, a customary bankers’ acceptance discount rate for the contract
period relevant to such borrowing plus stamping fees equal to the applicable
margin for LIBOR based loans.


F-26
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


11
- LONG-TERM DEBT (Continued)





The
weighted-average interest rates of funds borrowed under the ABL Credit Facility
was 5.83% for the year ended November 29, 2008 and 6.96% for the period ended
November 24, 2007.





As of
November 29, 2008, the aggregate eligible assets in our borrowing base totaled
$66,400,000 (representing the sum of the U.S. borrowing base and the Canadian
borrowing base) that is subject to a $15,000,000 million availability block, of
which $900,000 was utilized for letter of credit obligations and approximately
$33,800,000 was outstanding under the ABL Credit Facility.





The
obligations under the ABL Credit Facility are guaranteed by the Company's U.S.
subsidiaries and the obligations of Barzel Canada under the ABL Credit Facility
are guaranteed by the Canadian subsidiaries of the Company, in each case subject
to certain exceptions.  The obligations under the ABL Credit Facility
are secured by perfected first priority security interests in substantially all
the cash, deposit accounts, accounts receivable and inventory of the Company and
its U.S. subsidiary guarantors and perfected second priority security interests
in substantially all of the remaining assets of the Company and its U.S.
subsidiary guarantors.  The obligations of Barzel Canada under the ABL
Credit Facility are secured by perfected first priority security interests in
substantially all the cash, deposit accounts, accounts receivable and inventory
of Barzel Canada and its subsidiary guarantors and perfected second priority
security interests in substantially all of the remaining assets of Barzel Canada
and its subsidiary guarantors.





The ABL
Credit Facility permits voluntary prepayments (without reducing availability for
future revolving borrowings) and voluntary commitment reductions at any time, in
each case without premium or penalty.





Under the
ABL Credit Facility, in general, the Company is permitted to pay dividends and
repurchase common stock so long as after paying such dividend or repurchasing
such common stock, at least $65,000,000 is available to be drawn by the
subsidiary borrowers under the ABL Credit Facility and the Company would be able
to meet certain fixed charge ratio requirements.  In addition, the
Company is permitted to make payments not to exceed $275,000 to redeem
outstanding warrants.





The ABL
Credit Facility contains a number of covenants that restrict the Company’s
corporate activities.  The covenants may restrict the Company’s
ability to repurchase or redeem the Notes. In addition, at any time when excess
availability (defined as the lesser of (a) the $175,000,000 revolving commitment
and (b) the aggregate borrowing base (but without giving effect to the
$15,000,000 availability block, (c) minus the amount outstanding under the ABL
Credit Facility) under the credit agreement is less than $20,000,000 for five
consecutive business days or there is an event of default under the ABL Credit
Facility, there will be a sweep of all cash proceeds from U.S. and Canadian bank
accounts of the U.S. borrower, the Canadian borrower, Barzel and the other
guarantors of obligations under the ABL Credit Facility to repay or cash
collateralize any credit extensions outstanding. Such cash sweep would only
terminate when excess availability under the ABL Credit Facility is greater than
$20,000,000 for 30 consecutive days or such event of default is cured. In
addition, the ABL Credit Facility includes a financial covenant under which the
Company will be required to maintain a 1.0 to 1.0 fixed charge coverage ratio
whenever excess availability under the credit agreement is less than
$20,000,000.  As of November 29, 2008, excess availability under the
ABL Credit Facility was $31,658,000.





12
– INITIAL PUBLIC OFFERING





On March
12, 2007, the Company consummated an initial public offering of 18,750,000 units
at an offering price of $8.00.  Each unit consisted of one share of
common stock and one warrant ("public warrants"). There were 6,352,847 public
warrants outstanding at November 29, 2008.  Each warrant entitles the
holder to purchase from the Company one share of common stock at an exercise
price of $5.50 commencing on March 7, 2008.  The public warrants
expire on March 7, 2011.  The Company may redeem the outstanding
public warrants, as well as the warrants that were issued in the private
placement (as described in Note 13), in whole, but not in part, at a price of
$0.01 per warrant at any time after the warrants become exercisable, upon a
minimum of 30 days' prior written notice of redemption, if (and only if), the
last sales price of the common stock equals or exceeds $11.00 per share for any
20 trading days within a 30 day trading period ending three business days before
the Company sends the notice of redemption.  The Company paid the
underwriters of the initial public offering fees equal to $10,389,737, including
expenses,




F-27
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


12
– INITIAL PUBLIC OFFERING (Continued)





or 7.0%
of the gross proceeds (net of amount reduced for conversion).  On
December 31, 2007, the Company's securities began trading on NASDAQ under the
symbols TONS for the common stock and TONSW for the warrants.  The
Company's units ceased to trade as a separate class of securities and all
outstanding units were separated into common stock and warrants.




13
- PRIVATE PLACEMENTS





Certain
of the Company's founding stockholders purchased an aggregate of 4,166,667
warrants in a private placement, which was consummated on March 5, 2007, at a
price of $0.90 per warrant, or an aggregate purchase price of $3,750,000. Each
warrant entitles the holder to purchase one share of common stock at a price of
$5.50 and is exercisable commencing on March 7, 2008 until expiration on March
5, 2011 or earlier upon redemption.  The Company’s Board of Directors
determined, based on its assessment of historical and then current trading
prices of warrants of similarly situated special purpose acquisition
corporations, that the fair value for a warrant at that time was equal to such
purchase price per warrant.





To
further fund the Company's working capital requirements, an affiliate of the
Company's Chairman purchased, on June 21, 2007, in a private placement, 787,402
warrants for $1,000,000, or $1.27 per warrant, being the volume-weighted average
price for the 20 trading days prior to the placement.  Each warrant
entitles the holder to purchase one share of common stock at a price of $5.50
and is exercisable commencing March 7, 2008 until expiration on June 21, 2011 or
earlier upon redemption.  The Company’s Board of Directors determined,
based on such average trading price, that the fair value for a warrant at that
time was equal to such purchase price per warrant. These warrants are
identical to the public warrants, except as otherwise necessary to reflect the
fact that they were sold in a private placement, to permit delivery of
unregistered shares upon exercise and permit net cashless exercise so as to,
among other reasons, permit tacking of holding periods under Rule
144.





On
November 15, 2007, in connection with arranging for the financing of the
acquisition of Acquired Company, the Company and its Chairman entered into an
agreement pursuant to which the Chairman agreed to purchase in a private
placement 1,875,000 units for a purchase price of $8.00 per unit, or an
aggregate of $15,000,000.  Each unit was substantially the same as the
units sold in the Company’s initial public offering at the same purchase price
per unit and consisted of one share of its common stock and one
warrant.  Each warrant entitles the holder to purchase one share of
common stock at a price of $5.50 and is exercisable commencing on March 7, 2008,
until expiration on November 15, 2011 or earlier upon redemption.  The
Company’s Board of Directors determined, based on the purchase price per unit in
the Company's initial public offering, the purposes of such offering and the
absence of any change in such purposes, as well as the trading prices of the
Company’s common stock and warrants at that time, that the fair value for a unit
at that time was equal to such purchase price per unit.  On November
15, 2007, the units were issued to affiliates of the Chairman and former special
adviser pursuant to such agreement.




These
warrants are identical to the public warrants, except as otherwise necessary to
reflect the fact that they were sold in a private placement, to permit delivery
of unregistered shares upon exercise and permit net cashless exercise so as to,
among other reasons, permit tacking of holding periods under Rule
144.  Subject to limited exceptions (such as a transfer to relatives
and trusts and controlled entities for estate and tax planning purposes), these
warrants were not transferable until consummation of the Company's initial
business combination.  The underwriters did not receive any
underwriting discounts or commissions on the sale of these
warrants.





14
- COMMON STOCK AND WARRANTS




Pursuant
to the Company's amended and restated certificate of incorporation, a public
stockholder who voted against the Acquisition at the Company's special meeting
of stockholders held on October 25, 2007 was entitled to request that the
Company convert each of his shares into cash equal to the conversion price per
share. Public stockholders of the Company owning 3,860,196 shares of common
stock (out of 25,312,500 issued and outstanding on October 25, 2007) voted
against the Acquisition and converted these shares into cash at a conversion
price per share of $7.84 or $30,263,936 in the aggregate.




On
November 29, 2008, the Company had 26,564,607 shares of common stock outstanding
and 6,352,847 warrants outstanding. At November 29, 2008, the Company had
reserved 6,352,847 shares of common stock for issuance upon exercise of
warrants.




On
November 24, 2007, the Company had 21,452,304 shares of common stock
outstanding, representing 4,687,500 shares issued to the founding stockholders,
plus 18,750,000 shares issued as part of the units in the offering, plus
1,875,000 shares issued as




F-28
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


14
- COMMON STOCK AND WARRANTS (Continued)




part of
the units in the private placement consummated on November 15, 2007, less
3,860,196 shares converted to cash as part of the stockholders' approval of the
Acquisition.




On
November 24, 2007, the Company had 25,579,069 warrants outstanding, representing
18,750,000 warrants issued as part of the units in the Company’s initial public
offering, plus 4,166,667 warrants issued in the private placement consummated on
March 5, 2007, plus 787,402 warrants issued in the private placement consummated
June 21, 2007, plus 1,875,000 warrants issued as part of the units in the
private placement consummated on November 15, 2007.




Stock
splits




On
January 12, 2007, the Company filed an amended and restated certificate of
incorporation with the Secretary of the State of Delaware in order to, among
other things, (i) effect a stock split of its common stock on a 3 for 2 basis,
resulting in 4,687,500 shares issued and outstanding, and (ii) integrate into
one instrument all provisions of its amended and restated certificate of
incorporation, as amended.  All amounts have been restated for all
periods presented.




Exchange
of Warrants




Between
August 1, 2008 and November 29, 2008, pursuant to Exchange Agreements between
the Company and various holders of an aggregate of 19,226,222 warrants to
purchase common stock, par value $0.001 per share, of the Company, the Company
issued an aggregate of 5,112,303 shares of common stock to such holders in
exchange for their surrender of such warrants, which were cancelled upon such
surrender. The warrants are exercisable at $5.50 and expire on March 7, 2011.
The exchanges were privately negotiated, and included an aggregate of 2,305,145
shares issued to certain officers and directors of the Company (at an exchange
ratio based upon the consolidated closing bid prices for the common stock and
warrants of the Company on various dates were in accordance with NASDAQ
regulations) and an aggregate of 2,807,158 shares issued to certain
non-affiliates of the Company.  The shares of common stock issued on
such exchange were exempt from registration under section 3(a)(9) of the
Securities Act of 1933, as amended, as the exchanges were between existing
security holders and no commissions or other remuneration was paid or given
directly or indirectly for soliciting such exchanges.




The
Company and certain stockholders have agreed to hold in escrow an aggregate of
842,415 shares of common stock issued in such exchanges (the “Escrow Shares”).
The Escrow Shares will remain in escrow until the Company’s 2009 Annual Meeting
of Stockholders, at which the issuance of the Escrow Shares will be submitted
for stockholder approval.  If such approval is obtained, the Escrow
Shares will be released to the appropriate stockholder.  If such
approval is not obtained, the Company will unwind the relevant Exchanges and, in
connection therewith, the Escrow Shares will be returned to the Company for
cancellation and the Company will re-issue the relevant warrants surrendered in
such Exchanges.  As a result of the escrow arrangement, the Company
has reduced the aggregate number of shares issued in the Exchanges without
stockholder approval to below 20% of the shares of common stock outstanding
prior to the Exchanges.




15
- PREFERRED STOCK





The
Company is authorized to issue 10,000,000 shares of preferred stock with such
designations, voting and other rights and preferences as may be determined from
time to time by the board of directors.




F-29
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


16
- RELATED PARTY TRANSACTIONS





The
following transactions with related parties were concluded in the normal course
of business and were measured at their respective exchange values, which are the
amounts established and agreed to by the related parties:





Year
      ended
                  November
      29,
                  2008
                
                
                Period
      from
                  January
      1,
                  2007
      to
                  November
      24,
                  2007
                
                
                Period
      from
                  April
      26,
                  2006
      to
                  December
      31,
                  2006Processing
      revenue from a joint venture
                
                $
                155
                
                
                $
                18
                
                
                $
                —Processing
      charges paid to a joint venture
                
                $
                3,950
                
                
                $
                200
                
                
                $
                —Interest
      charges paid to a director and a principal stockholder
                
                $
                —
                
                
                $
                17
                
                
                $
                —Consulting
      fees paid to an entity owned by an officer and director
                
                $
                1,428
                
                
                $
                75
                
                
                $
                —Legal
      fees paid to a firm of which a director is a former
partner
                
                $
                2,547
                
                
                $
                
                
                
                $





The
Company had trade accounts payable and accrued liabilities of $1,523,000 and
$1,639,000 for processing charges due to a joint venture (Delta Tube Inc.) at
November 29, 2008 and November 24, 2007, respectively.  The Company had approximately $268,000 and $1,642,000 for legal fees
due at November 29, 2008 and November 24, 2007, respectively to a law firm of
which a former director was a partner (such partner resigned as director of the
Company prior to the end of the 2008 year).





17
- FINANCIAL INSTRUMENTS





Fair
value of financial instruments




The fair
value of financial instruments has been estimated using data which management
considers the best available methodology deemed suitable for the pertinent
category of financial instruments as follows:





–
            Due
      to their short-term maturity, the carrying value of certain financial
      instruments was assumed to approximate their fair value. These financial
      instruments include cash and cash equivalents, trade accounts receivable,
      trade accounts payable, accrued liabilities, accounts payable to a joint
      venture and restructuring charges.


–
            The
      fair value of the Notes is based on market prices for similar debt
      instruments of companies in similar industries with similar debt
      structures:





November
      29,
                  2008
                
                
                November
      24,
                  2007Carrying
                  amount
                
                
                Fair
                  value
                
                
                Carrying
                  amount
                
                
                Fair
                  valueNotes
                
                $
                315,000
                
                
                $
                207,270
                
                
                $
                315,000
                
                
                $
                291,911ABL
      Credit Facility
                
                
                33,814
                
                
                
                33,814
                
                
                
                75,588
                
                
                
                75,588$
                348,814
                
                
                $
                241,084
                
                
                $
                390,588
                
                
                $
                367,499





–
            In
      the past, there was no significant difference between the fair value and
      the carrying amount of the ABL Credit Facility given that the ABL Credit
      Facility bears interest at a variable rate. However, in connection with
      the financial crisis, tightened liquidity and economic downturn, which
      unfolded in the latter part of 2008, similar debt instruments were issued
      to active market participants bearing significantly higher loan premiums.
      The Company was not able to identify a similar debt instrument on the open
      market, including recently concluded transactions, having substantially
      the same terms and conditions, in order to adequately approximate the fair
      value of the ABL Credit Facility. Accordingly, and in light of recent
      market conditions, the determination of the fair value of the ABL Credit
      Facility would have been a costly process, and thus, would likely exceed
      its related benefit. The terms and conditions of the ABL Credit Facility
      are described in Note 11.





F-30
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


17
- FINANCIAL INSTRUMENTS (Continued)




Exchange
rate risk




Although
the Company's financial results are reported in U.S. dollars, a substantial
portion of the Company's revenues is received in, and expenses are incurred in,
Canadian dollars. The Company may in the future utilize forward exchange
contracts to hedge its exposure to exchange rate fluctuations in connection with
future sales and purchases denominated in U.S. dollars by its Canadian
subsidiaries. At November 29, 2008 and November 24, 2007, the Company had
no such forward foreign currency contracts outstanding.





Interest
rate risk




The
Company's exposure to interest rate risk is as follows:





Cash
      and cash equivalents
            Floating
      rateTrade
      accounts receivable
            Non-interest
      bearingAccounts
      payable
            Non-interest
      bearingAccrued
      liabilities
            Non-interest
      bearingRestructuring
      Charges
            Non-interest
      bearingIncome
      and other taxes
            Non-interest
      bearingLong-term
      debt
            Fixed
      rate:
            $
      315,000,000Floating
      rate:
            $
      33,814,000





Concentration
risk




The
Company does not have a concentration of available sources of supply, labor,
service or other rights that, if suddenly eliminated, could severely impact its
operations.





Financial
instruments which potentially subject the Company to a concentration risk
principally consist of cash and cash equivalents. The Company has its cash and
cash equivalents placed with high quality, financial institutions. The balances
at such institutions at November 29, 2008 and periodically throughout the year
are in excess of federally insured limits. As part of its cash management
process, the Company performs periodic evaluation of the relative credit
standing of these institutions.  The Company has not experienced any
losses related to this concentration of risk.  At November 29,
2008, the amount in excess of federal insured limits was approximately
$11,117,000 for the U.S. subsidiaries and $12,462,000 for the Canadian
subsidiaries.  At November 29, 2008, amounts in excess of $10,060,000
minimum bank requirements are invested by a financial institution in overnight
daily deposits in pooled U.S. Government backed securities.




Credit
risk




Concentration
of credit risk with respect to sales and accounts receivable is limited due to
the large number of customers comprising the Company's customer base and their
dispersion across different geographies and no one customer accounted for more
than 10.0% of sales in 2008 (one customer accounted for 12.6% of sales in
2007).  One customer had a net trade accounts receivable balance
representing approximately 21.8% of accounts receivable, net at November 29,
2008 (subsequent to November 29, 2008, this accounts receivable balance was paid
in full).  No customers accounted for more than 10% of accounts
receivable, net at November 24, 2007.  The Company generally does not
require collateral or other security to support customer
receivables.




Commodity
price risk




In the
normal course of business, the Company is exposed to market risk or price
fluctuations related to the purchase, production or sale of steel products. The
Company's market risk strategy has generally been to obtain competitive prices
for its products and services and allow operating results to reflect market
price movements dictated by supply and demand.




F-31
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


18
- INVESTMENT IN A JOINT VENTURE




The
Company holds a 60% equity interest and a 50% voting interest in a joint venture
with ArcelorMittal Tubular Products Montreal Inc., that processes carbon steel
into tubing. The joint venture, Delta Tube and Company, Ltd. ("Delta Tube"), is
located in LaSalle, Québec, Canada.





Condensed
financial information of the joint venture is summarized below:





Year
                  ended
                  November
      29,
                  2008
                
                
                Period
      from
                  January
      1, 2007 to
                  November
      24,
                  2007
                
                
                Period
      from
                  April
      26, 2006 to
                  December
      31,
                  2006OperationsNet
      sales
                
                $
                4,772
                
                
                $
                106
                
                
                $
                —Operating
      income
                
                $
                449
                
                
                $
                (19
                )
                
                $
                —








November
      29,
                  2008
                
                
                November
      24, 2007Balance
      sheetAssetsCurrent
      assets
                
                $
                2,500
                
                
                $
                2,368Property,
      plant and equipment
                
                
                1,196
                
                
                
                1,727$
                3,696
                
                
                $
                4,095LiabilitiesCurrent
      liabilities
                
                $
                339
                
                
                $
                368Joint
      venture investmentCapital
      contributions
                
                
                2,504
                
                
                
                2,504Undistributed
      earnings
                
                
                1,103
                
                
                
                628Accumulated
      other comprehensive income
                
                
                (250
                )
                
                
                595$
                3,696
                
                
                $
                4,095





19
– CONTINGENCIES





In
October 2001, the Company’s subsidiary, American Steel and Aluminum Corporation
(“ASA”), was named as one of 57 defendants in an action brought by two private
parties under the Comprehensive Environmental Response Compensation and
Liability Act, or CERCLA, to recover costs incurred and to be incurred in
connection with a waste disposal facility in Cumberland, Rhode Island which has
been categorized as a Superfund site by federal authorities.  During
2006, ASA entered into a settlement with the plaintiffs, with the approval of
the United States Environmental Protection Agency, or EPA, resolving its alleged
liability for all claims for past and future response and oversight costs in
connection with the Remedial Investigation/Feasibility Study for the
site.  The litigation remains pending against the non-settling
defendants.  The settlement does not address future remediation costs
and the Company does not believe it is currently possible to estimate its share,
if any, of such costs should claims for their recovery be pursued against
ASA.  As part of the rationalization of the Company’s distribution
facilities, on February 13, 2009, the Company sold the facility in Cumberland,
Rhode Island.  The sale of this facility does not relieve the Company
of its potential liability for such environmental claims.





The
Company is involved in various other lawsuits, claims, demands, and other legal
proceedings and investigations arising out of or incidental to the conduct of
its business.  While it is not possible to determine the ultimate
disposition of each of these matters, the Company does not believe that their
ultimate disposition will have a material adverse effect on its results of
operations, financial condition or cash flows.




F-32
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


20
- COMMITMENTS





The
Company has entered into operating leases for certain facilities and equipment
which expire at various dates until 2019. The following schedule outlines the
future minimum rental payments under these commitments at November 29,
2008:





2009
                
                $
                4,7182010
                
                
                3,6012011
                
                
                3,2312012
                
                
                2,0712013
                
                
                1,166Thereafter
                
                
                5,243Total
      minimum payments
                
                $
                20,030





Total
rent expense under the operating leases included in the accompanying
consolidated statements of operations approximated $5,100,000, $248,000 and nil
for the year ended November 29, 2008, and for the periods ended November 24,
2007 and December 31, 2006, respectively.





At
November 29, 2008, the Company had outstanding purchase commitments of
approximately $282,000.





21 - RETIREMENT PLANS





A U.S.
subsidiary makes available to substantially all of its employees a defined
contribution plan under the Internal Revenue Code Section 401(k). The plan
allows employees to contribute a portion of their pre-tax income in accordance
with specified guidelines. Investment elections are made at the discretion of
the employees and the plan is administered by an independent third party. The
U.S. subsidiary matches a percentage of the employee contributions up to a
certain limit. Costs incurred under the 401(k) plan approximated $524,000,
$15,200 and nil for the year ended November 29, 2008, and for the periods ended
November 24, 2007 and December 31, 2006, respectively.





A
Canadian subsidiary makes available to all of its employees a defined
contribution plan.  The Canadian subsidiary contributes a percentage
of the employees' salaries to the plan. Investment elections are made at the
discretion of the employees and the plan is administered by an independent third
party.  Costs incurred under the plan approximated $646,000, $20,000
and nil for the year ended November 29, 2008, and for the periods ended November
24, 2007 and December 31, 2006, respectively.





22
- RESTRUCTURING CHARGES





In April
2008, the Company announced a limited restructuring program associated with the
closure of the Cambridge, Ontario facility and the implementation of
organizational changes, particularly in the replenishment, processing,
distribution and sales processes. The program will result in the termination of
certain employees, the possible relocation or reassignment of other employees
and other exit costs associated with the closure of the Cambridge
facility.





For the
year ended November 29, 2008, the Company recognized a restructuring charge of
$13,348,000, relating to this program. The charge is included in the line item
“Restructuring costs” in the Consolidated Statement of Operations.




F-33
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


22
- RESTRUCTURING CHARGES (Continued)





The
following table summarizes the components of the restructuring charge for the
year ended November 29, 2008:





Severance,
      payroll and other related costs (1)
                    
                    $
                    12,953Lease
      termination obligations and related costs (2)
                    
                    
                    311Other
      exit costs (3)
                    
                    
                    84Total
      restructuring charge
                    
                    $
                    13,348





(1)
            Represents
      severance for 189 employees; 101 employees related to three Canadian
      plants, 66 related to US manufacturing plants and 22 corporate overhead
      personnel.


(2)
            Represents
      the remaining fair value of lease obligations for the Cambridge facility,
      as determined at the cease-use date of the facility, net of estimated
      sublease income that could be reasonably obtained in the future, and will
      be paid out over the remaining lease term, which ends in fiscal year 2009.
      Projected sublease income is based on management's estimates, which are
      subject to change.


(3)
            Consists
      primarily of cost to relocate inventory from the Cambridge facility to
      other facilities.





The
following table summarizes the liability related to the 2008 restructuring
program:





Balance
                  at
                  November
      24, 2007
                
                
                Charges
                
                
                Payments
                
                
                Other
                
                
                Balance
                  at
                  November
      29,
                  2008Severance,
      payroll and other related costs
                
                $
                —
                
                
                $
                12,953
                
                
                $
                (4,815
                )
                
                $
                —
                
                
                $
                8,138Lease
      termination obligations and related
                
                
                —
                
                
                
                311
                
                
                
                (66
                )
                
                
                —
                
                
                
                245Other
      facility exit costs
                
                
                —
                
                
                
                84
                
                
                
                (62
                )
                
                
                —
                
                
                
                22Foreign
      exchange
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (840
                )
                
                
                (840
                )Total
                
                $
                —
                
                
                $
                13,348
                
                
                $
                (4,943
                )
                
                $
                (840
                )
                
                $
                7,565





The
Company also accelerated depreciation expense on property, plant and equipment
at the Cambridge facility in the amount of $518,000 for the year ended November
29, 2008.





23
- INFORMATION ABOUT GEOGRAPHIC AREAS





The
Company has determined that it has one operating segment as an intermediate
processor and distributor of carbon steel, stainless steel and aluminum
products.  In making operating decisions and assessing performance,
the Company’s chief operating decision-maker reviews financial information on a
consolidated basis. The Company does not aggregate and has not aggregated
operating segments. The Company aggregates all the revenue from its products and
services into one amount in its financial statements.





The
Company operates in one reportable segment as an intermediate processor and
distributor of carbon steel, stainless steel and aluminum products. Sales are
attributed to countries based on the location of the external
customer.





Net sales
include direct sales and toll processing revenues.  For the year ended
November 29, 2008, direct sales and toll processing revenues were approximately
$789.3 million and $11.8 million, respectively.  For the period from
January 1, 2007 to November 24, 2007, direct sales and toll processing revenues
were approximately $14.4 million and $1.9


million,
respectively.  For the period from April 26, 2006 to December 31,
2006, direct sales and toll processing revenues were nil.


F-34
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


23
- INFORMATION ABOUT GEOGRAPHIC AREAS (Continued)





The
following table summarizes the Company's financial information by geographic
area:





United
      States
                      
                      
                      Canada
                      
                      
                      Total2008Net
      salesDomestic
                      
                      $
                      377,175
                      
                      
                      $
                      406,825
                      
                      
                      $
                      784,000Export
                      
                      
                      212
                      
                      
                      
                      16,846
                      
                      
                      
                      17,058Total
                      
                      $
                      377,387
                      
                      
                      $
                      423,671
                      
                      
                      $
                      801,058Operating
      loss
                      
                      $
                      16,688
                      
                      
                      $
                      (55,113
                      )
                      
                      $
                      (38,425
                      )Depreciation
                      
                      $
                      4,264
                      
                      
                      $
                      7,780
                      
                      
                      $
                      12,044Long-lived
      assets
                      
                      $
                      261,706
                      
                      
                      $
                      73,209
                      
                      
                      $
                      334,9152007Net
      salesDomestic
                      
                      $
                      6,362
                      
                      
                      $
                      9,013
                      
                      
                      $
                      15,375Export
                      
                      
                      228
                      
                      
                      
                      701
                      
                      
                      
                      929Total
                      
                      $
                      6,590
                      
                      
                      $
                      9,714
                      
                      
                      $
                      16,304Operating
      loss
                      
                      $
                      (3,602
                      )
                      
                      $
                      (1,551
                      )
                      
                      $
                      (5,153
                      )Depreciation
                      
                      $
                      158
                      
                      
                      $
                      216
                      
                      
                      $
                      374Long-lived
      assets
                      
                      $
                      269,099
                      
                      
                      $
                      114,383
                      
                      
                      $
                      383,4822006Net
      salesDomestic
                      
                      $
                      —
                      
                      
                      $
                      —
                      
                      
                      $
                      —Export
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Total
                      
                      $
                      —
                      
                      
                      $
                      —
                      
                      
                      $
                      —Operating
      loss
                      
                      $
                      (145
                      )
                      
                      $
                      —
                      
                      
                      $
                      (145
                      )Depreciation
                      
                      $
                      —
                      
                      
                      $
                      —
                      
                      
                      $
                      —Long-lived
      assets
                      
                      $
                      —
                      
                      
                      $
                      —
                      
                      
                      $
                      —





F-35
 Barzel
Industries Inc. and Subsidiaries (Formerly Novamerican Steel Inc.)
 Notes
to Consolidated Financial Statements
 (In U.S.
dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


24
- SUBSEQUENT EVENTS





In the
first quarter of 2009, the Company further simplified the design of the network,
including a reduction in U.S. and Canadian workforce, and rationalized its
distribution facilities in the U.S.  The implementation of the
reduction in workforce and rationalization of its distribution facilities in the
U.S. resulted in a total reduction of 203 employees in the U.S. and Canada in
the first quarter of 2009.  It also included the exit of four
redundant distribution facilities located in Connecticut, Massachusetts, Rhode
Island and New York in the first quarter of 2009.





F-36


Report
of Independent Registered Public Accounting Firm
  Board of
Directors and Stockholders of
 Novamerican
Steel Inc. (formerly Symmetry Holdings Inc.)
  We have
audited the accompanying consolidated balance sheet of Novamerican Steel Inc. (a
Canadian Corporation) and Subsidiaries (the “Company,” the “Predecessor” or the
“Acquired Company”) as of November 14, 2007 and the related consolidated
statements of operations and comprehensive income, shareholders’ equity and cash
flows for the period from November 26, 2006 to November 14, 2007. These
financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
  We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provide a reasonable
basis for our opinion.
  In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Novamerican Steel Inc. and
Subsidiaries as of November 14, 2007, and the results of their operations
and their cash flows for the period from November 26, 2006 to November 14,
2007 in conformity with accounting principles generally accepted in the United
States of America.
  /s/
Raymond Chabot Grant Thornton LLP
  Chartered
Accountants
  Montreal,
Canada
 April 17,
2008





F-37
 Acquired
Company and Subsidiaries
 Consolidated
Statement of Operations and Comprehensive Income
 (In
thousands of U.S. dollars, except share and per share data)







Period
      from
                  November
      26,
                  2006
      to
                  November
      14, 2007Net
      sales
                
                $
                785,045Cost
      of sales
                
                
                638,813Gross
      margin
                
                
                146,232Operating
      expensesPlant
                
                
                41,668Delivery
                
                
                24,115Selling
                
                
                13,630Administrative
      and general
                
                
                36,126115,539Operating
      income
                
                
                30,693Interest
      expense
                
                
                383Interest
      income
                
                
                (2,533
                )Share
      in income of a joint venture
                
                
                (238
                )(2,388
                )Income
      before income taxes
                
                
                33,081Income
      taxes (Note 4)
                
                
                12,676Net
      income
                
                $
                20,405Net
      income per share—basic and diluted
                
                $
                1.95Weighted
      average shares outstanding –basic and diluted
                
                $
                10,450,000Comprehensive
      incomeNet
      income
                
                
                20,405Changes
      in cumulative translation adjustment
                
                
                30,117$
                50,522








The
accompanying notes are an integral part of the consolidated financial
statements.





F-38
 Acquired
Company and Subsidiaries
 Consolidated
Statement of Shareholders’ Equity
 (In
thousands of U.S. dollars, except share data)





Common shares
                  
                  
                  Retained
                  
                  
                  Accumulated
                    other
                    comprehensive
                  
                  
                  Total
                    Shareholders’Number
                  
                  
                  Amount
                  
                  
                  earnings
                  
                  
                  income
                  
                  
                  EquityBalance
      at November 25, 2006
                  
                  
                  10,450,000
                  
                  
                  $
                  38,904
                  
                  
                  $
                  266,018
                  
                  
                  $
                  23,624
                  
                  
                  $
                  328,546Net
      income
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  20,405
                  
                  
                  
                  
                  
                  
                  
                  20,405Dividends
      paid ($1.50 per share)
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (15,675
                  )
                  
                  
                  
                  
                  
                  
                  (15,675
                  )Changes
      in cumulative translation adjustment
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  30,117
                  
                  
                  
                  30,117Balance
      at November 14, 2007
                  
                  
                  10,450,000
                  
                  
                  $
                  38,904
                  
                  
                  $
                  270,748
                  
                  
                  $
                  53,741
                  
                  
                  $
                  363,393








The
accompanying notes are an integral part of the consolidated financial
statements.





F-39
 Acquired
Company and Subsidiaries
 Consolidated
Statement of Cash Flows
 (In
thousands of U.S. dollars)


Period
      from
                  November
      26, 2006 to
                  November
      14, 2007CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income
                
                $
                20,405Adjustments
      to reconcile net income to net cash from operating
    activitiesDepreciation
      and amortization
                
                
                10,401Deferred
      income taxes
                
                
                (3,683
                )Loss
      on disposal of property, plant and equipment
                
                
                228Share
      of income of a joint venture
                
                
                (238
                )Changes
      in working capital itemsTrade
      accounts receivable
                
                
                4,297Income
      taxes receivable
                
                
                (2,133
                )Inventories
                
                
                29,319Prepaid
      expenses and other assets
                
                
                (623
                )Accounts
      payable and accrued liabilities
                
                
                14,997Income
      taxes payable
                
                
                3,608Net
      cash from operating activities
                
                
                76,578CASH
      FLOWS FROM INVESTING ACTIVITIESShort
      term investment disposal
                
                
                37,541Additions
      to property, plant and equipment
                
                
                (12,158
                )Proceeds
      from disposal of property, plant and equipment
                
                
                12,224Other
      assets
                
                
                (39
                )Net
      cash from investing activities
                
                
                37,568CASH
      FLOWS FROM FINANCING ACTIVITIESNet
      decrease in bank indebtedness
                
                
                (540
                )Dividends
      paid
                
                
                (15,675
                )Repayment
      of long-term debt
                
                
                (41,337
                )Net
      cash used for financing activities
                
                
                (57,552
                )Effect
      of exchange rate changes on cash and cash equivalents
                
                
                6,480Net
      increase in cash and cash equivalents
                
                
                63,074Cash
      and cash equivalents, beginning of period
                
                
                31,016Cash
      and cash equivalents, end of period
                
                $
                94,090SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATIONInterest
      paid
                
                $
                2,498Income
      taxes paid
                
                $
                15,490





The
accompanying notes are an integral part of the consolidated financial
statements.


F-40
 Acquired
Company and Subsidiaries
 Consolidated
Balance Sheet
 (In
thousands of U.S. dollars)





November
      14,
                  2007ASSETSCurrent
      assetsCash
      and cash equivalents
                
                $
                94,090Trade
      accounts receivable, net (Note 5)
                
                
                117,440Income
      taxes receivable
                
                
                2,409Inventories
      (Note 6)
                
                
                146,802Prepaid
      expenses and other
                
                
                2,934Deferred
      income taxes (Note 4)
                
                
                4,012367,687Investment
      in a joint venture
                
                
                1,986Property,
      plant and equipment (Note 7)
                
                
                104,637Goodwill
                
                
                12,994Other
      assets
                
                
                258$
                487,562LIABILITIESCurrent
      liabilitiesTrade
      accounts payable
                
                $
                67,110Trade
      accounts payable to a company controlled by a director
                
                
                1,179Trade
      accounts payable to a joint venture (Note 12)
                
                
                1,686Accrued
      liabilities
                
                
                36,203Income
      taxes payable
                
                
                5,424111,602Deferred
      income taxes (Note 4)
                
                
                12,567124,169Contingencies
      and commitments (Notes 13 and 14)SHAREHOLDERS’
      EQUITYPreferred
      shares, no par value: Unlimited number of shares authorized;
      none issued or outstandingCommon
      shares, no par value: Unlimited number of shares authorized; 10,450,000
      shares issued and outstanding
                
                
                38,904Retained
      earnings
                
                
                270,748Accumulated
      other comprehensive income
                
                
                53,741363,393$
                487,562





The
accompanying notes are an integral part of the consolidated financial
statements.





F-41
 Acquired
Company and Subsidiaries
 Notes
to Consolidated Financial Statements
 (In
U.S. dollars; tabular amounts in thousands of U.S. dollars)


1
- GOVERNING STATUTES AND NATURE OF OPERATIONS





Novamerican
Steel Inc. (“Novamerican”)
was incorporated under the Canada Business Corporations Act. Novamerican
processes and distributes, through its 22 locations in the Northeastern,
Mid-Atlantic and Mid-Western United States and the Canadian provinces of Québec
and Ontario, carbon steel, stainless steel and aluminum products, including
carbon steel tubular products, and operates as an intermediary between primary
metal producers and manufacturers that require processed metal.


On June
21, 2007, Symmetry Holdings Inc. (“Symmetry”)
and its wholly owned indirect subsidiary, 632422 N.B. LTD., a corporation
existing under the laws of the Canadian province of New Brunswick, entered into
an arrangement agreement with Novamerican to acquire all of its outstanding
common shares in exchange for cash by way of a court-approved statutory plan of
arrangement under the Canada Business Corporations Act (the “Acquisition”).





2
- SUBSEQUENT EVENT





On
November 15, 2007, Symmetry acquired all of the outstanding common stock
of  Novamerican for $56.00 per share.  The purchase
consideration for the Acquisition was $585,200,000. In addition, Novamerican
incurred selling costs of approximately $2,092,000,which were indirect and
general costs expensed as incurred. Novamerican’s stock ceased trading as of
November 14, 2007.





Symmetry
completed the Acquisition and the other transactions contemplated by the
arrangement agreement after receiving the approval of the stockholders of
Novamerican holding at least 66 2/3% of votes cast at the special meeting of
stockholders, the approval of the stockholders of Symmetry pursuant to its
amended and restated certificate of incorporation, the approval of the
Acquisition pursuant to the Investment Canada Act, the approval of the
Acquisition under the Competition Act (Canada), and the expiration of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
Following completion of the Acquisition on November 15, 2007, Novamerican became
a wholly owned indirect subsidiary of Symmetry.





3
- ACCOUNTING POLICIES





The
accompanying consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
and the reporting currency is the United States of America dollar (“U.S.
dollar”).


A summary
of significant accounting policies consistently applied in the preparation of
the accompanying consolidated financial statements follows.





Basis
of consolidation





The
consolidated financial statements include the accounts of Novamerican and its
wholly-owned subsidiaries (collectively, the “Company”
or the “Predecessor”).
All intercompany balances and transactions have been eliminated.





Joint
venture





The
Company’s interest in a joint venture is accounted for by the equity method.
Accordingly, the Company’s share in income of the joint venture is included in
consolidated net income.





Fiscal
year





The
Company operated on a fiscal period that ended on the last Saturday of November.
As a result of the Acquisition on November 15, 2007, the financial statements
included herein are presented as of November 14, 2007 and for the period from
November 26, 2006 to November 14, 2007. For presentation purposes, the period
from November 26, 2006 to November 14, 2007 is referred to as the fiscal 2007
period.





F-42
 Acquired
Company and Subsidiaries
 Notes
to Consolidated Financial Statements
 (In
U.S. dollars; tabular amounts in thousands of U.S. dollars)


3
- ACCOUNTING POLICIES (Continued)





Translation
of foreign currencies





Transactions
concluded in foreign currencies by the Company are translated into their
respective functional currency as follows: monetary assets and liabilities are
translated at the exchange rate in effect at period end; revenues and expenses
are translated at the average exchange rate for the month in which they occur.
Exchange gains and losses arising from transactions denominated in foreign
currencies are included in net sales in the consolidated statements of
operations and comprehensive income. Foreign exchange losses amounted to
$1,451,000 for the fiscal 2007 period.





The
financial statements of the Company’s Canadian subsidiaries are translated from
their functional currency, the Canadian dollar, into the reporting currency, the
U.S. dollar, as follows: assets and liabilities are translated at the exchange
rate in effect at the end of the period; revenues and expenses are translated at
the average exchange rate for the period. All cumulative translation gains or
losses are included in accumulated other comprehensive income in the
consolidated balance sheet.





Accounting
estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. On an ongoing basis, management reviews its
estimates based on currently available information. Management believes the most
sensitive estimates include the allowance for doubtful accounts, the
recoverability of goodwill and the provision for income taxes. Actual results
could differ from these estimates.





Revenue
recognition





Revenue
from product sales is recognized when there is persuasive evidence of an
arrangement, the amount is fixed or determinable, delivery of the product to the
customer has occurred, there are no uncertainties surrounding product acceptance
and collection of the amount is considered probable. Title to the product
generally passes and revenue is recognized upon delivery of the product at the
customer’s destination. Sales returns and allowances are treated as reductions
to sales and are provided for based on historical experience and current
estimates.





The
customer is invoiced for the complete product delivered to the customer’s
designated location and shipping and handling charges are not invoiced
separately. Shipping and handling costs are recorded under the “Delivery”
caption on the consolidated statements of operations and comprehensive
income.





Cash
and cash equivalents





Cash and
cash equivalents include cash in banks and term deposits which are short-term,
highly liquid investments with original maturities of three months or
less.





Trade
accounts receivable





Credit is
extended based on evaluation of a customer’s financial condition and, generally,
collateral is not required. Trade accounts receivable are stated at amounts due
from customers based on agreed upon payment terms net of an allowance for
doubtful accounts. Accounts outstanding longer than the agreed upon payment
terms are considered past due. The Company determines its allowance by
considering a number of factors, including the length of time trade accounts
receivable are past due, the customer’s current ability to pay its obligation to
the Company, and the condition of the general economy and the industry as a
whole. The Company writes off trade accounts receivable when they are determined
to be uncollectible, and any payments subsequently received on such receivables
are credited to the bad debt expense.





F-43
 Acquired
Company and Subsidiaries
 Notes
to Consolidated Financial Statements
 (In
U.S. dollars; tabular amounts in thousands of U.S. dollars)


3
- ACCOUNTING POLICIES (Continued)





Inventories





Inventories
are stated at the lower of cost or market and include the cost of purchased
steel and freight. Cost is determined using the specific identification method
or the moving average cost method.





Property,
plant and equipment





Property,
plant and equipment are stated at cost and are reviewed for possible impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. If changes in circumstances indicate that the carrying
amount of an asset that the Company expects to hold and use may not be
recoverable, future cash flows expected to result from the use of the asset and
its disposition are estimated. If the undiscounted value of the future cash
flows is less than the carrying amount of the asset, impairment is
recognized. Management believes that there has been no impairment of the
Company’s property, plant and equipment as of November 14,
2007.





Property,
plant and equipment are depreciated over their estimated useful lives using the
following methods:





Buildings
      and building improvements
                  
                  Straight-line
                  
                  10
      to 40 yearsMachinery
      and equipment
                  
                  Straight-line
                  
                  5
      to 20 yearsFurniture
      and fixtures
                  
                  Straight-line
                  
                  5
      to 15 yearsTransportation
      equipment
                  
                  Straight-line
                  
                  3
      to 7 yearsDiminishing
      balance
                  
                  or
      30%Computer
      equipment
                  
                  Straight-line
                  
                  3
      to 5 yearsDiminishing
      balance
                  
                  or
      30%Leasehold
      improvements
                  
                  Straight-line
                  
                  5
      to 10 years





No depreciation is
recorded on assets under construction.





Depreciation
expense was approximately $10,292,000 for the fiscal 2007 period.





Goodwill





Goodwill
represents the excess of the purchase price over the fair value of the net
assets acquired. In accordance with Statement of Financial Accounting
Standard (“SFAS”) No. 142,Goodwill and Other Intangible
Assets, goodwill is tested for impairment annually or more frequently if
events or changes in circumstances indicate that it is impaired. Goodwill is
allocated to reporting units and any potential goodwill impairment is identified
by comparing the carrying amount of a reporting unit with its fair value. If any
potential impairment is identified, it is quantified by comparing the carrying
amount of goodwill to its fair value. In connection with the Acquisition of the
Company as discussed in Note 2, Subsequent Event, the Company did not complete
an impairment assessment for the 2007 fiscal period as the purchase price paid
for the Company’s net assets, including goodwill, indicated that there was no
impairment of the recorded goodwill at November 14, 2007.





Other
assets





Other
assets are recorded at cost and are composed primarily of expenses incurred in
issuing long-term debt, cash deposits and the cash surrender value of certain
life insurance policies.  Debt issuance costs were fully amortized
during the year with repayment of the long-term debt. Amortization expense was
approximately $109,000 for the fiscal 2007 period.





Income
taxes





The
provision for income taxes is computed on the pretax income of the consolidated
subsidiaries located within each taxing country based on the current income tax
law. Deferred income taxes are provided based upon currently enacted income tax
rates for temporary differences in the recognition of assets and liabilities on
the financial statements and for income tax purposes.


F-44
 Acquired
Company and Subsidiaries
 Notes
to Consolidated Financial Statements
 (In
U.S. dollars; tabular amounts in thousands of U.S. dollars)


3
- ACCOUNTING POLICIES (Continued)





Deferred
income taxes include the benefit of losses carried forward when it is more
likely than not that future profits will result. Should the opportunity to
realize the benefit of these losses expire, such amounts would result in
additional deferred income tax expense.





The
Company has not provided for Canadian income taxes or foreign withholding taxes
on the remaining undistributed earnings of its American subsidiaries which are
considered to be permanently reinvested.  Under current Canadian
income tax law, the Company may repatriate undistributed earnings of such
foreign subsidiaries without any income tax effect. However, should the Company
repatriate part or all of the undistributed earnings of its American
subsidiaries, a 5% withholding tax would be assessable on that amount. At
this time, the Company does not intend to repatriate any earnings of American
subsidiaries.





Comprehensive
income





Components
of comprehensive income include net income and changes in cumulative translation
adjustment.





Current
and pending accounting changes





Current





Effective
fiscal year 2007, the Company adopted “SFAS” No. 154,Accounting Changes and Error
Corrections - a replacement of APB Opinion No. 20 and FASB Statement No.
3. This statement replaces Accounting Principles Board
(“APB”) Opinion No. 20,Accounting Changes, and SFAS
No. 3,Reporting
Accounting Changes in Interim Financial Statements, and changes the
requirements for the accounting for and reporting of a change in accounting
principle. It applies to all voluntary changes in accounting principle. It also
applies to changes required by an accounting pronouncement in the unusual
instance that the pronouncement does not include specific transition
provisions.  The adoption of SFAS No. 154 had no impact on the
preparation of the consolidated financial statements.





Pending





In 2006,
the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No.
(“FIN”) 48,Accounting
for Uncertainty in Income Taxes. This interpretation clarifies the
accounting for uncertainty in income taxes recognized in an enterprise's
financial statements in accordance with SFAS No. 109, Accounting for Income Taxes.
It prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of an income tax position taken
or expected to be taken in an income tax return. It also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition.    FIN 48 is effective
for the Company at the beginning of the 2008 fiscal year including interim
periods.  The impact resulting from the adoption of FIN 48 has not yet
been determined.





In May
2007, the FASB issued FASB Statement of Position ("FSP") FIN 48-1, which
clarifies when a tax position is considered settled under FIN 48,Accounting for Uncertainty in
Income Taxes. The FSP explains that a tax position can be effectively
settled on the completion of an examination by a taxing authority without being
legally extinguished. For tax positions considered effectively settled, an
enterprise would recognize the full amount of tax benefit, even if (1) the tax
position is not considered more likely than not to be sustained solely on the
basis of its technical merits and (2) the statute of limitations remains
open. The guidance in the FSP should be applied on the initial adoption of FIN
48.





In
September 2006, the FASB issued SFAS No. 157,Fair Value Measurements.
This statement defines fair value, establishes a framework for measuring fair
value, and expands disclosures about fair value measurements. It applies under
other accounting pronouncements that require or permit fair value measurements.
Accordingly, SFAS No. 157 does not require any new fair value measurements.
SFAS No. 157 is effective for the Company as of the beginning of the 2008
fiscal year. The impact resulting from the adoption of SFAS No. 157 has not
yet been determined.





F-45
 Acquired
Company and Subsidiaries
 Notes
to Consolidated Financial Statements
 (In
U.S. dollars; tabular amounts in thousands of U.S. dollars)


3
- ACCOUNTING POLICIES (Continued)





In April
2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial
Assets and Financial Liabilities. This statement's objective is to
improve financial reporting by allowing entities to mitigate volatility in
reported earnings caused by the measurement of related assets and liabilities
using different attributes, without having to apply complex hedge accounting
provisions. Under SFAS No. 159, entities that elect the fair value option will
report unrealized gains and losses in earnings at each subsequent reporting
date. The new statement establishes presentation and disclosure requirements to
help financial statement users understand the effect of the entity's election on
its earnings. SFAS No. 159 is effective for the Company as of the beginning of
the 2008 fiscal year. The impact resulting from the adoption of SFAS No. 159 has
not yet been determined.





4
- INCOME TAXES





The
following summarizes the Company’s income taxes on the earnings of its Canadian
and U.S. operations.





Income
before income taxes by local jurisdiction:





Fiscal
      2007
                      periodCanada
                    
                    $
                    10,011United
      States
                    
                    
                    23,070$
                    33,081





The
income tax provision is composed of the following:





Fiscal
      2007
                    periodCurrentCanada
                  
                  $
                  5,318United
      States
                  
                  
                  11,04116,359DeferredCanada
                  
                  
                  (731
                  )United
      States
                  
                  
                  (2,952
                  )(3,683
                  )$
                  12,676





F-46
 Acquired
Company and Subsidiaries
 Notes
to Consolidated Financial Statements
 (In
U.S. dollars; tabular amounts in thousands of U.S. dollars)


4
- INCOME TAXES (Continued)





The
components of the Company’s net deferred income tax liability are as
follows:





November 14,2007AssetsCurrent
      deferred income taxesInventories
                  
                  $
                  383Trade
      accounts receivable
                  
                  
                  289Non
      deductible reserves
                  
                  
                  378Net
      operating loss
                  
                  
                  3,2784,328Long-term
      deferred income taxesNon
      capital losses
                  
                  
                  999Investment
      in a partnership
                  
                  
                  1,890Other
      items
                  
                  
                  422,931Less:
      Valuation allowance
                  
                  
                  (1,890
                  )Net
      deferred tax asset
                  
                  $
                  5,369LiabilitiesCurrent
      deferred income taxesPrepaid
      expenses
                  
                  $
                  316Long-term
      deferred income taxesProperty,
      plant and equipment
                  
                  
                  13,608Total
      deferred tax liability
                  
                  $
                  13,924Net
      deferred tax liability
                  
                  $
                  (8,555
                  )








Deferred
income tax assets and liabilities are classified on a net current and
non-current basis within each tax jurisdiction.  Net current deferred
income tax assets are separately stated as deferred income taxes in the amount
of $4,012,000 at November 14, 2007.  Net non-current deferred tax
liabilities are separately stated as deferred income taxes in the amount of
$12,567,000 at November 14, 2007.





The
reconciliation between the Canadian statutory income tax rate and the Company’s
effective income tax rate is as follows:





Fiscal
      2007 periodCanadian
      statutory income tax rate
                
                
                32.0
                %Difference
      in jurisdictional rates
                
                
                3.4Rate
      change impact of deferred taxes
                
                
                (1.8
                )Adjustment
      to valuation allowance
                
                
                5.1Other
      Items
                
                
                (0.4
                )Effective
      income tax rate
                
                
                38.3
                %








F-47
 Acquired
Company and Subsidiaries
 Notes
to Consolidated Financial Statements
 (In
U.S. dollars; tabular amounts in thousands of U.S. dollars)


5
- TRADE ACCOUNTS RECEIVABLE





Trade
accounts receivable consist of the following:





November
      14,2007Trade
      accounts
                
                $
                118,359Allowance
      for doubtful accounts
                
                
                (919
                )$
                117,440





Changes
in the Company’s allowance for doubtful accounts are as follows:





November
      14,2007Balance
      at beginning of period
                
                $
                3,707Bad
      debt expense
                
                
                571Accounts
      written off
                
                
                (1,557
                )Recoveries
                
                
                (1,802
                )Balance
      at end of period
                
                $
                919





6
- INVENTORIES





November
      14,2007Raw
      materials
                
                $
                82,139Finished
      goods
                
                
                64,663$
                146,802





7
- PROPERTY, PLANT AND EQUIPMENT





November 14,2007Land
                
                $
                11,063Buildings
      and building improvements
                
                
                55,324Machinery
      and equipment
                
                
                102,633Furniture
      and fixtures
                
                
                1,398Transportation
      equipment
                
                
                3,426Computer
      equipment
                
                
                4,217Leasehold
      improvements
                
                
                1,694Assets
      under construction
                
                
                3,862183,617Accumulated
      depreciation
                
                
                78,980$
                104,637





8
- BANK INDEBTEDNESS





The bank
indebtedness of the Company’s Canadian subsidiaries consisted of various demand
revolving credit facilities available by either prime rate loans or bankers’
acceptances, bearing interest at a Canadian bank’s prime rate (actual rate 6.25%
at November 14, 2007), or bankers’ acceptance rates, plus a premium varying from
0% to 0.5% (actual rate 6.50% at November 14, 2007), and secured by
inventories, movable hypothecs covering the universality of present and future
book debts and a negative pledge on certain assets of the Canadian subsidiaries.
There were no cross collateralizations among the various facilities. The
agreement was terminated on November 14, 2007.




F-48
 Acquired
Company and Subsidiaries
 Notes
to Consolidated Financial Statements
 (In
U.S. dollars; tabular amounts in thousands of U.S. dollars)


9
- LONG-TERM DEBT





On May 8,
2007, a U.S. subsidiary entered into a revolving credit agreement with a U.S.
bank, which provides for borrowings, based upon a formula, of up to $50,000,000
through May 8, 2012. At November 14, 2007, there was $1,000,000 in outstanding
letters of credit and  $49,000,000 in available borrowings. There were
no outstanding balances under this agreement at November 14,
2007.  The interest rate of borrowings under the credit agreement is
the bank’s prime rate, currently 7.50%, less 1% , or LIBOR, currently 4.88% plus
0.875%.   Among the restrictive financial covenants contained in
the agreement are ratios as to fixed charges, tangible capital base and senior
liabilities to tangible capital base, all of which were respected as of November
14, 2007.  Borrowings are collateralized by all assets of the U.S.
subsidiary having a carrying value of $196,423,000.





Mortgage
loan, amounting to nil at November 14, 2007, bearing interest at a rate of
5.75%, maturing on October 22, 2018, repayable in monthly capital
installments of $36,000 in 2007 (CA$41,675), secured by a first hypothec on land
and building having a carrying value of $9,141,000 (CA$8,782,000) as of
November 14, 2007. The company repaid the remaining balance of the loan on
April 20, 2007.





A U.S.
subsidiary entered into a $53,000,000 term loan agreement with a group of banks,
as amended, of which an amount of nil was outstanding at November 14,
2007.  On November 22, 2005, the term of the agreement was extended
for one year through April 7, 2007 and the group of banks became one
bank.  The interest rate on the term loan is the bank’s prime rate,
currently 7.25%, plus a margin varying from 0.125% to 1.375%, or LIBOR,
currently 4.88%, plus a margin varying from 1.375% to 2.625%. Among the
restrictive financial covenants contained in the agreement are ratios as to
fixed charges, tangible capital base and senior liabilities to tangible capital
base, all of which were respected as of November 14, 2007.  The term
loan is collateralized by all assets of the U.S. subsidiary having a carrying
value of $196,423,000.  On December 7, 2006, the U.S. subsidiary
repaid all amounts due under the $53,000,000 term loan agreement.





10
- RELATED PARTY TRANSACTIONS





The
following transactions with related parties were concluded in the normal course
of business and were measured at their respective exchange values, which are the
amounts established and agreed to by the related parties:





Fiscal
      2007 PeriodProcessing
      revenue from a joint venture
                    
                    $
                    188Management
      fees from a joint venture
                    
                    $
                    54Processing
      charges paid to a joint venture
                    
                    $
                    2,971Rental
      charges paid to companies controlled by a director
                    
                    $
                    1,386Rental
      charges paid to companies jointly controlled by a
      director
                    
                    $
                    436Freight
      charges paid to a company controlled by a director
                    
                    $
                    10,809





11
- FINANCIAL INSTRUMENTS





Fair
value of financial instruments





The fair
value of financial instruments has been estimated using data which management
considers the best available methodology deemed suitable for the pertinent
category of financial instruments as follows:





Due to
their short-term maturity, the carrying value of certain financial instruments
was assumed to approximate their fair value. These financial instruments include
cash and cash equivalents, trade accounts receivable, trade accounts payable and
accrued liabilities, trade accounts payable to a joint venture and trade
accounts payable to a company controlled by a director.





F-49
 Acquired
Company and Subsidiaries
 Notes
to Consolidated Financial Statements
 (In
U.S. dollars; tabular amounts in thousands of U.S. dollars)


11
- FINANCIAL INSTRUMENTS (Continued)





Exchange
rate risk





Although
the Company's financial results are reported in U.S. dollars, a substantial
portion of the Company's revenues is received in, and expenses are incurred in,
Canadian dollars. The Company may in the future utilize forward exchange
contracts to hedge its exposure to exchange rate fluctuations in connection with
future sales and purchases denominated in U.S. dollars by certain of its
Canadian subsidiaries. At November 14, 2007, the Company had no such
forward foreign currency contracts outstanding.





Interest
rate risk





The
Company's exposure to interest rate risk is as follows:





Cash
      and cash equivalents
            Floating
      rateTrade
      accounts receivable
            Non-interest
      bearingTrade
      accounts payable and accrued liabilities
            Non-interest
      bearingIncome
      and other taxes
            Non-interest
      bearing





Concentration
risk





The
Company does not have a concentration of available sources of supply, labor,
service or other rights that, if suddenly eliminated, could severely impact its
operations.





Financial
instruments which potentially subject the Company to a concentration risk
principally consist of cash and cash equivalents. The Company has its cash and
cash equivalents placed with high quality, financial institutions. The balances
at such institutions at November 14, 2007 and periodically throughout the year
are in excess of federally insured limits. As part of its cash management
process, the Company performs periodic evaluation of the relative credit
standing of these institutions. The Company has not experienced any losses
related to this concentration of risk. At November 14, 2007, the amount in
excess of federal insured limits was approximately $19,918,000 for the U.S.
subsidiaries and $29,257,000 for the Canadian Subsidiaries. At November 14,
2007, a portion of this amount was invested by a financial institution in
overnight daily deposit in pooled U.S. Government backed securities
approximating $13,166,000.





Credit
risk





Concentration
of credit risk with respect to sales and accounts receivable is limited due to
the large number of customers comprising the Company's customer base and their
dispersion across different geographies, except for one customer that accounted
for 12.4% of sales in the fiscal 2007 period. No customer accounted for more
than 10% of trade accounts receivable in the fiscal 2007 period. The Company
generally does not require collateral or other security to support customer
receivables.





Commodity
price risk





In the
normal course of business, the Company is exposed to market risk or price
fluctuations related to the purchase, production or sale of steel products. The
Company's market risk strategy has generally been to obtain competitive prices
for its products and services and allow operating results to reflect market
price movements dictated by supply and demand.





F-50
 Acquired
Company and Subsidiaries
 Notes
to Consolidated Financial Statements
 (In
U.S. dollars; tabular amounts in thousands of U.S. dollars)


12
- JOINT VENTURE





The
Company holds a 60% equity interest and a 50% voting interest in a joint venture
that processes carbon steel into tubing.  The joint venture, Delta
Tube and Company, Limited Partnership (“Delta Tube”) is located in LaSalle,
Québec, Canada.


Condensed
financial information of the joint venture is summarized below:





Fiscal
      2007 PeriodOperationsNet
      sales
                
                $
                4,516Operating
      income
                
                $
                380








November
      14, 2007Balance
      sheetAssetsCurrent
      assets
                
                $
                2,405Property,
      plant and equipment
                
                
                1,794$
                4,199LiabilitiesCurrent
      liabilities
                
                $
                386Joint
      venture investmentCapital
      contributions
                
                
                2,504Undistributed
      earnings
                
                
                603Accumulated
      other comprehensive income
                
                
                706$
                4,199








At
November 14, 2007, the Company had a trade account payable to Delta Tube in the
amount of $1,686,000.




13
- CONTINGENCIES





In
October 2001, the Company’s subsidiary, American Steel and Aluminum Corporation
(“ASA”), was named as one of 57 defendants in an action brought by two private
parties under the Comprehensive Environmental Response Compensation and
Liability Act, or CERCLA, to recover costs incurred and to be incurred in
connection with a waste disposal facility in Cumberland, Rhode Island which has
been categorized as a Superfund site by federal authorities.  During
2006, ASA entered into a settlement with the plaintiffs, with the approval of
the United States Environmental Protection Agency, or EPA, resolving its alleged
liability for all claims for past and future response and oversight costs in
connection with the Remedial Investigation/Feasibility Study for the
site.  The litigation remains pending against the non-settling
defendants.





The
settlement does not address future remediation costs and the Company does not
believe it is currently possible to estimate its share, if any, of such costs
should claims for their recovery be pursued against ASA.





The
Company is involved in various other lawsuits, claims, demands, and other legal
proceedings and investigations arising out of or incidental to the conduct of
its business.  While it is not possible to determine the ultimate
disposition of each of these matters, the Company does not believe that their
ultimate disposition will have a material adverse effect on its financial
position, results of operations or cash flows.





F-51
 Acquired
Company and Subsidiaries
 Notes
to Consolidated Financial Statements
 (In
U.S. dollars; tabular amounts in thousands of U.S. dollars)


14
- COMMITMENTS





The
Company has entered into operating leases for certain facilities and equipment
which expire at various dates until 2013. The following schedule outlines the
future minimum rental payments under these commitments as at November 14,
2007:





2008
                    
                    $
                    4,0832009
                    
                    
                    3,4932010
                    
                    
                    2,2902011
                    
                    
                    2,0492012
                    
                    
                    802Thereafter
                    
                    
                    162Total
      minimum payments
                    
                    $
                    12,879





Rental
expense under the operating leases amounted to approximately $4,827,000 for the
fiscal 2007 period.





15
- RETIREMENT PLANS





A U.S.
subsidiary makes available to substantially all of its employees a defined
contribution plan under the Internal Revenue Code Section 401(k). The plan
allows employees to contribute a portion of their pretax income in accordance
with specified guidelines. A percentage of such contribution, up to a certain
limit, is matched by the employer. Investment elections are made at the
discretion of the employees and the plan is administered by an independent third
party. Costs incurred under the 401(k) plan amounted to approximately
$537,000 for the fiscal 2007 period.





All
Canadian subsidiaries make available to all of their employees a defined
contribution plan.  The Canadian subsidiaries contribute a percentage
of the employees’ salaries to the plan.  Investment elections are made
at the discretion of the employees and the plan is administered by an
independent third party.  Costs incurred under the plan amounted to
approximately $685,000 for the fiscal 2007 period.





16
- FINANCIAL INFORMATION BY GEOGRAPHIC AREA





The
Company operates in one reportable segment as an intermediate processor and
distributor of carbon steel, stainless steel and aluminum products. Sales are
attributed to countries based on the location of the external
customer.


The
following table summarizes the Company’s financial information by geographic
area:





United States
                  
                  Canada
                  
                  
                  TotalNet
      salesDomestic
                  
                  $
                  338,632
                  
                  
                  $
                  400,405
                  
                  
                  $
                  739,037Export
                  
                  
                  608
                  
                  
                  
                  45,400
                  
                  
                  
                  46,008Total
                  
                  $
                  339,240
                  
                  
                  $
                  445,805
                  
                  
                  $
                  785,045Operating
      income
                  
                  $
                  17,846
                  
                  
                  $
                  12,846
                  
                  
                  $
                  30,692Depreciation
                  
                  $
                  3,882
                  
                  
                  $
                  6,410
                  
                  
                  $
                  10,292Long-lived
      assets
                  
                  $
                  60,285
                  
                  
                  $
                  57,604
                  
                  
                  $
                  117,889





F-52





REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 
 To the
Board of Directors and Shareholders of
 Novamerican
Steel Inc.
 
 
 
 We have
audited the accompanying consolidated statements of operations and comprehensive
income and cash flows of Novamerican Steel Inc. (a Canadian Corporation) and
Subsidiaries (the “Company”, “Acquired Company” or the “Predecessor”) for the
year ended November 25, 2006. These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on
these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the results of operations and the cash flows of
Novamerican Steel Inc. and Subsidiaries for the year ended November 25, 2006 in
conformity with accounting principles generally accepted in the United States of
America.
 
 
 /s/
Raymond Chabot Grant Thornton LLP
 Chartered
Accountants
 
 
 Montreal,
Canada
 December
19, 2006




F-53
 Acquired
Company and Subsidiaries
 Consolidated
Statement of Operations and Comprehensive Income
 (In
thousands of U.S. dollars, except per share data)





Year
      endedNovember
      25,
                    2006Net
      sales
                  
                  $
                  840,798Cost
      of sales
                  
                  
                  655,659Gross
      margin
                  
                  
                  185,139Operating
      expensesPlant
                  
                  
                  45,233Delivery
                  
                  
                  25,586Selling
                  
                  
                  13,886Administrative
      and general
                  
                  
                  31,034115,739Operating
      income
                  
                  
                  69,400Interest
      expense
                  
                  
                  1,139Share
      in income of a joint venture
                  
                  
                  (743
                  )396Income
      before income taxes
                  
                  
                  69,004Income
      taxes (Note 3)
                  
                  
                  24,706Net
      income
                  
                  $
                  44,298Net income per share
      (Note 4)Basic
                  
                  $
                  4.26Diluted
                  
                  $
                  4.25Comprehensive
      incomeNet
      income
                  
                  $
                  44,298Changes
      in cumulative translation adjustment
                  
                  
                  3,134Changes
      in fair value of interest rate swap, net of deferred
                    income
      taxes of $29
                  
                  
                  42$
                  47,474





The
accompanying notes are an integral part of the consolidated financial
statements.





F-54
 Acquired
Company and Subsidiaries
 Consolidated
Statement of Cash Flows
 (In
thousands of U.S. dollars)





Year
      endedNovember
      25,
                  2006CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income
                
                $
                44,298Adjustments
      to reconcile net income to net cash from operating
    activitiesDepreciation
      and amortization
                
                
                10,697Share
      in income of a joint venture
                
                
                (743
                )Deferred
      income taxes
                
                
                (795
                )Gain
      on disposal of property, plant and equipment
                
                
                (995
                )Changes
      in working capital itemsTrade
      accounts receivable
                
                
                15,310Income
      taxes receivable
                
                
                2,858Inventories
                
                
                (34,234
                )Prepaid
      expenses and other
                
                
                (634
                )Accounts
      payable and accrued liabilities
                
                
                (21,098
                )Income
      taxes payable
                
                
                696Net
      cash from operating activities
                
                
                15,360CASH
      FLOWS FROM INVESTING ACTIVITIESRepayment
      of loan to a Corporation
                
                
                17,621Loan
      to a Corporation
                
                
                (37,885
                )Distribution
      from a joint venture
                
                
                1,132Additions
      to property, plant and equipment
                
                
                (22,581
                )Proceeds
      from disposal of property, plant and equipment
                
                
                10,877Other
      assets
                
                
                (67
                )Net
      cash used for investing activities
                
                
                (30,903
                )CASH
      FLOWS FROM FINANCING ACTIVITIESNet
      decrease in bank indebtedness
                
                
                (2,236
                )Issue
      of common shares
                
                
                4,113Repayment
      of long-term debt
                
                
                (3,670
                )Net
      cash used for financing activities
                
                
                (1,793
                )Effect
      of exchange rate changes on cash and cash
                  equivalents
                
                
                547Net
      decrease in cash and cash equivalents
                
                
                (16,789
                )Cash
      and cash equivalents, beginning of year
                
                
                47,805Cash
      and cash equivalents, end of year
                
                $
                31,016SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATIONInterest
      paid
                
                $
                2,444Income
      taxes paid
                
                $
                24,738





The
accompanying notes are an integral part of the consolidated financial
statements.


F-55
 Acquired
Company and Subsidiaries
 Notes
to Consolidated Financial Statements
 (In
U.S. dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


1
- GOVERNING STATUTES AND NATURE OF OPERATIONS





Novamerican
Steel Inc. (Novamerican) was incorporated under the Canada Business Corporations
Act. The Company processes and distributes, through its 23 locations in the
Northeastern, Mid-Atlantic and Mid-Western United States and the Canadian
provinces of Québec and Ontario, carbon steel, stainless steel and aluminum
products, including carbon steel tubular products, and operates as an
intermediary between primary metal producers and manufacturers that require
processed metal.




2
- ACCOUNTING POLICIES





The
accompanying consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
and the reporting currency is the United States of America dollar (U.S.
dollar).




A summary
of significant accounting policies consistently applied in the preparation of
the accompanying consolidated financial statements follows.




Basis
of consolidation





The
consolidated financial statements include the accounts of Novamerican and all
its wholly owned subsidiaries (collectively, the Company). All intercompany
balances and transactions have been eliminated.




Joint
venture





The
Company’s interest in a joint venture is accounted for by the equity method.
Accordingly, the Company’s share in income of joint venture is included in
consolidated net income.




Fiscal
year





The
fiscal year-end of the Company is the last Saturday of November. The fiscal year
ending November 25, 2006 includes 52 weeks of operations.




Translation
of foreign currencies





Transactions
concluded in foreign currencies by the Company are translated into their
respective functional currency as follows: monetary assets and liabilities are
translated at the exchange rate in effect at year-end; revenues and expenses are
translated at the average exchange rate for the month in which they occur.
Exchange gains and losses arising from transactions denominated in foreign
currencies are included in net sales in the consolidated statements of
operations and comprehensive income. Losses amounted to $469,000 in
2006.




The
financial statements of the Company’s Canadian subsidiaries are translated from
their functional currency, the Canadian dollar, into the reporting currency, the
U.S. dollar, as follows: assets and liabilities are translated at the exchange
rate in effect at year-end; revenues and expenses are translated at the average
exchange rate for the year. All cumulative translation gains or losses are
included in accumulated other comprehensive income in the consolidated balance
sheet.




Accounting
estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. On an ongoing basis, management reviews its
estimates based on currently available information. Management believes the most
sensitive estimates include the allowance for doubtful accounts, the
recoverability of goodwill and the provision for income taxes. Actual results
could differ from these estimates.




F-56
 Acquired
Company and Subsidiaries
 Notes
to Consolidated Financial Statements
 (In
U.S. dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


2
- ACCOUNTING POLICIES (Continued)





Revenue
recognition





Revenue
from product sales is recognized when there is persuasive evidence of an
arrangement, the amount is fixed or determinable, delivery of the product to the
customer has occurred, there are no uncertainties surrounding product acceptance
and collection of the amount is considered probable. Title to the product
generally passes and revenue is recognized upon delivery of the product at the
customer’s destination. Sales returns and allowances are treated as reductions
to sales and are provided for based on historical experience and current
estimates.




The
customer is invoiced for the complete product delivered to the customer’s
designated location and shipping and handling charges are not invoiced
separately. Shipping and handling costs are recorded under the “Delivery”
caption on the consolidated statements of operations and comprehensive
income.




Cash
and cash equivalents





Cash and
cash equivalents include cash in banks and term deposits which are short-term,
highly liquid investments with original maturities of three months or
less.




Property,
plant and equipment





Property,
plant and equipment are depreciated over their estimated useful lives using the
following methods:





Buildings
      and building improvements
                  Straight-line
                  10
      to 40 yearsMachinery
      and equipment
                  Straight-line
                  5
      to 20 yearsFurniture
      and fixtures
                  Straight-line
                  5
      to 15 yearsTransportation
      equipment
                  Straight-line
                  3
      to 7 yearsDiminishing
      balance
                  or
      30%Computer
      equipment
                  Straight-line
                  3
      to 5 yearsDiminishing
      balance
                  or
      30%Leasehold
      improvements
                  Straight-line
                  5
      to 10 yearsAircraft
                  Straight-line
                  15
      years





No
depreciation is recorded on assets under construction.




Depreciation
expense was approximately $10,492,000 for the year ended November 25,
2006.




Other
assets





Amortization
expense relating to deferred costs incurred in issuing long-term debt was
approximately $205,000 for the year ended November 25, 2006.




Income
taxes





The
provision for income taxes is computed on the pretax income of the consolidated
subsidiaries located within each taxing country based on the current income tax
law. Deferred income taxes are provided based upon currently enacted income tax
rates for temporary differences in the recognition of assets and liabilities on
the financial statements and for income tax purposes.




Deferred
income taxes include the benefit of losses carried forward when it is more
likely than not that future profits will result. Should the opportunity to
realize the benefit of these losses expire, such amounts would result in
additional deferred income tax expense.




F-57
 Acquired
Company and Subsidiaries
 Notes
to Consolidated Financial Statements
 (In
U.S. dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


2
- ACCOUNTING POLICIES (Continued)





No
provision has been made for deferred income taxes that may result from future
remittance of approximately $89,227,000 of undistributed tax paid earnings of
the foreign subsidiaries as of November 25, 2006. Under current Canadian
income tax law, the Company may repatriate undistributed earnings of such
foreign subsidiaries without any income tax effect. However, should the Company
repatriate part or all of the undistributed earnings of its foreign
subsidiaries, a 5% withholding tax would be assessable on that amount. At this
time, the Company does not intend to repatriate any earnings of foreign
subsidiaries.




Comprehensive
income





Components
of comprehensive income include net income, changes in cumulative translation
adjustment and changes in fair value of interest rate swap net of deferred
income taxes.




Current
and pending accounting changes





Current




Effective
November 27, 2005, the Company adopted revised SFAS No.123 (“SFAS
No. 123 (R)”), Share-Based Payment, which
requires all entities to recognize the fair value of share-based payment awards
(stock compensation) classified in equity. The adoption of SFAS No. 123
(R) did not have an initial impact on the consolidated financial
statements.




Effective
November 27, 2005, the Company adopted SFAS No. 151, Inventory Costs, which
clarifies that abnormal amounts of idle facility expense, freight, handling
costs, and wasted materials (spoilage) should be recognized as current-period
charges and by requiring the allocation of fixed production overheads to
inventory based on the normal capacity of production facilities. The adoption of
SFAS No. 151 did not have a material impact on the consolidated financial
statements.




Effective
November 27, 2005, the Company adopted SFAS No. 153, Exchanges of Nonmonetary Assets—an
amendment of APB Opinion No. 29. SFAS No. 153 amends Opinion
No. 29 to eliminate the exception for non-monetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
non-monetary assets that do not have commercial substance. A non-monetary
exchange has commercial substance if the future cash flows of the entity are
expected to change significantly as a result to the exchange. The adoption of
SFAS No. 153 did not have a material impact on the consolidated financial
statements.




Effective
November 25, 2006, the Company adopted Staff Accounting Bulletin
No. 108 (“SAB 108”), Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements issued by the U.S. Securities and Exchange Commission.
SAB 108 was issued to provide consistency between how registrants quantify
financial statement misstatements. There have been two widely-used methods for
quantifying the effects of financial statement misstatements. The “roll-over”
method quantifies the amount by which the current year income statement is
misstated and can result in the accumulation of errors on the balance sheet that
may not have been material to any individual income statement, but which may
misstate one or more balance sheet accounts. The “iron curtain” method
quantifies the error as the cumulative amount by which the current year balance
sheet is misstated and can result in disregarding the effects of errors in the
current year income statement that result from the correction of an error
existing in previously issued financial statements. The Company used the
roll-over method for quantifying identified financial statement misstatements.
SAB 108 established an approach that requires quantification of financial
statement misstatements based on the effects of the misstatement on each of the
Company’s financial statements and the related financial statement disclosures.
This approach is commonly referred to as the “dual approach” because it requires
quantification of errors under both the roll-over and iron curtain
methods.




SAB 108
allows registrants to initially apply the dual approach either by retroactively
adjusting prior financial statements as if the dual approach had always been
used or by recording the cumulative effect of initially applying the dual
approach as adjustments to the carrying values of assets and liabilities as of
November 27, 2005 with an offsetting adjustment recorded to the opening
balance of retained earnings. Use of this “cumulative effect” transition method
requires detailed disclosure of the nature and amount of each individual error
being corrected through the cumulative adjustment and how and when it arose. The
adoption of SAB 108 had no impact on the preparation of the consolidated
financial statements.




F-58
 Acquired
Company and Subsidiaries
 Notes
to Consolidated Financial Statements
 (In
U.S. dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


2
- ACCOUNTING POLICIES (Continued)





Pending




The FASB
issued FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income
Taxes—an interpretation of FASB Statement No. 109, in
June 2006. This interpretation clarifies the accounting for uncertainty in
income taxes recognized in an enterprise’s financial statements in accordance
with SFAS No. 109, Accounting for Income Taxes.
It prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of an income tax position taken
or expected to be taken in an income tax return. It also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. FIN 48 is effective for the Company at
the beginning of the 2008 fiscal year. The impact resulting from the adoption of
FIN 48 has not yet been determined.




In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This
statement defines fair value, establishes a framework for measuring fair value,
and expands disclosures about fair value measurements. It applies under other
accounting pronouncements that require or permit fair value measurements.
Accordingly, SFAS No. 157 does not require any new fair value measurements.
SFAS No. 157 is effective for the Company at the beginning of the 2008
fiscal year. The impact resulting from the adoption of SFAS No. 157 has not
yet been determined.




In
May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections—a replacement of APB Opinion No. 20 and FASB Statement
No. 3. This statement replaces APB Opinion No. 20, Accounting Changes, and SFAS
No. 3, Reporting
Accounting Changes in Interim Financial Statements, and changes the
requirements for the accounting for and reporting of a change in accounting
principle. It applies to all voluntary changes in accounting principle. It also
applies to changes required by an accounting pronouncement in the unusual
instance that the pronouncement does not include specific transition provisions.
This statement is effective for the Company at the beginning of the 2007 fiscal
year.




3—INCOME
TAXES





The
following summarizes the Company’s income taxes on the earnings of its Canadian
and U.S. operations.





Income
before income taxes by local jurisdiction:





Year
      endedNovember
      25,2006Canada
                    
                    $
                    34,284United
      States
                    
                    
                    34,720$
                    69,004





The
income tax provision is composed of the following:





Year
      endedNovember
      25,2006CurrentCanada
                    
                    $
                    11,638United
      States
                    
                    
                    13,86325,501DeferredCanada
                    
                    
                    (655
                    )United
      States
                    
                    
                    (140
                    )(795
                    )$
                    24,706





F-59
 Acquired
Company and Subsidiaries
 Notes
to Consolidated Financial Statements
 (In
U.S. dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


3
- INCOME TAXES (Continued)





The
reconciliation between the Canadian statutory income tax rate and the Company’s
effective income tax rate is as follows:





Year
      endedNovember
      25,2006Canadian
      statutory income tax rate
                  
                  
                  34.4
                  %United
      States statutory income tax rate difference
                  
                  
                  3.2Provincial
      incentive for manufacturing and processing activities
                  
                  
                  (0.5
                  )Other
      items
                  
                  
                  (1.3
                  )Effective
      income tax rate
                  
                  
                  35.8
                  %





4
- EARNINGS PER SHARE





The basic
income per share is computed by dividing the net income applicable to common
shares by the weighted average number of common shares outstanding during the
year.




The
diluted income per share is computed by dividing the net income applicable to
common shares by the weighted average number of common shares outstanding during
the year, plus the effects of dilutive stock options. The diluted income per
share is computed using the treasury method, which assumes that all stock
options are exercised at the beginning of the year and that the funds obtained
are used to purchase common shares of the Company at the average trading price
of the common shares during the period.




The
following table provides the reconciliation between basic and diluted income per
share:


Year
      endedNovember
      25,2006Net
      income
                      
                      $
                      44,298Weighted
      average number of common shares outstanding
                      
                      
                      10,391,891Effect
      of dilutive stock options
                      
                      
                      58,109Weighted
      average number of diluted common shares outstanding
                      
                      
                      10,450,000Net
      income per shareBasic
                      
                      $
                      4.26Diluted
                      
                      $
                      4.25





F-60
 Acquired
Company and Subsidiaries
 Notes
to Consolidated Financial Statements
 (In
U.S. dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


5
- RELATED PARTY TRANSACTIONS





The
following transactions with related parties were concluded in the normal course
of business and were measured at their respective exchange values, which are the
amounts established and agreed to by the related parties:





Year
      endedNovember
      25,2006Processing
      revenue from a joint venture
                  
                  $
                  200Management
      fees from a joint venture
                  
                  $
                  53Processing
      charges paid to a joint venture
                  
                  $
                  3,645Rental
      charges paid to companies controlled by a director
                  
                  $
                  1,780Rental
      charges paid to companies jointly controlled by a
      director
                  
                  $
                  394Freight
      charges paid to a company controlled by a director
                  
                  $
                  10,525





6
      - FINANCIAL INSTRUMENTS AND HEDGING
ACTIVITIES





Exchange
rate risk





Although
the Company’s financial results are reported in U.S. dollars, a substantial
portion of the Company’s revenues is received in, and its expenses are incurred
in Canadian dollars. The Company utilizes, from time to time, forward exchange
contracts to hedge its exposure to exchange rate fluctuations in connection with
future sales and purchases denominated in U.S. dollars by certain of its
Canadian subsidiaries. At November 25, 2006, the Company had no such
forward foreign currency contracts outstanding.




Commodity
price risk





In the
normal course of business, the Company is exposed to market risk or price
fluctuations related to the purchase, production or sale of steel products. The
Company’s market risk strategy has generally been to obtain competitive prices
for its products and services and allow operating results to reflect market
price movements dictated by supply and demand.




7
- JOINT VENTURE





The
Company holds a 60% equity interest and a 50% voting interest in a joint venture
that processes carbon steel into tubing.




Condensed
financial information of the joint venture is summarized below:





Twelve-month
      period endedNovember
      25,2006OperationsNet
      sales
                  
                  $
                  5,725Operating
      income
                  
                  $
                  1,289





8 –
CONTINGENCIES





The
Company is contingently liable under claims issued in the normal course of
business and with respect to claims and litigation that arise from time to time.
In the opinion of management, any uninsured liability, which may arise from such
contingencies, would not have a material adverse effect on the consolidated
financial statements.




F-61
 Acquired
Company and Subsidiaries
 Notes
to Consolidated Financial Statements
 (In
U.S. dollars; tabular amounts in thousands of U.S. dollars, except share and per
share data)


9 –
COMMITMENTS





The
Company has entered into operating leases for certain facilities and equipment
which expire at various dates until 2013. The following schedule outlines the
future minimum rental payments under these commitments as at November 25,
2006:





2007
                    
                    $
                    3,5152008
                    
                    
                    2,8882009
                    
                    
                    2,1662010
                    
                    
                    1,8112011
                    
                    
                    1,642Thereafter
                    
                    
                    628Total
      minimum payments
                    
                    $
                    12,650





Rental
expense under the operating leases amounted to approximately $4,168,000 for the
year ended November 25, 2006.




10
- RETIREMENT PLAN





A U.S.
subsidiary makes available to substantially all of its employees a defined
contribution plan under the Internal Revenue Code Section 401(k). The plan
allows employees to contribute a portion of their pretax income in accordance
with specified guidelines. A percentage of such contribution, up to a certain
limit, is matched by the employer. Investment elections are made at the
discretion of the employees and the plan is administered by an independent third
party. The U.S. subsidiary matches a percentage of the employee contributions up
to a certain limit. Costs incurred under the 401(k) plan amounted to
approximately $552,000 for the year ended November 25, 2006.




11
- FINANCIAL INFORMATION BY GEOGRAPHIC AREA





The
Company operates in one reportable segment as an intermediate processor and
distributor of carbon steel, stainless steel and aluminum products. Sales are
attributed to countries based on the location of the external
customer.




The
following table summarizes the Company’s financial information by geographic
area:





United
      States
                    
                    
                    Canada
                    
                    
                    Total2006Net
      salesDomestic
                    
                    $
                    359,057
                    
                    
                    $
                    440,845
                    
                    
                    $
                    799,902Export
                    
                    
                    463
                    
                    
                    
                    40,433
                    
                    
                    
                    40,896Total
                    
                    $
                    359,520
                    
                    
                    $
                    481,278
                    
                    
                    $
                    840,798Operating
      income
                    
                    $
                    29,840
                    
                    
                    $
                    39,560
                    
                    
                    $
                    69,400Depreciation
                    
                    $
                    3,802
                    
                    
                    $
                    6,690
                    
                    
                    $
                    10,492





F-62


ITEM
      9.
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE





None.





ITEM
      9A(T).
            CONTROLS
      AND PROCEDURES





Evaluations
of Disclosure Controls and Procedures





Under the supervision and with the
participation of our management team, including our Chief Executive Officer, who
also serves as our principal financial officer, we conducted an evaluation of
our disclosure controls and procedures, as such term is defined under
Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act
of 1934, as amended (“Exchange Act”), as of November 29, 2008. Based on this
evaluation, the principal financial officer concluded that our disclosure
controls and procedures are effective to ensure that information required to be
disclosed in the reports that are filed or submitted under the Exchange Act, is
recorded, processed, summarized and reported, within the time periods specified
in the SEC’s rules and forms, and that such information is accumulated and
communicated to management, including our Chief Executive Officer and principal
financial officer, as appropriate, to allow timely decisions regarding required
disclosure.





Report
of Management on Internal Control over Financial Reporting





Management is responsible for the
preparation, integrity and fair presentation of the consolidated financial
statements appearing in our periodic filings with the SEC. The consolidated
financial statements were prepared in conformity with U.S. generally accepted
accounting principles and, accordingly, include certain amounts based on our
best judgments and estimates.





Management is also responsible for
establishing and maintaining adequate internal control over financial reporting
for Barzel Industries Inc. as such term is defined in Rules 13a-15(f) under
the Exchange Act.  Internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of our
financial reporting and the preparation of financial statement for external
reporting purposes in accordance with U.S. generally accepted accounting
principles.





Internal control over financial
reporting includes maintaining records that in reasonable detail accurately and
fairly reflect our transactions and dispositions of the Company; providing
reasonable assurance that transactions are recorded as necessary to permit
preparation of our financial statements in accordance with generally accepted
accounting principals; providing reasonable assurance that receipts and
expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and providing
reasonable assurance regarding the prevention or timely detection of
unauthorized acquisition, use or disposition of company assets that could have a
material effect on our financial statements.  Because of its inherent
limitations, internal control over financial reporting is not intended to
provide absolute assurance that a misstatement of our financial statements would
be prevented or detected.





Management conducted an evaluation of
the effectiveness of our internal control over financial reporting based on the
framework inInternal Control—Integrated
Framework  issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on this evaluation, management concluded that
our internal control over financial reporting was effective as of November 29,
2008.





This report does not include an
attestation report of our independent registered public accounting firm
regarding internal control over financial reporting. Management’s report was not
subject to attestation by our independent registered public accounting firm
pursuant to temporary rules of the SEC that permit us to provide only
management’s report in this report for the year ended November 29,
2008.





A non-accelerated filer is not
required to file the auditor's attestation report on internal control over
financial reporting until it files an annual report for its first fiscal year
ending on or after December 15, 2009 (that is, its annual report for fiscal year
2010).





53


Changes
in Internal Control Over Financial Reporting





During the fourth quarter of the
period covered by this report, there has been no change in our internal control
over financial reporting that has materially affected or is reasonably likely to
materially affect our internal control over financial reporting.





ITEM
      9B.
            OTHER
      INFORMATION





None.





PART
III





ITEM 10.
            DIRECTORS, EXECUTIVE OFFICERS
      AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
      ACT


ITEM
      11.
            EXECUTIVE
      COMPENSATION


ITEM
      12.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      SHAREHOLDER MATTERS


ITEM
      13.
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE


ITEM
      14.
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES





Except as set forth below, the
information required by Items 10, 11, 12, 13 and 14 will appear in the Barzel
Industries Inc. Proxy Statement for the Annual Meeting of Stockholders to be
held on May 12, 2009, which will be filed pursuant to Regulation 14A under the
Securities Exchange Act of 1934 and is incorporated by reference into this
report pursuant to General Instruction G(3) of Form 10-K (other than the
portions thereof deemed to be filed for the purpose of Section 18 of the
Securities Exchange Act of 1934).





Code
of Ethics





We have adopted a code of ethics
applicable to all members of our Board of Directors, executive officers and
employees.  Such code of ethics is available on our Internet website,
www.barzel.com.  We intend to disclose any amendment to, or waiver of,
a provision of our code of ethics by filing a Form 8-K with the
SEC.





ITEM
      15.
            EXHIBITS





(a)
            (1)
            Financial
      StatementsSee
      Index to Consolidated Financial Statements at page 37 of this
      report.(2)
            Financial
      Statement SchedulesNone(b)
            ExhibitsThe
      exhibits listed in the following table have been filed with this
      report.





54


EXHIBIT
INDEX





ExhibitNumber
            
            Description
      of Document3.1*
            
            Amended
      and Restated Certificate of Incorporation of Barzel Industries Inc., as
      amended3.2(7)
            
            Amended
      and Restated By-laws of Barzel Industries Inc. as amended4.1(1)
            
            Specimen
      certificate representing common stock of Barzel Industries
      Inc.4.2(1)
            
            Specimen
      certificate representing warrants issued in the  initial public
      offering of Barzel Industries Inc.4.3(1)
            
            Specimen
      certificate representing warrants issued in the private placement of
      Barzel Industries Inc.4.4(3)
            
            Warrant
      Agreement, dated March 5, 2007, between Continental Stock Transfer &
      Trust Company, as warrant agent, and Barzel Industries Inc.4.5(9)
            
            Amendment
      to Warrant Agreement, dated as of June 21, 2007, between Continental Stock
      Transfer & Trust Company, as warrant agent, and Barzel Industries
      Inc.4.6.1(7)
            
            Indenture,
      dated as of November 5, 2007, among Barzel Industries Inc., Barzel Finco
      Inc., and The Bank of New York Mellon f/k/a The Bank of New York, as
      Trustee, relating to the issuance by Barzel Finco Inc. of 11.5% Senior
      Secured Notes due 20154.6.2(7)
            
            First
      Supplemental Indenture, dated as of December 3, 2007, to
      Indenture4.6.3*
            
            Second
      Supplemental Indenture, dated as of February 11, 2009, to
      Indenture10.1.1(4)
            
            ABL
      Credit Agreement, dated as of November 15, 2007, among Barzel Industries
      Inc., Barzel Finco Inc., Barzel Canada Inc., the lenders party thereto,
      JPMorgan Chase Bank as Administrative Agent, JPMorgan Chase Bank, N.A.,
      Toronto Branch, as Canadian Agent, and CIT Business Credit Canada Inc. and
      The CIT Group/Business Credit, Inc., as Syndication Agents10.1.2(7)
            
            Amendment
      No. 1, dated December 14, 2007, to Credit Agreement10.2(4)
            
            Guarantee
      and Collateral Agreement (ABL), dated as November 15, 2007, among Barzel
      Industries Inc., Barzel Finco Inc., Barzel Industries Canada Inc., other
      subsidiaries of Barzel Industries Inc. identified therein, and JPMorgan
      Chase Bank, N.A., as Administrative Agent10.3(4)
            
            Canadian
      Guarantee and Collateral Agreement (ABL), dated as of November 15, 2007,
      among Barzel Industries Canada Inc., other subsidiaries of Barzel
      Industries Canada Inc. identified therein, JPMorgan Chase Bank, N.A.,
      Toronto Branch, as Canadian Agent10.4(4)
            
            Lien
      Subordination and Intercreditor Agreement, dated as of November 15, 2007,
      among Barzel Industries Inc., Barzel Finco Inc., Barzel Industries Canada
      Inc., other subsidiaries of Barzel Industries Inc. identified therein,
      JPMorgan Chase Bank, N.A., as Administrative Agent, and The Bank of New
      York Mellon f/k/a The Bank of New York, as Collateral Agent.10.5(4)
            
            Purchase
      Agreement (Senior Notes), dated November 14, 2007, among Barzel Finco
      Inc., the guarantors signatory thereto, and J.P. Morgan Securities Inc. on
      behalf of the Initial Purchaser10.6(4)
            
            Collateral
      Agreement (Senior Notes), dated November 15, 2007, Barzel Industries Inc.,
      Barzel Finco Inc., other subsidiaries of Barzel Industries Inc. identified
      therein, and The Bank of New York Mellon f/k/a The Bank of New York, as
      Collateral Agent


55






10.7(4)
            
            Registration
      Rights Agreement dated as of November 15, 2007, among Barzel Industries
      Inc., Barzel Finco Inc., the guarantors signatory thereto, and J.P. Morgan
      Securities Inc. and CIBC World Markets Corp., as the Initial
      Purchasers10.8(4)
            
            Intercompany
      Notes, dated as of November 15, 200710.9(4)
            
            Canadian
      Collateral Agreement (Intercompany Notes), dated as November 15, 2007,
      between Barzel Industries Inc. and BNY Trust Company of Canada, as
      Canadian Collateral Agent10.10(5)
            
            Warrant
      Subscription Agreement, dated June 21, 2007, by and between Barzel
      Industries Inc. and Gilbert E. Playford10.11(5)
            
            Unit
      Subscription Agreement, dated June 21, 2007, by and between Barzel
      Industries Inc. and Gilbert E. Playford10.12(5)
            
            Arrangement
      Agreement, dated as of June 21, 2007, among Barzel Industries, 632422 N.B.
      Ltd., and Acquired Company10.13(5)
            
            Lock-Up
      Agreement, dated as of June 21, 2007, among Barzel Industries Inc.,
      Acquired Company, 632422 N.B. Ltd., and D. Bryan Jones and Scott B.
      Jones10.14(5)
            
            Non-Competition
      Agreement, dated as of June 21, 2007, among Barzel Industries Inc.,
      Acquired Company,  632422 N.B. Ltd., and Scott B.
      Jones10.15(5)
            
            Non-Competition
      Agreement, dated as of June 21, 2007, among Barzel Industries Inc.,
      Acquired Company, 632422 N.B. Ltd., and D. Bryan Jones10.16(6)
            
            Registration
      Rights Agreement, dated March 5, 2007, among Barzel Industries Inc. and
      the signatories thereto10.17(9)
            
            Amendment,
      dated as of  November 15, 2007, to Registration Rights
      Agreement, dated March 5, 2007, among Barzel Industries Inc. and the
      signatories thereto10.18.1(6)
            
            Stock
      Escrow Agreement, dated March 12, 2007, between Continental Stock Transfer
      & Trust Company, as escrow agent, and Barzel Industries
      Inc.10.18.2(9)
            
            Amendment,
      dated as of November 15, 2007, to Stock Escrow Agreement, dated March 12,
      2007, among Barzel Industries Inc. and the signatories
thereto10.18.3*
            
            Second
      Amendment, dated as of December 23, 2008, to Stock Escrow Agreement, dated
      March 12, 2007, among Barzel Industries Inc. and the signatories
      thereto10.18.4*
            
            Third
      Amendment, dated as of February 26, 2009, to Stock Escrow Agreement, dated
      March 12, 2007, among Barzel Industries Inc. and the signatories
      thereto10.19*
            
            Services
      Agreement, dated January 1, 2009, between Barzel Industries
      Inc.  and ILUT, Srl.10.20(1)
            
            Trademark
      License Agreement, dated September 15, 2006, between Barzel Industries
      Inc. and Domenico Lepore10.21(8)
            
            Employment
      Agreement, dated as of January 1, 2008, between Barzel Industries Inc. and
      Corrado De Gasperis10.22(8)
            
            Employment
      Agreement, dated as of January 1, 2008, between Barzel Industries Inc. and
      Domenico Lepore


56





10.23(8)
            
            Employment
      Agreement, dated as of January 1, 2008, between Barzel Industries Inc. and
      Karen Narwold10.24.1(10)
            
            Form
      of Exchange Agreement (Affiliates)10.24.2(10)
            
            Form
      of Exchange Agreement (Non-Affiliates)10.25*
            
            Replenishment
      Agreement, dated as of November 28, 2008, by and between Barzel Industries
      Inc. and ArcelorDofasco Mittal Inc.21.1*
            
            List
      of Subsidiaries24.1*
            
            Powers
      of Attorney (Contained on signature page)31.1*
            
            Officer's
      Certificate Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 200231.2*
            
            Officer's
      Certificate Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 200232*
            
            Certification
      Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002





*  Filed
herewith.





(1)
            Incorporated
      by reference to the Registration Statement of Registrant on Form S-1
      (Registration No. 333-135353).


(2)
            Incorporated
      by reference to the Current Report of Registrant on Form 8-K filed on
      December 6, 2007 (SE File No.
001-33342).


(3)
            Incorporated
      by reference to the Quarterly Report of Registrant on Form 10-Q for the
      quarter ended March 31, 2007 (File No.
  001-33342).


(4)
            Incorporated
      by reference to the Current Report of Registrant on Form 8-K filed
      November 20, 2007 (File No.
001-33342).


(5)
            Incorporated
      by reference to the Quarterly Report of Registrant on Form 10-Q for the
      quarter ended June 30, 2007 (File No.
  001-33324).


(6)
            Incorporated
      by reference to the Quarterly Report of Registrant on Form 10-Q for the
      quarter ended March 31, 2007 (File No.
  001-33324).


(7)
            Incorporated
      by reference to the Annual Report of Registrant on Form 10-K for the
      fiscal year ended November 24, 2007 (File No.
  001-33342).


(8)
            Incorporated
      by reference to the Quarterly Report of Registrant on Form 10-Q for the
      quarter ended February 23, 2008 (File No.
  001-33342).


(9)
            Incorporated
      by reference to the Registration Statement of Registrant on Form S-1
      (Registration No. 333-151581).


(10)
            Incorporated
      by reference to the Quarterly Report of Registrant on Form 10-Q for the
      quarter ended August 30, 2008 (File No.
  001-33342).


57




SIGNATURES





Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.





BARZEL
      INDUSTRIES INCDate:
            February
      27, 2009
            
            By:
            /s/
      Corrado De GasperisCorrado
      De Gasperis
              Chief
      Executive Officer
              (Principal
      Executive Officer and Principal Financial Officer)





KNOW ALL MEN BY THESE PRESENTS, that
each individual whose signature appears below hereby constitutes and appoints
Corrado De Gasperis and Karen G. Narwold, and each of them individually, his or
her true and lawful agent, proxy and attorney-in-fact, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to (i) act on, sign and file with the
Securities and Exchange Commission any and all amendments to this Report
together with all schedules and exhibits thereto, (ii) act on, sign and file
with the Securities and Exchange Commission any and all exhibits to this Report
and any and all exhibits and schedules thereto, (iii) act on, sign and file any
and all such certificates, notices, communications, reports, instruments,
agreements and other documents as may be necessary or appropriate in connection
therewith and (iv) take any and all such actions which may be necessary or
appropriate in connection therewith, granting unto such agents, proxies and
attorneys-in-fact, and each of them individually, full power and authority to do
and perform each and every act and thing necessary or appropriate to be done, as
fully for all intents and purposes as he or she might or could do in person, and
hereby approving, ratifying and confirming all that such agents, proxies and
attorneys-in-fact, any of them or any of his, her or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.





Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.





Signatures
            
            Titles
            Date/s/
      Gilbert E. Playford
            
            Chairman
      of the Board
            February
      27, 2009Gilbert
      E. Playford/s/
      Corrado De Gasperis
            
            Chief
      Executive Officer and Director
            February
      27, 2009Corrado
      De Gasperis
            
            (Principal
      Executive Officer and Principal Financial Officer)/s/
      Domenico Lepore
            
            President
      and Director
            February
      27, 2009Domenico
      Lepore/s/
      Carl A. Rojas
            
            Controller
            February
      27, 2009Carl
      A. Rojas
            
            (Principal
      Accounting Officer)/s/
      Martin Derek Powell
            
            Director
            February
      27, 2009Martin
      Derek Powell/s/
      Scott C. Mason
            
            Director
            February
      27, 2009Scott
      C. Mason/s/
      Oded Cohen
            
            Director
            February
      27, 2009Oded
      Cohen


58





EXHIBIT
INDEX





ExhibitNumber
            
            Description
      of Document3.1*
            
            Amended
      and Restated Certificate of Incorporation of Barzel Industries Inc., as
      amended3.2(7)
            
            Amended
      and Restated By-laws of Barzel Industries Inc., as amended4.1(1)
            
            Specimen
      certificate representing common stock of Barzel Industries
      Inc.4.2(1)
            
            Specimen
      certificate representing warrants issued in the  initial public
      offering of Barzel Industries Inc.4.3(1)
            
            Specimen
      certificate representing warrants issued in the private placement of
      Barzel Industries Inc.4.4(3)
            
            Warrant
      Agreement, dated March 5, 2007, between Continental Stock Transfer &
      Trust Company, as warrant agent, and Barzel Industries Inc.4.5(9)
            
            Amendment
      to Warrant Agreement, dated as of June 21, 2007, between Continental Stock
      Transfer & Trust Company, as warrant agent, and Barzel Industries
      Inc.4.6.1(7)
            
            Indenture,
      dated as of November 5, 2007, among Barzel Industries Inc., Barzel Finco
      Inc., and The Bank of New York Mellon f/k/a The Bank of New York, as
      Trustee, relating to the issuance by Barzel Finco Inc. of 11.5% Senior
      Secured Notes due 20154.6.2(7)
            
            First
      Supplemental Indenture, dated as of December 3, 2007, to
      Indenture4.6.3*
            
            Second
      Supplemental Indenture, dated as of February 11, 2009, to
      Indenture10.1.1(4)
            
            ABL
      Credit Agreement, dated as of November 15, 2007, among Barzel Industries
      Inc., Barzel Finco Inc., Barzel Industries Canada Inc., the lenders party
      thereto, JPMorgan Chase Bank as Administrative Agent, JPMorgan Chase Bank,
      N.A., Toronto Branch, as Canadian Agent, and CIT Business Credit Canada
      Inc. and The CIT Group/Business Credit, Inc., as Syndication
      Agents10.1.2(7)
            
            Amendment
      No. 1, dated December 14, 2007, to Credit Agreement10.2(4)
            
            Guarantee
      and Collateral Agreement (ABL), dated as November 15, 2007, among Barzel
      Industries Inc., Barzel Finco Inc., Barzel Industries Canada Inc., other
      subsidiaries of Barzel Industries Inc. identified therein, and JPMorgan
      Chase Bank, N.A., as Administrative Agent10.3(4)
            
            Canadian
      Guarantee and Collateral Agreement (ABL), dated as of November 15, 2007 ,
      among Barzel Industries Canada Inc., other subsidiaries of Barzel
      Industries Canada Inc. identified therein, JPMorgan Chase Bank, N.A.,
      Toronto Branch, as Canadian Agent10.4(4)
            
            Lien
      Subordination and Intercreditor Agreement, dated as of November 15, 2007,
      among Barzel Industries Inc., Barzel Finco Inc., Barzel Industries Canada
      Inc., other subsidiaries of Barzel Industries Inc. identified therein,
      JPMorgan Chase Bank, N.A., as Administrative Agent, and The Bank of New
      York Mellon f/k/a The Bank of New York, as Collateral Agent.10.5(4)
            
            Purchase
      Agreement (Senior Notes), dated November 14, 2007, among Barzel Finco
      Inc., the guarantors signatory thereto, and J.P. Morgan Securities Inc. on
      behalf of the Initial Purchaser


59





10.6(4)
            
            Collateral
      Agreement (Senior Notes), dated November 15, 2007, Barzel Industries Inc.,
      Barzel Finco Inc., other subsidiaries of Barzel Industries Inc. identified
      therein, and The Bank of New York Mellon f/k/a The Bank of New York, as
      Collateral Agent10.7(4)
            
            Registration
      Rights Agreement dated as of November 15, 2007, among Barzel Industries
      Inc., Barzel Finco Inc., the guarantors signatory thereto, and J.P. Morgan
      Securities Inc. and CIBC World Markets Corp., as the Initial
      Purchasers10.8(4)
            
            Intercompany
      Notes, dated as of November 15, 200710.9(4)
            
            Canadian
      Collateral Agreement (Intercompany Notes), dated as November 15, 2007,
      between Barzel Industries Inc. and BNY Trust Company of Canada, as
      Canadian Collateral Agent10.10(5)
            
            Warrant
      Subscription Agreement, dated June 21, 2007, by and between Barzel
      Industries Inc. and Gilbert E. Playford10.11(5)
            
            Unit
      Subscription Agreement, dated June 21, 2007, by and between Barzel
      Industries Inc. and Gilbert E. Playford10.12(5)
            
            Arrangement
      Agreement, dated as of June 21, 2007, among Barzel Industries, 632422 N.B.
      Ltd., and Acquired Company10.13(5)
            
            Lock-Up
      Agreement, dated as of June 21, 2007, among Barzel Industries Inc.,
      Acquired Company, 632422 N.B. Ltd., and D. Bryan Jones and Scott B.
      Jones10.14(5)
            
            Non-Competition
      Agreement, dated as of June 21, 2007, among Barzel Industries Inc.,
      Acquired Company,  632422 N.B. Ltd., and Scott B.
      Jones10.15(5)
            
            Non-Competition
      Agreement, dated as of June 21, 2007, among Barzel Industries Inc.,
      Acquired Company, 632422 N.B. Ltd., and D. Bryan Jones10.16(6)
            
            Registration
      Rights Agreement, dated March 5, 2007, among Barzel Industries Inc. and
      the signatories thereto10.17(9)
            
            Amendment,
      dated as of  November 15, 2007, to Registration Rights
      Agreement, dated March 5, 2007, among Barzel Industries Inc. and the
      signatories thereto10.18.1(6)
            
            Stock
      Escrow Agreement, dated March 12, 2007, between Continental Stock Transfer
      & Trust Company, as escrow agent, and Barzel Industries
      Inc.10.18.2(9)
            
            Amendment,
      dated as of November 15, 2007, to Stock Escrow Agreement, dated March 12,
      2007, among Barzel Industries Inc. and the signatories
thereto10.18.3*
            
            Second
      Amendment, dated as of December 23, 2008, to Stock Escrow Agreement, dated
      March 12, 2007, among Barzel Industries Inc. and the signatories
      thereto10.18.4*
            
            Third
      Amendment, dated as of February 26, 2009, to Stock Escrow Agreement, dated
      March 12, 2007, among Barzel Industries Inc. and the signatories
      thereto10.19*
            
            Services
      Agreement, dated January 1, 2009, between Barzel Industries
      Inc.  and ILUT, Srl.10.20(1)
            
            Trademark
      License Agreement, dated September 15, 2006, between Barzel Industries
      Inc. and Domenico Lepore


60





10.21(8)
            
            Employment
      Agreement, dated as of January 1, 2008, between Barzel Industries Inc. and
      Corrado De Gasperis10.22(8)
            
            Employment
      Agreement, dated as of January 1, 2008, between Barzel Industries Inc. and
      Domenico Lepore10.23(8)
            
            Employment
      Agreement, dated as of January 1, 2008, between Barzel Industries Inc. and
      Karen Narwold10.24.1(10)
            
            Form
      of Exchange Agreement (Affiliates)10.24.2(10)
            
            Form
      of Exchange Agreement (Non-Affiliates)10.25*
            
            Replenishment
      Agreement, dated as of November 28, 2008, by and between Barzel Industries
      Inc. and ArcelorDefasco Mittal Inc.21.1*
            
            List
      of Subsidiaries24.1*
            
            Powers
      of Attorney (Contained on signature page)31.1*
            
            Officer's
      Certificate Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 200231.2*
            
            Officer's
      Certificate Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 200232*
            
            Certification
      Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002





*  Filed
herewith.





(1)
            Incorporated
      by reference to the Registration Statement of Registrant on Form S-1
      (Registration No. 333-135353).


(2)
            Incorporated
      by reference to the Current Report of Registrant on Form 8-K filed on
      December 6, 2007 (SE File No.
001-33342).


(3)
            Incorporated
      by reference to the Quarterly Report of Registrant on Form 10-Q for the
      quarter ended March 31, 2007 (File No.
  001-33342).


(4)
            Incorporated
      by reference to the Current Report of Registrant on Form 8-K filed
      November 20, 2007 (File No.
001-33342).


(5)
            Incorporated
      by reference to the Quarterly Report of Registrant on Form 10-Q for the
      quarter ended June 30, 2007 (File No.
  001-33324).


(6)
            Incorporated
      by reference to the Quarterly Report of Registrant on Form 10-Q for the
      quarter ended March 31, 2007 (File No.
  001-33324).


(7)
            Incorporated
      by reference to the Annual Report of Registrant on Form 10-K for the
      fiscal year ended November 24, 2007 (File No.
  001-33342).


(8)
            Incorporated
      by reference to the Quarterly Report of Registrant on Form 10-Q for the
      quarter ended February 23, 2008 (File No.
  001-33342).


(9)
            Incorporated
      by reference to the Registration to the Registration Statement on Form S-1
      (Registration No. 333-151581).


(10)
            Incorporated
      by reference to the Quarterly Report of Registrant on Form 10-Q for the
      quarter ended August 30, 2008 (File No.
  001-33342).


61