1038363--2/24/2009--METALS_USA

related topics

{debt, indebtedness, cash}

{condition, economic, financial}

{cost, operation, labor}

{acquisition, growth, future}

{personnel, key, retain}

{operation, natural, condition}

{competitive, industry, competition}

{customer, product, revenue}

{stock, price, operating}

{product, liability, claim}

{cost, regulation, environmental}

Our business, financial condition, results of operations and cash flows are heavily affected by changing metal prices. Our operating results and liquidity could be negatively affected during economic downturns because the demand for our products is cyclical. We rely on metal suppliers in our business and purchase a significant amount of metal from a limited number of suppliers and termination of one or more of our relationships with any of them could have a material adverse effect on our business, financial condition, results of operations or cash flows. Intense competition in our fragmented industry could adversely affect our profitability. Our ability to retain our key employees is critical to the success of our business, and failure to do so may adversely affect our revenues and as a result could materially adversely affect our business, financial condition, results of operations and cash flows. We are subject to litigation that could strain our resources and distract management. Environmental costs could decrease our net cash flow and adversely affect our profitability. Adverse developments in our relationship with our unionized employees could adversely affect our business. Our historical financial information is not comparable to our current financial condition, results of operations and cash flows because of our use of purchase accounting in connection with the Merger (which resulted in a new valuation for the assets and liabilities of Metals USA to their fair values) and the acquisitions of Port City, Lynch Metals and Allmet. We may not successfully implement our acquisition strategy, and acquisitions that we pursue may present unforeseen integration obstacles and costs, increase our leverage and negatively impact our performance. Our parent company, Metals USA Holdings, is a holding company and relies on dividends and other payments, advances and transfers of funds from us to meet its dividend and other obligations. Metals USA Holdings ability to repay its $300.0 million initial aggregate principal amount of Senior Floating Rate Toggle Notes due 2012 (the 2007 Notes ) depends upon the performance of its subsidiaries and their ability to make distributions. We may not be able to retain or expand our customer base if the North American manufacturing industry continues to erode through moving offshore or through acquisition and merger or consolidation activity in our customers industries. We may face product liability claims that are costly and create adverse publicity. We may not be able to generate sufficient cash to service all of our indebtedness. Our substantial leverage exposes us to interest rate risk and could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from meeting our obligations under our indebtedness. Our debt agreements impose significant operating and financial restrictions, which could have a material adverse effect on our business, financial condition, results of operations or cash flows. Despite our substantial indebtedness, we may still be able to incur significantly more indebtedness which could have a material adverse effect on our business, financial condition or results of operations. Because a substantial portion of our indebtedness bears interest at rates that fluctuate with changes in certain prevailing short-term interest rates, we are vulnerable to interest rate increases. We are controlled by Apollo and its affiliates, and their interests as equity holders may conflict with yours.

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1038363--2/24/2009--METALS_USA_INC