##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





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

For the quarterly period ended March 31, 2009

Commission File Number 333-146181





METALS USA HOLDINGS CORP.

(Exact name of Registrant as Specified in its Charter)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Delaware                                                       |  | 20-3779274                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)
|                                                               | 
|One Riverway, Suite 1100 Houston, Texas                        |  | 77056                                  
|(Address of Principal Executive Offices)                       |  | (Zip Code)                             

Registrants telephone number, including area code: (713) 965-0990





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   ̈

Indicate by check mark whether the Registrant submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ̈    No   ̈

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 accelerated filer, large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ̈    Accelerated filer   ̈    Non-accelerated filer  x    Smaller reporting company   ̈

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

Number of shares of common stock outstanding at May 15, 2009 of Metals USA Holdings Corp.: 14,077,500









---

##### Table of Contents

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future
events that are intended as forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this Quarterly Report, other than statements
of historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. These statements appear in a number of places, including
Managements Discussion and Analysis of Financial Condition and Results of Operations. These statements represent our reasonable judgment on the future based on various factors and using numerous assumptions and are subject to
known and unknown risks, uncertainties and other factors that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not
relate strictly to historical or current facts. They use words such as anticipate, believe, estimate, expect, forecast, may, should, plan,
project and other words of similar meaning. In particular, these include, but are not limited to, statements relating to the following:



| |  |  | projected operating or financial results, including anticipated cash flows from operations and asset sale proceeds;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | expectations regarding capital expenditures, interest expense and other payments;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | our beliefs and assumptions relating to our liquidity position, including our ability to adapt to changing market conditions; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to compete effectively for market share with industry participants.
| | - |  | -------------------------------------------------------------------------------

Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown
risks, uncertainties and other factors including, among others:



| |  |  | supply, demand, prices and other market conditions for steel and other commodities;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | the timing and extent of changes in commodity prices;
| | - |  | -----------------------------------------------------



| |  |  | the effects of competition in our business lines;
| | - |  | -------------------------------------------------



| |  |  | the condition of the steel and metal markets generally, which will be affected by interest rates, foreign currency fluctuations and general economic
conditions;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the ability of our counterparties to satisfy their financial commitments;
| | - |  | -------------------------------------------------------------------------



| |  |  | tariffs and other government regulations relating to our products and services;
| | - |  | -------------------------------------------------------------------------------



| |  |  | adverse developments in our relationship with both our key employees and unionized employees;
| | - |  | ---------------------------------------------------------------------------------------------



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



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



| |  |  | our substantial indebtedness;
| | - |  | -----------------------------



| |  |  | restrictive covenants in our indebtedness that may adversely affect our operational flexibility;
| | - |  | ------------------------------------------------------------------------------------------------



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



| |  |  | our ability to retain key employees; and
| | - |  | ----------------------------------------



| |  |  | our expectations with respect to our acquisition activity.
| | - |  | ----------------------------------------------------------

In addition, there may be other factors that could cause our actual results to be materially different from the results referenced in the forward-looking statements, some of which are included elsewhere in this
Form 10-Q, including Managements Discussion and Analysis of Financial Condition and Results of Operations. Many of these factors will be important in determining our actual future results. Consequently, no
forward-looking statement can be guaranteed. Our actual future results may vary materially from those expressed or implied in any forward-looking statements. All forward-looking statements contained in this Form 10-Q are qualified in their
entirety by this cautionary statement. Forward-looking statements speak only as of the date they are made, and we disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of this
Form 10-Q, except as otherwise required by applicable law.



1



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND

SUBSIDIARIES

TABLE OF CONTENTS



|               |  |                                                                                                              |  |   
|-------------- |  | ------------------------------------------------------------------------------------------------------------ |  | --
|               |  | PART I.FINANCIAL INFORMATION                                                                                |  |   
|               |  |                                                                                                             
|Item 1.        |  | Financial Statements                                                                                         |  |   
|               |  | Unaudited Condensed Consolidated Balance Sheets at March 31, 2009 and December 31, 2008                      |  | 3 
|               |  | Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2009 and 2008 |  | 4 
|               |  | Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2009 and 2008 |  | 5 
|               |  | Notes to Unaudited Condensed Consolidated Financial Statements                                               |  | 6 
|               |  |                                                                                                             
|Item 2.        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 26
|               |  |                                                                                                             
|Item 3.        |  | Quantitative and Qualitative Disclosures about Market Risk                                                   |  | 42
|               |  |                                                                                                             
|Item 4.        |  | Controls and Procedures                                                                                      |  | 42
|               |  |                                                                                                             
|               |  | PART II.OTHER INFORMATION                                                                                   |  |   
|               |  |                                                                                                             
|Item 1.        |  | Legal Proceedings                                                                                            |  | 44
|               |  |                                                                                                             
|Item 1A.       |  | Risk Factors                                                                                                 |  | 44
|               |  |                                                                                                             
|Item 2.        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                  |  | 44
|               |  |                                                                                                             
|Item 3.        |  | Defaults Upon Senior Securities                                                                              |  | 44
|               |  |                                                                                                             
|Item 4.        |  | Submission of Matters to a Vote of Security Holders                                                          |  | 44
|               |  |                                                                                                             
|Item 5.        |  | Other Information                                                                                            |  | 44
|               |  |                                                                                                             
|Item 6.        |  | Exhibits                                                                                                     |  | 44
|               | 
|Signature      |  | 45                                                                                                          
|               | 
|Certifications |  |                                                                                                             



2



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share amounts)



|                                                                                                                                                     |  |               |         |   |                  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                     |  | March 31,2009 |         |   | December 31,2008 |  
|Assets                                                                                                                                               |  |               |         |   |                  |   |         |  
|Current Assets:                                                                                                                                      |  |               |         |   |                  |   |         |  
|Cash                                                                                                                                                 |  | $             | 160.0   |   |                  | $ | 166.7   |  
|Accounts receivable, net of allowance of $9.1 and $8.8, respectively                                                                                 |  |               | 170.0   |   |                  |   | 189.3   |  
|Inventories                                                                                                                                          |  |               | 311.3   |   |                  |   | 422.6   |  
|Deferred income tax asset                                                                                                                            |  |               | 22.6    |   |                  |   | 23.6    |  
|Prepayments and other                                                                                                                                |  |               | 6.1     |   |                  |   | 6.5     |  
|                                                                                                                                                     |  |               |         |   |                  |   |         |  
|Total current assets                                                                                                                                 |  |               | 670.0   |   |                  |   | 808.7   |  
|Property and equipment, net                                                                                                                          |  |               | 191.9   |   |                  |   | 190.1   |  
|Assets held for sale, net                                                                                                                            |  |               | 0.9     |   |                  |   | 1.8     |  
|Intangible assets, net                                                                                                                               |  |               | 12.1    |   |                  |   | 13.6    |  
|Goodwill                                                                                                                                             |  |               | 50.2    |   |                  |   | 49.9    |  
|Other assets                                                                                                                                         |  |               | 22.2    |   |                  |   | 24.1    |  
|                                                                                                                                                     |  |               |         |   |                  |   |         |  
|Total assets                                                                                                                                         |  | $             | 947.3   |   |                  | $ | 1,088.2 |  
|                                                                                                                                                     |  |               |         |   |                  |   |         |  
|Liabilities and Stockholders Deficit                                                                                                                |  |               |         |   |                  |   |         |  
|Current liabilities:                                                                                                                                 |  |               |         |   |                  |   |         |  
|Accounts payable                                                                                                                                     |  | $             | 60.2    |   |                  | $ | 47.2    |  
|Accrued liabilities                                                                                                                                  |  |               | 53.0    |   |                  |   | 60.9    |  
|Current portion of long-term debt                                                                                                                    |  |               | 1.6     |   |                  |   | 1.6     |  
|                                                                                                                                                     |  |               |         |   |                  |   |         |  
|Total current liabilities                                                                                                                            |  |               | 114.8   |   |                  |   | 109.7   |  
|Long-term debt, less current portion                                                                                                                 |  |               | 792.6   |   |                  |   | 942.6   |  
|Deferred income tax liability                                                                                                                        |  |               | 71.6    |   |                  |   | 62.2    |  
|Other long-term liabilities                                                                                                                          |  |               | 22.9    |   |                  |   | 24.7    |  
|                                                                                                                                                     |  |               |         |   |                  |   |         |  
|Total liabilities                                                                                                                                    |  |               | 1,001.9 |   |                  |   | 1,139.2 |  
|                                                                                                                                                     |  |               |         |   |                  |   |         |  
|Commitments and contingencies                                                                                                                        |  |               |         |   |                  |   |         |  
|Stockholders deficit:                                                                                                                               |  |               |         |   |                  |   |         |  
|Common stock, $.01 par value, 30,000,000 shares authorized, 14,077,500 issued and outstanding at March 31, 2009, and December 31,
2008, respectively |  |               | 0.1     |   |                  |   | 0.1     |  
|Additional paid-in capital                                                                                                                           |  |               | 6.5     |   |                  |   | 6.4     |  
|Retained deficit                                                                                                                                     |  |               | (58.6   | ) |                  |   | (54.5   | )
|Accumulated other comprehensive loss                                                                                                                 |  |               | (2.6    | ) |                  |   | (3.0    | )
|                                                                                                                                                     |  |               |         |   |                  |   |         |  
|Total stockholders deficit                                                                                                                          |  |               | (54.6   | ) |                  |   | (51.0   | )
|                                                                                                                                                     |  |               |         |   |                  |   |         |  
|Total liabilities and stockholders deficit                                                                                                          |  | $             | 947.3   |   |                  | $ | 1,088.2 |  
|                                                                                                                                                     |  |               |         |   |                  |   |         |  

See notes to unaudited condensed consolidated financial statements.



3



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions)



|                                                                                                   |  |                             |       |   |      |   |       |  
|-------------------------------------------------------------------------------------------------- |  | --------------------------- | ----- | - | ---- | - | ----- | -
|                                                                                                   |  | Three Months EndedMarch 31, |      
|                                                                                                   |  | 2009                        |       |   | 2008 |  
|Net Sales                                                                                          |  | $                           | 330.2 |   |      | $ | 489.0 |  
|Operating costs and expenses:                                                                      |  |                             |       |   |      |   |       |  
|Cost of sales (exclusive of operating and delivery, and depreciation and amortization shown below) |  |                             | 287.7 |   |      |   | 376.6 |  
|Operating and delivery                                                                             |  |                             | 34.7  |   |      |   | 46.5  |  
|Selling, general and administrative                                                                |  |                             | 24.0  |   |      |   | 29.2  |  
|Depreciation and amortization                                                                      |  |                             | 4.7   |   |      |   | 5.5   |  
|                                                                                                   |  |                             |       |   |      |   |       |  
|Operating income (loss)                                                                            |  |                             | (20.9 | ) |      |   | 31.2  |  
|Other (income) expense:                                                                            |  |                             |       |   |      |   |       |  
|Interest expense                                                                                   |  |                             | 19.3  |   |      |   | 25.1  |  
|Gain on extinguishment of debt                                                                     |  |                             | (32.3 | ) |      |   |      |  
|Other (income) expense, net                                                                        |  |                             | (0.1  | ) |      |   | (0.1  | )
|                                                                                                   |  |                             |       |   |      |   |       |  
|Income (loss) before income taxes                                                                  |  |                             | (7.8  | ) |      |   | 6.2   |  
|Provision (benefit) for income taxes                                                               |  |                             | (3.7  | ) |      |   | 2.4   |  
|                                                                                                   |  |                             |       |   |      |   |       |  
|Net income (loss)                                                                                  |  | $                           | (4.1  | ) |      | $ | 3.8   |  
|                                                                                                   |  |                             |       |   |      |   |       |  







See notes to unaudited condensed consolidated financial statements.



4



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)



|                                                                                                   |  |                             |        |   |      |   |        |  
|-------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                                   |  | Three Months EndedMarch 31, |       
|                                                                                                   |  | 2009                        |        |   | 2008 |  
|Cash flows from operating activities:                                                              |  |                             |        |   |      |   |        |  
|Net income (loss)                                                                                  |  | $                           | (4.1   | ) |      | $ | 3.8    |  
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |                             |        |   |      |   |        |  
|Provision for bad debts                                                                            |  |                             | 1.0    |   |      |   | 0.6    |  
|Depreciation and amortization                                                                      |  |                             | 5.2    |   |      |   | 6.6    |  
|Gain on extinguishment of debt                                                                     |  |                             | (32.3  | ) |      |   |       |  
|Amortization of debt issuance costs and discounts on long-term debt                                |  |                             | 1.5    |   |      |   | 1.4    |  
|Deferred income taxes                                                                              |  |                             | 10.5   |   |      |   | (2.8   | )
|Stock-based compensation                                                                           |  |                             | 0.1    |   |      |   | 0.3    |  
|Non-cash interest on PIK option                                                                    |  |                             | 8.2    |   |      |   |       |  
|Changes in operating assets and liabilities, net of acquisitions:                                  |  |                             |        |   |      |   |        |  
|Accounts receivable                                                                                |  |                             | 18.3   |   |      |   | (47.2  | )
|Inventories                                                                                        |  |                             | 111.3  |   |      |   | (30.5  | )
|Prepayments and other                                                                              |  |                             | 0.4    |   |      |   | (2.1   | )
|Accounts payable and accrued liabilities                                                           |  |                             | 5.8    |   |      |   | 27.9   |  
|Other                                                                                              |  |                             | (1.9   | ) |      |   | 1.2    |  
|                                                                                                   |  |                             |        |   |      |   |        |  
|Net cash provided by (used in) operations                                                          |  |                             | 124.0  |   |      |   | (40.8  | )
|                                                                                                   |  |                             |        |   |      |   |        |  
|Cash flows from investing activities:                                                              |  |                             |        |   |      |   |        |  
|Sales of assets                                                                                    |  |                             |       |   |      |   | 0.1    |  
|Purchases of assets                                                                                |  |                             | (0.9   | ) |      |   | (2.8   | )
|Acquisition costs, net of cash acquired                                                            |  |                             | (4.2   | ) |      |   |       |  
|                                                                                                   |  |                             |        |   |      |   |        |  
|Net cash used in investing activities                                                              |  |                             | (5.1   | ) |      |   | (2.7   | )
|                                                                                                   |  |                             |        |   |      |   |        |  
|Cash flows from financing activities:                                                              |  |                             |        |   |      |   |        |  
|Borrowings on credit facility                                                                      |  |                             | 45.0   |   |      |   | 276.0  |  
|Repayments on credit facility                                                                      |  |                             | (162.0 | ) |      |   | (222.5 | )
|Repayments of long-term debt                                                                       |  |                             | (8.6   | ) |      |   | (0.8   | )
|Deferred financing costs                                                                           |  |                             |       |   |      |   | (0.3   | )
|                                                                                                   |  |                             |        |   |      |   |        |  
|Net cash (used in) provided by financing activities                                                |  |                             | (125.6 | ) |      |   | 52.4   |  
|                                                                                                   |  |                             |        |   |      |   |        |  
|Net (decrease) increase in cash and cash equivalents                                               |  |                             | (6.7   | ) |      |   | 8.9    |  
|Cash and cash equivalents, beginning of period                                                     |  |                             | 166.7  |   |      |   | 13.6   |  
|                                                                                                   |  |                             |        |   |      |   |        |  
|Cash and cash equivalents, end of period                                                           |  | $                           | 160.0  |   |      | $ | 22.5   |  
|                                                                                                   |  |                             |        |   |      |   |        |  
|Supplemental cash flow information:                                                                |  |                             |        |   |      |   |        |  
|Cash paid for interest                                                                             |  | $                           | 4.0    |   |      | $ | 13.6   |  
|                                                                                                   |  |                             |        |   |      |   |        |  
|Cash paid for income taxes                                                                         |  | $                           | 2.6    |   |      | $ | 0.4    |  
|                                                                                                   |  |                             |        |   |      |   |        |  
|Investments in property, plant and equipment not paid                                              |  | $                           | 0.6    |   |      | $ | 0.3    |  
|                                                                                                   |  |                             |        |   |      |   |        |  

See notes to unaudited condensed consolidated financial statements.



5



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions)

1. Organization and Basis of Presentation

Organization

On May 18,
2005, Metals USA Holdings Corp. (formerly named Flag Holdings Corporation), a Delaware corporation (Metals USA Holdings), and its wholly owned subsidiary, Flag Acquisition Corporation, a Delaware corporation (Flag
Acquisition), entered into an Agreement and Plan of Merger (the Merger Agreement) with Metals USA, Inc. (Metals USA). On November 30, 2005, Flag Acquisition, then a wholly owned subsidiary of Flag Intermediate
Holdings Corporation (Flag Intermediate) merged with and into Metals USA (the Merger), with Metals USA being the surviving corporation. Metals USA Holdings and its wholly owned subsidiaries, Flag Intermediate and Metals USA,
are referred to collectively herein as the Company. Metals USA prior to the Merger is referred to herein as the Predecessor Company.

We believe that we are a leading provider of value-added processed carbon steel, stainless steel, aluminum and specialty metals, as well as manufactured metal components. For the three months ended March 31,
2009, approximately 94% of our revenue was derived from our metals service center and processing activities, which are segmented into two groups: Flat Rolled and Non-Ferrous Group and Plates and Shapes Group. The remaining portion of our revenue was
derived from our Building Products Group, which principally manufactures and sells aluminum products related to the residential remodeling industry. We purchase metal from primary producers that generally focus on large volume sales of unprocessed
metals in standard configurations and sizes. In most cases, we perform the customized, value-added processing services required to meet the specifications provided by end-use customers. Our Plates and Shapes Group and Flat Rolled and Non-Ferrous
Group customers are in the land and marine transportation, energy, aerospace, defense, electrical and appliance manufacturing, fabrication, furniture, commercial construction, and machinery and equipment industries. Our Building Products Group
customers are primarily distributors and contractors engaged in the residential remodeling industry.

Basis of Presentation

Principles of ConsolidationThe condensed consolidated financial statements include the accounts of Metals USA Holdings, Flag
Intermediate, and Metals USA and its subsidiaries. Intercompany accounts and transactions have been eliminated in the consolidated financial statements.

Interim Financial InformationThe interim consolidated financial statements included herein are unaudited; however, they include adjustments of a normal recurring nature which, in our opinion, are
necessary to present fairly the interim consolidated financial information as of and for the periods indicated. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year-end. The results of operations for
the interim periods presented are not necessarily indicative of the results to be expected for the entire year.

Use of Estimates and
AssumptionsThe preparation of financial statements in conformity with accounting principles generally accepted in the United States (GAAP) requires management to make estimates and assumptions that affect (i) the reported
amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net sales and expenses recognized during the
periods presented. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial
statements; accordingly, actual results could differ from these estimates.

Allowance for Doubtful AccountsThe determination
of collectibility of the Companys accounts receivable requires management to make frequent judgments and estimates in order to determine the appropriate



6



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in millions, except share amounts)



amount of allowance needed for doubtful accounts. The Companys allowance for doubtful accounts is estimated to cover the risk of loss related to
accounts receivable. This allowance is maintained at a level we consider appropriate based on historical and other factors that affect collectibility. These factors include historical trends of write-offs, recoveries and credit losses, the careful
monitoring of customer credit quality, and projected economic and market conditions. Different assumptions or changes in economic circumstances could result in changes to the allowance.

InventoriesInventories are stated at the lower of cost or market. Our inventories are accounted for using a variety of methods including
specific identification, average cost and the first-in first-out method of accounting. Inventory quantities are regularly reviewed and provisions for excess or obsolete inventory are recorded primarily based on our forecast of future demand and
market conditions.

Financial DerivativesWe use financial derivatives to mitigate the Companys exposure to volatility in
interest rates. The Company hedges only exposures in the ordinary course of business. The Company accounts for its derivative instruments in accordance with Statement of Financial Accounting Standards (SFAS) No. 133,
Accounting for Derivative Instruments and Hedging Activity (SFAS 133), which requires all derivatives to be carried on the balance sheet at fair value and meet certain documentary and analytical requirements to qualify for
hedge accounting treatment. Hedge accounting creates the potential for a statement of operations match between the changes in fair values of derivatives and the changes in cost of the associated underlying transactions, in this case interest
expense. Derivatives held by the Company are designated as hedges of specific exposures at inception, with an expectation that changes in the fair value will essentially offset the change in cost for the underlying exposure. Fair values of
derivatives are determined from market observation or dealer quotations. Interest rate swap derivatives outstanding at March 31, 2009, all have remaining terms of approximately two years or less and the associated underlying transactions are
expected to occur within that time frame.

The effective portion of the change in fair value of derivatives is reported in other
comprehensive income, a component of stockholders deficit, until the underlying transaction occurs. Any determination that an underlying transaction is not probable of occurring will result in the recognition in earnings of gains and losses
deferred in other comprehensive income. Amounts due from counterparties (unrealized hedge gains) or owed to counterparties (unrealized hedge losses) are included in other assets and accrued liabilities, respectively.

See Note 5 for additional information on underlying hedge categories, notional and fair values of derivatives, types and classifications of derivatives
used, and gains and losses from hedging activity.

Goodwill Goodwill represents the residual between the consideration
transferred in a business combination and the net of the acquisition-date amounts of identifiable assets acquired and liabilities assumed measured at fair value. We use estimates and judgments to measure the fair value of identifiable assets
acquired and liabilities assumed.

Intangible AssetsIntangible assets consist primarily of customer lists. We are amortizing
the customer lists over five years using an accelerated amortization method which approximates their useful life and economic value to us.

Debt Issuance CostsWe defer certain expenses incurred to obtain debt financing and amortize these costs to interest expense over the terms of the respective agreements. See Note 6 for additional information on debt issuance
costs.



7



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in millions, except share amounts)



Fair Value of Financial Assets and LiabilitiesStatement of Financial Accounting Standard
No. 157 Fair Value Measurements (SFAS 157) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 classifies the inputs used to measure fair value into the following hierarchy:

Level 1Quoted prices in active markets for identical assets or liabilities. The Company uses stock quotes from an active, established stock market
for the valuation of its short-term investments, which are reported in other current assets in the Companys consolidated balance sheet.

Level 2Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities. The Companys interest rate swap derivatives are valued using market data which is derived by combining certain inputs with quantitative models and processes to generate
interest rate forward curves and discount factors (see Note 5).

Level 3Unobservable inputs that are supported by little or no market
activity, but which are significant to the fair value of the assets or liabilities as determined by market participants.

Assets and
liabilities measured at fair value on a recurring basis are summarized below:



|                       |  |                                              |      |   |         |   |         |  |   |         |   |  |   |  
|---------------------- |  | -------------------------------------------- | ---- | - | ------- | - | ------- |  | - | ------- | - |  | - | -
|                       |  | Fair Value Measurements as of March 31, 2009
|                       |  | Total                                        |      |   | Level 1 |   | Level 2 |  |   | Level 3
|Short-term investments |  | $                                            | 0.1  |   |         | $ | 0.1     |  | $ |        |   |  | $ | 
|Interest rate swaps    |  |                                              | (5.8 | ) |         |   |        |  |   | (5.8    | ) |  |   | 
|                       |  |                                              |      |   |         |   |         |  |   |         |   |  |   |  
|Total                  |  |                                              | (5.7 | ) |         |   | 0.1     |  |   | (5.8    | ) |  |   | 
|                       |  |                                              |      |   |         |   |         |  |   |         |   |  |   |  

Unrealized gains or losses on short-term investments and derivatives are recorded in accumulated
other comprehensive income (loss) at each measurement date.

Revenue recognitionWe recognize revenues generally when products
are shipped and our significant obligations have been satisfied. Shipping and handling costs billed to our customers are accounted for as revenues. Risk of loss for products shipped passes at the time of shipment. Provisions are made currently for
estimated returns.

Cost of salesOur Plates and Shapes and Flat Rolled and Non-Ferrous Groups classify, within cost of sales,
the underlying commodity cost of metal purchased in mill form, the cost of inbound freight charges together with third-party processing cost, if any.

Cost of sales for our Building Products Group includes the cost of raw materials, manufacturing labor and overhead costs, together with depreciation and amortization expense associated with property, buildings and
equipment used in the manufacturing process.

Operating and delivery expenseOur operating and delivery expense reflects the
cost incurred by our Plates and Shapes and Flat Rolled and Non-Ferrous Groups for labor and facility costs associated with the value- added metal processing services that we provide. With respect to our Building Products Group, operating costs are
associated with the labor and facility costs attributable to the warehousing of our finished goods at our sales center facilities. Delivery expense reflects labor, material handling and other third party costs incurred with the delivery of product
to customers.

Delivery expense totaled $8.3 and $12.2 for the three months ended March 31, 2009 and 2008, respectively.



8



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in millions, except share amounts)



Selling, general and administrative expensesSelling, general and administrative expenses
include sales and marketing expenses, executive officers compensation, office and administrative salaries, insurance, accounting, legal, computer systems and professional services costs not directly associated with the processing,
manufacturing, operating or delivery costs of our products.

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

Foreign Currency TranslationThe
functional currency for our Canadian subsidiary, Allmet, is the Canadian dollar. We translate the functional currency into U.S. dollars based on the current exchange rate at the end of the period for the balance sheet and a weighted average rate for
the period on the statement of operations. The resulting translation adjustments are recorded in accumulated other comprehensive income (loss), a component of stockholders deficit.

New Accounting Pronouncements

In May 2008, the Financial Accounting Standards Board (FASB) issued SFAS No. 162, Hierarchy of Generally Accepted Accounting Principles (SFAS 162). This statement is intended to improve financial
reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements of nongovernmental entities that are presented in conformity with GAAP. The effective date of this
statement was November 15, 2008. The adoption of SFAS 162 did not have a material impact on the Companys consolidated financial statements.

In April 2008, the FASB issued FASB Staff Position (FSP) No. SFAS 142-3, Determination of the Useful Life of Intangible Assets (FSP SFAS 142-3). FSP SFAS 142-3 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 SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142). The intent
of FSP SFAS 142-3 is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141R (revised 2007),
Business Combinations (SFAS 141R) and other applicable accounting literature. FSP SFAS 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and must be applied
prospectively to intangible assets acquired after the effective date. The Company has not acquired any intangible assets since adopting FSP SFAS 142-3. As such, there has been no impact to the Companys financial statements since the
January 1, 2009 adoption date.

In March 2008, the FASB issued SFAS No. 161, Disclosures About Derivative Instruments and
Hedging Activitiesan amendment of FASB Statement No. 133 (SFAS 161), which expands the disclosure requirements in SFAS 133 about an entitys derivative instruments and hedging activities. SFAS 161s disclosure
provisions apply to all entities with derivative instruments subject to SFAS 133 and its related interpretations. The provisions also apply to related hedged items, bifurcated derivatives, and nonderivative instruments that are designated and
qualify as hedging instruments. Entities with instruments subject to SFAS 161 must provide more robust qualitative disclosures and expanded quantitative disclosures. Such disclosures, as well as existing SFAS 133 required disclosures, generally will
need to be presented for every annual and interim reporting period. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. For the three months ended March 31,
2009, we have included the statements expanded disclosures about derivative instruments and hedging activities within the Companys financial statements.



9



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in millions, except share amounts)



In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations
(SFAS 141R), which replaces SFAS 141. SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any
non-controlling interest in the acquiree and the goodwill acquired in connection with a business combination. The Statement also establishes disclosure requirements that will enable users to evaluate the nature and financial effect of the business
combination. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of an entitys first fiscal year that begins after December 15, 2008. The Company applied the provisions of
SFAS 141R in connection with the acquisition that closed during the first quarter of 2009 (see Note 2 below). The adoption of SFAS 141R did not have a material impact on the Companys consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB
No. 51 (SFAS 160). SFAS 160 requires that accounting and reporting for minority interests will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS 160 also establishes reporting
requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. This Statement is effective as of the beginning of an entitys first
fiscal year beginning after December 15, 2008. The adoption of SFAS 160 did not have a material impact on the Companys consolidated financial statements.

In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157 (FSP FAS 157-2), which delayed the effective date of SFAS 157 for all
nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on at least an annual basis, until fiscal years beginning after November 15, 2008. Nonfinancial assets and
liabilities that the Company measures at fair value on a non-recurring basis consist primarily of property and equipment, goodwill, and intangible assets, which are subject to fair value adjustments in certain circumstances (for example, when there
is evidence of impairment). The adoption of FSP FAS 157-2 did not have a material impact on the Companys consolidated financial statements.

2.
Acquisitions

VR Laser Acquisition

On February 20 2009, we purchased substantially all of the operating assets of VR Laser Services USA, Inc. (VR Laser) for approximately $4.2. The purchase price was funded by borrowings under our
asset-based revolving credit facility (the ABL facility). VR Laser was a metal processor of carbon steel plate products located in Philadelphia, Pennsylvania. The total purchase price represents the acquisition-date fair value of the
individual assets acquired, which consist entirely of plant and equipment. The VR Laser acquisition replicates much of our existing processing capabilities in our Plates and Shapes Southeast geographic region and expands our service offerings in the
marine and defense industries.



10



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in millions, except share amounts)



3. Inventories

Inventories consist of the following:



|                                         |  |               |       |                  |   |      
|---------------------------------------- |  | ------------- | ----- | ---------------- | - | -----
|                                         |  | March 31,2009 |       | December 31,2008
|Raw materials                           |  |               |       |                  |   |      
|Plates and Shapes                        |  | $             | 185.3 |                  | $ | 254.8
|Flat Rolled and Non-Ferrous              |  |               | 87.5  |                  |   | 111.7
|Building Products                        |  |               | 9.5   |                  |   | 10.9 
|                                         |  |               |       |                  |   |      
|Total raw materials                      |  |               | 282.3 |                  |   | 377.4
|                                         |  |               |       |                  |   |      
|Work-in-process and finished goods      |  |               |       |                  |   |      
|Plates and Shapes                        |  |               |      |                  |   |     
|Flat Rolled and Non-Ferrous              |  |               | 15.5  |                  |   | 29.2 
|Building Products                        |  |               | 13.5  |                  |   | 16.0 
|                                         |  |               |       |                  |   |      
|Total work-in-process and finished goods |  |               | 29.0  |                  |   | 45.2 
|                                         |  |               |       |                  |   |      
|Total inventories                        |  | $             | 311.3 |                  | $ | 422.6
|                                         |  |               |       |                  |   |      

4. Intangible Assets

The carrying amounts of the Companys intangible assets are as follows:



|                               |  |               |       |   |                  |   |       |  
|------------------------------ |  | ------------- | ----- | - | ---------------- | - | ----- | -
|                               |  | March 31,2009 |       |   | December 31,2008 |  
|Customer lists                 |  | $             | 40.7  |   |                  | $ | 40.7  |  
|Effect of foreign currency     |  |               | 0.1   |   |                  |   | 0.1   |  
|Less: Accumulated amortization |  |               | (31.7 | ) |                  |   | (30.3 | )
|                               |  |               |       |   |                  |   |       |  
|                               |  | $             | 9.1   |   |                  | $ | 10.5  |  
|                               |  |               |       |   |                  |   |       |  
|Trade name                     |  | $             | 3.3   |   |                  | $ | 3.3   |  
|Less: Accumulated amortization |  |               | (0.4  | ) |                  |   | (0.3  | )
|                               |  |               |       |   |                  |   |       |  
|                               |  | $             | 2.9   |   |                  | $ | 3.0   |  
|                               |  |               |       |   |                  |   |       |  
|Patents                        |  | $             | 0.6   |   |                  | $ | 0.6   |  
|Less: Accumulated amortization |  |               | (0.5  | ) |                  |   | (0.5  | )
|                               |  |               |       |   |                  |   |       |  
|                               |  | $             | 0.1   |   |                  | $ | 0.1   |  
|                               |  |               |       |   |                  |   |       |  

Aggregate amortization expense for the three months ended March 31, 2009 and 2008 was $1.4
and $2.3, respectively.



11



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in millions, except share amounts)



The following table represents the total estimated amortization of customer list intangible assets,
excluding the effect of foreign currency, for the remaining lives of the assets:



|                          |  |                              |    
|------------------------- |  | ---------------------------- | ---
|For the Year Ending       |  | EstimatedAmortizationExpense
|2009 (remaining 9 months) |  | $                            | 3.5
|2010                      |  | $                            | 3.4
|2011                      |  | $                            | 1.6
|2012                      |  | $                            | 0.5

5. Derivatives

In February 2008, we entered into a series of interest rate swap agreements that entitle us to receive quarterly payments of interest at a floating rate indexed to the three-month London Interbank Offered Rate
(LIBOR) and pay a fixed rate that ranges from 2.686% to 2.997%, thereby converting $250.0 notional amount of the outstanding borrowings on our ABL facility from a floating rate obligation to a fixed rate obligation. The interest rate
swap agreements all have initial terms of approximately three years or less and the associated underlying transactions are expected to occur within that time frame.

The primary objective for our use of these interest rate hedges is to reduce our exposure to changes in interest rates on the ABL facility. The Company endeavors to finance its investment in working capital at the
lowest possible cost and to manage variable interest rate exposure to achieve greater flexibility in meeting overall financial objectives.

We have designated the interest rate swaps as cash flow hedges for accounting purposes. We account for these hedges in accordance with SFAS 133, and therefore defer in accumulated other comprehensive income (loss) (OCI), a
component of stockholders deficit, the effective portion of cash flow hedging gains and losses that equal the change in cost of the underlying hedged transactions. As the underlying hedged transactions occur, the associated deferred hedging
gains and losses are reclassified into earnings to match the change in cost of the transaction. Because we hedge only with derivatives that have high correlation with the underlying transaction cost, changes in derivatives fair value and the
underlying cost are expected to largely offset.

The following table presents the location within the consolidated balance sheet of all
assets and liabilities associated with the Companys outstanding derivatives at March 31, 2009.



|                                                                  |  |                             |  |                            |   |                               |   |                            |  |                               |     |  |   |    
|----------------------------------------------------------------- |  | --------------------------- |  | -------------------------- | - | ----------------------------- | - | -------------------------- |  | ----------------------------- | --- |  | - | ---
|                                                                  |  |                             |  | Asset Derivatives          |   | Liability Derivatives        
|                                                                  |  | Balance Sheet Location      |  | Fair Value atMarch 31,2009 |   | Fair Value atDecember 31,2008 |   | Fair Value atMarch 31,2009 |  | Fair Value atDecember 31,2008
|                                                                  |  |                             |  | (in millions)             
|Interest rate swaps                                               |  | Other current assets        |  | $                          |  |                               | $ |                           |  | $                             |    |  | $ |   
|                                                                  |  | Other noncurrent assets     |  |                            |  |                               |   |                           |  |                               |    |  |   |   
|                                                                  |  | Accrued liabilities         |  |                            |  |                               |   |                           |  |                               | 3.1 |  |   | 1.8
|                                                                  |  | Other long-term liabilities |  |                            |  |                               |   |                           |  |                               | 2.7 |  |   | 4.8
|                                                                  |  |                             |  |                            |   |                               |   |                            |  |                               |     |  |   |    
|Total derivatives designated as hedging instruments underSFAS 133 |  |                             |  | $                          |  |                               | $ |                           |  | $                             | 5.8 |  | $ | 6.6
|                                                                  |  |                             |  |                            |   |                               |   |                            |  |                               |     |  |   |    



12



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in millions, except share amounts)



The following table presents the pretax impact of the Companys derivative instruments and their
location within the consolidated statements of operations for the three months ended March 31, 2009 and 2008. Pretax realized gains and losses from derivatives which are recognized in earnings are included in interest expense in the
consolidated statements of operations.



|                    |  |                                                                        |     |                                                                          |   |                                                                             |  |   |      |   |      |   |      |  |   |   |  |   |  
|------------------- |  | ---------------------------------------------------------------------- | --- | ------------------------------------------------------------------------ | - | --------------------------------------------------------------------------- |  | - | ---- | - | ---- | - | ---- |  | - | - |  | - | -
|                    |  | Amount of Gain (Loss)Recognized in OCI onDerivative (EffectivePortion) |     | Amount of Gain (Loss)Reclassified from OCIinto Income (EffectivePortion) |   | Amount of Gain (Loss)Recognized in Incomeon Derivative (IneffectivePortion)
|                    |  | Three months endedMarch 31,                                            |     | Three months endedMarch 31,                                              |   | Three months endedMarch 31,                                                
|                    |  | 2009                                                                   |     | 2008                                                                     |   | 2009                                                                        |  |   | 2008 |   | 2009 |   | 2008
|                    |  | (in millions)                                                         
|Interest rate swaps |  | $                                                                      | 0.8 |                                                                          | $ | 0.7                                                                         |  | $ | (0.8 | ) |      | $ |     |  | $ |  |  | $ | 

Pretax realized gains and losses from derivatives which were recognized in earnings during the
three months ended March 31, 2009 and 2008 effectively offset changes in the cost of the Companys hedged exposure, and no amount of such gains and losses resulted from hedge ineffectiveness, nor was any component of these gains and losses
excluded from the Companys assessment of hedge effectiveness.

The Companys credit exposure related to interest rate swaps is
represented by the fair value of swap agreements with a net positive fair value (asset position) to the Company at the reporting date. At such times, the outstanding instruments expose the Company to credit loss in the event of nonperformance by the
counterparty to the agreements. However, we have not experienced any credit loss as a result of counterparty nonperformance in the past. Our credit risk exposure with respect to our interest rate swaps is limited to a single counterparty, which we
monitor based on credit ratings.

6. Other Assets

Other assets consist of the following:



|                             |  |               |      |                  |   |     
|---------------------------- |  | ------------- | ---- | ---------------- | - | ----
|                             |  | March 31,2009 |      | December 31,2008
|Deferred financing costs     |  | $             | 7.3  |                  | $ | 8.0 
|Deferred debt offering costs |  |               | 8.6  |                  |   | 9.6 
|Deferred management fees     |  |               | 4.6  |                  |   | 4.9 
|Other                        |  |               | 1.7  |                  |   | 1.6 
|                             |  |               |      |                  |   |     
|Total other assets           |  | $             | 22.2 |                  | $ | 24.1
|                             |  |               |      |                  |   |     

Aggregate amortization of debt issuance costs for the three months ended March 31, 2009 and
2008 was $1.6 and $1.0, respectively. Amortization for the three months ended March 31, 2009 includes $0.5 of accelerated amortization in connection with the extinguishment of debt during the first quarter of 2009.



13



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in millions, except share amounts)



7. Accrued Liabilities

Accrued liabilities consist of the following:



|                                                                   |  |               |      |                  |   |     
|------------------------------------------------------------------ |  | ------------- | ---- | ---------------- | - | ----
|                                                                   |  | March 31,2009 |      | December 31,2008
|Accrued salaries and employee benefits                             |  | $             | 10.7 |                  | $ | 19.3
|Accrued taxes, other than income                                   |  |               | 2.7  |                  |   | 3.1 
|Accrued interest                                                   |  |               | 19.7 |                  |   | 14.6
|Accrued insurance                                                  |  |               | 4.7  |                  |   | 5.2 
|Accrued audit and tax fees                                         |  |               | 1.1  |                  |   | 0.8 
|Accrued warranty liability                                         |  |               | 0.5  |                  |   | 0.5 
|Accrued lease terminations                                         |  |               | 0.4  |                  |   | 0.2 
|Accrued management fees                                            |  |               | 4.0  |                  |   | 5.4 
|Accrued Merger considerationPredecessor common shares outstanding |  |               | 4.6  |                  |   | 6.0 
|Current portion of interest rate swap liability                    |  |               | 3.1  |                  |   | 1.7 
|Other                                                              |  |               | 1.5  |                  |   | 4.1 
|                                                                   |  |               |      |                  |   |     
|Total accrued liabilities                                          |  | $             | 53.0 |                  | $ | 60.9
|                                                                   |  |               |      |                  |   |     

8. Debt

Debt consists of the following:



|                                                                    |  |               |       |                  |   |      
|------------------------------------------------------------------- |  | ------------- | ----- | ---------------- | - | -----
|                                                                    |  | March 31,2009 |       | December 31,2008
|Senior Secured Asset-Based Revolving Credit Facility (ABL facility) |  | $             | 251.0 |                  | $ | 368.0
|111/8% Senior Secured
Notes due 2015 (Metals USA Notes)             |  |               | 275.0 |                  |   | 275.0
|Senior Floating Rate Toggle Notes due 2012 (2007 Notes)             |  |               | 260.7 |                  |   | 293.7
|Industrial Revenue Bond                                             |  |               | 5.7   |                  |   | 5.7  
|Other                                                               |  |               | 1.8   |                  |   | 1.8  
|                                                                    |  |               |       |                  |   |      
|Total debt                                                          |  |               | 794.2 |                  |   | 944.2
|Lesscurrent portion of debt                                        |  |               | 1.6   |                  |   | 1.6  
|                                                                    |  |               |       |                  |   |      
|Total long-term portion of debt                                     |  | $             | 792.6 |                  | $ | 942.6
|                                                                    |  |               |       |                  |   |      

The weighted average interest rates under the ABL facility for the three months ended
March 31, 2009 and 2008 were 3.26%, and 5.63%, respectively.

Senior Secured Asset-Based Revolving Credit Facility

The ABL facility permits us to borrow on a revolving basis through November 30, 2011. Substantially all of our subsidiaries
are borrowers under the ABL facility.

On June 8, 2007, we executed an amendment to the ABL facility (the June 2007
amendment), which increased the commitment from $450.0 to $525.0, comprised of $500.0 of Tranche A Commitments and $25.0 of Tranche A-1 Commitments. Additionally, the June 2007 amendment reduced the borrowing cost on the Tranche A facility by
25 basis points, reduced the borrowing cost on the Tranche A-1 facility by 75 basis points and gave us the option to increase the Tranche A Commitments by $100.0. Costs incurred in connection with the June 2007 amendment totaled $1.6, and are being
amortized over the existing term of the ABL facility, which expires November 30, 2011.



14



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in millions, except share amounts)



On July 1, 2008, we executed our option to increase the Tranche A Commitments by $100.0, which
increased the total commitment from $525.0 to $625.0. All other existing terms under the ABL facility remained unchanged. Costs incurred to exercise the option to increase the ABL facility totaled $2.4, and are being amortized over the existing term
of the ABL facility.

The maximum availability under the ABL facility is based on eligible receivables and eligible inventory, subject to
certain reserves. During September 2008, we borrowed approximately $160.0 on the ABL facility in response to concerns about credit markets. As of March 31, 2009, we had $324.3 of eligible collateral, $251.0 in outstanding advances, $15.1 in
open letters of credit and $58.2 of additional borrowing capacity. As of March 31, 2009, we had $160.0 of available cash and cash equivalents.

At May 12, 2009, we had $283.1 of eligible collateral, $209.5 in outstanding advances, $15.1 in open letters of credit and $58.5 of additional borrowing capacity. As of May 12, 2009, we had approximately $106.7 of available cash
and cash equivalents.

The obligations under the ABL facility are guaranteed by the Company and certain of our domestic subsidiaries and
are secured (i) on a first-priority lien basis by accounts receivable and inventory and (ii) on a second-priority lien basis by other assets, subject to certain exceptions and permitted liens.

The ABL facility bears interest with respect to loans utilizing the Tranche A Commitments at the banks base rate plus an applicable margin ranging
between -0.25% and -0.50%, or LIBOR, at our option, plus an applicable margin ranging between 1.00% and 1.75% as determined in accordance with the amended loan and security agreement governing the ABL facility. The ABL facility bears interest with
respect to the Tranche A-1 Commitments at the banks base rate plus an applicable margin of 0.75%, or LIBOR, at our option, plus an applicable margin of 2.75% under the June 2007 amendment. The marginal rates related to the Tranche A
Commitments will vary with our financial performance as measured by the fixed charge coverage ratio (the FCCR). The FCCR is determined by dividing (i) the sum of Adjusted EBITDA (as defined by the loan and security agreement
governing the ABL facility) minus income taxes paid in cash minus non-financed capital expenditures by (ii) the sum of certain distributions paid in cash, cash interest expense and scheduled principal reductions on debt, and is calculated based
on such amounts for the three immediately preceding months.

For purposes of determining covenant compliance, the FCCR is calculated based
on the most recent period of four consecutive fiscal quarters. As long as our borrowing availability is greater than or equal to $45.0, we do not have to maintain a minimum fixed charge coverage ratio. Should borrowing availability fall below $45.0,
we must maintain a fixed charge coverage ratio of at least 1.0 to 1.0. As of March 31, 2009, our FCCR was 1.08.

Interest on base rate
loans is payable on the last day of each quarter. Interest on LIBOR loans is payable on maturity of the LIBOR loan or on the last day of the quarter if the term of the LIBOR loan exceeds 90 days. A commitment fee of 0.25% per annum is payable
on any unused commitments under the ABL facility. The applicable base rate and the effective LIBOR rate for the Tranche A Commitments and Tranche A-1 Commitments were 3.25% and 1.19%, respectively, as of March 31, 2009.

The loan and security agreement governing the ABL facility requires us to comply with limited affirmative, negative and subjective covenants, the most
significant of which are: (i) the maintenance of a borrowing base availability of at least $45.0, or, if such required borrowing base availability is not maintained, the maintenance of the FCCR, (ii) restrictions on additional indebtedness
and (iii) restrictions on liens, guarantees and quarterly dividends. There are no limitations with respect to capital expenditures.



15



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in millions, except share amounts)



The loan and security agreement governing the ABL facility provides for up to $15.0 of swingline
loans and up to $100.0 for the issuance of letters of credit. Both the face amount of any outstanding letters of credit and any swingline loans will reduce borrowing availability under the ABL facility on a dollar-for-dollar basis.

The ABL facility contains customary representations, warranties and covenants as a precondition to lending, which includes a material adverse change in
the business, limitations on our ability to incur or guarantee additional debt, subject to certain exceptions, pay dividends, or make redemptions and repurchases with respect to capital stock, repay debt, create or incur certain liens, make certain
loans or investments, make acquisitions or investments, engage in mergers, acquisitions, asset sales and sale lease-back transactions, and engage in certain transactions with affiliates. In addition, the ABL facility requires a lock-box arrangement,
which as long as borrowing availability is greater or equal to $45.0 and in the absence of default, is controlled by the Company.

The ABL
facility contains events of default with respect to: default in payment of principal when due, default in the payment of interest, fees or other amounts after a specified grace period, material breach of the representations or warranties, default in
the performance of specified covenants, failure to make any payment when due under any indebtedness with a principal amount in excess of a specified amount, certain bankruptcy events, certain ERISA violations, invalidity of certain security
agreements or guarantees, material judgments or a change of control. In the event of default the agreement may permit the lenders to: (i) restrict the account or refuse to make revolving loans; (ii) cause customer receipts to be applied
against borrowings under the ABL facility causing the Company to suffer a rapid loss of liquidity and the ability to operate on a day-to-day basis; (iii) restrict or refuse to provide letters of credit; or ultimately: (iv) terminate the
commitments and the agreement; or (v) declare any or all obligations to be immediately due and payable if such default is not cured in the specified period required. Any payment default or acceleration under the ABL facility would also result
in a default under the Metals USA Notes and the 2007 Notes that would provide the holders of the Metals USA Notes and the 2007 Notes with the right to demand immediate repayment. We are in compliance with all covenants as of March 31, 2009.

In February 2008, $250.0 notional amount of outstanding borrowings under the ABL facility was swapped from a floating LIBOR-based rate to
a fixed rate (see Note 5).

Costs related to the establishment of the ABL facility, in addition to subsequent amendments to the ABL
facility, were capitalized and are being charged to interest expense over the life of the ABL facility. Unamortized issuance costs of $7.3 as of March 31, 2009, are included in other non-current assets.

Senior Floating Rate Toggle Notes due 2012

On July 10, 2007, Metals USA Holdings issued $300.0 initial aggregate principal amount of Senior Floating Rate Toggle Notes due 2012 (the 2007 Notes). The 2007 Notes were issued at an initial issue
price of 97% of the principal amount thereof, and the original issue discount is being amortized to interest expense over the life of the 2007 Notes. The 2007 Notes are senior unsecured obligations that are not guaranteed by any of Metals USA
Holdings subsidiaries. As such, the 2007 Notes are structurally subordinated to all indebtedness and other liabilities (including trade payables) of Metals USA Holdings subsidiaries.

Metals USA Holdings must make an election regarding whether interest payments on the 2007 Notes will be made in cash or through PIK Interest prior to the
start of the applicable interest period. Metals USA Holdings may elect to pay interest (1) entirely in cash or (2) entirely by increasing the principal amount of the 2007 Notes or issuing new 2007 Notes (PIK Interest), or
(3) on 50% of the outstanding principal amount of the 2007 Notes in cash and on 50% of the outstanding principal amount of the 2007 Notes by increasing the principal amount of



16



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in millions, except share amounts)



the outstanding 2007 Notes or by issuing new 2007 Notes (Partial PIK Interest). Cash interest on the 2007 Notes will accrue at a rate per annum,
reset quarterly, equal to LIBOR plus a spread of 6.00%, which increases by 0.25% to 6.25% in year 2, by 0.50% to 6.50% in year 3, and by 0.75% to 6.75% in year 4. In the event PIK Interest is paid on the 2007 Notes after the first four interest
periods, the then-applicable margin over LIBOR on the 2007 Notes would increase by 0.75% for each period in which PIK Interest is paid. If Metals USA Holdings elects to pay any PIK Interest, Metals USA Holdings will increase the principal amount on
the 2007 Notes or issue new 2007 Notes in an amount equal to the amount of PIK Interest for the applicable interest payment period to holders of the 2007 Notes on the relevant record date. Interest is payable quarterly in arrears on January 1,
April 1, July 1 and October 1. PIK Interest notes, resulting from the conversion of interest into PIK notes, when paid will be treated as an operating activity in the Consolidated Statements of Cash Flows in accordance with SFAS
95.

The initial five interest payments on the 2007 Notes were paid solely in cash. Flag Intermediate provided funds to Metals USA Holdings
to fund the initial five quarterly interest payments on the 2007 Notes, which were paid on October 1, 2007, January 2, 2008, April 1, 2008, July 1, 2008, and October 1, 2008 and which totaled $7.7, $8.4, $8.1, $6.5 and
$6.6, respectively.

On September 26, 2008, we made a permitted election under the indenture governing the 2007 Notes to pay all
interest that is due on January 1, 2009, for the interest period beginning on October 1, 2008, and ending on December 31, 2008, entirely through PIK Interest. The January 1, 2009 PIK Interest payment amounted to $8.2. The Company
must make an election regarding whether subsequent interest payments will be made in cash, through PIK Interest, or Partial PIK Interest, prior to the start of the applicable interest period. In the absence of such an election for any interest
period, interest on the 2007 Notes will be payable according to the election for the previous interest period. As a result, the PIK Interest election is now the default election for future interest periods unless we elect otherwise not later than
the commencement of an interest period.

The terms of the ABL facility, as well as the indenture governing the Metals USA Notes, restrict
Flag Intermediate and certain of its subsidiaries from making payments or transferring assets to Metals USA Holdings, including dividends, loans, or distributions. Such restrictions include prohibition of dividends in an event of default and
limitations on the total amount of dividends paid to Metals USA Holdings. In the event these agreements do not permit Flag Intermediate to provide Metals USA Holdings with sufficient distributions to fund interest and principal payments on the 2007
Notes when due, Metals USA Holdings may default on the 2007 Notes unless other sources of funding are available. The amount available under the restricted payment provision contained in the loan and security agreement governing the ABL facility was
$58.3 as of March 31, 2009. No amount was available under the restricted payment provision contained in the indenture governing the Metals USA Notes as of March 31, 2009. As of March 31, 2009, Metals USA Holdings had $160.0 of
available cash and cash equivalents.

On or after January 15, 2008, Metals USA Holdings may redeem some or all of the 2007 Notes at
certain redemption prices, plus accrued and unpaid interest and additional interest, if any, to the redemption date. If Metals USA Holdings makes certain public offerings, sales or issuances of common stock, and does not redeem the 2007 Notes, it
will be required to make an offer to repurchase the maximum principal amount of the 2007 Notes that may be purchased out of the proceeds thereof, at a price equal to 100% of the principal amount, plus accrued and unpaid interest and additional
interest, if any, to the date of repurchase.

If Metals USA Holdings experiences a change of control and does not redeem the 2007 Notes, it
will be required to make an offer to repurchase the 2007 Notes at a price equal to 101% of the principal amount, plus accrued interest and unpaid interest and additional interest, if any, to the date of repurchase.



17



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in millions, except share amounts)



Under the indenture governing the 2007 Notes, we are required to pay interest on overdue principal at
1% per annum in excess of the rates discussed above and are required to pay interest on overdue installments of interest at such higher rate to the extent lawful. The indenture governing the 2007 Notes contains covenants described under
Covenant Compliance below.

The indenture governing the 2007 Notes contains covenants that, among other things, limit Metals
USA Holdings ability and the ability of certain of its subsidiaries to incur or guarantee additional indebtedness or issue disqualified or preferred stock, repurchase or redeem capital stock or subordinated indebtedness, pay dividends or make
distributions to its stockholders, incur restrictions on the ability of its subsidiaries to pay dividends or to make other payments to Metals USA Holdings, transfer or sell assets, create liens, enter into transactions with affiliates, make
investments or acquisitions, and merge or consolidate with other companies or transfer all or substantially all of its assets.

Our
affiliates, which include Apollo Management V L.P. (Apollo Management and together with its affiliated investment entities Apollo), as well as our Chief Executive Officer and our Chief Financial Officer, have purchased a
portion of our 2007 Notes in the market. For the three months ended March 31, 2009, interest paid on the 2007 Notes held by affiliates amounted to $3.5, and was paid entirely by PIK Interest. From time to time, depending upon market, pricing
and other conditions, as well on cash balances and liquidity, we, our subsidiaries or affiliates may seek to purchase or sell some amount of the Metals USA Notes or additional amounts of the 2007 Notes. Any such purchases or sales may be made in the
open market, privately negotiated transactions, tender offers or otherwise. The amounts of any such purchases or sales may be material.

Costs related to the issuance of the 2007 Notes were capitalized and are being charged to interest expense over the life of the 2007 Notes. Unamortized issuance costs of $2.8 as of March 31, 2009, are included in other non-current
assets.

111/8% Senior Secured Notes Due 2015

On November 30, 2005, Flag Acquisition sold $275.0 aggregate principal amount of the Metals
USA Notes. The Metals USA Notes bear interest at a rate per annum equal to 111/8%, payable semi-annually in arrears, on June 1 and December 1 of each year, commencing on June 1, 2006. The Metals USA Notes will mature on December 1, 2015. We may redeem
some or all of the Metals USA Notes at any time on or after December 1, 2010 at a predetermined redemption price plus accrued and unpaid interest and additional interest, if any, to the applicable redemption date. If we experience a change of
control and we do not redeem the Metals USA Notes, we will be required to make an offer to repurchase the Metals USA Notes at a price equal to 101% of the principal amount, plus accrued and unpaid interest and additional interest, if any, to the
date of repurchase.

As a result of the Merger, Metals USA assumed the obligations of Flag Acquisition including the Metals USA
Notes. All domestic operating subsidiaries of Metals USA have agreed, jointly and severally with Flag Intermediate (Guarantors), to unconditionally and irrevocably guarantee Metals USAs obligations under the Metals USA Notes and
Indenture dated as of November 30, 2005. Additionally, Flag Intermediate has unconditionally guaranteed to be a primary obligor of the due and punctual payment and performance of the obligations under the Indenture.

Metals USA Holdings is not a guarantor of the Metals USA Notes. There is a limitation on the amount of funds which can be transferred by the Guarantors
to Metals USA Holdings in the form of dividends. Such amount available for distribution shall be increased by an amount equal to 50% of Consolidated Net Income, as



18



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in millions, except share amounts)



defined, or reduced by an amount equal to 100% of Consolidated Net Loss, as defined. No amount was available under the restricted payment provision contained
in the indenture governing the Metals USA Notes as of March 31, 2009.

The indebtedness evidenced by the Metals USA Notes and the
guarantees will rank: equally with all of our and the Guarantors existing and future senior indebtedness; junior in priority as to collateral that secures the ABL facility on a first-priority lien basis with respect to our and the
Guarantors obligations under the ABL facility, any other debt incurred after December 1, 2005 that has a priority security interest relative to the Metals USA Notes in the collateral that secures the ABL facility, any hedging obligations
related to the foregoing debt and all cash management obligations incurred with any lender under the ABL facility; equal in priority as to collateral that secures the Metals USA Notes and the guarantees on a first-priority lien basis with respect to
our and the Guarantors obligations under any other equivalent priority lien obligations incurred after December 1, 2005; and senior to all of our and the Guarantors existing and future subordinated indebtedness. The Metals USA Notes
will also be effectively junior to the liabilities of any non-guarantor subsidiaries.

The Metals USA Notes contain covenants that are
customary for debt instruments, including limitations on our or the guarantors ability to incur or guarantee additional debt, subject to certain exceptions, pay dividends, or make redemptions and repurchases with respect to capital stock,
create or incur certain liens, make certain loans or investments, make acquisitions or investments, engage in mergers, acquisitions, asset sales and sale lease-back transactions, and engage in certain transactions with affiliates.

The Metals USA Notes indenture contains certain customary events of default, including (subject, in some cases, to customary cure periods thresholds)
defaults based on (1) the failure to make payments under the Metals USA indenture when due, (2) breach of covenants, (3) cross-defaults to other material indebtedness, (4) bankruptcy events and (5) material judgments. We
were in compliance with all covenants as of March 31, 2009.

Costs related to the establishment of the Metals USA Notes were
capitalized and are being charged to interest expense over the life of the Metals USA Notes. Unamortized issuance costs of $5.8 as of March 31, 2009, are included in other non-current assets.

Industrial Revenue Bond

The
Industrial Revenue Bond (IRB) is payable on May 1, 2016 in one lump sum payment. The interest rate assessed on the IRB varies from month to month and was 0.65% at March 31, 2009. The IRB is secured by real estate and equipment
acquired with proceeds from the IRB. The IRB places various restrictions on certain of our subsidiaries, including but not limited to maintenance of required insurance coverage, maintenance of certain financial ratios, limits on capital expenditures
and maintenance of tangible net worth and is supported by a letter of credit. We were in compliance with all covenants as of March 31, 2009.

9.
Stockholders Deficit

Common StockIn accordance with its Certificate of Incorporation dated May 9, 2005, and as
amended on November 28, 2005, Metals USA Holdings was authorized to issue 30,000,000 shares of capital stock, all of which were shares of common stock, $.01 par value. At March 31, 2009, 14,077,500 shares were issued and outstanding.



19



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in millions, except share amounts)



10. Stock-Based Compensation

Metals USA Holdings Amended and Restated 2005 Stock and Incentive Plan (the Plan) permits the issuance of options and restricted stock awards on Metals USA Holdings stock to employees and
directors of, or consultants to, the Company, except that consultants may only receive awards with the consent of the president of Metals USA. A total of $0.1 and $0.3 was recorded as stock-based employee compensation during the three months ended
March 31, 2009 and 2008, respectively.

On January 3, 2007, the Board of Directors of Metals USA Holdings adopted the Metals USA
Holdings Corp. 2006 Deferred Compensation Plan (the Deferred Compensation Plan). The Deferred Compensation Plan was adopted in connection with the payment by Metals USA Holdings of a cash dividend of approximately $149.0 to its
stockholders on January 3, 2007 (the January 2007 Dividend), and credits to individual accounts established for stock option holders an amount equal to $6.56 per share on certain unvested options, for a total of approximately $2.3.
Payment of this liability was subject to continued employment for two years following the adoption date. The entire amount was paid in one lump sum on January 5, 2009, upon completion of such period. This modification of the Companys
stock-based compensation resulted in incremental expense of $1.4 related to the Deferred Compensation Plan, which was recognized over a two-year vesting period beginning on the date of adoption of the Deferred Compensation Plan.

Description of Share Option Plan

The Plan has
reserved for issuance up to 1.4 million shares of common stock. The Plan has two tranches of options, Tranche A and Tranche B. Tranche A options vest on a pro-rata basis over five years, have a term of ten years, and expire if not exercised.
Tranche B options, which include both a service and a performance condition, vest on the eighth anniversary of the date of grant or earlier dependent on the satisfaction of an internal rate of return on capital invested, have a term of ten years
from date of grant, and expire if not exercised. Awards are generally granted with an exercise price equal to the fair value of Metals USA Holdings stock at the date of grant. The fair value of the stock is a calculated value based on the
date of each of the respective grants using a combination of discounted cash flows and financial metrics from companies with similar characteristics of Metals USA Holdings. Certain option and share awards provide for accelerated vesting if there is
a change in control (as defined in the Plan).

In connection with a $25.0 dividend paid to our stockholders in May 2006 (the May 2006
Dividend) and pursuant to the Plans provisions of rights preservation, the Board of Directors modified the outstanding options by reducing the per share exercise price by $1.78 in order to retain the participants rights
proportionate with those prior to the dividend payment.

In connection with the January 2007 Dividend, the outstanding employee stock
options under the Plan were adjusted a second time by an amount approximately equal to the per share amount of this dividend. The per share exercise price of the options granted on November 30, 2005, was decreased by $4.22 to $4.00 and the per
share exercise price of the options granted on March 17, 2006, was reduced by $4.89 to $4.00.

Because the payment of the January 2007
Dividend resulted in the internal rate of return of the funds managed by Apollo with respect to its investment in Metals USA Holdings to be near 25%, the Board of Directors exercised its discretion under the Plan to vest all of the outstanding
Tranche B options. In addition, the Board of Directors exercised its discretion to vest all Tranche A options granted to directors affiliated with Apollo. In connection with the accelerated vesting of these options, we recognized $1.8 of non-cash
stock-based compensation expense, net of related tax effects, in the first quarter of 2007.



20



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in millions, except share amounts)



In connection with the payment by Metals USA Holdings of a cash dividend of approximately $139.5 to
its stockholders on July 10, 2007 (the July 2007 Dividend), stock option holders were paid approximately $9.25 per share on outstanding options (an amount equal to the per-share amount of the July 2007 Dividend), for a total of
approximately $9.2. The cash payment to holders of outstanding options to acquire shares of Metals USA Holdings common stock was made to equitably adjust such option holders by the Metals USA Holdings Board of Directors pursuant to the
exercise of its discretion to preserve the rights of options holders under the Plan. As a result of the cash payment on outstanding options, we were required to recognize $0.3 of non-cash stock-based compensation expense, net of related tax effects,
in the third quarter of 2007.

Tranche A Options

The fair value of Tranche A option awards was estimated on the date of grant using a black-scholes option valuation model. No options have been granted
since the first quarter of 2006. The following is a summary of valuation assumptions for Tranche A option grants outstanding as of March 31, 2009:



|                                    |  |            
|----------------------------------- |  | -----------
|Expected dividend yield             |  | 0%         
|Expected stock price volatility     |  | 54.7%-54.9%
|Risk free interest rate             |  | 4.0%-4.6%  
|Expected life of options (in years) |  | 6.5-10.0   

The following is a summary of stock option activity for Tranche A options for the three-month
period ended March 31, 2009:



|                              |  |                           |      |                               |   |                                                 |  |                  |  |        
|----------------------------- |  | ------------------------- | ---- | ----------------------------- | - | ----------------------------------------------- |  | ---------------- |  | -------
|                              |  | WeightedAverage FairValue |      | WeightedAverageExercise Price |   | WeightedAverageRemainingContractualLife (Years) |  | Number ofOptions
|Balance, December 31, 2008    |  | $                         | 6.63 |                               | $ | 4.00                                            |  |                  |  | 555,630
|Granted                       |  |                           |     |                               |   |                                                |  |                  |  |       
|Exercised                     |  |                           |     |                               |   |                                                |  |                  |  |       
|Canceled or expired           |  |                           |     |                               |   |                                                |  |                  |  |       
|                              |  |                           |      |                               |   |                                                 |  |                  |  |        
|Balance, March 31, 2009       |  | $                         | 6.63 |                               | $ | 4.00                                            |  | 6.7              |  | 555,630
|                              |  |                           |      |                               |   |                                                 |  |                  |  |        
|Vested and Exercisable as of: |  |                           |      |                               |   |                                                 |  |                  |  |        
|March 31, 2009                |  |                           |      |                               | $ | 4.00                                            |  | 6.7              |  | 381,380
|                              |  |                           |      |                               |   |                                                 |  |                  |  |        

A summary of nonvested Tranche A stock options for the three-month period ended March 31,
2009, is presented below:



|                               |  |                                      |      |                  |         |  
|------------------------------ |  | ------------------------------------ | ---- | ---------------- | ------- | -
|                               |  | Weighted AverageGrant-Date FairValue |      | Number ofOptions |        
|Nonvested at December 31, 2008 |  | $                                    | 6.80 |                  | 178,329 |  
|Granted                        |  |                                      |     |                  |        |  
|Vested                         |  |                                      |     |                  | (4,079  | )
|Exercised                      |  |                                      |     |                  |        |  
|Canceled or expired            |  |                                      |     |                  |        |  
|                               |  |                                      |      |                  |         |  
|Nonvested at March 31, 2009    |  | $                                    | 6.81 |                  | 174,250 |  
|                               |  |                                      |      |                  |         |  



21



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in millions, except share amounts)



As of March 31, 2009, there was $0.7 of total unrecognized compensation cost related to
nonvested share-based compensation arrangements granted under the Tranche A options, which will be amortized over a remaining period of 1.7 years.

Tranche B Options

The fair value of the Tranche B options was also estimated on the date of grant using the same
option valuation model used for the Tranche A options. No options have been granted since the first quarter of 2006. The following is a summary of valuation assumptions for Tranche B option grants outstanding as of March 31, 2009:



|                                    |  |            
|----------------------------------- |  | -----------
|Expected dividend yield             |  | 0%         
|Expected stock price volatility     |  | 54.3%-54.7%
|Risk free interest rate             |  | 4.0%-5.0%  
|Expected life of options (in years) |  | 8.0-10.0   

The following is a summary of stock option activity for Tranche B options for the three-month
period ended March 31, 2009:



|                              |  |                           |      |                               |   |                                                 |  |                  |  |        
|----------------------------- |  | ------------------------- | ---- | ----------------------------- | - | ----------------------------------------------- |  | ---------------- |  | -------
|                              |  | WeightedAverage FairValue |      | WeightedAverageExercise Price |   | WeightedAverageRemainingContractualLife (Years) |  | Number ofOptions
|Balance, December 31, 2008    |  | $                         | 6.92 |                               | $ | 4.00                                            |  |                  |  | 395,631
|Granted                       |  |                           |     |                               |   |                                                |  |                  |  |       
|Exercised                     |  |                           |     |                               |   |                                                |  |                  |  |       
|Canceled or expired           |  |                           |     |                               |   |                                                |  |                  |  |       
|                              |  |                           |      |                               |   |                                                 |  |                  |  |        
|Balance, March 31, 2009       |  | $                         | 6.92 |                               | $ | 4.00                                            |  | 6.7              |  | 395,631
|                              |  |                           |      |                               |   |                                                 |  |                  |  |        
|Vested and Exercisable as of: |  |                           |      |                               |   |                                                 |  |                  |  |        
|March 31, 2009                |  |                           |      |                               | $ | 4.00                                            |  | 6.7              |  | 395,631
|                              |  |                           |      |                               |   |                                                 |  |                  |  |        

All Tranche B stock options outstanding as of March 31, 2009 are fully vested and
exercisable.

Restricted Stock

The Plan allows for grants of restricted stock as long-term compensation for directors and employees of, or consultants to, the Company or any of its subsidiaries. Grants of restricted stock have a vesting period that
is determined at the discretion of the Board of Directors. The Company amortizes stock-based compensation expense associated with restricted stock ratably over the vesting period. For the three-month period ending March 31, 2009, there were no
shares of nonvested restricted stock outstanding.

11. Income Taxes

As of March 31, 2009, our unrecognized tax benefits totaled $7.2, and based on the contingent and uncertain nature of our liability, we are unable to make an estimate of the period of potential cash settlement,
if any, with respective taxing authorities. The total amount of unrecognized tax benefits that, if recognized, would impact the Companys effective tax rate is $0.1 for the three months ended March 31, 2009.



22



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in millions, except share amounts)



We file numerous consolidated and separate income tax returns in the United States and various
foreign jurisdictions. We are no longer subject to U.S. Federal income tax examinations for years before 2002 and are no longer subject to state and local, or foreign income tax examinations for years before 2000.

We account for any applicable interest and penalties on uncertain tax positions as a component of income tax expense. As of March 31, 2009, the
liability for uncertain income taxes includes interest and penalties of $1.5, of which $0.1 is included in our statement of operations and impacted the Companys effective income tax rate for the three months ended March 31, 2009.

12. Segment and Related Information

The following tables show summarized financial information for our reportable segments. The amounts shown as an operating loss under the column heading Corporate and Other consist primarily of general and administrative costs
that are not allocated to the segments. Goodwill and customer list intangible assets resulting from the Merger are assigned to reporting units solely for testing for impairment. The reconciliation of operating income to net income before income
taxes is shown within the Consolidated Statements of Operations and therefore is not separately presented.



|                                 |  |                              |       |   |                           |   |       |                  |  |   |                    |   |  |       |      |   |  |   |       |  
|-------------------------------- |  | ---------------------------- | ----- | - | ------------------------- | - | ----- | ---------------- |  | - | ------------------ | - |  | ----- | ---- | - |  | - | ----- | -
|                                 |  | Three Months Ended March 31, |      
|                                 |  | Plates andShapes             |       |   | FlatRolled andNon-Ferrous |   |       | BuildingProducts |  |   | Corporateand Other |   |  | Total |     
|2009:                            |  |                              |       |   |                           |   |       |                  |  |   |                    |   |  |       |      |   |  |   |       |  
|Net sales                        |  | $                            | 172.5 |   |                           | $ | 140.9 |                  |  | $ | 19.7               |   |  | $     | (2.9 | ) |  | $ | 330.2 |  
|Operating income (loss)          |  |                              | (8.7  | ) |                           |   | (2.3  | )                |  |   | (4.3               | ) |  |       | (5.6 | ) |  |   | (20.9 | )
|Capital expenditures             |  |                              | 0.4   |   |                           |   | 0.4   |                  |  |   |                   |   |  |       | 0.1  |   |  |   | 0.9   |  
|Depreciation and amortization(1) |  |                              | 2.4   |   |                           |   | 1.8   |                  |  |   | 0.6                |   |  |       | 0.4  |   |  |   | 5.2   |  
|2008:                            |  |                              |       |   |                           |   |       |                  |  |   |                    |   |  |       |      |   |  |   |       |  
|Net sales                        |  | $                            | 249.6 |   |                           | $ | 216.0 |                  |  | $ | 26.1               |   |  | $     | (2.7 | ) |  | $ | 489.0 |  
|Operating income (loss)          |  |                              | 28.4  |   |                           |   | 14.9  |                  |  |   | (5.7               | ) |  |       | (6.4 | ) |  |   | 31.2  |  
|Capital expenditures             |  |                              | 2.1   |   |                           |   | 0.3   |                  |  |   | 0.3                |   |  |       | 0.1  |   |  |   | 2.8   |  
|Depreciation and amortization(1) |  |                              | 2.4   |   |                           |   | 1.8   |                  |  |   | 1.3                |   |  |       | 1.1  |   |  |   | 6.6   |  



|(1) | Includes depreciation expense reflected in cost of goods sold for the Building Products Group.
|--- | ----------------------------------------------------------------------------------------------



|                            |  |               |       |                  |   |        
|--------------------------- |  | ------------- | ----- | ---------------- | - | -------
|                            |  | March 31,2009 |       | December 31,2008
|Total Assets:               |  |               |       |                  |   |        
|Plates and Shapes           |  | $             | 390.6 |                  | $ | 483.3  
|Flat Rolled and Non-Ferrous |  |               | 263.1 |                  |   | 309.2  
|Building Products           |  |               | 54.4  |                  |   | 62.0   
|Corporate and Other         |  |               | 239.2 |                  |   | 233.7  
|                            |  |               |       |                  |   |        
|Consolidated                |  | $             | 947.3 |                  | $ | 1,088.2
|                            |  |               |       |                  |   |        
|Goodwill:                   |  |               |       |                  |   |        
|Plates and Shapes           |  | $             | 15.5  |                  | $ | 15.5   
|Flat Rolled and Non-Ferrous |  |               | 20.5  |                  |   | 20.5   
|Building Products           |  |               | 1.8   |                  |   | 1.8    
|Corporate and Other         |  |               | 12.4  |                  |   | 12.1   
|                            |  |               |       |                  |   |        
|Consolidated                |  | $             | 50.2  |                  | $ | 49.9   
|                            |  |               |       |                  |   |        



23



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in millions, except share amounts)



Changes in goodwill for the three months ended March 31, 2009 are due to the recognition of
additional tax liabilities.

We recorded a $19.5 write-down for inventory lower of cost or market adjustments during the first quarter of
2009 in our metals service center businesses.

We have implemented certain initiatives within our Building Products segment in response to
the downturn in the housing and residential remodeling markets, including reductions in square footage under lease, standardization of sales center layouts, and manufacturing consolidation. We continue to evaluate various alternative strategies for
our building products business.

Assets classified as held for sale as of March 31, 2009 are associated with a facility within our
metals service center business that was closed during the first quarter of 2007. We continue to serve the marketing area of the closed facility with our existing sales force by expanding the responsible territories of other facilities, and through
the use of common carrier for product delivery.

13. Commitments and Contingencies

Letters of Credit

Letters of
credit outstanding at March 31, 2009 consist of a letter of credit in the amount of $5.8 in conjunction with the IRB (see Note 8) and other letters of credit aggregating $9.3 (total letters of credit of $15.1 at March 31, 2009). Other
letters of credit consist primarily of collateral support for our property and casualty insurance program. All letters of credit reduce the amount available to borrow under the ABL Facility.

Pension Fund Withdrawal Obligation

During 2007, we discontinued our participation in a multiemployer pension fund. In connection with our cessation of contributions to the plan, we were assessed a withdrawal liability of approximately $5.6, which we are paying in monthly
installments through 2021. As of March 31, 2009, our total withdrawal liability, including interest and amortization charges, amounted to approximately $7.8.

Dividends Relating to 2007 Notes

See Note 8 for a discussion of the extent to which Metals
USA Holdings is dependent on Flag Intermediates cash flows to service its debt.

Contingencies

From time to time, we are involved in a variety of claims, lawsuits and other disputes arising in the ordinary course of business. We believe the
resolution of these matters and the incurrence of their related costs and expenses should not have a material adverse effect on our consolidated financial position, results of operations, cash flows or liquidity.

14. Related Party Transactions

Upon completion of
the Merger, Metals USA Holdings entered into a management agreement with Apollo under which Apollo or its affiliates provide us with management services. Pursuant to the agreement, Apollo receives an annual management fee equal to $2.0,
payable on March 15 of every year, starting on March 15,



24



---

##### Table of Contents

METALS USA HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in millions, except share amounts)



2006. The management agreement will terminate on December 31, 2012, unless terminated earlier by Apollo. Apollo elected to waive $0.5 of the annual
management fee indefinitely, but reserved the right to revoke this waiver. The payment obligation has been recorded as a current liability (see Note 7) at the present value of minimum future annual payments of $1.5. A discount rate of 6.1% was used
in the determination of present value, which approximated our incremental borrowing rate at the inception of the agreement. Deferred management fees of $8.6 were recorded as a current asset, and are being amortized on a straight-line basis over the
term of the agreement. For the three month periods ended March 31, 2009 and 2008, amortization of deferred management fees was $0.4 for each period, with $0.3 recorded as administrative expense and $0.1 recorded as interest expense during each
period.

The management agreement also provides that affiliates of Apollo will be entitled to receive a fee in connection with certain
subsequent financing, acquisition, disposition and change of control transactions with a value of $25.0 or more, with such fee to be equal to 1% of the gross transaction value of any such transaction. In connection with the issuance of the 2006
Notes, Apollo was paid a fee of $1.5. Apollo elected to waive transaction fees of $3.0 payable in connection with the issuance of the 2007 Notes and $1.0 payable in connection with the exercise of the option to increase the Tranche A Commitments
under the ABL facility in July 2008.

Upon a termination of the management agreement prior to December 31, 2012, Apollo will be
entitled to receive the present value of (a) $14.0, less (b) the aggregate amount of management fees that were paid to it under the agreement prior to such termination, and less (c) management fees waived. Both the management
agreement and transaction fee agreement contain customary indemnification provisions in favor of Apollo and its affiliates, as well as expense reimbursement provisions with respect to expenses incurred by Apollo and its affiliates in connection with
its performance of services thereunder.

Our affiliates, which include Apollo, as well as our Chief Executive Officer and our Chief
Financial Officer, have purchased a portion of our 2007 Notes in the market. For the three months ended March 31, 2009, interest paid on the 2007 Notes held by affiliates amounted to $3.5, and was paid entirely by PIK Interest. From time to
time, depending upon market, pricing and other conditions, as well on cash balances and liquidity, we, our subsidiaries or affiliates may seek to purchase or sell some amount of the Metals USA Notes or additional amounts of the 2007 Notes. Any such
purchases or sales may be made in the open market, privately negotiated transactions, tender offers or otherwise. The amounts of any such purchases or sales may be material.

15. Comprehensive Income

The following table sets forth comprehensive income, net of applicable
taxes, for the three months ended March 31, 2009 and 2008.



|                                                   |  |                             |      |   |      |   |      |  
|-------------------------------------------------- |  | --------------------------- | ---- | - | ---- | - | ---- | -
|                                                   |  | Three Months EndedMarch 31, |     
|                                                   |  | 2009                        |      |   | 2008 |  
|Net income (loss)                                  |  | $                           | (4.1 | ) |      | $ | 3.8  |  
|Other comprehensive income:                        |  |                             |      |   |      |   |      |  
|Foreign currency translation adjustments           |  |                             | (0.1 | ) |      |   | (0.2 | )
|Unrealized gains (losses) on derivatives           |  |                             | 0.5  |   |      |   | 0.4  |  
|Unrealized gains (losses) on investment securities |  |                             |     |   |      |   | (0.1 | )
|                                                   |  |                             |      |   |      |   |      |  
|Total comprehensive income (loss)                  |  | $                           | (3.7 | ) |      | $ | 3.9  |  
|                                                   |  |                             |      |   |      |   |      |  



25



---

##### Table of Contents

ITEM 2.Managements Discussion And Analysis Of Financial Condition And
Results Of Operations

This section contains statements that constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. See disclosure presented on the inside of the front cover of this Form 10-Q for cautionary information with respect to such forward-looking statements. Readers
should refer to Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, 2008, for risk factors that may affect future performance.

Overview

All references to the Company include Metals USA Holdings, Flag Intermediate,
its wholly owned subsidiary Metals USA, and the wholly owned subsidiaries of Metals USA.

We believe that we are a leading provider of
value-added processed carbon steel, stainless steel, aluminum and specialty metals, as well as manufactured metal components. For the three months ended March 31, 2009, approximately 94% of our revenue was derived from our metals service center
and processing activities, which are segmented into two groups: Flat Rolled and Non-Ferrous Group and Plates and Shapes Group. The remaining portion of our revenue was derived from our Building Products Group, which principally manufactures and
sells aluminum products related to the residential remodeling industry. We purchase metal from primary producers that generally focus on large volume sales of unprocessed metals in standard configurations and sizes. In most cases, we perform the
customized, value-added processing services required to meet the specifications provided by end-use customers. Our Plates and Shapes Group and Flat Rolled and Non-Ferrous Group customers are in the land and marine transportation, energy, aerospace,
defense, electrical and appliance manufacturing, fabrication, furniture, commercial construction, and machinery and equipment industries. Our Building Products Group customers are primarily distributors and contractors engaged in the residential
remodeling industry.

Selected Operational Information

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

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

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



26



---

##### Table of Contents

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

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

Industry Trends

Metals Service Centers

The metals production and distribution industries have experienced an increase in demand for steel
and other metals in recent years driven largely by new market development in China, Brazil, Russia, and India, as well as Europe in general. Through the first half of 2008, demand growth outpaced supply inputs creating upward cost pressure on
commodity inputs such as ores, energy and transportation. In early 2008, global steel prices were at record highs.

However, global and
economic conditions are significantly less favorable compared with those experienced during the first half of 2008. The level of global economic activity has declined through the latter part of 2008 and the first quarter of 2009, as the worlds
major economies, including the U.S. and European region, are experiencing difficulties related to, in large part, the tightening of credit conditions globally. The impact of economic uncertainty on steel markets has become more apparent over the
past six months as the volatile global economic climate has resulted in softening demand and prices for steel products. As demand has slowed along with the worldwide economy, steel prices globally have deteriorated.

The decline in steel prices resulting from weakened demand and an oversupply of steel throughout the supply chain have contributed to a significant
decline in steel product shipments from metals service centers in the U.S in year-over-year comparisons. The timing of the effect that future price trends will have on the domestic steel market is difficult to predict, and any number of political or
general economic factors could cause prices to decline further.

Building Products

The current state of the housing and mortgage markets is causing significant contraction in the home improvement remodeling industry. Research indicates
that remodeling activity is pro-cyclical with both new residential construction and the broader economy, but remodeling lags homebuilding by several quarters. The high cyclicality of remodeling activity appears to be driven by discretionary
improvements, similar to the products sold by our building products business, which are quite volatile. Improvement spending is expected to be much more cyclical and more sensitive to upturns and downturns in the general economy, whereas maintenance
and repair spending is expected to be fairly stable over time.

The weak housing market, national economic recession, and reductions in the
amount spent on high-end home improvement projects continue to hinder remodeling activity. Although lower financing costs are reducing the cost of financing home improvement projects, they have not been adequate to offset rising unemployment and
falling consumer confidence.

We have implemented certain initiatives within our Building Products segment in response to the downturn in
the housing and residential remodeling markets, including reductions in square footage under lease,



27



---

##### Table of Contents

standardization of sales center layouts, and manufacturing consolidation. We continue to evaluate various alternative strategies for our building products
business.

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

Critical Accounting Policies and Estimates

The discussion and analysis of the Companys financial condition and results of operations is based upon the Companys consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these
consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. Estimates are based
on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The result of this process forms the basis for making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. We review our estimates and judgments on a regular, ongoing basis. Actual results may differ from these estimates due to changed circumstances and conditions.

The following accounting policies and estimates are considered critical in light of the potential material impact that the estimates, judgments and
uncertainties affecting the application of these policies might have on the Companys reported financial information.

Accounts
ReceivableWe generally recognize revenue as product is shipped (risk of loss for our products generally passes at time of shipment), net of provisions for estimated returns. Financial instruments, which potentially subject us to
concentrations of credit risk, consist principally of trade accounts and notes receivable. Collections on our accounts receivable are made through several lockboxes maintained by our lenders. Credit risk associated with concentration of cash
deposits is low as we have the right of offset with our lenders for a substantial portion of our cash balances. Concentrations of credit risk with respect to trade accounts receivable are within several industries. Generally, credit is extended once
appropriate credit history and references have been obtained. We perform ongoing credit evaluations of customers and set credit limits based upon reviews of customers current credit information and payment history. We monitor customer payments
and maintain a provision for estimated credit losses based on historical experience and specific customer collection issues that we have identified. Provisions to the allowance for doubtful accounts are made monthly and adjustments are made
periodically based upon our expected ability to collect all such accounts. Generally we do not require collateral for the extension of credit.

Each month we consider all available information when assessing the adequacy of the provision for allowances, claims and doubtful accounts. Adjustments made with respect to the allowance for doubtful accounts often relate to improved
information not previously available. Uncertainties with respect to the allowance for doubtful accounts are inherent in the preparation of financial statements. The rate of future credit losses may not be similar to past experience.

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

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



28



---

##### Table of Contents

Results of Operations

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

Consolidated ResultsThree Months Ended March 31, 2009 Compared to March 31, 2008



|                                                                                                   |  |                                   |       |   |   |       |   |      |   |       |   |  |       |  
|-------------------------------------------------------------------------------------------------- |  | --------------------------------- | ----- | - | - | ----- | - | ---- | - | ----- | - |  | ----- | -
|                                                                                                   |  | 2009                              |       |   | % |       |   | 2008 |   |       | % | 
|                                                                                                   |  | (In millions, except percentages) |      
|Net sales                                                                                          |  | $                                 | 330.2 |   |   | 100.0 | % |      | $ | 489.0 |   |  | 100.0 | %
|Cost of sales (exclusive of operating and delivery, and depreciation and amortization shown below) |  |                                   | 287.7 |   |   | 87.1  | % |      |   | 376.6 |   |  | 77.0  | %
|Operating and delivery                                                                             |  |                                   | 34.7  |   |   | 10.5  | % |      |   | 46.5  |   |  | 9.5   | %
|Selling, general and administrative                                                                |  |                                   | 24.0  |   |   | 7.3   | % |      |   | 29.2  |   |  | 6.0   | %
|Depreciation and amortization                                                                      |  |                                   | 4.7   |   |   | 1.4   | % |      |   | 5.5   |   |  | 1.1   | %
|                                                                                                   |  |                                   |       |   |   |       |   |      |   |       |   |  |       |  
|Operating income (loss)                                                                            |  |                                   | (20.9 | ) |   | -6.3  | % |      |   | 31.2  |   |  | 6.4   | %
|Interest expense                                                                                   |  |                                   | 19.3  |   |   | 5.8   | % |      |   | 25.1  |   |  | 5.1   | %
|Gain on extinguishment of debt                                                                     |  |                                   | (32.3 | ) |   | -9.8  | % |      |   |      |   |  |      |  
|Other (income) expense, net                                                                        |  |                                   | (0.1  | ) |   | 0.0   | % |      |   | (0.1  | ) |  | 0.0   | %
|                                                                                                   |  |                                   |       |   |   |       |   |      |   |       |   |  |       |  
|Income (loss) before income taxes                                                                  |  | $                                 | (7.8  | ) |   | -2.4  | % |      | $ | 6.2   |   |  | 1.3   | %
|                                                                                                   |  |                                   |       |   |   |       |   |      |   |       |   |  |       |  

Net sales. Net sales decreased $158.8 million, or 32.5%, from $489.0 million for the
three months ended March 31, 2008 to $330.2 million for the three months ended March 31, 2009. The decrease was primarily attributable to a 35.8% decrease in volumes for our Flat Rolled and Non-Ferrous and Plates and Shapes Product Groups,
partially offset by a 4.4% increase in average realized prices, in addition to a net sales decrease of $6.4 million for our Building Products Group.

Cost of sales. Cost of sales decreased $88.9 million, or 23.6%, from $376.6 million for the three months ended March 31, 2008, to $287.7 million for the three months ended March 31,
2009. The decrease was primarily attributable to a 35.8% decrease in volumes for our Flat Rolled and Non-Ferrous and Plates and Shapes Product Groups, in addition to a $5.7 million decrease in cost of sales for our Building Products Group,
partially offset by a 19.2% increase in the average cost per ton for our metals service center businesses. We recorded a $19.5 million write-down for inventory lower of cost or market adjustments in our metal service center businesses as a
result of continued price decreases and weaker demand for steel products during the first quarter of 2009. Inventory tonnage on hand as of March 31, 2009 was reduced 18% from December 31, 2008. Cost of sales as a percentage of net sales
increased from 77.0% for the first quarter of 2008 to 87.1% for the first quarter of 2009 primarily due to the lower of cost or market write-down discussed above.

Operating and delivery. Operating and delivery expenses decreased $11.8 million, or 25.4%, from $46.5 million for the three months ended March 31, 2008 to $34.7 million for the three months ended
March 31, 2009. The decrease was a result of lower variable costs associated with decreased shipments. As a percentage of net sales, operating and delivery expenses increased from 9.5% for the three months ended March 31, 2008 to
10.5% for the three months ended March 31, 2009.

Selling, general and administrative. Selling, general and administrative
expenses decreased $5.2 million, or 17.8%, from $29.2 million for the three months ended March 31, 2008 to $24.0 million for the three months ended March 31, 2009. Lower variable costs of $3.1 million associated with decreased incentive
compensation were the primary contributor to the period-over-period decrease. As a percentage of net sales, selling, general and administrative expenses increased from 6.0% for the three months ended March 31, 2008 to 7.3% for the three months
ended March 31, 2009.

Depreciation and amortization.Depreciation and amortization expense decreased $0.8 million,
or 14.5%, from $5.5 million for the three months ended March 31, 2008 to $4.7 million for the three months ended



29



---

##### Table of Contents

March 31, 2009. The decrease was primarily due to lower amortization of customer list intangible assets (which is recognized on an accelerated
basis and decreases over the life of the assets) recorded in connection with the acquisitions completed in May 2006, the acquisition of Lynch Metals in July 2007, and the Merger.

Operating income (loss). Operating income (loss) decreased $52.1 million, or 167.0%, from operating income of $31.2 million for the three
months ended March 31, 2008 to an operating loss of $20.9 million for the three months ended March 31, 2009. The decrease was primarily a result of the decrease in net sales discussed above. As a percentage of net sales, operating income
(loss) decreased from 6.4% for the three months ended March 31, 2008 to (6.3%) for the three months ended March 31, 2009.

Interest expense. Interest expense decreased $5.8 million, or 23.1%, from $25.1 million for the three months ended March 31, 2008 to $19.3 million for the three months ended March 31, 2009. This decrease was primarily a
function of lower average interest rates on our ABL facility and a lower LIBOR base rate on the 2007 Notes. The weighted average outstanding balance on our ABL facility remained level at $313.3 million for the three months ended March 31, 2009
and 2008; however, the weighted average interest rate decreased from 5.63% for the three months ended March 31, 2008 to 3.26% for the three months ended March 31, 2009.

Segment ResultsThree Months Ended March 31, 2009 Compared to March 31, 2008



|                            |  |          |       |   |                            |   |                       |  |   |                 |   |                |   |     |  |     |  
|--------------------------- |  | -------- | ----- | - | -------------------------- | - | --------------------- |  | - | --------------- | - | -------------- | - | --- |  | --- | -
|                            |  | NetSales |       |   | OperatingCosts andExpenses |   | OperatingIncome(Loss) |  |   | CapitalSpending |   | TonsShipped(1) |  
|2009:                       |  |          |       |   |                            |   |                       |  |   |                 |   |                |   |     |  |     |  
|Plates and Shapes           |  | $        | 172.5 |   |                            | $ | 181.2                 |  | $ | (8.7            | ) |                | $ | 0.4 |  | 137 |  
|Flat Rolled and Non-Ferrous |  |          | 140.9 |   |                            |   | 143.2                 |  |   | (2.3            | ) |                |   | 0.4 |  | 113 |  
|Building Products           |  |          | 19.7  |   |                            |   | 24.0                  |  |   | (4.3            | ) |                |   |    |  |    |  
|Corporate and other         |  |          | (2.9  | ) |                            |   | 2.7                   |  |   | (5.6            | ) |                |   | 0.1 |  | (2  | )
|                            |  |          |       |   |                            |   |                       |  |   |                 |   |                |   |     |  |     |  
|Total                       |  | $        | 330.2 |   |                            | $ | 351.1                 |  | $ | (20.9           | ) |                | $ | 0.9 |  | 248 |  
|                            |  |          |       |   |                            |   |                       |  |   |                 |   |                |   |     |  |     |  
|2008:                       |  |          |       |   |                            |   |                       |  |   |                 |   |                |   |     |  |     |  
|Plates and Shapes           |  | $        | 249.6 |   |                            | $ | 221.2                 |  | $ | 28.4            |   |                | $ | 2.1 |  | 220 |  
|Flat Rolled and Non-Ferrous |  |          | 216.0 |   |                            |   | 201.1                 |  |   | 14.9            |   |                |   | 0.3 |  | 168 |  
|Building Products           |  |          | 26.1  |   |                            |   | 31.8                  |  |   | (5.7            | ) |                |   | 0.3 |  |    |  
|Corporate and other         |  |          | (2.7  | ) |                            |   | 3.7                   |  |   | (6.4            | ) |                |   | 0.1 |  | (2  | )
|                            |  |          |       |   |                            |   |                       |  |   |                 |   |                |   |     |  |     |  
|Total                       |  | $        | 489.0 |   |                            | $ | 457.8                 |  | $ | 31.2            |   |                | $ | 2.8 |  | 386 |  
|                            |  |          |       |   |                            |   |                       |  |   |                 |   |                |   |     |  |     |  



|(1) | Shipments are expressed in thousands of tons and are not an applicable measure for the Building Products Group.
|--- | ---------------------------------------------------------------------------------------------------------------

Plates and Shapes. Net sales decreased $77.1 million, or 30.9%, from $249.6 million for the three months ended March 31, 2008 to $172.5
million for the three months ended March 31, 2009. The decrease was primarily attributable to a 37.7% decrease in shipments, partially offset by an 11.0% increase in average realized prices, for the three months ended March 31, 2009
compared to the three months ended March 31, 2008.

Operating costs and expenses decreased $40.0 million, or 18.1%, from $221.2
million for the three months ended March 31, 2008 to $181.2 million for the three months ended March 31, 2009. The decrease was primarily attributable to a 37.7% decrease in shipments, partially offset by a 33.9% increase in the
average cost per ton for the three months ended March 31, 2009 compared to the three months ended March 31, 2008. This segment recorded a $14.4 million write-down for inventory lower of cost or market adjustments during the first quarter
of 2009, which contributed to the increase in the average cost per ton.



30



---

##### Table of Contents

Operating income (loss) decreased by $37.1 million, or 130.6%, from operating income of $28.4 million for
the three months ended March 31, 2008 to operating loss of $8.7 million for the three months ended March 31, 2009. The decrease primarily resulted from lower net sales which were driven by a decrease in shipments, in addition to the
charges incurred to write-down the segments inventories as of March 31, 2009, as discussed above. Operating income (loss) as a percentage of net sales decreased from 11.4% for the three months ended March 31, 2008 to (5.0%) for
the three months ended March 31, 2009.

Flat Rolled and Non-Ferrous. Net sales decreased $75.1 million, or 34.8%, from
$216.0 million for the three months ended March 31, 2008 to $140.9 million for the three months ended March 31, 2009. The decrease was primarily attributable to a 32.7% decrease in shipments, in addition to a 3.0% decrease in average
realized prices, for the three months ended March 31, 2009 compared to the three months ended March 31, 2008. Sales of non-ferrous metals accounted for 36.1% of the segments sales product mix for the first quarter of 2009, compared
to 46.1% for the first quarter of 2008.

Operating costs and expenses decreased $57.9 million, or 28.8%, from $201.1 million for the three
months ended March 31, 2008 to $143.2 million for the three months ended March 31, 2009. The decrease was primarily attributable to a decrease in shipments of 32.7% in addition to an increase in the average cost per ton of 4.3%. This
segment recorded a $5.1 million write-down for inventory lower of cost or market adjustments during the first quarter of 2009, which contributed to the increase in the average cost per ton. Operating costs and expenses as a percentage of net sales
increased from 93.1% for the three months ended March 31, 2008 to 101.6% for the three months ended March 31, 2009.

Operating
income (loss) decreased by $17.2 million, or 115.4%, from operating income of $14.9 million for the three months ended March 31, 2008 to an operating loss of $2.3 million for the three months ended March 31, 2009. The decrease was
primarily attributable to the decrease in sales volumes discussed above, which were a primarily a function of lower shipments, in addition to the charges incurred to write-down the segments inventories as of March 31, 2009, as discussed
above. Operating income (loss) as a percentage of net sales decreased from 6.9% for the three months ended March 31, 2008 to (1.6%) for the three months ended March 31, 2009.

Building Products. Net sales decreased $6.4 million, or 24.5%, from $26.1 million for the three months ended March 31, 2008 to $19.7
million for the three months ended March 31, 2009. The sales decrease was driven by lower home improvement remodeling activity. Consumer spending on residential remodeling has decreased dramatically due to the depreciation of homes, lower
limits on home equity loans and decreased access to affordable credit for homeowners and residential remodeling contractors. These factors have led to significant contraction in the remodeling industry and negative growth in our Building Products
Group.

Operating costs and expenses decreased $7.8 million, or 24.5%, from $31.8 million for the three months ended March 31, 2008 to
$24.0 million for the three months ended March 31, 2009. The decrease was primarily due to lower sales volume and a decrease in variable costs related to lower market demand. Operating costs and expenses as a percentage of net sales
remained level at 121.8% for the three months ended March 31, 2009 and 2008.

Operating loss decreased by $1.4 million, or 24.6%, from
$5.7 million for the three months ended March 31, 2008 to $4.3 million for the three months ended March 31, 2009. The decrease was primarily attributable to lower operating costs, which decreased at a rate in line with the decline in sales
discussed above. Operating loss as a percentage of net sales remained level 21.8% for the three months ended March 31, 2009 and 2008.

Corporate and other. This category reflects certain administrative costs and expenses management has not allocated to its industry segments. These costs include compensation for executive officers, insurance, professional
fees for audit, tax and legal services and data processing expenses. The negative net sales amount represents the elimination of intercompany sales. The operating loss decreased $0.8 million, or 12.5%, from $6.4 million for the three
months ended March 31, 2008 to $5.6 million for the three months ended March 31, 2009.



31



---

##### Table of Contents

Liquidity and Capital Resources

Our primary sources of short-term liquidity are borrowings under the ABL facility and our cash flow from operations. We believe these resources will be sufficient to meet our working capital and capital
expenditure requirements for the next year.

In operating our business, we need to finance our investment in working capital. Our ABL
facility is the principal means by which we finance our investment in working capital (e.g., raw materials such as metal, which are crucial to operating our business) and therefore our ABL facility is crucial to our ability to purchase inventory. We
increased the size of the ABL facility in July 2008 (see Financing ActivitiesThe ABL facility below) given its importance to us as a means to access additional capital. Access to the ABL facility and the cost of borrowing under it
are constrained by certain covenants contained in the loan and security agreement governing the ABL facility and the indentures governing the Metals USA Notes and the 2007 Notes. These covenants are each based on Adjusted EBITDA, as discussed more
fully below (see also Financing ActivitiesCovenant Compliance below).

The FCCR is also an important measure of our
liquidity and affects our ability to take certain actions, including paying dividends to our stockholders, making acquisitions and incurring additional debt. In addition, the applicable interest rates associated with the ABL facility are determined
by the FCCR (see Financing ActivitiesThe ABL facilityInterest Rate and Fees and Financing ActivitiesCovenant Compliance below).

The ability to implement strategic bolt-on acquisitions is one of our key strategies, and our ability to incur additional debt is a necessary element to support this strategy. The indentures governing the
Metals USA Notes and the 2007 Notes contain covenants that restrict our ability to take certain actions, such as incurring additional debt, if we are unable to meet defined Adjusted EBITDA to fixed charges and consolidated total debt ratios (each,
as defined). See Financing ActivitiesCovenant Compliance below for further discussion of our restrictive covenants.

During September 2008, we borrowed approximately $160.0 million on the ABL facility in response to concerns about credit markets. As of March 31, 2009, we had eligible collateral of $324.3 million, $251.0 million in outstanding
advances, $15.1 million in open letters of credit and $58.2 million of additional borrowing capacity. As of March 31, 2009, we had $160.0 million of available cash and cash equivalents.

At May 12, 2009, we had $283.1 million of eligible collateral, $209.5 million in outstanding advances, $15.1 million in open letters of credit and
$58.5 million of additional borrowing capacity. As of May 12, 2009, we had approximately $106.7 million of available cash and cash equivalents.

Our borrowing availability fluctuates daily with changes in eligible accounts receivables and inventory, less outstanding borrowings and letters of credit. See Financing Activities below.

We generally meet long-term liquidity requirements, the repayment of debt and investment funding needs, through additional borrowings under the ABL
facility and the issuance of debt securities. At March 31, 2009, our long-term debt consisted of $251.0 million of outstanding borrowings on the ABL facility, $275.0 million principal amount of the Metals USA Notes, $260.7 million principal
amount of the 2007 Notes, an Industrial Revenue Bond with $5.7 million principal amount outstanding and $0.2 million in vendor financing and purchase money notes.

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



32



---

##### Table of Contents

Although we do not produce any metal, our financial performance is affected by changes in metal
prices. When metal prices rise, the prices at which we are able to sell our products generally increase over their historical costs; accordingly, our working capital (which consists primarily of accounts receivable and inventory) tends to
increase in a rising price environment. Conversely, when metal prices fall, our working capital tends to decrease. Our working capital (current assets less current liabilities) decreased from $699.0 million at December 31, 2008 to
$555.2 million at March 31, 2009.

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

The following discussion of the principal sources and uses of cash should be read in conjunction with our Unaudited Condensed Consolidated Statements of
Cash Flows which are set forth under Item 1Financial Statements.

During the three months ended March 31, 2009,
net cash provided by operating activities was $124.0 million. This amount represents net loss, less gain on extinguishment of debt and costs that did not involve cash flows for the period, of $9.9 million, in addition to changes in operating
assets and liabilities that resulted in a cash inflow of $133.9 million for the period, an amount that was primarily attributable to decreases in accounts receivable and inventories. During the three months ended March 31, 2008, net cash used
in operating activities was $40.8 million. This amount represents net income, adjusted for costs that did not involve cash flows for the period, of $9.9 million, in addition to changes in operating assets and liabilities that resulted in a cash
outflow of $50.7 million for the period, an amount that was primarily attributable to increases in accounts receivable and inventories, partially offset by increases in accounts payable and accrued liabilities.

Net cash used in investing activities was $5.1 million for the three months ended March 31, 2009, and consisted of $4.2 million for the acquisition
of VR Laser and $0.9 million of capital expenditures. Net cash used in investing activities was $2.7 million for the three months ended March 31, 2008, and consisted primarily of $2.8 million of purchases of assets. For the three months ended
March 31, 2008, the most significant internal capital project was the expansion of our New Orleans Plates and Shapes facility.

Net
cash used in financing activities was $125.6 million for the three months ended March 31, 2009, and consisted primarily of net repayments on the ABL facility of $117.0 million, in addition to repayments of other long-term debt of $8.6 million.
Net cash provided by financing activities was $52.4 million for the three months ended March 31, 2008, and consisted primarily of net borrowings on the ABL facility of $53.5 million.

Adjusted EBITDA

EBITDA represents net income
before interest, income taxes, depreciation and amortization. Adjusted EBITDA (as defined by the loan and security agreement governing the ABL facility and the indentures governing the Metals USA Notes and the 2007 Notes) is defined as EBITDA
further adjusted to exclude certain non-cash, non-recurring and realized (or in the case of the indentures, expected) future cost savings directly related to prior acquisitions. EBITDA and Adjusted EBITDA are not defined terms under GAAP. Neither



33



---

##### Table of Contents

EBITDA nor Adjusted EBITDA should be considered an alternative to operating income or net income as a measure of operating results or an alternative to cash
flow as a measure of liquidity. There are material limitations associated with making the adjustments to our earnings to calculate EBITDA and Adjusted EBITDA and using these non-GAAP financial measures as compared to the most directly comparable
GAAP financial measures. For instance, EBITDA and Adjusted EBITDA do not include:



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



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



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

We present EBITDA because we consider it an important supplemental measure of our performance and believe it is
frequently used by our investors and other interested parties, as well as by our management, in the evaluation of companies in our industry, many of which present EBITDA when reporting their results. In addition, EBITDA provides additional
information used by our management and board of directors to facilitate internal comparisons to historical operating performance of prior periods. Further, management believes EBITDA facilitates their operating performance comparisons from period to
period because it excludes potential differences caused by variations in capital structure (affecting interest expense), tax positions (such as the impact of changes in effective tax rates or net operating losses) and the age and book depreciation
of facilities and equipment (affecting depreciation expense).

We believe that the inclusion of supplementary adjustments to EBITDA applied
in presenting Adjusted EBITDA are appropriate to provide additional information to investors about the performance of the business, and we are required to reconcile net income to Adjusted EBITDA to demonstrate compliance with debt covenants.
Management uses Adjusted EBITDA as a key indicator to evaluate performance of certain employees.

Reconciliation of Net Income to EBITDA
and Adjusted EBITDA



|                                           |  |                             |       |   |      |   |       |  
|------------------------------------------ |  | --------------------------- | ----- | - | ---- | - | ----- | -
|                                           |  | Three Months EndedMarch 31, |      
|                                           |  | 2009                        |       |   | 2008 |  
|                                           |  | (dollars in millions)       |      
|Net income (loss)                          |  | $                           | (4.1  | ) |      | $ | 3.8   |  
|Depreciation and amortization(1)           |  |                             | 5.2   |   |      |   | 6.6   |  
|Interest expense                           |  |                             | 19.3  |   |      |   | 25.1  |  
|Gain on extinguishment of debt             |  |                             | (32.3 | ) |      |   |      |  
|Provision (benefit) for income taxes       |  |                             | (3.7  | ) |      |   | 2.4   |  
|Other (income) expense                     |  |                             | (0.1  | ) |      |   | (0.1  | )
|                                           |  |                             |       |   |      |   |       |  
|EBITDA                                     |  |                             | (15.7 | ) |      |   | 37.8  |  
|Covenant defined adjustments:              |  |                             |       |   |      |   |       |  
|Facilities closure(2)                      |  |                             | 0.4   |   |      |   | 1.9   |  
|Stock options and grant expense(3)         |  |                             | 0.1   |   |      |   | 0.3   |  
|Management fees(4)                         |  |                             | 0.3   |   |      |   | 0.3   |  
|                                           |  |                             |       |   |      |   |       |  
|Adjusted EBITDA(5)                         |  | $                           | (14.9 | ) |      | $ | 40.3  |  
|                                           |  |                             |       |   |      |   |       |  
|Fixed charge coverage ratio numerator(6)   |  | $                           | 142.5 |   |      | $ | 114.3 |  
|Fixed charge coverage ratio denominator(6) |  | $                           | 131.5 |   |      | $ | 75.2  |  
|Fixed charge coverage ratio(6)             |  |                             | 1.08  |   |      |   | 1.52  |  
|                                           |  |                             |       |   |      |   |       |  



|(1) | Includes depreciation for Building Products that is included in cost of sales.
|--- | ------------------------------------------------------------------------------



34



---

##### Table of Contents

|(2) | This amount represents charges in the Building Products Group for severance costs incurred in the first quarter of 2009 and the closure of five facilities during the first quarter
of 2008.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Non-cash stock option and stock grant expense.
|--- | ----------------------------------------------

|(4) | Includes accrued expenses related to the management agreement we have with Apollo.
|--- | ----------------------------------------------------------------------------------

|(5) | As defined by the loan and security agreement governing the ABL facility. Given the wide variety of capital structures used to finance working capital in our industry, we believe
that Adjusted EBITDA is a useful tool in addition to net income to evaluate our financial condition.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | These amounts represent the FCCR numerator, the FCCR denominator, and the FCCR, each as defined by the ABL facility, and calculated based on the most recent period of four
consecutive fiscal quarters.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Financing Activities

The ABL Facility

The ABL
facility permits us to borrow on a revolving basis through November 30, 2011. Substantially all of our subsidiaries are borrowers under the ABL facility.

On July 1, 2008, we executed our option to increase the Tranche A Commitments by $100.0 million, which increased the total commitment from $525.0 million to $625.0 million. All other existing terms under the ABL
facility remained unchanged. Costs incurred to exercise the option to increase the ABL facility totaled $2.4 million, and are being amortized over the existing term of the ABL facility.

On June 8, 2007, we executed the June 2007 amendment to the ABL facility, which increased the commitment from $450.0 million to $525.0 million,
comprised of $500.0 million of Tranche A Commitments and $25.0 million of Tranche A-1 Commitments. Additionally, the June 2007 amendment reduced the borrowing cost on the Tranche A facility by 25 basis points, reduced the borrowing cost on the
Tranche A-1 facility by 75 basis points and gave us the option to increase the Tranche A Commitments by $100.0 million. Costs incurred in connection with the June 2007 amendment totaled $1.6 million, and are being amortized over the existing term of
the ABL facility, which expires November 30, 2011.

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



| |  |  | 85% of the net amount of eligible accounts receivable;
| | - |  | ------------------------------------------------------



| |  |  | the lesser of (x) 70% of the lesser of the original cost or market value of eligible inventory and (y) 90% of the net orderly liquidation value of
eligible inventory; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | at all times prior to the termination of the Tranche A-1 Commitments, the sum of 5% of the net amount of eligible accounts receivable and 5% of the net orderly
liquidation value of eligible inventory.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Initial borrowings under the ABL facility were used to repay the outstanding
amounts drawn under our existing revolving credit facility and to fund other costs and expenses related to the Merger. The loan and security agreement governing the ABL facility provides for up to $15.0 million of swing-line loans and up to $100.0
million for the issuance of letters of credit. Both the face amount of any outstanding letters of credit and any swing-line loans will reduce borrowing availability under the ABL facility on a dollar-for-dollar basis.

During September 2008, we borrowed approximately $160.0 million on the ABL facility in response to concerns about credit markets. As of March 31,
2009, we had $324.3 million of eligible collateral, $251.0 million in outstanding advances, $15.1 million in open letters of credit and $58.2 million of additional borrowing capacity. As of March 31, 2009, we had $160.0 million of available
cash and cash equivalents.



35



---

##### Table of Contents

At May 12, 2009, we had $283.1 million of eligible collateral, $209.5 million in outstanding
advances, $15.1 million in open letters of credit and $58.5 million of additional borrowing capacity. As of May 12, 2009, we had approximately $106.7 million of available cash and cash equivalents.

Guarantees and Security. Substantially all of our subsidiaries are defined as borrowers under the loan and security agreement
governing the ABL facility. The obligations under the ABL facility are guaranteed by Flag Intermediate and certain of our domestic subsidiaries and are secured (i) on a first-priority lien basis by our, the other borrowers and the
guarantors accounts, inventory, cash and proceeds and products of the foregoing and certain assets related thereto and (ii) on a second-priority lien basis by substantially all of our, the other borrowers and the guarantors
other assets, subject to certain exceptions and permitted liens. Metals USA Holdings is not a party to the ABL facility, and indebtedness under the ABL facility is not guaranteed by Metals USA Holdings.

Interest Rate and Fees. Interest is calculated based upon a margin (established within a specific pricing grid for loans utilizing Tranche A
Commitments) over reference rates. The marginal rates vary with our financial performance as measured by the FCCR. The FCCR is determined by dividing (i) the sum of Adjusted EBITDA (as defined by the loan and security agreement governing the
ABL facility) minus income taxes paid in cash minus non-financed capital expenditures by (ii) the sum of certain distributions paid in cash, cash interest expense and scheduled principal reductions on debt, and is calculated based on such
amounts for the three immediately preceding months.

The interest rates with respect to loans utilizing the Tranche A Commitments are, at
our option, (i) the higher of (a) the prime rate of Credit Suisse in effect at its principal office in New York City and (b) the federal funds effective rate plus 0.5%; plus, in each case, an applicable margin ranging between -0.25%
and -0.50% as determined in accordance with the loan and security agreement governing the ABL facility or (ii) the rate (as adjusted for statutory reserves) for Eurodollar deposits for one, two, three, six or, if agreed to by all lenders under
the loan and security agreement, nine or twelve months, as selected by us, by reference to the British Bankers Association Interest Settlement Rates, plus an applicable margin ranging between 1.00% and 1.75% as determined in accordance with
the loan and security agreement governing the ABL facility. The interest rates with respect to loans utilizing the Tranche A-1 Commitments are, at our option, (i) the higher of (a) the prime rate of Credit Suisse in effect at its principal
office in New York City and (b) the federal funds effective rate plus 0.5%; in each case plus an applicable margin of 0.75% or (ii) the rate (as adjusted for statutory reserves) for Eurodollar deposits for one, two, three, six or, if
agreed to by all lenders under the loan and security agreement, nine or twelve months, as selected by us, by reference to the British Bankers Association Interest Settlement Rates, plus an applicable margin of 2.75%.

A commitment fee is payable on any unused commitments under the ABL facility of 0.25% per annum. The applicable base rate and the effective LIBOR
rate for the Tranche A Commitments and Tranche A-1 Commitments were 3.25% and 1.19%, respectively, as of March 31, 2009.

Certain
Covenants. The ABL facility contains customary representations, warranties and covenants as a precondition to lending, including a material adverse change in the business, limitations on our ability to incur or guarantee additional debt, subject
to certain exceptions, pay dividends, or make redemptions and repurchases, with respect to capital stock, repay debt, create or incur certain liens, make certain loans or investments, make acquisitions or investments, engage in mergers,
acquisitions, asset sales and sale lease-back transactions, and engage in certain transactions with affiliates. In addition, the ABL facility requires a lock-box arrangement, which, as long as borrowing availability is greater or equal to $45.0
million and in the absence of default, is controlled by Metals USA. As long as our borrowing availability is greater than or equal to $45.0 million, we do not have to maintain a minimum FCCR. Should borrowing availability fall below $45.0 million,
we must maintain an FCCR of at least 1.0 to 1.0. For purposes of determining covenant compliance, the FCCR is determined by dividing (i) the sum of Adjusted EBITDA (as defined by the loan and security agreement governing the ABL facility) minus
income taxes paid in cash minus non-financed capital expenditures by (ii) the



36



---

##### Table of Contents

sum of certain distributions paid in cash, cash interest expense and scheduled principal reductions on debt, and is calculated based on such amounts for the
most recent period of four consecutive fiscal quarters. As of March 31, 2009, our FCCR was 1.08.

Additionally, payments to affiliates
are limited to the greater of $3.0 million or 3% of Adjusted EBITDA (as defined in the loan and security agreement governing the ABL facility) provided borrowing availability equals at least $25.0 million. Further, distributions in respect of
capital stock are limited to the payment of up to $25.0 million, plus $5.0 million for each full fiscal quarter (with any amount not used in any fiscal quarter being permitted to be used in succeeding fiscal quarters), plus 50% of cumulative
consolidated net income, or if a loss, minus 100% of the amount thereof, plus 100% of the aggregate net proceeds received by us from certain sales and issuances of capital stock or from certain capital contributions, of dividends in any fiscal
quarter provided that borrowing availability is greater than $50.0 million and the FCCR is at least 1.0 to 1.0.

The ABL facility contains
events of default with respect to: default in payment of principal when due, default in the payment of interest, fees or other amounts after a specified grace period, material breach of the representations or warranties, default in the performance
of specified covenants, failure to make any payment when due under any indebtedness with a principal amount in excess of a specified amount, certain bankruptcy events, certain ERISA violations, invalidity of certain security agreements or
guarantees, material judgments, or a change of control. In the event of default the agreement may permit the lenders to: (i) restrict the account or refuse to make revolving loans; (ii) cause customer receipts to be applied against
borrowings under the ABL facility causing the Company to suffer a rapid loss of liquidity and the ability to operate on a day-to-day basis; (iii) restrict or refuse to provide letters of credit; or ultimately: (iv) terminate the
commitments and the agreement; or (v) declare any or all obligations to be immediately due and payable if such default is not cured in the specified period required. Any payment default or acceleration under the ABL facility would also result
in a default under the Metals USA Notes and the 2007 Notes that would provide the holders of the Metals USA Notes and the 2007 Notes with the right to demand immediate repayment.

Interest Rate Swaps. In February 2008, $250.0 million notional amount of outstanding borrowings under the ABL facility were swapped from a
floating LIBOR-based rate to a fixed rate. The swaps entitle us to receive quarterly payments of interest at a floating rate indexed to the three-month LIBOR and pay a fixed rate that ranges from 2.686% to 2.997%, converting a portion of the
outstanding borrowings on our ABL facility from a floating rate obligation to a fixed rate obligation. Pretax realized gains and losses from derivatives which were recognized in earnings during the three months ended March 31, 2009 amounted to
$0.8 million of additional interest expense. These gains and losses effectively offset changes in the cost of the Companys hedged exposure, and no component of these gains and losses was excluded from the Companys assessment of hedge
effectiveness. The fair value of the Companys interest rate swaps was $5.8 million at March 31, 2009, with $3.1 million classified as accrued liabilities and $2.7 million classified as other long-term liabilities in the consolidated
balance sheet.

2007 Notes

On
July 10, 2007, we issued $300.0 million initial aggregate principal amount of the 2007 Notes due July 1, 2012. The 2007 Notes were issued at an initial issue price of 97% of the principal amount thereof, and original issue discount is
being amortized to interest expense over the life of the 2007 Notes. The 2007 Notes are senior unsecured obligations that are not guaranteed by any of Metals USA Holdings subsidiaries. As such, the 2007 Notes are structurally subordinated to
all indebtedness and other liabilities (including trade payables) of Metals USA Holdings subsidiaries.

Metals USA Holdings must make
an election regarding whether interest payments on the 2007 Notes will be made in cash or through PIK Interest prior to the start of the applicable interest period. Metals USA Holdings may elect to pay interest (1) entirely in cash or
(2) entirely by increasing the principal amount of the 2007 Notes or issuing new 2007 Notes (PIK Interest), or (3) on 50% of the outstanding principal amount of the 2007 Notes in cash and on 50% of the outstanding principal
amount of the 2007 Notes by increasing the principal amount of



37



---

##### Table of Contents

the outstanding 2007 Notes or by issuing new 2007 Notes (Partial PIK Interest). Cash interest on the 2007 Notes will accrue at a rate per annum,
reset quarterly, equal to LIBOR plus a spread of 6.00%, which increases by 0.25% to 6.25% in year 2, by 0.50% to 6.50% in year 3, and by 0.75% to 6.75% in year 4. In the event PIK Interest is paid on the 2007 Notes after the first four interest
periods, the then-applicable margin over LIBOR on the 2007 Notes would increase by 0.75% for each period in which PIK Interest is paid. If Metals USA Holdings elects to pay any PIK Interest, Metals USA Holdings will increase the principal amount on
the 2007 Notes or issue new 2007 Notes in an amount equal to the amount of PIK Interest for the applicable interest payment period to holders of the 2007 Notes on the relevant record date. Interest is payable quarterly in arrears on
January 1, April 1, July 1 and October 1. PIK Interest notes, resulting from the conversion of interest into PIK notes, when paid will be treated as an operating activity in the Consolidated Statements of Cash Flows in
accordance with SFAS 95.

The initial five interest payments on the 2007 Notes were paid solely in cash. Flag Intermediate provided funds
to Metals USA Holdings to fund the initial five quarterly interest payments on the 2007 Notes, which were paid on October 1, 2007, January 2, 2008, April 1, 2008, July 1, 2008, and October 1, 2008 and which totaled $7.7
million, $8.4 million, $8.1 million, $6.5 million and $6.6 million, respectively.

On September 26, 2008, we made a permitted election
under the indenture governing the 2007 Notes to pay all interest that was due on January 1, 2009, for the interest period beginning on October 1, 2008, and ending on December 31, 2008, entirely through PIK Interest. The
January 1, 2009 PIK Interest payment amounted to $8.2 million. The Company must make an election regarding whether subsequent interest payments will be made in cash, through PIK Interest, or Partial PIK Interest, prior to the start of the
applicable interest period. In the absence of such an election for any interest period, interest on the 2007 Notes will be payable according to the election for the previous interest period. As a result, the PIK Interest election is now the default
election for future interest periods unless we elect otherwise not later than the commencement of an interest period.

The terms of the ABL
facility, as well as the indenture governing the Metals USA Notes, restrict Flag Intermediate and certain of its subsidiaries from making payments or transferring assets to Metals USA Holdings, including dividends, loans, or distributions. Such
restrictions include prohibition of dividends in an event of default and limitations on the total amount of dividends paid to Metals USA Holdings. In the event these agreements do not permit Flag Intermediate to provide Metals USA Holdings with
sufficient distributions to fund interest and principal payments on the 2007 Notes when due, Metals USA Holdings may default on the 2007 Notes unless other sources of funding are available. The amount available under the restricted payment provision
contained in the loan and security agreement governing the ABL facility was $58.3 million as of March 31, 2009. No amount was available under the restricted payment provision contained in the indenture governing the Metals USA Notes as of
March 31, 2009. As of March 31, 2009, Metals USA Holdings had $160.0 million of available cash and cash equivalents.

On or after
January 15, 2008, Metals USA Holdings may redeem some or all of the 2007 Notes at certain redemption prices, plus accrued and unpaid interest and additional interest, if any, to the redemption date. If Metals USA Holdings makes certain public
offerings, sales or issuances of common stock, and does not redeem the 2007 Notes, it will be required to make an offer to repurchase the maximum principal amount of the 2007 Notes that may be purchased out of the proceeds thereof, at a price equal
to 100% of the principal amount, plus accrued and unpaid interest and additional interest, if any, to the date of repurchase.

If Metals
USA Holdings experiences a change of control and does not redeem the 2007 Notes, it will be required to make an offer to repurchase the 2007 Notes at a price equal to 101% of the principal amount, plus accrued interest and unpaid interest and
additional interest, if any, to the date of repurchase.

Under the indenture governing the 2007 Notes, we are required to pay interest on
overdue principal at 1% per annum in excess of the rates discussed above and are required to pay interest on overdue installments of interest at such higher rate to the extent lawful. The indenture governing the 2007 Notes contains covenants
described under Covenant Compliance below.



38



---

##### Table of Contents

The indenture governing the 2007 Notes contains covenants that, among other things, limit Metals USA
Holdings ability and the ability of certain of its subsidiaries to incur or guarantee additional indebtedness or issue disqualified or preferred stock, repurchase or redeem capital stock or subordinated indebtedness, pay dividends or make
distributions to its stockholders, incur restrictions on the ability of its subsidiaries to pay dividends or to make other payments to Metals USA Holdings, transfer or sell assets, create liens, enter into transactions with affiliates, make
investments or acquisitions, and merge or consolidate with other companies or transfer all or substantially all of its assets.

Our
affiliates, which include Apollo Management V L.P. (Apollo Management and together with its affiliated investment entities Apollo), as well as our Chief Executive Officer and our Chief Financial Officer, have purchased a
portion of our 2007 Notes in the market. For the three months ended March 31, 2009, interest paid on the 2007 Notes held by affiliates amounted to $3.5 million, and was paid entirely by PIK Interest. From time to time, depending upon market,
pricing and other conditions, as well on cash balances and liquidity, we, our subsidiaries or affiliates may seek to purchase or sell some amount of the Metals USA Notes or additional amounts of the 2007 Notes. Any such purchases or sales may be
made in the open market, privately negotiated transactions, tender offers or otherwise. The amounts of any such purchases or sales may be material.

The Metals USA Notes

On the closing date of the Merger, we
received approximately $268.0 million of net cash proceeds from the sale of $275.0 million in aggregate principal amount of the Metals USA Notes, after deducting expenses of the offering. Interest on the Metals USA Notes accrues at the rate of
111/8% per annum and is payable semiannually in arrears on June 1 and December 1 and commenced on June 1,
2006. The Metals USA Notes will mature on December 1, 2015. We may redeem some or all of the Metals USA Notes at any time on or after December 1, 2010, at a predetermined redemption price plus accrued and unpaid interest and additional
interest, if any, to the applicable redemption date. If we experience a change of control and we do not redeem the Metals USA Notes, we will be required to make an offer to repurchase the Metals USA Notes at a price equal to 101% of the principal
amount, plus accrued and unpaid interest and additional interest, if any, to the date of repurchase.

Under the indenture governing
the Metals USA Notes, we are required to pay interest on overdue principal at 1% per annum in excess of the above rate and are required to pay interest on overdue installments of interest at such higher rate to the extent lawful. The indenture
governing the Metals USA Notes contains the covenants described under Covenant Compliance below.

The Metals USA Notes
indenture contains certain customary events of default, including (subject, in some cases, to customary cure periods thresholds) defaults based on (1) the failure to make payments under the Metals USA indenture when due, (2) breach of
covenants, (3) cross-defaults to other material indebtedness, (4) bankruptcy events and (5) material judgments. We were in compliance with all covenants as of March 31, 2009.

Covenant compliance

Our FCCR as defined by
the ABL facility is calculated based on a numerator consisting of Adjusted EBITDA less cash taxes and capital expenditures and a denominator consisting of interest expense and certain distributions, and is calculated based on such amounts for the
most recent period of four consecutive fiscal quarters. As of March 31, 2009, our FCCR was 1.08. As of March 31, 2009, we had $58.2 million of additional borrowing capacity under the ABL facility. Failure to comply with the FCCR covenant
of the ABL facility can result in limiting our long-term growth prospects by hindering our ability to incur future indebtedness or grow through acquisitions.

The indentures governing the Metals USA Notes and the 2007 Notes contain covenants that restrict our ability to take certain actions, such as incurring additional debt and making certain acquisitions, if we are unable



39



---

##### Table of Contents

to meet defined Adjusted EBITDA to Fixed Charges and consolidated total debt ratios (each, as defined). The covenants in the indenture requires us to have an
Adjusted EBITDA to Fixed Charge ratio (measured on a trailing four-quarter basis and calculated differently from the fixed charge coverage ratio as defined by the ABL facility) of 2.0 to 1.0 to incur ratio indebtedness and a consolidated
total debt ratio of no greater than 4.75 to 1.0 to incur ratio indebtedness in connection with acquisitions. Based on the calculations for the trailing four quarters, we are able to satisfy these covenants and incur additional
indebtedness under these ratios, including for acquisition purposes, under our indentures. The most restrictive of the covenants in all of our debt agreements is the FCCR in our ABL facility; accordingly, we have presented our covenant compliance on
that basis.

The FCCR (as defined in the loan and security agreement governing the ABL facility) is determined by dividing (i) the sum
of Adjusted EBITDA (as defined by the loan and security agreement governing the ABL facility) minus income taxes paid in cash minus non-financed capital expenditures by (ii) the sum of certain distributions paid in cash, cash interest expense
and scheduled principal reductions on debt, and is calculated based on such amounts for the most recent period of four consecutive fiscal quarters. Adjusted EBITDA is defined as EBITDA further adjusted to exclude certain non-cash, non-recurring and
realized or expected future cost savings directly related to prior acquisitions. We believe that the inclusion of the supplemental adjustments applied in calculating Adjusted EBITDA is appropriate to provide additional information to investors to
demonstrate compliance with our financial covenants and assess our ability to incur additional indebtedness in the future. EBITDA, adjusted EBITDA and fixed charges are not defined terms under GAAP. Adjusted EBITDA should not be considered an
alternative to operating income or net income as a measure of operating results or an alternative to cash flows as a measure of liquidity. Fixed charges should not be considered an alternative to interest expense. Because we are highly leveraged, we
believe that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA are appropriate to provide additional information to investors to demonstrate compliance with the covenants in our debt agreements.

As of March 31, 2009, we were in compliance with all of the debt covenants including those of the loan and security agreement governing the ABL
facility and the indentures governing the Metals USA Notes and the 2007 Notes. Both the loan and security agreement governing the ABL facility and the indentures governing the Metals USA Notes and the 2007 Notes contain restrictions as to the
payment of dividends. The amount available under the restricted payment provision contained in the loan and security agreement governing the ABL facility was $58.3 million as of March 31, 2009. No amount was available under the restricted
payment provision contained in the indenture governing the Metals USA Notes as of March 31, 2009. As of March 31, 2009, Flag Intermediate and its wholly-owned subsidiary, Metals USA, had $155.3 million of total stockholders equity.

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

Commitments and Contingencies

From time to time, we are involved in a variety of claims, lawsuits and other disputes arising in the ordinary course of business. We believe the
resolution of these matters and the incurrence of their related costs and expenses should not have a material adverse effect on our consolidated financial position, results of operations, liquidity or cash flows.

Off-Balance Sheet Arrangements

We were not engaged
in off-balance sheet arrangements through any unconsolidated, limited purpose entities and no material guarantees of debt or other commitments to third parties existed at March 31, 2009.



40



---

##### Table of Contents

New Accounting Pronouncements

In May 2008, the Financial Accounting Standards Board (FASB) issued SFAS No. 162, Hierarchy of Generally Accepted Accounting Principles (SFAS 162). This statement is intended
to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements of nongovernmental entities that are presented in conformity with GAAP. The
effective date of this statement was November 15, 2008. The adoption of SFAS 162 did not have a material impact on the Companys consolidated financial statements.

In April 2008, the FASB issued FASB Staff Position (FSP) No. SFAS 142-3, Determination of the Useful Life of Intangible Assets
(FSP SFAS 142-3). FSP SFAS 142-3 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 SFAS No. 142, Goodwill and
Other Intangible Assets (SFAS 142). The intent of FSP SFAS 142-3 is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair
value of the asset under SFAS No. 141R (revised 2007), Business Combinations (SFAS 141R) and other applicable accounting literature. FSP SFAS 142-3 is effective for financial statements issued for fiscal years beginning
after December 15, 2008 and must be applied prospectively to intangible assets acquired after the effective date. The Company has not acquired any intangible assets since adopting FSP SFAS 142-3. As such, there has been no impact to the
Companys financial statements since the January 1, 2009 adoption date.

In March 2008, the FASB issued SFAS No. 161,
Disclosures About Derivative Instruments and Hedging Activitiesan amendment of FASB Statement No. 133 (SFAS 161), which expands the disclosure requirements in SFAS 133 about an entitys derivative instruments
and hedging activities. SFAS 161s disclosure provisions apply to all entities with derivative instruments subject to SFAS 133 and its related interpretations. The provisions also apply to related hedged items, bifurcated derivatives, and
nonderivative instruments that are designated and qualify as hedging instruments. Entities with instruments subject to SFAS 161 must provide more robust qualitative disclosures and expanded quantitative disclosures. Such disclosures, as well as
existing SFAS 133 required disclosures, generally will need to be presented for every annual and interim reporting period. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after
November 15, 2008. For the three months ended March 31, 2009, we have included the statements expanded disclosures about derivative instruments and hedging activities within the Companys financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS 141R), which replaces SFAS 141.
SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill
acquired in connection with a business combination. The Statement also establishes disclosure requirements that will enable users to evaluate the nature and financial effect of the business combination. SFAS 141R applies prospectively to business
combinations for which the acquisition date is on or after the beginning of an entitys first fiscal year that begins after December 15, 2008. The Company applied the provisions of SFAS 141R in connection with the acquisition of VR Laser
during the first quarter of 2009. The adoption of SFAS 141R did not have a material impact on the Companys consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51 (SFAS 160). SFAS 160 requires that accounting and reporting for
minority interests will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS 160 also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. This Statement is effective as of the beginning of an entitys first fiscal year beginning after December 15, 2008. The adoption of SFAS 160 did not have a material
impact on the Companys consolidated financial statements.



41



---

##### Table of Contents

In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, Effective Date of FASB
Statement No. 157 (FSP FAS 157-2), which delayed the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements
on at least an annual basis, until fiscal years beginning after November 15, 2008. Nonfinancial assets and liabilities that the Company measures at fair value on a non-recurring basis consist primarily of property and equipment, goodwill, and
intangible assets, which are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The adoption of FSP FAS 157-2 did not have a material impact on the Companys consolidated financial
statements.

ITEM 3.Quantitative And Qualitative Disclosures About Market Risk

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

Our exposure to market risk for changes in interest rates relates primarily to the ABL facility and the 2007 Notes, both of which are subject to variable
interest rates. As of March 31, 2009, outstanding borrowings under the ABL facility were $251.0 million. Based on the weighted average borrowings outstanding on the ABL facility during the three months ended March 31, 2009, a one percent
increase or decrease in the weighted average facility rate would have resulted in a change to pretax interest expense of approximately $0.8 million for the period.

As of March 31, 2009, the outstanding principal amount of the 2007 Notes was $260.7 million. Based on this amount, a one percent increase or decrease in the base rate would have resulted in a change to pretax
interest expense of $0.7 million for the three months ended March 31, 2009. At May 8, 2009, the 2007 Notes were traded at approximately 47% of face value, based on quoted market prices.

In February 2008, $250.0 million notional amount of outstanding borrowings under the ABL facility were swapped from a floating LIBOR-based rate to a
fixed rate. The swaps entitle us to receive quarterly payments of interest at a floating rate indexed to the three-month LIBOR and pay a fixed rate that ranges from 2.686% to 2.997%, converting a portion of the outstanding borrowings on our ABL
facility from a floating rate obligation to a fixed rate obligation. Pretax realized gains and losses from derivatives which were recognized in earnings during the three months ended March 31, 2009, amounted to $0.8 million of additional
interest expense. These gains and losses effectively offset changes in the cost of the Companys hedged exposure, and no amount of such gains and losses resulted from hedge ineffectiveness, nor was any component of these gains and losses
excluded from the Companys assessment of hedge effectiveness. The fair value of the Companys interest rate swaps was $5.8 million at March 31, 2009, with $3.1 million classified as other accrued liabilities and $2.7 million
classified as other long-term liabilities in the consolidated balance sheet.

$275.0
million aggregate principal amount of Metals USA Notes were outstanding at March 31, 2009, with a fixed interest rate of 111/8%. Changes in market interest rates will not impact cash interest payable on the Metals USA Notes. At May 8, 2009, the Metals USA Notes were traded at approximately 72% of face value, based on quoted market prices.

ITEM 4.Controls And Procedures

As of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of our management,
including the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) of Metals USA Holdings Corp, of the effectiveness of our disclosure controls and procedures (as defined pursuant to Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934).



42



---

##### Table of Contents

Based on that evaluation, the CEO and CFO of Metals USA Holdings Corp. have concluded that our disclosure
controls and procedures are effective to ensure that the information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commissions rules and forms, and that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

We maintain a system of internal accounting controls that are designed to provide reasonable assurance that our books and records accurately reflect our
transactions and that our policies and procedures are followed. There have been no changes in our internal controls over financial reporting or in other factors that occurred during the most recent fiscal quarter that have materially affected,
or are reasonably likely to materially affect, our internal controls over financial reporting.



43



---

##### Table of Contents

PART II. OTHER INFORMATION

ITEM 1.Legal Proceedings

From time to time, we
are involved in a variety of claims, lawsuits and other disputes arising in the ordinary course of business. We believe the resolution of these matters and the incurrence of their related costs and expenses should not have a material adverse effect
on our consolidated financial position, results of operations, liquidity or cash flows. While it is not feasible to predict the outcome of all pending suits and claims, the ultimate resolution of these matters as well as future lawsuits could have a
material adverse effect on our business, financial condition, results of operations, cash flows or reputation.

ITEM 1A.Risk Factors

There have been no material changes to the disclosure related to risk factors made in our Annual
Report on Form 10-K for the year ended December 31, 2008.

ITEM 2.Unregistered Sales of Equity Securities
and Use of Proceeds

None.

ITEM 3.Defaults Upon Senior Securities

None.

ITEM 4.Submission of Matters to a Vote of Security Holders

None.

ITEM 5.Other Information

In the first quarter of 2009, an error was discovered in the calculation of the FCCR for the
year ended December 31, 2008. As a result, the FCCR for the year ended December 31, 2008 was incorrectly reported as 2.91, rather than 1.43. The Company was in compliance with all debt covenants as of December 31, 2008, and the
calculation error had no effect on the Companys compliance with any debt covenants as of December 31, 2008, nor did it in any way affect the Companys interest rates with respect to borrowings utilizing the ABL facility.

ITEM 6.Exhibits



|              |  |                                                                                                                                                                                                              
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                  
|              | 
|31.1*         |  | Certification of the Chief Executive Officer of Metals USA Holdings Corp., dated May 15, 2009, pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
|              | 
|31.2*         |  | Certification of the Chief Financial Officer of Metals USA Holdings Corp., dated May 15, 2009, pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
|              | 
|32.1*         |  | Certification of the Chief Executive Officer of Metals USA Holdings Corp., dated May 15, 2009, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.     
|              | 
|32.2*         |  | Certification of the Chief Financial Officer of Metals USA Holdings Corp., dated May 15, 2009, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.     



|* | Filed herewith.
|- | ---------------



44



---

##### Table of Contents

SIGNATURE

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, who has signed this report on behalf of the Registrant and as the principal financial officer of the Registrant.



|                   |  |                           |  |                                                                           
|------------------ |  | ------------------------- |  | --------------------------------------------------------------------------
|                   |  | METALS USA HOLDINGS CORP.
|                   |  |                          
|Date: May 15, 2009 |  | By:                       |  | /S/    ROBERT C.
MCPHERSON, III                                           
|                   |  |                           |  | Robert C. McPherson, III Senior Vice President and Chief Financial Officer



45