40-F

	UNITED STATES SECURITIES AND EXCHANGE COMMISSION
		Washington, DC   20549
		_________________________________________________________
		FORM 40-F
[  ]		REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[X]		ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005				Commission File Number 0-22774
RUSSEL METALS INC.
(Exact name of Registrant as specified in its charter)
Canada			6711		41-1443629
(Province or other jurisdiction of incorporation or Organization)			(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number (if applicable))
Suite 210, 1900 Minnesota Court, Mississauga, Canada ON L5N 3C9, (905) 819-7777
(Address and telephone number of Registrant's principal executive offices)
FIL (US) Inc., c/o CT Corporation Suite 300, 801 West Tenth Street, Anchorage, Alaska 99801 U.S.A., (905) 819-7777
(Name, address (including zip code) and telephone number (including area code)
of agent for service in the United States
_________________________________________________________
Securities registered or to be registered pursuant to Section 12(b) of the Act.
None
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
6.375% Senior Notes Due March 1, 2014
For annual reports, indicate by check mark the information filed with this Form:
[X] Annual Information Form                                                            [X] Audited annual financial statements
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.
Common Shares - 50,656,009
Indicate by check mark whether the Registrant by filing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934 (the "Exchange Act").  If "Yes" is marked, indicate the file number assigned to the Registrant in connection with such Rule.
Yes [  ] 82 - -___________________________                                 No [X]
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such other shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]                                                                                             No [  ]

Documents Included in this Form
No.	Documents
1.	Annual Information Form of the Registrant for the fiscal year ended December 31, 2005, dated February 27, 2006.
2.	Management's Discussion and Analysis of the Registrant for the year ended December 31, 2005.
3.	Consolidated Financial Statements for the year ended December 31, 2005.

DISCLOSURE CONTROLS AND PROCEDURES

Disclosure controls and procedures are defined by the Securities and Exchange Commission as those controls and other procedures that are designed to ensure that information required to be disclosed by the Registrant in reports filed or submitted by it under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.  The Registrant's Chief Executive Officer and Chief Financial Officer have evaluated the Registrant's disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 40-F and have determined that such disclosure controls and procedures are effective.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

Since the most recent evaluation of the Registrant's internal control over financial reporting, there have not been any significant changes in the Registrant's internal control over financial reporting that has materially affected or is reasonably likely to materially affect, the Registrant's internal control over financial reporting.

The design of the Registrant's system of controls and procedures is based, in part, upon assumptions about the likelihood of future events.  There can be no assurance that the design of such system of controls and procedures will succeed in achieving its goals under all potential future conditions, regardless of how remote.

NOTICE OF PENSION FUND BLACKOUT PERIOD

The Registrant was not required by Rule 104 of Regulation BTR to send any notice to any of its directors or executive officers during the year ended December 31, 2005.

AUDIT COMMITTEE FINANCIAL EXPERT

In 2005, the members of the audit committee of the Company were P. Brunet, C. R. Fiora, J. F. Dinning and R. Hartog.  From October 27, 2004 to December 31, 2005, Mr. Brunet was a member of the audit committee.  He served as Chair of the Committee from April 27, 2005, until his resignation from the board on December 31, 2005.  Mr. Brunet was succeeded by Mr. Alain Benedetti as a board member and Chair of the Committee on February 23, 2006.

The Registrant's board of directors has determined that the former Chair and the present Chair of the Committee are Chartered Accountants and each are considered to be audit committee financial experts as that term is defined in paragraph 8(b) of General Instruction B to the Form 40-F under the Securities Exchange Act of 1934, as amended.  The Registrant's board of directors has also determined that all members of the audit committee are independent, as that term is defined in the applicable listing standards of the Nasdaq Stock Market, Inc.

CODE OF ETHICS

The Registrant has adopted a code of business conduct and ethics (the "code") that applies to all directors, officers and employees.  The Registrant has posted the text of its code on its website. The text of the code can be viewed by visiting www.russelmetals.com and selecting the "about russel metals" icon.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The aggregate fees charged by Deloitte & Touche LLP for audit services for the year ended December 31, 2005 were Cdn$929,000 (2004:  Cdn$978,000).

Audit Related Fees

The aggregate fees charged by Deloitte & Touche LLP for the year ended December 31, 2005 for assurance and related services that are reasonably related to the performance of the audit or review of the Registrant's financial statements and are not reported above were Cdn$692,000 (2004:  Cdn$718,000).  Such services include work on:  offering documents - $Nil (2004:  Cdn$534,000); review of the Sarbanes-Oxley work prepared by the Company - Cdn$655,000 (2004:  $138,000); and audits of employee benefit plans - Cdn$37,000 (2004:  Cdn$46,000).

Tax Fees

The aggregate fees charged by Deloitte & Touche LLP for U.S. tax compliance and planning work for the year ended December 31, 2005 were Cdn$154,000 (2003:  Cdn$213,000).

Other Fees

D&T did not charge any other fees in 2004 or 2005.

Audit Committee Pre-Approval Policies

Since the enactment of the Sarbanes-Oxley Act of 2002 on July 30, 2002, all non-audit services performed by the Registrant's auditor are required to be approved by the audit committee of the Registrant.

OFF-BALANCE SHEET ARRANGEMENTS

The Registrant is not a party to any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues, or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

See "Management's Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2005", included as Document No. 3 to this Annual Report.

UNDERTAKING AND CONSENT TO SERVICE OF PROCESS

A.      Undertaking

The Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.

B.      Consent to Service of Process

The Registrant has previously filed with the Commission a Form F-X in connection with the 6.375% Senior Notes Due March 1, 2014.

EXHIBITS

The following exhibits are filed as part of this report:

Exhibit
No.	Title
1.	Consent of Deloitte & Touche LLP.
31.	Certification of CEO and CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.	Certification of CEO and CFO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereto duly authorized.
	RUSSEL METALS INC.
February 27, 2006	By: /s/ BRIAN R. HEDGES
	Brian R. Hedges
	Executive Vice President & CFO

EXHIBIT INDEX
No.	Document	Sequential Page No.
1.	Consent of Deloitte & Touche LLP
31.	Certification of CEO and CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.	Certification of CEO and CFO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

EX-99

	ANNUAL
	INFORMATION
	FORM
	FEBRUARY 27, 2006
RUSSEL METALS INC., SUITE 210, 1900 MINNESOTA COURT, MISSISSAUGA, ONTARIO
CANADA L5N 3C9

TABLE OF CONTENTS
	Page		Page
Russel Metals Inc.	3
		Risks Related to our Business and
History of the Company	3	the Metals Distribution Industry	15
Business	3	General Development of the Business	19
Overview	3
		Ratings	20
Description of the Business	4
Products, Services and Customers	7	Market for the Securities of
Revenue by Product	9	Russel Metals Inc.	21
Metal Suppliers	9
		Dividend Records	22
Properties	10
Non-Metal Operations	12	Major Subsidiaries	22
Employees	12	Directors and Executive Officers	23
Legal Proceedings	12	Charter of Audit Committee	28
Environmental Regulation	12	Additional Information	36
Present Actions	13
Settled Actions	14

RUSSEL METALS INC.

             Russel Metals Inc. (Russel Metals or the Company) is one of the largest metals distribution and processing companies in North America.  The Company primarily distributes steel products and conducts its distribution business in three principal business segments:  metals service centers, energy tubular products and steel distributors.  For the year ended December 31, 2005, Russel Metals had consolidated revenues of $2.6 billion.

             The address of Russel Metals' head office is Suite 210, 1900 Minnesota Court, Mississauga, Ontario L5N 3C9, tel. no. (905) 819-7777, fax no. (905) 819-7409.  Unless the context otherwise requires, references to "Company", "we", "us" or "our" as used herein refers to Russel Metals Inc. and its subsidiaries.  All dollar references are in Canadian dollars unless otherwise stated.

HISTORY OF THE COMPANY

             Russel Metals Inc. is the successor corporation to Federal Grain Limited, which was incorporated under the laws of Canada in 1929 and subsequently amalgamated with Searle Grain Company Limited on August 1, 1967 to continue under the name Federal Grain Limited.  The name was changed to Federal Industries Ltd. on April 16, 1973 and the Company was continued under the Canada Business Corporations Act on May 5, 1980.  On June 1, 1995, the name was changed to Russel Metals Inc. On January 1, 2002, Russel Metals Inc. was formed upon the amalgamation of its predecessor of the same name with A. J. Forsyth and Company Limited, a subsidiary with Canadian service center operations, and three non-operating subsidiaries.

BUSINESS

Overview

We believe we operate the largest metals service centers operation in Canada.  During 2005, we processed and distributed products to a broad base of approximately 19,000 customers through a network of 52 locations across Canada.  In addition, we have four U.S. locations.  Our network of metals service centers carries a broad line of metal products in a wide range of sizes, shapes and specifications, including carbon hot rolled and cold finished steel, pipe and tubular products, stainless steel and aluminum.  We purchase these products primarily from North American steel producers, and package and sell them to end users in accordance with their specific needs.  Our metals service centers operations accounted for $1.5 billion, or 59%, of our total revenues in 2005.

Our energy tubular products operations carry a specialized product line focused on the needs of its energy industry customers.  These operations distribute oil country tubular goods (OCTG), line pipe, tubes, valves and fittings from five Canadian and two U.S. locations.  We purchase these products either from the pipe processing arms of North American steel mills or from independent manufacturers of pipe and pipe accessories.  Our energy tubular products operations accounted for $595 million, or 23%, of our total revenues in 2005.

Our steel distributors act as master distributors selling steel in large volumes to other steel service centers and equipment manufacturers mainly on an "as is" basis.   The main steel products sourced by this segment are carbon steel plate, beams, channel, flat rolled products, rails and pipe products.  Our steel distributors operations accounted for $469 million, or 18%, of our total revenues in 2005.

DESCRIPTION OF THE BUSINESS
Industry Overview
Metals service centers bridge the gap between the capabilities of large metal producers, who manufacture large volumes of steel, aluminum and specialty metals in standard sizes and configurations and require long lead times, and the specific needs of end users by acquiring large volumes of metal from producers and packaging and processing the metal in accordance with end user specifications.  Many end users purchase metal products from service centers because their requirements are smaller than the minimum order quantities available from the producers or because such end users require specialized metal processing services, a commitment to reliable just-in-time delivery and flexibility to meet their changing product and manufacturing requirements that large producers are either unwilling or unable to provide.  Service centers also allow end users to reduce their total production cost by shifting the responsibility for pre-production processing to service centers, which, through economies of scale, can achieve greater operational efficiency from the processing equipment.
We estimate that in 2005, the service center industry in Canada had total sales of approximately $6 billion.  According to industry sources, comparable statistics for the U.S. industry for 2005 indicate sales of approximately US$52 billion.
Service centers are the largest category of customers of domestic steel producers in Canada.  The following table shows Canadian shipments (net of returned shipments) by Canadian steel mills to Canadian service centers and all other net domestic shipments by Canadian steel mills for the years indicated.  These figures do not include metal products other than steel, such as aluminum, that we also distribute.
Net Domestic Shipments of Steel Mill Products by Canadian Steel Mills
(millions of metric tons)
	1996	1997	1998	1999	2000	2001	2002	2003	2004	2005(1)
Shipments to Cdn.
Service Centers	3.57	3.81	3.48	3.85	3.80	4.02	4.06	3.65	3.65	3.44
All Other Shipments	7.57	7.92	7.87	8.22	8.20	7.53	7.59	7.69	7.62	6.90
Total Shipments	11.14	11.73	11.35	12.07	12.00	11.55	11.65	11.33	11.27	10.34
% to Service Centers	32.0%	32.5%	30.7%	31.9%	31.7%	34.8%	34.8%	32.2%	32.4%	33.3%
(1) 12 months ended November 30, 2005
(Source:  Statistics Canada)
The metals service center industry is intensely competitive.  Generally, the metals service center industry competes on price and the ability to provide customers with value-added services such as product selection, timely delivery, reliability, quality and processing capability.  There has been significant consolidation in the industry in both the United States and Canada over the past decade.  Many of our competitors are small companies, often owner-operated, with limited product lines, inventory and geographic customer bases.  Many of these small, owner-operated businesses have limited access to capital for modernization and expansion, have not had a viable exit strategy, and have been left with limited liquidity options.
Competitive Strengths
We believe that the following strengths have enabled us to achieve net earnings in the top decile of our industry and give us a competitive advantage in the metals distribution industry:
Leading Market Position.   We believe we are the largest service center operator in Canada based on revenues and that we represent over 25% of the total service center market in Canada.  We also believe we are the largest service center operator in each of the regions of Canada except for Ontario where we are the second largest.  Our 52 Canadian service centers service a broad base of approximately 19,000 customers across all regions of Canada.  Our geographic presence, large volume and leading market position enable us to successfully source steel at competitive prices.
Strong Supplier Relationships and Unique Market Insight.   We are among the largest purchasers of steel in North America and have well-established relationships with North America's largest steel producers, which enable us to ensure multiple sources for steel products and services.  We believe that our steel distributors operation is one of the largest independent steel importers in North America.  Our steel distributors enable us to augment our product lines at our metals service centers when product is not available or when we can obtain steel competitively by purchasing abroad.  Through our steel distributors operations, we regularly purchase from multiple suppliers in 20 countries around the world.  This enables us to monitor global steel supply and assess its impact on North American steel demand and pricing trends. This timely access to market information and global outlook allows us to proactively manage inventory levels and prices in our service center operations and make low cost purchases of steel imports when available.
Successful Acquisition Track Record.   Over the last five years, we have successfully integrated a number of acquisitions.  For example, in October 2001, we acquired A.J. Forsyth and Company Limited, the leading service center operation in British Columbia, and in July 2003, we acquired Acier Leroux inc., the leading service center operation in Quebec.  These acquisitions strengthened our Canadian service center market presence and were immediately accretive to Russel Metals.  Once we have completed an acquisition, we rationalize the operations and balance sheet and reinforce the best practices found in our combined operations.
Multiple Business Segments and Diversified Service Center Customer Base.   We operate in three segments of the metals distribution business, each with a distinct customer base and business cycle:  metals service centers, energy tubular products and steel distributors.  Our largest segment, metals service centers, has a diversified customer base across a wide variety of industries, including machinery and equipment manufacturing, construction, shipbuilding and natural resources, such as mining and petroleum.  Our focused segments, energy tubular products and steel distributors, are not significantly dependent on any one customer. In 2005, our metals service center average order size was $1,888.  In addition, in 2005, none of our approximately 19,000 service center customers accounted for more than 3% of our total revenues.
Superior Service and Product Selection.   We believe that we have a reputation for superior and timely service, and diverse product selection.  Each of our metals service centers has the ability to offer one stop shopping to our customers.  We also provide customized processing services and offer just-in-time delivery to quickly satisfy end user specifications.  We have developed strong relationships with our customers and are able to identify their needs early so we can respond to short lead times or just-in-time delivery requirements common in the industry.  Because local managers have significant operational control, our metals service centers can react quickly to changes in local markets and customer demands.
Prudent Inventory Management.   We manage our inventory to avoid unnecessary commitments of working capital while maintaining sufficient supply to respond quickly to customer orders.  We tailor our inventory and processing services at each service center location to the needs of that particular market.  The negotiation of purchase agreements with suppliers is centralized to leverage our buying power and global market insights; however, the branch management team determines actual supply of inventory to each of our locations.  Local monitoring allows us to more accurately assess inventory requirements at each metals service center.  We believe our decentralized inventory management, combined with our global market insights, has allowed us to react more quickly than many of our competitors to changing metals prices and customer needs, and to optimize our use of working capital.  As a result of our prudent inventory management, our metals service centers turn their inventory 4 to 5.5 times per year while the industry average is lower. Given the particular importance of inventory management in the price-sensitive service center business, we believe that this gives us a significant competitive advantage.
Experienced Management Team.   Our senior executives and other key members of our management team have an average of 27 years of experience in the metals distribution business.  To facilitate an entrepreneurial culture, our compensation policies, at both senior and local management levels, are based on the profitability and asset utilization of our business units.
Business Strategy
Our primary goals are to continue to be a leading metals distribution company, increase our market share, expand services to customers and improve operating profits and cash flows.  Our business strategies, aimed at achieving our goals, consist of the following:
Managing Capital Utilization.   We will continue to aggressively manage our balance sheet to reduce debt and to enable us to fund acquisitions, capital expenditures and working capital requirements from existing bank lines.  We intend to continue to manage inventory based on our expected customer demands rather than speculate on market pricing which will enable us to maximize our inventory turns.  Our capital expenditure for maintenance of existing assets is less than depreciation expense.  Our expenditures for new equipment and facilities along with capital expenditures for maintenance are expected to generate capital expenditures higher than depreciation expense over a period of years due to construction of larger facilities in growing markets and expanding product lines.
Expanding through Select Acquisitions.   Over the past few years, we have strengthened our Canadian franchise through acquisitions, which we have rationalized and integrated, with our existing operations.  We now have a major presence in all of the Canadian regions.  Management believes that maintaining and growing that strong position should be the primary strategic goal of our acquisition policy. We intend to continue to investigate acquisition opportunities that will be immediately accretive to earnings and that will enable us to build on our Canadian service center presence or extend our product offerings in Canada, such as increasing our share in flat rolled products and processing.  In our energy tubular products and steel distributors operations, as well as our United States service center operations, we will continue to look for strong product niche players or strong regional operations.
Decentralizing Operating Management Combined with Economies of Scale.  We continue to manage our businesses on a decentralized basis, with local management accountable for day-to-day operations, profitability and growth of the business, which we believe fosters an entrepreneurial culture across our operations.  Our localized operating management allows us to capitalize on name recognition, end user relationships of our businesses, and the local and regional market knowledge of the operations' staff. In addition, management oversight through centralized purchasing, management information systems and cash management enables us to benefit from economies of scale and lower purchasing costs.

Products, Services and Customers
Metals Service Centers
Our metals service centers sell plate, flat rolled carbon and other general line carbon steel products, as well as some stainless steel, aluminum and other non-ferrous specialty metal products in a wide range of sizes, shapes and specifications.  General line steel products consisting of plate, structurals, bars, sheet, pipe, tubing and hollow structural steel tubing, are used by end users in a wide variety of industries.  Within Canada, our metals service centers operate under the names Russel Metals, Métaux Russel, A. J. Forsyth, Acier Leroux, Acier Loubier, Acier Richler, B&T Steel, Leroux Steel, Mégantic Métal, McCabe Steel, Russel Leroux, and York-Ennis.  Our U.S. service center operations are conducted under the names Russel Metals Williams Bahcall and Baldwin International.  The Williams Bahcall operation focuses primarily on the distribution of general line carbon products through three facilities in Wisconsin. Baldwin International distributes specialty alloy products through its facility in Ohio.
Our metals service centers also provide customized processing services to satisfy specifications established by end users. By providing these services, as well as by offering inventory management and just-in-time delivery, we enable end users to reduce their overall production costs and decrease capital required for raw materials and metals processing equipment.  Our value added processes include, but are not limited to:
·	shearing, slitting and cutting to length: the cutting of metal into smaller pieces or into narrower coils;
·	laser, flame and plasma cutting: the cutting of metal to produce various shapes or parts according to end user supplied drawings;
·	leveling: the flattening of metal to uniform tolerances for proper machining;
·	tee-splitting: the splitting of metal beams;
·	edge trimming: removing a portion of the edges of coiled metal to produce uniform width and round or smooth edges; and
·	cambering: the bending of structural steel to improve load-bearing capabilities.
In 2005, our metals service centers segment handled an average of approximately 3,262 transactions per day with an average revenue of approximately $1,888 per transaction.  Typically, our metals service centers sales are made on an individual purchase order basis.
Our metals service centers operations provide products and services to end users in a wide variety of industries, including machinery and equipment manufacturing, construction, shipbuilding and natural resources, such as mining and petroleum.  During 2005, no individual service center customer accounted for more than 3% of our total revenue.
Energy Tubular Products
Our energy tubular products operations distribute oil country tubular goods, line pipe, tubes, valves and fittings primarily to the energy industry.  This segment consists of four businesses, each of which sells a distinct line of products.  These businesses include:
Fedmet Tubulars-- a distributor of oil country tubular goods (which includes casing and tubing), line pipe and related products. Fedmet Tubulars' sales office is located in Calgary, Alberta.
Triumph Tubular & Supply-- a distributor of oil country tubular goods. Triumph’s sales office is located in Calgary, Alberta.
Comco Pipe and Supply Company-- a distributor of pipe, valve and fitting products. Comco Pipe and Supply specializes in the supply and distribution of pipe and fluid handling products to the energy, construction, manufacturing, pulp and paper and mining industries. These products are distributed through facilities in Calgary and Edmonton, Alberta; Stonewall, Manitoba; and Guelph and Sarnia, Ontario.
Pioneer Pipe --a distributor and processor of steel pipe products to the construction, oil and gas and ski industries in the western United States. Pioneer Pipe has facilities in Aurora, Colorado and Lindon, Utah. These operations include Spartan Steel, headquartered in Evergreen, Colorado.
The energy tubular products businesses sell a range of products to end users located primarily in western Canada and the western United States.  During 2005, no individual energy sector customer accounted for more than 1.5% of our total revenue.
Steel Distributors
Our steel distributors act as master distributors selling steel in large volumes to other steel service centers and equipment manufacturers mainly on an "as is" basis.  Our steel distributors source their steel domestically and off shore.
We source carbon steel, plate, beams, channel, flat rolled products, rail and pipe products.  Sales commitments for a significant portion of these products are obtained prior to their purchase or while the product is in production and transit.  Products for which sales commitments have not been obtained are held in public warehouses for resale to North American service centers and other customers.
Our steel distributors operations is conducted through Wirth Steel located in Canada and the Sunbelt Group located in the United States.  Arrow Steel, a division of Sunbelt Group, processes coils.
In 2005, no individual customer of the steel distributors operations accounted for more than 1% of our total revenue.

Revenue by Product
The following table sets out the revenues by product based on dollar revenues for the fiscal years ended December 31, 2005, 2004 and 2003.
Sales by Product Group
		Years Ended December 31,
				% of				% of					% of
(in thousands of dollars, except percentages)		2005		Total	2004			Total			2003		Total
Carbon:
Plate (Discreet & Plate in Coil)		$   797,297		30.5%	$   730,300			30.3%		$   350,082			23.3%
General Line:
Structurals (WF & I Beam, Angles,
Channels, Hollow Tubes)		534,177		20.5%	570,444			23.6%		344,806			22.9%
Bars (Hot Rolled and cold Finished)		186,167		7.1%	194,961			8.1%		135,057			9.0%
Tubing/Pipe (Standard, Oil Country
Tubular Goods)		635,362		24.3%	460,003			19.1%		335,534			22.3%
Grating/Expanded		25,820		1.0%	22,464			0.9%		15,708			1.0%
Flat Rolled (Sheet, Strip & Coil)		189,266		7.2%	226,998			9.4%		124,623			8.3%
Wire Rods/Wire Products/Rails		5,272		0.2%	1,983			0.1%		2,404			0.2%
Flanges, Fittings and Valves		75,873		2.9%	38,982			1.6%		39,967			2.7%
Total Carbon		2,449,234		93.7%	2,246,135			93.1%		1,348,181			89.7%
Total Non-Ferrous
(Sheet Extrusion, Tubular Goods, etc.)		66,350		2.5%	59,239			2.5%		81,648			5.4%
Other		99,662		3.8%	107,128			4.4%		73,985			4.9%
Total		$2,615,246		100.0%	$2,412,502			100.0%		$1,503,814			100.0%
Metal Suppliers
North American steel mills are the primary source of supply for our metals service centers.  In addition, we purchase steel from international sources when steel is either not available or is not priced on a competitive basis in North America.  This includes circumstances where the particular product is in short supply or where North American mills do not produce the particular product.  We have developed an effective coordinated purchasing program that allows us to derive economies of scale through volume purchases, and also allows us to access metal supplies globally.  Substantially all of our purchases are made under existing purchase orders and we have no material long-term metal supply contracts.  We believe that alternate suppliers are available with respect to all of our product lines and our metals service centers operations generally maintain multiple suppliers for all product lines.
Our Canadian service centers operations have over 200 suppliers.  Purchases from our four largest suppliers represented approximately 43.6% of the requirements of the Canadian service center operations in 2005.  We believe that we are one of the largest purchasers from most Canadian and many U.S. steel mills. Our U.S. service center operations have more than 50 suppliers and their four largest suppliers represent approximately 47.5% of their requirements.
The primary sources of supply for the energy tubular products sector are the pipe processing arms of North American steel mills and independent manufacturers of pipe and accessories.  During 2005, the largest single supplier of the energy sector represented approximately 10.7% of energy tubular products purchases.
The steel distributors sector deals on a regular basis with multiple suppliers in 20 countries around the world.  In 2005, the largest single supplier represented approximately 11.4% of the purchases by the steel distributors.
Competition
Our Canadian service centers compete with other service centers that are regional and local in geographic coverage and our U.S. service centers compete with other service centers that are national, regional and local in geographic coverage.  The service center industry is highly competitive with competition focused on price, product availability and quality, processing capability and on-time delivery.
We believe that our service center operations are favourably positioned with respect to our competitors for several reasons.  First, the geographic scope and diversity of our Canadian operations and the breadth of our product line allow us to service national and regional end users throughout Canada.  We believe that we provide our Canadian end users with a wider range of products and more value-added services than many of our regional or local competitors.  Second, we believe that our access to and contact with international markets through our steel distributors business not only provides us with certain purchasing and distribution advantages over many of our competitors, but also enables us to better anticipate trends and opportunities in the domestic and international steel markets, allowing us to more proactively manage our inventory.
The energy tubular products distribution industry is very diverse and is made up of many small private companies each having a unique product offering.  Generally, companies in this industry are regional in geographic coverage and focus on specific market niches.  These companies typically carry a broad product line and competition is focused on price, product availability and quality and on-time delivery.
Our steel distributors compete with other international steel importers, as well as steel producers in North America.  Competition focuses on price, product quality and availability and terms of shipment (including freight costs, which vary and can be as much as 15% of the landed cost of a product).  The business is highly dependent on global economic conditions and on the relationships we have with our international network of suppliers.
PROPERTIES
We have 64 warehouse facilities, 57 in Canada and 7 in the United States. Our steel distributors operations and two of our energy tubular products operations distribute goods that are held in public warehouses or yards until sold.
Set forth below is certain information, as of December 31, 2005, with respect to our principal operating facilities.
	Number of Facilities						Approximate Square Feet
	Owned		Leased			Owned			Leased			Total
Metals Service Centers
Canada
British Columbia	9		-			264,330			-			264,330
Alberta	4		4			123,723			56,934			180,657
Saskatchewan	3		-			52,260			-			52,260
Manitoba	2		1			199,296			54,000			253,296
Ontario	7		5			661,460			63,797			725,257
Quebec	12		-			811,970			-			811,970
New Brunswick	3		-			74,400			-			74,400
Nova Scotia	1		-			50,880			-			50,880
Newfoundland	1		-			19,200			-			19,200
Total	42		10			2,257,519			174,731			2,432,250
United States
Wisconsin	1		2			30,016			183,977			213,993
Ohio	1		-			41,040			-			41,040
Total	2		2			71,056			183,977			255,033
Energy Tubular Products
Canada
Alberta	1		1			45,000			8,100			53,100
Manitoba	-		1			-			28,000			28,000
Ontario	-		2			-			27,200			27,200
Total	1		4			45,000			63,300			108,300
Steel Distributors
United States
Texas	1		-			69,440			-			69,440
Non-Metal Operations
The remaining non-metals operation, Thunder Bay Terminals, covers an area of approximately 290 acres at its location in Thunder Bay, Ontario.  Most of the property is under long-term leases.  A coal handling system is located at the site and comprises a number of structures, including structures which trains enter to be unloaded, and ship docking facilities.  Coal storage structures and equipment are also located at the site.  All the structures and most of the equipment are owned by Thunder Bay Terminals.
EMPLOYEES
As at December 31, 2005, we had approximately 2,480 full-time and full-time equivalent employees.  Approximately 260 of these employees are located in the United States.  We have 34 collective bargaining agreements covering approximately 1,070 employees at 38 of our locations, one of which has expired and is currently being negotiated.  Through to the end of 2006, there are 8 other collective bargaining agreements covering approximately 214 employees, which we intend to renegotiate prior to their expiration.  We have maintained generally favourable relations with our employees.  Since 2002, we have experienced no work stoppages at any of our locations and have successfully renegotiated 54 collective agreements in that period.
LEGAL PROCEEDINGS
From time to time, we are involved in legal proceedings relating to claims arising out of our operations in the ordinary course of business.  We do not believe that there are any material proceedings, pending or threatened against us or any of our properties other than those discussed in this document under "Environmental Regulation."
ENVIRONMENTAL REGULATION
We are subject to a variety of federal, provincial, territorial, state and local environmental laws and regulations in Canada and the United States.  Such laws and regulations relate to, among other things, the discharge of contaminants into water and air and into and onto land, the disposal of waste, the handling, storage and transportation of hazardous materials and the storage of materials in underground tanks.  In particular, operations divested between 1991 and 1997 included chrome plating facilities and the transportation and storage of petroleum products.  We could be responsible for clean up of or damages from releases of hazardous materials on or emanating from the properties where these operations were conducted.
In Canada, while there are federal environmental statutes such as the Canadian Environmental Protection Act, 1999, the Fisheries Act, and the Transportation of Dangerous Goods Act, 1992 which apply to us, each Canadian province and territory and most municipalities in which we operate also enact and enforce their own environmental laws.  In the United States, the primary federal regulatory laws to which we are subject include the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act and the Clean Water Act.  We are also subject to environmental regulation at the state and local levels in the United States.
Environmental Policy
We have adopted an Environmental Policy, applicable to all segments of the Company, to ensure that our operations comply with applicable environmental laws in the jurisdiction in which they operate, and to minimize our operations' impact on the natural environment.  The policy is supported by an Environmental Management System, which clearly defines and communicates lines of responsibility for environmental matters within the organization, provides assistance and support to the operating units in addressing their individual environmental needs, and under which the environmental performance of the operations is monitored and reported to Senior Management.  Standard Operating Procedures have been developed to encourage uniformity and consistency in the handling of environmental matters, where such matters are common to multiple operating locations.
We believe that our current operating facilities are in material compliance with applicable environmental laws, regulations and our environmental policy.
Present Actions
The following paragraphs summarize significant environmental litigation, regulatory action and remediation in which we are presently involved.  The anticipated expenditures on these sites all relate to previously divested or discontinued operations and do not relate to the metals distribution business.
Denton, Maryland
Pursuant to a Consent Order issued by the Maryland Department of the Environment (MDE) in 1987 and subsequently amended in April 1993, one of our non-operating subsidiaries is treating groundwater contaminated with volatile organic compounds from a former manufacturing facility on its property in Denton, Maryland.  The 1993 amendment to the Consent Order allows the subsidiary to focus the remediation project on localized areas of contamination.  To date, approximately US$2.5 million has been expended in connection with the investigation and remediation of groundwater on this site.  The treatment system has recently undergone repair and upgrade activities, to restore the system to optimum operating efficiency, and the recurring annual cost to operate and maintain the treatment system is approximately US$70,000.  In 2005, the subsidiary met with MDE officials to explore and discuss alternatives for achieving file closure.
Hamilton, Ontario
Contamination was discovered in 1991 by a subsidiary of ours on its property in Hamilton, Ontario, resulting from its historic, on-site chrome plating operations.  The contamination, which consists primarily of chromium, was reported to the Ontario Ministry of Environment (the "MOE") and the local municipality. The subsidiary retained environmental consultants to determine the extent of contamination on the site and on neighboring properties and has developed a plan to deal with the contamination, which has been reviewed by the MOE.  This plan involves the use of a groundwater extraction and treatment system, which has been installed and is presently remediating both contamination on site and that caused by the subsidiary on neighboring properties.  The subsidiary undertook certain actions, approved by the MOE, to upgrade and improve the remediation system, which commenced during 2002 and continued through 2004 and discussions continue with MOE to ensure they remain informed and satisfied.  To date, approximately $3.2 million has been expended and we expect that the groundwater extraction and treatment will continue indefinitely at an annual cost including operating and maintenance expenses of approximately $150,000.
Whitehorse, Yukon and Skagway, Alaska
Certain of our subsidiaries operated a petroleum distribution business in Alaska, Yukon and northern British Columbia including a petroleum pipeline between Whitehorse, Yukon and Skagway, Alaska.  This business was sold as of June 1, 1995.  We continue to own properties in Skagway and in Whitehorse formerly used in connection with that business including petroleum tank farms.  The petroleum tanks and pipelines have been removed from these properties.  The surface clean-up of the former Skagway tank farm was started in 1999 and is now substantially completed.  Remedial work for the property in Whitehorse known as the upper tank farm has also been substantially completed and the results are before the Canadian National Energy Board, Environment Canada and the Yukon Territorial government for approval.  We have expended approximately $7.9 million on these two properties.  We do not anticipate any further material costs with respect to either the former Skagway tank farm or the upper tank farm at Whitehorse.
In addition, the purchasers of the petroleum distribution business have filed a complaint in Alaska and a writ in the Yukon Territory against us relating to environmental contamination at the Whitehorse lower tank farm and a historical barrel-washing pit sold with the petroleum distribution business.  The actions relate to petroleum hydrocarbons and also lead, zinc and other contaminants.  On October 5, 2000, Orders were issued by the Yukon Territorial government pursuant to the Environment Act (Yukon) against us and other responsible parties to investigate, establish a plan of restoration and restore this site.  The Yukon Territorial government vacated these Orders in 2002; however, it has advised that it remains of the view that investigation and restoration remain necessary.  Consequently, we and some others, under a cost-sharing agreement entered into in 2005, are continuing the investigation of the property and the development of an acceptable restoration plan.  Approximately $1.4 million has been expended to date.  A proposed risk-based remedial approach is being developed, for consideration by the Yukon Territorial government.  Our final costs with respect to these issues cannot be determined until a remedial approach has been decided, a restoration plan has been approved, and third party liability, if any, has been taken into account.  We cannot assure you that costs with respect to this matter will not be material.
Settled Actions
Gary, Indiana
Asubsidiary of ours was previously subject to an Agreed Order with the Indiana Department of Environmental Management ("IDEM") requiring certain soil and groundwater investigation and remediation activities at a previously leased property in Gary, Indiana at which the subsidiary once operated a chrome plating facility.  In the period 1992 to 2005, approximately US$2.8 million was expended in connection with this work.  During 2005, IDEM confirmed that the subsidiary has complied with the terms of the Agreed Order.  The issues addressed by the Order are considered resolved and the action closed.  No further activity or expenditure is anticipated, in connection with this action.
Thunder Bay, Ontario
One of our subsidiaries operated a trucking terminal in Thunder Bay, Ontario.  This property was sold as of December 31, 1992.  Within the time specified in the agreement of purchase and sale, the purchaser discovered petroleum contamination in the vicinity of an underground diesel storage tank.  We agreed to undertake remediation and monitoring efforts at the property.  These activities took place from 1995 through to 2000.  The purchaser has since notified us that they believe the remediation had not been completed in accordance with the terms of the Agreement of Purchase and Sale.  In 2005, we offered, and the purchaser accepted, a settlement of a nominal amount in exchange for a final release.

RISKS RELATED TO OUR BUSINESS AND THE METALS
DISTRIBUTION INDUSTRY
Volatile metal prices can cause significant fluctuations in our operating results.
The price we pay for, and availability of, steel and various specialty metals (such as aluminum), and the prices we can charge for such products, fluctuate due to numerous factors beyond our control, including Canadian, American and international economic conditions, currency exchange rates, global demand for steel and other metal products, including demand in high-growth markets such as China, trade sanctions, tariffs, labor costs, competition and over capacity of steel producers, including price surcharges. Substantially all of our revenues are derived from the sale of steel and specialty metals.  As a result, fluctuations in availability and cost of steel and specialty metals and the prices we can charge for our products may materially adversely affect our business, financial condition, results of operations and cash flows.  We have no material long-term, fixed-price purchase contracts.  Our commitments for metal purchases are generally at prevailing market prices in effect at the time that we place our orders.  During periods of rising raw materials pricing, we may be unable to pass such increases, which may include surcharges by our suppliers, on to end users.  To the extent we are not able to pass on to our customers any increases, our business, financial condition, results of operations and cash flows will be materially adversely affected.  When metal prices decline, end user demands for lower prices and competitors' responses to those demands could result in lower sale prices and, consequently, lower margins as we use existing inventory.
Our business may be affected by the cyclicality of the metals industry and the industries that purchase our products.
We operate businesses that are substantially affected by changes in economic cycles and whose revenues and earnings vary with the level of general economic activity in the markets they serve.  Periods of economic slowdown or recession in the United States or other countries, or the perception that one may occur, could decrease the demand for our products, affect the availability and cost of our products and adversely affect our revenues, operating profits and net earnings.
Some of our customers operate in industries that experience significant fluctuations in demand based on economic conditions, oil and gas prices and other factors, including exchange rate fluctuations, that are beyond our control.  Many of our customers generate a significant portion of their revenues through exporting goods to the United States.  Thus, a strengthening in the Canadian dollar relative to the U.S. dollar can adversely affect the competitiveness of these customers.  The Canadian dollar rose relative to the U.S. dollar approximately 22% in 2003, 7% in 2004 and 3% in 2005.  If the ability of our customers to export their products to the United States is reduced, the demand for our products could decline, which could have a material adverse effect on our business, financial conditions, results of operations and cash flows.
Significant competition could reduce our market share and harm our financial performance.
We face significant competition in our metals service centers and energy tubular products operations. In Canada, our primary competitors are other service centers and energy products distributors, which are regional and local in geographic coverage.  In the United States, we compete with other service centers and energy product distributors, which are national, regional and local in geographic coverage.  We also compete with steel producers which are larger than we are, that typically sell to very large end users requiring regular shipments of large volumes of metals.  Competition is based on price, product availability and quality, processing capability and on-time delivery.  Some of our competitors may have lower steel costs and fewer environmental and government regulations, as well as lower public company regulatory compliance obligations and related costs, than we do.  In addition, some of our competitors may be less leveraged than we are and therefore may have greater financial resources and flexibility than we have.  Increased competition could reduce our profitability by forcing us to lower our prices or to offer increased services at a higher cost to us.
Our steel distributors compete with other international steel importers and exporters as well as North American steel producers in the destination market.  Competition is principally based on price, product quality and availability, and terms of shipment (including freight costs, which vary and can be as much as 15% of the landed cost of a product).  The imposition of trade sanctions by governments on the import of steel products into such government's jurisdiction may place us at a competitive disadvantage as compared to domestic steel producers in such jurisdiction.
An interruption in sources of metals supply could have a material adverse effect on our results of operations.
We purchase our principal inventory, including carbon steel, stainless steel, alloy steel, aluminum and a variety of other metals on a frequent basis from a number of producers, primarily in North America to keep our inventory levels to a minimum.  We have no long-term contracts to purchase metal.  If, in the future, we are unable to obtain sufficient amounts of steel and other metal products at competitive prices or on a timely basis from our traditional suppliers, we may not be able to obtain such products from alternative sources at competitive prices to meet our delivery schedules, which could materially adversely affect our business, financial condition, results of operations and cash flows.  Production time and the cost of our products could increase if we were to lose one of our primary suppliers.  Any interruption or reduction in the supply of any of these products may make it difficult or impossible to satisfy customers' just-in-time delivery requirements, which could materially adversely affect our business, financial condition, results of operations and cash flows.
Any future acquisitions could be difficult to integrate and could adversely affect our operating results.
A substantial part of our growth in profitability has come from acquisitions which we have successfully integrated.  As part of our strategy, we expect to continue to pursue complementary acquisitions and investments.  Acquisitions may involve debt incurrence, operating losses, dilutive issuances of equity securities and significant cash expenditures that could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Any future acquisitions involve a number of risks, including:
·	our inability to integrate the acquired business;
·	diversion of management attention;
·	impairment of goodwill adversely affecting our reported net income;
·	our inability to retain the management or other key employees of the acquired business;
·	our inability to establish uniform standards, controls, procedures and policies;
·	our inability to retain customers of our acquired companies;
·	exposure to legal claims for activities of the acquired business prior to the acquisition;
·	damage to our reputation as a result of performance or customer satisfaction problems relating to an acquired business; and
·	the performance of any acquired business could be lower than we anticipated.
If we fail to renegotiate any of our collective agreements or if we or our principal customers or suppliers experience work stoppages, our financial condition may be harmed.
As of December 2005, we had 34 collective bargaining agreements covering approximately 1,070 employees belonging to a variety of unions at 38 of our locations, one of which has expired and is currently being negotiated.  Through to the end of 2006, 8 other collective bargaining agreements covering approximately 214 employees will expire.  If we fail to renegotiate these contracts, we may face work stoppages.  Even if we do renegotiate these contracts, any renewal of collective bargaining agreements could result in higher wages or benefits to union members.  We cannot assure you that there will not be any labour disruptions, or higher ongoing labour costs, either of which could materially adversely affect our business, financial condition, results of operations and cash flows. In addition, many of our customers and suppliers have unionized work forces.  If one or more of our customers or suppliers experience a material work stoppage or slow down, it could materially adversely affect our business, financial condition, results of operations and cash flows.
Environmental liabilities could have a material adverse effect on our results of operations and financial position.
We are subject to a variety of federal, provincial, territorial, state and local environmental laws and regulations in Canada and the United States. Such laws and regulations relate to, among other things, the discharge of contaminants into water and air and into and onto land, the disposal of waste, the handling, storage and transportation of hazardous materials, and the storage of materials in underground tanks. In particular, our divested non-metal operations included chrome plating facilities and the transportation and storage of petroleum products and hazardous materials.  We could be responsible for clean up of, or damages from, releases of hazardous materials on or emanating from the properties where these operations were conducted.  We are required by environmental laws and regulations to conduct our operations in compliance with permits issued by governmental authorities.  The failure to have such permits or to comply with their terms could result in fines or penalties.
In Canada, there are federal environmental statutes such as the Canadian Environmental Protection Act, 1999, the Fisheries Act, and the Transportation of Dangerous Goods Act, 1992, which apply to us. In addition, each Canadian province and territory and most municipalities in which we operate also enact and enforce their own environmental laws. In the United States, the primary federal regulatory laws to which we are subject include the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act and the Clean Water Act.  We are also subject to environmental regulation at the state and local levels in the United States.
There are currently remediation and/or investigation activities at three former facilities where soil and/or groundwater contamination is present. Financial costs with respect to those activities cannot be predicted at this time.  See "Business -- Environmental Regulation" for more details about our environmental proceedings. In addition, some of our current properties are located in industrial areas with histories of heavy industrial use, which may require us to incur expenditures and to become subject to environmental liabilities for contamination that arises from our current or former operations or from causes other than our operations. Such environmental costs could materially adversely affect our business, financial condition, results of operations and cash flows.  We do not carry environmental insurance coverage to offset the effects of such potential losses.   We may be required as a matter of law to satisfy, with respect to the government or third parties, the environmental liabilities related to divested businesses should the acquirers of our divested businesses fail to fulfill any environmental obligations for events prior to divestiture.  Because of the potential existence of currently unknown environmental issues and frequent changes to environmental laws and regulations and the interpretation and enforcement of these laws and regulations, there can be no assurance that compliance with environmental laws, or remediation obligations under such laws, will not have a material adverse effect on us in the future.
Changes in government regulations could have an adverse effect on our business.
Our operations are subject to laws and regulations relating to workplace safety and worker health and related regulations, which, among other requirements, establish noise, dust and safety standards. While we believe that we are in material compliance with currently applicable laws and regulations, future events such as any changes in laws and regulations, may give rise to additional expenditures or liabilities.  We cannot assure you that compliance with such government regulations will not materially adversely affect our business, financial condition, results of operations and cash flows.
We are exposed to currency exchange risk, which could have a material adverse effect on our operating results.
Although our financial results are reported in Canadian dollars, a portion of our sales and operating costs are denominated in U.S. dollars.  In addition, we are exposed to currency exchange risk on our debt, including the notes and interest thereon, and assets denominated in U.S. dollars.  Since we present our financial statements in Canadian dollars, any change in the value of the Canadian dollar relative to the U.S. dollar during a given financial reporting period would result in a foreign currency loss or gain on the translation of our U.S. dollar denominated debt and assets into Canadian dollars.  Consequently, our reported earnings could fluctuate materially as a result of foreign exchange translation gains or losses.  While it is not our normal practice to enter into significant hedging arrangements other than in relation to our long-term debt, we may use futures and forward contracts to partially hedge against short-term fluctuations in currency; however, such activities provide only short-term protection against a limited portion of our currency exposure.
We may, from time to time, hedge a portion of our net exchange rate exposure under the U.S. dollar denominated debt with respect to either or both of principal and interest by way of one or more swap transactions to Canadian dollars, to the extent our management considers it reasonable to do so having regard to the then prevailing levels of our net assets located in the United States and our U.S. dollar revenues, and to the extent available on reasonable terms; however, such activities provide only short-term protection and there can be no assurance that they will be effective in insulating us against exchange rate fluctuations.  In February 2004,we entered into fixed for fixed cross currency swaps with major banks to manage the foreign currency exposure on the last US $100 million of the Senior Notes.
The failure of our key computer-based systems could have a material adverse effect on our business.
We depend to a significant degree on our computer based-systems in the operation of our business, particularly in our inventory management.  The destruction or the failure of any such computer-based systems for any significant period of time would materially adversely affect our business, financial condition, results of operations and cash flows.
The loss of key individuals could adversely affect our ability to implement our business strategy.
Our success is dependent in large part on the management and leadership skills of our senior management team, including Edward M. Siegel, Jr., our President and Chief Executive Officer; and Brian R. Hedges, our Chief Financial Officer.  If we lose either of these individuals or fail to attract and retain equally qualified personnel, we may not be able to implement our business strategy.
In addition, because of our decentralized operating structure, the loss of any senior managers or key employees at regional centers could materially adversely affect our business, financial condition, results of operations and cash flows.  We cannot assure you that we will be able to attract and retain equally qualified personnel when needed.
GENERAL DEVELOPMENT OF THE BUSINESS
On July 3, 2003, we purchased 99.52% of the issued and outstanding Class A shares and 97.53% of the issued and outstanding Class B shares of Acier Leroux inc. for cash of $48.9 million and 3,546,874 common shares of Russel Metals Inc.  On August 19, 2003, under the provisions of the Companies Act (Quebec), we acquired the remaining shares of Acier Leroux for $1.2 million in cash.
On February 12, 2004, we issued 5,750,000 common shares at $9.00 per share for net proceeds of $49.2 million.
On February 20, 2004, we issued US $175 million 6.375% Senior Notes due March 1, 2014.
On February 23, 2004, we repurchased US $95.5 million of our 10% Senior Notes at a premium of $72.50 per US $1,000 of notes.
On March 22, 2004, we redeemed our $30 million Class II Preferred Shares and on March 26, 2004 we redeemed our $30 million 8% Debentures.
On June 1, 2004, we redeemed the remaining US$20.1 million of our 10% Senior Notes at a premium of $50.00 per US$1,000 of notes.

RATINGS
We have received the following credit ratings from each of Moody's Investors Service ("Moody's"), Standard & Poors Rating Services ("S&P") and Dominion Bond Rating Services Ltd. ("DBRS") (each a "Rating Agency"):
		Moody's		S & P		DBRS
Corporate rating		Ba2		BB		-
Senior unsecured notes		Ba3		BB-		BB
Bank Credit Facility		-		-		BB (high)
Outlook		Stable		Stable		Stable
Moody's Investors Service
Moody's credit ratings are on a long-term debt rating scale that ranges from Aaa to C, which represents the range from highest to lowest quality of such securities rated.  According to Moody's, a rating of Ba is the fifth highest of nine major categories.  Moody's applies numerical modifiers 1, 2 and 3 in each generic rating classification from Aa to Caa in its corporate bond rating system.  The modifier 1 indicates that the issue ranks in the higher end of its generic rating category, the modifier 2 indicates a mid-range ranking and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category.
In February 2004, Moody's upgraded its rating for the Company by one notch.  Moody's corporate rating for the Company is Ba2.  In addition, Moody's assigned a Ba3 rating to our US$175 million of senior unsecured notes due 2014.  This rating is an upgrade from the B1 rating previously assigned.  The outlook for both ratings is stable.
Standard & Poor's Ratings Services
S&P's credit ratings are on a long-term debt rating scale that ranges from AAA to D, which represents the range from the highest to lowest quality of such securities rated.  According to S&P, the BB rating is the fifth highest of ten major rating categories.  The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.
In February 2004, S&P raised its long-term corporate credit rating for the Company to BB and assigned its BB- rating to the new senior unsecured notes to be issued in connection with the recapitalization of the Company, which consisted of the issuance of Cdn $51.8 million in equity and US$175 million in notes to repurchase all public debt and preferred shares outstanding.  These ratings were an upgrade from the prior status.  The rating outlook is stable.
Dominion Bond Rating Services Ltd.
The DBRS credit ratings are on a long-term debt rating scale that ranges from AAA to D, which represents the range from highest to lowest quality of debt securities rated.  According to DBRS, the BB rating is the fifth highest of ten major rating categories.  Each rating category from AA to CCC is denoted by the subcategories "high" and "low".  The absence of either a "high" or "low" designation indicates the rating is in the "middle" of the category.
In June of 2005, DBRS assigned ratings of BB (high) to our bank credit facility and BB to our senior unsecured notes.  In its first rating review issued since October 2001, DBRS has assigned a rating outlook of stable for both categories.  The ratings are based on public information.
We understand that the ratings are based on, among other things, information furnished to the Ratings Agencies by us and information obtained by the Ratings Agencies from publicly available sources. The credit ratings given by the Ratings Agencies are not recommendations to buy, hold or sell any of the securities of the Company since such ratings do not comment as to market price or suitability for a particular investor.  There is no assurance that any rating will remain in effect for any given period of time or that any rating will not be revised or withdrawn entirely by a Rating Agency in the future.
What the ratings address
Unsecured Debt: Credit ratings are the current opinion of the rating agency on creditworthiness of an obligor with respect to a specific financial obligation and a specific class of financial obligation for a specific financial program.  Ratings take into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and take into account the currency in which the obligation is denominated.
Rating Outlook:  Rating outlook assesses the potential direction of a long-term credit rating over the intermediate to longer-term.  In determining a rating outlook consideration is given to any changes in the economic and fundamental business conditions.  An outlook is not necessarily a precursor of a rating change.
MARKET FOR THE SECURITIES OF RUSSEL METALS
Our common shares are listed and posted for trading on The Toronto Stock Exchange under the symbol "RUS".  Information concerning the trading prices and volumes during fiscal 2005 is set out in the following table:
The Toronto Stock Exchange Share Price Trading Range
Month	High		Low		Close		Share Volume
December 2005	$22.75		$20.82		$21.85		2,927,645
November 2005	21.55		18.87		21.28		7,050,007
October 2005	19.18		17.25		19.14		3,123,175
September 2005	18.84		16.91		18.74		5,677,620
August 2005	17.29		15.35		17.20		4,054,048
July 2005	16.59		13.85		16.09		4,158,850
June 2005	15.73		13.80		13.85		4,343,921
May 2005	14.80		13.40		14.65		8,172,766
April 2005	16.84		14.21		14.50		4,945,107
March 2005	18.05		15.35		16.11		4,935,670
February 2005	18.78		15.30		18.00		4,755,848
January 2005	15.90		14.60		15.55		2,613,110
The transfer agent and registrar for our common shares is CIBC Mellon Trust Company, 320 Bay Street, P.O. Box 1, Toronto, Ontario M5H 4A6

DIVIDEND RECORD
The following table shows common share dividends paid on a per share basis.
	Years Ended December 31,
	2005		2004	2003
Common shares	$  0.900		$  0.505	$  0.290
In April 2000, the Directors adopted a dividend policy with $0.20 per share as the targeted annual level of dividend on common shares and authorized the payment of the first quarterly dividend of $0.05 per common share, payable June 15, 2000.  We increased the quarterly dividend by $0.01 to $0.06 per common share during the third quarter of 2002.  In the first quarter of 2003, we further increased the dividend to $0.07 per common share and in the fourth quarter of 2003, it was again increased $0.01 to $0.08 per share.  In the second quarter of 2004, the dividend was increased to $0.10 per share; in the third quarter of 2004, it was increased to $0.15 per share and in the fourth quarter, it was increased to $0.175 per share.  In the first quarter of 2005, the dividend was increased to $0.20 per share and in the third quarter, it was increased to $0.25 per share.  In the first quarter of 2006, the dividend was increased to $0.35 per share.
The ability to pay dividends on common shares is impacted by restrictions associated with the senior notes due March 1, 2014.  Dividends on common shares in excess of $0.08 per share per quarter and the repurchase of common shares are considered to be restricted payments under the Note Indenture.  At December 31, 2005, we have $144 million available for restricted payments.
The ability to make restricted payments is adjusted quarterly by 50% of the quarterly net income or loss if the cumulative net income from December 31, 2003 is positive, or 100% of the quarterly net income or loss if the cumulative net income from December 31, 2003 is negative.  Net income is adjusted for certain exclusions.
We redeemed all outstanding preferred shares in March 2004.  Dividends on preferred shares were paid quarterly in equal installments.  In 2004, we paid preferred share dividends of $0.509 per share including the amount accrued to the redemption date.  In 2003, the dividends paid were $1.875 per share.
MAJOR SUBSIDIARIES
The following is a list of the major subsidiaries of Russel Metals at December 31, 2005, all of which are wholly owned.
		Jurisdiction of incorporation
Fedmet Corp.		State of Delaware
Fedmet Enterprises Corporation		State of Delaware
Fedmet International Corporation		State of Delaware
FIL (US) Inc.		State of Alaska
Pioneer Steel & Tube Corp.		State of Delaware
RMI Holdings LLC		State of Delaware
Russel Metals Corp.		State of Delaware
Russel Metals Williams Bahcall Inc.		State of Delaware
Sunbelt Group L.P.		State of Texas
Thunder Bay Terminals Ltd.		Ontario
Triumph Tubular & Supply Ltd.		Alberta
Wirth Steel, a General Partnership		Quebec

DIRECTORS AND EXECUTIVE OFFICERS
The following table sets out the name and municipality of residence and position held with the Company and the principal occupation of each of the directors of the Company.  Each individual was a director on December 31, 2005, with the exception of Mr. Benedetti, who became a director on February 23, 2006.  Information relating to executive officers follows.
DIRECTORS
Name, Municipality of		Date Became
Residence and Position Held		Director		Principal Occupation
ALAIN BENEDETTI (1)(2) Montreal, Quebec Director		February 23, 2006		Corporate Director
JAMES F. DINNING (1)(2)(4) Calgary, Alberta Director		February 17, 2003			Chairman of the Board Western Financial Group (insurance, investment and banking)
CARL R. FIORA (1)(3) Middletown, Ohio Director		May 11, 1994		Corporate Director
ANTHONY F. GRIFFITHS (2)(4) Toronto, Ontario Director; Chairman of the Board		May 14, 1997			Corporate Director
ROBBERT HARTOG (1)(4) Perkinsfield, Ontario Director		May 14, 1997		President, Robhar Investments Ltd. (private investment company)
LISE LACHAPELLE (2)(4) Ile-des-soeurs, Quebec Director		May 15,1996		Corporate Director
JOHN W. ROBINSON (3)(4) Greensboro, North Carolina Director		May 11, 1995		Corporate Director
EDWARD M. SIEGEL, JR. Westport, Connecticut Director; President and Chief Executive Officer			May 6, 1998	President and Chief Executive Officer of the Company
(1)	Member of the Audit Committee
(2)	Member of the Nominating and Corporate Governance Committee
(3)	Member of the Management Resources and Compensation Committee
(4)	Member of the Environmental Management and Health & Safety Committee

Mr. Benedetti is a Corporate Director.  In addition, he is Vice Chairman of the Canadian Institute of Chartered Accountants.  From 1998 to his retirement in June 2004 he was Vice Chairman and Canadian Area Managing Partner of Ernst & Young LLP.  Mr. Benedetti is currently a director of Dorel Industries Inc. and Birks & Mayors Inc. and is a Governor of Dynamic Mutual Funds.

Mr. Dinning is Chairman of the Board of Western Financial Group (insurance, investment and banking).  From 1997 to 2005, Mr. Dinning was Executive Vice President of TransAlta Corporation.  Prior to 1997, Mr. Dinning held several key positions during his 11 years as a member of the Legislative Assembly in Alberta, culminating as Treasurer of Alberta.  Mr. Dinning is a director of Finning International Inc., JED Oil Inc., Liquor Stores Income Fund, Oncolytics Biotech Inc., Parkland Income Fund and Shaw Communications Inc.

Mr. Fiora is a Corporate Director. Prior to retiring on November 30, 1990, Mr. Fiora was the President and Chief Executive Officer of Armco Steel Company L.P., a steel manufacturing company.

Mr. Griffiths is a Corporate Director. From 1985 to 1993 Mr. Griffiths served in several capacities at Mitel Corporation, including Chief Executive Officer and Chairman.  From 1993 to present, Mr. Griffiths has been associated with various companies acting as an independent consultant.  Mr. Griffiths is Chairman of the Board of Novadaq Technologies Inc., and is a director of Alliance Atlantis Communications Inc., Crum & Forster Holdings Corp., Fairfax Financial Holdings Limited, Hub International Limited, Jaguar Mining Inc., Lindsey Morden Group Inc., Northbridge Financial Corporation, Odyssey Re Holdings Corp., PreMD Inc. and Vitran Corporation Inc.

Mr. Hartog is President of Robhar Investments Ltd., a private investment company.  He is currently a director of Crum & Forster Holdings Corp., Fairfax Financial Holdings Limited, Lindsey Morden Group Inc., Northbridge Financial Corporation and Odyssey Re Holdings Corp.

Ms. Lachapelle is a Corporate Director.   She was the President and Chief Executive Officer of The Forest Products Association of Canada from September 1994 to 2001.  Prior to September 1994, she was President of Strategico Inc. for one year and a consultant with Strategico for three years.  Ms. Lachapelle is a director of Abitibi-Consolidated Inc., Industrial Alliance Insurance and Financial Services Inc., INNERGEX Power Income Fund and Mirabaud Canada Inc.

Mr. Robinson is a Corporate Director.  He was President and CEO of SMP Steel Corp. (steel distribution) until retirement in December 1998.

Mr. Siegel is the President and Chief Executive Officer of the Company.  Mr. Siegel's career in the metals industry began in 1965 when he joined The Titan Industrial Corporation, a steel trading company based in New York.  As Senior Vice President, his primary responsibility was for the tubular products division.  In 1985, Mr. Siegel joined Duferco Inc. as a Vice President, with responsibility for starting a tubular products operation and for augmenting Duferco's trading of steel products worldwide.  In February 1987, Mr. Siegel joined Russel Metals as a Vice President with responsibility for the export of prime and secondary materials from Canadian steel mills and for the import of semi-finished material to Canadian mills.  Over the succeeding 13 years, Mr. Siegel assumed various responsibilities eventually becoming President and Chief Executive Officer of Russel Metals Inc. in 1997.

             Effective December 31, 2005, Mr. Pierre Brunet resigned as a Director due to his increased workload, after accepting the position of Chairman of a large financial institution.  On February 23, 2006, Mr. Alain Benedetti was appointed a Director to fill the vacancy created by Mr. Brunet's resignation. Mr. Benedetti will stand for election as a Director, together with the seven Directors standing for re-election at the upcoming annual meeting of shareholders.

EXECUTIVE OFFICERS
Name and municipality of				Position
Residence				Held	Principal Occupation
EDWARD M. SIEGEL, JR. Westport, Connecticut				Director; President and Chief Executive Officer	Executive Officer of Russel Metals Inc
BRIAN R. HEDGES Toronto, Ontario				Executive Vice President and Chief Financial Officer	Executive Officer of Russel Metals Inc.
MARION E. BRITTON Mississauga, Ontario				Vice President, Chief Accounting Officer and Assistant Secretary	Executive Officer of Russel Metals Inc.
Mr. Siegel is a director and executive officer of the Company.  Mr. Siegel's biography can be found in the paragraph following the director's table.
Mr. Hedges is an executive officer of the Company.  Mr. Hedges is a Chartered Accountant.  He has been employed with the Company since 1994.  His business career encompasses the positions of Chief Financial Officer, President and CEO of Gandalf Technologies, as well as Chief Financial Officer of Teleglobe Inc. Both companies were involved in the Canadian international telecommunications industry.  During his earlier years at Russel Metals, Mr. Hedges oversaw the divestitures of non-metals operations and the restructuring from a holding company (known as Federal Industries Ltd.) to a metal distribution operating company.  Mr. Hedges is responsible for the financial and support activities of the Company's operations.
Ms. Britton is an executive officer of the Company.  Ms. Britton is a Chartered Accountant.  In 1984, Ms. Britton joined Marshall Drummond McCall and joined Russel Metals in 1987 when Drummond McCall was acquired.  From 1987 to 1994, Ms. Britton was responsible for financial management for the Metals Operations.  In 1994, Ms. Britton assumed the role of Vice President and Corporate Controller of Russel Metals.  In 2004, Ms. Britton's title changed to Vice President and Chief Accounting Officer.  Since 1994, Ms. Britton has been responsible for the financial reporting of the Company.  In addition, she has assisted with debt and equity financings and the merging of the Company's three major acquisitions with its current operations.
During the last five years, all of the directors and officers have had the principal occupations indicated opposite their respective names, with the exception of A. Benedetti and J.F. Dinning whose occupational history is described above.
E. M. Siegel, Jr., the Company's President and Chief Executive Officer, is the only related (1)director. He was elected a director on May 6, 1998.  None of the other directors has any material business or professional relationship with the Company.
(1)The Toronto Stock Exchange Guidelines provide that:  "An unrelated director is a director who is independent of management and is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director's ability to act with a view to the best interests of the corporation, other than interests and relationships arising from shareholding.  A related director is a director who is not an unrelated director".
All directors serve one-year terms and are elected at the annual meeting of shareholders of the Company.  The term of office of each of the current directors of the Company will expire at the annual meeting of shareholders of Russel Metals to be held in May 2006.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors delegates certain of its functions to four committees of the Board to facilitate more detailed consideration of certain issues.  These committees bring recommendations to the Board for consideration and approval as appropriate.  Each committee is comprised entirely of unrelated directors.
The Audit Committee meets quarterly to review the Company's financial statements, management's discussion and analysis of financial conditions and results of operations, report to shareholders and press releases.  The Audit Committee monitors the integrity of internal control and management information through discussions with management and regular meetings with the external auditors. In addition, the Committee reviews other public disclosure documents, including the annual information form, the management proxy circular, registrations and prospectuses.
The Nominating and Corporate Governance Committee develops comprehensive written mandates for each of the Board committees, monitors and evaluates the corporate governance system, recommends candidates for election to the Board and serves as a forum for concerns of directors which may not be appropriate for discussion in full Board meetings.
The Management Resources and Compensation Committee reviews compensation policies for the Company's executive officers and is responsible for succession planning for the most senior members of management.
The Company has established an Environmental Management and Health & Safety Committee for the purpose of reviewing compliance policies and procedures in accordance with legislative and regulatory requirements with regard to environmental and health and safety issues.
As at the date hereof, the directors and executive officers of Russel Metals as a group beneficially own, directly or indirectly, or exercise control or direction over 2% of the outstanding common shares.
If any director of the Company is, or within ten years before the date of this annual information form has been, a director or officer of any other issuer that, while such director was acting in that capacity, (a) was the subject of a cease trade or similar order, or an order that denied the other issuer access to any exemptions under Canadian securities legislation, for a period of more than 30 consecutive days, the Company is required to state that fact and describe the basis on which the order was made and whether the order is still in effect; or (b) became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, the Company is required to state that fact.  To the knowledge of the Company, the only director of the Company in respect of whom any such disclosure is required is Mr. A. F. Griffiths.  In relation to part (a), Mr. Griffiths was formerly director of Brazilian Resources, Inc., which was issued a temporary cease trade order by the Ontario Securities Commission on June 10, 2001 relating to management and insiders.  This order was rescinded on July 30, 2001.  In relation to part (b), Mr. Griffiths was a director of Consumers Packaging Inc. at the time it was placed into liquidation under the protection of the CCAA (2001) and cease trade orders were issued against management and insiders due to failure to file financial statements.  Mr. Griffiths was a director of Slater Steel Inc., when it operated under the protection of the CCAA in an orderly wind-down (2003).
AUDIT COMMITTEE INFORMATION
In 2005, the members of the audit committee of the Company were P. Brunet, C. R. Fiora, J. F. Dinning and R. Hartog.  From October 27, 2004 to December 31, 2005, Mr. Brunet was a member of the audit committee.  He served as Chair of the Committee from April 27, 2005, until his resignation from the board on December 31, 2005.  Mr. Brunet was succeeded by Mr. Alain Benedetti as a board member and Chair of the Committee on February 23, 2006.  The audit committee has direct communication with the Company's finance department to review issues as appropriate and meets directly with the external auditors of the Company on a quarterly basis.
Each of the members of the Audit Committee are independent and financially literate.  The former Chair and the present Chair of the Committee are Chartered Accountants and each are considered to be a "financial expert", as defined in the Securities Exchange Act of 1934, as amended.  Each member of the Audit Committee has the ability to perform his responsibilities as an Audit Committee member based on their education and/or experience as summarized below:
A. Benedetti (Chair)	· · · ·		Chartered Accountant Vice Chairman of the Canadian Institute of Chartered Accountants Former Vice Chairman and Canadian Area Managing Partner for Ernst & Young LLP Chairman of the Audit Committee of Dorel Industries Inc. and Birks & Mayors Inc.
R. Hartog	· · · ·	President of Robhar Investments Ltd., a private investment company Former CEO of Waltec Enterprises Ltd. Current Audit Committee member of Crum & Forster Holdings Corp., Fairfax Financial Holdings Limited, Northbridge Financial Corporation and Odyssey Re Holdings Corp. Former Audit Committee member of Atlantic Resources International, Dalex Inc., Georgian College, Huronia District Hospital, IRDI, Municipal Trust and Padinox Inc.
J. F. Dinning	· · ·	Former Provincial Treasurer of Alberta Bachelor of Commerce honours degree Former Audit Committee member of Shaw Communications Inc. and Finning International Inc.
C. R. Fiora	· ·	Former President and CEO of Armco Steel LLP Former member of the Audit Committee of First Financial Bancorp
Audit Fees
The aggregate fees charged by Deloitte & Touche LLP for audit services for the year ended December 31, 2005 were $929,000 (2004:  $978,000).
Audit-Related Fees
The aggregate fees charged by Deloitte & Touche LLP for the year ended December 31, 2005 for assurance and related services that are reasonably related to the performance of the audit and are not reported above were $692,000 (2004: $718,000).  Such services include work on:  offering documents - $nil (2004:  $534,000); review of the Sarbanes-Oxley work prepared by the Company - $655,000 (2004:  $138,000); and audits of employee benefit plans - $37,000 (2004:  $46,000).
Tax Fees
The aggregate fees charged by Deloitte & Touche for U.S. tax compliance and planning work for the fiscal year ended December 31, 2005 were $154,000 (2004:  $213,000).

CHARTER OF
THE AUDIT COMMITTEE GENERAL
1.  Purpose and Responsibilities
The primary purpose of the Committee is to assist Board oversight of:
(a) the integrity of Russel's financial statements;
(b) Russel's compliance with legal and regulatory requirements;
(c) the External Auditor's qualifications and independence; and
(d) the performance of Russel's internal audit function and the External Auditor.
2.  Definitions and Interpretation
2.1 Definitions
In this Charter:
(a) "Board" means the board of directors of Russel;
(b) "Chair" means the chair of the Committee;
(c) "Committee" means the audit committee of the Board;
(d) "Director" means a member of the Board;
(e) "External Auditor" means Russel's independent auditor; and
(f) "Russel" means Russel Metals Inc.
2.2         Interpretation
The provisions of this Charter are subject to the provisions of Russel's by-laws and to the applicable provisions of the Canada Business Corporations Act (the "Act"), and any other applicable legislation.
3. Establishment and Composition of the Committee
3.1         Establishment of the Audit Committee
The Committee is hereby continued with the constitution, function and responsibilities herein set forth.
3.2       Appointment and Removal of Members of the Committee
(a) Board Appoints Members.  The members of the Committee shall be appointed by the Board, having considered the recommendation of the Nominating and Corporate Governance Committee of the Board.
(b) Annual Appointments.  The appointment of members of the Committee shall take place annually at the first meeting of the Board after a meeting of the shareholders at which Directors are elected, provided that if the appointment of members of the Committee is not so made, the Directors who are then serving as members of the Committee shall continue as members of the Committee until their successors are appointed.
(c) Vacancies.  The Board may appoint a member to fill a vacancy, which occurs in the Committee between annual elections of Directors.
(d) Removal of Member.  Any member of the Committee may be removed from the Committee by a resolution of the Board.
3.3     Number of Members
The Committee shall consist of three or more Directors.
3.4      Independence of Members
Each member of the Committee shall be independent for the purposes of all applicable regulatory and stock exchange requirements.
3.5    Financial Literacy
(a) Financial Literacy Requirement.  Each member of the Committee shall be financially literate or must become financially literate within a reasonable period of time after his or her appointment to the Committee.
(b)          Definition of Financial Literacy.  "Financially literate" means the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by Russel's financial statements.
3.6         Audit Committee Financial Expert
(a)         Attributes of an Audit Committee Financial Expert.  To the extent possible, the Board will appoint to the Committee at least one Director who has the following attributes:
	(i)	an understanding of generally accepted accounting principles and financial statements;
	(ii)	ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves;
	(iii)	experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by Russel's financial statements, or experience actively supervising one or more persons engaged in such activities;
	(iv)	an understanding of internal controls and procedures for financial reporting; and
	(v)	an understanding of audit committee functions.
(b)          Experience of the Audit Committee Financial Expert.  To the extent possible, the Board will appoint to the Committee at least one Director who acquired the attributes in (a) above through:
	(i)	education and experience as a principal financial officer, principal accounting officer, controller, public accountant or auditor or experience in one or more positions that involve the performance of similar functions (or such other qualification as the Board interprets such qualification in its business judgment);
	(ii)	experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor or person performing similar functions;
	(iii)	experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing or evaluation of financial statements; or
	(iv)	other relevant experience.
3.7           Retirement and Term
(a)          Rotation of Membership.  The Nominating and Corporate Governance Committee shall recommend to the Board a process for ensuring that at least every three years, unless otherwise expressly determined by the Board, at least one member of the Committee will retire from the Committee and at least one new member will be appointed to the Committee who has not been a member of the Committee for at least three years.
(b)         Six Year Term Limit.  No person shall serve on the Committee for a period of more than six consecutive years unless the Board shall, in any particular case, specifically determine to make an exception from such limitation.
3.8         Board Approval Required
No member of the Committee shall serve on more than three other public company audit committees without the approval of the Board.
4.           COMMITTEE CHAIR
4.1         Board to Appoint Chair
The Board shall appoint the Chair from the members of the Committee who are unrelated directors (or, if it fails to do so, the members of the Committee shall appoint the Chair of the Committee from among its members).
4.2         Term
The position of Chair shall normally be rotated every three years, but the term of any Chair may be extended for a longer term, not to exceed six years.
5.           Committee Meetings
5.1         Quorum
A quorum of the Committee shall be two.
5.2         Secretary
The Chair shall designate from time to time a person who may, but need not, be a member of the Committee, to be Secretary of the Committee.
5.3         Time and Place of Meetings
The time and place of the meetings of the Committee and the calling of meetings and the procedure in all things at such meetings shall be determined by the Committee; provided, however, the Committee shall meet at least quarterly.
5.4          In Camera Meetings
The Committee shall meet separately, periodically, with each of:
(a)          management;
(b)          the External Auditor; and
(c)          the internal auditor.
5.5         Right to Vote
Each member of the Committee shall have the right to vote on matters that come before the Committee.
5.6         Invitees
The Committee may invite Directors, officers and employees of Russel or any other person to attend meetings of the Committee to assist in the discussion and examination of the matters under consideration by the Committee.  The External Auditor shall receive notice of each meeting of the Committee and shall be entitled to attend any such meeting at Russel's expense.
5.7         Regular Reporting
The Committee shall report to the Board at the Board's next meeting the proceedings at the meetings of the Committee and all recommendations made by the Committee at such meetings.
6.          Authority of Committee
6.1        Retaining and Compensating Advisors
The Committee shall have the authority to engage independent counsel and other advisors as the Committee may deem appropriate in its sole discretion and to set and pay the compensation for any advisors employed by the audit committee.  The Committee shall not be required to obtain the approval of the Board in order to retain or compensate such consultants or advisors.
6.2         Other Expenses
The Committee shall determine, and Russel shall pay, the ordinary expenses of the Committee that are necessary or appropriate in carrying out their duties.
6.3         Recommendations to the Board
The Committee shall have the authority to make recommendations to the Board, but shall have no decision-making authority other than as specifically contemplated in this Charter.
7.           Remuneration of Committee Members
7.1         Remuneration of Committee Members
Members of the Committee and the Chair shall receive such remuneration for their service on the Committee as the Board may determine from time to time.
7.2          Directors' Fees
No member of the Committee may earn fees from Russel or any of its subsidiaries other than directors' fees (which fees may include cash and/or shares or options or other in-kind consideration ordinarily available to directors, as well as all of the regular benefits that other directors receive).  For greater certainty, no member of the Committee shall accept, directly or indirectly, any consulting, advisory or other compensatory fee from Russel.
SPECIFIC DUTIES AND RESPONSIBILITIES
8.            Integrity of Financial Statements
8.1          Review and Approval of Financial Information
(a)          Annual Financial Statements.  The Committee shall review and discuss with management and the External Auditor, Russel's audited annual financial statements and related MD&A together with the report of the External Auditor thereon and, if appropriate, recommend to the Board that it approve the audited annual financial statements.
(b)          Interim Financial Statements.  The Committee shall review and discuss with management and the External Auditor and, if appropriate, approve, Russel's interim unaudited financial statements (including, without limitation, its quarterly unaudited financial statements and any other unaudited special purpose financial statements intended for publication) and related MD&A.
(c)          Material Public Financial Disclosure.  The Committee shall discuss with management and the External Auditor:
	(i)	the types of information to be disclosed and the type of presentation to be made in connection with earnings press releases;
	(ii)	financial information and earnings guidance (if any) provided to analysts and rating agencies; and
	(iii)	press releases containing financial information (paying particular attention to any use of "pro forma" or "adjusted" non-GAAP information).
(d)          Procedures for Review.  The Committee shall be satisfied that adequate procedures are in place for the review of Russel's disclosure of financial information extracted or derived from Russel's financial statements (other than financial statements, MD&A and earnings press releases, which are dealt with elsewhere in this Charter) and shall periodically assess the adequacy of those procedures.
(e)          Accounting Treatment.  The Committee shall review and discuss with management and the External Auditor:
	(i)	major issues regarding accounting principles and financial statement presentation, including any significant changes in Russel's selection or application of accounting principles and major issues as to the adequacy of Russel's internal controls and any special audit steps adopted in light of material control deficiencies;
	(ii)	analyses prepared by management and/or the External Auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements; and
	(iii)	the effect of regulatory and accounting initiatives, as well as off-balance sheet structures on Russel's financial statements.
(f)          The Committee should review and discuss with management and, if appropriate , with the External Auditor or legal counsel, the management certifications of the financial statements as required by the Sarbanes-Oxley Act of 2002, under applicable securities laws in Canada or otherwise.
9.           External Auditor
9.1         External Auditor
(a)          Authority with Respect to External Auditor.  As a representative of Russel's shareholders, the Committee shall be directly responsible for the appointment, compensation and oversight of the work of the External Auditor engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for Russel.  In the discharge of this responsibility, the Committee shall:
	(i)	have sole responsibility for recommending to the Board the person to be proposed to Russel's shareholders for appointment as External Auditor for the above-described purposes as well as the responsibility for recommending such External Auditor's compensation and determining at any time whether the Board should recommend to Russel's shareholders whether the incumbent External Auditor should be removed from office;
	(ii)	review the terms of the External Auditor's engagement, discuss the audit fees with the External Auditor and be solely responsible for approving such audit fees; and
	(iii)	require the External Auditor to confirm in its engagement letter each year that the External Auditor is accountable to the Board and the Committee as representatives of shareholders.
(b)          Independence.  The Committee shall satisfy itself as to the independence of the External Auditor.  As part of this process the Committee shall:
	(i)	assure the regular rotation of the lead audit partner as required by law and consider whether, in order to ensure continuing independence of the External Auditor, Russel should rotate periodically, the audit firm that serves as External Auditor;
	(ii)	require the External Auditor to submit on a periodic basis to the Committee, a formal written statement delineating all relationships between the External Auditor and Russel and that the Committee is responsible for actively engaging in a dialogue with the External Auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the External Auditor and for recommending that the Board take appropriate action in response to the External Auditor's report to satisfy itself of the External Auditor's independence;
	(iii)	unless the Committee adopts pre-approval policies and procedures, approve any non-audit services provided by the External Auditor and may delegate such approval authority to one or more of its independent members who shall report promptly to the Committee concerning their exercise of such delegated authority; and
	(iv)	review and approve the policy setting out the restrictions on Russel hiring partners, employees and former partners and employees of Russel's current or former External Auditor.
(c)          Issues Between External Auditor and Management.  The Committee shall:
	(i)	review any problems experienced by the External Auditor in conducting the audit, including any restrictions on the scope of the External Auditor's activities or an access to requested information;
	(ii)	review any significant disagreements with management and, to the extent possible, resolve any disagreements between management and the External Auditor; and
	(iii)	review with the External Auditor:
		· any accounting adjustments that were proposed by the External Auditor, but were not     made by management;
		· any communications between the audit team and audit firm's national office     respecting auditing or accounting issues presented by the engagement;
		· any management or internal control letter issued, or proposed to be issued by the     External Auditor to Russel; and
		· the performance of Russel's internal audit function and internal auditors.
(d)          Non-Audit Services.
	(i)	The Committee shall either:
		· approve any non-audit services provided by the External Auditor or the external     auditor of any subsidiary of Russel to Russel (including its subsidiaries); or
		· adopt specific policies and procedures for the engagement of non-audit services,     provided that such pre-approval policies and procedures are detailed as to the     particular service, the audit committee is informed of each non-audit service and the     procedures do not include delegation of the audit committee's responsibilities to     management.
	(ii)	The Committee may delegate to one or more independent members of the Committee the authority to pre-approve non-audit services in satisfaction of the requirement in the previous section, provided that such member or members must present any non-audit services so approved to the full audit committee at its first scheduled meeting following such pre-approval.
	(iii)	The Committee shall instruct management to promptly bring to its attention any services performed by the External Auditor which were not recognized by Russel at the time of the engagement as being non-audit services.
(e)          Evaluation of External Auditor.  The Committee shall evaluate the External Auditor each year, and present its conclusions to the Board.  In connection with this evaluation, the Committee shall:
	(i)	review and evaluate the performance of the lead partner of the External Auditor;
	(ii)	obtain the opinions of management with respect to the performance of the External Auditor; and obtain and review a report by the External Auditor describing:
		· the External Auditor's internal quality-control procedures;
		· any material issues raised by the most recent internal quality-control review, or peer
		· review, of the External Auditor's firm or by any inquiry or investigation by     governmental or professional authorities, within the preceding five years, respecting     one or more independent audits carried out by the External Auditor's firm, and any     steps taken to deal with any such issues; and
		· all relationships between the External Auditor and Russel (for the purposes of assessing     the External Auditor's independence).
(f)          Review of Management's Evaluation and Response.  The Committee shall:
	(i)	review management's evaluation of the External Auditor's audit performance;
	(ii)	review the External Auditor's recommendations, and review management's response to and subsequent follow-up on any identified weaknesses;
	(iii)	review management's response to significant internal control recommendations of the internal audit staff and the External Auditor;
	(iv)	Receive regular reports from management and receive comments from the External Auditor, if any, on:
		· Russel's principal financial risks;
		· the systems implemented to monitor those risks; and
		· the strategies (including hedging strategies) in place to manage those risks; and
	(v)	recommend to the Board whether any new material strategies presented by management should be considered appropriate and approved.
10.         Internal Control
10.1       Review by Audit Committee
The Committee shall review:
(a)          any internal control report prepared by management, including management's assessment of the effectiveness of Russel's internal control structure and procedures for financial reporting; and
(b)          the External Auditor's attestation, and report (if any), on the assessment made by management of the effectiveness of Russel's internal control structure and procedures for financial reporting.
11.         Internal Audit Function
11.1       Internal Auditor
In connection with Russel's internal audit function, the Committee shall:
(a)          review the terms of reference of the internal auditor and meet with the internal auditor as the Committee may consider appropriate to discuss any concerns or issues;
(b)          in consultation with the External Auditor and the internal audit group, review the adequacy of Russel's internal control structure and procedures designed to ensure compliance with laws and regulations and any special audit steps adopted in light of material deficiencies and controls;
(c)           review the periodic reports of activities of the internal auditor; and
(d)           periodically review with the internal auditor any significant difficulties, disagreements with management or scope restrictions encountered in the course of the work of the internal auditor.
12.          Compliance with Legal and Regulatory Requirements
12.1        Risk Assessment and Risk Management
The Committee shall discuss Russel's major financial risk exposures and the steps management has taken to monitor and control such exposures.
12.2        Related Party Transactions
The Committee shall review and approve all related party transactions in which Russel is involved or which Russel proposes to enter into.
12.3         Whistle Blowing
The Committee shall put in place procedures for:
(a)           the receipt, retention and treatment of complaints received by Russel regarding accounting, internal accounting controls or auditing matters; and
(b)           the confidential, anonymous submission by employees of Russel of concerns regarding questionable accounting or auditing matters.
13.          Annual Performance Evaluation
On an annual basis, the Committee shall follow the process established by the Board and overseen by the Nominating and Corporate Governance Committee for assessing the performance of the Committee.
14.          Charter Review
The Committee shall review and assess the adequacy of this Charter annually and recommend to the Board any changes it deems appropriate.
ADDITIONAL INFORMATION
Additional information, including directors' and officers' remuneration and securities authorized for issuance under the Company's Share Option Plan, is contained in the Management Proxy Circular.
Additional financial information is provided in Russel Metals' consolidated financial statements and its Managements Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2005.
A copy of the foregoing documents together with a copy of this annual information form and any interim financial statements issued by Russel Metals subsequent to December 31, 2005 may be obtained on request to the Assistant Secretary, Russel Metals Inc., Suite 210, 1900 Minnesota Court, Mississauga, Ontario L5N 3C9.  These documents are also posted regularly to our web site located at http://www.russelmetals.com/english/investor/financial.html and filed on SEDAR at http://www.sedar.com.
When the securities of Russel Metals are in the course of a distribution pursuant to a short-form prospectus or when a preliminary short-form prospectus has been filed in respect of a distribution of Russel Metals' securities, Russel Metals will provide to any person, upon request to the Assistant Secretary of Russel Metals at the address noted above, one copy of this annual information form, the Annual Report of Russel Metals, any interim financial statements, the Management Proxy Circular and any other document that is incorporated by reference into the preliminary short form prospectus or the short form prospectus.

EX-99

Russel Metals Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
For The Year Ended December 31, 2005

The following management's discussion and analysis of financial condition and results of operations of Russel Metals Inc. and its subsidiaries provides information to assist the reader and should be read in conjunction with the audited Consolidated Financial Statements for the year ended December 31, 2005, including the notes thereto.  Statements contained in this document that relate to our beliefs or expectations as to certain future events are not statements of historical fact and are forward-looking statements.  We caution readers that there are important factors, risks and uncertainties, including but not limited to economic, competitive and governmental factors affecting our operations, markets, products, services and prices that could cause our actual results, performance or achievements to be materially different from those forecasted or anticipated by us in such forward-looking statements.  All dollar references in this report are in Canadian dollars unless otherwise stated.

This management's discussion and analysis of financial condition and results of operations includes a number of measures that are not prescribed by generally accepted accounting principles (GAAP) and as such may not be comparable to similar measures presented by other companies.  We believe these measures are commonly employed to measure performance in our industry and are used by analysts, investors, lenders and other interested parties to evaluate financial performance and our ability to incur and service debt to support our business activities.  The measures we use are specifically defined where they are first used in this report.

While we believe that non-GAAP measures are helpful supplemental information, they should not be considered in isolation as an alternative to net income, cash flows generated by operating, investing or financing activities, or other financial statement data presented in accordance with GAAP.

Additional information related to Russel Metals Inc., including our Annual Information Form, may be obtained from SEDAR at www.sedar.com or on our website at www.russelmetals.com.

Overview

We are one of the largest metals distribution companies in North America.  We conduct business primarily in three metals distribution segments: metals service centers; energy tubular products; and steel distributors.

The continued strong performance in all three of our operating segments is reflected in our results.  Revenues for 2005 increased over 2004 levels, as the average selling price of steel remained elevated despite declining from the peak of 2004.

The unprecedented rate of increase in the price of steel in 2004 and our successful acquisition of Acier Leroux in 2003 were the most significant factors affecting our results for 2004.

Both the moderate decline in metal prices and the continued high average level of pricing contributed to another strong year in 2005. The basic earnings per share of $2.47 for the year ended December 31, 2005 are lower than those reported for the year ended December 31, 2004 of $3.64, mainly due to the swing to inventory holding losses in 2005 from inventory holding gains in 2004.

Summarized Financial Information

The table discloses selected information related to revenues, earnings and common share information over the last eight quarters.  The quarterly numbers for 2004 and the first quarter of 2005 have been restated to reclassify the operations of Armabec Inc. to discontinued, related to the sale in the second quarter of 2005.

2005

	Three Months Ended				Year Ended
(in thousands of dollars,
except per share data and volumes)	Mar. 31	June 30	Sept. 30	Dec. 31	Dec. 31
Revenues	$  693,889	$  644,845	$  629,604	$  646,908	$ 2,615,246
Earnings from operations	58,807	39,205	42,687	60,842	201,541
Net earnings
– continuing operations	33,490	23,540	25,932	41,816	124,778
Net earnings	33,444	23,524	25,932	41,816	124,716
Basic earnings per common share
– continuing operations	$        0.67	$        0.47	$        0.51	$        0.83	$          2.47
Basic earnings per common share	$        0.67	$        0.47	$        0.51	$        0.83	$          2.47
Diluted earnings per common share
– continuing operations	$        0.66	$        0.46	$        0.50	$        0.81	$          2.42
Diluted earnings per common share	$        0.66	$        0.46	$        0.50	$        0.81	$          2.42
Market price of common shares
High	$      18.78	$      16.84	$      18.84	$      22.75	$        22.75
Low	$      14.60	$      13.40	$      13.85	$      17.25	$        13.40
Number of common shares traded	12,304,628	17,461,794	13,890,518	13,100,827	56,757,767

2004

	Three Months Ended				Year Ended
(in thousands of dollars,
except per share data and volumes)	Mar. 31	June 30	Sept. 30	Dec. 31	Dec. 31
Revenues	$  512,402	$  588,014	$  688,812	$  623,274	$ 2,412,502
Earnings from operations	59,971	90,806	99,130	73,204	323,111
Net earnings
– continuing operations	25,651	51,304	57,740	45,774	180,469
Net earnings	25,304	50,407	58,605	43,530	177,846
Basic earnings per common share
– continuing operations	$        0.54	$        1.05	$        1.16	$       0.92	$           3.70
Basic earnings per common share	$        0.53	$        1.03	$        1.18	$       0.87	$           3.64
Diluted earnings per common share
– continuing operations	$        0.53	$        1.01	$        1.14	$       0.91	$           3.61
Diluted earnings per common share	$        0.52	$        1.00	$        1.16	$       0.86	$           3.56
Market price of common shares
High	$        9.65	$      11.25	$      13.00	$     15.75	$          15.75
Low	$        8.01	$        8.55	$      10.25	$     11.61	$            8.01
Number of common shares traded	8,078,316	21,082,325	17,151,707	15,858,809	62,171,157

Results of Operations

The following table provides operating profits from continuing operations before interest, taxes and restructuring costs.  The corporate expenses included are not allocated to specific operating segments.  The gross margins (revenue minus cost of sales) as a percentage of revenues for the operating segments are also shown below.  The table shows the segments as they are reported to management and they are consistent with the segmented reporting in the consolidated financial statements.

				2005	2004
				Change	Change
(in thousands of dollars,				as a %	as a %
except percentages)	2005	2004	2003	of 2004	of 2003
Segment Revenues
Metals service centers	$ 1,539,673	$ 1,532,048	$    909,502	0%	68%
Energy tubular products	595,215	395,296	297,532	51%	33%
Steel distributors	468,720	471,205	283,579	(1%)	66%
Other	11,638	13,953	13,201	(17%)	6%
	$ 2,615,246	$ 2,412,502	$ 1,503,814	8%	60%
Segment Operating Profits
Metals service centers	$    115,218	$    209,413	$      37,567	(45%)	457%
Energy tubular products	53,977	47,200	13,764	14%	243%
Steel distributors	46,575	78,189	13,380	(40%)	484%
Other	2,385	4,565	4,002	(48%)	14%
Corporate expenses	(16,614)	(16,256)	(8,018)	(2%)	(103%)
Operating profits from continuing operations	$    201,541	$    323,111	$      60,695	(38%)	432%
Segment Gross Margin as a % of Revenues
Metals service centers	23.1%	30.9%	26.2%
Energy tubular products	14.6%	19.6%	11.6%
Steel distributors	14.3%	23.5%	10.8%
Total operations	19.8%	27.8%	20.8%
Segment Operating Profits as a % of Revenues
Metals service centers	7.5%	13.7%	4.1%
Energy tubular products	9.1%	11.9%	4.6%
Steel distributors	9.9%	16.6%	4.7%
Total operations	7.7%	13.4%	4.0%

Metals service centers

a)                    Description of operations

We provide processing and distribution services to a broad base of more than 19,000 end users through a network of 52 Canadian locations and 4 U.S. locations.  Our metals service centers carry a broad line of products in a wide range of sizes, shapes and specifications, including carbon hot rolled and cold finished steel, pipe and tubular products, stainless steel and aluminum.  We purchase these products primarily from steel producers in North America and process and package them in accordance with end user specifications.  We service all major geographic regions of Canada and the Midwest region in the United States.  Within Canada, the service centers operate under the names Russel Metals, Métaux Russel, A.J. Forsyth, Acier Leroux, Acier Loubier, Acier Richler, B&T Steel, Leroux Steel, Mégantic Métal, McCabe Steel, Russel Leroux and York-Ennis.  Our U.S. service center operations are conducted under the names Russel Metals Williams Bahcall and Baldwin International.  The Williams Bahcall operations focus primarily on the distribution of general line carbon products through three facilities all located in Wisconsin. Baldwin International distributes specialty alloy products from its facility in Ohio.

Our metals service centers results for 2003, 2004 and the first quarter of 2005 have been restated to report Armabec Inc. as a discontinued operation.  Armabec was sold during the second quarter of 2005.  Similarly, our metals service centers results for 2003 and 2004 were restated at the end of 2004 to report Poutrelles Delta Inc. as discontinued operations.  Poutrelles Delta was sold in the first quarter of 2005.  Both operations were acquired as part of the Acier Leroux acquisition in 2003.  As such, results for Armabec and Poutrelles Delta are not included in the metals service centers segment.

b)                    Factors affecting results

The following is a general discussion of the significant factors affecting metals service centers results.  More specific information on how these factors impacted 2005, 2004 and 2003 is found in the sections that follow.

Steel pricing fluctuates significantly throughout the business cycle.  Steel pricing was the most significant factor affecting both the 2005 and 2004 results.  Steel prices are influenced by overall demand, trade sanctions, scrap steel pricing and product availability.  Supply side management, practiced by steel producers in North America, and international supply and demand which impacts steel imports affect product availability.  Trade sanctions are initiated either by steel mills or government agencies in North America and, less directly, worldwide.  Over the last several years steel prices have been extremely volatile.

Demand is significantly affected by economic cycles with revenues and operating profit fluctuating with the level of general business activity in the markets serviced.  We are most impacted by the manufacturing (excluding automotive), resource and construction segments of the Canadian economy.  Demand has been relatively stable over the last several years.

Canadian service centers, which represent the majority of the metals service centers operations, are particularly affected by regional general economic conditions.  We have operations in all regions of Canada and believe that we have a national market share of more than 25%.  This large market share and our diverse customer base, of approximately 19,000 customers, suggest that our results should mirror the performance of the regional economies of Canada, excluding the automotive industry.

c)                    Metals service centers segment results -- 2005 compared to 2004

Revenue for 2005 approximates that of 2004.  The average selling price of steel for the year ended December 31, 2005 is approximately the same as the year ended December 31, 2004.  The average selling price increased during the first nine months of 2004 to a price peak in September 2004.  The price declined since that date to July 2005 and has been relatively stable since then.  The average selling price for the quarter ended December 31, 2005 declined approximately 12% from the quarter ended December 31, 2004.  This decline is modest compared to the increase of 62% for the quarter ended December 31, 2004 compared to the quarter ended December 31, 2003.

Overall tons shipped for the year ended December 31, 2005 approximated those in 2004.  Tons shipped declined in Eastern Canada and improved in the Prairie region and at Williams Bahcall.  Tons shipped in the Prairie region were approximately 8% higher for the year ended December 31, 2005 compared to 2004, due to strong oil and gas activity in that area.  Demand was strong at the Williams Bahcall operations with approximately a 5% increase in tons due to customer demand in that region.  We believe that the decline in tons shipped in the Eastern Canadian regions primarily relates to a slowdown in manufacturing activity and reductions in inventories at our customers' locations.

In January 2004, steel mills initiated raw material surcharges due to sharp price increases in scrap metal and other input costs that caused the price of steel to increase substantially.  These surcharges, which were being applied to most of the service center carbon steel products, approximated $190 per ton in September 2004.  During 2005, many mills have included the surcharge within their base metal price and eliminated the surcharge as a separate cost.  The average price of metal has declined since September 2004; however, the average price of metal remains high compared to the price prior to the implementation of surcharges.  Based on our product mix, the average cost of metal received, including surcharges, in the month of December 2005 is approximately 44% above the price for the month of December 2003 prior to the implementation of surcharges.

Based on our product mix, the average cost of metal received, including surcharges, increased approximately 56% from January 2004 to December 2004.  The increase was more significant in the first half of 2004 with approximately two thirds of the increase occurring in that period.  Based on our database, the average cost of metal received during the month of December 2005 was approximately 14% lower than the average cost of metal received for the month of December 2004.

Gross margin as a percentage of revenues declined from 30.9% for the year ended December 31, 2004 to 23.1% for the year ended December 31, 2005.

We estimated that our operating profit for the year ended December 31, 2004 included a before tax inventory holding gain of approximately $63 million due to rising steel prices.  For the year ended December 31, 2005, we estimate that our operating profit includes a before tax inventory holding loss of approximately $38 million due to falling steel prices.  The majority of our inventories are accounted for using average cost.  The inventory holding gains or losses were estimated based on the best information available.  We are unable to quantify with precision inventory holding gains or losses due to the complexity of our 56 service center locations, which buy and sell over 14,000 different SKU's. 

The average revenue per invoice for 2005 was approximately $1,888 compared to the average for the 2004 year of approximately $1,866 and for 2003 of approximately $989.

The change in the Canadian dollar versus the U.S. dollar has not been a significant factor in the metals service centers results as the value of sales in U.S. dollars is not significant and inventory is purchased for the Canadian operations from Canadian or U.S. suppliers based on the landed cost at the specific location in Canada.

Operating expenses in the service center segment have decreased by $23.8 million, or 9%, for 2005 compared to 2004, primarily as a result of variable compensation programs that reflect the decreased earnings, year over year and lower compensation paid in locations that were restructured in 2004 or early 2005.

Service center operating profits for the year ended December 31, 2005 decreased $94.2 million, or 45%, compared to the same period in 2004.  The decline relates to an unfavorable change in inventory holding gains and losses of approximately $101 million for the 2005 year compared to the 2004 year, offset by lower expenses.

d)                    Metals service centers segment results -- 2004 compared to 2003

Revenue for 2004 increased $623 million due to the acquisition of Acier Leroux and the increased price of steel compared to the year ended December 31, 2003.  The operations of Acier Leroux were fully merged with our service centers and thus the impact of the acquisition on revenue was only estimated.  We estimated, before giving effect to the impact of increased steel prices, that approximately a quarter of the revenue increase for the year ended December 31, 2004 related to the acquisition of Acier Leroux.  Gross margin percentages and segment operating profits as a percentage of revenue for the Acier Leroux operations were similar to those of our other service center operations, which had increased by the same amount.  Increased selling prices accounted for the balance of the increased revenue in 2004.  The selling price increase occurred across all regions and product lines.  The Williams Bahcall operations had a very profitable turn around year due to steel pricing.

The raw material surcharges initiated by steel mills in January 2004 caused the price of steel to increase substantially.  We had estimated that our operating profit for 2004 included a before tax inventory holding gain of approximately $63 million.  This holding gain occurred during the first nine months of 2004 and was estimated based on the best information available.

We estimated that the average selling price per ton, for our product mix in the service centers segment, had increased approximately 43% for 2004 compared to 2003.  The increases in each quarter during 2004 compared to the prior quarter were first quarter 17%, second quarter 19%, third quarter 12% and fourth quarter 4%.  The average selling price increase is consistent with the increase in the cost of metal.

Based on a comparison of inventory at December 31, 2004 to inventory at December 31, 2003, the average cost per ton of inventory on hand had increased approximately 69%.

For 2003 and 2004, demand, based on tons sold, excluding the Acier Leroux acquisition, was surprisingly stable given the increase in selling price and the stronger Canadian dollar.

The change in the Canadian dollar versus the U.S. dollar was not a significant factor in the metals service centers results as the value of sales in U.S. dollars was not significant and inventory was purchased for the Canadian operations from Canadian or U.S. suppliers based on the landed cost at the location in Canada.  We remain concerned about the impact that the appreciation of the Canadian dollar may have on our Canadian manufacturing customers.

Operating expenses in the metals service centers segment had increased significantly primarily as a result of the Acier Leroux acquisition.  In addition, we have a pay for performance program, which covers a large portion of our employees.  Provisions for incentive payouts, based on the higher level of profits, had increased operating expenses.  Operating expenses as a percentage of revenues improved as the higher revenues more than offset the higher expenses.

Metals service centers operating profits for 2004 increased $172 million, or 457%, compared to 2003.

Energy Tubular Products

a)                    Description of operations

These operations distribute oil country tubular goods (OCTG), line pipe, tubes, valves and fittings, primarily to the energy industry in Western Canada and the Western United States, from 5 Canadian and 2 U.S. locations.  We purchase these products either from the pipe processing arms of North American steel mills, independent manufacturers of pipe and pipe accessories or international steel mills.  The energy tubular products segment operates under the names Comco Pipe & Supply Company, Fedmet Tubulars, Triumph Tubular & Supply, Pioneer Pipe and Spartan Steel.

b)                    Factors affecting results

The following is a general discussion of the factors affecting our energy tubular products segment operations.  More specific information on how these factors impacted 2005, 2004 and 2003 is found in the sections that follow.

Oil and gas pricing, which impacts oil rig count and subsequent drilling activities particularly in Western Canada, significantly affects demand.  Oil and gas pricing has been high throughout 2004 and 2005.

Oil and gas drilling in Western Canada peaks during the period from October to March; thus revenues and operating profits have been historically higher during this period.

The Canadian operations are affected by the U.S. dollar exchange rate since some products are sourced outside Canada and are priced in U.S. dollars.  While metal pricing has impacted our earnings more significantly, the appreciation of the Canadian dollar has also contributed by reducing our average cost of metal.

Pricing is influenced by overall demand, trade sanctions and product availability.  Trade sanctions are initiated either by steel mills or government agencies in North America.  Trade sanctions have not been a factor for pipe products during the reported periods.

c)                    Energy tubular products segment results -- 2005 compared to 2004

Revenues increased 51% to $595.2 million in the year ended December 31, 2005 compared to the year ended December 31, 2004.  Oil and gas related activity in Alberta is the driving factor for this large increase in volume.  Project revenue, mainly from increased demand in the oil sands of Northern Alberta, accounted for approximately 23% of the revenue increase.  Continued high oil and gas pricing and more rig activity during 2005 compared to 2004 accounted for the rest of the increase in revenue. 

The gross margin for this segment as a percentage of revenues at 14.6% for the year ended December 31, 2005 is a decline from the segment gross margin percentage of 19.6% for the year ended December 31, 2004.  The lower margin mainly relates to the increased cost of goods sold resulting from higher metal pricing.

Operating profits increased by $6.8 million, or 14%, for the year ended December 31, 2005, compared to the year ended December 31, 2004.  This increase in operating profits is driven by higher volumes and higher metal prices.

d)                    Energy tubular products results -- 2004 compared to 2003

Revenues increased 33% in 2004 compared to 2003.  Stable oil and gas pricing and more rig activity during 2004 compared to 2003 had resulted in some volume increases for the OCTG operations in Western Canada and the Western United States.  Increased prices resulted in higher revenues and the realization of some inventory holding gains.  Revenues and operating profits had increased with the higher metal pricing.  The segment gross margins as a percentage of revenues were 19.6% for 2004 compared to 11.6% for 2003 due mainly to stronger demand and pricing.

Operating profits increased by $33 million, or 243%, in 2004, compared to 2003.  The increase was due to higher volumes in the OCTG operations and strong margins.

Steel distributors

a)                    Description of operations

Our steel distributors act as master distributors selling steel in large volumes to other steel service centers and equipment manufacturers mainly on an "as is" basis and providing processing of coil products for their customer base.  Our steel distributors source their steel both domestically and off shore.  The international sourcing provides our other business segments with valuable insight regarding international pricing trends and their potential impact on steel markets in North America.

The main steel products sourced by this segment are structural beam, plate, coils, pipe and tubing.  The operations in this sector are Wirth Steel and Sunbelt Group.  Arrow Steel, a division of Sunbelt Group, processes coils.

b)                    Factors affecting results

The following is a general discussion of the factors affecting our steel distributors.  More specific information on how these factors impacted 2005, 2004 and 2003 is found in the sections that follow.

Steel pricing is influenced by overall demand, trade sanctions and by product availability both domestically and worldwide.  Trade sanctions are initiated either by steel mills or government agencies in North America.  Mill capacity by product line in North America and international supply and demand impact steel imports and significantly affect product availability.

The large demand for steel and scrap steel in China during 2004 was a significant factor in the price of steel and the availability of imports to North America.  During this period, our steel distributors found availability of supply within North America, which they continue to utilize along with imports.

Movement in the U.S. dollar has had some effect on the Canadian steel distributor operations since purchases of inventory are mainly in U.S. dollars.  Steel is predominantly transacted in U.S. dollars and the Canadian mills adjust the price accordingly.  The effect of the strengthening Canadian dollar was fully offset by rising metal prices.

c)                    Steel distributors results -- 2005 compared to 2004

Steel distributors revenues decreased 1% in the year ended December 31, 2005 compared to the year ended December 31, 2004.  While revenue was flat, the 2005 revenues were generated by lower average selling prices offset by higher volumes.

Gross margin as a percentage of revenues declined from 23.5% for the year ended December 31, 2004 to 14.3% for the year ended December 31, 2005.  This decline primarily was related to the price of steel being at the highest levels in 2004 and stronger demand for certain products in 2004.  The 2005 margins are closer to historical levels excluding 2004.  The 2005 results also are impacted by holding losses versus holding gains in 2004.

Operating expenses are 37% lower for 2005 compared to 2004, which was mainly due to lower variable compensation.

The operating profit for 2005 is $46.6 million, which was $31.6 million lower than 2004, mainly driven by steel pricing.

d)                    Steel distributors results -- 2004 compared to 2003

Steel distributors revenues increased 66% in 2004 compared to 2003 mainly due to higher selling prices and demand for imported product.  The demand for imports was due to lack of availability of certain products in North America.  In the first quarter of 2004, volumes were negatively impacted by a lack of supply into North America due to high demand in the Far East and the lower U.S. dollar compared to other currencies.  During the remainder of 2004, the steel distributors operations realized selling prices above average due to continuous price increases for their products during the year.  This resulted in inventory holding gains on both inventory on hand and inventory ordered prior to the January 2004 raw material surcharge added by the North American mills.  The gross margin achieved in the year continued to be higher than we had previously experienced in the steel distributors segment due to the rapid increase in the price of steel in North America and tight supply of certain products; however, it had declined during the last two quarters of 2004.

Operating expenses had increased due to expenses related to highly variable compensation plans driven by operating profits.

Other -- 2005 compared to 2004

Other revenue and income represents the results of our coal handling terminal in Thunder Bay, Ontario.  Revenue in 2005 was lower than the same period in 2004 and 2003 due to decreased coal and potash volumes.  The lower volumes resulted in an operating profit of $2.4 million for 2005 compared to a profit of $4.6 million for 2004.

Corporate -- 2005 compared to 2004 and 2003

The corporate expenses for 2005 are comparable to 2004; however, the 2005 expenses include lower costs for corporate incentive plans based on lower earnings levels offset by increased costs for work in 2005 to address the Sarbanes-Oxley and OSC internal control certification requirements and expensing of stock-based compensation.  The majority of the corporate expense increase for 2005 and 2004 compared to 2003 reflects accruals for corporate incentive plans based on earnings levels.

Consolidated Results -- 2005 compared to 2004 and 2003

The results for 2005 represent a decline from the 2004 year; however, they are significantly above 2003 and prior years.

Operating profits from continuing operations before other costs were $201.5 million in 2005, compared to $323.1 million in 2004 and $60.7 million in 2003. Lower gross margins in the metals service centers and steel distributors segments accounted for most of the difference between 2004 and 2005.  This related to declining metal prices resulting in inventory holding losses in 2005 compared to inventory holding gains in 2004.  Strong volumes and corresponding operating profits in the energy tubular products sector offset a portion of the decline.

Both 2005 and 2004 have higher volume and higher operating profits than 2003 due to the acquisition of Acier Leroux in July 2003 and the impact of the high price of metal.

Interest Expense

The following table shows the components of interest expense.

(in thousands of dollars)	2005	2004	2003
Interest on long-term debt
6.375% Senior Notes	$    15,184	$    13,464	$              -
10% Senior Notes	-	2,936	16,420
8% Convertible Debentures	-	557	2,400
	15,184	16,957	18,820
Other interest (net)	2,345	3,067	3,903
Total interest	$    17,529	$    20,024	$    22,723

Consolidated interest expense for 2005 decreased by $2.5 million compared to 2004 and $5.2 million compared to 2003.  This was due to lower interest rates on long-term debt and lower exchange rates on the unhedged portion of the U.S. denominated long-term debt in 2005 compared to 2004 and 2003.  In addition, strong cash flow from operations reduced short-term debt and corresponding short-term interest.

Debt Restructuring Cost

During the first quarter of 2004, we restructured our long-term debt at interest rates that significantly reduced the interest costs.  We issued US$175 million of 6.375% Senior Notes due March 1, 2014.  As of June 1, 2004 all other long-term debt was redeemed.  We also entered into fixed interest cross currency swaps to hedge US$100 million of the 6.375% Senior Notes to eliminate the foreign exchange exposure.  The currency swaps result in an additional interest cost of $0.3 million per quarter, which is included in the interest expense.

On February 23, 2004, we redeemed US$95.5 million of our 10% Senior Notes at US$1,072.50 per US$1,000 unit.  The US$72.50 per unit premium as well as the deferred costs related to the debt redeemed resulted in a charge of $11.3 million in the first quarter of 2004.

The remaining US$20.1 million of 10% Senior Notes was redeemed on June 1, 2004 at US$1,050 per US$1,000 unit.  The US$50.00 per unit premium and the remaining deferred costs resulted in a charge of $1.9 million in the second quarter of 2004.  The remaining deferred costs of $0.5 million related to the previous bank facility were charged to debt redemption costs in the fourth quarter of 2004.

Restructuring

The restructuring charges for 2003 and 2004 related to the rationalization of overlapping Acier Leroux and Russel Metals operations.  During the second quarter of 2005, we completed the sale of the Lachine property for a before tax gain of $2.9 million.  In the third quarter of 2005, a decision was made to close an Ontario facility made redundant by the Acier Leroux acquisition.  In the third quarter of 2005, we accrued the severance for the employees and wrote down the facility and equipment to their net realizable values resulting in restructuring costs of $1.8 million.

During 2004, we recorded a charge of $3.6 million mainly related to restructuring at the Russel Metals Ontario locations and the carrying costs of the vacant Lachine, Quebec facility.

In 2003, we recorded a restructuring charge of $3.6 million mainly related to employee severances, pensions and benefits for the closure of our Lachine location at the end of 2003.  Employee-related charges for Ontario and Atlantic region restructuring were also recorded during the six months from July to December 2003.

In September 2002, we acquired the Williams Steel operation in Milwaukee, Wisconsin.  Prior to 2004, economic conditions in the Wisconsin region resulted in significant deterioration in the Williams Bahcall customer base.  As this operation was unprofitable and did not project a significant improvement over the forecast period, we determined that goodwill of $2.4 million related to this acquisition was impaired.  The goodwill related to Williams Bahcall was reduced to zero in the fourth quarter of 2003.

Income Taxes

The provision for income taxes for 2005 was $60.4 million, which is lower than 2004 due to higher earnings in 2004.  In addition, during 2005, the Company recorded income tax recoveries of $6.7 million related to tax reassessment, issues under appeal with the tax authorities and adjustments related to prior years' taxes.  This recovery of taxes reduced the income tax rate for 2005 to 32.6%.  Excluding the tax recoveries, our income tax rate for the year ended December 31, 2005 would have been 36.2%.  For the year ended December 31, 2004, the income tax rate of 36.8% was higher than the average combined statutory rate due to non-deductible items.  Our normalized effective income tax rate based on current operations is estimated to be 35.5%.

Earnings

Earnings from continuing operations for 2005 were $124.8 million compared to $180.5 million for 2004 and $19.1 million for 2003.  Basic earnings per common share from continuing operations for 2005 were $2.47 compared to $3.70 for 2004 and $0.42 for 2003.  The lower earnings per share for 2005 are primarily as a result of declining metal prices compared to rising metal prices in 2004.

In December 2004, the minority shareholders of our Poutrelles Delta business indicated that they would exercise their right to purchase the business.  The transaction closed on February 23, 2005.  We reclassified Poutrelles Delta to discontinued operations in the income statement for 2004 and the balance sheet as at December 31, 2004.  During the fourth quarter of 2004, we recorded a write-down to fair value of $0.6 million in anticipation of the sale.  The loss of $38,000 in 2005 represents losses reported by this unit prior to sale.

In May 2005, we completed the sale of Armabec Inc. to a third party for book value.  The transaction costs of approximately $30,000 were expensed to discontinued operations.  Net proceeds from this transaction were $2.4 million.  Although Armabec was not a material operation, its sale required us to restate the income statement to reclassify it to discontinued operations.

Net loss from discontinued operations was $2.6 million for 2004.  During 2004, we recorded a provision of $3.2 million, net of income taxes, related to lease obligations under a long-term lease from an operation discontinued in 1995 and environmental cleanup costs.  The property had been vacant for the last year and we have been unsuccessful in finding a new tenant; thus, the provision previously provided under discontinued operations was not sufficient to cover the remaining lease obligations.  We continue to honor our obligations for environmental cleanup at properties utilized by operations disposed of in the early 1990s.  The U.S. operations of Acier Leroux earned $0.3 million during 2004.  We sold the operation in Plattsburgh, New York in the third quarter of 2004.

Shares Outstanding and Dividends

The weighted average number of common shares outstanding for 2005 was 50,461,330 compared to 48,671,915 for 2004 and 40,021,479 for 2003.  The increase relates to the public offering of 5,750,000 common shares in February 2004 and employee stock options exercised.  The number of common shares outstanding at December 31, 2005 was 50,656,009.

The significant increase in our stock price during the last three years resulted in employees exercising stock options to acquire 768,350 common shares during 2005, 1,114,317 common shares during 2004 and 1,419,567 common shares during 2003.

We have returned a portion of our earnings to our common shareholders by paying common share dividends of $45.4 million in 2005, $25.0 million in 2004 and $11.6 million in 2003.  In July 2005, the Board of Directors approved a 25% increase in the quarterly dividend, to $0.25 per common share, which was the amount paid during the last half of 2005.  The cash dividend declared on common shares was $0.90 per share for 2005, $0.505 per share for 2004 and $0.29 per share for 2003.

Our U.S. Senior Notes consider any dividend payment in excess of $0.08 per common share per quarter to be a restricted payment.  We currently have $144 million available for restricted payments in our "basket".  The basket is replenished from earnings on a quarterly basis.  We have adequate room at our current dividend level for a number of years assuming we remain profitable.

As at February 23, 2006, we had 50,656,009 common shares outstanding.

EBITDA

The following table shows the reconciliation of GAAP earnings from continuing operations to EBITDA:

(in thousands of dollars)	2005	2004	2003
Earnings from continuing operations	$  124,778	$  180,469	$    19,077
Income taxes	60,374	105,268	13,250
Interest expense	17,529	20,024	22,723
Earnings before interest and incometaxes (EBIT)	202,681	305,761	55,050
Depreciation and amortization	19,158	18,598	16,330
Earning before interest, income taxes,
depreciation and amortization (EBITDA)	$  221,839	$  324,359	$    71,380

We believe that EBITDA may be useful in assessing our operating performance and as an indicator of our ability to service or incur indebtedness, make capital expenditures and finance working capital requirements.  The items excluded in determining EBITDA are significant in assessing our operating results and liquidity.  Therefore, EBITDA should not be considered in isolation or as an alternative to cash from operating activities or other combined income or cash flow data prepared in accordance with GAAP.

EBITDA to Interest Expense Ratio

(in thousands of dollars, except ratios)	2005	2004	2003
EBITDA	$  221,839	$  324,359	$    71,380
Interest expense	17,529	20,024	22,723
EBITDA to interest expense	12.7x	16.2x	3.1x

The EBITDA to interest expense ratio is provided to assist readers in determining our ability to generate cash from operations to cover our financial charges, income taxes and items not considered to be in the ordinary course of business.  Debt analysts and debt rating agencies routinely use this measure to evaluate companies.

Accounting Policies and Estimates

a)                     Change in Accounting Policies

There were no new accounting policies adopted during 2005.  Note 2 to the consolidated financial statements includes our current accounting policies.

b)                     Accounting Estimates

The preparation of our financial statements requires management to make estimates and judgements that affect the reported amounts.  On an ongoing basis, we evaluate our estimates, including those related to bad debts, inventory obsolescence, useful lives of fixed assets, asset retirement obligations, income taxes, restructuring costs, pensions and other post-retirement benefits, fair values, guarantees, environmental obligations, contingencies and litigation.  We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Our most significant assets are accounts receivable and inventory.

Accounts Receivable

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments.  Assessments are based on aging of receivables, legal issues (bankruptcy status), past collection experience, current financials or credit agency reports and the experience of our credit personnel.  Accounts, which we determine as uncollectible, are reserved in the period in which the determination is made.  If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Inventories

We review our inventory for obsolescence, slow moving product and to ensure that the cost of inventory is not in excess of its estimated market value.  Inventory reserves or write-downs are recorded when cost exceeds the market value and when product is determined slow moving or obsolete.  Significant reductions in market value could result in additional write-downs.

Other areas involving significant estimates and judgements include:

Income Taxes

We believe that we have adequately provided for income taxes based on all of the information that is currently available.  The calculation of income taxes in many cases, however, requires significant judgement in interpreting tax rules and regulations, which are constantly changing.  Our tax filings are also subject to audits, which could materially change the amount of current and future income tax assets and liabilities.  Any change would be recorded as a charge or a credit to income tax expense.

Employee Benefit Plans

We perform a valuation at least every three years to determine the actuarial present value of the accrued pension and other retirement benefits.  The valuation uses management's assumptions for the discount rate, expected long-term rate of return on plan assets, rate of compensation increase, health-care cost trend and expected average remaining years of service of employees.

While we believe that these assumptions are reasonable, differences in actual results or changes in assumptions could materially affect employee benefit obligations and future net benefit plans costs.  We account for differences between actual and assumed results by recognizing differences in benefit obligations and plan performance over the working lives of the employees who benefit from the plans.

Capital Expenditures

Capital expenditures were $26.5 million for 2005 compared to $25.4 million in 2004.  In 2005, we divested fixed assets which had a total net book value of $5.5 million; thus after depreciation expense the fixed asset balance is comparable to 2004.

Our normal capital expenditures are mainly related to maintenance capital, the purchase of additional processing equipment across a broad base of our operations and upgrades to our existing facilities and computer systems.  Our expectation is for capital expenditures to be at levels higher than depreciation expense over a period of years due to the construction of larger facilities in growing markets and expanding product lines.

Depreciation expense was $17.7 million in 2005 and $17.3 million in 2004.

Liquidity

We stress working capital management to ensure working capital is minimized and leverage reduced over the economic cycle.  The metals distribution business experiences significant swings in cash flow in order to fund working capital.  Inventory and accounts receivable represent a large percentage of our total assets employed and vary throughout each cycle.  At December 31, 2005 and 2004, inventory and accounts receivable represented approximately 80% of our total assets excluding cash.  Inventory and accounts receivable balances are higher during 2005 and 2004 due to metal pricing and we have had no significant increase in fixed assets, as volumes have remained stable.

  Accounts Receivable and Inventory
  as a Percentage of Total Assets

(in thousands of dollars, except percentages)	2005	2004	2003
Accounts receivable and inventory	$    833,628	$    914,611	$    551,952
Total assets less cash	1,048,128	1,145,847	771,611
% of total assets less cash	80%	80%	72%

Our existing bank credit facilities are used to fund the growth in working capital caused by demand or steel price increases, which require higher inventory and accounts receivable levels to support the higher activity levels.  Based on our experience, an increase of $100 million in revenues would require approximately $30 million of net working capital to support the higher activity levels.  When demand weakens, or the price of steel declines, cash is generated from the reduction of inventory and lower levels of accounts receivable.  This cash is used to reduce the borrowings under our bank credit facilities.

The balances disclosed in our consolidated cash flow statements are adjusted to remove the non-cash component related to foreign exchange rate fluctuations impacting inventory, accounts receivable, accounts payable and income tax balances of our U.S. operations.

	Quarters Ended
Inventory Turns	Dec. 31	Sept. 30	June 30	Mar. 31	Dec. 31
	2005	2005	2005	2005	2004
Metals service centers	4.8	5.4	5.2	4.4	3.7
Energy tubular products	3.8	3.5	2.9	4.4	2.9
Steel distributors	4.4	5.1	3.6	3.9	3.3
Total	4.4	4.7	4.2	4.3	3.4

Inventory turns are calculated using the cost of sales for the quarter annualized divided by the ending inventory position.

Inventory declined during 2005 providing cash of $76.5 million.  Metals service centers had improved turns of 4.8 related to lower inventory levels.  Our goal is to ensure that we keep our inventory levels as low as possible while still satisfying the needs of our customers in order to minimize inventory valuation risk.  We expect our metals service centers operations to turn over their inventory at higher rates than the industry average.  Based on information published by the Metals Service Center Institute in its monthly Metals Activity Report, the average inventory turns for U.S. based steel companies for the three months ended December 31, 2005 was 4.1 turns and for Canadian based companies was 4.0 turns.  Our metals service centers inventory based on tons was approximately 17% lower at December 31, 2005 than it was a year earlier.

The improvement in inventory turns for the energy tubular products segment in the fourth quarter of 2005 compared to the fourth quarter of 2004 relates to higher cost of sales in 2005.  Inventory levels are higher in 2005 to service higher revenues.  Steel distributors had improved turns mainly related to lower inventory levels at December 31, 2005 compared to December 31, 2004.

The other major components of working capital are accounts receivable and accounts payable.  Accounts receivable as at December 31, 2005 are approximately the same as at December 31, 2004.  Accounts payable decreased $32.2 million, which related to lower variable compensation levels accrued at December 31, 2005 compared to 2004 and lower purchases of inventory in 2005.

During the year ended December 31, 2005, we made income tax payments of $110.4 million.  This represented final instalments of $60.7 million for the 2004 year and instalments of $49.7 million for the 2005 year.  During 2004, we made tax payments of $47.3 million.

During 2005, we utilized cash of $26.5 million on capital expenditures and $45.4 million on common share dividends.  During 2004, we utilized cash of $25.4 million on capital expenditures and $25.0 million on common share dividends.

Free Cash Flow

(in thousands of dollars)	2005	2004	2003
Cash from operating activities before working capital	$  149,578	$  210,278	$    40,681
Purchase of fixed assets	(26,463)	(25,394)	(34,879)
Proceeds on sale of fixed assets	1,644	849	1,804
Proceeds on assets held for sale and sale of businesses	5,869	3,675	-
	$  130,628	$  189,408	$      7,606

Free cash flow may be useful in assessing our ability to pay dividends and reduce outstanding debt.  Our investors and analysts regularly refer to this number.

Debt and Credit Facilities

In 2004, we consolidated our long-term debt and we currently have outstanding US$175 million of 6.375% Senior Notes due in 2014.  We also entered into fixed interest cross currency swaps on US$100 million of this debt to eliminate the foreign exchange exposure on the portion of the debt not hedged by our investment in our U.S. subsidiaries.  Our long-term debt at December 31, 2005 is $204.0 million compared to $210.6 million at December 31, 2004 and $179.4 million at December 31, 2003.

We manage our cash position based on bank borrowings net of cash.  Our bank credit facilities table provides the split between loans and outstanding cheques or cash on deposit. The net borrowings peaked during the first quarter of 2005 at $116.3 million and have been reduced to $nil at the end of 2005 due to a reduction in inventory and strong earnings during 2005.

Bank Credit Facilities
	Russel Metals	U.S. Subsidiary
As at December 31, 2005(in millions of dollars)	Facility	Facility	Total
Bank loans	$           -	$           -	$            -
Outstanding cheques (on deposit)	(13.3)	(31.7)	(45.0)
Net borrowings (cash)	(13.3)	(31.7)	(45.0)
Letters of credit	46.1	35.7	81.8
	$      32.8	$       4.0	$      36.8
Facilities availability	$    200.0	$     52.5	$    252.5

We have a facility, with a syndicate of Canadian and U.S. banks, for a revolving loan of $200 million, which currently expires on October 29, 2008.  We may extend this facility annually with the consent of the syndicate.  We are entitled to borrow, on a revolving basis, up to an amount equal to the sum of specified percentages of our eligible accounts receivable and inventories, to a maximum of $200 million.  At December 31, 2005, we were entitled to borrow $200 million, including letters of credit under this facility.  At December 31, 2005, we had no borrowings and had letters of credit of $46.1 million under this facility.  At December 31, 2004, we had borrowings of $13.0 million and had letters of credit of $35.1 million under this facility.

In addition, certain U.S. subsidiaries have their own one-year bank credit facility.  The maximum borrowing under this facility is US$45.0 million.  At December 31, 2005, these subsidiaries had no borrowings and had letters of credit of US$30.6 million.  At December 31, 2004, these subsidiaries had no borrowings and had letters of credit of US$14.6 million.

Cash generated from operating activities before working capital changes was $210.3 million for the 2004 year, and was $149.6 million for 2005.  This is significantly stronger than the prior three years when it averaged $45 million.  The maximum borrowing available under our bank facilities is approximately $253 million.  Including cash, we have approximately $216 million of unutilized borrowing capacity at December 31, 2005.  We expect that the cash generated from operating activities combined with our unutilized bank facilities will be sufficient to fund our interest obligations and fixed asset purchases in 2006.  The rapid growth in revenue required additional working capital funding of $202.6 million during 2004 and $121.6 million during the first quarter of 2005.  Increased profitability enabled us to finance the majority of this working capital growth.  The remainder was financed through our bank facilities.  Reduction in inventory levels and continued profitability allowed us to repay all bank borrowings by the end of 2005.

We have made several acquisitions and we believe we can continue to grow by acquisition.  We believe we have the ability to fund future acquisitions through the utilization or expansion of our existing bank facilities and the issuance of new equity, if required.  At December 31, 2005 we had a very low financial leverage with a debt to equity ratio of 0.3.

Contractual Obligations

As at December 31, 2005, we were contractually obligated to make payments under our long-term debt agreements and operating lease obligations that come due during the following periods.

(in thousands	Long-Term	Cross Currency	Long-Term	Lease
of dollars)	Debt Maturities	Swaps	Debt Interest	Obligations	Total
2006	$              -	$             -	$      15,200	$     10,151	$      25,351
2007	-	-	15,200	8,483	23,683
2008	-	-	15,200	6,202	21,402
2009	-	-	15,200	5,607	20,807
2010	-	-	15,200	4,629	19,829
2011 and beyond	204,033	15,210	48,167	7,519	274,929
Total	$    204,033	$    15,210	$    124,167	$     42,591	$    386,001

The fixed interest cross currency swaps obligate us to purchase US$100 million at $1.3180 for each US$1.00. Based on the December 31, 2005 exchange rate, we would incur an obligation of $15.2 million in addition to our long-term debt obligation of $204.0 million.  The long-term debt interest in the table includes the impact of our swaps.

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements consist of letters of credit disclosed in the bank credit facilities table, operating lease obligations disclosed in the contractual obligation table and short-term foreign exchange contracts.  The short-term foreign exchange contracts are used to hedge specific inventory purchases, denominated in U.S. dollars and euros, of approximately US$58.7 million and €2.9 million maturing in the first half of 2006.

We have multiple defined benefit pension plans in Canada, as disclosed in Note 14 to the 2005 Consolidated Financial statements.  We expect to contribute approximately $3.5 million to these plans during 2006.

Vision and Strategy

The metals distribution business is a segment of a mature, cyclical industry.  The use of service centers and steel distributors by both manufacturers and end users of steel continues to grow.  This is evidenced by the growth in the percentage of total steel shipments from steel producers to service centers.  As the distribution segment's share of steel industry shipments continues to grow, service centers such as ours can grow their business over the course of a cycle.

We strive to deal with the cyclical nature of the business by operating with the lowest possible net assets throughout the course of a cycle.  In addition, our aim is to be more profitable through the various successive peaks and troughs within the steel cycle.  In order to achieve this, management emphasizes profitability rather than revenue growth. This intensive asset management reduces borrowings and therefore interest expense in declining periods in the economic cycle.  This in turn creates higher, more stable returns on net assets over the course of the cycle.  Our conservative management approach creates relatively stronger trough earnings but could cause potential peak earnings to be somewhat muted.  Management strongly believes that it is more prudent to be profitable throughout a cycle, without the spikes in earnings caused by less emphasis on asset management, and have average earnings over the full range of the cycle in the top deciles of the industry.

Growth from selective acquisitions is also a core management philosophy.  We focus on investment opportunities in businesses that have strong market niches or provide mass to our existing operations.

In both the energy tubular products and steel distributors segments, all of the business units have significant operations in the market niche that they service.  Consistent with our acquisition philosophy, any new acquisitions in these areas could likely be either major stand-alone operations or those that complement our existing operations.

In the future, we believe that the length of the steel-based economic cycle will continue to shorten and a management structure and philosophy that allows the fastest reaction to the changes that affect the industry will be the most successful.  We will continue to invest in business systems to enable faster reaction times to changing business conditions.  In addition, management believes the high level of service and flexibility provided by service centers will enable this distribution channel to capture an increasing percentage of total steel revenues to end users, allowing for increased growth within the sector.

Risk

The timing and extent of future price changes from the steel producers and their impact on us can not be predicted with any certainty due to the inherent cyclical nature of the steel industry.

Controls and Procedures

As of December 31, 2005, an evaluation was carried out, under the supervision of and with the participation of management, including the President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15 under the U.S. Securities and Exchange Act of 1934 and under Multilateral Instrument 52-109.  Based on that evaluation, the President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective.  No changes were made in our internal control over financial reporting during the year ended December 31, 2005, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Outlook

Before we discuss 2006, we would like to take this opportunity to thank our employees for a great 2005.  Once again, the Russel Metals' employees showed their skill at reacting quickly and maximizing returns as well if not better than any in the sector.  In addition, we would like to thank Ken Gilbert, Vice President Quebec Region, who retired in 2005 after a successful 42-year career that culminated with his leadership role in the successful integration of Acier Leroux within Russel Metals.

The steel sector has been as stable in the second half of 2005 as we have experienced in several years and it is projected to remain that way into early 2006.  All three legs of our platform: the metals service centers, the energy tubular products and the steel distributors segments, are performing at excellent levels.  Assuming there is no major surprise in the price of steel, the price of oil and gas and the Canadian dollar does not appreciate materially, we are optimistic that 2006 should be another excellent year for Russel Metals.

Dated February 23, 2006

EX-99

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Description	Page
Management's Report to the Shareholders………………………………………….………	2
Auditors' Report…………………………………………………………………………….	3
Consolidated Balance Sheets……………………………………………………………….	4
Consolidated Statements of Earnings and Retained Earnings………………………………	5
Consolidated Cash Flow Statements……………………………………………………….	6
Notes to the Consolidated Financial Statements……………………………………………	7

Management's Report to the Shareholders

The accompanying consolidated financial statements, management's discussion and analysis and all information in the Annual Report have been prepared by management and approved by the Audit Committee and the Board of Directors of the Company.

These consolidated financial statements were prepared in accordance with Canadian generally accepted accounting principles and, where appropriate, reflect management's best estimates and judgements.  Management is responsible for the accuracy, integrity and objectivity of the consolidated financial statements and management's discussion and analysis within reasonable limits of materiality and for the consistency of financial data included in the text of the Annual Report with that contained in the consolidated financial statements.

To assist management in the discharge of these responsibilities, the Company maintains a system of internal controls designed to provide reasonable assurance that its assets are safeguarded, that only valid and authorized transactions are executed, and that accurate, timely and comprehensive financial information is prepared.  In addition, the Company maintains a system of disclosure controls in order to provide reasonable assurance that the financial information is relevant, reliable and accurate.

The Company's Audit Committee is appointed annually by the Board of Directors.  The Audit Committee, which is composed entirely of outside directors, meets with management to satisfy itself that management is properly discharging its financial reporting responsibilities and to review the consolidated financial statements, the management's discussion and analysis and the report to shareholders.  The Audit Committee reports its findings to the Board of Directors for consideration in approving the consolidated financial statements, the managements discussion and analysis and the report to shareholders for presentation to the shareholders.

The consolidated financial statements have been audited on behalf of the shareholders by the external auditors, Deloitte & Touche LLP, in accordance with Canadian generally accepted auditing standards.  Deloitte & Touche LLP has full and free access to the Audit Committee.

Dated February 23, 2006

(signed) E. M. Siegel, Jr.	(signed) Brian R. Hedges
President and Chief Executive Officer	Executive Vice President and
	Chief Financial Officer

Auditors' Report

To the Shareholders of Russel Metals Inc.

We have audited the consolidated balance sheets of Russel Metals Inc. as at December 31, 2005 and 2004 and the consolidated statements of earnings and retained earnings and of cash flows for each of the years in the three-year period ended December 31, 2005.  These consolidated financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards.  Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2005 and 2004 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2005 in accordance with Canadian generally accepted accounting principles.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.  Accordingly we express no such opinion.

(signed) Deloitte & Touche LLP

Chartered Accountants

Toronto, Ontario
January 30, 2006

COMMENTS BY AUDITORS ON CANADA – U.S. REPORTING DIFFERENCES

The standards of the Public Company Accounting Oversight Board (United States) require the addition of an explanatory paragraph (following the opinion paragraph) when there are changes in accounting principles that have a material effect on the comparability of the Company's consolidated financial statements, such as the changes described in Note 2 to the consolidated financial statements.  Our report to the Shareholders, dated January 30, 2006, is expressed in accordance with Canadian reporting standards which do not require a reference to such changes in accounting principles in the auditors' report when the change is properly accounted for and adequately disclosed in the financial statements.

(signed) Deloitte & Touche LLP

Chartered Accountants

Toronto, Ontario
January 30, 2006

Consolidated Balance Sheets

At December 31($000)	2005	2004
ASSETS
Current
Cash	$       47,055	$            634
Accounts receivable	359,594	360,696
Inventories	474,034	553,915
Prepaid expenses and other assets	7,010	7,069
Income taxes receivable	304	5,996
Discontinued operations (Note 5)	-	9,483
	887,997	937,793
Property, Plant and Equipment (Note 6)	181,841	180,655
Assets Held For Sale (Note 4)	5,085	6,291
Deferred Financing Charges	7,240	8,357
Goodwill (Note 4)	9,205	9,205
Future Income Tax Assets (Note 10)	994	1,614
Other Assets	2,821	2,566
	$ 1,095,183	$ 1,146,481
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness	$        2,098	$      33,242
Accounts payable and accrued liabilities	312,937	348,166
Income taxes payable	5,588	60,049
Discontinued operations (Note 5)	2,386	9,403
	323,009	450,860
Contingencies, Guarantees and Commitments (Note 15)
Other Accrued Liabilities (Note 12)	15,210	11,440
Long-Term Debt (Note 8)	204,033	210,630
Pensions and Benefits (Note 14 b)	8,949	10,146
Future Income Tax Liabilities (Note 10)	5,285	6,831
	556,486	689,907
Shareholders' Equity (Note 11)	538,697	456,574
	$ 1,095,183	$  1,146,481

ON BEHALF OF THE BOARD,

(signed) C.R. Fiora	(signed) R. Hartog
Director	Director

Consolidated Statements of Earnings and Retained Earnings

For the Years Ended December 31
($000, except per share data)	2005	2004	2003
Revenues	$  2,615,246	$  2,412,502	$  1,503,814
Cost of sales and operating expenses	2,413,705	2,089,391	1,443,119
Earnings before the following	201,541	323,111	60,695
Restructuring (Note 4)	(1,140)	3,632	3,583
Debt restructuring costs (Note 8)	-	13,718	-
Foreign exchange gain (Note 12)	-	-	(348)
Goodwill impairment (Note 4)	-	-	2,410
Interest expense, net (Note 9)	17,529	20,024	22,723
Earnings before income taxes	185,152	285,737	32,327
Provision for income taxes (Note 10)	(60,374)	(105,268)	(13,250)
Earnings from continuing operations	124,778	180,469	19,077
Loss from discontinued operations (Note 5)	(62)	(2,623)	(578)
Net earnings for the year	124,716	177,846	18,499
Retained earnings --
Dividends on preferred shares	-	(611)	(2,250)
Earnings available to common shareholders	124,716	177,235	16,249
Dividends on common shares	(45,434)	(25,004)	(11,605)
Retained earnings, beginning of the year	262,733	110,502	105,858
Retained earnings, end of the year (Note 11)	$   342,015	$   262,733	$   110,502
Basic earnings per common share (Note 11)
- continuing operations	$          2.47	$         3.70	$           0.42
Basic earnings per common share	$           2.47	$          3.64	$         0.41
Diluted earnings per common share
- continuing operations	$            2.42	$            3.61	$            0.40
Diluted earnings per common share	$          2.42	$          3.56	$           0.39

Consolidated Cash Flow Statements

For the Years Ended December 31 ($000)	2005	2004	2003
Operating activities
Earnings from continuing operations	$    124,778	$    180,469	$      19,077
Depreciation and amortization	19,158	18,598	16,330
Future income taxes	6,305	5,021	(426)
Gain (loss) on sale of fixed assets and assets held for sale	(1,972)	264	(89)
Stock-based compensation	1,309	804	217
Restructuring costs	-	2,051	3,162
Debt redemption costs	-	3,071	-
Goodwill impairment	-	-	2,410
Cash from operating activities before working capital	149,578	210,278	40,681
Changes in non-cash working capital items
Accounts receivable	(2,368)	(122,814)	18,193
Inventories	76,475	(260,898)	91,439
Accounts payable and accrued liabilities	(32,189)	128,473	(12,669)
Current income taxes	(55,644)	54,711	11,681
Other	51	(2,075)	2,571
Change in non-cash working capital	(13,675)	(202,603)	111,215
Cash from operating activities	135,903	7,675	151,896
Financing activities
(Decrease) increase in bank borrowing	(31,144)	(44,851)	56,952
Issue of common shares	4,385	54,439	5,663
Dividends on common shares	(45,434)	(25,004)	(11,605)
Dividends on preferred shares	-	(611)	(2,250)
Deferred financing costs	(338)	(9,117)	(77)
Issuance of long-term debt	-	235,200	-
Repurchase of long-term debt	-	(184,715)	-
Redemption of preferred shares	-	(30,000)	-
Repayment of debt assumed	-	-	(99,262)
Cash used in financing activities	(72,531)	(4,659)	(50,579)
Investing activities
Purchase of fixed assets	(26,463)	(25,394)	(34,879)
Proceeds on sale of fixed assets	1,644	849	1,804
Proceeds from assets held for sale and sale of businesses	5,869	3,675	-
Purchase of businesses (Note 4)	-	-	(70,359)
Other	(4,443)	305	(4,628)
Cash used in investing activities	(23,393)	(20,565)	(108,062)
Discontinued operations
Operating activities	(62)	(1,174)	(406)
Investing activities	6,504	349	1,091
Cash from (used in) discontinued operations	6,442	(825)	685
Increase (decrease) in cash	46,421	(18,374)	(6,060)
Cash position, beginning of the year	634	19,008	25,068
Cash position, end of the year	$      47,055	$           634	$      19,008

Notes to the Consolidated Financial Statements

1.      Summary of Significant Accounting Policies

a)       Basis of presentation

The consolidated financial statements include the accounts of Russel Metals Inc. and its subsidiary companies herein referred to as the Company.  The reporting currency is Canadian dollars unless otherwise noted.  All  inter-company balances, transactions and profits have been eliminated.

These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles.  Material differences from accounting principles generally accepted in the U.S. are disclosed in Note 16.

The revenue and results of operations of Poutrelles Delta and Armabec Inc., which have been sold, have been reclassified to reflect the classification of these operations as discontinued (Note 5).

b)       Inventories

Inventories are recorded at the lower of cost and net realizable value.  Cost is determined on either an average cost basis or an actual cost basis depending on the business unit.

c)       Property, plant, equipment and depreciation

Property, plant, equipment and leasehold improvements are recorded at cost.  Depreciation is provided on a straight-line basis at rates that charge the original cost of such assets to operations over their estimated useful lives.  The rates used are 20 to 40 years for buildings, 10 years for machinery and equipment, 2 to 5 years for computer equipment, and over the lease term for leasehold improvements.  Depreciation expense was $17,703,000 in 2005 (2004: $17,326,000; 2003: $15,140,000).

d)       Deferred financing charges and amortization

Costs incurred that relate to financing are deferred and amortized on a straight-line basis over the period of the related financing.  Deferred financing charges are recorded at cost less accumulated amortization.  Amortization of deferred financing charges was $1,455,000 in 2005 (2004: $1,271,000; 2003: $1,190,000).

e)       Goodwill

Goodwill represents the excess purchase price paid on acquisitions over the value assigned to identifiable net assets acquired.  The Company reviews goodwill for impairment annually and whenever facts and circumstances indicate that carrying amounts may not be recoverable.  As part of the evaluation, the estimated future undiscounted cash flows associated with the underlying business operation are compared to the carrying amount of goodwill to determine if a write-down is required.  If such an assessment indicates that the undiscounted future cash flows will not be recovered, the carrying amount is reduced to the estimated fair value (Note 4).

f)       Pensions

The cost of pension benefits earned by employees covered under defined benefit plans is determined using the projected benefit method prorated on service and is charged to expense as services are rendered.  Actuarial gains and losses and past service costs are amortized on a straight-line basis over the estimated average remaining service lives of the employee groups.  The amortization of actuarial gains and losses utilizes the corridor approach.  The cost of post-retirement benefits other than pensions is recognized on an accrual basis over the working lives of employees.

g)       Income taxes

The Company uses the liability method of income tax allocation.  Under this method, future tax assets and liabilities are determined based on differences between the financial accounting and tax bases of assets and liabilities and are measured using the substantively enacted tax rates and laws that will be in effect when the differences are expected to reverse.  Future income tax assets are recognized to the extent that their realization is more likely than not.

h)       Foreign currency translation

The accounts of self-sustaining foreign subsidiaries are translated from U.S. dollars to Canadian dollars at the noon spot rates in effect at the balance sheet date, which was 1.1659 at December 31, 2005 (2004: 1.2036).  Revenues and expenses are translated at the average rate of exchange for the year.  For 2005, the U.S. dollar published average exchange rate was 1.2114 (2004: 1.3013; 2003: 1.4010).  The resulting gains or losses are included in the cumulative translation adjustment line of shareholders' equity.

Exchange gains or losses on long-term debt denominated in foreign currencies not designated as a hedge are expensed as incurred (see Note 12).  Exchange gains or losses on the translation of long-term debt denominated in a foreign currency designated as a hedge of the Company's net investment in foreign subsidiaries are included in the cumulative translation adjustment line of shareholders' equity.

i)       Earnings per share

Basic earnings per common share are calculated using the weighted daily average number of common shares outstanding.  The weighted average number of common shares for 2005 was 50,461,330 (2004: 48,671,915; 2003: 40,021,479).

j)       Revenue recognition

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, selling price is fixed and collection is reasonably assured.  Revenue on certain sales within the energy tubular products segment, where the Company acts as an agent, is presented on a net basis.  Freight and shipping billed to customers are included in revenue.

k)       Stock-based compensation

The Company uses the fair value-based approach to account for stock-based compensation granted to employees subsequent to January 1, 2003.  Compensation expense and an increase in contributed surplus is recognized for stock options over their vesting period based on their estimated fair values on the date of grant, as determined by the Black-Scholes option-pricing model.  Compensation expense is also recognized for deferred share units  when issued with the liability marked to market until exercised.

l)       Derivative financial instruments

The Company uses foreign exchange contracts to manage foreign exchange risk on certain committed cash outflows, primarily inventory purchases.  When the derivative instruments have been designated and are highly effective at offsetting risks, hedge accounting is applied.  Hedge accounting requires that gains and losses on the hedging item are recognized through income in the same period or manner as the hedged item.  Realized and unrealized foreign exchange gains and losses not designated as a hedge are included in income.  Derivatives are not entered into for speculative purposes and the use of derivative contracts is governed by documented risk management policies.

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions.  This process includes linking all derivatives to specific firm commitments or forecasted transactions.  The Company assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the cash flows of hedged items.

m)       Cash

Cash includes short-term investments with a maturity of less than 30 days.

n)       Use of estimates

The preparation of consolidated financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported 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 periods.  In particular, inventories, accounts receivable, asset retirement obligations, fair values, other contingencies, and assigned values on net assets acquired represent management's best estimates.  Actual results could differ from these estimates.

2.      Change in Accounting Policies

a)     Effective January 1, 2004, the Company adopted the new accounting guideline, AcG-13, Hedging Relationships, which establishes certain conditions when hedge accounting may be applied.  The guideline sets out the requirements for the identification, designation, documentation and effectiveness of hedging relationships for the purpose of applying hedge accounting.  The adoption of this standard did not have a material effect on the Company's results of operations, financial position or cash flows.  The Company has applied this standard to the fixed for fixed cross currency swaps entered into on February 20, 2004, in order to hedge the last US$100 million of its US$175 million U.S. Senior Notes (Note 8).  In addition, this standard has been applied to the Company's other hedging relationships, namely foreign exchange contracts used to manage certain committed cash flows and the hedge of the net investment in U.S. subsidiaries.

b)     Effective January 1, 2004, the Company adopted the new CICA Handbook section 3110, Asset Retirement Obligations.  This standard establishes standards for the recognition, measurement and disclosure of liabilities for asset retirement obligations and the associated asset retirement costs.  The Company has certain significant asset retirement obligations relating to its land lease for its Thunder Bay Terminal operations.  The landlord has the option to retain the facilities or to require the Company to remove them.  In addition, the Company has certain end-of-lease obligations in six of its service center operations (Note 6).  The adoption of this standard did not have a material effect on the Company's results of operations, financial position or cash flows.

c)     Effective January 1, 2004, the Company prospectively adopted the new CICA Handbook section 1100, Generally Accepted Accounting Principles (GAAP).  This standard establishes what constitutes Canadian generally accepted accounting standards and provides guidance on the GAAP hierarchy.  The adoption of this standard did not have a material effect on the Company’s results of operations, financial position or cash flows.

d)     Effective October 1, 2004, the Company prospectively adopted the new accounting guideline AcG-15, Variable Interest Entities.  The adoption of this standard did not have a material effect on the Company’s results of operations, financial position or cash flows.

e)     Effective May 1, 2003, the Company adopted the new accounting standard for the Disposal of Long-Lived Assets and Discontinued Operations.  This standard, along with emerging issues abstracts EIC-134, Accounting for Severance and Termination Benefits and EIC-135, Accounting for Costs Associated with Exit and Disposal Activities (Including Costs Incurred in a Restructuring) have been applied to the restructuring as a result of the Acier Leroux inc. acquisition (Note 4).

3.      Future Accounting Changes

On September 8, 2005, the CICA issued EIC-156, Accounting by a Vendor for Consideration Given to a Customer (including a Reseller of the Vendor's Products).  The Company is currently evaluating the effect of this standard on its consolidated financial statements and is expected to adopt the standard effective January 1, 2006.

During 2005, the CICA issued three new accounting standards: CICA Handbook section 1530, Comprehensive Income; CICA Handbook section 3855, Financial Instruments – Recognition and Measurement; and CICA Handbook section 3865, Hedges.  These standards, which must be adopted together, are effective for fiscal years beginning on or after October 1, 2006.  The Company is currently evaluating the impact on its consolidated financial statements of adopting these standards effective January 1, 2007.

a)     Comprehensive Income

This standard provides guidance on the presentation of comprehensive income which is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources.  Comprehensive income is comprised of net income and other comprehensive income.  Other comprehensive income includes certain gains and losses that are recognized outside of net income.

b)     Financial Instruments – Recognition and Measurement

This standard provides guidance for recognizing and measuring financial assets and financial liabilities which are to be valued at fair value with certain limited exceptions.  The standard also provides guidance on the classification of gains and losses into net income or other comprehensive income.

c)      Hedges

This standard replaces existing hedge accounting guidance in CICA Handbook section 1650, Foreign Currency Translation, and accounting guideline AcG-13, Hedging Relationships, and provides requirements for the designation, documentation and disclosure of qualifying hedge relationships.

4.      Business Acquisitions and Restructuring

a)      Acquisitions

On July 3, 2003, the Company purchased 99.52% of the issued and outstanding Class A shares, 97.53% of the issued and outstanding Class B shares, 86.61% of the outstanding 8% convertible unsecured subordinated debentures and 87.2% of the outstanding 7.25% convertible unsecured subordinated debentures of Acier Leroux inc.   Acier Leroux is a metals service center operation with Canadian locations in Ontario, Quebec and the Atlantic provinces.  The Company issued 3,546,874 shares and paid $48,947,000 in cash in consideration for the shares and $16,684,000 in cash in consideration for the tendered debentures.  In addition, the Company entered into an arrangement with the former Chairman and Chief Executive Officer of Acier Leroux requiring payments over a three-year period in the amount of $1,350,000, which was accrued as a transaction cost.

On August 19, 2003, the Company, under the provisions of the Companies Act (Quebec), acquired the remaining shares of Acier Leroux for $1,190,000 in cash.  On August 27, 2003, Acier Leroux redeemed the debentures not acquired in the offer.

The final net assets acquired, at assigned values, are as follows:

($000)
Accounts receivable	$     74,572
Inventories	82,880
Fixed assets	60,180
Other assets	2,122
Goodwill	7,815
Total assets - continuing operations	227,569
Accounts payable and accrued liabilities	(47,127)
Accrued pension and benefit liability	(1,380)
Future income taxes	11,057
Net identifiable assets - continuing operations	190,119
Discontinued operations	7,481
Total net assets acquired, before debt assumed	$   197,600
Financed by:
Debt assumed, net of cash of $2.7 million	$   123,956
Cash consideration	50,137
Russel Metals common shares - issued	19,969
Transaction costs, net of taxes	3,538
	$   197,600

Effective September 1, 2000, the Company purchased Triumph Tubular & Supply Ltd., a Calgary, Alberta, distributor of oil country tubular goods.  Under the purchase agreement, additional amounts under an earnout based on results could be paid over five years and would be incremental to goodwill.  The final payment in this earnout arrangement of $1,390,000 was paid in 2004.

These acquisitions were accounted for using the purchase method and their results of operations have been consolidated since their respective acquisition dates.

The 2004 goodwill relating to Triumph Tubular & Supply Ltd. has been allocated to the energy tubular products segment.  The remaining goodwill for 2004 and 2003 was allocated to the metals service centers segment.  The tax-deductible portion of goodwill is $nil.

The continuity of the carrying value of the goodwill is as follows:

($000)
Balance December 31, 2003	$    4,216
Change in allocation of the purchase price of Acier Leroux	3,599
Triumph Tubular earnout	1,390
Balance December 31, 2004 and 2005	$    9,205

b)      Restructuring

Restructuring of the Company's service center segment's operations as a result of acquisitions is charged to income as incurred.  Under certain conditions, restructuring relating to the acquired operation is included in the net assets acquired.

In 2003, a restructuring charge of $3.6 million was recorded relating to the severance, employee benefits and termination costs due to the closure of the Russel Metals' operations as a result of the acquisition of Acier Leroux.  These costs primarily relate to the closure of the Russel Metals' Lachine, Quebec location.  Operations ceased at Lachine on December 31, 2003, and the vacant property along with the vacant Dartmouth property acquired in the Leroux acquisition were classified in Assets Held for Sale in the first quarter of 2004.

During 2004, the Company sold its Dartmouth property for the book value of $2.2 million.  In 2004, the Company incurred a restructuring charge of $3.7 million related to the restructuring of the Russel Metals' locations as a result of the Acier Leroux acquisition.  These costs primarily relate to the restructuring of the Ontario region and the on going costs associated with the Lachine property.

In 2004, restructuring of $0.5 million (2003: $3.1 million) was charged to provisions provided for the restructuring of the Bahcall locations as a result of the Williams Steel purchase in 2002.  The unutilized balance of $0.3 million relating to A.J. Forsyth was released to income in 2004.  Also, the additional restructuring relating to Bahcall of $0.2 million was charged to income in 2004.  The restructuring of these operations as a result of acquisitions was completed in 2004.

On May 2, 2005, the Company sold its Lachine property, previously classified as an Asset Held for Sale, for net proceeds of $5.8 million.  The resulting before tax gain of $2.9 million has been recorded in restructuring.

On September 2, 2005, the Company announced the closure of one of its Ontario branches.  The Company determined based on a valuation that the carrying amount of the property and equipment was greater than the fair value and recorded an impairment loss in the third quarter of $1.3 million.  On December 31, 2005, the Company vacated the property and accordingly classified its carrying value of $5.1 million as an Asset Held for Sale.  In addition, the Company provided for contractual termination costs of $0.5 million relating to the employees at this location.  At December 31, 2005, $0.2 million of these costs remained to be paid.

In 2005, the Company recorded restructuring income of $361,000 relating to costs accrued as part of the fair value of Acier Leroux net assets acquired that were not required.  These costs primarily related to the resolution of matters relating to Poutrelles Delta (Note 5).

Restructuring was charged to income as follows:

($000)	2005	2004	2003
Impairment loss on Ontario branch	$    1,315	$           -	$           -
Ontario branch severance and
other employee termination costs	525	-	-
Gain on Asset Held for Sale	(2,932)	-	-
Acier Leroux restructuring	313	3,695	3,583
Acier Leroux unutilized acquisition	(361)	-	-
Williams Steel acquisition	-	231	-
A.J. Forsyth acquisition	-	(294)	-
Restructuring	$   (1,140)	$    3,632	$    3,583

The continuity of the Acier Leroux restructuring provision is as follows:

	Special	Contractual
	Termination	Termination
($000)	Benefits	Costs	Other	Total
Balance December 31, 2003	$       228	$    2,402	$       532	$    3,162
Restructuring expensed in 2004	-	783	2,912	3,695
Cash payments	(198)	(1,516)	(861)	(2,575)
Non-cash changes to the provision	(30)	(1,169)	(2,583)	(3,782)
Balance December 31, 2004	-	500	-	500
Restructuring expensed in 2005	-	(359)	672	313
Cash payments	-	(73)	(672)	(745)
Balance December 31, 2005	$            -	$         68	$            -	$         68

Non-cash changes to the provision relate to the write down of fixed assets and changes in accrued employee benefit obligations.

c)      Goodwill Impairment

The Company completed its annual goodwill impairment tests, using projected discounted cash flows during the fourth quarter of 2005 and 2004, resulting in no impairment charge.

In the fourth quarter of 2003, this evaluation concluded that the fair value associated with the service center segment's Williams Bahcall operation due to continuing operating losses could not support the carrying value of the goodwill, and, accordingly, the Company recorded a goodwill impairment charge of $2.4 million.

5.      Discontinued Operations and Divestitures

During 2005, the Company disposed of two operations acquired with the Acier Leroux acquisition.

On May 10, 2005, the Company sold its investment in Armabec Inc., a metals service center, for book value less selling costs of approximately $30,000.  In the second quarter of 2005, as a result of this divestiture, the Company classified Armabec Inc. as discontinued, and the revenue and results of operations for the period from January 1, 2005 to the date of sale and the comparative years ended December 31, 2004 and 2003 were reclassified to discontinued operations accordingly.  The revenue generated by this operation for the period prior to sale was $1.0 million (2004:  $6.1 million; 2003: $3.2 million) and the pre-tax profit for the period prior to sale was $5,000 (2004:  $0.4 million; 2003: $0.3 million).

On December 23, 2004, the Company received an offer pursuant to the Shareholders Agreement whereby the minority shareholders would purchase the Company’s holdings of Poutrelles Delta Inc.  For the year ended December 31, 2004, the Company classified Poutrelles Delta as discontinued and recorded a loss to fair value of $0.6 million.  On February 23, 2005, the Company sold its investment in Poutrelles Delta, for $4.1 million in cash.  The write-down to fair value at December 31, 2004 resulted in no additional gain or loss upon sale.  The revenue and results of operations for Poutrelles Delta for the current and prior periods was reclassified as discontinued.  The revenue generated by this operation for 2005 was $3.0 million (2004:  $25.9 million; 2003: $10.1 million) and pre-tax loss was $71,000 (2004:  $0.6 million; 2003: $nil).

During 2004, the Company disposed of two asset groups acquired with the Acier Leroux acquisition.

On May 14, 2004, the Company sold the inventory and certain fixed assets of the Dollard Steel operation for book value of $1.5 million.

On July 30, 2004, the Company sold the inventory and fixed assets of its Plattsburgh, New York, operation for the book value of US$360,000.  As part of the acquisition of Acier Leroux, the Company had adopted a formal plan to dispose of their U.S. operations and classified them as discontinued.  All of the Leroux U.S. operations have been divested.  The Company has certain residual obligations relating to these operations which are recorded as a discontinued operations liability of $2.4 million.  The revenue generated by these operations prior to sale was $3.4 million (2003: $3.3 million) and the pre-tax loss was $0.3 million (2003: $0.8 million loss).

During the year ended December 31, 2004, the Company incurred an additional charge of $3.2 million, net of tax, relating to long-term lease obligations and other environmental cleanup costs for operations classified as discontinued in 1995.

Basic and fully diluted loss per share from discontinued operations was $0.00 (2004:  $0.06; 2003: $0.01).

6.      Property, Plant and Equipment

($000)	2005		2004
	Cost	Net	Cost	Net
Land and buildings	$  132,768	$    96,482	$  134,861	$  101,497
Machinery and equipment	193,512	75,333	184,833	69,668
Leasehold improvements	25,657	10,026	24,547	9,490
	$  351,937	$  181,841	$  344,241	$  180,655

During the year ended December 31, 2005, the Company increased its probability-weighted undiscounted expected cash flow relating to its asset retirement obligations by $1.3 million and the probability-weighted discounted expected cash flow by $0.3 million primarily as a result of an increase in the probabilities.  The probability range is 50% - 99% and the discount rate used was 9%.  The asset retirement obligation, including applicable accretion at December 31, 2005, was $0.4 million (2004: $0.1 million).

7.      Revolving Credit Facilities

On October 29, 2004, the Company entered into a credit facility with a syndicate of banks, which provides a line of credit to a maximum of $200 million, including letters of credit.  This three-year facility provides for annual extensions.  On October 29, 2005, the Company extended the facility for an additional one-year period to October 29, 2008.  Borrowings under this facility are restricted by certain financial covenants with which the Company was in compliance at December 31, 2005.  The obligations of the Company under this agreement are secured by a pledge of trade accounts receivable and inventories of a significant portion of the Company's operations.  At December 31, 2005, the Company had borrowings of $nil (2004: $13.0 million) and letters of credit of $46.1 million (2004: $35.1 million) under this facility.  Deferred charges relating to the previous bank facility of $0.5 million were charged to income in 2004.

In addition, certain U.S. subsidiaries of the Company have their own credit facility.  The maximum borrowing under this facility is US $45.0 million.  At December 31, 2005, these subsidiaries had US $nil borrowings (2004: US $nil) and letters of credit of US $30.6 million (2004: US $14.6 million) under this facility.

On February 25, 2005, the Company entered into an agreement with its banking syndicate to provide, in addition to existing facilities, a $50 million bridge facility for a term of one year.  The provisions of the existing credit facilities, including financial covenants therein, applied to the new bridge facility.  This bridge facility was repaid and cancelled in its entirety on August 29, 2005.

8.      Long-Term Debt

The long-term debt is comprised of the following:

($000)	2005	2004
6.375% US$175 million Senior Notes due March 1, 2014	$  204,033	$  210,630

On February 20, 2004, the Company completed the issue of US$175 million of Senior Notes due March 1, 2014, bearing interest at 6.375%.  The proceeds of this issue were used to redeem US$95.5 million of the 10% Senior Notes due June 1, 2009, including a call premium for 1.0725; the $30 million 8% Subordinated Debentures due June 15, 2006, and the $30 million Class II preferred shares during the first quarter of 2004.  The remaining US$20.l million of 10% Senior Notes were redeemed on June 1, 2004, including a call premium, for 1.05. The call premiums and deferred charges of $2.5 million relating to the redeemed debt were charged to income in 2004.

The US$175 million Senior Notes are redeemable, in whole or in part, at the option of the Company on or after March 1, 2009 at 103.188% of the principal amount declining rateably to 100% of the principal amount on or after March 1, 2012.  In addition, the senior notes are also redeemable, in whole, at the option of the Company at any time at 100% of the principal amount in the event of certain changes affecting Canadian withholding taxes.  The Senior Notes contain certain restrictions on the payment of common share dividends in excess of $0.08 per share per quarter.  The Company was in compliance with all debt covenants at December 31, 2005.

On February 20, 2004, the Company entered into fixed for fixed cross currency swaps with major banks to manage the foreign currency exposure on the last US$100 million of the 6.375% Senior Notes.  On the swaps, the Company receives U.S. denominated interest at 6.375% on a notional US$100 million and pays Canadian dollar interest at 7.12% on a notional $131.8 million.  As part of the swaps, the Company exchanged US$100 million for $131.8 million on February 20, 2004 and will receive US$100 million for $131.8 million on March 1, 2014.  Both the swap counterparties and the Company have the right to early terminate the swaps in the first quarter of 2009.  On a monthly basis, the Senior Notes are recorded at month-end exchange rates and the difference between the swap rate of $1.3180 and the month-end rate on the US$100 million relating to the swap is recorded separately in Other Assets or Other Accrued Liabilities.

9.      Interest expense

($000)	2005	2004	2003
Interest on long-term debt	$   15,184	$   16,957	$   18,820
Other interest expense, net	2,345	3,067	3,903
	$   17,529	$   20,024	$   22,723

Interest income on short-term investments is recorded as a reduction of short-term interest expense.  Total interest paid by the Company in 2005 was $17,732,000 (2004:  $20,071,000; 2003:  $21,746,000).

10.      Income taxes

a)      The non-current future income tax balances consist of:

($000)	2005	2004
Future income tax assets
Tax benefits of loss carryforwards	$        771	$        860
Plant and equipment	(533)	(649)
Pensions and benefits	999	981
Other timing	1,624	2,644
Gross future income tax assets	2,861	3,836
Valuation allowance	(1,867)	(2,222)
Total future income tax assets	994	1,614
Future income tax liabilities
Plant and equipment	(6,175)	(5,137)
Pensions and benefits	2,123	2,399
Other timing	1,105	(2,250)
Unrealized foreign exchange charged to equity	(2,338)	(1,843)
Total future income tax liabilities	(5,285)	(6,831)
Net future income taxes	$   (4,291)	$   (5,217)

b)     The Company's effective income tax rate is derived as follows:

	2005	2004	2003
Average combined statutory rate	35.5%	36.0%	37.0%
Rate difference of U.S. companies	0.7%	0.9%	-
Recognition of previously unrecorded tax benefits	(1.3)%	-	-
Statutory tax rate changes	-	-	2.8%
Large Corporation Tax	-	-	0.6%
Other	(2.3)%	(0.1)%	0.6%
Average effective tax rate	32.6%	36.8%	41.0%

c)      The details of the income tax provision are as follows:

($000)	2005	2004	2003
Current provision	$    54,069	$  100,225	$    13,664
Future provision	6,305	5,043	(1,314)
Statutory rate adjustments	-	-	900
	$    60,374	$  105,268	$    13,250

d)     Income taxes paid in 2005 were $110,388,000 (2004:  $47,311,000; 2003:  $7,777,000).

e)      The Company has Canadian net operating losses carried forward for tax purposes for which a valuation allowance has been recorded that expire as follows:

($000)	Year of Expiry	Amount
	2006	$      543
	2007	745
	2008	507
	2009	4
	2010	263
	2011	145
	2012	4

11.      Shareholders' Equity

a)     The components of shareholders' equity are as follows:

($000)	2005	2004
Common shares	$   208,139	$  203,090
Retained earnings	342,015	262,733
Contributed surplus (relating to stock-based compensation)	1,091	446
Cumulative translation adjustment	(12,548)	(9,695)
	$  538,697	$  456,574

b)     At December 31, 2005, the authorized share capital of the Company consists of:

         (i)     an unlimited number of common shares without nominal or par value;

         (ii)    an unlimited number of Class I preferred shares without nominal or par value, issuable in
                  series; and

         (iii)   an unlimited number of Class II preferred shares without nominal or par value, issuable in
                   series.

The Directors have the authority to issue the Class I and Class II preferred shares in series and fix the designation, rights, privileges and conditions to be attached to each series, except that the Class I shares shall be entitled to preference over the Class II shares with respect to the payment of dividends and the distribution of assets in the event of liquidation, dissolution or winding-up of the Company.

The Company's 1,200,000 cumulative, redeemable Class II preferred shares were redeemed on March 22, 2004 (Note 8).

c)     The number of common shares issued and outstanding at December 31 was as follows:

	Number of	Amount
	Shares	($000)
Balance, December 31, 2003	43,023,342	$   147,981
Common shares issued	5,750,000	49,240
Stock options exercised	1,114,317	5,869
Balance, December 31, 2004	49,887,659	203,090
Stock options exercised	768,350	5,049
Balance, December 31, 2005	50,656,009	$   208,139

d)     The Company has a shareholder-approved share option plan, the purpose of which is to provide the directors and employees of the Company and its subsidiaries with the opportunity to participate in the growth and development of the Company.  The number of common shares that may be issued under the share option plan is 5% of the current issued and outstanding common shares.  The options are exercisable on a cumulative basis to the extent of 20% per year of total options granted, except that under certain specified conditions the options become exercisable immediately.  The consideration paid by employees for purchase of common shares is added to share capital.

The following is a continuity of options outstanding:

			Weighted Average
	Number of Options		Exercise Price
	2005	2004	2005	2004
Balance, beginning of the year	1,793,816	2,031,133	$   6.52	$   4.40
Granted	856,000	888,500	15.85	9.15
Exercised	(768,350)	(1,114,317)	5.71	4.76
Expired and forfeited	(12,000)	(11,500)	6.75	4.03
Balance, end of the year	1,869,466	1,793,816	$ 11.12	$   6.52
Exercisable	275,666	327,216	$ 11.87	$   5.45

The outstanding options have an exercise price range as follows:

(number of options)	2005	2004
$15.85	852,800	-
$  9.15	553,600	776,050
$  5.50 - $  9.14	-	27,000
$  4.50 - $  5.49	335,066	567,766
$  3.00 - $  4.49	128,000	423,000
Options outstanding	1,869,466	1,793,816

The options expire in the years 2007 to 2015 and have a weighted average remaining contractual life of 8.2 years (2004: 7.8 years).

The Black-Scholes option-pricing model assumptions used to compute compensation expense under the fair value-based method are as follows:

	2005	2004	2003
Dividend yield	5.0%	5.0%	5.0%
Expected volatility	25.3%	28.5%	34.6%
Expected life	7 yrs	7 yrs	7 yrs
Risk free rate of return	5.0%	5.0%	5.0%
Weighted average fair value of options granted	$  2.93	$  1.89	$  1.30

e)     The Company has established a Deferred Share Unit (DSU) plan for its directors.  A DSU entitles the holder to receive, upon redemption, a cash payment equivalent to the market value of a common share at the redemption date.  DSUs are credited to the director accounts on a quarterly basis and vest immediately.  At December 31, 2005, there were 18,024 DSUs outstanding (2004: 7,775).

f)     Total compensation cost for stock-based compensation is as follows:

($000)	2005	2004	2003
Stock options	$  1,309	$     804	$     217
DSUs	274	120	-
	$  1,583	$     924	$     217

g)     Diluted share amounts were computed as follows:

(number of shares)	2005	2004	2003
Weighted average shares outstanding	50,461,330	48,671,915	40,021,479
Dilution impact of stock options	1,070,367	1,114,227	1,981,324
Diluted weighted average shares outstanding	51,531,697	49,786,142	42,002,803

12.      Financial Instruments

a)     Fair value

The fair value of long-term debt as at December 31, 2005 and 2004 is estimated based on the last quoted trade price, where they exist, or on the current rates available to the Company for similar debt of the same remaining maturities.

($000)	2005	2004
Long-term debt
Carrying amount	$  204,033	$  210,630
Fair value	$  197,912	$  212,736

On February 20, 2004, the Company entered into fixed for fixed cross currency swaps with major banks (Note 8).  At December 31, 2005, the fair value of the liability relating to these swaps was $29.8 million (2004:  $19.4 million).  The change in the spot foreign exchange rate on the swaps of $15.2 million (2004:  $11.4 million) is recorded as an Other Accrued Liability.  At December 31, 2005 and 2004, the Company had forward exchange contracts outstanding whose fair value approximates their contract value.

As at December 31, 2005 and 2004, the estimated fair value of other financial assets, liabilities and off balance sheet instruments approximates their carrying values.

b)     Credit risk

The Company, in the normal course of business, is exposed to credit risk relating to accounts receivable from its customers.  This risk is mitigated by the fact that its customer base is geographically diverse and in different industries.  The Company is also exposed to credit risk from the potential default by any of its counterparties on its foreign exchange forward contracts and the fixed for fixed cross currency swaps.  The Company mitigates this risk by entering into forward contracts  and swaps with members of the credit facility syndicate.

c)     Interest rate risk

The Company is not exposed to significant interest rate risk.  The Company's long-term debt is at fixed rates.  The Company's bank debt that is used to finance working capital, which is short-term in nature, is at floating interest rates.

d)     Foreign exchange risk

The Company uses foreign exchange contracts with maturities of less than a year to manage foreign exchange risk on certain future committed cash outflows.  As at December 31, 2005, the Company had outstanding forward foreign exchange contracts in the amounts of US $58.7 million and € 2.9 million, maturing in the first half of 2006 (2004: US $27.6 million and € nil).  The foreign exchange gain on U.S. denominated financial assets and liabilities included in 2005 operating earnings from continuing operations was $1.6 million (2004: $2.3 million; 2003: $881,000).

The Company has designated US $75 million of the Senior Notes as a hedge of its net investment in foreign subsidiaries.  The exchange gains and losses on U.S. borrowings not designated as a hedge of its net investment or hedged by the fixed for fixed cross currency swaps are charged to income as incurred.  The hedge designation resulted in no net foreign exchange gain or loss recognized in income in 2005 (2004: $nil; 2003: $348,000).

13.      Segmented Information

The Company conducts business primarily in three metals business segments.

         i)      Metals service centers

         The Company's network of metals service centers provides processing and distribution services
         on a broad line of metal products in a wide range of sizes, shapes and specifications, including
         carbon hot rolled and cold finished steel, pipe and tubular products, stainless steel and
         aluminum.  The Company services all major geographic regions of Canada and certain regions
         in the Midwestern United States.

         ii)      Energy tubular products

         The Company's energy tubular products operations distribute oil country tubular products, line
         pipe, tubes, valves and fittings, primarily to the energy sector in Western Canada and the
         Western United States.

         iii)      Steel distributors

         The Company's steel distributors act as master distributors selling steel to customers in large
         volumes, mainly on an "as is" basis.  The steel distributors source their steel domestically and
         off shore.

The Company has segmented its operations on the basis of type of customer, management reporting and geographic segments in which it operates.  The inter-segment sales from steel distributors to metals service centers were $57.4 million (2004: $54.4 million; 2003: $33.8 million).  These sales, which are at market rates, are eliminated in the table following.

a)     Results by business segment:

($000)	2005	2004	2003
Segment Revenues
Metals service centers	$  1,539,673	$  1,532,048	$     909,502
Energy tubular products	595,215	395,296	297,532
Steel distributors	468,720	471,205	283,579
	2,603,608	2,398,549	1,490,613
Other	11,638	13,953	13,201
	$  2,615,246	$  2,412,502	$  1,503,814
Segment Operating Profits
Metals service centers	$     115,218	$     209,413	$       37,567
Energy tubular products	53,977	47,200	13,764
Steel distributors	46,575	78,189	13,380
	215,770	334,802	64,711
Other income	2,385	4,565	4,002
Corporate expenses	(16,614)	(16,256)	(8,018)
	$     201,541	$     323,111	$       60,695
Capital Expenditures
Metals service centers	$       23,612	$       24,390	$       33,466
Energy tubular products	1,436	758	1,032
Steel distributors	188	71	77
Other	1,227	175	304
	$        26,463	$       25,394	$       34,879
Depreciation Expense
Metals service centers	$       15,049	$       14,817	$       12,575
Energy tubular products	981	1,108	1,126
Steel distributors	428	463	529
Other	1,245	938	910
	$       17,703	$       17,326	$       15,140
Identifiable Assets
Metals service centers	$     583,827	$     662,422	$     501,433
Energy tubular products	280,968	228,325	144,809
Steel distributors	138,119	192,383	71,436
Identifiable assets by segment	1,002,914	1,083,130	717,678
Assets not included in segments
Cash	47,055	634	19,008
Income tax assets	1,298	7,610	16,370
Deferred financing charges	7,240	8,357	3,547
Other assets	2,821	2,566	2,840
Corporate and other operating assets	33,855	44,184	31,176
Total assets	$  1,095,183	$  1,146,481	$      790,619

b)     Results by geographic segment:

($000)	2005	2004	2003
Segment Revenues
Canada	$  1,984,968	$  1,770,290	$  1,124,630
United States	618,640	628,259	365,983
	$  2,603,608	$  2,398,549	$  1,490,613
Segment Operating Profits
Canada	$     161,313	$     232,512	$       55,448
United States	54,457	102,290	9,263
	$     215,770	$     334,802	$       64,711
Identifiable Assets
Canada	$     839,401	$     903,019	$     580,955
United States	163,513	180,111	136,723
	$  1,002,914	$  1,083,130	$     717,678

14.      Pensions and Benefits

a)      The Company maintains defined benefit pension plans, post-retirement benefit plans and defined contribution pension plans in Canada and 401(k) defined contribution pension plans in the United States.  Actuarial valuations are performed on defined benefit plans every three years or earlier if required.  Three of the Company's plans were valued at December 31, 2005, eight of the Company's plans were valued at December 31, 2004, one plan was valued November 1, 2004, and four plans were valued at January 1, 2004.  All of the Company's pension plans have a measurement date of December 31, 2005.

The components of the Company's pension and benefit expense include the following:

($000)	2005	2004	2003
Defined benefit pension plans
Benefits earned during the year	$     1,761	$     1,505	$     1,538
Interest cost on benefit obligation	4,476	4,166	3,825
Expected return on plan assets	(4,191)	(3,952)	(3,353)
Curtailment loss	-	81	225
Settlement loss	-	225	648
Other	325	334	170
	2,371	2,359	3,053
Post-retirement benefits	376	12	112
Defined contribution plans
Paid during the year	792	808	794
	3,539	3,179	3,959
Related to discontinued operations	(244)	(230)	(462)
Pension and benefit expense	$     3,295	$     2,949	$     3,497

The actuarial determinations were based on the following assumptions in each year:

	2005	2004	2003
Assumed discount rate - year end	5.0%	6.0%	6.5%
Expected long-term rate of return on plan assets	7.0%	7.0%	7.0%
Rate of increase in future compensation	4.0%	4.0%	4.0%
Rate of increase in future government benefits	3.5%	3.5%	3.5%

The health care cost trend rates used were 5% for dental and 10% (2004: 8%; 2003: 9%) graded out for medical, which is reduced 1% per year until 5% and 5% thereafter.  A 1% change in trend rates would result in an increase in the accrued benefit obligation for post-retirement benefits of $742,000 or a decrease of $633,000 and an increase in net periodic cost of $45,000 or a decrease of $38,000.

b)      The following information pertains to the Company's defined benefit pension and other benefit plans, excluding those which are in the process of being wound up.

	Pension Plans		Other Benefit Plans
($000)	2005	2004	2005	2004
Reconciliation of accrued benefit obligation
Balance, beginning of the year	$   74,256	$   64,159	$     6,390	$      5,643
Current service cost	1,761	1,505	-	8
Participant contribution	317	327	-	-
Interest cost	4,476	4,166	371	355
Benefits paid	(5,434)	(3,347)	(396)	(377)
Plan amendments	590	312	-	-
Corporate restructuring giving rise to curtailment	-	81	-	(348)
Actuarial loss	11,881	7,053	507	1,109
Balance, end of the year	$   87,847	$   74,256	$     6,872	$      6,390
Reconciliation of fair value of plan assets
Balance, beginning of the year	$   59,832	$   56,335	$             -	$             -
Actual return of plan assets	7,982	3,156	-	-
Employer contributions	3,549	3,361	396	377
Employee contributions	317	327	-	-
Benefits paid	(5,434)	(3,347)	(396)	(377)
Balance, end of the year	$   66,246	$     9,832	$             -	$             -
Unamortized amounts
Funded status - (deficit)	$  (21,601)	$  (14,424)	$    (6,872)	$    (6,390)
Unrecognized prior service cost	851	315	-	-
Unamortized net actuarial loss	17,531	9,713	1,142	640
Accrued benefit liability	$    (3,219)	$    (4,396)	$    (5,730)	$    (5,750)

As at December 31, 2005, all the plans in the above table had an unfunded obligation.  On December 31, 2004, one of the Company's pension plans, included in the previous table, had a projected benefit obligation of $9.3 million, a fair value of plan assets of $9.5 million and a surplus of $0.2 million.  At December 31, 2004, the remaining plans had an unfunded obligation.  The closure of Lachine (see Note 4) resulted in a partial settlement and curtailment of one of the Company's plans.

In 2003, the Company acquired two pension plans as part of the Acier Leroux acquisition.  These plans had assets of $4.2 million and an accrued benefit obligation of $5.6 million as of the acquisition date.  The deficit in the plan of $1.4 million was included in the net assets acquired in the Leroux acquisition.

The other benefit plans represent obligations to retired employees of sold or closed businesses.  No active employees are entitled to post retirement benefits.

($000)	2005	2004
Defined contribution plans
Fair value of plan assets
Canadian plans	$     6,523	$     5,598
401(k) U.S. plans	22,916	19,149
	$   29,439	$   24,747

The Company has a number of plans in the process of being wound up that relate to previously discontinued operations with no further benefit obligation.  The resolution of the surplus may result in sharing arrangements with employees of those operations.  The fair value of the plan assets and surplus at December 31, 2005 is $2.8 million (2004: $2.7 million).

c)     As at December 31, 2005, approximately 43% of all pension plan assets were invested in equities, 30% in fixed income securities, and 27% in cash and cash equivalents.  The expected return on plan assets is based on the fair value of plan assets.  Management endeavours to have an asset mix of approximately 55% in equities, 40% in fixed income securities and 5% in cash and cash equivalents.  The investment policy allows up to 30% in cash and cash equivalents.  The volatility of the markets has caused management to invest a correspondingly greater percentage of the pension plan assets in cash and cash equivalents.  The plan assets are not invested in either derivatives or real estate assets.

The expected annual benefits to be paid from the plans are as follows:

	Pension	Other
($000)	Plans	Benefit Plans	Total
2006	$     4,079	$        352	$      4,431
2007	3,605	376	3,981
2008	3,762	399	4,161
2009	3,939	422	4,361
2010	4,158	442	4,600
2011 - 2015	25,064	2,438	27,502

As a result of a recent court decision, the Company may be subject to a surplus sharing arrangement on one of its pension plans as a result of a partial plan windup.  The timing and the amount of surplus subject to sharing is currently being reviewed by the Company.

The elements of defined benefit costs recognized in the year are as follows:

($000)	2005	2004
Current service costs	$   1,761	$   1,513
Interest on accrued benefit obligation	4,847	4,521
Actual return on assets	(7,982)	(3,156)
Actuarial loss on accrued benefit obligation	12,389	5,277
Curtailment	-	(267)
Settlement	-	225
Prior service costs	590	312
Elements of future benefit costs	11,605	8,425
Adjustments to recognize the long-term
nature of employee benefit costs:
Difference between expected and actual return on assets	3,791	(796)
Difference between actuarial losses recognized and
actuarial losses incurred	(12,113)	(5,206)
Difference between prior service costs recognized and
prior service costs incurred.	(536)	(52)
Defined benefit cost recognized	$   2,747	$   2,371

15.      Contingencies, Guarantees and Commitments

a)     The Company and certain of its subsidiaries have been named defendants in a number of legal actions. Although the outcome of these claims cannot be determined, management intends to defend all claims and has recorded provisions based on its best estimate of the potential losses.  In the opinion of management the resolution of these matters is not expected to have a materially adverse effect on the Company's financial position, cash flows or operations.

b)     The Company and its subsidiary companies have operating lease commitments, with varying terms, requiring approximate annual payments as follows:  2006: $10.2 million; 2007: $8.5 million; 2008: $6.2 million; 2009: $5.6 million ; 2010: $4.6 million; 2011 and beyond: $7.5 million.  Rental expense on operating leases was as follows:  2005:  $11.1 million, 2004:  $13.6 million and 2003: $10.1 million.

c)     The Company is incurring site cleanup and restoration costs related to properties not utilized in current operations.  Remedial actions are currently underway at three sites.  The estimated costs of these cleanups have been provided for based on management's best estimates.  Additional costs may be incurred at these or other sites as site cleanup and restoration progress, but the amounts cannot be quantified at this time.

d)     The Company has also entered into other agreements that provide indemnifications to counterparties in certain transactions including underwriting agreements.  These indemnifications generally require the Company to indemnify the counterparties for costs incurred as a result of losses from litigation that may be suffered by counterparties arising from those transactions.  The Company does not expect to make a payment on these indemnifications and, accordingly, no liability has been accrued.

16.      United States Generally Accepted Accounting Principles

The following table represents the differences between Canadian and U.S. Generally Accepted Accounting Principles (GAAP):

($000)	2005	2004	2003
Net earnings for the year under Canadian GAAP	$  124,716	$  177,846	$    18,499
Amortization of transitional obligation - pensions	(561)	(561)	(561)
Net earnings - U.S. GAAP	124,155	177,285	17,938
Change in other comprehensive income items:
Currency translation adjustment, net of tax	(2,853)	(4,862)	909
Fair value of derivatives, net of tax	(4,136)	(5,196)	-
Unrealized gain in available for sale securities	-	(262)	262
Minimum pension liability, net of tax	(3,758)	(599)	1,395
Comprehensive earnings - U.S. GAAP	$  113,408	$  166,366	$    20,504
Opening retained earnings and comprehensive earnings
- U.S. GAAP	$  249,650	$  108,899	$  102,250
Dividends on common shares	(45,434)	(25,004)	(11,605)
Dividends on preferred shares	-	(611)	(2,250)
Comprehensive earnings - U.S. GAAP	113,408	166,366	20,504
Closing retained earnings and comprehensive earnings
- U.S. GAAP	317,624	249,650	108,899
Common shares	208,139	203,090	147,981
Contributed surplus	1,091	446	192
Shareholders' equity - U.S. GAAP	$  526,854	$  453,186	$  257,072
Basic earnings per common share - U.S. GAAP
- continuing operations	$        2.46	$        3.68	$        0.41
Fully diluted earnings per common share - U.S. GAAP
- continuing operations	$        2.41	$        3.60	$       0.39
Basic earnings per common share - U.S. GAAP	$        2.46	$        3.63	$       0.39
Fully diluted earnings per common share - U.S. GAAP	$        2.41	$        3.55	$       0.37

a)     In 1999, for Canadian GAAP purposes, the Company retroactively adopted CICA Handbook section 3461, Employee Future Benefits, and recorded a cumulative charge to retained earnings in connection with the re-measurement of its pension obligations.  Under U.S. GAAP, an actuarial loss was recognized upon the re-measurement of the pension obligations, which is being amortized to net income using the corridor approach, over the expected average service lives of the employee group.  In addition, the U.S. standard requires the recognition of an additional minimum pension liability.  Five of the Company's plans and one executive arrangement have a minimum liability, which has been charged to other comprehensive income under U.S. GAAP.

b)      Other cumulative comprehensive income also includes changes in the cumulative translation account, which represents a reduction in the Company's shareholders' equity and represents unrealized translation adjustments that arise on the translation to Canadian dollars of U.S. denominated assets and liabilities.  The Company has designated certain U.S. denominated debt as a hedge of its net investment in these U.S. subsidiaries (Note 12).  The change in the cumulative exchange account relating to debt designated as a hedge of the Company's net investment in its foreign subsidiaries is a gain of $2.8 million in 2005 (2004 gain: $14.1 million; 2003 gain: $25.1 million).  Under Canadian GAAP, these amounts are included in the cumulative translation adjustment component of shareholders' equity.

Under Canadian GAAP, certain financial instruments qualify as a hedge for accounting purposes and therefore any gains and losses on these contracts are recognized in income when the hedged item affects earnings.  Under U.S. GAAP, all derivative instruments must be recognized on the balance sheet at fair value.  The Company has designated its fixed for fixed cross currency swaps and other forward contracts as hedges.  The effective portion of the changes in fair value of these instruments is accumulated in other comprehensive income and is released from other comprehensive income when the hedged item affects earnings.  As at December 31, 2005, the fair value of the fixed for fixed swaps not included in Other Accrued Liabilities was $14.6 million (2004: $8.0 million) net of tax of $4.5 million (2004: $2.8 million).  As at December 31, 2005, the fair value of the forward contracts, net of tax, was $0.1 million (2004: $nil).

c)     As at December 31, 2003, the Company had certain available-for-sale securities that are recorded at the lower of cost or market for Canadian accounting standards and marked to market through other comprehensive income in the amount of $262,000, net of tax of $141,000 as required by U.S. standards.  These securities were sold in 2004.

d)     In March 2005, the FASB issued FIN 47, Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143 (FIN 47), which requires an entity to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liability's fair value can be reasonably estimated.  FIN 47 was adopted by the Company during the year.  The adoption of this standard did not have a material effect on the Company's results of operations, financial position or cash flows.

e)     During 2004, the Company adopted FASB FIN 46, Consolidation of Variable Interest Entities.  The adoption of this standard did not have a material effect on the Company's results of operations, financial position or cash flows.

f)     During 2003, the Company adopted SFAS 143, Accounting for Asset Retirement Obligations; SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets; SFAS 148, Accounting for Stock-based Compensation, Transition and Disclosure; and EITF 02-16, Accounting by a Customer for Certain Consideration Received from a Vendor.  The implementation of these standards did not differ materially from the corresponding Canadian standards except that the Company adopted the Canadian Asset Retirement Obligation standard January 1, 2004.

g)     In December 2004, FASB issued Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004).  Share-Based Payments, or SFAS 123R.  SFAS 123R applies to all awards granted after the required effective date and to awards modified, repurchased, or cancelled after that date.  SFAS 123R will be effective in the Company's fiscal year ending December 31, 2006.  In March 2005, the SEC Staff issued Staff Accounting Bulletin No. 107 (SAB 107) to give guidance on the implementation of SFAS 123R.  The Company utilizes the fair value-based approach to account for stock-based compensation and is currently evaluating the impact of these standards on the Company's consolidated financial statements.

EX-99

EXHIBIT 1

Independent Registered Chartered Accountants' Consent

We consent to the use of our report dated January 30, 2006 on the consolidated balance sheets of Russel Metals Inc. as at December 31, 2005 and 2004 and the consolidated statements of earnings and retained earnings and of cash flows for each of the years in the three-year period ended December 31, 2005, appearing in this Annual Report on Form 40-F of Russel Metals Inc. for the year ended December 31, 2005.

/s/ Deloitte and Touche LLP

Independent Registered Chartered Accountants

Toronto, Ontario
January 30, 2006

EX-99

EXHIBIT 31
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Edward M. Siegel, Jr. certify that:
1. I have reviewed this annual report on Form 40-F of Russel Metals Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a -15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management over financial reporting or other employees who have a significant role in the registrant's internal control over financial reporting.
	/s/ Edward M. Siegel, Jr.
Dated: February 27, 2006	Edward M. Siegel, Jr.
	President and Chief Executive Officer

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brian R. Hedges, certify that:
1. I have reviewed this annual report on Form 40-F of Russel Metals Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a -15(e) and 15(d)-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management over financial reporting or other employees who have a significant role in the registrant's internal control over financial reporting.
	/s/ Brian R. Hedges
Dated:  February 27, 2006	Brian R. Hedges
	Executive Vice President &
	Chief Financial Officer

EX-99

EXHIBIT 32

CERTIFICATION OF CEO AND CFO PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Russel Metals Inc. (the "Company") on Form 40-F for the year ended December 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Edward M. Siegel, Jr., as the President and Chief Executive Officer of the Company and Brian R. Hedges, as the Executive Vice President and Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

1.     The Report fully complies with the requirements of Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934; and

2.     The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.

	/s/ Edward M. Siegel, Jr.
Dated: February 27, 2006	Edward M. Siegel, Jr.
	President and Chief Executive Officer
	/s/ Brian R. Hedges
Dated: February 27, 2006	Brian R. Hedges
	Executive Vice President
	& Chief Financial Officer
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.