8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported) December 23, 2004

RYERSON TULL, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

(State or Other Jurisdiction of Incorporation)

1-9117	36-3425828
(Commission File Number)	(I.R.S. Employer Identification No.)

2621 West 15th Place, Chicago, Illinois 60608

(Address Of Principal Executive Offices, including Zip Code)

(773) 762-2121

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, If Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)

Item 8.01 Other Events

On October 26, 2004, Ryerson Tull, Inc. (the “Company”) entered into a definitive agreement to purchase Integris Metals, Inc. (“Integris”), a joint venture between Alcoa Inc. and BHP Billiton. The Company will purchase all of the equity interest in Integris for $410 million plus assumption of Integris’ debt, which was approximately $250 million as of October 1, 2004. The transaction is expected to be completed by early 2005, subject to customary closing conditions. Information relating to Integris is attached hereto as Exhibit 99.1.

The Company issued its 3.50% Convertible Senior Notes due 2024 and 8¼% Senior Notes due 2011 in November 2004 and December 2004, respectively. All notes were guaranteed by Ryerson Tull Procurement Corporation, a subsidiary of the Company. The Company is updating its historical financial information to provide the footnote required by Rule 3-10 of Regulation S-X. Financial statements for the years ended December 31, 2003, December 31, 2002 and December 31, 2001 are attached hereto as Exhibit 99.2. Financial statements for the three and nine months ended September 30, 2004 and September 30, 2003 are attached hereto as Exhibit 99.3.

Pro forma financial statements which reflect the Company’s two aforementioned note issuances, the previously disclosed acquisition of J & F Steel LLC (which closed on July 31, 2004) and the proposed acquisition of Integris are attached hereto as Exhibit 99.4.

Item 9.01 Financial Statements and Exhibits

A list of exhibits is attached hereto as an Exhibit Index and is incorporated by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	RYERSON TULL, INC.
Dated: December 23, 2004	/s/ Lily L. May
	By: Lily L. May
	Its: Vice President, Controller and Chief Accounting Officer

EXHIBIT INDEX

Exhibit No.	Description
23.1	Consent of Pricewaterhouse Coopers LLP regarding Ryerson Tull, Inc.
23.2	Consent of Pricewaterhouse Coopers LLP regarding Integris Metals, Inc.
23.3	Consent of Pricewaterhouse Coopers LLP regarding the metals distribution businesses of NAMD Inc.—Successor Entity.
23.4	Consent of Pricewaterhouse Coopers LLP regarding the metals distribution businesses of NAMD Inc.—Predecessor Entity.
23.5	Consent of Pricewaterhouse Coopers LLP regarding Reynolds Aluminum Supply Company.
99.1	Information relating to Integris Metals, Inc.
99.2	Financial statements of Ryerson Tull, Inc. for the years ended December 31, 2003, December 31, 2002 and December 31, 2001 (including the financial statement schedule).
99.3	Financial statements of Ryerson Tull, Inc. for the three and nine months ended September 30, 2004 and September 30, 2003.
99.4	Unaudited pro forma condensed consolidated financial data of Ryerson Tull, Inc.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 33-59161, 33-62897 and 333-59009) and in the Registration Statements on Form S-8 (Nos. 33-59783, 33-48770, 33-13292, 33-32504, 333-06977, 333-06989, 333-78429, 333-62382 and 333-88476) of Ryerson Tull, Inc. (the “Company”) of our report dated February 18, 2004, except for Note 18, for which the date is December 21, 2004, relating to the consolidated financial statements and financial statement schedule of the Company, which appears in this Current Report on Form 8-K.

/s/    PricewaterhouseCoopers LLP

Chicago, Illinois

December 22, 2004

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Ryerson Tull, Inc. Registration Statements on Form S-3 (No. 33-59161, No. 33-62897 and No. 333-59009) and Form S-8 (No. 33-59783, No. 33-48770, No. 33-13292, No. 33-32504, No. 333-06977, No. 333-06989, No. 333-78429, No. 333-62382 and No. 333-88476), of our report dated March 11, 2004, except for Note 16 and Note 17, for which the date is July 28, 2004, relating to the consolidated financial statements of Integris Metals, Inc. and Subsidiary, which appears in this Current Report on Form 8-K.

/s/    PricewaterhouseCoopers LLP

Minneapolis, Minnesota

December 23, 2004

EX-23.3

Exhibit 23.3

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Ryerson Tull, Inc. Registration Statements on Form S-3 (No. 33-59161, No. 33-62897 and No. 333-59009) and Form S-8 (No. 33-59783, No. 33-48770, No. 33-13292, No. 33-32504, No. 333-06977, No. 333-06989, No. 333-78429, No. 333-62382 and No. 333-88476), of our report dated June 17, 2002, except for Note 8 and Note 9, for which the date is July 28, 2004, relating to the combined financial statements of The Metals Distribution Businesses of NAMD Inc.—Successor Entity, which appears in this Current Report on Form 8-K.

/s/    PricewaterhouseCoopers LLP

Minneapolis, Minnesota

December 23, 2004

EX-23.4

Exhibit 23.4

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Ryerson Tull, Inc. Registration Statements on Form S-3 (No. 33-59161, No. 33-62897 and No. 333-59009) and Form S-8 (No. 33-59783, No. 33-48770, No. 33-13292, No. 33-32504, No. 333-06977, No. 333-06989, No. 333-78429, No. 333-62382 and No. 333-88476), of our report dated June 17, 2002, except for Note 8 and Note 9, for which the date is July 28, 2004, relating to the combined financial statements of The Metals Distribution Businesses of NAMD Inc.—Predecessor Entity, which appears in this Current Report on Form 8-K.

/s/    PricewaterhouseCoopers LLP

Minneapolis, Minnesota

December 23, 2004

EX-23.5

Exhibit 23.5

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Ryerson Tull, Inc. Registration Statements on Form S-3 (No. 33-59161, No. 33-62897 and No. 333-59009) and Form S-8 (No. 33-59783, No. 33-48770, No. 33-13292, No. 33-32504, No. 333-06977, No. 333-06989, No. 333-78429, No. 333-62382 and No. 333-88476), of our report dated March 15, 2002, except for Note 9, for which the date is July 28, 2004, relating to the combined financial statements of Reynolds Aluminum Supply Company (The Distribution Business of Reynolds Metal Company), which appears in this Current Report on Form 8-K.

/s/    PricewaterhouseCoopers LLP

Pittsburgh, Pennsylvania

December 23, 2004

EX-99.1

Exhibit 99.1

Information relating to Integris Metals, Inc.

In this Exhibit 99.1, unless the context otherwise require, “we” “us,” “our,” “Integris” and “Integris Metals” and similar terms refer to Integris Metals, Inc. and subsidiary. Unless the context otherwise requires, “Alcoa” refers to Alcoa Inc. and its subsidiaries and affiliates and “BHP Billiton” refers to BHP Billiton Plc and BHP Billiton Limited and their respective subsidiaries and affiliates.

1

Integris Metals, Inc. and Subsidiary

INDEX TO FINANCIAL STATEMENTS

	Page
Report of Independent Auditors	3
Consolidated Financial Statements—Integris Metals, Inc. and Subsidiary
Consolidated Balance Sheets at January 2, 2004, January 3, 2003 and October 1, 2004 (unaudited)	4
Consolidated Statements of Income for the Period from November 1, 2001 Through December 28, 2001, the 53-Week Period Ended January 3, 2003, the 52-Week Period Ended January 2, 2004, and for the 39-Week Periods Ended October 3, 2003 (unaudited) and October 1, 2004 (unaudited)	5
Consolidated Statements of Cash Flows for the Period from November 1, 2001 Through December 28, 2001, the 53-Week Period Ended January 3, 2003, the 52-Week Period Ended January 2, 2004, and for the 39-Week Periods Ended October 3, 2003 (unaudited) and October 1, 2004 (unaudited)	6
Consolidated Statements of Changes in Stockholders’ Equity for the Period from November 1, 2001 Through December 28, 2001, the 53-Week Period Ended January 3, 2003, the 52-Week Period Ended January 2, 2004, and for the 39-Week Period Ended October 1, 2004 (unaudited)	7
Notes to Consolidated Financial Statements	8
Reports of Independent Auditors	33
Combined Financial Statements—The Metals Distribution Businesses of NAMD Inc.
Combined Balance Sheet at October 31, 2001 (Successor Entity)	35
Combined Statement of Operations and Comprehensive Income (Loss) for the Six-Month Period Ended June 30, 2001 (Predecessor Entity) and the Four-Month Period Ended October 31, 2001 (Successor Entity)	36
Combined Statement of Cash Flows for the Six-Month Period Ended June 30, 2001 (Predecessor Entity) and the Four-Month Period Ended October 31, 2001 (Successor Entity)	37
Combined Statements of Changes in Parent Company Investment for the Six-Month Period Ended June 30, 2001 (Predecessor Entity) and the Four-Month Period Ended October 31, 2001 (Successor Entity)	38
Notes to Combined Financial Statements	39
Report of Independent Auditors	51
Combined Financial Statements—Reynolds Aluminum Supply Company
Combined Balance Sheet at October 31, 2001	52
Combined Statement of Income, Comprehensive Income and Parent Company Investment for the Ten-Month Period Ended October 31, 2001	53
Combined Statement of Cash Flows for the Ten-Month Period Ended October 31, 2001	54
Notes to Combined Financial Statements	55

2

Report of Independent Auditors

To the Board of Directors and Stockholders

of Integris Metals, Inc. and Subsidiary

In our opinion, the accompanying consolidated balance sheets and related consolidated statements of income, of cash flows and of changes in stockholders’ equity present fairly, in all material respects, the consolidated financial position of Integris Metals, Inc. and Subsidiary (the “Company”) at January 3, 2003 and January 2, 2004, and the consolidated results of their operations and their cash flows for the period from November 1, 2001 through December 28, 2001, the 53-week period ended January 3, 2003, and the 52-week period ended January 2, 2004, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/S/    PRICEWATERHOUSECOOPERS LLP

        PricewaterhouseCoopers LLP

Minneapolis, Minnesota

March 11, 2004, except for Note 16 and Note 17,

for which the date is July 28, 2004

3

Integris Metals, Inc. and Subsidiary

Consolidated Balance Sheets

	January 3, 2003			January 2, 2004		October 1, 2004
(dollars in thousands)						(unaudited)
Assets
Current assets
Cash and cash equivalents	$	6,904		$	2,847	$	4,225
Trade receivables, less allowances of $5,834, $6,173 and $6,074		158,872			179,248		258,989
Inventories		277,593			273,013		369,710
Prepaid expenses and other current assets		6,256			17,969		14,920
Total current assets		449,625			473,077		647,844
Restricted cash		6,591			—		—
Property, plant and equipment, net (Note 4)		171,022			161,169		155,105
Goodwill, net (Note 5)		40,609			40,609		40,609
Other intangibles, net (Note 5)		8,284			7,024		6,038
Other assets		3,585			3,800		1,615
Deferred income taxes (Note 8)		—			2,030		5,850
Total assets	$	679,716		$	687,709	$	857,061
Liabilities and Stockholders’ Equity
Current liabilities
Book overdraft	$	12,612		$	27,309	$	33,384
Notes payable—related party (Note 6)		76,000			—		—
Accounts payable		59,760			43,851		68,119
Payable to related parties, net (Note 15)		3,349			2,426		3,997
Accrued expenses		30,869			17,864		26,434
Income taxes payable		1,285			2,067		7,657
Deferred income taxes (Note 8)		11,754			14,657		14,138
Total current liabilities		195,629			108,174		153,729
Notes payable—noncurrent (Note 6)		109,789			167,028		247,320
Deferred income taxes (Note 8)		1,820			—		—
Accrued pension and postretirement obligations (Note 11)		61,041			75,947		80,804
Other liabilities		4,826			2,609		3,441
Total liabilities		373,105			353,758		485,294
Commitments and contingencies
Stockholders’ equity
Common stock, 100,000 shares authorized, par value $.01, 100 shares issued and outstanding (Note 7)		—			—		—
Paid-in capital		307,741			317,616		317,616
Retained (deficit) earnings		(141	)		10,786		47,059
Accumulated other comprehensive (loss) income		(989	)		5,549		7,092
Total stockholders’ equity		306,611			333,951		371,767
Total liabilities and stockholders’ equity	$	679,716		$	687,709	$	857,061

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

4

Integris Metals, Inc. and Subsidiary

Consolidated Statements of Income

	Period From November 1, 2001 Through December 28, 2001			53-Week Period Ended January 3, 2003			52-Week Period Ended January 2, 2004			39-Week Period Ended October 3, 2003		39-Week Period Ended October 1, 2004
(dollars in thousands)										(unaudited)		(unaudited)
Net sales	$	221,048		$	1,520,332		$	1,494,088		$	1,132,307	$	1,491,480
Cost of sales		183,566			1,242,683			1,248,911			945,679		1,213,968
Gross profit		37,482			277,649			245,177			186,628		277,512
Selling, general and administrative expenses		42,156			242,604			217,619			164,310		194,320
Restructuring and other related costs (Note 3)		6,900			8,946			1,123			822		1,642
Operating (loss) income		(11,574	)		26,099			26,435			21,496		81,550
Other expense (income), net
Interest		1,332			8,381			10,340			7,827		7,649
Other		834			(1,054	)		(51	)		—		1,192
(Loss) income before income taxes		(13,740	)		18,772			16,146			13,669		72,709
Income tax (benefit) provision (Note 8)		(3,716	)		8,889			5,219			4,612		26,220
Net (loss) income	$	(10,024	)	$	9,883		$	10,927		$	9,057	$	46,489

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

5

Integris Metals, Inc. and Subsidiary

Consolidated Statements of Cash Flows

	Period From November 1, 2001 Through December 28, 2001			53-Week Period Ended January 3, 2003			52-Week Period Ended January 2, 2004			39-Week Period Ended October 3, 2003			39-Week Period Ended October 1, 2004
(dollars in thousands)										(unaudited)			(unaudited)
Cash flows from operating activities
Net (loss) income	$	(10,024	)	$	9,883		$	10,927		$	9,057		$	46,489
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities
Depreciation and amortization		2,523			16,202			16,275			12,198			11,935
Provision for doubtful accounts receivable		1,062			3,812			1,658			1,060			1,117
Deferred income tax (benefit) provision		(3,736	)		1,881			1,740			(249	)		(4,455	)
Asset write-downs		—			1,208			1,499			1,042			854
Gain on disposal of fixed assets		(25	)		(509	)		(378	)		(101	)		82
Amortization of deferred financing costs		—			572			995			741			791
Impact on cash flows from changes in working capital
Accounts receivable		(41,120	)		6,214			(13,845	)		(29,883	)		(79,681	)
Inventories		14,433			11,723			12,606			25,361			(95,342	)
Income tax receivable/payable		158			3,522			760			2,477			5,585
Prepaid expenses and other current assets		1,490			(953	)		206			758			2,257
Accounts payable and accrued expenses		7,359			(18,628	)		(32,447	)		(29,219	)		33,928
Accrued pension and postretirement obligations		963			7,339			6,362			5,664			4,766
Other liabilities		(80	)		(308	)		(2,626	)		(2,701	)		787
Net cash (used in) provided by operating activities		(26,997	)		41,958			3,732			(3,795	)		(70,887	)
Cash flows from investing activities
Purchase of property, plant and equipment		(1,589	)		(8,948	)		(16,384	)		(13,199	)		(4,953	)
Proceeds from sales of fixed assets		63			7,060			1,650			257			310
(Increase) decrease in restricted cash		(2,000	)		(4,591	)		6,591			6,591			—
Other		—			(37	)		(98	)		25			1,837
Net cash used in investing activities		(3,526	)		(6,516	)		(8,241	)		(6,326	)		(2,806	)
Cash flows from financing activities
Change in book overdraft		—			12,612			13,730			2,387			5,966
Borrowings on debt due to related parties		50,000			10,000			—			—			—
Repayment on debt due to related parties		—			(194,707	)		(66,125	)		(55,875	)		—
Borrowings on revolving debt		—			215,844			543,222			448,274			750,741
Repayment on revolving debt		—			(106,231	)		(490,758	)		(391,593	)		(672,230	)
Related party receivable/payable, net		(31,790	)		31,139			(1,010	)		(260	)		—
Deferred financing costs		—			(4,075	)		(127	)		(127	)		(175	)
Dividends paid		—			—			—			—			(10,216	)
Net cash provided by (used in) financing activities		18,210			(35,418	)		(1,068	)		2,806			74,086
Net (decrease) increase in cash and cash equivalents		(12,313	)		24			(5,577	)		(7,315	)		393
Effect of exchange rate changes on cash		788			(95	)		1,520			1,014			985
Net change in cash and cash equivalents		(11,525	)		(71	)		(4,057	)		(6,301	)		1,378
Cash and cash equivalents
Beginning of period		18,500			6,975			6,904			6,904			2,847
End of period	$	6,975		$	6,904		$	2,847		$	603		$	4,225
Supplemental disclosures of cash flow information
Cash paid for interest	$	777		$	8,065		$	8,831		$	6,976		$	6,851
Cash paid for income taxes		176			6,524			2,447			2,160			20,630
Supplemental disclosures of noncash items
Noncash capital contribution (Note 6)	$	—		$	—		$	9,875		$	9,875		$	—
Net unrealized gain on derivative instruments, net of deferred tax liability		—			—			580			—			182
Additional minimum pension liability adjustments, net of deferred tax benefit		—			2,241			4,780			—			—

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

6

Integris Metals, Inc. and Subsidiary

Consolidated Statements of Changes in Stockholders’ Equity

For the Period from November 1, 2001 through December 28, 2001,

the 53-Week Period Ended January 3, 2003, the 52-Week Period Ended

January 2, 2004, and the 39-Week Period Ended October 1, 2004

	Common Stock			Paid-in Capital		Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
	Shares	Amount
(dollars in thousands)
November 1, 2001 (date of formation) issuance of 100 shares in exchange for net assets contributed by stockholders	100	$	—	$	307,741	$	—		$	—		$	307,741
Net loss for the period	—		—		—		(10,024	)		—			(10,024	)
Foreign currency translation adjustment	—		—		—		—			287			287
Comprehensive loss													(9,737	)
Balances at December 28, 2001	100		—		307,741		(10,024	)		287			298,004
Net income for the period	—		—		—		9,883			—			9,883
Other comprehensive income
Foreign currency translation adjustment	—		—		—		—			965			965
Additional minimum pension liability, net of $1,432 of deferred tax benefit	—		—		—		—			(2,241	)		(2,241	)
Comprehensive income													8,607
Balances at January 3, 2003	100		—		307,741		(141	)		(989	)		306,611
Net income for the period	—		—		—		10,927			—			10,927
Other comprehensive income
Foreign currency translation adjustment	—		—		—		—			10,738			10,738
Additional minimum pension liability, net of $3,057 of deferred tax benefit	—		—		—		—			(4,780	)		(4,780	)
Net unrealized gain on derivative instruments, net of $370 of deferred tax liability	—		—		—		—			580			580
Comprehensive income													17,465
Noncash capital contribution	—		—		9,875		—			—			9,875
Balances at January 2, 2004	100		—		317,616		10,786			5,549			333,951
Net income for the period (unaudited)	—		—		—		46,489			—			46,489
Other comprehensive income (unaudited)
Foreign currency translation adjustment (unaudited)	—		—		—		—			1,361			1,361
Net unrealized gain on derivative instruments, net of $116 of deferred tax liability (unaudited)	—		—		—		—			182			182
Comprehensive income (unaudited)													48,032
Dividends paid	—		—		—		(10,216	)		—			(10,216	)
Balances at October 1, 2004 (unaudited)	100	$	—	$	317,616	$	47,059		$	7,092		$	371,676

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

7

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(dollars in thousands, unless otherwise noted)

1. Business Description and Basis of Presentation

Integris Metals, Inc. (the “U.S. Parent”) and its wholly owned Canadian Subsidiary (collectively the “Company”) was formed effective November 1, 2001, pursuant to the terms of a Contribution and Dissolution Agreement (the “Agreement”) by and among Reynolds Metals Company (“RMC”), NAMD Inc. (“NAMD”) and Billiton Investments Ireland Limited (“Billiton Ireland”). The Company is a metals service center, specializing primarily in stainless steel and aluminum products which are sourced globally, further processed to customer specifications, and delivered to customers across North America. The Company has three dedicated processing centers and 59 regional branches throughout the U.S. and Canada.

In accordance with the terms of the Agreement, RMC contributed certain assets and liabilities of its metals distribution businesses (hereinafter referred to as the “RASCO Businesses”) to the Company in exchange for 50 shares of the Company’s common stock. In addition, NAMD Inc. contributed certain assets and liabilities of its metals distribution businesses (the “NAMD Businesses”) to the Company in exchange for 50 shares of the Company’s common stock.

The RASCO Businesses

Reynolds Aluminum Supply Company (“RASCO”) was a component of RMC. RMC was a wholly owned subsidiary of Alcoa, Inc. (a Delaware corporation) (“Alcoa”). Alcoa acquired RMC in May 2000. Accordingly, the assets and liabilities of the RASCO Businesses contributed to the Company reflect the effects of push-down purchase accounting in connection with the May 2000 acquisition of RMC by Alcoa.

The accompanying financial statements include the RASCO Businesses (including (i) the assets and liabilities of the U.S. Operations of RASCO, (ii) the Canadian subsidiary of RASCO Specialty Metals (“RASCO Specialty Metals Ltd.”), and (iii) a U.S. subsidiary of RMC (“Permamet Inc.”)) (collectively the “RASCO Businesses predecessor entities”).

The NAMD Businesses

The NAMD Businesses were a component of NAMD Inc. NAMD Inc. (a U.S. Holding Company) was a wholly owned subsidiary of Billiton Ireland. Prior to October 6, 2000, NAMD Inc. was a wholly owned subsidiary of Rio Algom Limited (a Canadian corporation). On October 6, 2000, Rio Algom Limited was acquired by Billiton Plc (a United Kingdom corporation and ultimate parent company of Billiton Ireland).

Effective June 30, 2001, Billiton Plc entered into a merger agreement with BHP, Ltd. (an Australian corporation) (“BHP”). For accounting purposes in the U.S., this merger was treated as an acquisition of Billiton Plc by BHP. Accordingly, the accompanying assets and liabilities of the NAMD Businesses contributed to the Company reflect the effects of push-down purchase accounting in connection with the BHP acquisition of Billiton Plc on June 30, 2001.

The accompanying financial statements reflect the contribution of the NAMD Businesses’ which consisted of metals distribution operations in the U.S. and Canada. The NAMD Businesses’ operations in the U.S. and Canada were comprised of two separate businesses, Vincent Metal Goods (“VMG”) in the U.S. and Atlas Ideal Metals (“AIM”) in Canada (collectively, the “NAMD Businesses”).

8

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

Contributed Assets and Liabilities

Our initial formation on November 1, 2001, was accounted for as a corporate joint venture. A corporate joint venture is a jointly controlled entity (whose ownership seldom changes) that is owned and operated by and for the mutual benefit of the joint venture partners, who share in the risks and rewards of the joint ventures business purpose. Assets contributed in the initial formation of a corporate joint venture are valued at their historical cost (or predecessor basis).

Included in the assets contributed by NAMD is approximately $40.8 million of goodwill. This goodwill did not result from our formation since the assets contributed at our formation were valued at historical cost. The goodwill contributed by NAMD was pre-existing goodwill which resulted from the June 30, 2001 merger of Billiton Plc with BHP Limited as described further above.

As such, the assets and liabilities of the RASCO Businesses and the NAMD Businesses contributed to the Company at November 1, 2001, are based upon the predecessor basis of NAMD and RASCO respectively and consisted of the following:

	RASCO Businesses			NAMD Businesses			Amount Contributed at November 1, 2001
Current assets	$	154,093		$	312,123		$	466,216
Noncurrent assets		78,342			162,309			240,651
Current liabilities		(45,196	)		(67,551	)		(112,747	)
Noncurrent liabilities		(30,550	)		(255,829	)		(286,379	)
Net assets contributed	$	156,689		$	151,052		$	307,741

2. Summary of Significant Accounting Policies

Basis of Financial Statements

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include those of the U.S. parent company and its wholly owned Canadian Subsidiary. The Company’s fiscal year ends on the Friday closest to December 31. As such, the consolidated financial statements include the accounts of the Company’s operations at January 3, 2003, January 2, 2004 and October 1, 2004 (unaudited), and for the period from November 1, 2001 through December 28, 2001, the 53-week period ended January 3, 2003, the 52-week period ended January 2, 2004, and for the 39-week periods ended October 3, 2003 (unaudited) and October 1, 2004 (unaudited). All significant intercompany investments, accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Interim Financial Information (Unaudited)

The accompanying consolidated financial statements at October 1, 2004 and for the 39-week periods ended October 3, 2003 and October 1, 2004, are unaudited. In the opinion of management, these consolidated

9

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

statements have been prepared on the same basis as the audited consolidated financial statements included herein and include all adjustments, consisting of only normal recurring adjustments, necessary for the fair statement of results of the interim periods.

Revenue Recognition

The Company recognizes revenue from product sales (including amounts billed for shipping and handling) when ownership and risk of loss passes to the customer which is upon shipment. The Company records estimated discounts and rebates in the same period revenue is recognized based on historical experience.

Cash and Cash Equivalents

Cash equivalents are highly liquid short-term investments that are readily convertible to known amounts of cash and have original maturities of three months or less at date of purchase.

Restricted Cash

Included in restricted cash were proceeds held in escrow from the sale of property located in St. Louis, Missouri.

Inventories

Product inventories primarily consist of aluminum, stainless steel and other metal products for resale. Certain additional incremental processing costs are incurred based on customer specifications. All product inventories are considered finished goods. Product inventories are valued and recorded at the lower of cost or market value. Cost is determined on the first-in, first-out (“FIFO”) method for all inventories, except U.S. aluminum inventory, which is determined on the last-in, first-out (“LIFO”) method. LIFO inventory represented approximately 36%, 37% and 33% of consolidated inventories at January 3, 2003, January 2, 2004 and October 1, 2004, respectively. At January 3, 2003, the LIFO cost of aluminum inventories exceeded the FIFO cost of such inventories. At January 2, 2004 and October 1, 2004 (unaudited), the FIFO value of aluminum inventories exceeded the LIFO value by $1,185 and $14,311, respectively.

Property, Plant and Equipment

Property, plant and equipment is stated at cost. Initial contributions of property, plant and equipment from the stockholders were based upon their net book value.

Depreciation and amortization are computed on the straight-line method over the estimated useful lives of the assets including assets acquired under capital leases.

Land improvements	15 years
Buildings	25 to 40 years
Building improvements	20 to 40 years
Leasehold improvements	Term of lease
Machinery and equipment	5 to 25 years
Major processing equipment	12 to 18 years

Maintenance and repairs are charged to operations as incurred and additions or improvements are capitalized. When assets are sold, retired or otherwise disposed of, the asset cost and related accumulated depreciation or amortization are removed from the respective accounts and any gains or losses are included in operations.

10

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

Property, plant and equipment amounts are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset (asset group) may not be recoverable. An impairment loss would be recognized when the carrying amount of an asset exceeds the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. The impairment loss to be recorded would be the excess of the asset’s carrying value over its fair value. Fair value would be determined based upon the best information available in the circumstances including quoted prices or other valuation techniques.

Goodwill and Identified Intangible Assets

Goodwill and indefinite-lived intangible assets are not amortized. The carrying value of goodwill and indefinite-lived intangible assets are tested for impairment at least annually. The recoverability of unamortized goodwill assets is based upon the fair value of the Company determined by using a discounted cash flow analysis or other valuation techniques.

Prior to January 1, 2002, the excess of cost over net assets of businesses acquired was amortized on a straight-line basis over a period of 20 years. Effective January 1, 2002, the Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 primarily addresses the accounting for acquired goodwill and intangible assets (i.e., the post-acquisition accounting). The most significant changes made by SFAS No. 142 were (1) goodwill and indefinite-lived intangible assets are no longer amortized; (2) goodwill and indefinite-lived intangible assets are tested for impairment at least annually; and (3) the amortization period of intangible assets with finite lives is no longer limited to 40 years.

Identified intangible assets, specifically customer relationships and intellectual property, are amortized over a period of 4 and 20 years, respectively. Identified intangible assets are tested for impairment whenever events or circumstances indicate that the carrying amount of the asset may not be recoverable.

Shipping and Handling Fees and Costs

The Company classifies shipping and handling fees and costs as a component of selling, administrative and other expenses on the Consolidated Statements of Income. Total shipping and handling fees and costs for the period from November 1, 2001 through December 28, 2001, the 53-week period ended January 3, 2003, the 52-week period ended January 2, 2004, and for the 39-week periods ended October 3, 2003 (unaudited) and October 1, 2004 (unaudited), were $7,217, $45,574, $46,686, $35,881 and $37,893, respectively.

Derivatives and Hedging

The fair values of all outstanding derivative instruments are recorded on the Consolidated Balance Sheets.

All derivatives are held for purposes other than trading. The Company measures hedge effectiveness by formally assessing, at least quarterly, the historical and probable future high correlation of changes in the fair value or expected future cash flows of the hedged item. The ineffective portions, if any, are recorded in other expense (income) in the current period. If the hedging relationship ceases to be highly effective or it becomes probable that an expected transaction will no longer occur, gains or losses on the derivative are recorded in other expense (income).

Changes in the fair value of derivatives are recorded in current earnings along with the change in the fair value of the underlying hedged item if the derivative is designated as a fair value hedge or in other comprehensive income if the derivative is designated as a cash flow hedge. If no hedging relationship is designated, the derivative is marked to market through earnings.

11

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

Cash flows from derivative instruments are recognized in the Consolidated Statements of Cash Flows in a manner consistent with the underlying transactions. See Note 9 for additional information regarding the Company’s accounting for derivatives.

Foreign Currency Translation

For Canadian operations, the functional currency is the Canadian dollar. Assets and liabilities of these operations are translated at the exchange rate in effect at year end. Income statement accounts are translated at the average rate of exchange prevailing during the year. Translation adjustments arising from the use of differing exchange rates from period to period are included as other comprehensive income. Realized gains and losses from Canadian currency transactions are included in net income for the period.

Comprehensive Income (Loss)

Comprehensive income (loss) includes net income, foreign currency translation adjustments, additional minimum pension liabilities and gains and losses on derivative instruments designated and effective as cash flow hedges that are charged or credited to the accumulated other comprehensive income (loss) account in stockholders’ equity.

Income Taxes

The Company recognizes a liability or asset for the deferred tax consequences of temporary differences between the tax bases of assets or liabilities and their reported amounts in the financial statements. These temporary differences will result in taxable or deductible amounts in future years when the reported amounts of the assets or liabilities are recovered or settled. The deferred tax assets are reviewed periodically for recoverability and valuation allowances are provided, as necessary.

New Accounting Pronouncements

Effective January 4, 2003, the Company adopted SFAS No. 143, Accounting for Asset Retirement Obligations. This statement establishes accounting standards for recognition and measurement of a liability for an asset retirement obligation and the associated asset retirement cost. The adoption of this standard did not impact the Company’s consolidated financial position or results of operations.

Effective January 4, 2003, the Company adopted SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This statement supersedes existing accounting literature related to accounting and reporting for costs associated with exit or disposal activities. The provisions of this statement were effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of this standard did not impact the Company’s consolidated financial position or results of operations as the restructuring plan described in Note 3 was initiated prior to December 31, 2002.

In April 2003, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133. SFAS No. 149 is effective for certain contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. The adoption of this standard did not impact the Company’s consolidated financial position or results of operations.

12

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

In May 2003, Emerging Issues Task Force No. 00-21, Accounting for Revenue Arrangements with Multiple Deliverables was finalized. This addresses certain aspects of accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities. The guidance in the consensus is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The adoption of this standard did not impact the Company’s consolidated financial position or results of operations.

On May 19, 2004, the FASB issued FASB Staff Position (“FSP”) 106-2, (FSP 106.2) Accounting and Disclosure Requirements relates to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”). The Act introduces a prescription drug benefit under Medicare as well as a federal subsidy to sponsors of retiree health care benefit plans. The Company’s U.S. Postretirement Health Care Benefits plan offers prescription drug benefits and the Company expects to benefit from this legislation. The Company does not anticipate that its plan will need to be amended to obtain the benefits provided under the Act. In accordance with the FASB’s original guidance on the accounting for the Act, the Company elected to defer recognition of the effects of the Act and any measures of benefit cost or benefit obligation in the financial statements or accompanying notes. The Company will comply with the guidance set forth in FSP 106-2 in the third quarter of 2004. The impact, however, is not anticipated to be significant.

In December 2003, the FASB issued SFAS No. 132R, Employers’ Disclosures about Pensions and Other Postretirement Benefits. This statement requires additional disclosures to be made by employers regarding pensions and other postretirement benefit plans, but does not change the measurement or recognition of those plans. Under this Statement, the disclosure provisions regarding foreign plans and estimated future benefit payments are effective for fiscal years ending after December 15, 2003 and interim periods beginning after December 15, 2003. The Company has adopted the interim provisions of this Statement during the current fiscal year. The annual disclosure provisions of this Statement have been included in Note 11.

In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities. This is an interpretation of ARB No. 51, Consolidation of Financial Statements, which addresses the consolidation by business enterprises of variable interest entities that either: (1) do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support, or (2) the equity investors lack an essential characteristic of a controlling interest. In December 2003, the FASB issued a revision of FIN 46 (“FIN 46R”), which clarified certain complexities of FIN 46 and generally requires adoption of all special-purpose entities that qualify as variable interest entities no later than the end of the first reporting period ending after December 15, 2003, and to all non special-purpose entities that qualify as variable interest entities no later than the end of the first reporting period ending after March 15, 2004. The Company does not have any entities that require disclosure or new consolidation as a result of adopting the provisions of FIN 46 or FIN 46R.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in certain circumstances). Many of those instruments were previously classified as equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Statement is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of the Statement and still existing at the beginning of the interim period of adoption. Adoption of this standard did not impact the Company.

13

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

3. Restructuring and Other Related Costs

Prior to 2002, management approved various actions to expedite the integration of the Company’s two predecessor entities and to improve the long-term efficiency and competitiveness of the Company and reduce costs. These actions included certain restructuring charges related to employee reductions, changes to certain distribution operations and other merger-related costs in connection with the integration of business processes and systems. These restructuring and other charges and the subsequent reduction to the related accrued liability are as follows:

	Employee Termination Benefits			Asset Write- Downs			Other Related Costs			Total Restructuring and Other Related Costs
Initial charges for the period ended December 28, 2001	$	5,753		$	—		$	1,147		$	6,900
Cash payments		(343	)		—			(393	)		(736	)
Remaining liability, December 28, 2001		5,410			—			754			6,164
Net charges for the period ended January 3, 2003		1,698			849			6,399			8,946
Cash payments		(2,990	)		—			(3,732	)		(6,722	)
Reclassifications		(920	)		—			—			(920	)
Noncash adjustments		—			(849	)		—			(849	)
Remaining liability, January 3, 2003		3,198			—			3,421			6,619
Net (credits) charges for the period ended January 2, 2004		(314	)		1,499			(62	)		1,123
Cash payments		(2,538	)		—			(4,526	)		(7,064	)
Noncash adjustments		—			(1,499	)		1,456			(43	)
Effect of changes in exchange rate		61			—			142			203
Remaining liability, January 2, 2004		407			—			431			838
Net charges for the 39-week period ended October 1, 2004 (unaudited)		2			384			1,256			1,642
Cash payments (unaudited)		(376	)		—			(1,481	)		(1,857	)
Noncash adjustments (unaudited)		—			(384	)		—			(384	)
Effect of changes in exchange rate (unaudited)		(3	)		—			(1	)		(4	)
Remaining liability, October 1, 2004 (unaudited)	$	30		$	—		$	205		$	235

The remaining accrued liabilities for all periods presented for employee termination benefits and for other related costs have been classified as a component of accrued expenses.

Employee termination benefit charges in 2001 included 206 personnel reductions through voluntary and involuntary terminations primarily in the U.S. sales, marketing and corporate administrative functions of the Company. Employee termination benefit changes for the 53-week period ended January 3, 2003, represented severance charges related to the termination of 67 employees within the Company’s U.S. operations and its Canadian subsidiary. Terminated employees related primarily to the closing of distribution centers in Canada and the combination of corporate administrative functions in the U.S. In addition, for the 53-week period ended January 3, 2003, certain terminated U.S. employees also received additional bridged pension and OPEB benefits, the cost of which ($920) was reclassified as a component of accrued pension and postretirement obligations. Employee termination credits for the 52-week period ended January 2, 2004, related solely to adjustments to prior period amounts that were over accrued.

14

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

Asset write-downs for the 53-week period ended January 3, 2003, related primarily to the closure and sale of land and buildings in the U.S., including the write-down of certain processing equipment that will not be transferred to other locations. The $849 charge recognized, included $993 of asset write-downs and $215 of accelerated depreciation related to assets held and used that the Company intends to dispose of. The amount recorded is also net of a $359 gain on the sale of land and building in St. Louis, Missouri. The $1,499 charge for the 52-week period ended January 2, 2004, primarily represents a write-down of the carrying value of assets held for sale and the write-down of miscellaneous equipment. The $384 charge recognized in the 39-week period ended October 1, 2004, included $814 of asset write-downs of the carrying value of assets held for sale. The amount recorded is also net of a $430 gain on the sale of land and buildings in Philadelphia, Pennsylvania and Charlotte, North Carolina.

Other related costs in 2001 included a lease termination of $671 related to the closing of a distribution center in Canada and nonrecurring business integration costs of $476 incurred during the period primarily related to systems integration costs. Other related costs in the 53-week period ended January 3, 2003, included $2,318 of lease termination costs in the U.S. and Canada related to the exiting of certain leased facilities, for which the Company was still party to a lease obligation. In addition, the Company incurred $4,081 of nonrecurring merger integration costs during the period related primarily to systems integration costs ($1,335), benefit plan redesign and implementation ($544), employee and facility relocations ($1,797) and other nonrecurring merger-related costs ($405). These merger integration costs, which were charged to expense as incurred, were classified as a component of restructuring and other related costs on the accompanying Consolidated Statements of Income due to their nonrecurring nature. The net credit for other related costs in the 52-week period ended January 2, 2004, included the reversal of $1,045 of previously accrued lease termination costs offset by $983 of net period costs primarily associated with facility and employee relocation. The net charge for other related costs in the 39-week period ended October 1, 2004, was $1,256 of period costs which primarily consisted of facility and employee relocation costs.

The Company also maintains land, building and equipment in facilities that the Company intends to sell. These assets have a carrying value of $2,453, $13,605 and $10,608 at January 3, 2003, January 2, 2004 and October 1, 2004, respectively, and have been classified as assets held for sale and are included as a component of other current assets on the accompanying Consolidated Balance Sheets.

4. Supplemental Consolidated Financial Statement Information

Property, Plant and Equipment, Net

Property, plant and equipment, net, consisted of the following components:

	January 3, 2003			January 2, 2004			October 1, 2004
							(unaudited)
Land and improvements	$	25,188		$	23,183		$	24,688
Buildings and leasehold improvements		80,432			76,217			80,448
Machinery and equipment		91,805			98,432			100,436
Construction in progress		2,945			7,589			3,457
Total cost		200,370			205,421			209,029
Less: Accumulated depreciation and amortization		(29,348	)		(44,252	)		(53,924	)
	$	171,022		$	161,169		$	155,105

15

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) consisted of the following components:

	January 3, 2003			January 2, 2004			October 1, 2004
							(unaudited)
Cumulative translation adjustment	$	1,252		$	11,990		$	13,351
Additional minimum pension liability, net of deferred tax benefit		(2,241	)		(7,021	)		(7,021	)
Net unrealized gain on derivative instruments, net of deferred tax liability		—			580			762
	$	(989	)	$	5,549		$	7,092

5. Goodwill and Other Intangible Assets

Other intangible assets were comprised of the following:

	January 3, 2003			January 2, 2004			October 1, 2004
							(unaudited)
Other intangibles assets
Customer relationships	$	5,100		$	5,100		$	5,100
Less: Accumulated amortization		(1,276	)		(2,550	)		(3,506	)
Technology and patents		800			800			800
Less: Accumulated amortization		(40	)		(80	)		(110	)
Intangible pension asset		3,700			3,754			3,754
	$	8,284		$	7,024		$	6,038

The Company has completed its annual goodwill impairment test (performed in the fourth fiscal quarter) and has determined that there was no impairment at January 3, 2003 and January 2, 2004. Nothing has come to the Company’s attention that would indicate any impairment of its goodwill at October 1, 2004.

The goodwill contributed by the NAMD Businesses relates to the acquisition of Billiton (the “NAMD Businesses ultimate parent”) by BHP on June 30, 2001, as described in Note 1. The excess of the allocated purchase price to the NAMD Businesses over the tangible net assets acquired was allocated to goodwill with a 20-year estimated useful life.

Effective January 1, 2002, the Company ceased amortization of goodwill in connection with the adoption of SFAS No. 142, the effects of which increased pre-tax income for the fiscal year ended January 3, 2003, by approximately $2.0 million. Goodwill amortization expense recorded for the period from November 1, 2001 through December 28, 2001, was $235.

The estimated useful lives of customer relationships and technology and patents are 4 years and 20 years, respectively. The Company amortizes these intangible assets over their respective lives on the straight-line method. The straight-line method of amortization reflects an appropriate allocation of the costs of the intangible

16

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

assets to earnings in proportion to the amount of economic benefits obtained by the Company in each reporting period. Estimated amortization expense for the next five fiscal years is as follows:

2004	$	1,315
2005		1,315
2006		40
2007		40
2008		40

6. Notes Payable

Notes payable consisted of the following:

	January 3, 2003			January 2, 2004		October 1, 2004
						(unaudited)
Senior Euro-Dollar Revolving Loan (LIBOR), with interest rates ranging from 3.38% to 4.38% at January 2, 2004	$	75,000		$	150,000	$	205,000
Senior Revolving Loan (Prime Rate), with an interest rate of 5.75% at January 2, 2004		15,000			5,400		15,400
Senior Canadian Revolving Loan (Bankers’ Acceptance Rate), with an interest rate of 5.50% at January 2, 2004		19,789			9,302		19,794
Senior Canadian Revolving Loan (Prime Rate), with an interest rate of 6.25% at January 2, 2004		—			2,326		7,126
Billiton Facility B		38,000			—		—
RMC Liquidity Facility		38,000			—		—
Total loans payable		185,789			167,028		247,320
Less: Current maturities		(76,000	)		—		—
Noncurrent portion	$	109,789		$	167,028	$	247,320

The Senior Euro-Dollar Revolving Loan, the Senior Revolving Loan, and the Senior Canadian Euro-Dollar Revolving Loan (collectively, the “outstanding revolving loans”) are pursuant to a $350,000 Credit Agreement (the “Credit Agreement”) with a consortium of financial institutions entered into by the Company on August 26, 2002, as amended on April 28, 2004. The amended Credit Agreement increased the Company’s limit on the overall credit facility of $350,000. The Credit Agreement expires in August 2006 and allows the Company’s U.S. entity to borrow a maximum of $300,000 and the Company’s Canadian subsidiary to borrow a maximum of $50,000 (or the Canadian dollar equivalent). The amounts outstanding under the Senior Canadian Revolving Loan are denominated in Canadian dollars. These maximum loan amounts are subject to limitations as determined by a calculated borrowing base. Total availability is limited to, among other things, the eligible accounts receivables and inventory pledged as collateral under the credit agreement. The debt can be either revolving loans or term loans due no earlier than August 26, 2006. Interest on the U.S. entity loans (both revolving and term) are determined at the option of the Company at the JPMorgan Prime Rate (currently 3% over the federal funds rate) plus margin or the (Euro-Dollar) LIBOR plus margin. Interest rates on the Canadian entity loans are determined at the option of the Company at the JPMorgan Prime Rate plus margin or the Canadian Bankers’ Acceptance Rate plus margin. The margins on each of the interest rates noted above are subject to change in future periods based upon certain financial ratios which correspond to the Company’s creditworthiness. For U.S. Prime Rate loans, the margin on the JPMorgan Prime Rate can range from 1% to 2% and the margin on the Euro-Dollar LIBOR can range from 2% to 3%. For Canadian loans, the margin on the JPMorgan Prime Rate can range from 1% to 2% and the margin on the Bankers’ Acceptance Rate can range from 2% to 3%.

17

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

At January 2, 2004 and October 1, 2004, the JPMorgan Prime Rate was 4.0% and 5.75%, respectively, and the LIBOR ranged from 1.125% to 1.25% and from 1.6875% to 2.0%, respectively, depending upon the term of the outstanding revolving debt.

Amounts outstanding under the revolving credit facility have been classified as long-term, to the extent of available long-term back-up facilities pursuant to the Credit Agreement, in accordance with the Company’s ability and intent to refinance such obligations on a long-term basis. The Credit Agreement requires the Company to meet a fixed charge coverage ratio and limited the capital expenditures of the Company to $40,000 in 2003. Capital expenditures under the Credit Agreement are limited to $30,000 in both 2004 and 2005. As of January 2, 2004 and October 1, 2004, the Company was in compliance with all debt covenant requirements.

The Billiton Facility B and the RMC Liquidity Facility are revolving credit facilities and are subordinate to the debt outstanding under the Credit Agreement. The two facilities rank equal with each other and are subject to substantially the same terms and conditions. Both facilities were originally available through June 30, 2003 and were subsequently extended through June 30, 2004, and have interest due at the end of each calendar quarter at an annual rate of the three-month LIBOR plus 2.5%.

Effective March 24, 2003, and in connection with the settlement of contributed pension obligations described in Note 11, the Billiton Facility B Loan was reduced to reflect the contributed net pension differential pursuant to the terms of the Agreement. The corresponding decrease to the Billiton Facility B Loan of $9,875 was treated as a noncash capital contribution during the period ending January 2, 2004.

7. Stockholders’ Equity

The Company is authorized to issue 100,000 shares of common stock, 100 of which were issued on November 1, 2001 (50 shares each to RMC and NAMD Inc. in exchange for their respective net asset contributions). The common stock is subject to a stockholders’ agreement by and among the Company, Billiton Ireland, RMC, Billiton Company B.V. (a wholly owned subsidiary of BHP Billiton Plc) and Alcoa (a Delaware corporation).

The stockholders’ agreement addresses, among other things, corporate governance, including the composition of the Board of Directors and senior management, voting and transfer rights of the stockholders, additional capital contributions and dividend policies.

In addition, the stockholders’ agreement covers the buy-out or purchase rights of the stockholders in the event of a deadlock (as defined) as well as a call option right of a stockholder in the event the other stockholder ceases to own at least one-third of the issued and outstanding common stock.

Presently, the stock ownership and voting rights are shared 50% by RMC and Billiton Ireland (as parent company to NAMD Inc.). In connection with the contemplated initial public offering described in Note 17, the stockholders’ agreement will terminate upon completion of the contemplated transaction.

8. Income Taxes

The contribution of the net assets of the NAMD Businesses and RASCO Businesses to the Company was a tax-free transaction. As a result, the tax basis of the assets and tax attributes carried over to the Company on the effective date of contribution. The Company’s U.S. operations file a consolidated income tax return in the U.S. The Company’s Canadian operations file a separate income tax return for Canadian purposes.

18

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

(Loss) income before income taxes consisted of:

	Period From November 1, 2001 Through December 28, 2001			53-Week Period Ended January 3, 2003			52-Week Period Ended January 2, 2004
United States	$	(9,975	)	$	21,836		$	11,971
Canada		(3,765	)		(3,064	)		4,175
	$	(13,740	)	$	18,772		$	16,146

The income tax (benefit) provision consisted of:

	Period From November 1, 2001 Through December 28, 2001			53-Week Period Ended January 3, 2003		52-Week Period Ended January 2, 2004
Current provision
U.S. federal and state	$	20		$	7,008	$	3,479
Canada		—			—		—
Current provision		20			7,008		3,479
Deferred (benefit) provision
U.S. federal and state		(3,736	)		1,881		1,740
Canada		—			—		—
Deferred (benefit) provision		(3,736	)		1,881		1,740
Income tax (benefit) provision	$	(3,716	)	$	8,889	$	5,219

The income tax provision is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes. Differences between the statutory rates in the U.S. and Canada do not have a significant impact on the effective income tax rate reconciliation presented below. The items causing this difference are as follows:

	Period From November 1, 2001 Through December 28, 2001			53-Week Period Ended January 3, 2003		52-Week Period Ended January 2, 2004
Tax (benefit) expense at U.S. statutory rate	$	(4,809	)	$	6,571	$	5,788
Change in valuation allowance for Canadian net deferred tax assets		1,318			1,072		(1,453	)
State income taxes, net of federal benefit		(487	)		873		479
Nondeductible expenses and other		262			373		405
	$	(3,716	)	$	8,889	$	5,219

19

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities are as follows:

	January 3, 2003			January 2, 2004
Deferred income tax assets
Trade receivables	$	2,007		$	2,359
Accrued expenses		2,650			640
Accrued pension and postretirement obligations		20,574			24,937
Canadian operating loss carryforwards		3,570			2,257
U.S. operating loss carryforward		1,008			924
U.S. AMT NOL-carryforward		3,815			2,213
Additional minimum pension liability		1,432			4,489
Other		1,539			799
Total gross deferred income tax assets		36,595			38,618
Less: Valuation allowance for Canadian deferred tax assets		(6,796	)		(6,768	)
Net deferred income tax assets		29,799			31,850
Deferred income tax liabilities
Intangible assets		(1,959	)		(2,977	)
Inventories		(15,732	)		(17,286	)
Property, plant and equipment		(25,682	)		(23,844	)
Unrealized gain on derivatives		—			(370	)
Total gross deferred income tax liabilities		(43,373	)		(44,477	)
Net deferred income tax liabilities	$	(13,574	)	$	(12,627	)

The U.S. operating loss carryforward at January 2, 2004, represents various state net operating losses that expire at various dates between 2007 and 2022. In addition, a valuation allowance at January 2, 2004 has been provided against deferred tax assets related to the Canadian net operating loss carryforwards as well as other Canadian deferred tax assets because it is more likely than not that these tax benefits will not be realized based upon the existing uncertainty as to the ability of the Canadian operations to generate future taxable income. At January 2, 2004, Canadian net operating loss carryforwards of approximately $6,400 existed and will begin to expire in 2008.

The change in the valuation allowance for Canadian deferred tax assets includes the impact of foreign exchange, which has not been included in the Company’s annual effective tax rate. The change in the valuation allowance for Canadian deferred tax assets is as follows:

Balance at January 3, 2003	$	6,796
Utilization of Canadian deferred tax assets		(1,453	)
Foreign exchange impact		1,425
Balance at January 2, 2004	$	6,768

During the 39-week period ended October 1, 2004, the Company’s Canadian entity generated in excess of $6.4 million of taxable income and has projected additional taxable income to be generated throughout the remainder of fiscal 2004. In this regard, the Company will utilize all of its existing Canadian net operating loss

20

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

carryforwards in 2004. As such, all of the $2.3 million of valuation allowance recorded at January 2, 2004, related to the Canadian net operating loss carryforwards has been reversed at July 2, 2004 (as a discreet item in the 39-week period ended October 1, 2004). The Company continues to maintain a deferred tax asset valuation allowance of approximately $4.5 million at October 1, 2004, related to the remaining deferred tax assets in Canada as these deferred tax assets relate to temporary differences that are longer term in nature (primarily certain recurring book reserves, pension and OPEB liabilities and fixed assets). Because of the cyclical nature of the Company’s operations, it is not possible to forecast future taxable income into future years to currently conclude that it is “more likely than not” that these remaining Canadian deferred tax assets will ultimately be realized.

9. Financial Instruments and Derivatives

The carrying amounts of cash and cash equivalents, book overdraft and short-term debt approximate fair value because of the short maturity of the instruments.

The Company holds or purchases derivative financial instruments for purposes other than trading. The following are the details of the fair values of these investments as of:

	January 3, 2003		January 2, 2004			October 1, 2004
						(unaudited)
Commodities, principally aluminum and nickel	$	—	$	443		$	35
Interest rates		—		950			1,248
Foreign currency		—		(398	)		(1,863	)

From time to time, the Company may enter into fixed price sales contracts with its customers for certain of its inventory components (primarily aluminum and stainless steel). The Company enters into commodity futures and options contracts to reduce volatility in the price of these commodities. Currently, these commodity contracts cover periods commensurate with known exposures, generally within one year, and had an asset value of $443 and $35 at January 2, 2004 and October 1, 2004, respectively. The Company currently does not account for these contracts as hedges, but rather marks these contracts to market with a corresponding offset to current earnings.

The Company uses interest rate swaps to help maintain a strategic balance between fixed- and floating-rate debt and to manage overall financing costs. The Company has entered into pay fixed, receive floating interest rate swaps to effectively convert the interest rate from floating to fixed on $85,000 of debt, through June 2006. These interest rate swaps were designated as cash flow hedges and had an asset value of approximately $950 and $1,248 at January 2, 2004 and October 1, 2004, respectively, with a corresponding offset as a component of accumulated other comprehensive income, offset by a deferred tax liability of $370 and $486, respectively.

The interest rate swaps were fully effective and as such, no gain or loss from hedge ineffectiveness was recognized. Approximately $380 of the amount included in Other Comprehensive Income at January 2, 2004 will be reclassified as a component of interest expense within the next fiscal year.

The Company is subject to exposure from fluctuations in foreign currencies. Foreign currency exchange contracts are used by the Company’s Canadian subsidiary to hedge the variability in cash flows from the forecasted payment of currencies other than the functional currency. The Company’s Canadian subsidiary’s foreign currency contracts were principally used to purchase U.S. dollars. The U.S. dollar notional amount of all foreign currency contracts outstanding was $13,720 and $32,065 at January 2, 2004 and October 1, 2004 (unaudited), respectively, and had a liability value of $398 and $1,863, respectively. The Company currently does not account for these contracts as hedges but rather marks these contracts to market with a corresponding offset to current earnings.

21

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

The Company’s net derivative balance from the contracts described above was a $995 asset and a $580 liability at January 2, 2004 and October 1, 2004, respectively, and is included as a component of other assets on the accompanying Consolidated Balance Sheets.

10. Lease Commitments

The Company is party to numerous lease agreements in both the U.S. and Canada related to buildings, vehicles and office equipment leases. These building leases run into the beginning of 2012. The vehicle and office equipment leases run into the beginning of 2010. These leases are all accounted for as operating leases. The following are the minimum lease payments for the next five fiscal years and thereafter based on operating leases in effect at January 2, 2004:

2004	$	11,736
2005		9,305
2006		7,090
2007		4,652
2008		2,852
Thereafter		3,690
	$	39,325

Rental expense under operating lease agreements was $13,379 and $12,691 for the 53-week period ended January 3, 2003 and for the 52-week period ended January 2, 2004, respectively.

11. Employee Benefit Plans

Certain of the Company’s predecessors had noncontributory defined benefit pension plans (defined benefit plans), which provided retirement benefits for the majority of its predecessor company employees in both the U.S. and Canada. The Company’s predecessor NAMD U.S. business as well as the Company’s predecessor Canadian businesses (AIM for NAMD and RASCO Specialty Metals Ltd. for RASCO) had defined benefit pension plans specific to its respective predecessor business employees as well as plans which provided health care and life insurance benefits which were specific to substantially all of its retirees in the U.S. or Canada (other post employment benefits (“OPEB”)).

Prior to January 1, 2002, the Company’s predecessor U.S. RASCO businesses provided its predecessor employees pension and OPEB benefits through multi-employer plans along with Alcoa and its affiliates. Effective January 1, 2002, predecessor U.S. RASCO employees became legal employees of the Company (from November 1, 2001 through January 1, 2002, such employees were leased to the Company by Alcoa), and became participants in the Integris Pension Plan for U.S. employees.

In connection with the terms of the Agreement, effective January 1, 2002, both the U.S. employees and the Canadian employees became participants of the newly formed Integris pension and OPEB plans in both the U.S. and Canada. As such, the funded status of the respective U.S. and Canadian pension and OPEB predecessor plans were transferred to the newly formed Integris plans effective January 1, 2002.

22

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

Subsequent to formation (and merger) of the Integris U.S. and Canadian pension and OPEB plans, the Company’s Board of Directors approved amendments to the existing pension and OPEB benefits for both U.S. and Canadian employees. These amendments essentially resulted in equal benefits being provided to all employees since the predecessor company plans had differing benefit formulas. For accounting purposes, these plan amendments have been treated as a component of prior service cost and will be included as a component of pension and OPEB expense in future periods. For the purposes of the Agreement, however, the change in the pension/OPEB obligation resulting from these amendments resulted in an adjustment to the Billiton Facility B as described further in the last paragraph of Note 6.

In addition, and in accordance with the terms of the Agreement, Alcoa agreed to contribute a fully funded pension obligation for the U.S. RASCO employees that were previously participants of the multi-employer Alcoa pension plans. As such, effective January 1, 2002, $21,843 of pension obligation and related pension assets of $23,944 were contributed by Alcoa to the newly formed U.S. Integris Pension Plan related to the U.S. RASCO employees.

23

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

Actuarial valuations for the respective pension and OPEB plans are as of October 1 of each year. The benefit obligation, fair value of plan assets, funded status and actuarial assumption for the Integris plans based upon the October 1, 2003 and 2002, valuations are as follows:

2002 Plan Information

	U.S.						Canada
	Pension Benefits			OPEB			Pension Benefits			OPEB
Changes in benefit obligations
Benefit obligations at beginning of period	$	88,204		$	31,560		$	29,410		$	8,204
Service cost		3,730			1,555			790			90
Interest cost		8,433			2,503			1,910			444
Plan participants’ contributions		—			168			—			—
Plan amendments		3,309			(7,791	)		—			—
Actuarial (gains) losses		8,819			5,915			(17	)		(1,583	)
Transfer from RASCO plan		21,843			7,778			—			—
Benefits paid		(2,741	)		(1,219	)		(2,404	)		(296	)
Effect of changes in exchange rate		—			—			933			185
Benefit obligations at end of period		131,597			40,469			30,622			7,044
Changes in plan assets
Fair value of plan assets at beginning of period		74,951			—			33,078			—
Actual return on plan assets		(5,848	)		—			(2,424	)		—
Transfer from RASCO plan		23,944			—			—			—
Employer contribution		159			1,051			98			296
Plan participants’ contributions		—			168			—			—
Benefits paid		(2,741	)		(1,219	)		(2,404	)		(296	)
Effect of changes in exchange rate		—			—			613			—
Fair value of plan assets at end of period		90,465			—			28,961			—
Funded status		(41,132	)		(40,469	)		(1,661	)		(7,044	)
Unrecognized net actuarial loss		28,426			6,233			7,448			—
Unrecognized prior service cost		3,151			(7,494	)		—			(1,460	)
Contributions after measurement date		43			291			—			—
Net amount recognized	$	(9,512	)	$	(41,439	)	$	5,787		$	(8,504	)
Amounts recognized in the combined balance sheet consist of:
Accrued benefit liability	$	(16,885	)	$	(41,439	)	$	5,787		$	(8,504	)
Intangible asset		3,700			—			—			—
Accumulated other comprehensive income		3,673			—			—			—
Net amount recognized	$	(9,512	)	$	(41,439	)	$	5,787		$	(8,504	)
Weighted-average assumptions to determine the obligation at the end of the period
Discount rate		6.75	%		6.75	%		6.50	%		6.50	%
Expected return on plan assets		9.60	%		—			8.00	%		—
Rate of compensation increase		4.50	%		4.50	%		3.50	%		3.50	%
Weighted-average assumptions to determine cost
Discount rate		7.50	%		7.50	%		6.50	%		6.50	%
Expected return on plan assets		9.60	%		—			8.00	%		—
Rate of compensation increase		5.00	%		5.00	%		3.50	%		3.50	%

24

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

2003 Plan Information

	U.S.						Canada
	Pension Benefits			OPEB			Pension Benefits			OPEB
Changes in benefit obligations
Benefit obligations at beginning of period	$	131,597		$	40,469		$	30,622		$	7,044
Service cost		3,337			1,533			806			165
Interest cost		8,768			2,695			2,284			584
Plan participants’ contributions		—			231			—			—
Plan amendments		455			—			—			—
Actuarial (gains) losses		(2,300	)		709			952			942
Assumption change		9,144			2,705			—			—
Benefits paid		(3,506	)		(1,491	)		(2,619	)		(380	)
Effect of changes in exchange rate		—			—			6,780			1,722
Benefit obligations at end of period		147,495			46,851			38,825			10,077
Changes in plan assets
Fair value of plan assets at beginning of period		90,465			—			28,961			—
Actual return on plan assets		13,102			—			4,273			—
Transfer from RASCO plan		—			—			—			—
Employer contribution		181			1,260			287			380
Plan participants’ contributions		—			231			—			—
Benefits paid		(3,506	)		(1,491	)		(2,619	)		(380	)
Effect of changes in exchange rate		—			—			6,207			—
Fair value of plan assets at end of period		100,242			—			37,109			—
Funded status		(47,253	)		(46,851	)		(1,716	)		(10,077	)
Unrecognized net actuarial loss		30,678			9,655			8,000			936
Unrecognized prior service cost		3,274			(6,899	)		—			(826	)
Contributions after measurement date		44			352			—			—
Net amount recognized	$	(13,257	)	$	(43,743	)	$	6,284		$	(9,967	)
Amounts recognized in the combined balance sheet consist of:
Accrued benefit liability	$	(28,521	)	$	(43,743	)	$	6,284		$	(9,967	)
Intangible asset		3,754			—			—			—
Accumulated other comprehensive income		11,510			—			—			—
Net amount recognized	$	(13,257	)	$	(43,743	)	$	6,284		$	(9,967	)
Weighted-average assumptions to determine obligation at the end of the period
Discount rate		6.00	%		6.00	%		6.00	%		6.00	%
Expected return on plan assets		8.75	%		—			7.00	%		—
Rate of compensation increase		4.25	%		4.25	%		3.50	%		3.50	%
Weighted-average assumptions to determine cost
Discount rate		6.75	%		6.75	%		6.50	%		6.50	%
Expected return on plan assets		8.75	%		—			8.00	%		—
Rate of compensation increase		4.50	%		4.50	%		3.50	%		3.50	%

25

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

The aggregate projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were as follows as of January 3, 2003 and January 2, 2004:

	January 3, 2003		January 2, 2004
Projected benefit obligation	$	131,597	$	147,496
Accumulated benefit obligation		105,990		128,807
Fair value of plan assets		90,465		100,242

Components of Net Periodic Benefit Costs—53-Week Period Ended January 3, 2003

	U.S.						Canada
	Pension Benefits			OPEB			Pension Benefits			OPEB
Service cost	$	3,730		$	1,555		$	790		$	90
Interest cost		8,433			2,503			1,910			444
Expected return on plan assets		(9,767	)		—			(2,402	)		—
Amortization of prior service cost		158			(297	)		(41	)		—
Recognized net actuarial loss		4			—			—			—
Special termination benefits		522			398			—			—
Net periodic benefit cost	$	3,080		$	4,159		$	257		$	534

Components of Net Periodic Benefit Costs—52-Week Period Ended January 2, 2004

	U.S.						Canada
	Pension Benefits			OPEB			Pension Benefits			OPEB
Service cost	$	3,337		$	1,533		$	806		$	165
Interest cost		8,768			2,695			2,284			584
Expected return on plan assets		(8,781	)		—			(2,720	)		—
Amortization of prior service cost		331			(595	)		—			(826	)
Recognized net actuarial loss		426			186			443			—
Net periodic benefit cost	$	4,081		$	3,819		$	813		$	(77	)

For OPEB measurement purposes as of October 1, 2003 and 2002, a 12% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2003. The rate was assumed to decrease gradually to 5% for 2009 and remain at that level thereafter.

26

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

Components of Net Periodic Benefit Costs for the 39-week periods ended October 3, 2003 and October 1, 2004, are as follows:

	(Unaudited)
	39-Week Period Ended October 3, 2003
	U.S.						Canada
	Pension Benefits			OPEB			Pension Benefits			OPEB
Service cost	$	2,504		$	1,151		$	605		$	125
Interest cost		6,576			2,022			1,713			438
Expected return on plan assets		(6,587	)		—			(2,040	)		—
Amortization of prior service cost		249			(447	)		—			(620	)
Recognized net actuarial loss		320			140			333			—
Net periodic benefit cost	$	3,062		$	2,866		$	611		$	(57	)
	(Unaudited)
	39-Week Period Ended October 1, 2004
	U.S.						Canada
	Pension Benefits			OPEB			Pension Benefits			OPEB
Service cost	$	3,138		$	1,117		$	632		$	140
Interest cost		6,546			2,037			1,535			437
Expected return on plan assets		(6,623	)		—			(1,809	)		—
Amortization of prior service cost		282			(446	)		—			(597	)
Recognized net actuarial loss		1,131			222			359			—
Net periodic benefit cost	$	4,474		$	2,930		$	717		$	(20	)

In June 2004, the Company contributed approximately $1.7 million and $0.4 million to its U.S. and Canadian pension plans, respectively. The Company has no plans to make any further contribution in the current fiscal year.

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one-percentage-point change in assumed health care cost trend rates would have the following:

	U.S.					Canada
	1-Percentage Point Increase		1-Percentage Point Decrease			1-Percentage Point Increase		1-Percentage Point Decrease
Effect on total of service and interest cost components	$	453	$	(373	)	$	112	$	(94	)
Effect on the postretirement benefit obligation		5,103		(4,220	)		1,132		(965	)

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) introduces a prescription drug benefit under Medicare as well as a federal subsidy to sponsors of retiree health care benefit plans. The Company’s U.S. Postretirement Health Care Benefits plan offers prescription drug benefits. The Company adopted the effects of the Act in the fiscal third quarter of the 2004 fiscal year. The Company plan was

27

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

not amended in order to benefit from the new legislation and does not expect a significant impact on future benefit expenses or the future financial status of the plan. The impact of adopting the accounting requirements of the Act was not significant.

Plan Assets

The Company’s plan assets allocations for its U.S. defined benefit pension and postretirement health care benefits plans at January 2, 2004 and January 3, 2003, target allocation for fiscal year 2005 are as follows:

	2004 Target Asset Allocation Percentage	Percentage of Plan Assets
Asset Category		October 1, 2003		October 1, 2002
Domestic equity	32-70%	39.7	%	42.4	%
International equity	0-18%	15.5	%	13.3	%
Fixed income	30-50%	33.0	%	38.6	%
Cash and cash equivalents	0%	11.8	%	5.7	%
		100.0	%	100.0	%

The expected long-term rate of return is generally based on the pension plan’s asset mix, assumptions of equity returns based on historical long-term returns on asset categories, expectations for inflation, and estimates of the impact of active management of the assets.

The Company’s U.S. investment strategy and policies are designed to maximize the possibility of having sufficient funds to meet the long-term liabilities of the pension fund, while achieving a balance between the goals of growing the assets of the plan and keeping risk at a reasonable level. Current income is not a key goal of the plan. The asset allocation position reflects the ability and willingness to accept relatively more short-term variability in the performance of the pension plan portfolio in exchange for the expectation of a better funded status, better long-term returns and lower pension costs in the long run.

The plan prohibits investing in warrants and options, and engaging in short sales, margin transactions, and other specialized investment activities. The use of derivatives is also prohibited for the purpose of speculation or introducing leverage in the portfolio, circumventing the investment guidelines or taking risks that are inconsistent with the fund’s guidelines.

Cash Flows

The Company’s funding policy for the U.S. pension plan is to achieve a return on assets that meets the long-term funding requirements identified by the projections of the pension plan’s actuaries while simultaneously satisfying the fiduciary responsibilities prescribed by the Employee Retirement Income Security Act of 1974, as amended. The Company is not required to make any contributions to the U.S. pension plan in the fiscal year ended December 31, 2004.

Other Market Multi-Employer Benefit Plan Arrangements

The Company also participates in various multi-employer defined benefit pension plans that cover eligible employees covered by collective bargaining agreements. The Company made contributions related to these plans of $101, $583 and $522, respectively, for the period from November 1, 2001 through December 28, 2001, the 53-week period ended January 3, 2003 and the 52-week period ended January 2, 2004, respectively.

28

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

Benefit Plan Information for the Period Ended December 31, 2001

Alcoa 2001 Multi-Employer Plans

As described above, prior to January 1, 2002, Alcoa maintained various multi-employer defined benefit pension plans that covered substantially all of RASCO’s U.S. employees. Plans covering salaried employees provided pension benefits based on a formula that considers length of service and earnings during years of service. Plans covering hourly employees generally provided a specific amount of benefits for each year of service. For purposes of the 2001 financial statements, the predecessor RASCO U.S. plans were accounted for as multi-employer plans as defined in SFAS No. 87, Employer’s Accounting for Pensions. Costs related to these multi-employer plans have been charged to the Company for the period ended December 28, 2001, based on the number of predecessor RASCO U.S. employees participating in the various plans on an average cost per employee. The Company’s pension expense for the two-month period ended December 31, 2001, related to predecessor RASCO U.S. employees was $492.

Alcoa also maintained other post-retirement benefit plans that provided most of predecessor RASCO’s U.S. retired employees with health care and life insurance benefits. For purposes of the 2001 financial statements, the predecessor RASCO U.S. plans were accounted for as multi-employer plans as defined by SFAS No. 106, Employer’s Accounting for Postretirement Benefits Other than Pensions. Costs related to these Alcoa plans have been charged to the Company for the period ended December 28, 2001, based on the number of predecessor U.S. RASCO employees participating in the various plans on an average cost per employee.

The Company recognized an unfunded post-retirement benefit obligation of $7,778 at December 28, 2001, related to the predecessor RASCO multi-employer OPEB plan. These amounts were calculated assuming a discount rate of 7%. The plan is unfunded.

For measurement purposes, a 10% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2001 and future years.

2001 Funded Status of Predecessor Plans

The Company’s pension and OPEB plans, which are specific to the respective predecessor businesses account for such liabilities using actuarial methodologies. The actuarial valuations for the respective pension and OPEB plans are as of October 31, 2001. The benefit obligation, fair value of plan assets, funded status and actuarial assumption for these plans based upon the October 31, 2001, valuation are as follows:

	Predecessor NAMD U.S.						Predecessor NAMD Canada					Predecessor RASCO Canada
	Pension Benefit			OPEB			Pension Benefit		OPEB			Pension Benefit			OPEB
Benefit obligation	$	88,204		$	31,560		$	27,746	$	8,045		$	1,664		$	159
Fair value of plan assets		74,951			—			32,573		—			505			—
Funded status		(13,253	)		(31,560	)		4,827		(8,045	)		(1,159	)		(159	)
Unrecognized net actuarial loss		6,802			909			2,579		—			55			—
Net amount recognized at December 28, 2001	$	(6,451	)	$	(30,651	)	$	7,406	$	(8,045	)	$	(1,104	)	$	(159	)
Net periodic benefit cost for the period ended December 28, 2001	$	259		$	579		$	17	$	124		$	22		$	2

29

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

	Predecessor NAMD U.S.				Predecessor NAMD Canada				Predecessor RASCO Canada
	Pension Benefit		OPEB		Pension Benefit		OPEB		Pension Benefit		OPEB
Weighted-average assumptions at October 31, 2001
Discount rate	7.5	%	7.5	%	6.5	%	6.5	%	6.0	%	7.0	%
Expected return on plan assets	9.6	%	—		8.0	%	—		6.0	%	—
Rate of compensation increase	5.0	%	5.0	%	3.5	%	3.5	%	3.7	%	—

For measurement purposes, a 10% annual rate of increase in the per capita cost of covered health care benefit was assumed for 2001. The rate was assumed to decrease gradually to 5% for 2007 and remain at that level thereafter.

12. Employee 401(k) Savings Plan

Prior to July 1, 2002, the Company’s U.S. predecessor entities (VMG for the NAMD Businesses and RASCO U.S. including Permamet) provided separate 401(k) savings plans for substantially all U.S. predecessor employees. Predecessor employee contributions of up to 6% of eligible compensation were matched 66.67% by the VMG plan and predecessor employee contributions of up to 6% of eligible compensation were matched up to 50% by the RASCO U.S. plans. The Company’s combined matching contributions under both plans amounted to $570 and $1,008 for the period from November 1, 2001 through December 28, 2001 and for the period from December 29, 2001 through June 30, 2002, respectively.

Effective July 1, 2002, the respective U.S. predecessor company plans were merged and all U.S. employees began participating in the Integris Metals, Inc. 401(k) savings plan (the “Integris Plan”). Those employees eligible for early retirement as of June 30, 2002, and those within one year of becoming eligible are considered grandfathered and will continue to earn the 401(k) savings plan benefits that were in effect prior to the creation of the Integris Plan. Employees are allowed to participate in the 401(k) savings plan following 30 days of employment. Employee contributions are matched based on employee savings rates, employee contributions from 1% to 3% are matched 100% by the Company, employee contributions from 4% to 5% are matched 50% by the Company, and employee contributions from 6% to 9% are matched 25% by the Company. The Company’s matching contributions under the merged plan amounted to $1,296 from July 1, 2002 through January 3, 2003, and $2,800 during the 52-week period ended January 2, 2004.

13. Long-term Incentive Compensation Plan

During the 53-week period ended January 3, 2003, the Company adopted the 2002 Phantom Stock Option Plan (the “Plan”) for executive officers and key employees of the Company and its subsidiaries. The total number of phantom stock options that may be granted to employees under the Plan is 50 million. The Plan will automatically terminate on January 1, 2012. The phantom stock options provide the holder the opportunity to a cash award based upon future increases in a calculated value of the Company, as defined, further adjusted for certain performance goals. These awards vest over a four-year period with 50% vesting after year two and 25% vesting in each of the next two years. No awards were issued under this plan during the 53-week period ended January 3, 2003. During the 52-week period ended January 2, 2004, the Company’s Board of Directors authorized the issuance of approximately 1.5 million of such phantom stock options. None of the performance criteria had been met as of January 2, 2004, and as such, no compensation cost was recognized in the period ended January 2, 2004, in connection with the issuance of these phantom stock options. Subsequent to January 2, 2004, the Company’s Board of Directors authorized the issuance of 800,000 additional phantom stock units.

30

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

At October 1, 2004, the Company anticipates that certain performance goals will be met by the end of the current fiscal year. As such, the Company recorded approximately $4,200 of expense in the 39-week period ended October 1, 2004, related to these phantom stock awards.

14. Contingent Liabilities and Indemnification of Certain Claims

The Company is subject to various claims and actions including those pertaining to environmental laws and regulations, product liability, and health and safety matters arising in the ordinary course of business. Management believes, however, that the disposition of such claims and actions, either individually or in the aggregate, are not expected to have a material adverse effect on the Company’s financial position. No assurances can be given, however, that the disposition of one or more of such claims or actions in a particular reporting period will not be material in relation to the reported results for such period.

During 2002, Alcoa became aware of claims related to RASCO’s sale of certain allegedly defective aluminum products to maritime customers for use in the construction of ships prior to the formation of the Company, and the Company’s subsequent sale of such products after formation of the Company. In connection with the Company’s formation as described in Note 1, Alcoa has agreed to provide the Company with defense and indemnity to legal matters and claims associated with this matter for shipments prior to November 1, 2001. Based on the percentage of product purchased and shipped after November 1, 2001, the Company has recorded a $250 liability at January 2, 2004, related to its exposure. All other claims for product sold prior to November 1, 2001, are the responsibility of Alcoa.

15. Related Party Transactions

Alcoa is a supplier of aluminum products to the Company. During the period from November 1, 2001 through December 28, 2001, the 53-week period ended January 3, 2003, the 52-week period ended January 2, 2004, and the 39-week period ended October 1, 2004 (unaudited), the Company purchased from Alcoa $10,700, $172,125, $181,074, and $187,752, respectively, of aluminum products.

In connection with its formation, the Company entered into a Master Transition Services Agreement with Alcoa whereby Alcoa agreed to provide certain transition services to the Company for a fee to be calculated monthly. This agreement expired during 2003. The services related to this agreement primarily related to, but were not limited to (i) the provision of RASCO manufacturing and administrative personnel until such employees were legally transferred to the Company’s payroll on January 1, 2002, (ii) administrative services and expenses such as cash management, accounts receivable, accounts payable, and human resources, postage, telephone and facility rental, and (iii) information technology usage and support.

Total charges by Alcoa to the Company under this agreement for the period from November 1, 2001 through December 28, 2001, the 53-week period ended January 3, 2003, and the 52-week period ended January 2, 2004, were $2,683, $7,139 and $400, respectively. At January 3, 2003 and January 2, 2004, net amounts collectively due to/from Alcoa under all these arrangements are shown separately on the accompanying Consolidated Balance Sheets. See also Note 6 for a description of related party debt arrangements.

In addition, commencing in 2004 the Company began paying BHP Billiton for certain consulting and other employee related services. Total expenses related to these arrangements were $473 for the 39-week period ended October 1, 2004.

31

Integris Metals, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

16. Geographic and Product Information

The operations of the Company are comprised as follows:

	Period From November 1, 2001 Through December 28, 2001		53-Week Period Ended January 3, 2003		52-Week Period Ended January 2, 2004		39-Week Period Ended October 3, 2003		39-Week Period Ended October 1, 2004
							(unaudited)		(unaudited)
Net sales to customers
U.S.	$	182,162	$	1,281,894	$	1,226,784	$	928,534	$	1,261,052
Canada		38,886		238,438		267,304		203,773		230,428
Total net sales	$	221,048	$	1,520,332	$	1,494,088	$	1,132,307	$	1,491,480

	January 3, 2003		January 2, 2004		October 1, 2004
					(unaudited)
Tangible long-lived assets
U.S.	$	155,346	$	143,304	$	137,627
Canada		15,676		17,865		17,478
Total tangible long-lived assets	$	171,022	$	161,169	$	155,105

The following presents the percentage of sales by product line for the periods indicated:

	Period From November 1, 2001 Through December 28, 2001		53-Week Period Ended January 3, 2003		52-Week Period Ended January 2, 2004		39-Week Period Ended October 3, 2003		39-Week Period Ended October 1, 2004
Category							(unaudited)		(unaudited)
Aluminum	43	%	44	%	42	%	43	%	41	%
Stainless steel	43		41		43		43		46
Carbon steel	10		5		5		4		4
Other	4		10		10		10		9
	100	%	100	%	100	%	100	%	100	%

17. Subsequent Event

On April 22, 2004, the Company’s Board of Directors authorized the filing of a registration statement with the Securities and Exchange Commission that would permit the Company to sell shares of the Company’s common stock in connection with a proposed initial public offering. In connection with the proposed initial public offering, a process was begun to incorporate a Delaware holding company. Upon the completion of this process, the Company will be a wholly owned subsidiary of Integris Metals Corporation, a Delaware Corporation. On August 20, 2004 the Company filed a registration statement on Form S-1 with the Securities and Exchange Commission. The registration process was subsequently cancelled and on October 26, 2004, the shareholders entered into a definitive agreement to sell all of the capital stock of the Company.

32

Report of Independent Auditors

To the Management of

NAMD Inc.

In our opinion, the accompanying combined balance sheet and related combined statements of operations and comprehensive income (loss), of changes in parent company investment and of cash flows present fairly, in all material respects, the combined financial position of The Metals Distribution Businesses of NAMD Inc.—Successor Entity (the NAMD Businesses Successor Entity) at October 31, 2001, and the combined results of their operations and their cash flows for the four-month period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the NAMD Businesses Successor Entity’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/S/    PRICEWATERHOUSECOOPERS LLP

        PricewaterhouseCoopers LLP

Minneapolis, Minnesota

June 17, 2002, except for Note 8 and Note 9,

For which the date is July 28, 2004

33

Report of Independent Auditors

To the Management of

NAMD Inc.

In our opinion, the accompanying combined statements of operations and comprehensive income (loss), of changes in parent company investment and of cash flows present fairly, in all material respects, the combined results of operations and cash flows of The Metals Distribution Businesses of NAMD Inc.—Predecessor Entity (the NAMD Businesses Predecessor Entity) for the six-month period ended June 30, 2001, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the NAMD Businesses Predecessor Entity’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/S/    PRICEWATERHOUSECOOPERS LLP

        PricewaterhouseCoopers LLP

Minneapolis, Minnesota

June 17, 2002, except for Note 8 and Note 9,

For which the date is July 28, 2004

34

The Metals Distribution Businesses of NAMD Inc.

Combined Balance Sheet

(dollars in thousands)	October 31, 2001
Assets
Current assets
Cash and cash equivalents	$	16,669
Trade receivables, net of allowance for doubtful accounts of $3,304		115,072
Inventories		174,881
Income taxes receivable		2,392
Deferred income taxes		7,929
Prepaid expenses and other current assets		3,109
Total current assets		320,052
Property, plant and equipment, net		109,357
Goodwill, net		44,990
Other assets		33
Total assets	$	474,432
Liabilities and Parent Company Investment
Current liabilities
Accounts payable	$	54,392
Accrued expenses		13,159
Current portion of long-term debt due to Billiton (RA) Limited		145,797
Total current liabilities		213,348
Accrued pension and postretirement obligations		37,266
Long-term debt due to Billiton (RA) Limited, less current portion		60,000
Other liabilities		7,856
Total liabilities		318,470
Commitments
Parent company investment		155,962
Total liabilities and parent company investment	$	474,432

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

35

The Metals Distribution Businesses of NAMD Inc.

Combined Statement of Operations and Comprehensive Income (Loss)

	Predecessor			Successor
	For the Six-Month Period Ended June 30, 2001			For the Four-Month Period Ended October 31, 2001
(dollars in thousands)
Net sales	$	533,478		$	317,633
Cost of sales		449,774			268,473
Gross profit		83,704			49,160
Selling, administrative and other expenses		70,313			42,539
Operating income		13,391			6,621
Other income (expense), net
Interest expense		(8,711	)		(3,971	)
Other		447			(3,910	)
Income (loss) before income taxes		5,127			(1,260	)
Income taxes		(3,993	)		(1,760	)
Net income (loss)		1,134			(3,020	)
Other comprehensive income (loss)
Foreign currency translation adjustments		263			(2,303	)
Comprehensive income (loss)	$	1,397		$	(5,323	)

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

36

The Metals Distribution Businesses of NAMD Inc.

Combined Statement of Cash Flows

	Predecessor			Successor
	For the Six-Month Period Ended June 30, 2001			For the Four-Month Period Ended October 31, 2001
(dollars in thousands)
Cash flows from operating activities
Net income (loss)	$	1,134		$	(3,020	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities, excluding impact of acquisition
Depreciation and amortization		5,202			3,751
Deferred income tax benefit		(3,670	)		(2,082	)
Provision for doubtful trade receivables		628			384
(Gain) loss on disposal of fixed assets		(1,771	)		3
Effects on cash flows from changes in working capital
Accounts receivable		26			9,850
Inventories		30,250			11,315
Prepaid and other current assets		(641	)		(1,300	)
Accounts payable and accrued expenses		(5,960	)		(5,070	)
Accrued pension and post-retirement obligations		3,689			970
Other liabilities		(633	)		661
Net cash provided by operating activities		28,254			15,462
Cash flows from investing activities
Purchase of property, plant and equipment, net		(5,295	)		(2,687	)
Proceeds from sale of property, plant and equipment		2,020
Net cash used in investing activities		(3,275	)		(2,687	)
Cash flows from financing activities
Net increase (decrease) in amounts due affiliate		2,019			(14,557	)
Net cash activity with NAMD, Inc.		(18,126	)		5,181
Net cash used in financing activities		(16,107	)		(9,376	)
Effect of exchange rate changes on cash		596			(1,826	)
Net change in cash and cash equivalents		9,468			1,573
Cash and cash equivalents
Beginning of period		5,628			15,096
End of period	$	15,096		$	16,669
Supplemental disclosures of cash flow information
Cash paid for interest	$	10,105		$	5,201
Cash paid for income taxes		6,770			3,144

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

37

The Metals Distribution Businesses of NAMD Inc.

Combined Statements of Changes in Parent Company Investment

(dollars in thousands)	Total
Parent company investment at December 31, 2000	$	155,128
Net income		1,134
Foreign currency translation adjustments		263
Net cash and financing activity with NAMD Inc.		(18,126	)
Parent company investment at June 30, 2001, Predecessor Entity	$	138,399
Parent company investment at July 1, 2001, Successor Entity	$	144,204
Net loss		(3,020	)
Foreign currency translation adjustments		(2,303	)
Net cash and financing activity with NAMD Inc.		17,081
Parent company investment at October 31, 2001	$	155,962

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

38

The Metals Distribution Businesses of NAMD Inc.

Notes to Combined Financial Statements

(dollars in thousands, unless otherwise noted)

1. Business Description and Basis of Presentation

The Metals Distribution Businesses of NAMD Inc. (the “NAMD Businesses”) specialize primarily in stainless steel and aluminum, further processed to customer specifications, and delivered to customers across North America. The NAMD Businesses have more than 50 distribution and/or processing facilities throughout the U.S. and Canada.

The NAMD Businesses consist of metals distribution operations in the U.S. and Canada. Each of the NAMD Businesses’ U.S. and Canadian operations are part of the NAMD Inc. (the “Parent Company”) consolidated group, but were operated autonomously as two separate entities (Vincent Metal Goods (“VMG”) in the U.S. and Atlas Ideal Metals (“AIM”) in Canada). VMG in the U.S. is a division of NAMD Inc. and AIM in Canada is a wholly owned subsidiary of NAMD Inc. In addition, NAMD Inc. also owned 100% of numerous mining subsidiaries operated within the U.S. In connection with the preparation of these financial statements, the assets and liabilities of VMG have been combined with the assets and liabilities of AIM.

Effective November 11, 2001, NAMD Inc. contributed its metals distribution businesses (the “NAMD Businesses”) to a newly formed joint venture (“Integris Metals, Inc.”) in exchange for a 50% interest and Alcoa, Inc. (a Delaware Corporation) contributed its metals distribution business for the remaining 50% interest.

Initial October 2000 Acquisition

NAMD Inc. is a wholly owned subsidiary of Billiton Investments Ireland Ltd. (a wholly owned subsidiary of Billiton Plc.). Prior to October 6, 2000, NAMD Inc. was a wholly owned subsidiary of Rio Algom Limited (“RAL”) (a Canadian corporation). On October 6, 2000, RAL was acquired by Billiton Plc (“Billiton”). Accordingly, the parent company investment in the NAMD Businesses as of December 31, 2000, reflected in the accompanying Statements of Changes in Parent Company Investment reflects the carve out accounting described above, as well as the effects of the push down of the purchase accounting related to the proportionate consideration allocated to the NAMD Businesses in connection with the October 2000 acquisition.

Subsequent June 30, 2001 Acquisition

Effective June 30, 2001, Billiton entered into a merger agreement with BHP Ltd. (an Australian corporation) (“BHP”). For accounting purposes in the U.S., this merger was treated as a purchase of Billiton by BHP (the “June 2001 acquisition”). Accordingly, the accompanying combined financial statements as of October 31, 2001, and the four-month period then ended reflect the effects of the push down of the purchase accounting related to the NAMD Businesses in connection with the June 2001 acquisition.

The allocated purchase price to the net assets acquired as of the acquisition date in accordance with the purchase method of accounting is as follows:

Current assets	$	332,341
Property, plant and equipment		110,249
Deferred income taxes		5,847
Goodwill		45,754
Current liabilities		(73,289	)
Accrued pension and postretirement benefits		(36,348	)
Long-term debt		(234,796	)
Other liabilities		(5,554	)
	$	144,204

39

The Metals Distribution Businesses of NAMD Inc.

Notes to Combined Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

The allocation to the tangible assets acquired and liabilities assumed was on the basis of their estimated fair values. The excess over the estimated fair value of the tangible net assets acquired ($45.8 million) has preliminarily been allocated to goodwill with a 20-year useful life. Management is in the process of obtaining appropriate valuations of identifiable intangible assets acquired (primarily customer relationships), and the applicable useful lives, and will finalize the preliminary purchase price allocation when those valuations are completed. Management believes the 20-year life assumed in the preliminary allocation will approximate the weighted average lives of all intangible assets upon finalization of the allocation.

Effective January 1, 2002, the NAMD Businesses will cease amortization of residual goodwill and intangible assets with indefinite lives in connection with the adoption of Statement of Financial Accounting Standards (“SFAS”) No. 142 (see “New Accounting Pronouncements” in Note 2), the effects of which will increase pre-tax income on an annual basis by approximately $2.1 million based upon the preliminary purchase price allocation described above.

In connection with the push down of the purchase accounting of the June 2001 acquisition, the accompanying Combined Statement of Operations and Comprehensive Income (Loss) reflects the operations of the NAMD Businesses Predecessor for the six-month period ended June 30, 2001, acquisition and the Successor for the four-month period ended October 31, 2001.

Corporate Charges

Charges by the parent company to NAMD are based on costs that directly relate to NAMD or a percentage allocation of the total cost for the service provided. These services generally include legal, treasury, human resource and risk management services. Management believes that the allocation methods are reasonable. Management further believes these expenses to be reflective of same on a stand-alone basis.

2. Summary of Significant Accounting Policies

Basis of Financial Statements

The accompanying combined financial statements include the accounts of the metals distribution businesses of NAMD Inc. comprising the U.S. VMG business combined with the Canada AIM business. All significant intercompany accounts and transactions have been eliminated in the combination.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

The NAMD Businesses recognize revenue from product sales (including amounts billed for shipping and handling) when ownership and risk of loss passes to the customer, which is upon shipment. The NAMD Businesses record estimated discounts and rebates in the same period revenue is recognized based on historical experience.

40

The Metals Distribution Businesses of NAMD Inc.

Notes to Combined Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

Cash and Cash Equivalents

Cash equivalents are highly liquid short-term investments that are readily convertible to known amounts of cash and have original maturities of three months or less at date of purchase.

Inventories

Product inventories primarily consist of aluminum, stainless steel and other metal products for resale. Certain additional incremental processing costs are incurred as a result of cutting to length based on customer specifications. All product inventories are considered finished goods. Product inventories are valued at the lower of cost with cost determined on the last-in, first-out (“LIFO”) method or market based upon replacement cost. Materials and supplies inventories are carried at the lower of average cost or market. At October 31, 2001, the LIFO cost of product inventories exceeded the replacement cost of such inventories.

Property, Plant and Equipment

Property, plant and equipment are stated at cost (based on the June 2001 acquisition described in Note 1). Depreciation and amortization are provided by charges to operations using the straight-line method over the estimated useful lives of the assets set forth below:

Land improvements	20 years
Buildings	40 years
Building improvements	20 to 40 years
Leasehold improvements	Term of lease
Machinery and equipment	5 to 12 years
Major processing equipment	12 to 18 years

Maintenance and repairs are charged to operations as incurred and additions or improvements are capitalized. When assets are sold, retired or otherwise disposed of, the cost of the asset and the related accumulated depreciation or amortization are removed from the respective accounts and any gains or losses are included in operations.

Shipping and Handling Fees and Costs

The Company classifies shipping and handling fees and costs as a component of selling, administrative and other expenses on the Combined Statement of Operations and Comprehensive Income (Loss). Total shipping and handling fees and costs for the six months ended June 30, 2001 and for the four months ended October 31, 2001, were $7,389 and $5,742, respectively.

Goodwill

The excess of cost over net assets of businesses acquired is charged against earnings over a period of 20 years. The recoverability of unamortized goodwill assets is assessed on an ongoing basis by comparing anticipated undiscounted future cash flows from operations to the recorded unamortized cost (see however the description of SFAS No. 142 under “New Accounting Pronouncements” below).

Foreign Currency Translation

For Canadian operations, the functional currency is the Canadian dollar. Assets and liabilities of these operations are translated into U.S. dollars at the exchange rate in effect at year-end. Income statement accounts

41

The Metals Distribution Businesses of NAMD Inc.

Notes to Combined Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

are translated at the average rate of exchange prevailing during the year. Translation adjustments arising from the use of differing exchange rates from period to period are included as other comprehensive income (loss). Realized gains and losses from Canadian currency transactions are included in net income (loss) for the period.

Comprehensive Income (Loss)

Other comprehensive income (loss) refers to gains and losses that, under accounting principles generally accepted in the United States of America, are excluded from net income as these amounts are recorded directly as an adjustment to equity as a component of accumulated other comprehensive income. The NAMD Businesses’ accumulated other comprehensive income (loss) is comprised of the translation into U.S. dollars of the financial statements of its Canadian operations. The NAMD Businesses do not utilize any derivative financial instruments, the fair value of which would also be included as a component of accumulated other comprehensive income.

Income Taxes

Historically, VMG’s results of U.S. operations have been included in the consolidated U.S. federal income tax return of NAMD Inc. AIM’s results of operations in Canada were included in a separate tax return in Canada. The income tax expense and other tax related information as it relates to the U.S. operations has been calculated as if VMG had not been eligible to be included in the consolidated tax returns of NAMD Inc. (i.e., on a “separate return” basis).

The NAMD Businesses recognize an asset or liability for the deferred tax consequences of temporary differences between the tax bases of assets or liabilities and their reported amounts in the financial statements. These temporary differences will result in taxable or deductible amounts in future years when the reported amounts of the assets or liabilities are recovered or settled. The deferred tax assets are reviewed periodically for recoverability and valuation allowances are provided, as necessary.

New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets.

The most significant changes made by SFAS No. 141 are: 1) requiring that the purchase method of accounting be used for all business combinations initiated after June 30, 2001, and 2) establishing specific criteria for the recognition of intangible assets separately from goodwill.

SFAS No. 142 primarily addresses the accounting for acquired goodwill and intangible assets (i.e., the post-acquisition accounting). The provisions of SFAS No. 142 will be effective for the NAMD Businesses beginning in 2002. The most significant changes made by SFAS No. 142 are: 1) goodwill and indefinite-lived intangible assets will no longer be amortized; 2) goodwill and indefinite-lived intangible assets will be tested for impairment at least annually; and 3) the amortization period of intangible assets with finite lives will no longer be limited to forty years.

Effective January 1, 2001 the NAMD Businesses adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. This standard requires that all derivative instruments be recorded, at fair value, on the balance sheet. The adoption of this SFAS did not have an impact on the financial statements.

42

The Metals Distribution Businesses of NAMD Inc.

Notes to Combined Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

In December 2003, the FASB issued SFAS No. 132R, Employers’ Disclosures about Pensions and Other Postretirement Benefits. This statement requires additional disclosures to be made by employers regarding pensions and other postretirement benefit plans, but does not change the measurement or recognition of those plans. Under this Statement, the disclosure provisions regarding foreign plans and estimated future benefit payments are effective for fiscal years ending after December 15, 2003, and interim periods beginning after December 15, 2003. The disclosure provisions of this Statement for the U.S. plans have been included in Note 8.

3. Supplemental Balance Sheet Information

Property, Plant and Equipment, Net

Property, plant and equipment, net at October 31, 2001, included the following components:

Land and improvements	$	22,148
Buildings and leasehold improvements		52,681
Machinery and equipment		33,765
Construction in progress		3,688
Total cost		112,282
Less: Accumulated depreciation and amortization		(2,925	)
	$	109,357

Depreciation expense for the six-month period ended June 30, 2001, was $4,274 and the four-month period ended October 31, 2001, was $2,987.

Goodwill, Net

Goodwill, net at October 31, 2001, was comprised of the following:

Goodwill	$	45,754
Less: Accumulated amortization		(764	)
	$	44,990

Goodwill amortization expense recorded for the six-month period ended June 30, 2001, was $928 which reflected the amortization of the goodwill generated in the initial October 2000 acquisition and the expense recorded for the four-month period ended October 31, 2001, was $764 which reflected amortization of the goodwill resulting from the June 30, 2001, acquisition.

Accrued Expenses

Accrued expenses at October 31, 2001, were as follows:

Payroll	$	4,857
Vacation		3,179
Real estate taxes		2,090
Other		3,033
	$	13,159

43

The Metals Distribution Businesses of NAMD Inc.

Notes to Combined Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

4. Debt Due Billiton (RA) Limited

At October 31, 2001, debt obligations due to Billiton (RA) Limited were as follows:

Billiton Loan I, due December 31, 2005	$	51,886
Billiton Loan II, due March 31, 2005		99,735
Loan agreement with Billiton, due November 30, 2009		2,907
Grid note with Billiton, due on demand		2,049
AIM debt facility payable to Billiton, due January 7, 2008		49,220
Total notes payable		205,797
Less: Current portion		(145,797	)
Total long-term debt, less current portion	$	60,000

In connection with the joint venture formation described in Note 1, all of the amounts due to Billiton set forth above were refinanced into a Billiton A facility ($145,797) and a Billiton B facility ($60,000). In accordance with the terms of the Joint Venture Contribution Agreement, the Billiton A facility is due June 30, 2002, therefore amounts due under the Billiton A facility have been classified as current portion of long-term debt.

The Billiton A facility accrues interest at the three-month LIBOR plus 1.5% with interest payments due quarterly and the Billiton B facility accrues interest at an annual rate of LIBOR plus 1% with interest payments due quarterly. The Billiton B facility is due June 30, 2003. At October 31, 2001, the LIBOR was 2.2%.

5. Parent Company Investment

The parent company investment in the NAMD Businesses is presented as the equity component of the accompanying combined balance sheet since the combined NAMD Businesses are not a separate legal entity within the NAMD Inc. consolidated group. Certain cash flows generated by the NAMD Businesses’ VMG operations were used by NAMD Inc. to fund the operations of other entities within the consolidated NAMD group as well as other general corporate purposes. These cash transactions have been reported as net cash and financing activity with NAMD Inc. in the accompanying Combined Statements of Changes in Parent Company Investment and include the following:

	For the Six-Month Period Ended June 30, 2001			For the Four-Month Period Ended October 31, 2001
Net cash (advances to) proceeds from NAMD Inc.	$	(18,126	)	$	5,181
Noncash transfer to NAMD Inc. of certain debt due to Billiton Plc		—			11,900
	$	(18,126	)	$	17,081

On October 22, 2001, NAMD Inc. was reorganized. In connection with this reorganization, the NAMD Businesses received approximately $15.0 million of cash from NAMD Inc. (included above as a component of net cash proceeds) and also transferred $11.9 million of debt (due to Billiton) to NAMD Inc.

6. Income Taxes

As described in Note 1, the VMG operations in the U.S. were part of the U.S. operations of NAMD Inc. NAMD Inc. filed a consolidated income tax return in the U.S. The income tax information presented below for

44

The Metals Distribution Businesses of NAMD Inc.

Notes to Combined Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

the U.S. reflects VMG operations on a “separate return” basis. AIM in Canada files a separate income tax return for Canadian purposes. As described below, no tax benefits for AIM’s operating losses have been recorded for either period presented.

Income (loss) before income taxes consisted of:

	For the Six-Month Period Ended June 30, 2001			For the Four-Month Period Ended October 31, 2001
United States	$	8,684		$	3,328
Canada		(3,557	)		(4,588	)
	$	5,127		$	(1,260	)

The provision for income taxes consisted of:

	For the Six-Month Period Ended June 30, 2001			For the Four-Month Period Ended October 31, 2001
Current provision
U.S. Federal and state	$	7,663		$	3,842
Canada		—			—
Current provision		7,663			3,842
Deferred benefit
U.S. Federal and state		(3,670	)		(2,082	)
Canada		—			—
Deferred benefit		(3,670	)		(2,082	)
Provision for income taxes	$	3,993		$	1,760

The provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income (loss) before income taxes. The items causing this difference are as follows:

	For the Six-Month Period Ended June 30, 2001		For the Four-Month Period Ended October 31, 2001
Tax expense (benefit) at U.S. statutory rate	$	1,794	$	(441	)
Valuation allowance for Canadian net deferred tax assets		1,246		1,606
State income taxes		424		201
Nondeductible expenses and other		529		394
Tax expense as reported	$	3,993	$	1,760

45

The Metals Distribution Businesses of NAMD Inc.

Notes to Combined Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities at October 31, 2001, are as follows:

	October 31, 2001
Deferred income tax assets
Accounts receivable	$	1,108
Inventories		6,174
Accrued expenses		1,739
Accrued pension and postretirement obligations		15,815
Canadian net operating loss carryforwards		2,915
Other		109
Total gross deferred income tax assets		27,860
Less: Valuation allowance for Canadian deferred tax assets		(3,890	)
Net deferred income tax assets		23,970
Deferred income tax liabilities
Property, plant and equipment		(16,041	)
Total gross deferred income tax liabilities		(16,041	)
Net deferred income tax assets	$	7,929

A valuation allowance as of December 31, 2001, has been provided against deferred tax assets related to the Canadian net operating loss carryforwards as well as other Canadian net deferred tax assets because it is more likely than not these tax benefits will not be realized based on uncertainty as to the ability of the Canadian operations to generate future taxable income. At October 31, 2001, Canadian net operating loss carryforwards of approximately $3.7 million existed and will begin to expire in 2007.

7. Lease Commitments

The NAMD Businesses are party to numerous lease agreements in both the U.S. and Canada related to buildings, vehicles and office equipment leases. These leases have remaining terms ending through 2007 and are all accounted for as operating leases. The following are the minimum lease payments in each of the periods indicated based on operating leases in effect at October 31, 2001:

For the Period
November 1, 2001 to December 31, 2001	$	991
For the Years Ended
2002	$	5,211
2003		4,209
2004		3,067
2005		2,110
2006		1,819
Thereafter		4,895
Total minimum lease payments	$	22,302

Rental expense for all operating leases charged against earnings for the six-month period ended June 30, 2001, was $3,210, and the rental expense charged against earnings for the four-month period ended October 31, 2001, was $1,822.

46

The Metals Distribution Businesses of NAMD Inc.

Notes to Combined Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

8. Employee Benefit Plans

The NAMD Businesses have noncontributory defined benefit pension plans (defined benefit plans), which provide retirement benefits for the majority of its employees in both the U.S. and Canada. The U.S. plans were specific to the U.S. VMG operations. The Canadian plan was specific to the Canadian AIM operations. The NAMD Businesses also have plans which provide health care and life insurance benefits for substantially all of its retirees in the U.S. (other post employment benefits or OPEB).

The following tables set forth the components of the changes in benefit obligations and fair value of plan assets during the six-month period ended June 30, 2001 and the four-month period ended October 31, 2001, as well as the funded status and amounts both recognized and not recognized in the balance sheet at October 31, 2001:

	Six-Month Period Ended June 30, 2001												Four-Month Period Ended October 31, 2001
	U.S.						Canada						U.S.						Canada
	Pension Benefits			OPEB			Pension Benefits			OPEB			Pension Benefits			OPEB			Pension Benefits			OPEB
Changes in benefit obligations
Benefit obligations at beginning of period	$	78,072		$	27,923		$	28,356		$	8,029		$	83,034		$	29,343		$	28,673		$	8,256
Service cost		1,415			696			382			113			943			464			252			74
Interest cost		2,920			1,041			918			263			1,946			694			591			171
Plan participants’ contributions		—			77			—			—			—			51			—			—
Actuarial (gains) or losses		1,952			31			—			—			3,211			1,330			(1,246	)		(360	)
Benefits paid		(1,325	)		(425	)		(983	)		(149	)		(930	)		(324	)		(524	)		(96	)
Benefit obligations at end of period		83,034			29,343			28,673			8,256			88,204			31,558			27,746			8,045
Changes in plan assets
Fair value of plan assets at beginning of period		77,197			—			37,202			—			77,272			—			36,373			—
Actual return on plan assets		1,313			—			302			—			(1,449	)		—			(4,895	)		—
Employer contribution		87			348			(148	)		149			58			273			—			96
Plan participants’ contributions		—			77			—			—			—			51			—			—
Benefits paid		(1,325	)		(425	)		(983	)		(149	)		(930	)		(324	)		(619	)		(96	)
Fair value of plan assets at end of period		77,272			—			36,373			—			74,951			—			30,859			—
Funded status		(5,762	)		(29,343	)		7,700			(8,256	)		(13,253	)		(31,558	)		3,113			(8,045	)
Unrecognized net actuarial loss		—			—			107			—			7,032			1,330			4,293			—
Net amount recognized	$	(5,762	)	$	(29,343	)	$	7,807		$	(8,256	)	$	(6,221	)	$	(30,228	)	$	7,406		$	(8,045	)
Amounts recognized in the combined balance sheet consist of
Prepaid benefit cost	$	1,357		$	—		$	7,807		$	—		$	1,378		$	—		$	7,406		$	—
Accrued benefit liability		(7,119	)		(29,343	)		—			(8,256	)		(7,599	)		(30,228	)		—			(8,045	)
Net amount recognized	$	(5,762	)	$	(29,343	)	$	7,807		$	(8,256	)	$	(6,221	)	$	(30,228	)	$	7,406		$	(8,045	)

47

The Metals Distribution Businesses of NAMD Inc.

Notes to Combined Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

	Six-Month Period Ended June 30, 2001								Four-Month Period Ended October 31, 2001
	U.S.				Canada				U.S.				Canada
	Pension Benefits		OPEB		Pension Benefits		OPEB		Pension Benefits		OPEB		Pension Benefits		OPEB
Weighted-average assumptions to determine obligation at the end of the period
Discount rate	7.75	%	7.75	%	6.50	%	6.50	%	7.50	%	7.50	%	6.50	%	6.50	%
Expected return on plan assets	9.60	%	—		8.00	%	—		9.60	%	—		8.00	%	—
Rate of compensation increase	5.00	%	5.00	%	3.50	%	3.50	%	5.00	%	5.00	%	3.50	%	3.50	%
Weighted-average assumptions to determine cost
Discount rate	7.75	%	7.75	%	6.50	%	6.50	%	7.50	%	7.50	%	6.50	%	6.50	%
Expected return on plan assets	9.60	%	—		8.00	%	—		9.60	%	—		8.00	%	—
Rate of compensation increase	5.00	%	5.00	%	3.50	%	3.50	%	5.00	%	5.00	%	3.50	%	3.50	%

The net pension and OPEB amounts recognized as of June 30, 2001, do not include any unrecognized amounts since these obligations were revalued in connection with the June 2001 acquisition accounting. For OPEB measurement purposes as of June 30, 2001, a 7.8% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2001. The rate was assumed to decrease gradually to 5.5% for 2007 and remain at that level thereafter. For OPEB measurement purposes as of October 31, 2001, a 10.0% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2002. The rate was assumed to decrease gradually to 5.0% for 2007 and remain at that level thereafter.

	Six-Month Period Ended June 30, 2001										Four-Month Period Ended October 31, 2001
	U.S.					Canada					U.S.					Canada
	Pension Benefits			OPEB		Pension Benefits			OPEB		Pension Benefits			OPEB		Pension Benefits			OPEB
Components of net periodic benefit cost
Service cost	$	1,415		$	696	$	382		$	113	$	943		$	464	$	252		$	74
Interest cost		2,920			1,041		918			263		1,946			694		591			171
Expected return on plan assets		(3,558	)		—		(1,466	)		—		(2,372	)		—		(877	)		—
Net periodic benefit cost	$	777		$	1,737	$	(166	)	$	376	$	517		$	1,158	$	(34	)	$	245

Assumed health care cost trend rates have a significant effect on the amounts reported for the OPEB plan. A one-percentage-point change in assumed health care cost trend rates would have the following effects on an annualized basis:

	1-Percentage Point Increase		1-Percentage Point Decrease
Effect on total of service and interest cost components	$	216	$	(171	)
Effect on the postretirement benefit obligation		4,980		(4,022	)

48

The Metals Distribution Businesses of NAMD Inc.

Notes to Combined Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

Plan Assets

The Company’s plan assets allocated for its U.S. defined benefit pension and postretirement health care benefits plans at October 31, 2001, are as follows:

	Percentage of Plan Assets
	October 31, 2001
Asset Category
Domestic equity	40.8	%
International equity	15.2	%
Fixed income	41.0	%
Cash and cash equivalents	3.0	%
	100.0	%

In accordance with the joint venture formation described in Note 1, newly formed pension and OPEB plans were formed in the U.S. and Canada. Target asset allocation in future periods will be based on those of the new plans of the combined entity.

The expected long-term rate of return is generally based on the pension plan’s asset mix, assumptions of equity returns based on historical long-term returns on asset categories, expectations for inflation, and estimates of the impact of active management of the assets.

The Company’s U.S. investment strategy and policies are designed to maximize the possibility of having sufficient funds to meet the long-term liabilities of the pension fund, while achieving a balance between the goals of growing the assets of the plan and keeping risk at a reasonable level. Current income is not a key goal of the plan. The asset allocation position reflects the ability and willingness to accept relatively more short-term variability in the performance of the pension plan portfolio in exchange for the expectations of a better funded status, better long-term returns and lower pension costs in the long run.

The plan prohibits investing in warrants and options, and engaging in short sales, margin transactions, and other specialized investment activities. The use of derivatives is also prohibited for the purpose of speculation or introducing leverage in the portfolio, circumventing the investment guidelines or taking risks that are inconsistent with the fund’s guidelines.

Cash Flows

The Company’s funding policy for the U.S. pension plan is to achieve a return on assets that meets the long-term funding requirements identified by the projections of the pension plan’s actuaries while simultaneously satisfying the fiduciary responsibilities prescribed by the Employee Retirement Income Security Act of 1974, as amended. The Company is not required to make any contributions to the U.S. pension plan in the next fiscal year.

Defined Contribution Plan

The VMG operations in the U.S. also sponsor a defined contribution 401(k) employee savings and profit sharing plan. Employee contributions of up to 6% of eligible compensation are matched 66.67% by the VMG plan. Company contributions to the VMG plan for the six-month period ended June 30, 2001, were $3,256 and the four-month period ended October 31, 2001, were $1,828.

49

The Metals Distribution Businesses of NAMD Inc.

Notes to Combined Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

9. Geographic and Product Information

The operations of the NAMD Businesses are comprised as follows:

	Predecessor		Successor
	For the Six-Month Period Ended June 30, 2001		For the Four-Month Period Ended October 31, 2001
Net sales to customers
U.S.	$	415,354	$	251,423
Canada		118,124		66,210
Total net sales	$	533,478	$	317,633

	At October 31, 2001
Assets
U.S.	$	368,235
Canada		106,197
Total assets	$	474,432

The following table shows sales by product line for the periods indicated:

	Predecessor		Successor
	For the Six-Month Period Ended June 30, 2001		For the Four-Month Period Ended October 31, 2001
Aluminum	38.6	%	37.6	%
Stainless steel	36.3		37.3
Carbon steel	5.7		5.8
Other	19.4		19.3
	100.0	%	100.0	%

50

Report of Independent Auditors

To the Management of

Reynolds Aluminum Supply Company

In our opinion, the accompanying combined balance sheet and the related combined statements of income, comprehensive income and parent company investment, and of cash flows present fairly, in all material respects, the financial position of Reynolds Aluminum Supply Company (RASCO) at October 31, 2001, and the results of its operations and its cash flows for the ten months then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of RASCO’s management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

/S/    PRICEWATERHOUSECOOPERS LLP

        PricewaterhouseCoopers LLP

Pittsburgh, Pennsylvania

March 15, 2002, except for Note 9,

for which the date is July 28, 2004

51

Reynolds Aluminum Supply Company

(The Distribution Business of Reynolds Metals Company)

Combined Balance Sheet

(dollars in thousands)	October 31, 2001
Assets
Current assets
Cash and cash equivalents	$	1,831
Trade receivable from customers, net of allowance for doubtful accounts of $910		83,455
Inventories (Notes 2 and 3)		134,982
Prepaid expenses and other current assets		1,226
Total current assets		221,494
Property, plant and equipment, net (Note 5)		78,342
Total assets	$	299,836
Liabilities and Parent Company Investment
Current liabilities
Accounts payable	$	23,175
Due to Parent (Note 4)		13,439
Deferred income tax (Note 8)		18,245
Other accrued liabilities (Note 6)		8,582
Total current liabilities		63,441
Accrued pension and postretirement benefits (Notes 10 and 11)		18,727
Deferred income tax (Note 8)		1,927
Total liabilities		84,095
Commitments and contingencies (Note 12)
Parent company investment		215,741
Total liabilities and parent company investment	$	299,836

The accompanying notes are an integral part of these combined financial statements.

52

Reynolds Aluminum Supply Company

(The Distribution Business of Reynolds Metals Company)

Combined Statement of Income, Comprehensive Income and

Parent Company Investment

(dollars in thousands)	For the Ten-Month Period Ended October 31, 2001
Net sales (Note 1)	$	645,949
Cost of sales		543,890
Gross profit		102,059
Selling, administrative and other expenses		98,358
Income before income taxes		3,701
Provision for income taxes (Note 8)		1,410
Net income		2,291
Other comprehensive income
Foreign currency translation adjustment		(624	)
Comprehensive income	$	1,667
Parent company investment at December 31, 2000	$	271,372
Net income		2,291
Distributions to Alcoa, net (Notes 2 and 4)		(57,298	)
Other comprehensive income		(624	)
Parent company investment at October 31, 2001	$	215,741

The accompanying notes are an integral part of these combined financial statements.

53

Reynolds Aluminum Supply Company

(The Distribution Business of Reynolds Metals Company)

Combined Statement of Cash Flows

(dollars in thousands)	For the Ten-Month Period Ended October 31, 2001
Cash flows from operating activities
Net income	$	2,291
Adjustments for noncash transactions
Depreciation		4,365
Deferred income taxes		(5,987	)
Increase (decrease) in cash due to changes in
Receivables		12,473
Inventories		44,246
Accounts payable		(1,505	)
Accrued liabilities		(1,723	)
Other liabilities		1,637
Other assets		575
Net cash provided by operations		56,372
Cash flows from financing activities
Distributions to Parent Company, net		(57,298	)
Change in amounts due to Parent		1,922
Net cash used in financing activities		(55,376	)
Cash flows from investing activities
Capital expenditures		(3,738	)
Net cash used in investing activities		(3,738	)
Net change in cash and cash equivalents		(2,742	)
Cash and cash equivalents
Beginning of period		4,573
End of period	$	1,831

The accompanying notes are an integral part of these combined financial statements.

54

Reynolds Aluminum Supply Company

(The Distribution Business of Reynolds Metals Company)

Notes to Combined Financial Statements

(dollars in thousands, unless otherwise noted)

1. Business Description and Basis of Presentation

Reynolds Aluminum Supply Company (“RASCO”) is the metals distribution business of Reynolds Metals Company (“Reynolds”), a wholly owned subsidiary of Alcoa Inc. (“Alcoa”). The accompanying financial statements include the assets and liabilities of the U.S. operations of RASCO, RASCO Specialty Metals, Inc. (“RSM”), a Canadian subsidiary of Reynolds, and Permamet, Inc. a U.S. subsidiary of Reynolds. All such operations are herein referred to as RASCO. RASCO is in the business of supply chain management, specializing in aluminum and stainless steel products which are sourced globally, processed on its cut-to-length lines, slitters, shears, precision saws and plasma burners, and delivered to customers across North America. RASCO is a distributor of stainless steel and aluminum products. It manages the supply chain through a network of 38 locations in the United States and Canada.

On May 3, 2000, Alcoa and Reynolds completed a merger, which was accounted for as a purchase transaction. Accordingly, Alcoa has adjusted the assets and liabilities of RASCO to reflect the effects of the acquisition.

On November 1, 2001, Alcoa and Billiton Investments Ireland Limited (“Billiton”) formed a joint venture, Integris Metals, Inc. (“Integris”). Alcoa contributed RASCO to the joint venture for a 50% interest and Billiton contributed its metals distribution business for the remaining 50% interest.

The combined financial statements are prepared in conformity with accounting principles generally accepted in the United States of America.

All intercompany transactions have been eliminated.

The preparation of these financial statements include the use of “carve-out” accounting procedures wherein certain assets, liabilities and expenses historically recorded or incurred at the parent company level of Reynolds or Alcoa, which relate to or were incurred on behalf of RASCO, have been identified and pushed down or allocated as appropriate to reflect the financial results of RASCO for the period presented. For additional information concerning expenses charged or allocated to RASCO by the Parent Company (Note 4).

The accompanying financial statements do not reflect any allocation of general corporate debt or interest expense incurred by Alcoa or Reynolds in financing RASCO’s operations and activities. Alcoa and Reynolds do not make such allocations to its operations. For additional information concerning related party transactions (Note 4).

2. Significant Accounting Policies

Use of Estimates

The preparation of combined financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These may affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the combined financial statements. These may also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The carrying amounts relate to cash held at RSM and Permamet, and approximate fair value because of the short maturity of the investments. All investments purchased, with a maturity of three months or less, are

55

Reynolds Aluminum Supply Company

(The Distribution Business of Reynolds Metals Company)

Notes to Combined Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

considered cash equivalents. RASCO’s U.S. operations utilize a centralized cash management system with Alcoa. Cash receipts are transferred to Alcoa and cash disbursements are made by Alcoa on behalf of RASCO, each on a current basis. The net cash generated by RASCO during each period is reflected as distributions to the parent company, net in the accompanying statement of cash flows and charged directly to the Parent Company Investment account.

Revenue Recognition

Revenues (including amounts billed for shipping and handling) are recognized when title, ownership and risk of loss pass to the customers, which is generally upon shipment. RASCO records estimated discounts and rebates in the same period revenue is recognized based on historical experience.

Inventories

Inventories primarily consist of aluminum and stainless steel products purchased for resale. Certain additional incremental processing costs are incurred as a result of cutting to length based on customer specifications. All inventories are considered finished goods. Inventories are stated at the lower of cost or market with the cost for a substantial portion of the inventories determined under the last-in, first-out (“LIFO”) method. The cost of other inventory is principally determined under the first-in, first-out (“FIFO”) method.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost, which includes any fair market value adjustments made by Alcoa in connection with the acquisition of Reynolds. Depreciation of property, plant and equipment is computed using the straight-line method based on the estimated useful lives of the assets (buildings—25 to 33 years, machinery and equipment—10 to 25 years). Amortization of leasehold improvements is computed on the straight-line method over the life of the lease. Maintenance and repairs are charged to expense as incurred. Renewals and betterments, which extend the useful lives of assets, are capitalized. At the time property, plant and equipment is retired or otherwise disposed of, the cost and the related accumulated depreciation are adjusted and any profit or loss on disposition is included in the combined statement of operations.

Shipping and Handling Fees and Costs

The Company classifies shipping and handling fees as a component of selling, administrative and other expenses on the accompanying statement of income. Total shipping and handling fees and costs for the ten-month period ended October 31, 2001, were $13,816.

Income Taxes

Historically, RASCO’s results of U.S. operations have been included in the consolidated U.S. federal income tax return of Alcoa. RASCO’s results of operations in Canada were included in separate tax returns in that jurisdiction. For the U.S. operations that do not pay their own income tax, Alcoa internally allocates income tax expense at the statutory rate after adjustment for state income taxes and several other permanent items. The income tax expense and other tax related information as it relates to the U.S. operations has been calculated as if RASCO had not been eligible to be included in the consolidated tax returns of Alcoa (i.e., on a “stand-alone” basis). The calculation of tax provisions and deferred taxes necessarily required certain assumptions, allocations and estimates that management believes are reasonable to accurately reflect the tax reporting for RASCO as a stand-alone taxpayer.

56

Reynolds Aluminum Supply Company

(The Distribution Business of Reynolds Metals Company)

Notes to Combined Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

Parent Company Investment

Since RASCO is not a separate legal entity (see Note 1 for a description of the nature of operations), there are no customary equity and capital accounts. Instead a Parent Company Investment is maintained by RASCO to account for transactions as described in Notes 1 and 4. Parent Company Investment is comprised of the original investment by Alcoa, accumulated comprehensive income and other transactions with the Parent.

Comprehensive Income (Loss)

Other comprehensive income (loss) refers to gains and losses that, under accounting principles generally accepted in the United States of America, are excluded from net income as these amounts are recorded directly as an adjustment to equity as a component of accumulated other comprehensive income. The RASCO Business accumulated the comprehensive income is comprised of the translation into U.S. dollars of the financial statements of its Canadian operations. RASCO does not utilize any derivative financial instruments, the fair value of which would also be included as a component of accumulated other comprehensive income.

Foreign Currency Translation

The functional currency for RASCO’S Canadian operations is the Canadian dollar. Assets and liabilities of these operations are translated at the exchange rate in effect on the balance sheet date. Income statement accounts are translated at the average rate of exchange prevailing during the year. Translation adjustments are included as a component of the parent company investment. Gains and losses from foreign currency transactions are included in net income for the period. Gains and losses are not material to RASCO’s combined financial statements.

Recently Adopted Accounting Standards

Effective January 1, 2001, RASCO adopted Statement of Financial Accounting Standards (“SFAS”) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. This standard requires that all derivative instruments be recorded, at fair value, on the balance sheet. The adoption of this SFAS did not have an impact on RASCO’s financial statements.

RASCO adopted SFAS No. 141, Business Combinations, effective for all business combinations after June 30, 2001. This standard requires that all business combinations be accounted for using the purchase method of accounting and further clarifies the criteria for recognition of intangible assets separately from goodwill. The adoption of this SFAS did not have an impact on RASCO’s financial statements.

Recently Issued Accounting Standards

In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 142, Goodwill and Other Intangible Assets. This standard eliminates the amortization of goodwill and intangible assets with indefinite useful lives and requires annual testing for impairment. The adoption of this SFAS is not expected to have a material impact on RASCO’s financial statements.

In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This statement supersedes or amends existing accounting literature related to the impairment and disposal of long-lived assets. Management is currently developing a plan to apply the provisions of this standard to its operations on an ongoing basis.

57

Reynolds Aluminum Supply Company

(The Distribution Business of Reynolds Metals Company)

Notes to Combined Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. This statement establishes standards for accounting for obligations associated with the retirement of tangible long-lived assets. The standard is required to be adopted by RASCO beginning on January 1, 2003. Management is currently assessing the details of the standard and is preparing a plan of implementation.

3. Inventory

Approximately 45% of the total inventory at October 31, 2001, was valued on a LIFO basis. If valued on an average-cost basis, total inventory would have been $3,299 lower at October 31, 2001.

4. Related Party Transactions

Alcoa is a major supplier of aluminum products to RASCO from its other operations. During the ten-month period ended October 31, 2001, RASCO purchased from Alcoa approximately $80 million of aluminum sheet, plate and extrusions based on market prices as quoted on the London Metal Exchange. RASCO also participates in the Alcoa cash management system in which the cash collections are transferred to Alcoa on a daily basis, with the exception of certain minimum cash balances. The amounts due to Parent Company at October 31, 2001, were $13,439. RASCO also purchases certain services from Alcoa. These transactions and services are discussed in further detail below.

Alcoa Corporate Charges

RASCO uses, and is charged directly for, certain services that Alcoa corporate provides to its divisions. These services generally include information systems support, human resources, taxes, legal and certain shared accounting functions and are included in the general corporate charges below. In addition, Alcoa develops, negotiates and administers RASCO’s insurance programs. The insurance coverage includes coverage for real and personal property, workers compensation, automobile, general product and other standard liability coverage. Charges by Alcoa corporate to RASCO are based on costs that relate directly to RASCO or a percentage allocation of the total cost for the service provided. Where percentage allocations are used, such allocations are primarily based on a percentage of revenue or headcount, as applicable, which management believes represents a reasonable allocation of these costs from Alcoa corporate. Management further believes it is not practicable to estimate these expenses on a stand-alone basis.

The expenses charged to RASCO by Alcoa consist of the following and are reflected in cost of products sold and selling, general and administrative expenses in the combined statement of income, comprehensive income and Parent Company investment:

Employee benefits
Pensions	$	302
Other postretirement benefits		1,620
Insurance (principally medical for active personnel)		4,058
Workers’ compensation		283
General insurance		499
General corporate charges		7,495
	$	14,257

Of the $14,257, $10,050 and $4,207 are recorded in cost of products sold and selling, general and administrative expense, respectively.

58

Reynolds Aluminum Supply Company

(The Distribution Business of Reynolds Metals Company)

Notes to Combined Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

The charges for pension and other postretirement benefit costs included in these financial statements were actuarially determined expenses allocated based on the number of RASCO employees participating in the various plans and average costs per employee. See Notes 10 and 11 for additional discussion of pension and other postretirement benefits.

Medical insurance costs are allocated based upon historical claims cost per person for RASCO.

5. Property, Plant and Equipment, at Cost

Property, plant and equipment at October 31 consisted of:

Land and land improvements	$	5,032
Buildings		33,271
Machinery and equipment		43,939
Construction in progress		6,164
		88,406
Accumulated depreciation and amortization		(10,064	)
Net property, plant and equipment	$	78,342

6. Accrued Liabilities

Accrued liabilities at October 31 consisted of:

Compensation accrual	$	3,042
Vacation accrual		301
Accrued employee benefits		2,340
Other current liabilities		2,899
	$	8,582

7. Operating Leases

RASCO has entered into noncancelable operating leases for land, buildings, office space and equipment, which have various expiration dates through 2006.

As of October 31, future minimum lease payments under noncancelable operating leases with terms longer than one year are as follows:

2002	$	3,272
2003		1,354
2004		608
2005		271
2006		40
Thereafter		—
	$	5,545

Rent expense was approximately $3,200 for the ten-month period ended October 31, 2001.

59

Reynolds Aluminum Supply Company

(The Distribution Business of Reynolds Metals Company)

Notes to Combined Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

8. Income Taxes

The provision for income taxes consisted of:

	For the Ten-Month Period Ended October 31, 2001
Current
Federal	$	6,788
Foreign		398
State and local		211
		7,397
Deferred
Federal/State		(5,979	)
Foreign		(8	)
		(5,987	)
	$	1,410

The components of income before U.S. and foreign taxes on income were:

	For the Ten-Month Period Ended October 31, 2001
United States	$	2,725
Foreign		976
	$	3,701

The provision for income taxes differs from the amount computed using the U.S. federal tax rate for the following reasons:

	For the Ten-Month Period Ended October 31, 2001
Amount computed using the statutory rate	$	1,295
Increase (reduction) in taxes resulting from
Taxes on foreign income		49
State taxes, net of federal benefit		154
Other		(88	)
Provision for income taxes	$	1,410

60

Reynolds Aluminum Supply Company

(The Distribution Business of Reynolds Metals Company)

Notes to Combined Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

The components of net deferred tax assets and liabilities at October 31 were as follows:

	Deferred Tax Assets		Deferred Tax Liabilities
Inventory	$	—	$	19,240
Property, plant and equipment		—		8,967
Employee benefits		7,040		—
Allowance for bad debts and inventory reserves		718		—
Reserve for curtailment/shutdown		277		—
	$	8,035	$	28,207

9. Geographic and Product Information

The operations of the Company are comprised as follows:

	For the Ten-Month Period Ended October 31, 2001
Sales to customers
U.S.	$	581,154
Canada		64,795
Total sales and operating revenues	$	645,949
Assets
U.S.	$	267,012
Canada		32,824
Total assets	$	299,836

Sales by product line for the ten-month period ended October 31, 2001, were as follows:

	For the Ten-Month Period Ended October 31, 2001
Asset Category
Aluminum	48.8	%
Stainless steel	50.3
Other	0.9
	100.0	%

10. Pension Plans

Alcoa maintained various defined benefit pension plans that cover substantially all of RASCO’s employees. Substantially all of the U.S. employees of RASCO are covered by noncontributory defined benefit pension plans maintained by Alcoa. Plans covering salaried employees provide pension benefits based on a formula that

61

Reynolds Aluminum Supply Company

(The Distribution Business of Reynolds Metals Company)

Notes to Combined Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

considers length of service and earnings during years of service. Plans covering hourly employees generally provide a specific amount of benefits for each year of service. For purposes of these financial statements, the U.S. plans are accounted for as multi-employer plans as defined in SFAS No. 87, Employer’s Accounting for Pensions. Costs related to these multi-employer plans have been charged to RASCO based on the number of RASCO employees participating in the various plans on an average costs per employee. RSM maintains separate pension plans for certain Canadian employees.

As a result of the formation of Integris on November 1, 2001, it is probable that the U.S. employees covered by Alcoa plans will withdraw from the plans to participate in newly formed plans to be established by Integris. RASCO’s U.S. pension obligation is expected to be fully funded and therefore no obligation has been recognized as of October 31, 2001. RASCO’s domestic pension expense for the ten-month period ended October 31, 2001, was $808. There were no contributions due at October 31, 2001.

The table below reflects the status of RSM’s pension plans at October 31 as determined by actuarial valuation:

	For the Ten-Month Period Ended October 31, 2001
Change in benefit obligation
Benefit obligation at beginning of period—January 1, 2001	$	2,008
Service cost		85
Interest cost		117
Actuarial losses		(56	)
Benefits paid		(513	)
Benefit obligation at end of period—October 31, 2001		1,641
Change in plan assets
Fair value of plan assets at beginning of period—January 1, 2001		994
Actual return on plan assets		(39	)
Employer contribution		27
Benefits paid		(513	)
Fair value of plan assets at end of period—October 31, 2001		469
Funded status		(1,172	)
Unrecognized actuarial loss		130
Net amount recognized	$	(1,042	)

Amount recognized in the consolidated balance sheet:

	For the Ten-Month Period Ended October 31, 2001
Accrued benefit liability		$1,042
Net amount recognized		$1,042

62

Reynolds Aluminum Supply Company

(The Distribution Business of Reynolds Metals Company)

Notes to Combined Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

The components of net periodic benefit costs are reflected below:

	For the Ten-Month Period Ended October 31, 2001
Components of net periodic benefit costs
Service cost	$	85
Interest cost		117
Expected return on plan assets		50
	$	252

Weighted average assumptions used in the accounting for RSM’s plan follows:

	For the Ten-Month Period Ended October 31, 2001
Weighted average assumptions
Discount rate	6.00	%
Rate of compensation increase	3.66	%
Expected return on plan assets	6.00	%

Alcoa also sponsors a number of defined contribution pension plans. Expenses charged to RASCO for the period were $655,000.

11. Other Postretirement Benefits

Alcoa also maintains other postretirement benefit plans that provide most of RASCO’s U.S. retired employees with healthcare and life insurance benefits. Substantially, all employees may become eligible for these benefits if they work for RASCO until retirement age. For purposes of these financial statements, the U.S. plans are accounted for as multi-employer plans as defined by SFAS No. 106, Employer’s Accounting for Postretirement Benefits Other than Pensions. Costs related to these Alcoa plans have been charged to RASCO based on the number of RASCO employees participating in the various plans on an average costs per employee.

As a result of the formation of Integris on November 1, 2001, it is probable that the employees covered by this plan will withdraw from the plan to participate in a newly formed plan to be established by Integris. As a result, RASCO has recognized an unfunded postretirement benefit obligation of approximately $17,685 at October 31, 2001. These amounts were calculated assuming a discount rate of 7.0%. The plan is unfunded.

For measurement purposes, a 10% annual rate of increase in the per capita cost of covered healthcare benefits was assumed for 2001 and future years.

12. Contingent Liabilities

RASCO is subject to various claims and actions including those pertaining to environmental laws and regulations, product liability and health and safety matters arising in the ordinary course of business.

63

Reynolds Aluminum Supply Company

(The Distribution Business of Reynolds Metals Company)

Notes to Combined Financial Statements—(Continued)

(dollars in thousands, unless otherwise noted)

In early 2002, Alcoa became aware of asserted and potentially unasserted claims related to RASCO’s sale of certain aluminum products to maritime customers for use in the construction of ships prior to October 31, 2001. The matter is still in the preliminary stages of investigation. Therefore, it is not possible to determine the outcome or to estimate with any degree of accuracy the potential costs associated with these claims. Based on these facts, it is possible that future results of operations or liquidity could be materially affected. Due to this uncertainty, no amounts have been provided for such matters in the accompanying financial statements as of October 31, 2001. As a result of the formation of Integris on November 1, 2001, Alcoa has agreed to provide Integris with defense and indemnity to certain legal matters and claims.

Except for matters discussed above, management believes that the disposition of other claims and actions, either individually or in the aggregate, are not expected to have a material adverse effect on RASCO’s competitive or financial position. No assurance can be given, however, that the disposition of one or more of such claims or actions in a particular reporting period will not be material in relation to the reported results for such period.

64

EX-99.2

Exhibit 99.2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

    Ryerson Tull, Inc.:

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Ryerson Tull, Inc. and its subsidiaries at December 31, 2003 and December 31, 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 12 to the consolidated financial statements, on January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”

/s/    PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP

Chicago, Illinois

February 18, 2004, except for Note 18, for which the date is December 21, 2004

1

RYERSON TULL, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS

(Dollars in millions, except per share data)

	Year ended December 31,
	2003			2002			2001
Net sales	$	2,189.4		$	2,096.5		$	2,243.5
Cost of materials sold		1,766.7			1,685.9			1,841.1
Gross profit		422.7			410.6			402.4
Warehousing and delivery		226.4			226.6			245.8
Selling, general and administrative		187.5			196.6			203.8
Goodwill amortization		—			—			5.0
Adjustment to the gain on sale of Inland Engineered Materials Corporation		—			8.5			—
Restructuring and plant closure costs		6.2			2.7			19.4
(Gain) loss on sale of foreign interests		—			(4.1	)		3.3
Write-off of investment in MetalSite, Inc.		—			—			1.0
Gain on sale of assets		—			(10.9	)		(1.3	)
Operating profit (loss)		2.6			(8.8	)		(74.6	)
Other expense:
Other income and expense, net		0.1			(1.4	)		(5.9	)
Shares received on demutualization of insurance company		—			5.1			—
Interest and other expense on debt		(18.8	)		(14.6	)		(19.3	)
Income (loss) before income taxes		(16.1	)		(19.7	)		(99.8	)
Provision (benefit) for income taxes (Note 11)		(2.0	)		(7.3	)		(39.6	)
Income (loss) from continuing operations		(14.1	)		(12.4	)		(60.2	)
Discontinued operations—Inland Steel Company
Gain (loss) on sale (net of tax benefit of $1.0 in 2002)		—			(1.7	)		—
Income (loss) before cumulative effect of change in accounting principle		(14.1	)		(14.1	)		(60.2	)
Cumulative effect of change in accounting principle (net of tax benefit of $8.9 in 2002)		—			(82.2	)		—
Net income (loss)		(14.1	)		(96.3	)		(60.2	)
Dividend requirements for preferred stock		0.2			0.2			0.2
Net income (loss) applicable to common stock	$	(14.3	)	$	(96.5	)	$	(60.4	)
Per share of common stock
Basic:
Income (loss) from continuing operations	$	(0.58	)	$	(0.51	)	$	(2.44	)
Inland Steel Company—gain (loss) on sale		—			(0.07	)		—
Cumulative effect of change in accounting principle		—			(3.31	)		—
Basic earnings (loss) per share	$	(0.58	)	$	(3.89	)	$	(2.44	)
Diluted:
Income (loss) from continuing operations	$	(0.58	)	$	(0.51	)	$	(2.44	)
Inland Steel Company—gain (loss) on sale		—			(0.07	)		—
Cumulative effect of change in accounting principle		—			(3.31	)		—
Diluted earnings (loss) per share	$	(0.58	)	$	(3.89	)	$	(2.44	)
Retained earnings at beginning of year	$	339.9		$	441.4		$	506.8
Net income (loss) for the year		(14.1	)		(96.3	)		(60.2	)
Dividends declared:
Common ($0.20 per share)		(4.9	)		(5.0	)		(5.0	)
Preferred ($2.40 per share)		(0.2	)		(0.2	)		(0.2	)
Retained earnings at end of year	$	320.7		$	339.9		$	441.4

See Notes to Consolidated Financial Statements on pages 6-34.

2

RYERSON TULL, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollars in millions)

	Increase (decrease) in Cash Year ended December 31
	2003			2002			2001
Operating Activities
Net income (loss)	$	(14.1	)	$	(96.3	)	$	(60.2	)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization		23.9			25.0			31.8
Deferred income taxes		5.9			12.6			(7.2	)
Deferred employee benefit funding/cost		(47.1	)		(3.5	)		(2.1	)
Restructuring and plant closure costs, net of cash payments		2.2			(0.7	)		16.1
(Gain) loss from sale of ISC, net of tax		—			1.7			—
(Gain) loss on the sale of foreign interests		—			(4.1	)		3.3
Write-off of investment in MetalSite, Inc.		—			—			1.0
Gain from sale of assets		—			(10.9	)		(1.3	)
Shares received on demutualization of insurance company (Note 14)		—			(5.1	)		—
Cumulative effect of change in accounting principle		—			82.2			—
Change in:
Receivables		(29.3	)		(108.9	)		168.8
Inventories		16.0			(54.1	)		176.7
Other assets and income tax receivable		(1.3	)		4.8			2.0
Accounts payable		42.0			4.3			(21.2	)
Other accrued liabilities		(13.2	)		11.7			(33.0	)
Other items		2.4			(0.3	)		(2.3	)
Net adjustments		1.5			(45.3	)		332.6
Net cash provided by (used for) operating activities		(12.6	)		(141.6	)		272.4
Investing Activities
Capital expenditures		(19.4	)		(10.5	)		(13.4	)
Unrestricted proceeds from the sale of short-term investment (Note 14)		—			5.7			—
Investment in joint venture		(3.4	)		—			—
Proceeds from sale of investment in joint venture		—			4.1			2.9
Proceeds from sales of assets		5.0			12.0			5.1
Net cash provided by (used for) investing activities		(17.8	)		11.3			(5.4	)
Financing Activities
Long-term debt issued		—			120.0			—
Long-term debt retired		—			—			(142.2	)
Proceeds from credit facility borrowings		355.0			—			—
Repayments of credit facility borrowings		(195.0	)		—			—
Net short-term proceeds/(repayments) under credit facility		(114.0	)		—			(97.0	)
Borrowing agreement issuance costs		—			(5.4	)		(3.0	)
Net increase/(decrease) in book overdrafts		(9.4	)		13.1			(22.9	)
Dividends paid		(5.1	)		(5.2	)		(5.2	)
Acquisition of treasury stock		—			(0.1	)		—
Net cash provided by (used for) financing activities		31.5			122.4			(270.3	)
Net increase (decrease) in cash and cash equivalents		1.1			(7.9	)		(3.3	)
Cash and cash equivalents—beginning of year		12.6			20.5			23.8
Cash and cash equivalents—end of year	$	13.7		$	12.6		$	20.5
Supplemental Disclosures
Cash paid (received) during the year for:
Interest	$	17.3		$	11.3		$	23.9
Income taxes, net		(12.1	)		(27.3	)		(23.5	)

See Notes to Consolidated Financial Statements on pages 6-34.

3

RYERSON TULL, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEET

(Dollars in millions)

	At December 31
	2003			2002
Assets
Current assets:
Cash and cash equivalents	$	13.7		$	12.6
Restricted cash (Note 14)		1.1			1.2
Receivables less provision for allowances, claims and doubtful accounts of $11.7 and $9.9, respectively		257.8			228.5
Inventories (Note 2)		437.6			453.6
Income taxes receivable		4.2			—
Total current assets		714.4			695.9
Investments and advances		11.4			7.1
Property, plant and equipment, at cost, less accumulated depreciation (see details on page 32)		225.0			233.0
Deferred income taxes (Note 11)		146.0			147.7
Intangible pension asset (Note 9)		10.2			7.4
Deferred charges and other assets		7.4			10.4
Total assets	$	1,114.4		$	1,101.5
Liabilities
Current liabilities:
Accounts payable	$	144.9		$	112.2
Accrued liabilities:
Salaries, wages and commissions		18.3			18.6
Taxes		11.0			7.9
Interest on debt		4.8			4.4
Terminated facilities costs (Note 10)		6.8			7.0
Other accrued liabilities		11.0			24.8
Deferred income taxes (Note 11)		14.2			15.5
Total current liabilities		211.0			190.4
Long-term debt (Note 4)		266.3			220.4
Deferred employee benefits (Note 9)		254.8			285.1
Total liabilities		732.1			695.9
Commitments and contingencies (Note 16)
Stockholders’ Equity
Preferred stock, $1.00 par value, 15,000,000 shares authorized for all series, aggregate liquidation value of $3.5 in 2003 and 2002 (Note 5)		0.1			0.1
Common stock, $1.00 par value; authorized—100,000,000 shares; issued—50,556,350 shares (Notes 5 through 7)		50.6			50.6
Capital in excess of par value (Note 5)		861.2			861.7
Retained earnings		320.7			339.9
Restricted stock awards		(0.1	)		(0.2	)
Treasury stock at cost—Common stock of 25,730,465 shares in 2003 and 25,741,662 shares in 2002 (Note 5)		(752.0	)		(752.5	)
Accumulated other comprehensive income (Note 5)		(98.2	)		(94.0	)
Total stockholders’ equity		382.3			405.6
Total liabilities and stockholders’ equity	$	1,114.4		$	1,101.5

See Notes to Consolidated Financial Statements on pages 6-34.

4

RYERSON TULL, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Dollars in millions)

	Year ended December 31
	2003			2002			2001
Net income (loss)	$	(14.1	)	$	(96.3	)	$	(60.2	)
Other comprehensive income (loss):
Foreign currency translation adjustments		4.3			(0.1	)		2.2
Minimum pension liability adjustment, net of tax benefit of $5.1 in 2003, $29.5 benefit in 2002 and $29.6 benefit in 2001		(8.5	)		(44.7	)		(47.1	)
Comprehensive income (loss)	$	(18.3	)	$	(141.1	)	$	(105.1	)

SCHEDULES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

	At December 31
	2003		2002
Property, Plant and Equipment
Land and land improvements	$	27.5	$	28.2
Buildings, machinery and equipment		562.5		563.8
Transportation equipment		2.4		2.4
Total		592.4		594.4
Less: Accumulated depreciation		367.4		361.4
Net property, plant and equipment	$	225.0	$	233.0

See Notes to Consolidated Financial Statements on pages 6-34.

5

STATEMENT OF ACCOUNTING AND FINANCIAL POLICIES

Principles of Consolidation.    The Company consolidates entities in which it owns or controls more than 50% of the voting shares. All significant intercompany balances and transactions have been eliminated in consolidation. In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51” (FIN 46). FIN 46 requires that factors in addition to the voting interest in an entity be considered in determining whether an entity should be consolidated. In preparing these financial statements, the Company was required to apply the provisions of FIN 46 to transactions entered into after January 31, 2003.

Use of Estimates.    The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes to financial statements. Changes in such estimates may affect amounts reported in future periods.

Reclassification.    Certain items previously reported have been reclassified to conform with the 2003 presentation.

Revenue Recognition.    Revenue is recognized in accordance with SAB 101, “Revenue Recognition in Financial Statements.” Revenue is recognized upon shipment, which is substantially the same as recognizing revenue upon delivery to our customers given the proximity of our distribution sites to our customers.

Stock-Based Compensation.    Financial Accounting Standards Board Statement No. 123, “Accounting for Stock-Based Compensation,” (“SFAS 123”) encourages, but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company’s stock at the date of the grant over the amount an employee must pay to acquire the stock. Compensation cost for stock appreciation rights and performance equity units is recorded annually based on the quoted market price of the Company’s stock at the end of the period. The Company’s stock-based employee compensation plans are described more fully in Note 6.

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation for the years ended December 31, 2003, 2002 and 2001, respectively (in millions, except per share data):

	2003			2002			2001
Net income, as reported	$	(14.1	)	$	(96.3	)	$	(60.2	)
Deduct: Total stock-based employee compensation expense determined under fair value method for all stock option awards, net of related tax effects		1.5			1.7			1.7
Pro forma net income	$	(15.6	)	$	(98.0	)	$	(61.9	)
Earnings per share—as reported	$	(0.58	)	$	(3.89	)	$	(2.44	)
Earnings per share—pro forma	$	(0.64	)	$	(3.96	)	$	(2.51	)

Shipping and Handling Fees and Costs.    Shipping and handling fees billed to customers are classified in “Net Sales” in our Consolidated Statement of Operations and Reinvested Earnings. Shipping and handling costs, primarily distribution costs, are classified in “Warehousing and delivery” expense in our Consolidated Statement of Operations and Reinvested Earnings. These costs totaled $59.3 million in 2003, $58.1 million in 2002 and $64.1 million in 2001.

Benefits for Retired Employees.    The estimated cost of the Company’s defined benefit pension plan and its post-retirement medical benefits are determined annually by consulting actuaries. The cost of these benefits for retirees is accrued during their term of employment (see Note 9). Pensions are funded in accordance with the requirements of the Employee Retirement Security Act of 1974 into a trust established under the Company

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Pension Plan. Costs for retired employee medical benefits are funded when claims are submitted. Certain salaried employees are covered by a defined contribution plan, for which the cost is expensed in the period earned.

Per Share Results.    Basic per share results are based on the weighted average number of common shares outstanding and take into account the dividend requirements of preferred stock. Diluted per share results reflect the dilutive effect of outstanding stock options, the further dilutive effect of the assumed conversion into common stock of the outstanding shares of convertible preferred stock, and the elimination of the related preferred stock dividends.

Cash Equivalents.    Cash equivalents reflected in the financial statements are highly liquid, short-term investments with maturities of three months or less that are an integral part of the Company’s cash management portfolio. Checks issued in excess of funds on deposit at the bank represent “book” overdrafts and are reclassified to accounts payable. Amounts reclassified totaled $23.3 million and $32.7 million at December 31, 2003 and 2002, respectively.

Inventory Valuation.    Inventories are valued at cost, which is not in excess of market. Cost is determined by the last-in, first-out (“LIFO”) method.

Property, Plant and Equipment.    Property, plant and equipment are depreciated, for financial reporting purposes, using the straight-line method over the estimated useful lives of the assets. The provision for depreciation is based on the estimated useful lives of the assets (45 years for buildings and 14.5 years for machinery and equipment). Expenditures for normal repairs and maintenance are charged against income in the period incurred.

Long-lived Assets.    Long-lived assets and certain identifiable intangibles held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company estimates the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment is recognized.

Income Taxes.    The Company records operating loss and tax credit carryforwards and the estimated effect of temporary differences between the tax basis of assets and liabilities and the reported amounts in the Consolidated Balance Sheet. The Company follows detailed guidelines in each tax jurisdiction when reviewing tax assets recorded on the balance sheet and provides for valuation allowances as required.

Guarantees.    In November 2002, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Guarantees of Indebtedness of Others.” FIN 45 requires the disclosure of certain guarantees existing at December 31, 2002. In addition, FIN 45 requires the recognition of a liability for the fair value of the obligation for qualifying guarantee activities that are initiated or modified after December 31, 2002. Accordingly, the Company has applied the recognition provisions of FIN 45 prospectively to guarantee activities initiated after December 31, 2002. See Note 16 for a further discussion of guarantees.

Foreign Currency Translation.    The Company translates assets and liabilities of its foreign subsidiaries, where the functional currency is the local currency, into U.S. dollars at the current rate of exchange on the last day of the reporting period. Revenues and expenses are translated at the average monthly exchange rates prevailing during the year.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1:    Reorganization and Recapitalization

On February 25, 1999, the Company and its majority-owned subsidiary, Ryerson Tull, Inc. (“RT”), merged through the process of converting each share of RT Class A common stock into 0.61 share of Company common stock. After the merger, the Company changed its name from Inland Steel Industries, Inc. to Ryerson Tull, Inc. All references to RT in these financial statements refer to the pre-merger, majority-owned subsidiary of the Company.

The merger was accounted for as a purchase for financial reporting purposes. Under the purchase method of accounting, the assets and liabilities of RT in proportion to the 13 percent minority interest were recorded at their fair values at the effective time of the merger.

On July 16, 1998, Ispat International N.V. (“Ispat”) acquired Inland Steel Company (“ISC”), the Company’s wholly owned subsidiary that constituted the steel manufacturing and related operations segment of the Company’s consolidated operations, pursuant to an agreement and plan of merger dated May 27, 1998, as amended as of July 16, 1998 (the “ISC/Ispat Merger Agreement”), among the Company, ISC, Ispat and Inland Merger Sub, Inc. (an Ispat subsidiary). In the fourth quarter of 2000, the Company recorded a $7.5 million pretax charge related to Ispat’s claim for indemnification in connection with the resolution of a federal lawsuit. In the second quarter of 2002, the Company recorded an additional $2.7 million pretax charge related to Ispat’s claim for indemnification regarding environmental matters. In an agreement signed on September 15, 2003, the Company and Ispat settled all environmental and other indemnification claims between them related to the Company’s indemnification obligations under the ISC/Ispat Merger Agreement. See Note 16 regarding commitments and contingencies for a discussion of the settlement agreement.

Note 2:    Inventories

Inventories were classified on December 31 as follows:

	2003		2002
	(Dollars in Millions)
In process and finished products	$	437.4	$	453.3
Supplies		0.2		0.3
Total	$	437.6	$	453.6

Replacement costs for the LIFO inventories exceeded LIFO values by approximately $61 million and $39 million on December 31, 2003 and 2002, respectively.

Note 3:    Accounts Receivable Securitization

On December 20, 2002, the Company elected to terminate its trade receivables securitization facility and repurchase all interests in sold receivables at the face amount (See Note 4).

On March 29, 2001, the Company and certain of its subsidiaries completed arrangements for a $250 million 364-day trade receivables securitization facility with a group of financial institutions. The Company formed a special-purpose, wholly-owned, bankruptcy-remote subsidiary (“Ryerson Tull Receivables LLC”) for the sole purpose of buying receivables of certain subsidiaries of the Company and selling an undivided interest in substantially all trade accounts receivable to certain commercial paper conduits. On March 15, 2002, the facility was renewed for a 364-day period ending March 14, 2003, reduced from $250 million to $200 million, and modified certain termination events and covenants including, among other things, eliminating the provision

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requiring termination of the facility if the Company failed to maintain specified debt ratings on its long-term unsecured debt. This securitization facility included substantially all of the Company’s accounts receivable. Fundings under the facility were limited to the lesser of a funding base, comprised of eligible receivables, or $200 million.

Sales of accounts receivable were reflected as a reduction of “receivables less provisions for allowances, claims and doubtful accounts” in the Consolidated Balance Sheet and the proceeds received were included in cash flows from operating activities in the Consolidated Statement of Cash Flows. The repurchase of the interests in sold receivables was included in cash flows from operating activities in the Consolidated Statement of Cash Flows. Proceeds from the sales of receivables were less than the face amount of accounts receivable sold by an amount equal to a discount on sale that approximated the conduits’ financing cost of issuing their own commercial paper, which was backed by their ownership interests in the accounts receivable sold by the special purpose subsidiary, plus an agreed-upon margin. These costs, totaling $2.1 million in 2002 and $8.5 million in 2001, were charged to “other income and expense, net” in the Consolidated Statement of Operations.

Generally, the facility provided that as payments were collected from the sold accounts receivable, the special-purpose subsidiary could elect to have the commercial paper conduits reinvest the proceeds in new accounts receivable. The commercial paper conduits, in addition to their rights to collect payments from that portion of the interests in the accounts receivable that was owned by them, also had rights to collect payments from that portion of the ownership interest in the accounts receivable that was owned by the special-purpose subsidiary. In calculating the fair market value of the Company’s retained interest in the receivables, the book value of the receivables represented the best estimate of the fair market value due to the current nature of these receivables. The facility required the Company to comply with various affirmative or negative covenants and required early amortization if the special-purpose subsidiary did not maintain a minimum equity requirement. The facility also would terminate on the occurrence and failure to cure certain events, including, among other things, any failure of the special-purpose subsidiary to maintain certain ratios related to the collectability of the receivables, or the Company’s failure to maintain long-term unsecured debt ratings of at least B by Standard and Poor’s and B2 by Moody’s.

The table below summarizes certain cash flows from and paid to securitization trusts ($ in millions):

	Year ended December 31
	2003		2002			2001
Repurchase of sold securitizations	$	—	$	(120	)	$	—
Proceeds from new securitizations		—		—			200
Proceeds from collections reinvested		—		769			1,084

Note 4:    Long-Term Debt

Credit Facility

On December 20, 2002, the Company and its two main operating subsidiaries elected to establish a new four-year up to $450 million revolving credit facility that extends to December 19, 2006. The new facility is secured by inventory and trade receivables and guaranteed by the Company’s domestic subsidiaries. Contemporaneously, both the Company’s $200 million trade receivables securitization and its $175 million credit facility secured by inventory were cancelled, all outstanding borrowings under those facilities repaid and all interests in sold receivables repurchased, and letters of credit issued under the credit facility transferred to the new revolving credit facility. The Company also recorded in 2002 a pretax charge of $1.9 million (included in “Interest and other expense on debt” in the Consolidated Statements of Operations and Reinvested Earnings) to write-off the remaining unamortized issuance costs associated with the cancelled credit facility.

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At December 31, 2003, the Company had $166 million of borrowings, $47 million of letters of credit outstanding, and $151 million available under the $450 million revolving credit agreement. Total credit availability is limited by the amount of eligible account receivables and inventory pledged as collateral under the agreement, which aggregated $409 million at December 31, 2003, and further reduced by a $45 million availability block. $15 million of this availability block will become available if the Company meets certain financial ratios and the remaining $30 million will become available only upon the consent of lenders holding 85 percent of facility commitments. In addition, the availability blocks will increase each quarter beginning in March 2005 through the maturity of the Company’s 9 ¹/8% Notes in July 2006. (See discussion of Notes below). These blocked amounts can be used to repay the Notes and the increase in the availability block sets aside availability under the revolving credit to retire the Notes at maturity. The total increase in the availability block over the six quarters (first quarter of 2005 through June of 2006) will equal the outstanding principal value of the Notes, which is currently $100 million. Letters of credit issued under the facility reduce the amount available for borrowing. At year-end 2003, the weighted average interest rate on borrowings under the credit facility was 3.5 percent.

The revolving credit agreement also contains covenants that, among other things, restrict the payment of dividends, the amount of capital stock repurchases, the creation of certain kinds of secured indebtedness and of certain kinds of subsidiary debt, take or pay contracts, transactions with affiliates, mergers and consolidations, and sales of assets; and it contains cross-default provisions to other financing arrangements.

RT Notes

In July 1996, RT sold $150 million of 8 ¹/2% Notes, due July 15, 2001, and $100 million of 9 ¹/8% Notes, due July 15, 2006, in a public offering. The indenture under which the Notes were issued contains covenants limiting, among other things, the creation of secured indebtedness, sale and leaseback transactions, the repurchase of capital stock, transactions with affiliates, and mergers, consolidations and certain sales of assets. The Notes also include a cross-default provision in the event of a default in the revolving credit facility. On February 26, 1999, the indenture trustee agreed to a supplement to the indenture agreement allowing the Company to succeed its subsidiary, RT, as obligee for the Notes.

At December 31, 2003, $100 million of the Company’s 2006 Notes remain outstanding.

Regarding the 8 ¹/2% Notes, on July 16, 2001, the Company redeemed the $142.2 million outstanding balance that matured on that date.

Maturity of long-term debt due within five years is $266 million in 2006. See Note 16 regarding commitments and contingencies for other scheduled payments.

Note 5:    Capital Stock and Accumulated Other Comprehensive Income

On December 31, 2003, 5,954,864 shares of common stock remained reserved for issuance under the Company’s various stock plans and 80,003 shares are reserved for issuance upon conversion of shares of preferred stock.

The Series A $2.40 Cumulative Convertible Preferred Stock, $1.00 par value per share (“Series A Preferred Stock”), is convertible into common stock at the rate of one share of common stock for each share of Series A Preferred Stock and is redeemable, at the Company’s option, at $44 per share plus any accrued and unpaid dividends. Each such share is entitled to one vote and generally votes together with holders of common stocks as one class.

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The following table details changes in capital accounts:

	Common Stock			Treasury Stock					Preferred Stock Series A				Capital in Excess of Par Value			Accumulated Other Comprehensive Income
																Foreign Currency Translation			Minimum Pension Liability
	Shares	Dollars		Shares		Dollars			Shares		Dollars		Dollars
	(Shares in Thousands and Dollars in Millions)
Balance at January 1, 2001	50,556	$	50.6	(25,782	)	$	(754.1	)	81		$	0.1	$	862.8		$	(4.3	)	$	—
Issued under employee stock plans	—		—	5			0.2		—			—		(0.1	)		—			—
Conversion of Series A Preferred Stock	—		—	1			—		(1	)		—		—			—			—
Foreign currency translation	—		—	—			—		—			—		—			2.2			—
Minimum pension liability (net of tax of $29.6 cr.)	—		—	—			—		—			—		—			—			(47.1	)
Other changes	—		—	8			0.3		—			—		(0.2	)		—			—
Balance at December 31, 2001	50,556		50.6	(25,768	)		(753.6	)	80			0.1		862.5			(2.1	)		(47.1	)
Acquisition of treasury stock	—		—	(10	)		(0.1	)	—			—		—			—			—
Issued under employee stock plans	—		—	27			0.9		—			—		(0.6	)		—			—
Foreign currency translation	—		—	—			—		—			—		—			(0.1	)		—
Minimum pension liability (net of tax of $29.5 cr.)	—		—	—			—		—			—		—			—			(44.7	)
Other changes	—		—	9			0.3		—			—		(0.2	)		—			—
Balance at December 31, 2002	50,556		50.6	(25,742	)		(752.5	)	80			0.1		861.7			(2.2	)		(91.8	)
Acquisition of treasury stock	—		—	(2	)		—		—			—		—			—			—
Issued under employee stock plans	—		—	14			0.5		—			—		(0.5	)		—			—
Foreign currency translation	—		—	—			—		—			—		—			4.3			—
Minimum pension liability (net of tax of $5.1 cr.)	—		—	—			—		—			—		—			—			(8.5	)
Balance at December 31, 2003	50,556	$	50.6	(25,730	)	$	(752.0	)	80		$	0.1	$	861.2		$	2.1		$	(100.3	)

Note 6:    Stock Option Plans

The Company has adopted the disclosure-only provisions of FASB Statement No. 123, “Accounting for Stock-Based Compensation.” Accordingly, no compensation cost has been recognized for the stock option plans. Had compensation cost for the option plans been determined based on the fair value at the grant date for awards in 2003, 2002 and 2001 consistent with the provisions of FASB Statement No. 123, the Company’s net income and earnings per share would have been reduced to the pro forma amounts indicated below:

	2003			2002			2001
	(Dollars in Millions (except per share data))
Net income (loss)—as reported	$	(14.1	)	$	(96.3	)	$	(60.2	)
Net income (loss)—pro forma	$	(15.6	)	$	(98.0	)	$	(61.9	)
Earnings per share—as reported	$	(0.58	)	$	(3.89	)	$	(2.44	)
Earnings per share—pro forma	$	(0.64	)	$	(3.96	)	$	(2.51	)

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 2003: dividend yield of 1.00 percent; expected volatility of 50.31 percent; risk-free interest rate of 2.92 percent; and expected term of five years.

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Company Plan

The 2002 Incentive Stock Plan, approved by stockholders on May 8, 2002, provides for the issuance, pursuant to options and other awards, of 2.5 million shares of common stock plus shares available for issuance under the 1999 and 1995 Incentive Stock Plans, to officers and other key employees. As of December 31, 2003, a total of 2,041,695 shares were available for future grants. Options remain outstanding and exercisable under the 1999, 1995 and 1992 Incentive Stock Plans; however, no further options may be granted under these plans. Under the various plans, the per share option exercise price may not be less than 100 percent of the fair market value per share on the date of grant. Generally, options become exercisable over a three-year period with one-third becoming fully exercisable at each annual anniversary of grant. Options expire ten years from the date of grant. During 2003, options were granted to 13 executive officers under the 2002 Plan. The following summarizes the status of options under the plans for the periods indicated:

	Number of Shares		Option Exercise Price or Range Per Share		Weighted Average Exercise Price
Options (granted and unexercised) at December 31, 2000 (1,402,360 exercisable)	2,206,783		$	12.13-48.44	$	24.48
Granted	1,045,000			8.88		8.88
Exercised	—			—		—
Forfeited	(187,482	)		8.88-41.55		19.44
Expired	(161,817	)		17.13-41.55		26.71
Options (granted and unexercised) at December 31, 2001 (1,505,018 exercisable)	2,902,484			8.88-48.44		19.06
Granted	37,000			12.08		12.08
Exercised	(9,240	)		8.88		8.88
Forfeited	(75,154	)		8.88-30.88		26.22
Expired	(27,087	)		25.50-34.31		34.15
Options (granted and unexercised) at December 31, 2002 (2,008,396 exercisable)	2,828,003			8.88-48.44		18.67
Granted	1,127,000			6.63		6.63
Exercised	—			—		—
Forfeited	(181,836	)		6.63-41.55		23.97
Expired	(38,550	)		26.13-35.16		34.61
Options (granted and unexercised) at December 31, 2003 (2,326,937 exercisable)	3,734,617		$	6.63-48.44	$	14.61

The weighted-average fair value of options granted during 2003 was $2.86.

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The following table summarizes information about fixed-price stock options outstanding at December 31, 2003:

		Options Outstanding		Options Exercisable
Range of Exercise Prices	Number of Shares	Weighted- Average Remaining Contractual Life	Weighted- Average Exercise Price	Number of Shares	Weighted- Average Exercise Price
30.88	15,200	1/2 year	30.88	15,200	30.88
41.55 to 48.44	72,497	1/2 year	42.96	72,497	42.96
28.50 to 38.35	74,129	1 year	37.62	74,129	37.62
24.69 to 33.22	224,586	2 years	32.90	224,586	32.90
23.05	145,245	3 years	23.05	145,245	23.05
21.93 to 24.18	223,260	4 years	21.95	223,260	21.95
32.07	17,080	4 years	32.07	17,080	32.07
16.03 to 24.81	465,500	5 years	16.81	465,500	16.81
19.56	403,200	6 years	19.56	403,200	19.56
12.13	5,500	6 years	12.13	5,500	12.13
8.88	975,760	7 years	8.88	668,530	8.88
12.08	35,660	8 years	12.08	12,210	N/A
6.63	1,077,000	9 years	6.63	—	N/A

Stock appreciation rights (“SARs”) may also be granted with respect to shares subject to outstanding options. No SAR has been granted since 1990 under the Company Plan. However, in 1998, 90,000 SARs were granted under the Pre-merger Ryerson Tull 1996 Incentive Stock Plan and were substituted by 54,900 Company SARs after the merger of the Company and RT. SAR compensation expense recorded by the Company was not material for any of the last three years.

The 2002 Plan also provides, as did the 1999, 1995 and 1992 Plans, for the granting of restricted stock and performance awards to officers and other key employees. During 2003, no performance awards were granted and none were forfeited. Also during 2003, no shares of restricted stock were issued, 12,495 shares of previously granted restricted stock vested, while 2,000 shares were forfeited. During 2002, no performance awards were granted while 114 shares subject to performance awards were forfeited. Also during 2002, 19,000 shares of restricted stock were issued, 5,495 shares of previously granted restricted stock vested, while 610 shares were forfeited. During 2001, no performance awards were granted, while 3,337 shares subject to performance awards were forfeited. Also during 2001, 2,995 shares of restricted stock were issued, no shares of previously granted restricted stock vested, while 3,500 shares were forfeited.

At December 31, 2003, there were 17,000 shares of restricted stock issued, but not vested, and 426 shares from performance awards earned, but not issued and not vested.

Director Plan

The Ryerson Tull Directors’ 1999 Stock Option Plan, combined in 2003 with the Directors’ Compensation Plan (the “Directors’ Compensation Plan”), provided that each person who is a non-employee director as of the close of each annual meeting would be awarded a stock option for shares having a value determined by the Nominating and Governance Committee of the Board of Directors, historically set at $20,000 (based on the Black-Scholes option pricing model), and an exercise price equal to the fair market value of the Company’s common stock on the date of grant. Individuals who became non-employee directors other than at an annual meeting were at the time of their election or appointment as a non-employee director awarded stock options for shares having a value prorated to reflect a partial year’s service. The options awarded under the Directors’ Compensation Plan were not exercisable prior to the day after the six-month anniversary of the grant date and expire no later than 10 years after the date of grant. A total of 178,126 shares of the Company’s common stock is available for grant under the Directors’ Compensation Plan.

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On April 16, 2003, seven directors were granted a total of 35,700 option shares at an option price of $6.43 per share. Half of the options vested on October 17, 2003 with the remaining option shares vesting on April 16, 2004.

On May 8, 2002, seven directors were granted a total of 30,170 option shares at an option price of $11.21 per share. All of the option shares granted in 2002 have vested. On April 18, 2001, seven directors were granted a total of 31,990 option shares at an option price of $10.48 per share. All of the option shares granted in 2001 have vested.

Note 7:    Stockholder Rights Plan

Pursuant to a stockholder rights plan, on November 25, 1997, the Company’s Board of Directors declared a dividend distribution, payable to stockholders of record on December 17, 1997, of one preferred stock purchase right (a “Right”) for each outstanding share of the Company’s common stock. The Rights will expire December 17, 2007. On September 22, 1999, the stockholder rights plan was amended. Under this amended Plan, the Rights will separate from the common stock and a distribution will occur upon the earlier of (i) ten days following an announcement that a person or group has acquired beneficial ownership of 10 percent or more of the outstanding common stock or the date a person enters an agreement providing for certain acquisition transactions or (ii) ten business days following publication of a tender or exchange offer that would result in any person or group beneficially owning 10 percent or more of the common stock (or a later date as the Board determines). Any person that publicly announced prior to September 22, 1999 that it holds 10 percent or more of the outstanding common stock (“Existing 10% Stockholder”) will not cause a distribution to occur unless that person acquires additional common stock resulting in ownership of 15 percent or more.

In the event that any person or group acquires 10 percent or more of the outstanding shares of common stock (15% in the case of an Existing 10% Stockholder), each Right will entitle the holder, other than such acquiring person or group, to purchase that number of shares of common stock of the Company having a market value of twice the exercise price of the Right. At any time thereafter if the Company consummates certain business combination transactions or sells substantially all of its assets, each Right will entitle the holder, other than the person or group acquiring 10 percent or more of the outstanding shares of common stock, to purchase that number of shares of the surviving company stock which at the time of the transaction would have a market value of twice the exercise price of the Right. The preceding sentences will not apply to (i) persons who acquire common stock pursuant to an offer for all outstanding shares of common stock which the independent directors determine to be fair to and otherwise in the best interest of the Company and its stockholders after receiving advice from one or more investment banking firms and (ii) certain persons owning less than 15 percent of the outstanding common stock (20 percent of the outstanding common stock in the case of an Existing 10% Stockholder) who report their ownership on Schedule 13G under the Securities Exchange Act of 1934 or on Schedule 13D under the Exchange Act, provided that they do not state any intention to or reserve the right to control or influence the Company and such persons certify that they acquired their shares inadvertently and will not acquire any additional shares of common stock.

The Rights will not have voting rights and, subject to certain exceptions, will be redeemable at the option of the Company at a price of one cent per Right (subject to adjustments) at any time prior to the close of business on the fifteenth day following public announcement that a person or group has acquired beneficial ownership of 10 percent or more of the outstanding common stock or the date a person enters an agreement providing for certain acquisition transactions. Any Rights held by a person triggering a distribution date will become null and void. The Board may exchange all or part of the Rights, except for those acquired by the person or group acquiring 10 percent or more of the outstanding shares of common stock, for shares of common or preferred stock of the Company. Until a Right is exercised, the holder will have no rights as a stockholder. While the distribution of the Rights will not be taxable to stockholders or the Company, stockholders may recognize taxable income if the rights become exercisable.

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Note 8:    Derivatives and Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value.

Derivatives

The Company has only limited involvement with derivative financial instruments and does not use them for speculative or trading purposes.

Cash and Cash Equivalents

The carrying amount of cash equivalents approximates fair value because of the short maturity of those instruments.

Long-Term Debt

The estimated fair value of the Company’s long-term debt and the current portions thereof using quoted market prices of Company debt securities recently traded and market-based prices of similar securities for those securities not recently traded was $273 million at December 31, 2003 and $225 million at December 31, 2002, as compared with the carrying value of $266 million and $220 million at year-end 2003 and 2002, respectively.

Note 9:    Retirement Benefits

Prior to January 1, 1998, the Company’s non-contributory defined benefit pension plan covered certain employees, retirees and their beneficiaries. Benefits provided to participants of the plan were based on pay and years of service for salaried employees and years of service and a fixed rate or a rate determined by job grade for all wage employees, including employees under collective bargaining agreements.

Effective January 1, 1998, the Company froze the benefits accrued under its defined benefit pension plan for certain salaried employees, and instituted a defined contribution plan. Effective March 31, 2000, benefits for certain salaried employees of J. M. Tull Metals Company and AFCO Metals were similarly frozen, with the employees becoming participants in the Company’s defined contribution plan. Salaried employees who vested in their benefits accrued under the defined benefit plan at December 31, 1997, and March 31, 2000, are entitled to those benefits upon retirement. Certain transition rules have been established for those salaried employees meeting specified age and service requirements. For 2003, 2002 and 2001, expense recognized for such defined contribution plan was $3.6 million, $5.9 million and $6.5 million, respectively.

The Company has other deferred employee benefit plans, including a supplemental pension plan, the liability for which totaled $4.7 million at year-end 2003 and $4.8 million at year-end 2002.

The tables included below provide reconciliations of benefit obligations and fair value of plan assets of the Company plans as well as the funded status and components of net periodic benefit costs for each period related to each plan. The assumptions used to determine the information below related to Pension Benefits were as follows:

	2003		2002
Discount rate for calculating obligations	6.25	%	6.75	%
Discount rate for calculating net periodic benefit cost	6.75		7.50
Expected rate of return on plan assets	8.75		9.50
Rate of compensation increase	4.00		4.00

The expected rate of return on plan assets is 8.75% for 2004.

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The assumptions used to determine the information below related to Other Postretirement Benefits, primarily health care, were as follows:

	2003		2002
Discount rate for calculating obligations	6.00	%	6.75	%
Discount rate for calculating net periodic benefit cost	6.75		7.50
Rate of compensation increase	4.00		4.00

	Year ended September 30
	Pension Benefits						Other Benefits
	2003			2002			2003			2002
	(Dollars in millions)
Change in Benefit Obligation
Benefit obligation at beginning of year	$	379		$	359		$	175		$	162
Service cost		3			4			3			2
Interest cost		25			26			11			12
Plan amendments		4			—			(19	)		(2	)
Actuarial loss		31			15			21			10
Company restructuring		2			1			1			1
Benefits paid		(27	)		(26	)		(12	)		(10	)
Benefit obligation at end of year	$	417		$	379		$	180		$	175
Accumulated benefit obligation at end of year	$	415		$	378			N/A			N/A
Change in Plan Assets
Plan assets at fair value at beginning of year	$	245		$	294			—			—
Actual return on plan assets		41			(28	)		—			—
Employer contributions		56			5			12			10
Benefits paid (net of participant contributions)		(27	)		(26	)		(12	)		(10	)
Plan assets at fair value at end of year	$	315		$	245			—			—
Reconciliation of Prepaid (Accrued) and Total Amount Recognized
Funded status	$	(102	)	$	(134	)	$	(180	)	$	(175	)
Unrecognized net (gain)/loss		167			152			59			40
Unrecognized prior service cost		10			7			(32	)		(15	)
Prepaid (accrued) benefit cost at September 30		75			25			(153	)		(150	)
Change in account, October-December		—			—			3			3
Net amount recognized at December 31	$	75		$	25		$	(150	)	$	(147	)
Amounts recognized in statement of financial position consist of:
Prepaid (accrued) benefit cost	$	—		$	—		$	(153	)	$	(150	)
Accrued benefit liability		(100	)		(133	)		—			—
Intangible asset		10			7			—			—
Accumulated other comprehensive income		165			151			—			—
Change in account, October-December		—			—			3			3
Net amount recognized	$	75		$	25		$	(150	)	$	(147	)

For measurement purposes, the annual rate of increase in the per capita cost of covered health care benefits was 9 percent in 2003, grading down to 5 percent in 2009, the level at which it is expected to remain.

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	Pension Benefits						Other Benefits
	2003			2002			2003			2002
	(Dollars in millions)
Components of net periodic benefit cost
Service cost	$	3		$	4		$	3		$	2
Interest cost		25			26			11			12
Expected return on assets		(28	)		(30	)		—			—
Amortization of prior service cost		1			1			(2	)		(2	)
Recognized actuarial (gain)/loss		3			—			1			1
Net periodic benefit cost	$	4		$	1		$	13		$	13

The assumed health care cost trend rate has an effect on the amounts reported for the health care plans. For purposes of determining net periodic benefit cost, the annual rate of increase in the per capita cost of covered health care benefits was 10 percent in 2003, grading down to 5 percent in 2007. A one-percentage-point change in the assumed health care cost trend rate would have the following effects:

	1% increase		1% decrease
	(Dollars in Thousands)
Effect on service cost plus interest cost	$	514	$	(410	)
Effect on postretirement benefit obligation		3,323		(2,648	)

Additional Information

	Pension Benefits				Other Benefits
	2003		2002		2003	2002
	(Dollars in millions)
Increase in minimum liability included in other comprehensive income, net of tax	$	8.5	$	44.7	N/A	N/A

Pension Trust Assets

The expected long-term rate of return on pension trust assets is 8.75% based on the historical investment returns of the trust, the forecasted returns of the asset classes and a survey of comparable pension plan sponsors.

The Company’s pension trust weighted-average asset allocations at September 30, 2003 and 2002, by asset category are as follows:

	Trust Assets at September 30
	2003		2002
Equity securities	66.2	%	73.7	%
Debt securities	23.8		20.8
Real estate	5.2		5.5
Other	4.8		—
Total	100.0	%	100.0	%

The Compensation Committee of the Board of Directors has general supervisory authority over the Pension Trust Fund and approves the investment policies and plan asset target allocation. An internal management committee provides on-going oversight of plan assets in accordance with the approved policies and asset allocation ranges and has the authority to appoint and dismiss investment managers. The investment policy objectives are to maximize long-term return from a diversified pool of assets while minimizing the risk of large losses, and to maintain adequate liquidity to permit timely payment of all benefits. The policies include diversification requirements and restrictions on concentration in any one single issuer or asset class. The

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currently approved asset investment classes are cash; fixed income; domestic equities; international equities; real estate; private equities and hedge funds of funds. Company management allocates the plan asset among the approved investment classes and provides appropriate directions to the investment managers pursuant to such allocations. The approved target ranges and allocations as of September 30, 2003 and September 30, 2002 were as follows:

	Range		Target
Equity securities	30-85	%	75	%
Debt securities	5-50		10
Real estate	0-15		10
Other	0-15		5
Total			100	%

Equity securities include Ryerson Tull common stock in the amounts of $1.0 million (0.3 percent of total plan assets) and $0.8 million (0.3 percent of total plan assets) at September 30, 2003 and 2002, respectively.

Contributions

The Company has no required ERISA contributions for 2004, but may elect to make a voluntary contribution to improve the funded ratio of the plan. At December 31, 2003, the Company does not have an estimate of such potential contribution in 2004.

Note 10:    Restructuring Charge

2003

In the fourth quarter of 2003, the Company recorded a charge of $3.8 million as a result of consolidating plants in the Midwest and South regions of the United States. Included in the charge was severance for 58 employees. Also included was $0.9 million for additional rent at a facility that was closed in the 2000 restructuring. The restructuring actions associated with the $3.8 million charge will be completed by mid-2004. In the third quarter of 2003, the Company recorded a charge of $0.9 million as a result of consolidating plants in the East and Central Mountain regions and consolidating sales and administrative services in the Pacific Northwest. Included in the charge was severance for 53 employees. The restructuring actions associated with the $0.9 million charge have been completed. In the second quarter of 2003, the Company recorded a charge of $1.5 million as a result of workforce reductions. The charge consists of employee-related costs, including severance for 17 employees. The restructuring actions associated with the $1.5 million charge have been completed.

Excluding the $0.9 million adjustment to the 2000 restructuring, 2003 restructuring and plant closure costs totaled $5.3 million. This charge consists of employee-related and tenancy costs and will be used for future cash outlays. During 2003, the Company utilized $3.4 million of the $5.3 million charge. The December 31, 2003 reserve balance of $1.9 million is related primarily to employee costs and will be paid through 2005.

2002

In the second quarter of 2002, the Company recorded a charge of $2.0 million for costs associated with the closure of a facility in the southern United States. The charge consisted primarily of employee-related cash costs. Included in the charge was severance for 40 employees. The restructuring actions have been completed. During the first quarter of 2003, the Company utilized the remaining year-end 2002 reserve balance of $0.3 million.

2001

In the fourth quarter of 2001, the Company recorded a restructuring charge of $19.4 million as a result of workforce reductions and plant consolidation. In the third quarter of 2002, the Company recorded a charge of

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$0.7 million as an adjustment to the $19.4 million recorded in 2001 resulting in a total restructuring charge of $20.1 million. The $20.1 million charge consists of $10.3 million of non-cash asset write-offs and $9.8 million of future cash outlays for employee-related costs and tenancy costs. The additional $0.7 million charge recorded in 2002 was due to a reduction in the market value of assets in a multi-employer pension plan from the initial estimate in 2001 to the final calculation of the withdrawal liability in 2002. The remaining multi-employer pension plan withdrawal liability of $1.1 million will be funded through 2005. As part of the restructuring, certain facilities in Michigan were closed and the Company consolidated two facilities into one location in Chicago. Included in the charge was severance for 178 employees. The 2001 restructuring actions were completed by year-end 2002. During 2003, the Company utilized $1.7 million of the 2001 restructuring reserve. The December 31, 2003 reserve balance of $1.5 million is related to employee and tenancy costs.

In preparation for the Company’s planned disposition of one of the properties in Chicago, the Company retained an environmental consultant to conduct Phase I and Phase II environmental studies. Based on the consultant’s reports on environmental contaminants at the site, the Company believes that the $2 million reserve established in the fourth quarter of 2001 is adequate to cover potential remediation costs for environmental issues identified in the consultant’s reports.

2000

During 2000, the Company recorded a restructuring charge of $23.3 million, consisting of $10.7 million of asset write-offs and $12.6 million of future cash outlays for employee-related costs and tenancy costs. The charge was the result of realigning geographic divisions to improve responsiveness to local markets, exiting non-core businesses and centralizing administrative services to achieve economies of scale. Included in the charge was severance for 319 employees. The restructuring actions were completed by December 31, 2000. Based on court rulings in the fourth quarter of 2003, the Company recorded an additional $0.9 million reserve for future lease payments for a facility closed in the 2000 restructuring. During 2003, the Company utilized $1.0 million of the restructuring reserve. The December 31, 2003 reserve balance of $3.4 million is related to tenancy and other costs that will be paid through 2008.

Note 11:    Income Taxes

The elements of the provisions for income taxes related to continuing operations for each of the three years indicated below were as follows:

	Year ended December 31
	2003			2002			2001
	(Dollars in millions)
Current income taxes:
Federal	$	—		$	—		$	(1.8	)
State and foreign		0.5			1.4			(0.1	)
		0.5			1.4			(1.9	)
Deferred income taxes		(2.5	)		(8.7	)		(37.7	)
Total tax expense (benefit)	$	(2.0	)	$	(7.3	)	$	(39.6	)

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Income taxes on continuing operations differ from the amounts computed by applying the federal tax rate as follows:

	Year ended December 31
	2003			2002			2001
	(Dollars in millions)
Federal income tax expense computed at statutory tax rate of 35%	$	(5.6	)	$	(6.9	)	$	(34.9	)
Additional taxes or credits from:
State and local income taxes, net of federal income tax effect		(2.5	)		(3.0	)		(4.0	)
Non-deductible expenses		0.7			(0.5	)		2.9
Capital loss carryback		—			—			(2.3	)
Foreign losses not includable in federal taxable income		(0.3	)		(0.5	)		0.6
Canadian taxes		—			0.6			(0.5	)
Change in estimate		1.1			2.4			(1.0	)
Valuation allowance		4.5			0.6			—
All other, net		0.1			—			(0.4	)
Total income tax provision (benefit)	$	(2.0	)	$	(7.3	)	$	(39.6	)

The components of the deferred income tax assets and liabilities arising under FASB Statement No. 109 were as follows:

	December 31
	2003			2002
	(Dollars in Millions)
Deferred tax assets:
AMT tax credit carryforwards	$	60		$	56
FASB Statement No. 106 impact (post-retirement benefits other than pensions)		58			58
General business credit carryforwards		1			1
Federal net operating loss carryforwards		14			—
State net operating loss carryforwards		17			13
Bad debt allowances		4			4
Pension liability		37			49
Amortization (goodwill and purchase accounting adjustment)		13			15
Other deductible temporary differences		15			17
Less valuation allowances		(5	)		(1	)
		214			212
Deferred tax liabilities:
Fixed asset basis difference		47			48
Inventory basis difference		34			30
Other taxable temporary differences		1			2
		82			80
Net deferred tax asset	$	132		$	132

The Company had available at December 31, 2003, federal AMT credit carryforwards of approximately $60 million, which may be used indefinitely to reduce regular federal income taxes. The Company had available at December 31, 2003, federal net operating loss (“NOL”) carryforwards of approximately $14 million which expire during the years 2022 and 2023. The Company also had other federal general business credit carryforwards for tax purposes of approximately $1 million, which expire during the years 2004 through 2009. The Company believes that it is more likely than not that all of its federal tax credits and NOL’s will be realized.

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At December 31, 2003, the deferred tax asset related to the Company’s post-retirement benefits other than pensions (“FASB Statement No. 106 obligation”) was $58 million. At December 31, 2003, the Company also had a deferred tax asset related to the Company’s pension liability of $37 million. To the extent that future annual charges under FASB Statement No. 106 and the pension expense continue to exceed amounts deductible for tax purposes, this deferred tax asset will continue to grow. Thereafter, even if the Company should have a tax loss in any year in which the deductible amount would exceed the financial statement expense, the tax law provides for a 20-year carryforward period of that loss. Because of the long period that is available to realize these future tax benefits and the long-term nature of the related liabilities, these items are treated as having an indefinite reversal period and a valuation allowance for this deferred tax asset is not considered necessary.

The Company had $17 million of state NOL carryforwards available at December 31, 2003. The deferred tax asset for state NOL carryforwards as reviewed for recoverability based on historical taxable income, the expected reversals of existing temporary differences, tax planning strategies, and, most importantly, on projections of future taxable income. As a result of its analysis, the Company recorded an additional valuation allowance of $4.5 million in the current year as part of its income tax provision. The cumulative valuation allowance of $5.1 million as of December 31, 2003 relates to the NOL’s for thirteen specific state and local jurisdictions. Ten of these jurisdictions have a 3-5 year carryforward period, and all of the NOL’s associated with these ten jurisdictions have been included in the valuation allowance. In addition, a significant portion of the NOL’s for an additional three jurisdictions have been included in the valuation allowance to the extent that the Company does not expect to be able to utilize all of these specific NOL’s prior to their expiration in 2015-2023.

Note 12:    Goodwill

On January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). The Company has two reporting units, one comprised of its general line (“General Line”) service centers and the other comprised of its coil processing (“Coil Processing”) facilities. The Company estimated the fair value of its reporting units using a present value method that discounted future cash flows. The cash flow estimates incorporate assumptions on future cash flow growth, terminal values and discount rates. Any such valuation is sensitive to these assumptions. Because the fair value of each reporting unit was below its carrying value (including goodwill), application of SFAS 142 required the Company to complete the second step of the goodwill impairment test and compare the implied fair value of each reporting unit’s goodwill with the carrying value of that goodwill. As a result, the Company recorded an impairment charge of $91.1 million ($82.2 million after-tax) to write-off the entire goodwill amount as a cumulative effect of a change in accounting principle. The General Line goodwill impairment charge was $71.4 million after-tax while the Coil Processing goodwill impairment charge was $10.8 million after-tax.

The Financial Accounting Standards Board also issued Statement of Accounting Standards No. 141 (“SFAS 141”), “Business Combinations,” which requires all business combinations after June 30, 2001 to be accounted for under the purchase method.

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The following table presents a comparison of the 2003 results to 2002 and 2001 results adjusted to exclude goodwill amortization expense:

	In Millions (except per share data) Year ended December 31
	2003			2002			2001
Income (loss) before cumulative effect of change in accounting principle	$	(14.1	)	$	(14.1	)	$	(60.2	)
Cumulative effect of change in accounting principle		—			(82.2	)		—
Reported net income (loss)		(14.1	)		(96.3	)		(60.2	)
Addback: goodwill amortization, net of tax		—			—			4.2
Adjusted net income (loss)	$	(14.1	)	$	(96.3	)	$	(56.0	)
Basic earnings (loss) per share:
Reported net income (loss)	$	(0.58	)	$	(3.89	)	$	(2.44	)
Addback: goodwill amortization, net of tax		—			—			0.17
Adjusted net income (loss)	$	(0.58	)	$	(3.89	)	$	(2.27	)
Diluted earnings (loss) per share:
Reported net income (loss)	$	(0.58	)	$	(3.89	)	$	(2.44	)
Addback: goodwill amortization, net of tax		—			—			0.17
Adjusted net income (loss)	$	(0.58	)	$	(3.89	)	$	(2.27	)

Note 13:    Earnings Per Share

	2003			2002			2001
Basic earnings (loss) per share	(Dollars and Shares in Millions (except per share data))
Income (loss) from continuing operations	$	(14.1	)	$	(12.4	)	$	(60.2	)
Less preferred stock dividends		0.2			0.2			0.2
Income (loss) from continuing operations available to common stockholders		(14.3	)		(12.6	)		(60.4	)
Gain (loss) on sale of discontinued operations		—			(1.7	)		—
Income (loss) before cumulative effect of change in accounting principle		(14.3	)		(14.3	)		(60.4	)
Cumulative effect of change in accounting principle		—			(82.2	)		—
Net income (loss) available to common stockholders	$	(14.3	)	$	(96.5	)	$	(60.4	)
Average shares of common stock outstanding		24.8			24.8			24.8
Basic earnings (loss) per share
From continuing operations	$	(0.58	)	$	(0.51	)	$	(2.44	)
Gain (loss) on sale of discontinued operations		—			(0.07	)		—
Cumulative effect of change in accounting principle		—			(3.31	)		—
Basic earnings (loss) per share	$	(0.58	)	$	(3.89	)	$	(2.44	)

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	2003			2002			2001
Diluted earnings (loss) per share	(Dollars and Shares in Millions (except per share data))
Income (loss) from continuing operations available to common stockholders	$	(14.3	)	$	(12.6	)	$	(60.4	)
Gain (loss) on sale of discontinued operations		—			(1.7	)		—
Cumulative effect of change in accounting principle		—			(82.2	)		—
Net income (loss) available to common stockholders and assumed conversions	$	(14.3	)	$	(96.5	)	$	(60.4	)
Average shares of common stock outstanding		24.8			24.8			24.8
Dilutive effect of stock options		—			—			—
Shares outstanding for diluted earnings per share calculation		24.8			24.8			24.8
Diluted earnings (loss) per share
From continuing operations	$	(0.58	)	$	(0.51	)	$	(2.44	)
Gain (loss) on sale of discontinued operations		—			(0.07	)		—
Cumulative effect of change in accounting principle		—			(3.31	)		—
Diluted earnings (loss) per share	$	(0.58	)	$	(3.89	)	$	(2.44	)

Options to purchase 3,871,747 shares of common stock at prices ranging from $6.43 to $48.44 per share were outstanding under the Company’s Incentive Stock Plan and Directors’ Compensation Plan during 2003, but were not included in the computation of diluted EPS because to do so would be antidilutive. In 2002, options to purchase 2,929,433 shares of common stock at prices ranging from $8.88 to $48.44 per share were outstanding, but were not included in the computation of diluted EPS because to do so would be antidilutive. In 2001, options to purchase 2,973,744 shares of common stock at prices ranging from $8.88 to $48.44 per share were outstanding, but were not included in the computation of diluted EPS because to do so would be antidilutive.

Note 14:    Restricted Cash

In the first quarter of 2002, the Company recorded a $5.1 million pretax gain for the receipt of shares as a result of the demutualization of one of its insurance carriers, Prudential. This gain represents a portion of the total of $6.3 million of shares received. The remaining shares are attributable to participants of the optional life insurance plan and therefore the liability has been recorded as a benefit payable.

In the second quarter of 2002, the Company sold all of the shares received. As a result of the sale, the Company recorded in the second quarter income of $0.6 million, its allocable share of the gain on sale. This item is included in “other income and expense, net.” The portion of the sale proceeds attributable to optional life insurance plan participants ($1.3 million) is required to be used for the benefit of plan participants and as such, has been recorded as “restricted cash” in the Consolidated Balance Sheet. The restricted cash balance has earned interest totaling $0.1 million as of December 31, 2003. In the third quarter of 2002, the Company began making payments for the benefit of optional life insurance plan participants. At December 31, 2003, these payments totaled $0.3 million.

Note 15:    Revenue by Product

The following table shows the Company’s percentage of sales revenue by major product lines for 2003, 2002 and 2001:

	Percentage of Sales Revenues
Product Line	2003		2002		2001
Carbon flat rolled	37	%	34	%	35	%
Stainless and aluminum	34		33		30
Fabrication and carbon plate	13		15		16
Bars, tubing and structurals	13		14		15
Other	3		4		4
Total	100	%	100	%	100	%

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Note 16:    Commitments and Contingencies

ISC/Ispat Transaction

In 1998, Ryerson Tull, Inc. (together with its subsidiaries, the “Company”) sold its steel manufacturing segment (“ISC”) to Ispat International N.V. and certain of its affiliates (“Ispat”) pursuant to an agreement of sale and merger (the “ISC/Ispat Merger Agreement”). Pursuant to that agreement, the Company agreed to indemnify Ispat up to $90 million for losses incurred in connection with breaches of representations and warranties contained in the agreement and for expenditures and losses incurred relating to certain environmental liabilities. Ispat was required to make all such indemnification claims prior to March 31, 2000, other than claims related to tax matters, certain organizational matters and environmental matters. On May 29, 2001, the Company entered into a settlement agreement with Ispat that settled certain of such claims, other than those related to environmental liabilities and certain property tax matters, for approximately $15 million, which applied against the $90 million indemnification cap. Ispat also notified the Company of certain environmental matters of which Ispat was aware, of certain environmental expenses that it had incurred or might incur, of certain property tax matters and other matters arising under ISC/Ispat Merger Agreement for which Ispat believed it was entitled to indemnification under that agreement.

In an agreement signed on September 15, 2003 (the “Settlement Agreement”), the Company and Ispat settled all environmental and other indemnification claims between them related to the Company’s indemnification obligations under the ISC/Ispat Merger Agreement and certain matters related to the Ispat Pension Plan. The Settlement Agreement has the following key components:

On September 15, 2003, the Company contributed $21 million to the Ispat Pension Plan and Ispat released the Company from any remaining environmental and other indemnification obligations arising out of the ISC/Ispat transaction. The Company had previously established an accrual to cover this $21 million payment.

Ispat agreed to make specified monthly contributions to the Ispat Pension Plan totaling $29 million over the twelve-month period beginning January 2004, which will reduce and discharge the Company’s Letter of Credit to the PBGC on a dollar-for-dollar basis.

Ispat agreed to reimburse the Company for all fees or expenses (including interest expenses) payable to the provider or other person participating in the Letter of Credit (or any extension or replacement thereof) incurred by the Company in connection with (i) the Letter of Credit, (ii) any extension or replacement of the Letter of Credit, or (iii) any PBGC draw on the Letter of Credit or on any extension or replacement of the Letter of Credit.

If Ispat or any of its affiliates or subsidiaries receives any environmental insurance proceeds as a result of a claim related to the Company’s environmental indemnification obligations under the ISC/Ispat Merger Agreement, Ispat has agreed to pay the Company one-third of such proceeds (minus reimbursement of Ispat’s attorneys’ or other fees and expenses incurred in connection with pursuing such claims), up to a maximum amount of $21 million.

Under the ISC/Ispat Merger Agreement, Ispat and the Company agreed to the sharing of any property tax refunds resulting from the appeal of certain real estate property tax assessments. Under the Settlement Agreement, Ispat agreed to pay to the Ispat Pension Plan an amount equal to the cash received or the face amount of any credit or non-cash refund which Ispat is entitled to and receives related to property tax refunds or credits arising out of the appeals of certain real estate property tax assessments. Any such payments will pro-rata reduce Ispat’s monthly contributions to its pension plan as required by the Settlement Agreement, which contributions will reduce and discharge the Company’s Letter of Credit to the PBGC on a dollar-for-dollar basis.

On September 15, 2003, the Company entered into an agreement with Ispat and the PBGC under which the PBGC agreed that any contributions described above (the “Contributions”) made by Ispat or the Company to the Ispat Pension Plan would reduce and discharge the Letter of Credit and the Company’s guaranty on a dollar-for- dollar basis, until each of the Letter of Credit and the guaranty has been reduced to zero. The Company has a $5.5 million liability recorded related to this guaranty to the PBGC. Except for claims which could be made

24

under Employee Retirement Income Security Act of 1974, as amended, for the period in which the Company was the sponsor of the Ispat Pension Plan, after these Contributions have been made, the Company will have no further liability with respect to the Ispat Pension Plan.

Lease Obligations & Other

The Company has noncancellable operating leases for which future minimum rental commitments are estimated to total $71.4 million, including approximately $13.4 million in 2004, $11.8 million in 2005, $10.2 million in 2006, $7.3 million in 2007, $6.7 million in 2008 and $22.0 million thereafter.

Rental expense under operating leases totaled $16.4 million in 2003, $17.2 million in 2002 and $19.3 million in 2001.

To fulfill contractual requirements for certain customers in 2004, the Company has entered into certain fixed-price noncancellable contractual obligations. These purchase obligations aggregated $27 million at December 31, 2003.

There are various claims and pending actions against the Company other than those related to the ISC/Ispat transaction. The amount of liability, if any, for those claims and actions at December 31, 2003 is not determinable but, in the opinion of management, such liability, if any, will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Note 17:    Other Matters

Adjustment to the gain on sale of Inland Engineered Materials Corporation

In 2002, the Company recorded a pretax charge of $8.5 million in connection with the settlement of litigation. The charge was recorded as a selling price adjustment to the 1998 sale of Inland Engineered Materials Corporation.

China

In 2002, the Company realized a gain of $4.1 million representing the proceeds on the sale of the Company’s 49 percent interest in Shanghai Ryerson Limited.

Mexico

In the third quarter of 2003, the Company and G. Collado S.A. de C.V. formed Collado Ryerson, a joint venture that will enable the Company to expand service capability in Mexico. The Company invested $3.4 million in the joint venture for a 49 percent equity interest. The investment is accounted for as a cash outflow from investing activities.

In March 2000, the Company and Altos Hornos de Mexico, S.A. de C.V. (“AHMSA”) entered into an agreement to sell the Company’s 50 percent interest in their joint venture, Ryerson de Mexico, to AHMSA for $15 million, with payment due in July 2000. Upon finalizing the terms of payment for the sale, the Company exchanged its ownership in the joint venture for inventory and the joint venture’s Guadalajara facility. The cash received from the sale of the inventory, which amounted to $2.8 million in 2002 and $8.4 million in 2001, is accounted for as cash inflow from operating activities. The Company continues to own the Guadalajara facility. In a separate transaction, on December 27, 2001, the Company sold its subsidiary, Ryerson Industries de Mexico, S.A. de C.V. to Grupo Collado, S.A. de C.V. As a result the Company recorded a $3.3 million loss in 2001 on the sale of its Mexican interests.

25

Tata Ryerson Limited

The Company owns a 50 percent interest in Tata Ryerson Limited, a joint venture with the Tata Iron & Steel Corporation, an integrated steel manufacturer in India. Tata Ryerson Limited, which was formed in 1997, is a metals service center and processor with processing facilities at Jamshedpur, Pune, Bara, Howrah, Faridabad and Chennai, India. The impact of Tata Ryerson’s operations on the Company’s results of operations has not been material in any year held since inception.

IMF Steel International, Inc.

During the third quarter of 2001, the Company and The MacSteel Group dissolved their joint venture, IMF Steel International, Inc. As a result of the dissolution, the Company received $2.9 million, which is accounted for as a cash inflow from investing activities. This transaction had no impact on the net earnings for the period.

MetalSite, Inc.

During the second quarter of 2001, the Company recorded a $1.0 million charge to write-off its investment in MetalSite, Inc., which was an Internet steel marketplace that halted commercial operations in the second quarter.

Note 18:    Condensed Consolidating Financial Statements

In November 2004, the Company issued 3.50% Convertible Notes due 2024 that are unconditionally guaranteed on a senior unsecured basis by Ryerson Tull Procurement Corporation, an indirect wholly-owned subsidiary of the Company. In December 2004, the Company issued 8 ¼% Senior Notes due 2011 that are guaranteed by Ryerson Tull Procurement Corporation as well. The following condensed consolidating financial information as of December 31, 2003 and 2002 and for the three years ended December 31, 2003 is provided in lieu of separate financial statements for the Company and Ryerson Tull Procurement Corporation.

26

RYERSON TULL, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2003

(Dollars in millions)

	Parent			Guarantor			Non-guarantor			Eliminations			Consolidated
Net sales	$	—		$	1,669.4		$	2,207.1		$	(1,687.1	)	$	2,189.4
Cost of materials sold		—			1,651.4			1,802.4			(1,687.1	)		1,766.7
Gross profit		—			18.0			404.7			—			422.7
Warehousing and delivery		—			—			226.4			—			226.4
Selling, general and administrative expenses		0.7			2.9			183.9			—			187.5
Restructuring and plant closure costs		—			—			6.2			—			6.2
Operating profit (loss)		(0.7	)		15.1			(11.8	)		—			2.6
Other income and expense, net		0.1			—			—			—			0.1
Interest and other expense on debt		(13.2	)		—			(5.6	)		—			(18.8	)
Intercompany transactions:
Interest expense on intercompany loans		(20.3	)		(6.0	)		(28.3	)		54.6			—
Interest income on intercompany loans		1.4			5.8			47.4			(54.6	)		—
Income (loss) before income taxes		(32.7	)		14.9			1.7			—			(16.1	)
Provision (benefit) for income taxes		(7.8	)		5.9			(0.1	)		—			(2.0	)
Equity in (earnings) loss of subsidiaries		(10.8	)		—			(9.0	)		19.8			—
Net income (loss)	$	(14.1	)	$	9.0		$	10.8		$	(19.8	)	$	(14.1	)

27

RYERSON TULL, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2002

(Dollars in millions)

	Parent			Guarantor			Non-guarantor			Eliminations			Consolidated
Net sales	$	—		$	1,644.3		$	2,116.3		$	(1,664.1	)	$	2,096.5
Cost of materials sold		—			1,626.5			1,723.5			(1,664.1	)		1,685.9
Gross profit		—			17.8			392.8			—			410.6
Warehousing and delivery		—			—			226.6			—			226.6
Selling, general and administrative expenses		0.6			2.8			193.2			—			196.6
Adjustment to the gain on sale of Inland Engineered Materials Corporation		8.5			—			—			—			8.5
Restructuring and plant closure costs		—			—			2.7			—			2.7
Gain on the sale of foreign interest		—			—			(4.1	)		—			(4.1	)
Gain on the sale of assets		—			—			(10.9	)		—			(10.9	)
Operating profit (loss)		(9.1	)		15.0			(14.7	)		—			(8.8	)
Other income and expense, net		0.7			—			(2.1	)		—			(1.4	)
Shares received on demutualization of insurance company		5.1			—			—			—			5.1
Interest and other expense on debt		(14.2	)		—			(0.4	)		—			(14.6	)
Intercompany transactions:
Interest expense on intercompany loans		(22.8	)		(7.5	)		(37.6	)		67.9			—
Interest income on intercompany loans		3.1			5.1			59.7			(67.9	)		—
Income (loss) before income taxes		(37.2	)		12.6			4.9			—			(19.7	)
Provision (benefit) for income taxes		(9.5	)		5.0			(2.8	)					(7.3	)
Equity in (earnings) loss of subsidiaries		(15.3	)		—			(7.6	)		22.9			—
Income (loss) from continuing operations		(12.4	)		7.6			15.3			(22.9	)		(12.4	)
Discontinued operations—Inland Steel Company		(1.7	)		—			—			—			(1.7	)
Income (loss) before cumulative effect of change in accounting principle		(14.1	)		7.6			15.3			(22.9	)		(14.1	)
Cumulative effect of change in accounting principle		(82.2	)		—			(82.2	)		82.2			(82.2	)
Net income (loss)	$	(96.3	)	$	7.6		$	(66.9	)	$	59.3		$	(96.3	)

28

RYERSON TULL, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2001

(Dollars in millions)

	Parent			Guarantor			Non-guarantor			Eliminations			Consolidated
Net sales	$	—		$	1,560.5		$	2,270.5		$	(1,587.5	)	$	2,243.5
Cost of materials sold		—			1,543.7			1,884.9			(1,587.5	)		1,841.1
Gross profit		—			16.8			385.6			—			402.4
Warehousing and delivery		—			—			245.8			—			245.8
Selling, general and administrative expenses		0.2			2.4			201.2			—			203.8
Goodwill amortization		—			—			5.0			—			5.0
Restructuring and plant closure costs		—			—			19.4			—			19.4
Loss on the sale of foreign interest		3.3			—			—			—			3.3
Write-off of investment in MetalSite, Inc.		0.5			—			0.5			—			1.0
Gain on the sale of assets		—			—			(1.3	)		—			(1.3	)
Operating profit (loss)		(4.0	)		14.4			(85.0	)		—			(74.6	)
Other income and expense, net		2.4			—			(8.3	)		—			(5.9	)
Interest and other expense on debt		(19.0	)		—			(0.3	)		—			(19.3	)
Intercompany transactions:
Interest expense on intercompany loans		(23.1	)		(12.7	)		(47.4	)		83.2			—
Interest income on intercompany loans		2.6			8.5			72.1			(83.2	)		—
Income (loss) before income taxes		(41.1	)		10.2			(68.9	)		—			(99.8	)
Provision (benefit) for income taxes		(19.1	)		4.1			(24.6	)					(39.6	)
Equity in (earnings) loss of subsidiaries		38.2			—			(6.1	)		(32.1	)		—
Net income (loss)	$	(60.2	)	$	6.1		$	(38.2	)	$	32.1		$	(60.2	)

29

RYERSON TULL, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2003

(Dollars in Millions)

	Parent			Guarantor			Non-guarantor			Eliminations			Consolidated
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss)	$	(14.1	)	$	9.0		$	10.8		$	(19.8	)	$	(14.1	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	$	—		$	—		$	23.9		$	—			23.9
Equity in earnings of subsidiaries		(10.8	)		—			(9.0	)		19.8			—
Deferred income taxes		37.8			—			(31.9	)		—			5.9
Deferred employee benefit cost/funding		(0.1	)		—			(47.0	)		—			(47.1	)
Restructuring and plant closure costs		—			—			2.2			—			2.2
Change in:
Accounts receivable		(0.2	)		—			(29.1	)		—			(29.3	)
Inventory		—			—			16.0			—			16.0
Income tax receivable and other assets		(1.8	)		—			0.5			—			(1.3	)
Intercompany receivable/payable		(211.2	)		134.0			77.2			—			—
Accounts payable		—			27.6			14.4			—			42.0
Accrued liabilities		(11.5	)		0.8			(2.5	)		—			(13.2	)
Other items		(0.2	)		—			2.6						2.4
Net adjustments		(198.0	)		162.4			17.3			19.8			1.5
Net cash provided (used) by operating activities		(212.1	)		171.4			28.1			—			(12.6	)
INVESTING ACTIVITIES
Capital expenditures		—			—			(19.4	)		—			(19.4	)
Investments in and advances to joint ventures, net		—			—			(3.4	)		—			(3.4	)
Investments in non-guarantor subsidiaries		(132.4	)		—			—			132.4			—
Dividend received from subsidiary		130.0			—			—			(130.0	)		—
Loan to related companies		—			(3.8	)		(216.4	)		220.2			—
Loan repayment from related companies		—			—			157.2			(157.2	)		—
Proceeds from sales of assets		—			—			5.0			—			5.0
Net cash provided (used) in investing activities		(2.4	)		(3.8	)		(77.0	)		65.4			(17.8	)
FINANCING ACTIVITIES
Proceeds from credit facility borrowings		—			—			355.0			—			355.0
Repayment of credit facility borrowings		—			—			(195.0	)		—			(195.0	)
Net short-term proceeds/(repayments) under credit facility		—			—			(114.0	)		—			(114.0	)
Proceeds from intercompany borrowing		220.2			—			—			(220.2	)		—
Repayment of intercompany borrowing		—			(157.2	)		—			157.2			—
Net change in book overdrafts		—			(10.4	)		1.0			—			(9.4	)
Capital contribution from parent		—			—			132.4			(132.4	)		—
Dividends paid		(5.1	)		—			(130.0	)		130.0			(5.1	)
Net cash provided (used) by financing activities		215.1			(167.6	)		49.4			(65.4	)		31.5
Net change in cash and cash equivalents		0.6			—			0.5			—			1.1
Beginning cash and cash equivalents		0.4			—			12.2			—			12.6
Ending cash and cash equivalents	$	1.0		$	—		$	12.7		$	—		$	13.7

30

RYERSON TULL, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2002

(Dollars in Millions)

	Parent			Guarantor			Non- guarantor			Eliminations			Consolidated
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss)	$	(96.3	)	$	7.6		$	(66.9	)	$	59.3		$	(96.3	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		—			—			25.0			—			25.0
Equity in earnings of subsidiaries		(15.3	)		—			(7.6	)		22.9			—
Deferred income taxes		(1.6	)		—			14.2			—			12.6
Deferred employee benefit cost/funding		(0.1	)		—			(3.4	)		—			(3.5	)
Restructuring and plant closure costs		—			—			(0.7	)		—			(0.7	)
Gain on the sale of ISC, net of tax		1.7			—			—			—			1.7
Gain on sale of investment in joint venture		—			—			(4.1	)		—			(4.1	)
(Gain) or loss on sales of assets		—			—			(10.9	)		—			(10.9	)
Shares received on demutualization of insurance company		(5.1	)		—			—			—			(5.1	)
Cumulative effect of change in accounting principle		82.2			—			82.2			(82.2	)		82.2
Change in:
Accounts receivable		—			—			(108.9	)		—			(108.9	)
Inventory		—			—			(54.1	)		—			(54.1	)
Other assets		3.6			—			1.2			—			4.8
Intercompany receivable/payable		288.0			(154.7	)		(134.0	)		0.7			—
Accounts payable		(0.7	)		(0.2	)		5.9			(0.7	)		4.3
Accrued liabilities		8.2			0.6			2.9			—			11.7
Other items		(0.4	)		—			0.1						(0.3	)
Net adjustments		360.5			(154.3	)		(192.2	)		(59.3	)		(45.3	)
Net cash provided (used) by operating activities		264.2			(146.7	)		(259.1	)		—			(141.6	)
INVESTING ACTIVITIES
Capital expenditures		—			—			(10.5	)		—			(10.5	)
Unrestricted proceeds from sale of short-term investment		5.7			—			—			—			5.7
Proceeds from the sale of investment in joint venture		—			—			4.1			—			4.1
Loan to related companies								(131.5	)		131.5			—
Loan repayment from related companies								261.1			(261.1	)		—
Proceeds from sales of assets		—			—			12.0			—			12.0
Net cash provided (used) in investing activities		5.7			—			135.2			(129.6	)		11.3
FINANCING ACTIVITIES
Long-term debt issued		—			—			120.0			—			120.0
Proceeds from intercompany borrowing		—			131.5			—			(131.5	)		—
Repayment of intercompany borrowing		(261.1	)		—			—			261.1			—
Net change in book overdrafts		(0.2	)		15.2			(1.9	)		—			13.1
Borrowing agreement issuance costs		(5.4	)		—			—			—			(5.4	)
Dividends paid		(5.2	)		—			—			—			(5.2	)
Acquisition of treasury stock		(0.1	)		—			—			—			(0.1	)
Net cash provided (used) by financing activities		(272.0	)		146.7			118.1			129.6			122.4
Net change in cash and cash equivalents		(2.1	)		—			(5.8	)		—			(7.9	)
Beginning cash and cash equivalents		2.5			—			18.0			—			20.5
Ending cash and cash equivalents	$	0.4		$	—		$	12.2		$	—		$	12.6

31

RYERSON TULL, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2001

(Dollars in Millions)

	Parent			Guarantor			Non-guarantor			Eliminations			Consolidated
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss)	$	(60.2	)	$	6.1		$	(38.2	)	$	32.1		$	(60.2	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		—			—			31.8			—			31.8
Equity in earnings of subsidiaries		38.2			—			(6.1	)		(32.1	)		—
Deferred income taxes		(24.9	)		—			17.7			—			(7.2	)
Deferred employee benefit cost/funding		(0.4	)		—			(1.7	)		—			(2.1	)
Restructuring and plant closure costs		—			—			16.1			—			16.1
MetalSite write-off		0.5			—			0.5						1.0
(Gain) or loss on sales of assets		—			—			(1.3	)		—			(1.3	)
Loss on sale of foreign interests		3.3			—			—						3.3
Change in:
Accounts receivable		(0.9	)		—			169.7			—			168.8
Inventory		—			—			176.7			—			176.7
Other assets		2.2			—			(0.2	)		—			2.0
Intercompany receivable/payable		(93.0	)		176.6			(83.1	)		(0.5	)		—
Accounts payable		(0.2	)		(169.3	)		147.8			0.5			(21.2	)
Accrued liabilities		(21.6	)		0.5			(11.9	)		—			(33.0	)
Other items		3.9			—			(6.2	)		—			(2.3	)
Net adjustments		(92.9	)		7.8			449.8			(32.1	)		332.6
Net cash provided (used) by operating activities		(153.1	)		13.9			411.6			—			272.4
INVESTING ACTIVITIES
Capital expenditures		—			—			(13.4	)		—			(13.4	)
Proceeds from the sale of investment in joint venture		—			—			2.9			—			2.9
Investments in non-guarantor subsidiaries		(32.0	)		—			—			32.0			—
Loan to related companies		—			—			(437.5	)		437.5			—
Proceeds from sales of assets		—			—			5.1			—			5.1
Net cash provided (used) in investing activities		(32.0	)		—			(442.9	)		469.5			(5.4	)
FINANCING ACTIVITIES
Long-term debt retired		(142.2	)		—			—			—			(142.2	)
Increase/(decrease) in credit facility borrowing		(97.0	)		—			—			—			(97.0	)
Proceeds from intercompany borrowing		433.9			3.6			—			(437.5	)		—
Net change in book overdrafts		—			(17.5	)		(5.4	)		—			(22.9	)
Capital contribution from parent		—			—			32.0			(32.0	)		—
Borrowing agreement issuance costs		(3.0	)		—			—			—			(3.0	)
Dividends paid		(5.2	)		—			—			—			(5.2	)
Net cash provided (used) by financing activities		186.5			(13.9	)		26.6			(469.5	)		(270.3	)
Net change in cash and cash equivalents		1.4			—			(4.7	)		—			(3.3	)
Beginning cash and cash equivalents		1.1			—			22.7			—			23.8
Ending cash and cash equivalents	$	2.5		$	—		$	18.0		$	—		$	20.5

32

RYERSON TULL, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2003

(Dollars In Millions)

	Parent		Guarantor		Non-guarantor		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	1.0	$	—	$	12.7	$	—		$	13.7
Restricted cash		—		—		1.1		—			1.1
Receivables less provision for allowances, claims and doubtful accounts		0.2		—		257.6		—			257.8
Inventories		—		—		437.6		—			437.6
Income tax receivable		4.2		—		—		—			4.2
Intercompany receivable		—		130.1		—		(130.1	)		—
Total Current Assets		5.4		130.1		709.0		(130.1	)		714.4
Investments and advances		940.1		—		55.9		(984.6	)		11.4
Intercompany notes receivable		—		3.8		496.8		(500.6	)		—
Property, plant and equipment, at cost, less accumulated depreciation		—		—		225.0		—			225.0
Deferred income taxes		68.5		—		77.5		—			146.0
Intangible pension asset		—		—		10.2		—			10.2
Deferred charges and other assets		4.9		—		2.5		—			7.4
Total Assets	$	1,018.9	$	133.9	$	1,576.9	$	(1,615.3	)	$	1,114.4
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	3.1	$	87.6	$	54.2	$	—		$	144.9
Intercompany payable		23.5		—		106.6		(130.1	)		—
Salaries, wages and commissions		—		—		18.3		—			18.3
Other current liabilities		8.9		1.8		37.1		—			47.8
Total Current Liabilities		35.5		89.4		216.2		(130.1	)		211.0
Long-term debt		100.3		—		166.0		—			266.3
Long-term debt—intercompany		500.6		—		—		(500.6	)		—
Deferred employee benefits		0.2		—		254.6		—			254.8
Commitments and contingent liabilities
Total Liabilities		636.6		89.4		636.8		(630.7	)		732.1
Stockholders' Equity:
Preferred stock		0.1		—		—		—			0.1
Common stock		50.6		—		11.8		(11.8	)		50.6
Other stockholders' equity		331.6		44.5		928.3		(972.8	)		331.6
Total Stockholders' Equity		382.3		44.5		940.1		(984.6	)		382.3
Total Liabilities and Stockholders' Equity	$	1,018.9	$	133.9	$	1,576.9	$	(1,615.3	)	$	1,114.4

33

RYERSON TULL, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2002

(Dollars in Millions)

	Parent		Guarantor		Non-guarantor		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	0.4	$	—	$	12.2	$	—		$	12.6
Restricted cash		—		—		1.2		—			1.2
Receivables less provision for allowances, claims and doubtful accounts		—		—		228.5		—			228.5
Inventories		—		—		453.6		—			453.6
Intercompany receivable		—		264.3		—		(264.3	)		—
Total Current Assets		0.4		264.3		695.5		(264.3	)		695.9
Investments and advances		931.1		—		42.6		(966.6	)		7.1
Intercompany notes receivable		—		—		437.6		(437.6	)		—
Property, plant and equipment, at cost, less accumulated depreciation		—		—		233.0		—			233.0
Deferred income taxes		104.2		—		43.5		—			147.7
Intangible pension asset		—		—		7.4		—			7.4
Deferred charges and other assets		7.3		—		3.1		—			10.4
Total Assets	$	1,043.0	$	264.3	$	1,462.7	$	(1,668.5	)	$	1,101.5
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	3.1	$	70.4	$	38.7	$	—		$	112.2
Intercompany payable		234.8		—		29.5		(264.3	)		—
Salaries, wages and commissions		—		—		18.6		—			18.6
Other current liabilities		18.4		1.2		40.0		—			59.6
Total Current Liabilities		256.3		71.6		126.8		(264.3	)		190.4
Long-term debt		100.4		—		120.0		—			220.4
Long-term debt—intercompany		280.4		157.2		—		(437.6	)		—
Deferred employee benefits		0.3		—		284.8		—			285.1
Commitments and contingent liabilities
Total Liabilities		637.4		228.8		531.6		(701.9	)		695.9
Stockholders’ Equity:
Preferred stock		0.1		—		—		—			0.1
Common stock		50.6		—		11.8		(11.8	)		50.6
Other stockholders’ equity		354.9		35.5		919.3		(954.8	)		354.9
Total Stockholders’ Equity		405.6		35.5		931.1		(966.6	)		405.6
Total Liabilities and Stockholders’ Equity	$	1,043.0	$	264.3	$	1,462.7	$	(1,668.5	)	$	1,101.5

34

RYERSON TULL, INC. AND SUBSIDIARY COMPANIES

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

For the Years Ended December 31, 2003, 2002 and 2001

(Dollars in millions)

	Provisions for Allowances
Year Ended December 31,	Balance at Beginning of Year		Additions Charged to Income		Deductions from Reserves			Balance at End of Year
2003 Allowance for doubtful accounts	$	9.9	$	5.0	$	(3.2	)(A)	$	11.7
Valuation allowance—deferred tax assets		0.6		4.5		—			5.1
2002 Allowance for doubtful accounts	$	10.7	$	7.5	$	(6.8	)(A)	$	9.9
						(1.5	)(B)
Valuation allowance—deferred tax assets		—		0.6		—			0.6
2001 Allowance for doubtful accounts	$	24.5	$	7.3	$	(20.2	)(A)	$	10.7
						(0.9	)(B)
Valuation allowance—deferred tax assets		—		—		—			—

NOTES:

(A) Bad debts written off during the year

(B) Allowances granted during the year

35

EX-99.3

Exhibit 99.3

RYERSON TULL, INC.

AND SUBSIDIARY COMPANIES

Consolidated Statement of Operations (Unaudited)

	Dollars in Millions (except per share data)
	Three Months Ended September 30						Nine Months Ended September 30
	2004			2003			2004			2003
NET SALES	$	898.7		$	551.4		$	2,398.3		$	1,641.9
Cost of materials sold		747.4			448.4			1,961.6			1,325.7
GROSS PROFIT		151.3			103.0			436.7			316.2
Warehousing and delivery		63.3			56.8			183.5			169.5
Selling, general and administrative		56.8			46.5			161.9			141.5
Restructuring and plant closure costs		3.0			0.9			3.6			2.4
Gain on the sale of assets		(2.3	)		—			(4.7	)		—
OPERATING PROFIT (LOSS)		30.5			(1.2	)		92.4			2.8
Other revenue and expense, net		—			—			0.1			0.1
Interest and other expense on debt		(6.0	)		(4.2	)		(16.0	)		(14.0	)
INCOME (LOSS) BEFORE INCOME TAXES		24.5			(5.4	)		76.5			(11.1	)
PROVISION (BENEFIT) FOR INCOME TAXES		9.4			(2.2	)		29.3			(4.5	)
INCOME (LOSS) FROM CONTINUING OPERATIONS		15.1			(3.2	)		47.2			(6.6	)
DISCONTINUED OPERATIONS
Adjustment to gain on sale, net of tax		2.3			—			3.5			—
NET INCOME (LOSS)	$	17.4		$	(3.2	)	$	50.7		$	(6.6	)

See notes to consolidated financial statements

1

RYERSON TULL, INC.

AND SUBSIDIARY COMPANIES

Consolidated Statement of Operations (Unaudited)

	Dollars in Millions (except per share data)
	Three Months Ended September 30						Nine Months Ended September 30
	2004			2003			2004			2003
EARNINGS PER SHARE OF COMMON STOCK
Basic:
Income (loss) from continuing operations	$	0.61		$	(0.13	)	$	1.89		$	(0.27	)
Discontinued operations – adjustment to gain on sale		0.09			—			0.14			—
Net income (loss)	$	0.70		$	(0.13	)	$	2.03		$	(0.27	)
Diluted:
Income (loss) from continuing operations	$	0.59		$	(0.13	)	$	1.83		$	(0.27	)
Discontinued operations – adjustment to gain on sale		0.09			—			0.14			—
Net income (loss)	$	0.68		$	(0.13	)	$	1.97		$	(0.27	)
STATEMENT OF COMPREHENSIVE INCOME
NET INCOME (LOSS)	$	17.4		$	(3.2	)	$	50.7		$	(6.6	)
OTHER COMPREHENSIVE INCOME:
Unrealized loss on derivative instruments		(0.1	)		—			(0.1	)		—
Foreign currency translation adjustments		1.4			(0.5	)		1.8			3.5
COMPREHENSIVE INCOME (LOSS)	$	18.7		$	(3.7	)	$	52.4		$	(3.1	)

See notes to consolidated financial statements

2

RYERSON TULL, INC.

AND SUBSIDIARY COMPANIES

Consolidated Statement of Cash Flows (Unaudited)

	Dollars in Millions
	Nine Months Ended September 30
	2004			2003
OPERATING ACTIVITIES
Net income (loss)	$	50.7		$	(6.6	)
Adjustments to reconcile net income (loss) to net cash used for operating activities:
Depreciation and amortization		16.3			17.8
Deferred employee benefit funding/cost		(12.2	)		(49.9	)
Deferred income taxes		11.7			(1.1	)
Restructuring and plant closure costs		3.3			0.1
Discontinued operations - adjustment to the gain on the sale, net of tax		(3.5	)		—
Gain on the sale of assets		(4.7	)		—
Change in assets and liabilities:
Receivables		(205.0	)		(48.3	)
Inventories		(82.9	)		22.7
Other assets and income tax receivable		3.7			(7.8	)
Accounts payable		96.6			41.2
Accrued liabilities		9.1			(14.1	)
Other items		(0.2	)		2.3
Net adjustments		(167.8	)		(37.1	)
Net cash used for operating activities		(117.1	)		(43.7	)
INVESTING ACTIVITIES
Acquisitions, net of cash acquired		(37.9	)		—
Capital expenditures		(21.4	)		(8.9	)
Investment in joint venture		(2.0	)		(3.4	)
Loan to joint venture		(3.2	)		—
Loan repayment from joint venture		2.0			—
Proceeds from sales of assets		16.0			3.4
Net cash used for investing activities		(46.5	)		(8.9	)
FINANCING ACTIVITIES
Redemption of debt assumed in acquisition		(13.5	)		—
Proceeds from credit facility borrowings		486.0			205.0
Repayment of credit facility borrowings		(305.0	)		(80.0	)
Net short-term proceeds/(repayments) under credit facility		(6.0	)		(43.0	)
Net increase/(decrease) in book overdrafts		20.5			(20.5	)
Borrowing agreement issuance costs		(1.2	)		—
Dividends paid		(3.9	)		(3.9	)
Cash received on option exercises		1.6			—
Net cash provided by financing activities		178.5			57.6
Net increase in cash and cash equivalents		14.9			5.0
Cash and cash equivalents - beginning of year		13.7			12.6
Cash and cash equivalents - end of period	$	28.6		$	17.6
SUPPLEMENTAL DISCLOSURES
Cash paid (received) during the period for:
Interest	$	16.2		$	15.0
Income taxes, net		8.8			(2.4	)

See notes to consolidated financial statements

3

RYERSON TULL, INC.

AND SUBSIDIARY COMPANIES

Consolidated Balance Sheet (Unaudited)

	Dollars in Millions
	September 30, 2004				December 31, 2003
ASSETS
CURRENT ASSETS
Cash and cash equivalents			$	28.6			$	13.7
Restricted cash				0.9				1.1
Receivables less provision for allowances, claims and doubtful accounts of $13.2 and $11.7, respectively				487.8				257.8
Inventories				555.3				437.6
Income taxes receivable				—				4.2
Total current assets				1,072.6				714.4
INVESTMENTS AND ADVANCES				15.7				11.4
PROPERTY, PLANT AND EQUIPMENT
Valued on basis of cost	$	610.7			$	592.4
Less accumulated depreciation		373.1		237.6		367.4		225.0
DEFERRED INCOME TAXES				128.9				146.0
INTANGIBLE PENSION ASSET				10.2				10.2
OTHER ASSETS				9.5				7.4
Total Assets			$	1,474.5			$	1,114.4
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable			$	284.1			$	144.9
Salaries, wages and commissions				29.5				18.3
Other accrued liabilities				44.2				47.8
Total current liabilities				357.8				211.0
LONG-TERM DEBT				441.2				266.3
DEFERRED EMPLOYEE BENEFITS AND OTHER				242.6				254.8
Total liabilities				1,041.6				732.1
COMMITMENTS & CONTINGENCIES
STOCKHOLDERS’ EQUITY (Schedule A)				432.9				382.3
Total Liabilities and Stockholders’ Equity			$	1,474.5			$	1,114.4

See notes to consolidated financial statements

4

RYERSON TULL, INC.

AND SUBSIDIARY COMPANIES

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1 / FINANCIAL STATEMENTS

Results of operations for any interim period are not necessarily indicative of results of any other periods or for the year. The financial statements as of September 30, 2004 and for the three-month and nine-month periods ended September 30, 2004 and September 30, 2003 are unaudited, but in the opinion of management include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results for such periods. These financial statements should be read in conjunction with the financial statements and related notes contained in the Annual Report on Form 10-K for the year ended December 31, 2003.

NOTE 2 / INVENTORIES

Inventories were classified as follows:

	September 30, 2004		December 31, 2003
	(Dollars in Millions)
In process and finished products	$	555.0	$	437.4
Supplies		0.3		0.2
Total	$	555.3	$	437.6

Replacement costs for the LIFO inventories exceeded LIFO values by approximately $293 million and $61 million on September 30, 2004 and December 31, 2003, respectively.

5

NOTE 3 / EARNINGS PER SHARE

	Dollars and Shares in Millions (except per share data)
	Three Months Ended September 30					Nine Months Ended September 30
	2004		2003			2004		2003
Basic earnings (loss) per share
Income (loss) from continuing operations	$	15.1	$	(3.2	)	$	47.2	$	(6.6	)
Less preferred stock dividends		—		—			0.2		0.2
Income (loss) from continuing operations available to common shareholders	$	15.1	$	(3.2	)	$	47.0	$	(6.8	)
Discontinued operations - adjustment to the gain on sale		2.3		—			3.5		—
Net income (loss) available to common stockholders	$	17.4	$	(3.2	)	$	50.5	$	(6.8	)
Average shares of common stock outstanding		25.0		24.8			24.9		24.8
Basic earnings (loss) per share from continuing operations	$	0.61	$	(0.13	)	$	1.89	$	(0.27	)
Discontinued operations - adjustment to the gain on sale		0.09		—			0.14		—
Net income (loss) per share	$	0.70	$	(0.13	)	$	2.03	$	(0.27	)
Diluted earnings (loss) per share
Income (loss) from continuing operations available to common stockholders	$	15.1	$	(3.2	)	$	47.0	$	(6.8	)
Discontinued operations - adjustment to the gain on sale		2.3		—			3.5		—
Effect of convertible preferred stock		—		—			0.2		—
Net income (loss) available to common stockholders and assumed conversions	$	17.4	$	(3.2	)	$	50.7	$	(6.8	)
Average shares of common stock outstanding		25.0		24.8			24.9		24.8
Dilutive effect of stock options		0.6		—			0.6		—
Stock based compensation		—		—			0.1		—
Convertible securities		0.1		—			0.1		—
Shares outstanding for diluted earnings per share calculation		25.7		24.8			25.7		24.8
Diluted earnings (loss) per share from continuing operations	$	0.59	$	(0.13	)	$	1.83	$	(0.27	)
Discontinued operations - adjustment to the gain on sale		0.09		—			0.14		—
Net income (loss) per share	$	0.68	$	(0.13	)	$	1.97	$	(0.27	)

Options to purchase 1,564,890 shares of common stock at prices ranging from $16.03 per share to $38.35 per share were outstanding during the third quarter and first nine months of 2004, but were not included in the computation of diluted EPS because the options’ exercise price was greater than the average market price of the common shares. In the third quarter and the first nine months of 2003, options to purchase 3,983,676 shares of common stock at prices ranging from $6.43 per share to $48.44 per share were outstanding, but were not included in the computation of diluted EPS because to do so would be antidilutive.

6

NOTE 4 / STOCK OPTION PLANS

The Company has adopted the disclosure-only provisions of FASB Statement No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). Accordingly, no compensation cost has been recognized for the stock option plans. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation for the three month and nine month periods ended September 30, 2004 and 2003, respectively (in millions, except per share data):

	Three Months Ended September 30					Nine Months Ended September 30
	2004		2003			2004		2003
Net income (loss) - as reported	$	17.4	$	(3.2	)	$	50.7	$	(6.6	)
Deduct: Total stock-based employee compensation expense determined under fair value method for all stock option awards, net of related tax effects		0.2		0.4			0.6		1.2
Net income (loss) - pro forma	$	17.2	$	(3.6	)	$	50.1	$	(7.8	)
Earnings per share:
Basic - as reported	$	0.70	$	(0.13	)	$	2.03	$	(0.27	)
Basic - pro forma	$	0.69	$	(0.15	)	$	2.01	$	(0.32	)
Diluted - as reported	$	0.68	$	(0.13	)	$	1.97	$	(0.27	)
Diluted - pro forma	$	0.67	$	(0.15	)	$	1.95	$	(0.32	)

NOTE 5 / RESTRUCTURING CHARGES

2004

In the third quarter of 2004, the Company recorded a charge of $3.0 million as a result of consolidating two locations into one facility in the Northeast region of the United States. The charge consists of employee-related costs, including severance for 30 employees. The restructuring actions associated with the charge will be completed by year-end 2004. $0.2 million of the $3.0 million charge will be used for future cash outlays. During the third quarter of 2004, the Company utilized $2.8 million of the $3.0 million accrual.

In the second quarter of 2004, the Company recorded a charge of $0.6 million as a result of workforce reductions. The charge consists of employee-related costs, including severance for 3 employees. The restructuring actions associated with the charge will be completed by year-end 2004. $0.1 million of the $0.6 million charge will be used for future cash outlays. During the third quarter of 2004, the Company utilized the remaining accrual balance.

7

2003

In the fourth quarter of 2003, the Company recorded a charge of $3.8 million as a result of consolidating plants in the Midwest and South regions of the United States. Included in the charge was severance for 58 employees. Also included was $0.9 million for additional rent at a facility that was closed in the 2000 restructuring. The restructuring actions associated with the $3.8 million charge have been completed. In the third quarter of 2003, the Company recorded a charge of $0.9 million as a result of consolidating plants in the East and Central Mountain regions and consolidating sales and administrative services in the Pacific Northwest. Included in the charge was severance for 53 employees. The restructuring actions associated with the $0.9 million charge have been completed. In the second quarter of 2003, the Company recorded a charge of $1.5 million as a result of workforce reductions. The charge consisted of employee-related costs, including severance for 17 employees. The restructuring actions associated with the $1.5 million charge have been completed.

Excluding the $0.9 million adjustment to the 2000 restructuring, 2003 restructuring and plant closure costs totaled $5.3 million. This charge consisted of employee-related and tenancy costs and will be used for future cash outlays. During the third quarter and first nine months of 2004, the Company utilized $0.2 million and $1.4 million, respectively, of the $5.3 million charge. The September 30, 2004 accrual balance of $0.5 million is related primarily to employee costs and will be paid through 2005.

2002

In the second quarter of 2002, the Company recorded a charge of $2.0 million for costs associated with the closure of a facility in the southern United States. The charge consisted primarily of employee-related cash costs. Included in the charge was severance for 40 employees. The restructuring actions have been completed. During the first quarter of 2003, the Company utilized the remaining year-end 2002 accrual balance of $0.3 million.

2001

In the fourth quarter of 2001, the Company recorded a restructuring charge of $19.4 million as a result of workforce reductions and plant consolidation. In the third quarter of 2002, the Company recorded a charge of $0.7 million as an adjustment to the $19.4 million recorded in 2001 resulting in a total restructuring charge of $20.1 million. The $20.1 million charge consisted of $10.3 million of non-cash asset write-offs and $9.8 million of future cash outlays for employee-related costs and tenancy costs. The additional $0.7 million charge recorded in 2002 was due to a reduction in the market value of assets in a multi-employer pension plan from the initial estimate in 2001 to the final calculation of the withdrawal liability in 2002. The remaining multi-employer pension plan withdrawal liability of $0.6 million will be funded through 2005. As part of the restructuring, certain facilities in Michigan were closed and the Company consolidated two facilities into one location in Chicago. Included in the charge was severance for 178 employees. The 2001 restructuring actions were completed by year-end 2002. During the third quarter and first nine months of 2004, the Company utilized $0.2 million and $0.6 million, respectively, of the 2001 restructuring reserve. The September 30, 2004 accrual balance of $0.9 million is related to employee and tenancy costs.

In preparation for the Company’s planned disposition of one of the properties in Chicago, the Company retained an environmental consultant to conduct Phase I and Phase II environmental studies. Based on the consultant’s reports on environmental contaminants at the site, the Company believes that the $2 million reserve established in the fourth quarter of 2001 is adequate to cover potential remediation costs for environmental issues identified in the consultant’s reports.

8

2000

During 2000, the Company recorded a restructuring charge of $23.3 million, consisting of $10.7 million of asset write-offs and $12.6 million of future cash outlays for employee-related costs and tenancy costs. The charge was the result of realigning geographic divisions to improve responsiveness to local markets, exiting non-core businesses and centralizing administrative services to achieve economies of scale. Included in the charge was severance for 319 employees. The restructuring actions were completed by December 31, 2000. Based on court rulings in the fourth quarter of 2003, the Company recorded an additional $0.9 million reserve for future lease payments for a facility closed in the 2000 restructuring. During the third quarter and first nine months of 2004, the Company utilized $0.2 million and $1.1 million, respectively, of the restructuring reserve. The September 30, 2004 accrual balance of $2.3 million is related to tenancy and other costs that will be paid through 2008.

NOTE 6 / COMMITMENTS AND CONTINGENCIES

ISC/Ispat Transaction

In 1998, Ryerson Tull, Inc. (together with its subsidiaries, the “Company”) sold its steel manufacturing segment (“ISC”) to Ispat International N.V. and certain of its affiliates (“Ispat”) pursuant to an agreement of sale and merger (the “ISC/Ispat Merger Agreement”). Pursuant to that Agreement, the Company agreed to indemnify Ispat up to $90 million for losses incurred in connection with breaches of representations and warranties contained in the agreement and for expenditures and losses incurred relating to certain environmental liabilities. Ispat was required to make all such indemnification claims prior to March 31, 2000, other than claims related to tax matters, certain organizational matters and environmental matters.

As part of the sale transaction, the Inland Steel Industries Pension Plan was transferred to Ispat. As a condition to completing the ISC/Ispat transaction, Ispat and the Company entered into an agreement with the Pension Benefit Guaranty Corporation (“PBGC”) to provide certain financial commitments to reduce the underfunding of that pension plan (the “Ispat Pension Plan”) and to secure the Plan’s unfunded benefit liabilities on a termination basis. These commitments included a Company guaranty of $50 million of the obligations of Ispat to the PBGC in the event of a distress or involuntary termination of the Ispat Pension Plan.

In August 2001, the Company established a $50 million letter of credit in favor of the PBGC as security for the guaranty. Under the agreement among the PBGC, Ispat and the Company, by July 16, 2003, Ispat was required to take all necessary action to provide adequate replacement security to the PBGC, which would permit the Company to terminate the guaranty and the related letter of credit. Ispat did not provide the replacement security by such date, and the Company, in accordance with the aforementioned agreement, renewed its letter of credit on July 16, 2003 (the “PBGC Letter of Credit”), on a year-to-year basis until December 20, 2006. On September 15, 2003, the PBGC Letter of Credit and guaranty were reduced to $29 million pursuant to certain agreements signed on that date and described below.

On May 29, 2001, the Company entered into a settlement agreement with Ispat that settled certain claims, other than those related to environmental liabilities and certain property tax matters, for approximately $15 million, which applied against the $90 million indemnification cap. Ispat also notified the Company of certain environmental matters of which Ispat was aware, of certain environmental expenses that it had incurred or might incur, of certain property tax matters and of other matters arising under ISC/Ispat Merger Agreement for which Ispat believed it was entitled to indemnification under that Agreement.

On September 15, 2003, the Company and Ispat settled all environmental and other indemnification claims between them arising from the ISC/Ispat Merger Agreement, including certain matters related to the Ispat Pension Plan. The Company had previously established an accrual to cover these claims. Under this second settlement agreement:

• The Company contributed $21 million to the Ispat Pension Plan.

• Ispat released the Company from any remaining environmental and other indemnification obligations arising out of the ISC/Ispat Merger Agreement.

• Ispat agreed to make specified monthly contributions to the Ispat Pension Plan totaling $29 million over the twelve-month period beginning January 2004, to reduce and discharge the Company’s PBGC Letter of Credit, as described below.

• Ispat agreed to share certain property tax refunds and to pay to the Ispat Pension Plan an amount equal to the cash received or the face amount of any related credit or non-cash refund, which would pro-rata reduce Ispat’s monthly contributions.

• Ispat agreed to pay the Company one-third of any environmental insurance proceeds (less certain fees and expenses incurred in pursuing such claims), up to a maximum of $21 million, related to the Company’s environmental indemnifications under the ISC/Ispat Merger Agreement.

9

On September 15, 2003, the Company also entered into an agreement with Ispat and the PBGC under which the PBGC agreed that any contributions described above (the “Contributions”) made by Ispat or the Company to the Ispat Pension Plan would reduce and discharge the PBGC Letter of Credit and the Company’s guaranty on a dollar-for-dollar basis, until each was reduced to zero. The Company had a $5.5 million liability recorded related to this guaranty to the PBGC. Based on Ispat making the required monthly Contributions, the Company reduced the liability related to the PBGC guaranty to $3.5 million in the second quarter 2004 and recorded a favorable $1.2 million after-tax adjustment to the gain on the sale of ISC. During the third quarter of 2004, Ispat made the final monthly Contributions. As a result, the PBGC Letter of Credit was reduced to zero, and the Company reduced the liability related to the PBGC guaranty to zero and recorded a favorable $2.3 million after-tax adjustment to the gain on the sale of ISC. Except for claims which could be made under Employee Retirement Income Security Act of 1974, as amended, for the period in which the Company was the sponsor of the Ispat Pension Plan, the Company has no further liability with respect to the Ispat Pension Plan.

Other Matters

The Company is currently a defendant in antitrust litigation; the Company believes that this suit is without merit and has answered the complaint denying all claims and allegations. The trial court entered judgment on June 15, 2004 sustaining the Company’s summary judgment motion and those of the other defendants on all claims. On July 13, 2004, the plaintiff filed a notice of appeal. The Company cannot determine at this time whether any potential liability related to this litigation would materially affect its

10

financial position, results of operations, or cash flows. There are various claims and pending actions against the Company other than those related to the ISC/Ispat transaction and the antitrust litigation. The amount of liability, if any, for these claims and actions at September 30, 2004 is not determinable but, in the opinion of management, such liability, if any, will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

NOTE 7 / RESTRICTED CASH

In the first quarter of 2002, the Company recorded a $5.1 million pretax gain for the receipt of shares as a result of the demutualization of one of its insurance carriers, Prudential. This gain represented a portion of the total of $6.3 million of shares received. The remaining shares were attributable to participants of the optional life insurance plan and therefore the liability was recorded as a benefit payable.

In the second quarter of 2002, the Company sold all of the shares received. As a result of the sale, the Company recorded in that quarter income of $0.6 million, its allocable share of the gain on sale. This item was included in “other revenue and expense, net.” The portion of the sale proceeds attributable to optional life insurance plan participants ($1.3 million) is required to be used for the benefit of plan participants and as such, was recorded as “restricted cash” in the balance sheet. The restricted cash balance has earned interest totaling $0.1 million as of September 30, 2004. In the third quarter of 2002, the Company began making payments for the benefit of optional life insurance plan participants. At September 30, 2004, these payments totaled $0.5 million.

NOTE 8/RETIREMENT BENEFITS

In December 2003, the Financial Accounting Standards Board revised Statement of Financial Accounting Standards No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits” (SFAS 132). Beginning with the quarter ended on March 31, 2004, SFAS 132 requires the disclosure of the following information regarding the Corporation’s pension and postretirement medical benefit plans.

For the quarter ended September 30:

	Pension Benefits						Other Benefits
	Dollars in Millions
	2004			2003			2004			2003
Components of net periodic benefit cost
Service cost	$	1		$	1		$	1		$	1
Interest cost		6			6			2			3
Expected return on assets		(7	)		(7	)		—			—
Amortization of prior service cost		—			—			(1	)		(1	)
Recognized actuarial loss		2			1			1			—
Net periodic benefit cost	$	2		$	1		$	3		$	3

11

For the nine month period ended September 30:

	Pension Benefits						Other Benefits
	Dollars in Millions
	2004			2003			2004			2003
Components of net periodic benefit cost
Service cost	$	2		$	2		$	2		$	2
Interest cost		19			19			8			9
Expected return on assets		(22	)		(21	)		—			—
Amortization of prior service cost		1			1			(3	)		(2	)
Recognized actuarial loss		6			2			2			1
Net periodic benefit cost	$	6		$	3		$	9		$	10

Contributions

During the third quarter of 2004, the Company made a voluntary contribution of $21.5 million to the Pension Trust. At September 30, 2004, the Company does not have an estimate of potential contributions in the next twelve months.

NOTE 9/RECENT ACCOUNTING PRONOUNCEMENTS

In December 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 (the “Act”) was signed into law. The Act introduces a prescription drug benefit under Medicare and also provides that a nontaxable federal subsidy will be paid to sponsors of postretirement benefit plans that provide retirees with a drug benefit that is at least “actuarially equivalent” to the Medicare benefit. The Company sponsors certain postretirement medical benefit plans which provide prescription drugs and the receipt of the federal subsidy defined by the Act would reduce the liability for such plans and the annual cost.

In January 2004, the Financial Accounting Standards Board (FASB) issued a Staff Position document which acknowledged issues associated with measuring and recognizing the effect of the Act and allowed companies to elect to defer accounting for such effects until authoritative guidance on the accounting for the federal subsidy was issued. In May 2004, the FASB issued Staff Position SFAS No. 106-2 (“FSP 106-2”), “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003.” FSP 106-2 provides guidance on the accounting, disclosure, effective date and transition rules related to the Act. FSP 106-2 requires companies to account for the effect of the subsidy on benefits attributed to past service as an actuarial experience gain and as a reduction of the service cost component of net periodic health care costs for amounts attributable to current service, if the benefit provided is at least actuarially equivalent to the Medicare benefit. The Company adopted FSP 106-2 in the third quarter of 2004. However, the Company’s APBO and net periodic benefit cost do not reflect any amount associated with the subsidy because the Company is unable to conclude whether the benefits provided by the plan are actuarially equivalent to the Medicare Part D benefit under the Act.

In January 2003, the FASB issued FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities.” FIN 46 clarifies the application of Accounting Research Bulletin No. 51,

12

“Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or in which equity investors do not bear the residual economic risks. The interpretation was immediately applicable to variable interest entities (“VIEs”) created after January 31, 2003, and to VIEs in which an enterprise obtains an interest after that date. As originally issued, it applied in the fiscal year or interim period beginning after June 15, 2003, to VIEs in which an enterprise holds a variable interest that was acquired before February 1, 2003. In October 2003, the FASB issued FASB Staff Position No. 46-6, which defers the effective date for FIN 46 to the first interim or annual period ending after March 15, 2004 for non-special-purpose entity VIEs created before February 1, 2003. The adoption of FIN 46 did not have a material effect on the Company’s financial statements.

NOTE 10 / ACQUISITIONS

On July 30, 2004, the Company completed its acquisition of 100% of the equity interests in J & F Steel, LLC (“J&F”), in which the Company invested a total of approximately $59 million, by paying $37.9 million in cash, net of $4.5 million of cash acquired, and assuming $13.5 million of debt. The transaction is also subject to a post-closing adjustment, which is estimated to be $3.3 million. During the third quarter, the Company redeemed the $13.5 million of outstanding debt. The acquisition has been accounted for by the purchase method of accounting, and the purchase price has been allocated to assets acquired and liabilities assumed. The Company funded the transaction by drawing on its revolving credit facility.

The table below summarizes the pro forma results of the Company as if the acquisition of J & F had occurred at the beginning of the periods presented:

	Three Months Ended September 30, 2004		Nine Months Ended September 30, 2004
Net sales	$	914.3	$	2,501.7
Income before extraordinary items and cumulative effect of accounting changes		15.5		51.1
Net income		15.5		51.1
Net income per share:
Basic	$	0.71	$	2.19
Diluted	$	0.69	$	2.12

NOTE 11 / LONG-TERM DEBT

The Company amended its revolving credit agreement effective on July 30, 2004 simultaneous with the close of the J&F transaction. The amendment included an increase in the size of the facility from $450 million to $525 million and an extension of the final maturity date from December 19, 2006 to July 30, 2008. The amendment increased availability blocks from $45 million to $50 million, of which $30 million will become available only upon the consent of lenders holding 85 percent of facility commitments. The remaining $20 million of availability blocks becomes available if the Company meets certain financial ratios. At September 30, 2004, as a result of meeting required financial ratios, the $20 million availability block has become available for borrowing. All other items and conditions of the revolving credit agreement remain materially the same as previously disclosed. The Company paid $1.2 million in the third quarter of 2004 for fees associated with the amended revolving credit facility, which will be amortized over the term of the amended facility.

NOTE 12 / SUBSEQUENT EVENTS

On October 26, 2004, the Company announced the signing of a definitive agreement to purchase Integris Metals, Inc., a joint venture between Alcoa Inc. and BHP Billiton. Integris is one of North America’s largest metals service centers, with a strong position in aluminum and stainless steel. The Company will purchase all of the equity interest in Integris for $410 million plus assumption of Integris’ debt, which was approximately $250 million as of October 1, 2004. The transaction is expected to be completed by early 2005, subject to customary closing conditions and regulatory approval.

The Company plans to finance the acquisition with cash on hand and borrowing under new secured credit facilities, and intends to refinance a portion of these borrowings with funds raised through debt and/or equity offerings in the capital markets, as market conditions permit. The agreement provides for a breakup fee of up to $20 million to be paid by the Company if the transaction is not finalized by the end of January 2005. The Company’s preliminary estimate of goodwill associated with the acquisition is approximately $100 million.

On November 4, 2004, the Company, Inc. announced the pricing of its Rule 144A private offering of $145 million aggregate principal amount of 3.5% Convertible Senior Notes due 2024. The closing of the offering is expected to take place on November 10, 2004. The initial purchasers will have the option to purchase up to an additional aggregate principal amount of $30 million of Convertible Senior Notes. The issue price of the Notes is 100 percent of principal amount, with a discount to the initial purchasers of 3.0%.

Holders may convert the Notes into shares of the Company’s common stock on or prior to the trading day preceding the stated maturity, under the following circumstances: (1) during any calendar quarter (and only during such calendar quarter) commencing after December 31, 2004 and before January 1, 2020, if the last reported sale price of the Company’s common stock is greater than or equal to 125% of the conversion price for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding calendar quarter; (2) at any time on or after January 1, 2020, if the last reported sale price of the Company’s common stock on any date on or after December 31, 2019 is greater than or equal to 125% of the conversion price; (3) subject to certain limitations, during the five business day period after any five consecutive trading day period in which the trading price per Note for each day of that period was less than 98% of the product of the conversion rate and the last reported sale price of the Company’s common stock; (4) if the Company calls the Notes for redemption; or (5) upon the occurrence of certain corporate transactions.

The Notes will be convertible into the Company’s common stock at an initial conversion price of approximately $21.37 per share (equal to an initial conversion rate of 46.7880 shares per $1,000 principal amount) upon the occurrence of certain events. The conversion rate is subject to customary anti-dilution adjustments. Upon conversion, the Company will deliver cash equal to the lesser of the aggregate principal amount of the Notes being converted and the Company’s total conversion obligation (the market value of the common stock into which the Notes are convertible), and common stock in respect of the remainder. Following the issuance of the Notes, the payment of dividends on the Company’s common stock in excess of $0.20 per year per share will result in an adjustment to the conversion rate of the Notes.

NOTE 13 / CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

In November 2004, the Company issued 3.50% Convertible Notes due 2024 that are unconditionally guaranteed on a senior unsecured basis by Ryerson Tull Procurement Corporation, an indirect wholly-owned subsidiary of the Company. In December 2004, the Company issued 8 ¼% Senior Notes due 2011 that are guaranteed by Ryerson Tull Procurement Corporation as well. The following condensed consolidating financial information as of September 30, 2004 and December 31, 2003 and for the three and nine months ended September 30, 2004 and 2003 is provided in lieu of separate financial statements for the Company and Ryerson Tull Procurement Corporation.

13

RYERSON TULL, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2004

(Dollars in millions)

	Parent			Guarantor			Non-guarantor			Eliminations			Consolidated
Net sales	$	—		$	746.3		$	907.6		$	(755.2	)	$	898.7
Cost of materials sold		—			738.2			764.4			(755.2	)		747.4
Gross profit		—			8.1			143.2			—			151.3
Warehousing and delivery		—			—			63.3			—			63.3
Selling, general and administrative expenses		2.8			0.7			53.3			—			56.8
Restructuring and plant closure costs		—			—			3.0			—			3.0
Gain on the sale of assets		—			—			(2.3	)		—			(2.3	)
Operating profit (loss)		(2.8	)		7.4			25.9			—			30.5
Interest and other expense on debt		(3.1	)		—			(2.9	)		—			(6.0	)
Intercompany transactions:
Interest expense on intercompany loans		(6.2	)		(1.5	)		(5.8	)		13.5			—
Interest income on intercompany loans		0.5			0.9			12.1			(13.5	)		—
Income (loss) before income taxes		(11.6	)		6.8			29.3			—			24.5
Provision (benefit) for income taxes		(2.1	)		2.7			8.8			—			9.4
Equity in (earnings) loss of subsidiaries		(24.6	)		—			(4.1	)		28.7			—
Income (loss) from continuing operations		15.1			4.1			24.6			(28.7	)		15.1
Discontinued operations—Inland Steel Company		2.3			—			—			—			2.3
Net income (loss)	$	17.4		$	4.1		$	24.6		$	(28.7	)	$	17.4

14

RYERSON TULL, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2003

(Dollars in Millions)

	Parent			Guarantor			Non-guarantor			Eliminations			Consolidated
Net sales	$	—		$	420.0		$	555.8		$	(424.4	)	$	551.4
Cost of materials sold		—			415.5			457.3			(424.4	)		448.4
Gross profit		—			4.5			98.5			—			103.0
Warehousing and delivery		—			—			56.8			—			56.8
Selling, general and administrative expenses		0.2			0.7			45.6			—			46.5
Restructuring and plant closure costs		—			—			0.9			—			0.9
Operating profit (loss)		(0.2	)		3.8			(4.8	)		—			(1.2	)
Interest and other expense on debt		(3.2	)		—			(1.0	)		—			(4.2	)
Intercompany transactions:
Interest expense on intercompany loans		(5.1	)		(1.4	)		(6.8	)		13.3			—
Interest income on intercompany loans		0.2			1.8			11.3			(13.3	)		—
Income (loss) before income taxes		(8.3	)		4.2			(1.3	)		—			(5.4	)
Provision (benefit) for income taxes		(3.6	)		1.7			(0.3	)		—			(2.2	)
Equity in (earnings) loss of subsidiaries		(1.5	)		—			(2.5	)		4.0			—
Net income (loss)	$	(3.2	)	$	2.5		$	1.5		$	(4.0	)	$	(3.2	)

15

RYERSON TULL, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2004

(Dollars in millions)

	Parent			Guarantor			Non-guarantor			Eliminations			Consolidated
Net sales	$	—		$	1,903.7		$	2,419.8		$	(1,925.2	)	$	2,398.3
Cost of materials sold		—			1,883.1			2,003.7			(1,925.2	)		1,961.6
Gross profit		—			20.6			416.1			—			436.7
Warehousing and delivery		—			—			183.5			—			183.5
Selling, general and administrative expenses		(0.2	)		2.0			160.1			—			161.9
Restructuring and plant closure costs		—			—			3.6			—			3.6
Gain on the sale of assets		—			—			(4.7	)		—			(4.7	)
Operating profit (loss)		0.2			18.6			73.6			—			92.4
Other income and expense, net		0.1			—			—			—			0.1
Interest and other expense on debt		(9.3	)		—			(6.7	)		—			(16.0	)
Intercompany transactions:
Interest expense on intercompany loans		(17.2	)		(4.4	)		(18.2	)		39.8			—
Interest income on intercompany loans		1.3			3.5			35.0			(39.8	)		—
Income (loss) before income taxes		(24.9	)		17.7			83.7			—			76.5
Provision (benefit) for income taxes		(3.3	)		7.1			25.5			—			29.3
Equity in (earnings) loss of subsidiaries		(68.8	)		—			(10.6	)		79.4			—
Income (loss) from continuing operations		47.2			10.6			68.8			(79.4	)		47.2
Discontinued operations—Inland Steel Company		3.5			—			—			—			3.5
Net income (loss)	$	50.7		$	10.6		$	68.8		$	(79.4	)	$	50.7

16

RYERSON TULL, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2003

(Dollars in millions)

	Parent			Guarantor			Non-guarantor			Eliminations			Consolidated
Net sales	$	—		$	1,246.5		$	1,655.0		$	(1,259.6	)	$	1,641.9
Cost of materials sold		—			1,233.0			1,352.3			(1,259.6	)		1,325.7
Gross profit		—			13.5			302.7			—			316.2
Warehousing and delivery		—			—			169.5			—			169.5
Selling, general and administrative expenses		0.5			2.1			138.9			—			141.5
Restructuring and plant closure costs		—			—			2.4			—			2.4
Operating profit (loss)		(0.5	)		11.4			(8.1	)		—			2.8
Other income and expense, net		0.1			—			—			—			0.1
Interest and other expense on debt		(10.1	)		—			(3.9	)		—			(14.0	)
Intercompany transactions:
Interest expense on intercompany loans		(14.9	)		(4.6	)		(21.7	)		41.2			—
Interest income on intercompany loans		0.9			4.2			36.1			(41.2	)		—
Income (loss) before income taxes		(24.5	)		11.0			2.4			—			(11.1	)
Provision (benefit) for income taxes		(8.8	)		4.4			(0.1	)		—			(4.5	)
Equity in (earnings) loss of subsidiaries		(9.1	)		—			(6.6	)		15.7			—
Net income (loss)	$	(6.6	)	$	6.6		$	9.1		$	(15.7	)	$	(6.6	)

17

RYERSON TULL, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2004

(Dollars in Millions)

	Parent			Guarantor			Non-guarantor			Eliminations			Consolidated
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss)	$	50.7		$	10.6		$	68.8		$	(79.4	)	$	50.7
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		—			—			16.3			—			16.3
Equity in earnings of subsidiaries		(68.8	)		—			(10.6	)		79.4			—
(Gain) or loss on sales of assets		—			—			(4.7	)		—			(4.7	)
Deferred income taxes		(0.3	)		—			12.0			—			11.7
Deferred employee benefit cost/funding		—			—			(12.2	)		—			(12.2	)
Restructuring and plant closure costs		—			—			3.3			—			3.3
Gain on the sale of ISC, net of tax		(3.5	)		—			—			—			(3.5	)
Change in:
Accounts receivable		0.6			—			(205.6	)		—			(205.0	)
Inventory		—			—			(82.9	)		—			(82.9	)
Income tax receivable & other assets		5.0			—			(1.3	)		—			3.7
Intercompany receivable/payable		(1.8	)		(108.0	)		109.8			—			—
Accounts payable		(0.5	)		67.5			29.6			—			96.6
Accrued liabilities		(0.1	)		0.8			8.4			—			9.1
Other items		0.5			—			(0.7	)		—			(0.2	)
Net adjustments		(68.9	)		(39.7	)		(138.6	)		79.4			(167.8	)
Net cash provided (used) by operating activities		(18.2	)		(29.1	)		(69.8	)		—			(117.1	)
INVESTING ACTIVITIES
Acquisitions		—			—			(37.9	)		—			(37.9	)
Capital expenditures		—			—			(21.4	)		—			(21.4	)
Investments in joint venture		—			—			(2.0	)		—			(2.0	)
Investments in non-guarantor subsidiaries		(0.7	)		—						0.7			—
Loan to joint venture		(0.5	)		—			(2.7	)		—			(3.2	)
Loan repayment from joint venture		—			—			2.0			—			2.0
Loan to related companies		—			—			(43.7	)		43.7			—
Loan repayment from related companies		—			3.8			—			(3.8	)		—
Proceeds from sales of assets		—			—			16.0			—			16.0
Net cash provided (used) in investing activities		(1.2	)		3.8			(89.7	)		40.6			(46.5	)
FINANCING ACTIVITIES
Redemption of debt assumed in acquisition		—			—			(13.5	)		—			(13.5	)
Proceeds from credit facility borrowings		—			—			486.0			—			486.0
Repayment of credit facility borrowings		—			—			(305.0	)		—			(305.0	)
Net short-term proceeds/(repayments) under credit facility		—			—			(6.0	)		—			(6.0	)
Proceeds from intercompany borrowing		39.6			4.1			—			(43.7	)		—
Repayment of intercompany borrowing		(3.8	)		—			—			3.8			—
Net change in book overdrafts		—			21.2			(0.7	)		—			20.5
Capital contribution from parent company		—			—			0.7			(0.7	)		—
Borrowing agreement issuance costs		(1.2	)		—			—			—			(1.2	)
Dividends paid		(3.9	)		—			—			—			(3.9	)
Stock option exercise		1.6			—			—			—			1.6
Net cash provided (used) by financing activities		32.3			25.3			161.5			(40.6	)		178.5
Net change in cash and cash equivalents		12.9			—			2.0			—			14.9
Beginning cash and cash equivalents		1.0			—			12.7			—			13.7
Ending cash and cash equivalents	$	13.9		$	—		$	14.7		$	—		$	28.6

18

RYERSON TULL, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2003

(Dollars in Millions)

	Parent			Guarantor			Non-guarantor			Eliminations			Consolidated
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss)	$	(6.6	)	$	6.6		$	9.1		$	(15.7	)	$	(6.6	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		—			—			17.8			—			17.8
Equity in earnings of subsidiaries		(9.1	)		—			(6.6	)		15.7			—
Deferred income taxes		13.0			—			(14.1	)		—			(1.1	)
Deferred employee benefit cost/funding		—			—			(49.9	)		—			(49.9	)
Restructuring and plant closure costs		—			—			0.1			—			0.1
Change in:
Accounts receivable		(0.2	)		—			(48.1	)		—			(48.3	)
Inventory		—			—			22.7			—			22.7
Income tax receivable and other assets		(8.2	)		—			0.4			—			(7.8	)
Intercompany receivable/payable		(222.9	)		133.2			89.7			—			—
Accounts payable		—			36.6			4.6			—			41.2
Accrued liabilities		(13.8	)		0.5			(0.8	)		—			(14.1	)
Other items		0.1			—			2.2			—			2.3
Net adjustments		(241.1	)		170.3			18.0			15.7			(37.1	)
Net cash provided (used) by operating activities		(247.7	)		176.9			27.1			—			(43.7	)
INVESTING ACTIVITIES
Capital expenditures		—			—			(8.9	)		—			(8.9	)
Investments in and advances to joint ventures, net		—			—			(3.4	)		—			(3.4	)
Investments in non-guarantor subsidiaries		(132.4	)		—			—			132.4			—
Dividend received from subsidiary		130.0			—			—			(130.0	)		—
Loan to related companies		—			(2.2	)		(252.6	)		254.8			—
Loan repayment from related companies		—			—			157.2			(157.2	)		—
Proceeds from sales of assets		—			—			3.4			—			3.4
Net cash provided (used) in investing activities		(2.4	)		(2.2	)		(104.3	)		100.0			(8.9	)
FINANCING ACTIVITIES
Proceeds from credit facility borrowings		—			—			205.0			—			205.0
Repayment of credit facility borrowings					—			(80.0	)		—			(80.0	)
Net short-term proceeds/(repayments) under credit facility		—			—			(43.0	)		—			(43.0	)
Proceeds from intercompany borrowing		254.8			—			—			(254.8	)		—
Repayment of intercompany borrowing		—			(157.2	)		—			157.2			—
Net change in book overdrafts		—			(17.5	)		(3.0	)		—			(20.5	)
Capital contribution from parent company		—			—			132.4			(132.4	)		—
Dividends paid		(3.9	)		—			(130.0	)		130.0			(3.9	)
Net cash provided (used) by financing activities		250.9			(174.7	)		81.4			(100.0	)		57.6
Net change in cash and cash equivalents		0.8			—			4.2			—			5.0
Beginning cash and cash equivalents		0.4			—			12.2			—			12.6
Ending cash and cash equivalents	$	1.2		$	—		$	16.4		$	—		$	17.6

19

RYERSON TULL, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

SEPTEMBER 30, 2004

(Dollars in Millions)

	Parent		Guarantor		Non-guarantor		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	13.9	$	—	$	14.7	$	—		$	28.6
Restricted cash		—		—		0.9		—			0.9
Receivables less provision for allowances, claims and doubtful accounts		0.1		—		487.7		—			487.8
Inventories		—		—		555.3		—			555.3
Intercompany receivable		—		238.2		—		(238.2	)		—
Total Current Assets		14.0		238.2		1,058.6		(238.2	)		1,072.6
Investments and advances		1,011.3		—		70.8		(1,066.4	)		15.7
Intercompany notes receivable		—		—		540.5		(540.5	)		—
Property, plant and equipment, at cost, less accumulated depreciation		—		—		237.6		—			237.6
Deferred income taxes		66.3		—		62.6		—			128.9
Intangible pension asset		—		—		10.2		—			10.2
Deferred charges and other assets		5.3		—		4.2		—			9.5
Total Assets	$	1,096.9	$	238.2	$	1,984.5	$	(1,845.1	)	$	1,474.5
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	2.6	$	176.3	$	105.2	$	—		$	284.1
Intercompany payable		21.8		—		216.4		(238.2	)		—
Salaries, wages and commissions		—		—		29.5		—			29.5
Other current liabilities		2.8		2.7		38.7		—			44.2
Total Current Liabilities		27.2		179.0		389.8		(238.2	)		357.8
Long-term debt		100.2		—		341.0		—			441.2
Long-term debt—intercompany		536.4		4.1		—		(540.5	)		—
Deferred employee benefits		0.2		—		242.4		—			242.6
Commitments and contingent liabilities
Total Liabilities		664.0		183.1		973.2		(778.7	)		1,041.6
Stockholders’ Equity:
Preferred stock		0.1		—		—		—			0.1
Common stock		50.6		—		11.8		(11.8	)		50.6
Other stockholders’ equity		382.2		55.1		999.5		(1,054.6	)		382.2
Total Stockholders’ Equity		432.9		55.1		1,011.3		(1,066.4	)		432.9
Total Liabilities and Stockholders’ Equity	$	1,096.9	$	238.2	$	1,984.5	$	(1,845.1	)	$	1,474.5

20

RYERSON TULL, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2003

(Dollars In Millions)

	Parent		Guarantor		Non-guarantor		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	1.0	$	—	$	12.7	$	—		$	13.7
Restricted cash		—		—		1.1		—			1.1
Receivables less provision for allowances, claims and doubtful accounts		0.2		—		257.6		—			257.8
Inventories		—		—		437.6		—			437.6
Income tax receivable		4.2		—		—		—			4.2
Intercompany receivable		—		130.1		—		(130.1	)		—
Total Current Assets		5.4		130.1		709.0		(130.1	)		714.4
Investments and advances		940.1		—		55.9		(984.6	)		11.4
Intercompany notes receivable		—		3.8		496.8		(500.6	)		—
Property, plant and equipment, at cost, less accumulated depreciation		—		—		225.0		—			225.0
Deferred income taxes		68.5		—		77.5		—			146.0
Intangible pension asset		—		—		10.2		—			10.2
Deferred charges and other assets		4.9		—		2.5		—			7.4
Total Assets	$	1,018.9	$	133.9	$	1,576.9	$	(1,615.3	)	$	1,114.4
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	3.1	$	87.6	$	54.2	$	—		$	144.9
Intercompany payable		23.5		—		106.6		(130.1	)		—
Salaries, wages and commissions		—		—		18.3		—			18.3
Other current liabilities		8.9		1.8		37.1		—			47.8
Total Current Liabilities		35.5		89.4		216.2		(130.1	)		211.0
Long-term debt		100.3		—		166.0		—			266.3
Long-term debt—intercompany		500.6		—		—		(500.6	)		—
Deferred employee benefits		0.2		—		254.6		—			254.8
Commitments and contingent liabilities
Total Liabilities		636.6		89.4		636.8		(630.7	)		732.1
Stockholders' Equity:
Preferred stock		0.1		—		—		—			0.1
Common stock		50.6		—		11.8		(11.8	)		50.6
Other stockholders' equity		331.6		44.5		928.3		(972.8	)		331.6
Total Stockholders' Equity		382.3		44.5		940.1		(984.6	)		382.3
Total Liabilities and Stockholders' Equity	$	1,018.9	$	133.9	$	1,576.9	$	(1,615.3	)	$	1,114.4

21

EX-99.4

Exhibit 99.4

Unaudited Pro Forma Condensed Consolidated Financial Data

The following unaudited pro forma condensed consolidated financial data consists of an unaudited pro forma condensed consolidated balance sheet as of September 30, 2004 and unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2003 and for the nine months ended September 30, 2004. The pro forma statements reflect the effects of our July 30, 2004 acquisition of J & F Steel, the effects of our issuance of $175.0 million of 3.50% Convertible Senior Notes due 2024 in November 2004, the effects of our issuance of $150 million of 8 ¹/4% Senior Notes due 2011 in December 2004 and the effects of our pending acquisition of Integris. We invested approximately $45.5 million, including acquisition costs and an estimated post-closing adjustment totaling $3.9 million, for 100% of the equity interests in J & F Steel, LLC. In addition, we assumed $13.5 million of debt as part of the J & F Steel acquisition. Total consideration is subject to change based on the final determination of the post-closing adjustment. We will pay approximately $410.0 million in cash for 100% of the equity interests in Integris plus the assumption of Integris’ debt of approximately $250.0 million as of October 1, 2004. The acquisition of Integris may result in additional pro forma adjustments as further information becomes available.

We have derived our historical consolidated financial data for the year ended December 31, 2003 from our audited consolidated financial statements included herein. We have derived our historical consolidated financial data as of and for the nine months ended September 30, 2004 from our unaudited condensed consolidated financial statements included herein.

We have derived the historical financial data for J & F Steel for the year ended December 31, 2003 from the audited financial statements of J & F Steel, included in our Current Report on Form 8-K/A filed on October 6, 2004. The historical financial data included in the nine months ended September 30, 2004 pro forma consolidated statement of operations for J & F Steel reflects the operations of J & F Steel for the seven months ended July 30, 2004 up to the date of our acquisition. This data was derived from the unaudited financial statements of J & F Steel for the six months ended June 30, 2004, included in the Company’s Current Report on Form 8-K/A filed on October 6, 2004 and from the unaudited financial statements of J & F Steel for the month of July 2004 not included herein.

We have derived the historical consolidated financial data of Integris for the year ended January 2, 2004 from the audited consolidated financial statements of Integris attached to this Form 8-K as Exhibit 99.1, and the historical financial data of Integris as of and for the nine-months ended October 1, 2004 from the unaudited consolidated financial statements of Integris attached to this Form 8-K as Exhibit 99.1.

The unaudited pro forma condensed consolidated balance sheet gives effect to our issuance of $175.0 million of 3.50% Convertible Senior Notes due 2024 in November 2004 and our issuance of $150 million of Senior Notes due 2011 in December 2004 as if they had occurred on September 30, 2004. The unaudited pro forma as adjusted condensed consolidated balance sheet gives effect to our issuance of $175.0 million of 3.50% Convertible Senior Notes due 2024, our issuance of $150 million of Senior Notes due 2011 and the Proposed Integris Transactions as if they had occurred on September 30, 2004.

The unaudited pro forma condensed consolidated statements of operations reflect the J & F Steel acquisition, our issuance of $175.0 million of Convertible Senior Notes due 2024 in November 2004 and our issuance of $150 million of Senior Notes due 2011 as if they had occurred on January 1, 2003. The unaudited pro forma as adjusted condensed consolidated statements of operations reflect the J & F Steel acquisition, our issuance of $175.0 million of Convertible Senior Notes due 2024 in November 2004, our issuance of $150 million of Senior Notes due 2011 and the Proposed Integris Transactions as if they had occurred on January 1, 2003.

1

Management believes that, on the basis set forth herein, the pro forma statements reflect a reasonable estimate of the effects of the Integris and J & F Steel acquisitions, our issuance of $175.0 million of 3.50% Convertible Senior Notes due 2024 in November 2004 and our issuance of $150 million of Senior Notes due 2011 in December 2004 on our historical financial position and results of operations based on currently available information. The acquisitions are accounted for under the purchase method of accounting. The allocation of purchase price is based upon the estimated fair value of assets acquired and liabilities assumed. Certain of the purchase price allocations reflected in the unaudited pro forma financial statements are preliminary and may be different from the final allocation of the purchase price and any such differences may be material. The unaudited pro forma financial data is presented for informational purposes only and does not purport to represent what our financial position or results of operations would have been had the Integris and J & F Steel acquisitions, our issuance of $175.0 million of 3.50% Convertible Senior Notes due 2024 in November 2004 and our issuance of $150 million of Senior Notes due 2011 in fact occurred on the dates assumed or that may result from future operations. The unaudited pro forma financial data should be read in conjunction with our consolidated financial statements and the Integris and J & F Steel financial statements and related notes thereto.

2

Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of September 30, 2004

(in thousands)	The Company			Debt offerings pro forma adjustments (A)			Pro forma			Integris (B)		Integris pro forma adjustments (A)			Pro forma as adjusted
Assets
Current assets
Cash and cash equivalents	$	28,646		$	316,100	(1),(2)	$	28,646		$	4,225	$	—		$	32,871
					(316,100	)(1),(2)
Restricted cash		886			—			886			—		—			886
Receivables less allowances		487,775			—			487,775			258,989		—			746,764
Inventories		555,287			—			555,287			369,710		14,311	(3)		939,308
Prepaid expenses and other current assets		—			—			—			14,920		—			14,920
Total current assets		1,072,594			—			1,072,594			647,844		14,311			1,734,749
Investments and advances		15,666			—			15,666			—		—			15,666
Property, plant & equipment, net		237,644			—			237,644			155,105		—	(5)		392,749
Goodwill, net		—			—			—			40,609		56,669	(3)		97,278
Intangible pension asset		10,171			—			10,171			3,754		(3,754	)(6)		10,171
Other intangible assets, net		—			—			—			2,284		—	(7)		2,284
Other assets		9,567			8,900	(1),(2)		18,467			1,615		7,893	(4)(6)		27,975
Deferred income taxes		128,889			—			128,889			5,850		12,108	(3)		146,847
Total assets	$	1,474,531		$	8,900		$	1,483,431		$	857,061	$	87,227		$	2,427,719
Liabilities & stockholders’ equity
Current liabilities
Accounts payable	$	284,101		$	—		$	284,101		$	101,503	$	—		$	385,604
Non-trade payable—related parties		—			—			—			3,997		—			3,997
Salaries, wages & commissions		29,436			—			29,436			—		13,747	(8)		43,183
Other accrued liabilities		33,434			—			33,434			34,091		(8,747	)(3)(8)		58,778
Deferred income taxes		10,800			—			10,800			14,138		3,724	(3)		28,662
Total current liabilities		357,771			—			357,771			153,729		8,724			520,224
Long-Term debt		441,230			325,000	(1),(2)		450,130			247,320		420,000	(4)		1,117,450
		—			(316,100	)(1),(2)
Deferred employee benefits		242,646			—			242,646			80,804		30,270	(3)		353,720
Other liabilities		—			—			—			3,441		—			3,441
Total liabilities		1,041,647			8,900			1,050,547			485,294		458,994			1,994,835
Stockholders’ equity
Preferred stock		80			—			80			—		—			80
Common stock		50,556			—			50,556			—		—			50,556
Capital in excess of par value		857,550			—			857,550			317,616		(317,616	)(9)		857,550
Retained earnings (deficit)		367,485			—			367,485			47,059		(47,059	)(9)		367,485
Treasury stock		(746,182	)		—			(746,182	)		—		—			(746,182	)
Accumulated other comprehensive income (loss)		(96,515	)		—			(96,515	)		7,092		(7,092	)(9)		(96,515	)
Restricted stock awards		(90	)		—			(90	)		—		—			(90	)
Total stockholders’ equity		432,884			—			432,884			371,767		(371,767	)		432,884
Total liabilities & stockholders’ equity	$	1,474,531		$	8,900		$	1,483,431		$	857,061	$	87,227		$	2,427,719

3

Unaudited Pro Forma Condensed Consolidated Statement of Operations

Year ended December 31, 2003

(in thousands, except per share amounts)	The Company			J&F (C)			J&F pro forma adjustments (E)			Debt offerings pro forma adjustments (E)			Pro forma			Integris (D)			Integris pro forma adjustments (E)			Pro forma as adjusted
Net sales	$	2,189,435		$	157,579		$	—		$	—		$	2,347,014		$	1,494,088		$	—		$	3,841,102
Cost of materials sold		1,766,771			150,404			23	(1)		—			1,917,198			1,248,911			11,983	(8)(9)		3,178,092
Gross profit		422,664			7,175			(23	)		—			429,816			245,177			(11,983	)		663,010
Warehousing and delivery		226,429			4,784			—			—			231,213			—			96,641	(9)		327,854
Selling, general and administrative		187,467			11,073			—			—			198,540			217,619			(108,589	)(9)(10)(11)		307,570
Restructuring and plant closure costs		6,213			—			—			—			6,213			1,123			—			7,336
Write-off of goodwill and certain other assets		—			5,136			—			—			5,136			—			—			5,136
Impairment of long-lived assets		—			389			—			—			389			—			—			389
Gain on sale of assets		—			(157	)		—			—			(157	)		—			—			(157	)
Operating profit (loss)		2,555			(14,050	)		(23	)		—			(11,518	)		26,435			(35	)		14,882
Other revenue and expense, net		166			3			—			—			169			51			—			220
Interest and other expense on debt		(18,815	)		(1,237	)		(1,639	)(2)		(7,731	)(4),(6)		(29,422	)		(10,340	)		(17,320	)(12)		(57,082	)
Income (loss) before income taxes		(16,094	)		(15,284	)		(1,662	)		(7,731	)		(40,771	)		16,146			(17,355	)		(41,980	)
Provision (benefit) for income taxes		(2,011	)		(4,152	)		(451	)(3)		(3,015	)(5),(7)		(9,629	)		5,219			(5,610	)(13)		(10,020	)
Income (loss) from continuing operations	$	(14,083	)	$	(11,132	)	$	(1,211	)	$	(4,716	)	$	(31,142	)	$	10,927		$	(11,745	)	$	(31,960	)
Income (loss) from continuing operations per share of common stock
Basic income (loss) per share from continuing operations	$	(0.58	)										$	(1.25	)							$	(1.29	)
Diluted income (loss) per share from continuing operations	$	(0.58	)										$	(1.25	)							$	(1.29	)
Average shares of common stock outstanding
Basic		24,822												24,822									24,822
Diluted		24,822												24,822									24,822

4

Unaudited Pro Forma Condensed Consolidated Statement of Operations

Nine Months ended September 30, 2004

(in thousands, except per share amounts)	The Company			J&F (C)			J&F pro forma adjustments (E)			Debt offerings pro forma adjustments (E)			Pro forma			Integris (D)			Integris pro forma adjustments (E)			Pro forma as adjusted
Net sales	$	2,398,276		$	103,375		$	—		$	—		$	2,501,651		$	1,491,480		$	—		$	3,993,131
Cost of materials sold		1,961,539			89,611			14	(1)		—			2,051,164			1,213,968			8,871	(8)(9)		3,274,003
Gross profit		436,737			13,764			(14	)		—			450,487			277,512			(8,871	)		719,128
Warehousing and delivery		183,553			2,417			—			—			185,970			—			79,114	(9)		265,084
Selling, general and administrative		161,870			5,586			—			—			167,456			194,320			(88,936	)(9)(10)(11)		272,840
Restructuring and plant closure costs		3,553			—			—			—			3,553			1,642			—			5,195
Gain on sale of assets		(4,645	)		(2,449	)		—			—			(7,094	)		—			—			(7,094	)
Operating profit (loss)		92,406			8,210			(14	)		—			100,602			81,550			951			183,103
Other revenue and expense, net		98			—			—			—			98			(1,192	)		—			(1,094	)
Interest and other expense on debt		(16,034	)		(520	)		(982	)(2)		(5,561	)(4),(6)		(23,097	)		(7,649	)		(13,680	)(12)		(44,426	)
Income (loss) before income taxes		76,470			7,690			(996	)		(5,561	)		77,603			72,709			(12,729	)		137,583
Provision (benefit) for income taxes		29,288			3,124			(405	)(3)		(2,141	)(5),(7)		29,866			26,220			(4,590	)(13)		51,496
Income (loss) from continuing operations	$	47,182		$	4,566		$	(591	)	$	(3,420	)	$	47,737		$	46,489		$	(8,139	)	$	86,087
Income from continuing operations per share of common stock
Basic income per share from continuing operations	$	1.89											$	1.92								$	3.46
Diluted income per share from continuing operations	$	1.83											$	1.86								$	3.35
Average shares of common stock outstanding
Basic		24,902												24,902									24,902
Diluted		25,694												25,694									25,694

5

Notes to Unaudited Pro Forma Condensed

Consolidated Financial Statements

The following adjustments have been reflected in the unaudited pro forma condensed consolidated balance sheet as of September 30, 2004:

A. To reflect the following adjustments for the impact of the issuance of the $175 million of 3.50% Convertible Senior Notes due 2024:

(1) To reflect an increase in cash, unamortized bond issuance costs and the incremental borrowing from the issuance of the 3.50% Convertible Senior Notes due 2024 and the use of the net proceeds to pay down existing revolving credit facility debt. The notes bear interest payable semi-annually on May 1 and November 1. The notes are convertible into shares of our common stock under certain circumstances. If the notes are converted, we will deliver to the holder cash equal to the lesser of the principal amount of the notes converted and our total conversion obligation, as defined, and shares of common stock in respect to the remainder, if any, of our conversion obligation.

Certain of the convertible notes conversion rights and the registration rights qualify as embedded derivatives subject to separate accounting under SFAS 133. Under SFAS 133, these derivatives are required to be separately valued and recorded as an asset or liability at their fair value. Changes in fair value will be recorded in earnings. We will obtain a third-party valuation of the rights and will reflect these amounts in our consolidated financial statements, if significant. The pro forma balance sheet does not reflect adjustments to separately value and record these rights.

The notes are classified as long-term debt in the pro forma balance sheet. If any conversion contingency conditions are satisfied in the future, or if the holders of the notes elect to require us to repurchase the notes for cash on either the applicable repurchase dates or upon a fundamental change, we would be required to reclassify the notes from long-term debt to current, and related debt issuance costs would be written off.

To reflect the following adjustment for the impact of the issuance of the $150 million of 8 ¹/4% Senior Notes due 2011:

(2) To reflect an increase in cash, unamortized bond issuance costs and the incremental borrowing from the issuance of the senior notes and the use of the net proceeds to pay down existing senior secured revolving credit facility debt. The notes bear interest at 8 ¹/4% payable semi-annually. One of the optional redemption provisions of the notes qualifies as an embedded derivative subject to separate accounting under SFAS 133. Under SFAS 133, this derivative is required to be separately valued and recorded as an asset or liability at its fair value. Changes in fair value will be recorded in earnings. We will obtain a third-party valuation of the derivative upon completion of the notes offering and will reflect this amount in our consolidated financial statements, if significant. The pro forma balance sheet does not reflect an adjustment to separately value and record this derivative.

To reflect the following adjustments for the impact of the acquisition of Integris:

(3) To adjust identifiable assets and liabilities to estimated fair value. Finished goods inventory has been increased to market value. Deferred employee benefits has been adjusted to reflect the estimated net unfunded pension and postretirement obligations of Integris. Other accrued liabilities has been adjusted to reflect an estimated $5.0 million in anticipated change-in-control payments to be made to certain Integris employees upon closing. Deferred tax adjustments reflect the impact of the differences between book and tax treatment for purchase accounting adjustments related to inventory, deferred employee benefits, and accrued change-in-control costs at the Company’s assumed deferred effective tax rate.

6

Goodwill represents the excess of the purchase price over the allocated fair value of Integris’ net assets and is presented as a net adjustment to existing Integris goodwill to arrive at a pro forma Integris goodwill balance. Goodwill will not be amortized, but will be evaluated periodically for impairment.

If completed, we anticipate integrating Integris’ operations and facilities with our own subsequent to the close of the acquisition. The pro forma adjustments do not reflect asset write-offs or severance and exit cost liabilities that may be recorded upon finalization of any integration plans. To the extent we record the effects of such actions within purchase accounting, the resulting Integris acquisition goodwill will increase.

(4) To reflect increased borrowing and debt issuance costs related to the purchase of Integris as follows;

i. Borrowings of $420.0 million under an amended, five year, $1.1 billion senior secured credit facility to be entered into with a syndicated bank group. Borrowings under the facility are reflected as long-term debt in the condensed consolidated pro forma balance sheet.

ii. Costs for a new senior secured bridge loan facility to fund a portion of the cash purchase price for the Integris acquisition. As a result of this note offering, we will not borrow any amounts under the new bridge loan facility and it will expire.

Note that the fair value of Integris debt assumed is estimated to be the carrying value due to the revolving nature of the borrowings.

(5) The fair value of property, plant and equipment is subject to revision upon completion of an appraisal of fair value. The book value stated reflects the effects of push-down purchase accounting recorded in 2000 and 2001 at Integris’ predecessor companies. An increase of 5 percent in the fair value of property, plant and equipment would increase pro forma depreciation expense by approximately $587,000 and $782,000 in the nine months ended September 30, 2004 and in the year 2003, respectively;

(6) To eliminate assets not acquired and liabilities not assumed as part of the acquisition, which includes $2.1 million in unamortized Integris deferred debt issuance costs;

(7) The fair value of intangible assets is subject to revision upon completion of an appraisal of fair value. We do not expect the effect of such appraisal to be significant;

(8) To reclass balances to conform to our presentation; and

(9) To eliminate historical owners’ equity in Integris.

B. To reflect the historical balance sheet of Integris.

The preliminary allocation of the purchase price to the acquired assets and assumed liabilities of Integris follow. The final allocation may change upon completion of the valuation. The following table summarizes the actual preliminary allocation of the Integris purchase price as of September 30, 2004:

	Integris
Current assets	$	662,000,000
Property and equipment		155,000,000
Other assets		20,000,000
Goodwill		97,000,000
Total assets		934,000,000
Current liabilities		162,000,000
Long-term liabilities		362,000,000
Total liabilities		524,000,000
Purchase price	$	410,000,000

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The following adjustments have been reflected in the unaudited pro forma condensed consolidated statements of operations:

C. To reflect the pre-acquisition results of operations of J & F Steel for the periods presented. J & F Steel’s statements of operations for the periods presented include restructuring activities associated with the closure of a facility prior to acquisition of J & F Steel by us. Items related to the restructuring include $5,136,000 impairment of goodwill for the year ended December 31, 2003 and a $2,449,000 gain on the sale of assets in the nine months ended September 30, 2004.

D. To reflect the results of operations of Integris for the periods presented. Integris’ statements of operations for the periods presented include restructuring activities associated with employee reductions, changes to certain distribution operations and other merger-related costs in connection with the integration of business processes and systems, which totaled $1,642,000 and $1,123,000 in the nine months ended September 30, 2004 and in the year 2003, respectively.

E. To reflect the following adjustments for the impact of the acquisition of J & F Steel:

(1) To adjust depreciation expense to reflect the estimated fair value of property, plant and equipment at the date of acquisition;

(2) Estimated increase in interest expense related to increased borrowing to finance the acquisition. An increase of 0.125 percent in the interest rate would have increased interest expense by $86,000 and $114,000 in the nine months ended September 30, 2004 and in the year 2003, respectively; and

(3) Estimated effect on income tax expense (benefit) resulting from above adjustments assuming our on-going effective tax rates.

To reflect the following adjustments for the impact of the issuance of $175 million of 3.50% Convertible Senior Notes due 2024:

(4) Estimated increase in interest expense, including amortization of the issuance cost of the convertible notes; and

(5) Estimated effect on income tax expense (benefit) resulting from above adjustment assuming our on-going effective tax rates.

To reflect the following adjustments for the impact of the issuance of the $150 million of 8 ¹/4% Senior Notes due 2011:

(6) Estimated increase in interest expense, including amortization of the issuance cost of the senior notes; and

(7) Estimated effect on income tax expense (benefit) resulting from above adjustment assuming our on-going effective tax rates.

To reflect the following adjustments for the impact of the acquisition of Integris:

(8) The fair value of property, plant and equipment is subject to revision upon completion of an appraisal of fair value. The book value stated reflects the effects of push-down purchase accounting recorded in 2000 and 2001 at Integris’ predecessor companies. An increase of 5 percent in the fair value of property, plant and equipment would have increased depreciation expense by approximately $586,000 and $782,000 in the nine months ended September 30, 2004 and in the year 2003, respectively;

(9) To reclassify balances to conform to our presentation;

(10) The fair value of intangible assets is subject to revision upon completion of an appraisal of fair value. We do not expect the effect of such appraisal to be significant;

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(11) To adjust post-retirement benefit expense to reflect the estimated fair value of deferred employee benefits at the date of acquisition;

(12) Estimated increase in interest expense related to increased borrowing under the revolving credit facilities to finance the acquisition and additional amortization of deferred debt issuance costs under the revolving credit facilities and the bridge loan facility. An increase of 0.125 percent in the interest rate would have increased interest expense by $394,000 and $525,000 in the nine months ended September 30, 2004 and in the year 2003, respectively. The pro forma interest expense assumes that the parties to our new revolving credit agreement will be the same as the parties to our existing revolving credit agreement; and

(13) Estimated effect on income tax expense (benefit) resulting from above adjustments assuming our on-going effective tax rates.

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