SCHUFF STEEL CO, 424B1, 1997-07-01

SCHUFF STEEL CO
424B1, 1997-07-01
CONSTRUCTION - SPECIAL TRADE CONTRACTORS

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<PAGE> 1
Filed Pursuant to Rule 424(b)(1)
Reg No. 333-26711

2,000,000 SHARES

[SCHUFF LOGO] SCHUFF STEEL COMPANY [SCHUFF LOGO]

COMMON STOCK

------------------------

All of the 2,000,000 shares of common stock, $.001 par value per share (the
"Common Stock"), offered hereby are being sold by Schuff Steel Company (the
"Company"). Prior to this offering, there has been no public market for the
Common Stock of the Company. The Common Stock has been approved for quotation on
the Nasdaq National Market under the symbol "SHUF." See "Underwriting" for
factors considered in determining the initial public offering price.

SEE "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
=================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS(1) COMPANY(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share...................... $8.00 $0.56 $7.44
- -------------------------------------------------------------------------------------------------
Total(3)....................... $16,000,000 $1,120,000 $14,880,000
=================================================================================================
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act of 1933, as amended, in connection with
this offering. See "Underwriting."

(2) Before deducting expenses of this offering payable by the Company estimated
at $675,000, including a fee payable to the Company's financial consultant.
See "Underwriting."

(3) The Company has granted the Underwriters a 30-day option to purchase up to
300,000 additional shares of Common Stock on the same terms and conditions
as the securities offered hereby solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions, and Proceeds to Company will be $18,400,000,
$1,288,000, and $17,112,000, respectively. See "Underwriting."

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them and subject to
certain other conditions including the right of the Underwriters to withdraw,
cancel, modify or reject any order in whole or in part. It is expected that
delivery of the shares will be made against payment therefor on or about July 7,
1997.

------------------------

PRINCIPAL FINANCIAL SECURITIES, INC. CRUTTENDEN ROTH
INCORPORATED

The date of this Prospectus is June 30, 1997
<PAGE> 2

[Photos depicting various construction projects of the Company]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT AND OTHER STABILIZING TRANSACTIONS. SUCH TRANSACTIONS
MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, THE OVER-THE-COUNTER MARKET OR
OTHERWISE. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

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<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the detailed
information and Consolidated Financial Statements, including the Notes thereto,
appearing elsewhere in this Prospectus. Except as otherwise specified, all
information in this Prospectus: (i) gives effect to the redomestication merger
of the Company's predecessor Arizona corporation with and into the Company and
the exchange of 50,000 shares of Common Stock for each then issued and
outstanding share of common stock of the predecessor corporation pursuant to
such merger; (ii) gives effect to the revocation of the Company's subchapter S
election immediately prior to the closing of this offering; and (iii) assumes no
exercise of either the over-allotment option granted to the Underwriters or
currently outstanding stock options granted by the Company. Except as otherwise
specified, all references herein to the "Company" or "Schuff" include Schuff
Steel Company, a Delaware corporation, its subsidiary, and its predecessor
Arizona corporation.

THE COMPANY

Schuff Steel Company is a rapidly growing steel fabrication and erection
firm that provides a fully integrated range of steel construction services.
Schuff operates primarily in the southwestern United States with a concentration
in Arizona, Nevada and southern California, and has recently expanded its
operations into South America and Mexico. The Company is the largest steel
fabrication and erection firm serving the Arizona industrial and commercial
markets, a position it recently enhanced with the 1997 acquisition of B&K Steel
Fabrications, Inc. ("B&K Steel"). The Company also believes that it is the
leading steel fabricator and erector for the hotel and casino industry in
Nevada. Engineering News Record ranked the Company as the second largest steel
erection subcontractor in the United States based upon 1995 revenues and as the
largest steel erection subcontractor in the United States based upon 1994
revenues.

Schuff has achieved significant growth in revenues and pre-tax income over
the past five years. Revenues have more than doubled from $47.0 million in 1992
to $103.9 million ($113.3 million giving pro forma effect to the 1997 B&K Steel
acquisition) in 1996. During that same period, pre-tax income has grown at a
compound annual growth rate of 101.5%, from $610,000 in 1992 to $10.1 million in
1996.

The Company seeks to differentiate itself from its competitors by providing
a fully integrated range of steel construction services, including engineering,
detailing, fabrication and erection, and by providing a level of service and
expertise necessary to accommodate large, fast track projects. The Company
believes that there is an increasing trend in the industry to design and build
projects according to accelerated time schedules. With many projects, only a
portion of the detail design drawings are completed when construction begins.
The remaining drawings are completed, with numerous design changes being
implemented, throughout the construction process. The fast track,
"design-as-you-go" nature of these projects creates a demand for integrated
contractors that can (i) reduce the logistical and coordination problems
inherent in using multiple subcontractors and (ii) more efficiently respond to
rapid and multiple design changes while minimizing the project delays and cost
overruns commonly associated with such changes. The complexity and size of these
projects are particularly suited to contractors with extensive financial and
operational capabilities. The Company believes that it has gained a reputation
in the industry as a reliable, fully integrated provider of engineering,
detailing, fabrication and erection services with the ability to complete large,
complex projects on a timely, cost efficient basis.

The Company has provided its integrated fabrication and erection services
to a wide variety of projects, including hotels and casinos, office complexes,
hospitals, mining facilities, manufacturing plants, shopping malls, sports
stadiums, large diameter water pipes, and other public works projects. Examples
of major projects include: Bank One Ballpark, a baseball stadium featuring a
fully retractable steel roof being constructed for Major League Baseball's
Arizona Diamondbacks franchise; Agua Fria Siphon Project, an aqueduct system
with over two miles of specially fabricated 21 foot diameter pipe; MGM Grand
Hotel & Casino in Las Vegas, the world's largest hotel and casino; Intel Corp.'s
Fab 12 Plant, one of the largest semiconductor manufacturing plants in the
United States; and Bajo de la Alumbrera in Argentina, one of the largest copper
mines in the world.

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<PAGE> 4

The Company believes that the steel fabrication and erection industry is
highly fragmented and that many of its competitors are small businesses that
offer limited services or confine operations to local or regional markets. Given
the trend toward the use of fully integrated contractors, the Company believes
the industry may experience consolidation and that it is well positioned to take
advantage of potential acquisition opportunities.

BUSINESS STRATEGY

The Company's objective is to achieve and maintain a leading market
position in each of its geographic and specific product markets. The Company
seeks to achieve this objective by pursuing the following business strategies:
(i) promoting its ability to provide a fully integrated range of engineering,
detailing, fabrication and erection services, which enables the Company to
compete more effectively on large, complex, fast track, "design-as-you-go"
projects; (ii) focusing its engineering, detailing, fabrication and erection
expertise on distinct product segments requiring unique or innovative
techniques, where the Company typically experiences less competition; (iii)
diversifying its construction projects across a wide range of commercial,
industrial and specialty projects; and (iv) offering in-house project management
and engineering expertise not typically provided by steel fabricators or
erectors, which facilitates the Company's ability to procure contracts for
large, more complicated projects.

GROWTH STRATEGY

The Company seeks to achieve continued growth and diminish the impact of
business and economic cycles by pursuing the following strategies: (i) promoting
growth internally by adding sales and marketing personnel dedicated to fast
growing markets, further developing its engineering and design capabilities and
fabrication capacity, and continually updating its fabrication and detailing
equipment and technologies; (ii) capitalizing on the highly fragmented nature of
the steel fabrication and erection industry by pursuing selective acquisitions
of companies that offer the Company increased plant facilities, opportunities to
increase market share in selected geographic markets, penetration of new product
market segments and access to domestic and international markets targeted by the
Company for geographic expansion; (iii) pursuing additional project
opportunities by continuing to diversify into new geographic and product
markets, leveraging its existing relationships with key national and
multi-national general contractors and other customers, and establishing new
strategic alliances; and (iv) expanding its international operations by pursuing
opportunities in South America, Mexico and Southeast Asia.

The Company was incorporated in Arizona in 1976 and reincorporated under
the laws of Delaware in 1997. The Company's principal executive offices are
located at 420 South 19th Avenue, Phoenix, Arizona 85009, and its telephone
number is (602) 252-7787.

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<PAGE> 5

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered........................ 2,000,000 shares(1)
Common Stock to be outstanding immediately
after this offering....................... 7,000,000 shares(1)
Use of proceeds............................. Purchase of specialized equipment, funding
of the subchapter S distribution to the
Company's present stockholders, and general
corporate and working capital purposes. See
"Use of Proceeds" and "S Corporation
Distribution."
Nasdaq National Market symbol............... "SHUF"
</TABLE>

- ---------------
(1) Excludes 300,000 shares of Common Stock that may be sold by the Company upon
exercise of the Underwriters' over-allotment option. Also excludes 345,500
shares of Common Stock issuable upon exercise of stock options outstanding
under the Company's 1997 Stock Option Plan with an exercise price of $5.00
per share, and 22,500 shares of Common Stock issuable upon exercise of stock
options to be granted to the Company's non-employee directors upon their
appointment to the Board of Directors at the closing of this offering at an
exercise price equal to the initial public offering price. See "Management,"
"Description of Capital Stock" and "Underwriting."

RISK FACTORS

Prospective purchasers of Common Stock should carefully consider all of the
information contained in this Prospectus, particularly each of the factors set
forth herein under "Risk Factors" beginning on page 8. Among other matters, the
Company has experienced, and is expected to continue to experience, variations
in quarterly and annual results of operations. Factors that may affect these
results include, among other things, the timing and terms of major contract
awards and the starting and completion dates of projects. Based upon its current
backlog and project schedules, the Company anticipates that pre-tax income for
the second and third quarters of 1997 will be lower than recorded for the same
periods of 1996, and revenues for the third quarter of 1997 may be lower than
the same period of 1996. In this regard, the Company received a number of large
contract awards in late 1995 that positively impacted 1996 results, particularly
the third quarter of 1996. Other risk factors include the Company's utilization
of fixed price contracts, its dependence on the building construction industry
and subcontractors, the renewal of collective bargaining agreements, revenue and
cost adjustments under the percentage of completion accounting method, the
geographic concentration of the Company's operations, variations in backlog,
operating risks and litigation associated with construction activities,
compliance with laws and permitting requirements and other factors.

5
<PAGE> 6

SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following table sets forth selected summary financial data as of the
dates and for the periods indicated. The historical financial data for each year
in the five-year period ended December 31, 1996 are derived from the audited
financial statements of the Company. The quarterly periods reflect unaudited
results of the Company, which, in the opinion of management, reflect all
adjustments, consisting only of normal recurring adjustments, necessary to
fairly present the Company's financial position and results of operations for
the periods presented. The results for any interim period are not necessarily
indicative of results to be expected for a full fiscal year. See "Risk
Factors -- Fluctuating Quarterly Results of Operations." The following table
also sets forth unaudited pro forma financial information for each period that
gives effect to the revocation of the Company's S corporation status. The
following data should be read in conjunction with, and are qualified by
reference to, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Company's Consolidated Financial Statements and
Notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------ ------------------
1992 1993 1994 1995 1996(1) 1996 1997
------- ------- ------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT
DATA:
Revenues...................... $46,991 $58,640 $68,199 $62,090 $103,912 $ 10,410 $25,507
Cost of revenues.............. 41,752 50,376 58,874 54,222 86,998 8,418 21,655
------- ------- ------- ------- ------- -------- -------
Gross profit................ 5,239 8,264 9,325 7,868 16,914 1,992 3,852
General and administrative
expenses.................... 4,102 4,367 4,915 5,284 6,715 1,357 2,081
------- ------- ------- ------- ------- -------- -------
Operating income............ 1,137 3,897 4,410 2,584 10,199 635 1,771
Interest expense.............. (583) (627) (718) (752) (452) (147) (95)
Other income.................. 56 60 67 618 303 52 96
------- ------- ------- ------- ------- -------- -------
Income before income tax.... 610 3,330 3,759 2,450 10,050 540 1,772
Pro forma income taxes(2)..... 245 1,330 1,500 980 4,020 215 710
------- ------- ------- ------- ------- -------- -------
Pro forma net income(2)..... $ 365 $ 2,000 $ 2,259 $ 1,470 $ 6,030 $ 325 $ 1,062
======= ======= ======= ======= ======= ======== =======
Pro forma net income per
share(2).................... $ 0.99 $ 0.17
Shares used in
computation(3).............. 6,071 6,071

OTHER DATA:
Backlog(4).................... $34,466 $18,387 $22,544 $80,834 $ 67,335 $126,061 $65,550
</TABLE>

<TABLE>
<CAPTION>
AS OF MARCH 31,
----------------------
1997 PRO
1997 FORMA AS
SELECTED BALANCE SHEET DATA: ACTUAL ADJUSTED(5)
-------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital, including
current portion of long
term debt................. $ 5,700 $ 4,804 $ 8,498 $ 7,965 $ 8,476 $ 8,598 $16,103
Total assets................ 22,681 25,387 26,244 25,260 43,969 48,160 55,665
Long term debt, excluding
current portion........... 3,720 3,806 7,057 5,271 2,753 2,777 2,777
Stockholders' equity........ 4,256 5,320 6,032 6,768 10,682 11,436 18,941
</TABLE>

6
<PAGE> 7

- ---------------
(1) Does not give effect to the Company's acquisition of B&K Steel on January
31, 1997, which was accounted for under the purchase method of accounting.
Accordingly, financial information relating to B&K Steel has not been
included in periods prior to the acquisition. Giving effect to the
acquisition of B&K Steel, as if it had occurred on January 1, 1996, the
Company's pro forma and unaudited revenues, gross profit, income before
income taxes, pro forma net income (after pro forma income taxes), and pro
forma net income per share would have been $113,291,000, $18,097,000,
$10,165,000, $6,099,000, and $1.00, respectively.

(2) Prior to this offering, the Company elected to be treated as an S
corporation under the Internal Revenue Code of 1986, as amended (the
"Code"). As an S corporation, the Company was not subject to income taxes.
Pro forma net income reflects the provision for income taxes that would have
been recorded had the Company been subject to income taxes as a C
corporation for all periods, assuming an effective tax rate of 40%. Pro
forma net income does not include credits of $300,000 to income to be
recorded upon revocation of the Company's subchapter S election. See "S
Corporation Distribution" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

(3) Shares used in the computation of pro forma net income per share are based
upon a weighted average number of common shares and common stock equivalents
outstanding during each year. In accordance with Securities and Exchange
Commission Staff Accounting Bulletin (SAB) Number 83, all issuances of the
Company's common stock options at prices below the expected initial public
offering price during the twelve-month period preceding the proposed
offering have been treated as common stock equivalents as if they had been
issued at the Company's inception using the treasury stock method. In
addition, in accordance with SAB Number 55, common stock equivalents include
the number of shares expected to be issued in the proposed offering for
which the net offering proceeds will be used to make stockholder
distributions.

(4) Backlog is the amount of potential future revenues to be recognized upon
performance of contracts awarded to the Company. Backlog increases as new
contract commitments are received, decreases as revenues are recognized, and
increases or decreases to reflect modifications in the work to be performed
under a contract. Of the Company's $67.3 million backlog as of December 31,
1996, approximately $13.1 million was attributable to three projects for a
single customer in Las Vegas, Nevada, and approximately $34.3 million was
attributable to the Bank One Ballpark project in Phoenix, Arizona. Of the
Company's $65.6 million backlog at March 31, 1997, approximately $15.9
million was attributable to two projects for a single customer in Las Vegas,
and approximately $26.8 million was attributable to the Bank One Ballpark
project. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business -- Backlog."

(5) Gives effect to (i) the sale of the 2,000,000 shares of Common Stock by the
Company offered hereby and the application of the estimated net proceeds
therefrom, including payment of the $7.0 million S Corporation Distribution
and (ii) an increase to stockholders' equity to reflect the recognition of a
deferred tax asset, and corresponding credit to income, in the amount of
$300,000 upon revocation of the Company's S corporation election. See "Use
of Proceeds," "S Corporation Distribution," "Capitalization" and Note 1 to
Consolidated Financial Statements.

7
<PAGE> 8

RISK FACTORS

Investment in the Common Stock offered hereby involves certain risks. In
addition to the other information included elsewhere in this Prospectus,
prospective investors should give careful consideration to the following factors
before purchasing shares of the Common Stock offered hereby.

FLUCTUATING QUARTERLY RESULTS OF OPERATIONS

The Company has experienced, and in the future is expected to continue to
experience, substantial variations in its results of operations as a result of a
number of factors, many of which are outside the Company's control. In
particular, the Company's operating results may vary because of downturns in one
or more segments of the building construction industry, changes in economic
conditions, the Company's failure to obtain, or delays in awards of, major
projects, the cancellation of major projects, the Company's failure to timely
replace projects that have been completed or are nearing completion, or declines
in the amount of the Company's billings in excess of costs and recognized
earnings on uncompleted projects. Any of these factors could result in the
periodic inefficient or underutilization of the Company's resources and could
cause the Company's operating results to fluctuate significantly from period to
period, including on a quarterly basis. Based upon its current backlog and
project schedules, the Company anticipates that pre-tax income for the second
and third quarters of 1997 will be lower than recorded for the same periods of
1996, and revenues for the third quarter of 1997 may be lower than the same
period of 1996. In this regard, the Company received a number of large contract
awards in late 1995 that positively impacted 1996 results, particularly the
third quarter of 1996.

LARGE FIXED PRICE CONTRACTS

Of the Company's $65.6 million backlog at March 31, 1997, approximately
$62.1 million (95%) consisted of projects being performed on a fixed price
basis. In bidding on projects, the Company estimates its costs, including
projected increases in costs of labor, material and services. Despite these
estimates, costs and gross profit realized on a fixed price contract may vary
from estimated amounts because of unforeseen conditions or changes in job
conditions, variations in labor and equipment productivity over the terms of
contracts, higher than expected increases in labor or material costs and other
factors. These variations could have a material adverse effect on the Company's
business, financial condition and results of operations for any period. See
"Business -- Contracting Methods and Performance Bonding."

DEPENDENCE ON CONSTRUCTION INDUSTRY

The Company earns virtually all of its revenues in the building
construction industry, which is subject to local, regional and national economic
cycles. The Company's revenues and cash flows depend to a significant degree on
major construction projects in various industries, including the hotel and
casino, retail shopping, health care, mining, computer chip manufacturing,
public works and other industries, each of which industries may be adversely
affected by general or specific economic conditions. If construction activity
declines significantly in the Company's principal markets, the Company's
business, financial condition and results of operations would be adversely
affected.

DEPENDENCE ON SUBCONTRACTORS

The Company routinely relies on subcontractors to perform a significant
portion of its fabrication and project detailing to fulfill projects that the
Company cannot fulfill in-house due to capacity constraints or that are in
markets in which the Company has not established a strong local presence. With
respect to these projects, the Company's success depends on its ability to
retain and successfully manage these subcontractors. Any difficulty in
attracting and retaining qualified subcontractors on terms and conditions
favorable to the Company could have an adverse effect on the Company's ability
to complete these projects in a timely and cost effective manner.

UNION CONTRACTS

The Company currently is a party to a number of collective bargaining
agreements with various unions representing the Company's fabrication and
erection employees. These contracts expire or are subject to

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<PAGE> 9

expiration at various times in the future. The inability of the Company to renew
such contracts could result in work stoppages and other labor disturbances,
which could disrupt the Company's business and adversely affect the Company's
results of operations. See "Business -- Employees."

PERCENTAGE OF COMPLETION ACCOUNTING

The Company recognizes revenues using the percentage of completion
accounting method. Under this method, revenues are recognized based on the ratio
that costs incurred to date bear to the total estimated costs to complete the
project. Estimated losses on contracts are recognized in full when the Company
determines that a loss will be incurred. The Company frequently reviews and
revises revenues and total cost estimates as work progresses on a contract and
as contracts are modified. Accordingly, revenue adjustments based upon the
revised completion percentage are reflected in the period that estimates are
revised. Although revenue estimates are based upon management assumptions
supported by historical experience, these estimates could vary materially from
actual results. To the extent percentage of completion adjustments reduce
previously reported revenues, the Company would recognize a charge against
operating results, which could have a material adverse effect on the Company's
results of operations for the applicable period. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Introduction."

GEOGRAPHIC CONCENTRATION

The Company's fabrication and erection operations currently are conducted
primarily in Arizona and Nevada, states in which the construction industry has
experienced substantial growth during recent years. Of the $103.9 million in
revenues earned by the Company in 1996, the Company estimates that approximately
$66.5 million, or 64.0%, of those revenues were related to projects in Arizona
and Nevada. Because of this concentration, future construction activity and the
Company's business may be adversely affected in the event of a downturn in
economic conditions existing in Arizona and Nevada and in the southwestern
United States generally. Factors that may affect economic conditions include
increases in interest rates or limitations in the availability of financing for
construction projects, decreases in the amount of funds budgeted for
governmental projects, decreases in capital expenditures devoted to the
construction of plants, distribution centers, industrial facilities, hotels and
casinos, convention centers and other facilities, the prevailing market prices
of copper, gold and other metals that impact related mining activity, and
downturns in occupancy rates, office space demand, tourism and convention
related activity and population growth. See "Business -- Primary Markets and
Products."

VARIATIONS IN BACKLOG

The Company's backlog can be significantly affected by the receipt, or
loss, of individual contracts. For example, approximately 40.9% of the Company's
$65.6 million backlog at March 31, 1997 was attributable to the Bank One
Ballpark project in Phoenix, Arizona. In the event one or more large contracts
were terminated or their scope reduced, the Company's backlog would decrease
substantially. The Company's future business and results of operations may be
adversely affected if it is unable to replace significant contracts when lost or
completed, or if it otherwise fails to maintain a sufficient level of backlog.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Backlog."

OPERATING RISKS; LITIGATION

Construction and heavy steel plate weldments involve a high degree of
operational risk. Natural disasters, adverse weather conditions, design,
fabrication and erection errors and work environment accidents can cause death
or personal injury, property damage and suspension of operations. The occurrence
of any of these events could result in loss of revenues, increased costs, and
liability to third parties. The Company is subject to litigation claims in the
ordinary course of business, including lawsuits asserting substantial claims.
Currently, the Company does not maintain any reserves for its ongoing
litigation, and expenses litigation costs as incurred. The Company periodically
reviews the need to maintain a litigation reserve. The Company maintains risk
management, insurance, and safety programs intended to prevent or mitigate
losses. There can be no assurance that any of these programs will be adequate or
that the Company will be able to maintain adequate insurance in the future at
rates that it considers reasonable. See "Business -- Legal Proceedings and
Insurance."

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RISKS OF INTERNATIONAL OPERATIONS

The Company is expanding into international markets, with approximately
13.7% of its revenues in 1996 relating to projects outside the United States.
The Company's international operations are subject to certain political,
economic and other uncertainties, including risks of war, nationalization of
assets, renegotiation or nullification of existing contracts, changing political
conditions, changing laws and policies affecting trade and investment, and
overlap of different tax structures. Although the Company currently attempts to
limit its exposure to currency fluctuations by dealing solely in United States
dollars, there can be no assurance that the Company's international operations
will escape the risks of fluctuating currency values, hard currency shortages,
or controls on currency exchange.

COMPETITION

Many small and various large companies offer fabrication, erection and
related services that compete with those provided by the Company. Local and
regional companies offer competition in one or more of the Company's geographic
markets or product segments. Out of state or international companies may provide
competition in any market. The Company competes for every project it obtains.
Although the Company believes customers consider, among other things, the
availability and technical capabilities of equipment and personnel, efficiency,
safety record and reputation, price competition usually is the primary factor in
determining which qualified contractor with available equipment is awarded a
contract. Competition has resulted in pressure on pricing and operating margins,
and the effects of competitive pressure in the industry may continue. Some of
the Company's competitors have greater capital and other resources than the
Company and are well established in their respective markets. There can be no
assurance that the Company's competitors will not substantially increase their
commitment of resources devoted to competing aggressively with the Company or
that the Company will be able to compete profitably with its competitors.

SUBSTANTIAL LIQUIDITY REQUIREMENTS

The Company's operations require significant amounts of working capital to
procure materials for contracts to be performed over relatively long periods,
and for purchases and modifications of heavy-duty and specialized fabrication
equipment. In addition, the Company's contract arrangements with customers
sometimes require the Company to provide payment and performance bonds and, in
selected cases, letters of credit, to partially secure the Company's obligations
under its contracts, which may require the Company to incur significant
expenditures prior to receipt of payments. Furthermore, the Company's customers
often will retain a portion of amounts otherwise payable to the Company during
the course of a project as a guarantee of completion of that project. To the
extent the Company is unable to receive project payments in the early stages of
a project, the Company's cash flow would be reduced, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis and Results of
Operations -- Liquidity and Capital Resources."

NO ASSURANCE OF SUCCESSFUL ACQUISITIONS

The Company intends to consider acquisitions of and alliances with other
companies in its industry that could complement the Company's business,
including the acquisition of entities in diverse geographic regions and entities
offering greater access to industries and markets not currently served by the
Company. There can be no assurance that suitable acquisition or alliance
candidates can be identified or, if identified, that the Company will be able to
consummate such transactions. Further, there can be no assurance that the
Company will be able to integrate successfully any acquired companies into its
existing operations, which could increase the Company's operating expenses.
Moreover, any acquisition by the Company may result in potentially dilutive
issuances of equity securities, incurrence of additional debt and amortization
of expenses related to goodwill and intangible assets, all of which could
adversely affect the Company's profitability. Acquisitions involve numerous
risks, such as diverting attention of the Company's management from other
business concerns, the entrance of the Company into markets in which it has had
no or only limited experience and the potential loss of key employees of the
acquired company, any of which could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- Growth Strategy."

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<PAGE> 11

DEPENDENCE UPON KEY PERSONNEL

The Company's success depends on the continued services of the Company's
senior management and key employees as well as the Company's ability to attract
additional members to its management team with experience in the steel
fabrication and erection industry. Although the Company has implemented a stock
option plan designed to retain key management and other employees, and believes
that it offers competitive compensation to such personnel, the Company is not a
party to any employment agreements with its management personnel or other key
employees. The unexpected loss of the services of any of the Company's
management or other key personnel, or its inability to attract new management
when necessary, could have a material adverse effect upon the Company. See
"Management."

POTENTIAL ENVIRONMENTAL LIABILITY

The Company's operations and properties are affected by numerous federal,
state and local environmental protection laws and regulations, such as those
governing discharges to air and water and the handling and disposal of solid and
hazardous wastes. Compliance with these laws and regulations has become
increasingly stringent, complex and costly. There can be no assurance that such
laws and regulations or their interpretation will not change in a manner that
could materially and adversely affect the Company. Certain environmental laws,
such as the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") and its state law counterparts, provide for strict and joint and
several liability for investigation and remediation of spills and other releases
of toxic and hazardous substances. These laws may apply to conditions at
properties currently or formerly owned or operated by an entity or its
predecessors, as well as to conditions at properties at which wastes or other
contamination attributable to an entity or its predecessors come to be located.
Although the Company has not incurred any material environmental related
liability in the past and believes that it is in material compliance with
environmental laws, there can be no assurance that the Company, or entities for
which it may be responsible, will not incur such liability in connection with
the investigation and remediation of facilities it currently operates (or
formerly owned or operated) or other locations in a manner that could materially
and adversely affect the Company. See "Business -- Environmental Regulation."

GOVERNMENTAL REGULATION

Many aspects of the Company's operations are subject to governmental
regulations in the United States and in other countries in which the Company
operates, including regulations relating to occupational health and workplace
safety, principally the Occupational Safety and Health Act and regulations
thereunder. In addition, the Company is subject to licensure and holds or has
applied for licenses in each of the states in the United States in which it
operates and in certain local jurisdictions within such states. Although the
Company believes that it is in material compliance with applicable laws and
permitting requirements, there can be no assurance that it will be able to
maintain this status. Further, the Company cannot determine to what extent
future operations and earnings of the Company may be affected by new
legislation, new regulations or changes in or new interpretations of existing
regulations. See "Business -- Governmental Regulation."

CONTROL BY MAJORITY STOCKHOLDERS; ABILITY TO ISSUE PREFERRED STOCK

Upon completion of this offering, Mr. David A. Schuff, the Company's
Chairman and co-founder, and Mr. Scott A. Schuff, the Company's President, Chief
Executive Officer, co-founder and a member of its Board of Directors,
collectively will control the voting of approximately 71.4% of the outstanding
Common Stock. As a result, these individuals will control the vote on all
matters requiring approval of the stockholders, including causing or restricting
the sale or merger of the Company. In addition, the Company's Certificate of
Incorporation authorizes the Company to issue shares of "blank check" preferred
stock, the designation, number, voting powers, preferences, and rights of which
may be fixed or altered from time to time by the Board of Directors.
Accordingly, the Board of Directors has the authority, without stockholder
approval, to issue preferred stock with rights that could adversely affect the
voting power or other rights of the holders of the Common Stock. See
"Management," "Principal Stockholders" and "Description of Capital Stock --
Preferred Stock."

11
<PAGE> 12

ABSENCE OF PRIOR MARKET FOR COMMON STOCK; DETERMINATION OF OFFERING PRICE

Prior to this offering, there has been no public trading market for the
Common Stock. Consequently, the price of the Common Stock offered hereby was
determined through negotiations between the Company and the Representatives. In
addition, there can be no assurance that a regular trading market for the Common
Stock will develop after this offering or that, if developed, any such market
will be sustained. See "Underwriting."

POSSIBLE VOLATILITY OF STOCK PRICE

The stock market has experienced price and volume fluctuations that have
affected the market for many companies and have often been unrelated to the
operating performance of such companies. The market price of the Common Stock
could also be subject to significant fluctuations in response to variations in
the Company's quarterly operating results, analyst reports, announcements
concerning the Company, legislative or regulatory changes or the interpretation
of existing statutes or regulations affecting the Company's business,
litigation, general trends in the industry and other events or factors.

SHARES ELIGIBLE FOR FUTURE SALE

There will be 7,000,000 shares of Common Stock outstanding upon
consummation of this offering (assuming no exercise of the over-allotment option
granted to the Underwriters). Of these shares, 2,000,000 shares of Common Stock
will be freely tradeable. The 5,000,000 remaining shares of Common Stock are
beneficially held by Messrs. David A. Schuff and Scott A. Schuff who, together
with the Company, have agreed not to sell, contract to sell or otherwise dispose
of any shares of Common Stock without the consent of the Representatives for a
period of 180 days after the date of this Prospectus. Upon expiration of these
agreements, these shares will be eligible for sale in the public markets subject
to the notice, manner of sale, volume limitations, and current public reporting
requirements imposed by Rule 144 ("Rule 144") promulgated under the Securities
Act of 1933, as amended (the "Securities Act"). Sales of substantial amounts of
Common Stock in the open market, or the availability of such shares for sale
following this offering, could adversely affect the prevailing market price of
the Common Stock and may make it more difficult for the Company to sell its
equity securities in the future on terms it deems appropriate. See "Shares
Eligible for Future Sale," "Principal Stockholders" and "Underwriting."

IMMEDIATE AND SUBSTANTIAL DILUTION

Purchasers of Common Stock offered hereby will suffer immediate dilution of
$5.31 in the net tangible book value per share of the Common Stock from the
initial public offering price. See "Dilution."

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

This Prospectus contains forward-looking statements including statements
regarding, among other items, the Company's business strategy, growth strategy,
and anticipated trends in the Company's business. Additional written or oral
forward-looking statements may be made by the Company from time to time in
filings with the Securities and Exchange Commission or otherwise. The words
"believe," "expect," "anticipate," and "project" and similar expressions
identify forward-looking statements, which speak only as of the date the
statement is made. These forward-looking statements are based largely on the
Company's expectations and are subject to a number of risks and uncertainties,
some of which cannot be predicted or quantified and are beyond the Company's
control. Future events and actual results could differ materially from those set
forth in, contemplated by, or underlying the forward-looking statements.
Statements in this Prospectus, including those set forth in "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" describe factors, among others, that could contribute
to or cause such differences. In light of these risks and uncertainties, there
can be no assurance that the forward-looking information contained in this
Prospectus will in fact transpire or prove to be accurate. All subsequent
written and oral forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by this
section.

12
<PAGE> 13

THE COMPANY

Founded in 1976, the Company initially operated primarily as a steel
erector on commercial and industrial building projects and subcontracted steel
fabrication services to others. Due to a sharp increase in commercial and
industrial construction activity in the 1980's, many of the Company's
fabrication subcontractors could not meet the increased demand for steel
fabrication services and raised prices to the Company. In August 1985, the
Company acquired the assets of Marathon Steel Company, a Phoenix, Arizona-based
steel fabrication contractor. The acquisition of Marathon Steel Company enabled
the Company to become less dependent on steel fabrication subcontractors and to
continue its pursuit of large, more complicated construction projects.

The Company is a fully integrated fabricator and erector of structural
steel and heavy steel plate. The Company fabricates and erects structural steel
for commercial and industrial construction projects such as high and low rise
buildings and office complexes, hotels and casinos, convention centers, sports
arenas, shopping malls, hospitals, dams, bridges, mines and power plants. The
Company also specializes in the fabrication and erection of heavy steel plate,
including large diameter water pipe, water storage tanks, pollution control
scrubbers, tunnel liners, pressure vessels, and a variety of customized
projects. The Company seeks to differentiate its operations by offering
complete, turnkey steel construction services featuring engineering, detailing,
shop fabrication and field erection. By offering an integrated package of steel
construction services from a single source, the Company is able to respond more
efficiently to the design and construction challenges associated with large,
complex, "fast track" construction projects.

The Company was incorporated in Arizona in 1976 and was reincorporated in
Delaware in 1997. The Company's principal executive offices are located at 420
South 19th Avenue, Phoenix, Arizona 85009, and its telephone number is (602)
252-7787.

13
<PAGE> 14

S CORPORATION DISTRIBUTION

Since 1987, the Company has been subject to taxation under subchapter S of
the Code. As a result, the taxable income of the Company has been attributed and
taxed directly to the Company's stockholders, rather than to the Company.
Historically, the Company has not distributed all of its taxable income. Amounts
in excess of estimated stockholder tax liabilities and certain other
distributions have been retained as working capital and used to support business
operations.

The following table sets forth the Company's taxable income and accrued
distributions from the date of its S corporation election in 1987 through March
31, 1997:

<TABLE>
<S> <C>
Taxable income................................................. $26.1 million
Less: Distributions accrued and paid through March 31, 1997.... 10.6 million
Less: Distributions accrued but unpaid at March 31, 1997....... 4.8 million
-------------
Undistributed taxable income at March 31, 1997................. $10.7 million
=============
</TABLE>

Of the Company's undistributed taxable income, $7.0 million will be paid to
the Company's current stockholders from the proceeds of this offering (the "S
Corporation Distribution"), and the remainder will be retained by the Company as
equity. Purchasers of shares in this offering will not receive any of this
distribution. See "Use of Proceeds" and "Capitalization."

The Company has revoked its S corporation election in connection with this
offering. Upon revocation of its S corporation election, the Company became
subject to income taxation and, in connection therewith, the Company will record
a deferred tax asset of $300,000 in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Note 1 to Consolidated Financial Statements.

14
<PAGE> 15

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered hereby, after deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company (including
amounts payable to the Company's financial consultant), are estimated to be
approximately $14.2 million ($16.4 million if the Underwriters' over-allotment
option is exercised in full). The Company anticipates that such net proceeds
will be used as follows: (i) $7.0 million to fund the S Corporation
Distribution; (ii) approximately $2.5 million to purchase specialized
fabrication equipment; and (iii) the balance for general corporate purposes,
including, when and if available, the acquisition of businesses complementary to
the Company's business and growth strategy. The Company has no pending
commitments for and is not engaged in negotiations in connection with any
acquisitions. See "S Corporation Distribution."

Until applied as set forth above, all proceeds will be invested in
short-term, interest bearing, investment grade or equivalent securities or bank
certificates of deposit. Investment of the net proceeds in short-term
investments rather than operations could adversely affect the Company's overall
return on its capital.

DIVIDEND POLICY

Except for the distributions described in "Use of Proceeds" and "S
Corporation Distribution" above, the Company intends to retain earnings to
finance the operations and expansion of the Company's business and does not
anticipate paying cash dividends on its Common Stock in the foreseeable future.
See "Description of Capital Stock."

15
<PAGE> 16

CAPITALIZATION

The following table sets forth the actual capitalization of the Company as
of March 31, 1997, and the pro forma as adjusted amounts, which reflect (i) the
sale of the 2,000,000 shares of Common Stock offered hereby, after deducting the
underwriting discount and estimated offering expenses, (ii) the application of
the estimated net proceeds therefrom, including payment of the S Corporation
Distribution and (iii) an increase in retained earnings to reflect recognition
of a deferred tax asset and corresponding credit to income in the amount of
$300,000 upon revocation of the Company's S corporation election. See "Use of
Proceeds," "S Corporation Distribution," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and Note 1 to Consolidated
Financial Statements. The table should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
AS OF MARCH 31, 1997,
-----------------------
PRO FORMA
ACTUAL AS ADJUSTED
------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Long term debt, including current portion...................... $ 3,094 $ 3,094
Stockholders' equity:
Preferred Stock, $.001 par value; 1,000,000 shares
authorized; no shares outstanding......................... -- --
Common Stock, $.001 par value; 20,000,000 shares authorized;
5,000,000 shares issued and outstanding, actual; 7,000,000
shares issued and outstanding, as adjusted(1)............. 5 7
Unfunded pension losses(2)................................... (541) (541)
Additional paid in capital................................... 15 14,218
Retained earnings............................................ 11,957 5,257
------- -------
Total stockholders' equity........................... 11,436 18,941
------- -------
Total capitalization........................................... $14,530 $22,035
======= =======
</TABLE>

- ---------------
(1) Excludes up to 300,000 shares of Common Stock that may be sold by the
Company upon the exercise of the Underwriters' over-allotment option. Also
excludes up to 345,500 shares of Common Stock issuable upon exercise of
stock options outstanding at March 31, 1997 under the Company's 1997 Stock
Option Plan, and 22,500 shares of Common Stock issuable upon exercise of
stock options to be granted to the Company's non-employee directors upon
their appointment to the Board of Directors at the closing of this offering.
See "Management," "Description of Capital Stock" and "Underwriting."

(2) See Note 6 to Consolidated Financial Statements.

16
<PAGE> 17

DILUTION

The net tangible book value of the Company's Common Stock at March 31, 1997
was $11.3 million, or $2.27 per share of Common Stock. Net tangible book value
per common share represents the book value of the Company's tangible assets less
total liabilities divided by the number of shares of Common Stock outstanding.
At March 31, 1997, the Company had $10.7 million of undistributed taxable
income. If the $7.0 million S Corporation Distribution anticipated in this
offering had been previously distributed on that date, the Company's pro forma
tangible net book value would have been $4.3 million, or $0.87 per share.

Without taking into account any changes in such net tangible book value
subsequent to March 31, 1997, other than to give effect to (i) the sale by the
Company of 2,000,000 shares of Common Stock offered hereby (after deducting the
underwriting discount and estimated offering expenses) and the application of
the estimated proceeds thereof, including payment of the S Corporation
Distribution, and (ii) an increase in retained earnings to reflect the
recognition of a deferred tax asset, and corresponding credit to income, in the
amount of $300,000 upon revocation of the Company's S corporation election, the
pro forma net tangible book value of the Company as of March 31, 1997 would have
been $18.8 million, or $2.69 per share. This represents an immediate increase in
net tangible book value of $1.82 per share to current stockholders and immediate
dilution of $5.31 per share to new investors purchasing Common Stock pursuant to
this offering. Dilution per share to new investors represents the difference
between the amount per share paid by purchasers of Common Stock of the Company
pursuant to this offering and the pro forma net tangible book value per share of
Common Stock immediately after completion of this offering. The following table
illustrates the per share effect of this dilution on an investor's purchase of
shares:

<TABLE>
<S> <C> <C>
Initial public offering price per common share.................... $ 8.00
Pro forma net tangible book value per common share before this
offering..................................................... $0.87
Increase in pro forma net tangible book value per common share
attributable to new investors................................ 1.82
As adjusted pro forma net tangible book value per common share
after this offering............................................. 2.69
------
Dilution per common share to new investors........................ $ 5.31
======
</TABLE>

The foregoing table excludes up to 300,000 shares of Common Stock that may
be sold by the Company upon the exercise of the Underwriters' over-allotment
option. The table also excludes 345,500 shares of Common Stock issuable upon
exercise of stock options granted under the Company's 1997 Stock Option Plan at
an exercise price of $5.00 per share and 22,500 shares of Common Stock issuable
upon exercise of stock options to be granted to the Company's non-employee
directors upon their appointment to the Board of Directors at the closing of
this offering with an exercise price equal to the initial public offering price.
Assuming the exercise of all such options, other than the over-allotment option,
the pro forma net tangible book value per share before this offering would be
$1.16, the pro forma net tangible book value per share after this offering would
be $2.82, and the dilution per share to new investors would be $5.18. See
"Description of Capital Stock," "Underwriting" and "Management."

17
<PAGE> 18

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following sets forth selected historical consolidated financial data of
the Company for each of the years in the five-year period ended December 31,
1996 and for the three month periods ended March 31, 1996 and 1997. The selected
annual historical consolidated financial data are derived from the Company's
Consolidated Financial Statements audited by Ernst & Young LLP, independent
auditors. The selected annual historical consolidated financial data for the
three month periods ended March 31, 1996 and 1997 have been derived from the
Company's unaudited Consolidated Financial Statements for such periods. In the
opinion of management, the following unaudited data reflects all adjustments,
consisting only of normal recurring adjustments, necessary to fairly present the
Company's financial position and results of operations for the periods
presented. The results for any interim period are not necessarily indicative of
results to be expected for a full fiscal year. See "Risk Factors -- Fluctuating
Quarterly Results of Operations." For additional information, see the
Consolidated Financial Statements of the Company and Notes thereto included
elsewhere in this Prospectus. The following table should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and is qualified by reference thereto and to the Company's
Consolidated Financial Statements and Notes thereto.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------- ------------------
1992 1993 1994 1995 1996(1) 1996 1997
------- ------- ------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues............................... $46,991 $58,640 $68,199 $ 62,090 $103,912 $ 10,410 $25,507
Cost of revenues....................... 41,752 50,376 58,874 54,222 86,998 8,418 21,655
------- ------- ------- -------- -------- -------- -------
Gross profit......................... 5,239 8,264 9,325 7,868 16,914 1,992 3,852
General and administrative expenses.... 4,102 4,367 4,915 5,284 6,715 1,357 2,081
------- ------- ------- -------- -------- -------- -------
Operating income..................... 1,137 3,897 4,410 2,584 10,199 635 1,771
Interest expense....................... (583) (627) (718) (752) (452) (147) (95)
Other income........................... 56 60 67 618 303 52 96
------- ------- ------- -------- -------- -------- -------
Income before income taxes........... 610 3,330 3,759 2,450 10,050 540 1,772
Pro forma income taxes(2).............. 245 1,330 1,500 980 4,020 215 710
------- ------- ------- -------- -------- -------- -------
Pro forma net income(2).............. $ 365 $ 2,000 $ 2,259 $ 1,470 $ 6,030 $ 325 $ 1,062
======= ======= ======= ======== ======== ======== =======
Pro forma net income per share(2)...... $ 0.99 $ 0.17
Shares used in computation(3).......... 6,071 6,071

OPERATING DATA:
Backlog(4)............................. $34,466 $18,387 $22,544 $ 80,834 $ 67,335 $126,061 $65,550

BALANCE SHEET DATA:
Cash and cash equivalents.............. $ 90 $ 113 $ 63 $ 289 $ 7,253 $ 1,554 $ 4,750
Restricted funds on deposit(5)......... -- -- -- 220 2,249 220 2,896
Costs and recognized earnings in excess
of billings on uncompleted
contracts(6)......................... 681 714 777 1,076 871 62 1,332
Billings in excess of costs and
recognized earnings on uncompleted
contracts(6)......................... 5,846 4,215 6,506 5,940 19,623 13,207 22,407
Property and equipment, net............ 1,887 4,310 4,666 4,222 5,116 4,214 5,758
Total assets........................... 22,681 25,387 26,244 25,260 43,969 31,487 48,160
Long term debt, excluding current
portion.............................. 3,720 3,806 7,057 5,271 2,753 3,511 2,777
Stockholders' equity................... $ 4,256 $ 5,320 $ 6,032 $ 6,768 $ 10,682 $ 6,961 $11,436
</TABLE>

18
<PAGE> 19

- ---------------
(1) Does not give effect to the Company's acquisition of B&K Steel on January
31, 1997, which was accounted for under the purchase method of accounting.
Accordingly, financial information relating to B&K Steel has not been
included in periods prior to the acquisition. Giving effect to the
acquisition of B&K Steel as if it had occurred on January 1, 1996, the
Company's pro forma and unaudited revenues, gross profit, income before
income taxes, pro forma net income (after pro forma income taxes), and pro
forma net income per share would have been $113,291,000, $18,097,000,
$10,165,000, $6,099,000, and $1.00, respectively.

(2) Prior to this offering, the Company elected to be treated as an S
corporation under the Code. As an S corporation, the Company was not subject
to income taxes. Pro forma net income reflects the provision for income
taxes that would have been recorded had the Company been subject to income
taxes as a C corporation for all periods, assuming an effective tax rate of
40%. Pro forma net income does not include projected credits of $300,000 to
income to be recorded upon revocation of the Company's S corporation
election. See "S Corporation Distribution" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

(3) Shares used in the computation of pro forma net income per share are based
upon the weighted average number of common shares and common stock
equivalents outstanding during each year. In accordance with SAB Number 83,
all issuances of the Company's common stock options at prices below the
expected initial public offering price during the twelve-month period
preceding the proposed offering have been treated as common stock
equivalents as if they had been issued at the Company's inception using the
treasury stock method. In addition, in accordance with SAB Number 55, common
stock equivalents include the number of shares expected to be issued in the
proposed offering for which the net offering proceeds will be used to make
stockholder distributions.

(5) Restricted funds on deposit represent funds on deposit in an interest
bearing escrow account which are maintained in lieu of retention for a
specific contract. Retentions on contract receivables are amounts due which
are withheld until the completed project has been accepted by the customer
in accordance with the contract. See Note 1 to Consolidated Financial
Statements.

(6) The Company recognizes revenues and costs from construction projects using
the percentage of completion accounting method. Under this method, revenues
are recognized based upon the ratio of the costs incurred to date to the
total estimated costs to complete the project, commencing when progress is
sufficient to estimate final results with reasonable accuracy, which
typically occurs when fabricated product is shipped to the project site or
when erection of the project commences. Construction contracts with
customers generally provide that billings are to be made monthly in amounts
which are commensurate with the extent of performance under the contracts.
Costs and recognized earnings in excess of billings on uncompleted contracts
primarily represent revenues earned under the percentage of completion
method which have not been billed, and also include costs incurred in excess
of billings on contracts for which sufficient work has not been performed to
allow for recognition of revenues. Billings in excess of costs and
recognized earnings on uncompleted contracts represent amounts billed on
contracts in excess of the revenues allowed to be recognized under the
percentage of completion method on those contracts.

19
<PAGE> 20

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information regarding the
Company's financial position as of December 31, 1995 and 1996 and March 31, 1996
and 1997, and its results of operations for the years ended December 31, 1994,
1995, and 1996 and the three months ended March 31, 1996 and 1997. This
discussion should be read in conjunction with the preceding "Selected
Consolidated Financial and Operating Data" and the Company's Consolidated
Financial Statements and related Notes thereto and other financial data
appearing elsewhere in this Prospectus. Results of operations for interim
periods are not necessarily indicative of results to be expected for the full
fiscal year. For information relating to factors that could affect future
operating results, see "Risk Factors." Any forward-looking statements included
in this section or elsewhere in the Prospectus should be considered in light of
such risk factors, as well as the information set forth below and in other
portions of the Prospectus, any of which could cause the Company's actual
results to differ materially from those discussed herein.

INTRODUCTION

The Company's results of operations are affected primarily by (i) the level
of commercial and industrial construction in its principal markets, (ii) the
Company's ability to win project contracts, (iii) the amount and complexity of
project changes requested by customers or general contractors, (iv) the
Company's success in utilizing its resources at or near full capacity, and (v)
the Company's ability to complete contracts on a timely and cost effective
basis. The level of commercial and industrial construction activity is related
to several factors, including local, regional and national economic conditions,
interest rates, availability of financing, and the supply of existing facilities
relative to demand.

The Company believes that there is an increasing trend in the steel
fabrication and erection industry to design and build large, complex projects
according to accelerated time schedules. With many projects, only a portion of
the detail design drawings are completed when construction begins. The remaining
drawings are completed, with numerous design changes being implemented,
throughout the construction process. These fast track, "design-as-you-go"
projects are well-suited to integrated contractors that can (i) reduce the
logistical and coordination problems inherent in the use of multiple
subcontractors to complete a large, complex project and (ii) more efficiently
respond to rapid and multiple design changes while minimizing project delays and
cost overruns commonly associated with such changes. The complexity and size of
these projects requires subcontractors possessing extended financial and
operational capabilities. Typically, these projects offer greater potential
profit than small, less complex projects because project management and overhead
requirements for large projects usually are proportionately less. Individual
large projects can have a substantial impact upon the Company's results of
operations and cause significant fluctuations from quarter to quarter.

The Company obtains contracts through competitive bidding or negotiation,
which generally are either fixed price or cost-plus arrangements. During 1995
and 1996, approximately $57.0 million (92.0%) and $94.0 million (91%),
respectively, of the Company's revenues were derived from projects performed
pursuant to fixed price contracts. In bidding or negotiating contracts, the
Company must estimate its costs, including projected increases in labor,
material, and services costs. Project duration typically lasts from three to
twelve months.

The Company recognizes revenues using the percentage of completion
accounting method. Under this method, revenues are recognized based upon the
ratio of costs incurred to date to the estimated total cost to complete the
project. Revenue recognition begins when progress is sufficient to estimate
final results with reasonable accuracy, which typically occurs when fabricated
product is shipped to the project site or when erection of the project
commences. Revenues relating to changes in the scope of a contract are
recognized when the customer has authorized the change, the work is commenced
and the Company has made an estimate of the amount that will be paid for the
change. The cumulative impact of revisions in total cost estimates during the
progress of work is reflected in the period in which these revisions become
known. Estimated losses on contracts are recognized in full when it is
determined that a loss will be incurred on a contract.

Cost of revenues consists of the costs of materials, equipment, direct
labor, fringe benefits, and indirect costs associated with detailing,
fabrication and erection, including rent, depreciation and supervisory labor.
Other costs not associated with specific projects are included in general and
administrative expenses.

20
<PAGE> 21

Gross profit margins can be positively affected by large, more complex
projects, the percentage of negotiated contracts relative to competitively bid
contracts, the number and scope of contract modifications and improvements in
operating efficiencies. Gross profit margins can be adversely affected by
construction delays, inefficient or underutilization of the Company's resources,
availability and cost of materials and labor, the timing and performance of work
by other contractors, weather conditions and construction site conditions.

Backlog increases as contract commitments are obtained, decreases as
revenues are recognized, and increases or decreases to reflect modifications in
the work to be performed under the contract. The timing of contract commitments,
the size of projects and other factors beyond the Company's control can cause
significant fluctuation in backlog outstanding at any given date.

Prior to the completion of this offering, the Company was taxed as an S
corporation for income tax purposes. Accordingly, its income has been taxed
directly to its stockholders. Immediately prior to this offering, the Company's
S corporation election was revoked and the Company is presently subject to
income tax as a C corporation. For purposes of the financial information
contained in this section, pro forma income tax expense has been included
assuming an income tax rate of 40%, and pro forma net income reflects this
provision.

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated certain financial
data as a percentage of revenues:

<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues......................... 86.3 87.3 83.7 80.9 84.9
----- ----- ----- ----- -----
Gross profit........................... 13.7 12.7 16.3 19.1 15.1
General and administrative expenses...... 7.2 8.5 6.5 13.0 8.2
----- ----- ----- ----- -----
Operating income....................... 6.5 4.2 9.8 6.1 6.9
Interest expense......................... (1.1) (1.2) (0.4) (1.4) (0.4)
Other income............................. 0.1 1.0 0.3 0.5 0.4
----- ----- ----- ----- -----
Income before income taxes............. 5.5 4.0 9.7 5.2 6.9
Pro forma income taxes................... 2.2 1.6 3.9 2.1 2.7
----- ----- ----- ----- -----
Pro forma net income................... 3.3% 2.4% 5.8% 3.1% 4.2%
===== ===== ===== ===== =====
</TABLE>

THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31,
1996

Revenues. Revenues increased by 145.0% to $25.5 million for the three
months ended March 31, 1997 from $10.4 million for the three months ended March
31, 1996. The increase was attributable primarily to a greater number of large
individual contracts in 1997 as compared to 1996 and to an unusually low revenue
quarter for 1996 due to the Company being in the early stages of large contracts
for which revenue recognition had not begun. The revenues in the period ended
March 31, 1997 also included $1.6 million of revenues of B&K Steel following its
acquisition by the Company on January 31, 1997. The average revenues for the
Company's ten largest revenue generating projects in the three month period
ended March 31, 1997 was $2.0 million versus $850,000 in the three month period
ended March 31, 1996. One contract, relating to Bank One Ballpark, produced
revenues of $9.0 million for the first quarter of 1997. The largest contract in
progress during the three month period ended March 31, 1996 contributed only
$2.7 million to revenues earned in that quarter.

Gross profit. Gross profit increased by 93.4% to $3.9 million for the
three months ended March 31, 1997 from $2.0 million for the three months ended
March 31, 1996. The increase was attributable primarily to a 145.0% increase in
revenues. As a percentage of revenues, gross profit declined to 15.1% in 1997
from 19.1% in 1996 due to above-average 1996 margins resulting from higher than
anticipated revenues from requested contract modifications. The above-average
1996 margins were largely attributable to an increase in anticipated revenues
and lower than anticipated costs on a single contract. These changes, based on
the stage of completion of that contract, accounted for approximately 5.5% of
the margin impact on the quarter.

21
<PAGE> 22

General and administrative expenses. General and administrative expenses
increased by 53.4% to $2.1 million for the three months ended March 31, 1997
from $1.4 million for the three months ended March 31, 1996. General and
administrative expenses as a percentage of revenues decreased to 8.2% in 1997
from 13.0% in 1996 due to the 145.0% increase in revenues and a less than
proportionate increase in general and administrative expenses required to
support the increase in revenues. General and administrative expenses include
those for contract bids, estimating, sales and marketing, facilities, project
management, and support services, none of which increased in proportion to the
145.0% increase in revenues, primarily because the Company's higher average
contracts during the period do not require proportionately higher general and
administrative expenses. The Company believes that it currently has sufficient
management and administrative resources to support continued growth in revenues
without a proportionate increase in general and administrative expenses.

Interest expense. Interest expense decreased by 35.4% to $95,000 for the
three months ended March 31, 1997 from $147,000 for the three months ended March
31, 1996. The decrease was attributable to the lower average line of credit
borrowings, which was made possible by the Company's ability to increase its
billings in excess of costs and recognized earnings on uncompleted contracts.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

Pro forma net income. Pro forma net income increased by 226.8% to $1.1
million for the three months ended March 31, 1997 from $325,000 for the three
months ended March 31, 1996.

Backlog. Backlog at March 31, 1997 was $60.5 million less than at March
31, 1996. Backlog at March 31, 1996 was unusually high due to the receipt of
five contracts, each in excess of $10.0 million, during the fourth quarter of
1995 and the first quarter of 1996. These contracts produced backlog totalling
$86.5 million at March 31, 1996, $50.0 million of which was attributable to the
first and second phases of the Bank One Ballpark project. Backlog at March 31,
1997 included $26.8 million relating to the second and third phases of the Bank
One Ballpark project. The Company's backlog at March 31, 1997 also reflected
approximately $15.9 million attributable to two projects for a single customer
in Las Vegas, Nevada.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

Revenues. Revenues increased by 67.4% to $103.9 million in 1996 from $62.1
million in 1995. The increase was attributable primarily to larger individual
contracts in 1996 compared to 1995, including the Bank One Ballpark, which
contributed $19.8 million. The Bank One Ballpark project is expected to generate
total revenues approaching $55.0 million when completed in 1998. The average
revenues for the Company's ten largest revenue generating projects was $7.8
million in 1996 versus $3.3 million in 1995. Excluding Bank One Ballpark, the
ten largest revenue generating projects averaged $6.4 million in 1996, which
represented a 93.9% increase over the 1995 average of $3.3 million.

Gross profit. Gross profit increased by 115.0% to $16.9 million in 1996
from $7.9 million in 1995 primarily due to the 67.4% increase in revenues. As a
percentage of revenues, gross profit increased to 16.3% in 1996 from 12.7% in
1995. The increase as a percentage of revenues was attributable primarily to
greater overhead absorption, better pricing associated with larger projects,
improved operating efficiencies, and modifications to specific contracts. By
obtaining larger average value and more complex contracts, the Company has been
able to realize higher gross margins on such projects, a trend that was
reflected in the Company's gross profit in 1996. In addition, many of the
Company's fixed costs, such as depreciation, increased proportionately less than
the 67.4% increase in revenues, which further served to improve gross margins.

General and administrative expenses. General and administrative expenses
increased by 27.1% to $6.7 million in 1996 from $5.3 million in 1995. Of the
$1.4 million increase in 1996, $590,000 was attributable to bonus payments to
employees and $529,000 was attributable to a deferred compensation plan
implemented in 1996. The Company's deferred compensation plan was terminated in
1997. General and administrative expenses as a percentage of revenues decreased
to 6.5% in 1996 from 8.5% in 1995 due to the benefits of having larger average
contracts in 1996. In 1995, the Company experienced a 9.0% decrease in revenues
from 1994 and elected not to reduce general and administrative costs
proportionately in anticipation of future contract awards, thereby causing
higher general and administrative expenses as a percentage of revenues.

22
<PAGE> 23

Interest expense. Interest expense decreased by 39.9% to $452,000 in 1996
from $752,000 in 1995. The decrease was attributable to the lower average line
of credit borrowings, which reflected in large part the Company's ability to
increase its billings in excess of costs and recognized earnings on uncompleted
contracts. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

Pro forma net income. Pro forma net income increased by 310.2% to $6.0
million in 1996 from $1.5 million in 1995.

Backlog. Backlog at December 31, 1996 was $13.5 million less than at
December 31, 1995 due to the receipt of four contract awards that collectively
represented backlog of $47.2 million at December 31, 1995. Additionally, the
high level of backlog at the end of the first quarter of 1996 caused the Company
to become more selective in the pursuit of new contract awards during the
remainder of the year. Of the backlog at December 31, 1996, approximately $13.1
million was attributable to three projects for a single customer in Las Vegas,
Nevada, and approximately $34.3 million was attributable to the Bank One
Ballpark project in Phoenix, Arizona.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

Revenues. Revenues decreased by 9.0% to $62.1 million in 1995 from $68.2
million in 1994. The decrease was attributable primarily to the completion of
two large construction projects during 1994, delays in commencing work on
certain new projects, and a focus on certain targeted projects that did not
materialize. The average revenues for the Company's ten largest revenue
generating projects was $3.3 million in each of 1995 and 1994.

Gross profit. Gross profit decreased by 15.6% to $7.9 million in 1995 from
$9.3 million in 1994. As a percentage of revenues, gross profit decreased to
12.7% in 1995 from 13.7% in 1994 due primarily to the decrease in revenues
coupled with the relatively fixed nature of certain expenses. During 1995, the
Company's margins were adversely impacted by a single large project for which
the Company projected a small loss based upon difficulties in the fabrication
and erection of this unique project. Given that the majority of revenues from
this contract were recognized in 1995, margins were relatively lower than in
1994.

General and administrative expenses. General and administrative expenses
increased by 7.5% to $5.3 million in 1995 from $4.9 million in 1994. General and
administrative expenses as a percentage of revenues increased to 8.5% in 1995
from 7.2% in 1994. In 1995, the Company experienced a 9.0% decrease in revenues
from 1994 and elected not to reduce general and administrative costs
proportionately in anticipation of future contract awards, thereby causing
higher general and administrative expenses as a percentage of revenues.

Interest expense. Interest expense increased by 4.7% to $752,000 in 1995
from $718,000 in 1994. The increase was attributable to slightly higher average
amounts outstanding on the Company's revolving line of credit.

Pro forma net income. Pro forma net income decreased by 34.9% to $1.5
million in 1995 from $2.3 million in 1994.

Backlog. Backlog at December 31, 1995 was $58.3 million greater than at
December 31, 1994 due to the receipt of four contract awards totalling $47.2
million in the fourth quarter of 1995.

23
<PAGE> 24

QUARTERLY DATA

The following table sets forth certain quarterly consolidated financial
data for each of the Company's last nine quarters and such data as a percentage
of the Company's revenues for the respective quarters. The information has been
derived from unaudited consolidated financial statements prepared by management
that, in the opinion of management, reflect all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of such
quarterly information. The operating results for any quarter are not necessarily
indicative of the results to be expected for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
FISCAL YEAR
FISCAL YEAR 1995 FISCAL YEAR 1996 1997
--------------------------------------- --------------------------------------- -----------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31
-------- ------- -------- ------- -------- ------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues..................... $17,994 $11,909 $12,481 $19,706 $10,410 $29,691 $38,861 $24,950 $25,507
Cost of revenues............. 15,897 10,256 10,695 17,374 8,418 25,600 32,976 20,004 21,655
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit................. 2,097 1,653 1,786 2,332 1,992 4,091 5,885 4,946 3,852
General and administrative
expenses................... 1,283 1,306 1,255 1,440 1,357 1,500 1,748 2,110 2,081
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income............. 814 347 531 892 635 2,591 4,137 2,836 1,771
Interest expense............. (182) (217) (189) (164) (147) (90) (100) (115) (95)
Other income................. 25 13 17 563 52 80 75 96 96
------- ------- ------- ------- ------- ------- ------- ------- -------
Income before income taxes... 657 143 359 1,291 540 2,581 4,112 2,817 1,772
Pro forma income taxes....... 263 57 144 516 215 1,034 1,645 1,126 710
------- ------- ------- ------- ------- ------- ------- ------- -------
Pro forma net income......... $ 394 $ 86 $ 215 $ 775 $ 325 $1,547 $ 2,467 $1,691 $ 1,062
======= ======= ======= ======= ======= ======= ======= ======= =======

AS A PERCENTAGE OF REVENUES
--------------------------------------------------------------------------------------------------
Revenues..................... 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0%
Cost of revenues............. 88.3 86.1 85.7 88.2 80.9 86.2 84.9 80.2 84.9
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit................. 11.7 13.9 14.3 11.8 19.1 13.8 15.1 19.8 15.1
General and administrative
expenses................... 7.1 11.0 10.0 7.3 13.0 5.1 4.5 8.4 8.2
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income............. 4.6 2.9 4.3 4.5 6.1 8.7 10.6 11.4 6.9
Interest expense............. (1.0) (1.8) (1.5) (0.8) (1.4) (0.3) (0.3) (0.5) (0.4)
Other income................. 0.1 0.1 0.1 2.9 0.5 0.3 0.2 0.4 0.4
------- ------- ------- ------- ------- ------- ------- ------- -------
Income before income taxes... 3.7 1.2 2.9 6.6 5.2 8.7 10.5 11.3 6.9
Pro forma income taxes....... 1.5 0.5 1.2 2.6 2.1 3.5 4.2 4.5 2.7
------- ------- ------- ------- ------- ------- ------- ------- -------
Pro forma net income......... 2.2 % 0.7 % 1.7 % 4.0 % 3.1 % 5.2 % 6.3 % 6.8 % 4.2%
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

The Company has experienced, and is expected to continue to experience,
variations in quarterly and annual results of operations. Factors that may
affect these results include, among other things, the timing and terms of major
contract awards and the starting and completion dates of projects. Based upon
its current backlog and project schedules, the Company anticipates that pre-tax
income for the second and third quarters of 1997 will be lower than recorded for
the same periods of 1996, and revenues for the third quarter of 1997 may be
lower than the same period of 1996. In this regard, the Company received a
number of large contract awards in late 1995 which positively impacted 1996
results, particularly the third quarter of 1996.

24
<PAGE> 25

LIQUIDITY AND CAPITAL RESOURCES

The Company attempts to structure the payment arrangements under its
contracts to match costs incurred under the project. To the extent the Company
is able to bill in advance of costs incurred, it generates working capital
through billings in excess of costs and recognized earnings on uncompleted
contracts. To the extent the Company is not able to bill in advance of costs, it
relies on its credit facilities to meet its working capital needs. At March 31,
1997, the Company had no borrowings under its line of credit due in large part
to its billings in excess of costs and recognized earnings on uncompleted
contracts of $22.4 million. At March 31, 1997, the Company had working capital
of approximately $8.6 million. The Company believes that it has sufficient
liquidity through its present resources and the existence of its bank credit
facility to meet its near term financial needs.

The Company's short term cash needs are primarily for working capital to
support operations including receivables, inventories, and other costs incurred
in performing its contracts. Operating activities provided cash flows of
$251,000 for the three months ended March 31, 1997 and $14.4 million for the
year ended December 31, 1996. For the first quarter of 1997, operating cash
flows were less than net income due to increased working capital requirements.
For the year ended December 31, 1996, operating cash flows were greater than net
income (excluding pro forma income taxes) due to favorable billings relating to
contracts in process. Investing activities required $705,000 for the three
months ended March 31, 1997 and $2.3 million during the year ended December 31,
1996, substantially all of which were related to purchases of property and
equipment and the cash portion of the acquisition of B&K Steel. Financing
activities consumed $2.0 million for the three months ended March 31, 1997 and
$5.1 million for the year ended December 31, 1996, which were related primarily
to repayments of long-term debt and line of credit balances. Also included in
financing activities were distributions to stockholders for income taxes related
to the operations of the business and other stockholder distributions. These
distributions totaled $776,000 for the three months ended March 31, 1997 and
$2.3 million for the year ended December 31, 1996. Other than the S Corporation
Distribution, the Company does not anticipate paying any future dividends. See
"Dividend Policy."

The Company maintains a $6.5 million credit facility with a commercial bank
that is subject to renewal on June 30, 1998 and is collateralized by contract
receivables, equipment and inventory. The Company's credit facility requires
that the Company maintain minimum tangible net worth of $6.1 million, minimum
owners equity (the sum of capital, capital surplus and retained earnings divided
by total assets on a six-month average) of 21%, working capital of $4.9 million,
and a current ratio of at least 1.25 to 1.0. The security agreements pursuant to
which the Company's assets are pledged prohibit any further pledge of such
assets without the written consent of the Company's lender. Under this facility,
the Company may borrow up to an amount equal to 75% of qualifying contracts
receivable, but in no event less than $2.5 million. The Company's ability to
borrow is subject to, among other restrictions, billings in excess of costs and
recognized earnings on uncompleted contracts. At March 31, 1997, other than the
minimum borrowing amount, there was no additional credit available under the
line for future borrowings due to the high level of billings in excess of costs
and recognized earnings on uncompleted contracts. The Company also maintains an
equipment financing line of credit pursuant to which it may borrow up to
$500,000. This line of credit is subject to financial covenants similar to its
primary line of credit. The Company is seeking to modify its credit facility to
increase the amounts available, including the minimum borrowing amount.

The Company has two other long-term debt commitments that are related to
its property and equipment. One is a subordinated note payable to a limited
partnership comprised of the Company's present stockholders and certain of their
family members, which requires monthly payments of $12,037 plus interest and
matures in 1999. The balance on this loan was approximately $2.3 million at
March 31, 1997. The other long-term debt of the Company consists of two notes in
the aggregate principal amount of $796,250 incurred as part of the consideration
paid to the sellers in the B&K Steel acquisition. Such notes are payable in five
equal annual installments ending in 2002. The acquisition of B&K Steel, which
had 1996 revenues of approximately $9.4 million, was accounted for under the
purchase method of accounting. The fair value of the tangible net assets
acquired approximated the purchase price so no goodwill was recorded with
respect to the transaction.

The Company leases its fabrication and office facilities from a partnership
in which the present beneficial stockholders of the Company and their family
members are the general and limited partners. Under the lease

25
<PAGE> 26

for the Company's principal fabrication and office facilities, the Company's
annual rental payments were $264,000 in 1996, increasing to $292,000 for 1997,
$414,000 for 1998, $556,000 for 1999, $601,000 in 2000, and $605,000 in each
year thereafter during the 20 year term of the lease. The lease agreement for
the B&K Steel property and equipment provides for rental payments in the amount
of $340,000 per year over the 20 year term of the lease. The Company also leases
additional office facilities adjacent to the Company's existing principal office
and shop facilities. This office lease provides for rental payments of $135,000
per year over the 20 year term of the lease. See "Business -- Properties" and
"Certain Relationships and Related Transactions."

The Company estimates that its capital expenditures for 1997 will be
approximately $2.5 million. The Company believes that its available funds, cash
generated by operating activities and funds available under its bank credit
facility will be sufficient to fund these capital expenditures and its working
capital needs. However, the Company may expand its operations through future
acquisitions and may require additional equity or debt financing. See "Risk
Factors -- Substantial Liquidity Requirements."

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

Statements of Financial Accounting Standards No. 123, "Accounting for Stock
Based Compensation" (FAS 123), establishes a fair value method of accounting for
stock based compensation plans and for transactions in which an entity acquires
goods or services from non-employees in exchange for equity instruments. The
Company adopted this standard effective January 1, 1996. FAS 123 encourages, but
does not require, companies to record compensation costs for stock based
employee compensation. The Company has chosen to account for stock based
compensation to employees utilizing the intrinsic value method of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
Accordingly, compensation costs for stock options is measured as the excess, if
any, of the fair market value of the Company's stock at the date of grant over
the amount an employee must pay to acquire the stock. The Company's first stock
option grants were made in February 1997, thereby making the standards
applicable to the quarter ended March 31, 1997. The grants were made at amounts
that management believes equal the fair value of its Common Stock at the date of
grant and, accordingly, no compensation expense was required.

Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
(FAS 128), issued by the Financial Accounting Standards Board in February 1997,
is effective for periods ending after December 15, 1997. At that time, the
Company will be required to change the method currently used to compute earnings
per share and to restate all prior periods. Under the new requirements for
calculating primary earnings per share, the dilutive effect of stock options
will be excluded. The impact is expected to result in an increase in pro forma
primary earnings per share for the year ended December 31, 1996 of $0.22 and for
the quarter ended March 31, 1997 of $0.04. The impact of FAS 128 on the
calculation of fully diluted pro forma earnings per share for these periods is
not expected to be material.

26
<PAGE> 27

BUSINESS

GENERAL

The Company is a rapidly growing steel fabrication and erection company
that provides a fully integrated range of steel construction services.
Engineering News Record, a professional trade publication, ranked the Company
the second largest steel erection subcontractor in the United States based on
1995 revenues and the largest steel erection subcontractor in the United States
based on 1994 revenues. The Company seeks to differentiate its operations by
offering complete, turnkey steel construction services featuring engineering,
detailing, shop fabrication and field erection. By offering a single source of
steel construction services, the Company is able to respond more efficiently to
the design and construction challenges associated with large, fast track,
"design-as-you-go" construction projects.

The Company's services are employed in the construction of a variety of
commercial and industrial structures, such as hotels and casinos, office
buildings, hospitals, manufacturing plants, mining facilities, shopping malls,
sports stadiums, power plants, bridges, large diameter water pipes and other
public works projects. Its customers include general contractors, project
owners, engineering firms, mine operators and various governmental entities. The
Company operates primarily in the southwestern United States with a
concentration in Arizona, Nevada, and southern California, and is expanding its
operations in South America and Mexico.

The Company has experienced significant growth in revenues and pre-tax
income over the past five years. Revenues have more than doubled from $47.0
million in 1992 to $103.9 million ($113.3 million giving pro forma effect to the
1997 B&K Steel acquisition) in 1996. During that same period, pre-tax income has
grown at a compound annual growth rate of 101.5%, from $610,000 in 1992 to $10.1
million in 1996.

OVERVIEW OF INDUSTRY

Companies engaged in the steel fabrication and erection industry prepare
detailed shop drawings, fabricate and erect structural steel and steel plate
weldments, and perform related engineering services for the construction of
various facilities. The primary customers for these services include private
developers, general contractors, engineering firms and governmental agencies
involved in a variety of large scale construction projects. Historically, these
customers have relied on multiple subcontractors to perform various services to
complete a single project, primarily because few companies in this industry
offer fully integrated engineering, detailing, fabrication and erection
services.

The Company believes that there is an increasing trend in the construction
industry toward complex, fast track, "design-as-you-go" projects. This trend is
largely driven by the desire of project owners to more quickly secure the
benefits of revenue producing projects, such as casinos, mines and computer chip
plants. These projects require that all phases of construction be accomplished
in accordance with compressed time schedules. Further, because many construction
activities are dependent on the progress of steel erection, timely completion of
this phase is critical. These projects also are characterized by numerous design
changes requiring that all construction participants coordinate their efforts in
order to respond quickly and efficiently in implementing these changes. These
trends have created a demand for fully integrated fabrication and erection
contractors that can (i) avoid the coordination difficulties inherent in the use
of multiple subcontractors and (ii) implement rapid and multiple design changes
in a coordinated and timely manner, preventing project delays and reducing costs
to the general contractor or owner. The Company believes that it has gained a
reputation in the industry as a reliable, fully integrated provider of
engineering, detailing, fabrication and erection services with the ability to
complete large, complex projects on a timely, cost efficient basis.

The Company also believes that the steel fabrication and erection industry
is highly fragmented and that many of its competitors are small businesses
operating in local or regional markets. Given the trend toward the use of fully
integrated contractors and the large number of smaller companies engaged in this
industry, the Company believes the industry may experience consolidation.

27
<PAGE> 28

BUSINESS STRATEGY

The Company's objective is to achieve and maintain a leading market
position in each of its geographic and specific product markets. The Company
believes that its track record of providing quality services on a timely basis
has enabled it to garner a dominant share of the primary geographic markets
served by it and to increase its market share of large, fast track projects in
markets in which it maintains a significant presence. The Company will continue
to pursue its objective by implementing a strategy comprised of the following
components:

Promote Coordinated Service Capabilities. The Company promotes its
ability to provide a fully integrated range of engineering, detailing,
fabrication and erection services, which enables the Company to compete
more effectively on large, "design-as-you-go" projects that typically offer
more favorable contract terms. The Company believes it is positioned to
capitalize on industry trends toward construction of large, fast track
projects incorporating numerous design changes, and the increasing demand
for fully integrated fabrication and erection contractors capable of both
implementing those design changes in a timely and cost efficient manner and
providing overall project management capabilities.

Emphasize Innovative Services. The Company focuses its engineering,
detailing, fabrication and erection expertise on distinct product segments
requiring unique or innovative techniques, where the Company typically
experiences less competition and more advantageous negotiated contract
opportunities. The Company has extensive experience in providing services
requiring complex fabrication and erection techniques and other unusual
project needs, such as specialized transportation, steel treatment or
specialty coating applications. These service capabilities have enabled the
Company to address such design sensitive projects as computer chip
manufacturing facilities, large diameter underground water pipes, and
uniquely designed hotels and casinos.

Diversify Customer and Product Base. Although the Company seeks to
garner a leading share of the geographic and product markets in which it
competes, it also seeks to diversify its construction projects across a
wide range of commercial, industrial, and specialty projects. The following
chart sets forth the percentage of revenues attributable to the Company's
various geographic and project markets for 1996:

<TABLE>
<CAPTION>
INDUSTRIAL COMMERCIAL OTHER
---------- ---------- -----
<S> <C> <C> <C>
Arizona........................ 12% 30% 1%
California..................... 2% 19% --
Nevada......................... 4% 18% --
International.................. 14% -- --
</TABLE>

In recent periods, the Company has focused efforts on diversifying
into international markets. Accordingly, the Company believes that its
combined diversification into new geographic, specific product and
international markets will better enable it to expand its revenue base and
to reduce the impact of periodic market or economic conditions adversely
impacting one or more of its market segments.

Employ Unique Technical Expertise. The Company offers in-house
project management and design expertise not typically provided by steel
fabricators and erectors. The Company employs two registered structural
engineers and approximately 30 design and detailing personnel, which
permits the Company to occupy a more influential role in critical design
decisions on many projects. The Company believes that its ability to offer
these services allows it to negotiate rather than bid on a greater
percentage of its contracts, which enables the Company to obtain terms more
favorable to it than the terms of competitively bid projects, while at the
same time providing overall cost savings and project efficiencies to its
customers. The Company's technical expertise also permits it to compete
more effectively for projects offering unique structural or design
challenges, such as the fully retractable roof on the Bank One Ballpark,
the Salt River Siphon Replacement Project, and specialty coating of large
diameter water pipe. See "Business -- Primary Markets and Products."

28
<PAGE> 29

GROWTH STRATEGY

The Company believes that the steel fabrication and erection industry will
continue to be characterized by large, complex, fast track projects. The
complexity and size of these projects requires companies with extended financial
and operational capabilities. With its integrated service capabilities and
financial and management strength, the Company intends to take advantage of this
trend. Additionally, the fragmented nature of the industry provides the Company
opportunities for growth. The Company seeks to achieve continued growth and
diminish the impact of business and economic cycles by pursuing a growth
strategy consisting of the following components:

Promote Internal Growth. The Company intends to pursue continued
internal growth by adding sales and marketing personnel to dedicated, fast
growing markets in which the Company is actively pursuing new projects, by
further developing its engineering and design capabilities and fabrication
capacity, and by continually updating its fabrication and detailing
equipment and technologies. The Company believes that these efforts will
enhance its market share, revenues, and operating income in its existing
and targeted principal markets and improve its operating capacity.
Recently, the Company dedicated one sales manager to the rapidly expanding
Nevada commercial and industrial market and appointed one full-time
marketing representative to pursue new project opportunities in South
America. In addition, the Company recently secured additional office and
administrative facilities, which will permit the expansion of its existing
detailing, estimating and other project operations. The Company also
intends to invest approximately $2.5 million in new fabrication equipment
and technologies in 1997.

Acquire Synergistic Businesses. The Company will pursue selective
acquisitions of steel fabrication and erection companies that offer the
Company increased plant facilities, opportunities to increase market share
in selected geographic markets, penetration of new product market segments
and access to domestic and international markets targeted by the Company
for geographic expansion. Such acquisitions may also provide the additional
benefits of increased purchasing efficiencies with respect to steel and
other raw materials, payment and performance bonding and insurance
premiums, and more efficient allocation and utilization of labor resources
among projects within its geographic markets. The Company believes that
many of its competitors operate primarily on a local or limited geographic
basis and, while having established relationships in those markets, lack
the resources to compete for large or more complex projects. In addition,
the industry is highly fragmented with many of the Company's competitors
being closely or family held entities.

In January 1997, the Company completed the acquisition of all of the
outstanding capital stock of B&K Steel, a competitor of the Company located
in the Phoenix metropolitan area. B&K Steel is primarily a fabrication
contractor and had revenues of approximately $9.4 million in 1996. The
Company believes that the acquisition of B&K Steel will enable the Company
to capture a larger share of the Arizona industrial and commercial market
and will provide the Company with increased access to the mining industry
throughout the southwestern United States. The acquisition of B&K Steel
also provides the Company with additional fabrication facilities located
near the Company's existing facilities.

Create Additional Project Opportunities. The Company believes that
its ability to efficiently coordinate and implement numerous design and
logistical changes on large or more complex fast track projects, combined
with its established long term relationships with key national and
multi-national general contractors and other customers, will provide the
Company with opportunities to market its services in a number of markets in
which the Company has not yet achieved a leading position or conducted
significant operations. Domestically, the Company plans to expand into
markets in which it believes it can leverage its existing expertise to
achieve a significant share of such markets. Among the regions targeted by
the Company for domestic expansion are the Pacific Northwest, which
presents several opportunities in the expanding computer chip manufacturing
industry, and Texas, which offers the Company convenient and cost effective
access to its developing international markets.

The Company also will seek to capture significant market share in
selected product markets. Among other markets, the Company is seeking to
increase its participation in the construction of sports stadiums and
airports and, through its acquisition of B&K Steel, the mining and smaller
commercial construction

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markets. The Company plans to participate in these markets through the
acquisition of existing participants, expansion of strategic customer
relationships into new markets, and through increased sales and marketing
efforts generally.

Expand Internationally and Develop Strategic Alliances. The Company
recently has developed its presence in selected international markets,
including Chile and Argentina, and is pursuing opportunities in Mexico and
Southeast Asia. Each of these international markets is expected to have a
growing demand for services offered by the Company. In Argentina, the
Company recently completed fabrication and erection coordination services
for mill facilities at one of the largest copper mines in the world. The
Company also completed a large mining project in Chile. In addition, the
Company will seek to expand internationally by partnering with existing
multi-national customers such as Fluor Daniel, Inc. and Bechtel Group,
Inc., as well as other international structural and design engineering
firms, and by entering into strategic alliances with leading foreign
fabricators and erectors in the Company's targeted international markets.
The Company believes that its international alliances also will help to
reduce its risk of entry into foreign markets by partnering with entities
having an established presence and experience in such markets.

The Company has developed a strategic alliance with Corey, S.A. de
C.V., Mexico's leading steel fabrication and erection contractor. Pursuant
to this alliance, the parties intend to form a corporate joint venture that
intends to provide detailing services to the Company's domestic operations.
The Mexico joint venture intends to use state of the art Stru-Cad and
Autocad design systems, and is expected to significantly expand the
Company's internal detailing capacity. The Company believes its investment
in this joint venture will reduce its reliance on detailing subcontractors
and improve the Company's cost profile. The Company expects the alliance to
provide it access to several large projects in Mexico through Corey's
marketing, importation and fabrication support.

PRIMARY MARKETS AND PRODUCTS

The Company's current principal geographic markets include Arizona and
Nevada. The Company also has a substantial presence in southern California and
currently is expanding into selected international markets. Set forth below is a
description of the Company's primary markets and products.

Arizona Market. The Company is the leading steel fabrication and erection
firm in Arizona. The Company has been a prominent participant in many of
Arizona's largest and most visible public and private projects, including the
expansion of Sky Harbor Airport in Phoenix, which involved the night time
erection of pedestrian walkways linking the airport's main concourses; the
erection of 10,000 tons of bridge plate girders for the interchange of
Interstates 10 and 17 in Phoenix; and the fabrication of the Roosevelt Dam
penstock near Phoenix. In addition, the Company believes that it is the dominant
fabricator and erector for Arizona's rapidly growing semiconductor and computer
chip industry. The Company's major projects in this industry have included the
fabrication and erection of structural steel for Intel Corp.'s "Fab 12"
facility, which was one of the largest construction projects of its kind in the
United States in 1994 and 1995; the fabrication and erection of Motorola Inc.'s
Chandler, Arizona computer chip manufacturing facility in 1995; and the
1995-1996 fabrication and erection of portions of the Sumitomo Energy Center, a
new wafer manufacturing plant constructed by Sumitomo Sitix in Scottsdale,
Arizona. Recent large Arizona-based projects include:

- BANK ONE BALLPARK. In 1995, the Company was awarded a contract to
provide steel fabrication and erection services for the Bank One Ballpark
in Phoenix, a new state of the art baseball stadium for Major League
Baseball's Arizona Diamondbacks franchise that will feature, among other
things, a fully retractable roof consisting of steel components detailed,
fabricated and erected by the Company. The stadium contract is divided into
three phases representing a total of approximately $55 million in revenues
to the Company, of which approximately $29 million had been earned as of
March 31, 1997. The stadium will require over 20,000 tons of structural
steel and the employment of approximately 160 iron workers at the peak of
construction.

- BARROWS NEUROLOGICAL INSTITUTE. The Company was the fabricator and
erector for the Barrows Neurological Center in Phoenix, Arizona. Due to the
unique nature of this facility, the project required

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<PAGE> 31

highly specialized vibration control which resulted in a structural frame
that weighs five times normal tonnage for a building of this size.

- MAYO HOSPITAL. The Company is the fabricator and erector for the
Mayo Clinic's newest hospital facility currently being constructed in
Phoenix, Arizona.

Nevada Market. The Company believes that it is the dominant fabricator and
erector in the Nevada hotel and casino construction industry, which has
experienced rapid expansion over the past several years and is expected to
continue its expansion for the foreseeable future. The Company maintains a sales
manager dedicated to pursue Nevada-based projects. In recent years, the Company
has completed several large fast track projects in the Nevada hotel and casino
industry, including the 500,000 square foot Sands Expo and Convention Center,
which was completed in nine months; the Mirage Hotel and Casino; the Holiday
Riverboat remodeling project, which involved the fabrication and erection of two
120 foot high river boat "stacks" constructed by the Company during the active
operation of the resort; the launch tower of the "SkyScreamer SkyCoaster" thrill
ride at the MGM Grand Theme Park, a 220 foot high structure that was erected by
the Company in only three days; and the Orleans Hotel and Casino, which involved
the fabrication and erection of over 7,900 tons of structural steel for the
casino, entertainment, and retail areas. Among the Company's recent hotel and
casino projects in Nevada are the following:

- BELLAGIO HOTEL AND CASINO. The Company is the fabricator and
erector for the casino and retail areas of the Bellagio Hotel and Casino, a
new $1.2 billion Spanish-themed resort consisting of over one million
square feet of retail and casino space and a 37 story hotel tower with
approximately 3,800 rooms.

- MGM GRAND HOTEL AND CASINO RENOVATION. This structure is presently
the world's largest hotel and casino with 5,005 hotel rooms and one million
square feet of retail and casino space. The Company's participation
includes the completion of a facade renovation and the provision of
fabrication and erection services for the new MGM Convention Center, which
will consist of over 250,000 square feet of convention area.

- NEW YORK, NEW YORK HOTEL AND CASINO. The Company was the fabricator
and erector for the New York, New York hotel and casino, which required
approximately 6,500 tons of structural steel and represented a contract
price to the Company of over $15 million. The hotel was constructed to
resemble the New York City skyline, including replicas of the Statute of
Liberty, the Brooklyn Bridge, and other New York City landmarks.

- LUXOR HOTEL AND CASINO SHOWROOM THEATER. The Company has been
involved in the construction of the Luxor Hotel and Casino Showroom Theater
and renovation of the hotel ballroom.

California Market. The Company has maintained a strong presence in the
California market and intends to achieve a greater share of this geographic
market as it experiences an increase in new construction activity. The Company
provided fabrication and erection services for several new hospital facilities
in California, including the new Children's Hospital and Health Center in San
Diego, the expansion of the Sharp Women's Center in San Diego, which required
construction around existing and operating hospital wings, and the Valley
Medical Center in San Jose. The Company also was selected as the fabricator and
erector for the Fashion Valley Mall in San Diego, which involved the fabrication
and erection of over 7,000 tons of steel for a new second level of retail
shopping space, which was erected at night over the existing shopping facility
without disturbing the ordinary operations of the mall.

Specialty Markets. In addition to seeking to achieve a leading market
share in the principal geographic markets that it serves, the Company focuses
its fabrication and erection expertise on distinct product segments,
particularly product segments requiring unique or specialized expertise where
the Company has the potential to achieve a dominant market share. A recent
example of such a product segment is large diameter water pipe used in
governmental aqueduct systems. These projects require the complex formation and
welding of steel plate into large diameter pipe sections that are used to
transport water from major supply sources to various population centers,
primarily in the arid southwestern United States. The Company has developed
in-house specialized fabrication equipment used to construct and weld these pipe
sections, a unique coal tar and fiberglass enamel application system used to
coat the pipe, and customized transportation equipment

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<PAGE> 32

necessary to deliver the system to its ultimate destination. The Company's
expertise and specialized equipment development has made it a dominant
fabricator and erector of these large aqueduct projects in Arizona, Nevada, and
California. The Company's recently completed large diameter pipe projects
include the following:

- SALT RIVER SIPHON REPLACEMENT PROJECT. The Company served as the
fabricator and erector for the Salt River Siphon Replacement project, a
project requiring the fabrication of over 8,500 feet of 21 foot diameter
pipe for the U. S. Bureau of Reclamation. The system will transport water
from the Salt River near Phoenix, Arizona to the major population centers
of Arizona.

- AGUA FRIA SIPHON PROJECT. This project was similar in scope to and
followed the Company's successful completion of the Salt River Siphon
project, and entailed the specialized fabrication and erection of over two
miles of 21 foot diameter pipe from the Central Arizona Project canal
system under the Agua Fria River to Phoenix, Arizona.

- MOHAVE UNDERGROUND AQUEDUCT. The Company was the contractor for the
Mohave Underground Aqueduct project, a massive underground siphon system
for the California Department of Water that will transport water to San
Bernardino, California. The aqueduct system utilized over seven miles of 12
foot diameter pipe.

- RIVER MOUNTAIN TUNNEL. The Company recently completed fabrication
of the River Mountain Tunnel water system in Nevada, which consists of
several uniquely constructed pieces of 12 foot diameter pipe, which will be
used to transport water to Las Vegas, Nevada.

Other recent specialty projects completed by the Company include the
fabrication and erection of a missile launch complex at Vandenberg Air Force
Base, a thermal blast simulator for the U. S. Corps of Engineers designed to
test military and other equipment against the simulated forces of an atomic
blast, and numerous large capacity water storage tanks holding up to five
million gallons of water that have been fabricated by the Company for a variety
of governmental agencies, private utilities, and other industrial customers.

International Markets. The Company recently has focused its expansion into
selected international markets such as South America and Mexico, and is
exploring opportunities in Southeast Asia. In South America, the Company
provided the design consultation, fabrication, and delivery of approximately
7,200 tons of structural steel for the Bajo de la Alumbrera mining project in
Argentina, which is anticipated to be one of the largest copper mines in the
world when completed. In Chile, the Company recently completed the Verde Gold
mine project for Fluor Daniel, Inc. In Mexico, the Company is currently
providing the fabrication of an ore facility and conveyor system.

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Following is a list of selected projects in the Company's principal
geographic and product market segments which the Company has completed within
the last ten years, each of which represents a contract price in excess of
$1,000,000:

<TABLE>
<S> <C>
COMPUTER CHIP PLANTS LOCATION
- --------------------- --------
Intel C-12 Phoenix, AZ
Motorola Bldg 99 Phoenix, AZ
Western Digital Irvine, CA
NEC Megaline Project Sacramento, CA
Intel NADC and C-5 Bldgs Chandler, AZ
HOSPITALS
- ---------
Valley Medical Center Santa Clara
County, CA
Mayo Hospital Phoenix, AZ
Children's Hospital San Diego, CA
Sharps Hospital Womens' Center San Diego, CA
Riverside In-Patient Hospital Riverside, CA
Barrows Neurological Center Phoenix, AZ
Kaiser Clinic Los Angeles, CA
Veterans Administration Hospital San Diego, CA
DISTRIBUTION CENTERS
- -------------------
Smiths Distribution Center Tolleson, AZ
Smiths Distribution Center Riverside, CA
Toyota Distribution Center Ontario CA
Anheuser Busch Ontario, CA
Ralphs Grocery Distribution Los Angeles, CA
LARGE DIAMETER WATER PIPE
- ---------------------------
Mojave Siphon Pipe Adelanto, CA
Agua Fria Siphon Maricopa County,
AZ
Salt River Siphon Maricopa County,
AZ
Control Gorge Penstock Bishop, CA
Waddell Dam Siphon Pipe Maricopa County,
AZ
SPORTS ARENAS
- -------------
America West Arena Phoenix, AZ
INDUSTRIAL FACILITIES AND MINES LOCATION
- -----------------------------
Bajo de la Alumbrera Argentina, South
America
Verde Gold Santiago, Chili
Newmont Gold Mill #2, #4, #5 Carlin, NV
Phelps Dodge Mining Facility Morenci, AZ
U.S. Corps of Engineers Desalinization Plant Yuma, AZ
Titanium Metals Plant Henderson, NV
Preheater Tower Rillito, AZ
General Mills Process Plant Albuquerque, NM
AIRPORTS
- -------
Phoenix Sky Harbor (Terminal 4) Phoenix, AZ
McCarren Airport Las Vegas, NV
Skywest Terminal Salt Lake City, UT
HOTEL, CASINOS AND CONVENTION CENTERS
- ---------------------
MGM Hotel & Casino Las Vegas, NV
New York, New York Casino Las Vegas, NV
Sands Convention Center Las Vegas, NV
The Orleans Hotel & Casino Las Vegas, NV
Boulder Station Hotel & Casino Las Vegas, NV
The Mirage Hotel & Casino Las Vegas, NV
Flamingo Hilton Las Vegas, NV
Desert Inn Hotel & Casino Las Vegas, NV
Hard Rock Hotel & Casino Las Vegas, NV
SHOPPING MALLS
- ---------------
Scottsdale Fashion Square Scottsdale, AZ
Galleria at Sunset Las Vegas, NV
Boulevard Mall Expansion Las Vegas, NV
Nordstrom Department Store Santa Ana, CA
Fashion Valley Mall San Diego, CA
Barney's of New York Beverly Hills, CA
The Shops at Arizona Center Phoenix, AZ
</TABLE>

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<PAGE> 34

BUSINESS OPERATIONS

The primary services provided by the Company are engineering and
preparation of detail drawings, shop fabrication, and field erection. Following
is a description of the Company's principal services.

- Engineering and Detailing. The Company maintains significant
in-house structural engineering and detailing capabilities which enable it
to implement and coordinate with its shop and field personnel changes to
building and structural designs sought by project owners or general
contractors, and to help influence critical determinations as to the most
cost effective systems, designs, connections, and erection procedures for a
particular project. The Company's detailers prepare detail shop drawings of
the dimensions, positions, locations, and connections, and the fabrication
and erection sequences of, each piece of steel utilized in a project, and
continually update these drawings to accommodate design and other changes.
The Company utilizes a Stru-CAD automated detailing system that interacts
electronically with the Company's numerically controlled fabrication
equipment and produces updated detail drawings electronically, which are
delivered to each of the Company's domestic and foreign field locations.
The Company's detailing division initially prepares advance materials bills
by size and length of each steel piece within pre-defined areas or
sequences of erection for each project. Detailers coordinate directly with
customers and the Company's fabrication and erection teams to determine and
plan the order of fabrication and erection of a project and associated
personnel and equipment requirements.

- Shop Fabrication. The Company's fabrication services consist of the
procurement from steel producers of raw steel shapes in different sizes and
lengths. These shapes vary in cross-section from I-beams to angle, channel,
tube, pipe, and plate. Upon delivery of these steel shapes, and prior to
fabrication, the Company prepares load lists that identify the sequence and
date that each individual piece of steel is required on a project, a
procedure that reduces the handling of and the need to store materials in
the field. Upon completion of detail shop drawings, the Company's
fabrication shop cuts the raw steel pieces to length, drills and punches
holes through the use of numerically controlled beam lines, and completes
coping and beveling with its numerically controlled machinery and automated
burning equipment. The Company then fabricates fittings and completes
welding and inspection of each finished structural piece. The Company
utilizes advanced technologies to inspect weld seams, which significantly
reduces costs, fabrication hours, and the likelihood of structural defects.
After the completion of processing to customer specifications, finished
pieces are loaded for shipment to the construction site, often pursuant to
just-in-time delivery schedules.

- Field Erection. The erection process typically consists of
pre-assembly of steel component parts at the project site, the lifting of
components by crane to the appropriate location at the site and the final
assembly of major components to form the steel backbone of the project. The
Company's field erection crews erect fabricated steel components in
accordance with erection drawings prepared and updated by the Company's
detailers. The erection process for each project is managed by experienced
field supervisors and the Company employs local union erection personnel on
an as needed basis in areas near the project sites.

PROJECT MANAGEMENT

All contract awards to the Company are assigned a project number which is
used to track each steel component and man-hour associated with the project
through the entire construction process. All project drawings, specifications,
and completion schedules on a project are reviewed by the Company's General
Manager and all projects are assigned to one or more Project Managers who assume
primary responsibility for all aspects of the project, subject to oversight by
the General Manager. Often a Project Manager assigned to a given project will
have significant experience in similar projects. A Project Manager generally
will be responsible for one to five projects in various stages of completion at
any given time, depending on the scope, complexity, and geographic location of
such projects. Each project is divided into critical sequences of steel groups
that follow the anticipated erection or fabrication path. Each sequence follows
a timeline and the status is continually monitored. The General Manager and
Project Manager for each project coordinate and manage design changes or other
changes in scheduled completion deadlines in an effort to minimize overall
project

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<PAGE> 35

delays. The Company provides production bonuses to its Project Managers based
on, among other factors, the achievement of lower costs on a project than the
estimated costs used to formulate the initial bid or price or prices of
subsequent change orders, and the ability to minimize costs or cost overruns on
particularly complex projects or on projects that exceed initial cost estimates.

The Company believes that a key factor in its success has been its ability
to provide through its in-house personnel valuable input and assistance to
general contractors, engineering firms, and other customers with respect to
overall project design of fabrication and erection sequences and other critical
project decisions, which often results in overall project cost savings and
efficiencies and helps to solidify key customer relationships. In addition to
its centralized project management, the Company also uses a high percentage of
skilled erection employees local to projects and utilizes advanced scheduling
systems to enhance its ability to provide project management services to
customers complementary to its core engineering, detail drawing, shop
fabrication, and field erection services.

SAFETY AND QUALITY ASSURANCE

The Company has adopted and maintains important safety policies that are
administered and enforced by the Company's top management. The Company considers
workplace accident prevention to be of primary importance in all phases of its
operations and provides continual training on safety procedures and techniques
to all of its shop and field personnel.

The Company uses advanced welding and fabrication technologies and all of
the Company's products are fabricated in accordance with applicable industry and
specific customer standards and specifications. The Company has achieved and
maintains a level three certification by the American Institute of Steel
Construction (AISC) with respect to its fabrication operations, the highest
level of certification available from AISC. In addition, the Company's welding
employees are certified in accordance with the American Society of Mechanical
Engineers (ASME) Section IX, Non-Destructive Examination Inspector Certification
to Society Non-Destructive Testing TC-IA Standards. The Company has developed
project-specific and Company-wide quality assurance and quality control
programs, and utilizes sophisticated x-ray and ultra-sonic systems to inspect
weld seams.

SALES AND ESTIMATING

The Company's domestic sales and marketing efforts are led by five sales
managers. Each sales manager is responsible primarily for the Company's sales
and marketing efforts in defined geographic areas. The Company also employs one
full-time international marketing representative responsible primarily for the
development of the emerging South American and Mexican markets. In addition, the
Company employs ten full-time project estimators and one chief estimator. The
Company's sales representatives maintain relationships with and make personal
and other sales calls on general contractors, architects, engineers, and other
potential sources of business to determine potential new projects under
consideration, which provides the Company with valuable market information and
new project opportunities. The Company maintains future projects reports in
order to track the weekly progress of new opportunities. The Company's sales
efforts are further supported by most of its executive officers and by its
engineering personnel, who have substantial experience in the design,
fabrication, and erection of structural steel and heavy steel plate.

The Company competes for new project opportunities through its
relationships and interaction with its active and prospective customer base,
which provides the Company with valuable current market information and sales
opportunities. In addition, the Company frequently is contacted by governmental
agencies in connection with public construction projects, and by large private
sector project owners and by general contractors and engineering firms in
connection with new building projects such as plants, warehouse and distribution
centers, and other industrial and commercial facilities.

Upon selection of projects to bid or price, the Company's estimating
division reviews and prepares projected costs of shop, field, detail drawing
preparation and crane hours, steel and other raw materials, and

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<PAGE> 36

other costs. On bid projects, a formal bid is prepared detailing the specific
services and materials to be provided by the Company, payment terms and project
completion timelines. Upon acceptance, the Company's bid proposal is finalized
in a definitive contract.

CONTRACTING METHODS AND PERFORMANCE BONDING

The Company's projects are awarded through a competitive bid process or are
obtained through negotiation, in either case generally using one of two types of
contract pricing approaches: fixed price or cost-plus pricing. Under the fixed
price approach, the Company receives the price fixed in the contract, subject to
adjustment only for change orders placed by the customer. As a result, the
Company retains all cost savings but is also responsible for cost overruns.
Under the cost-plus arrangement, the Company receives a specified fee in excess
of its direct labor and material cost, up to a maximum amount, and thus seeks to
gain protection against cost overruns and sometimes benefits directly from cost
savings. Historically, a substantial majority of the Company's contracts have
been fixed price arrangements.

While customers may consider a number of factors, including availability,
capability, reputation, and safety record, price and the ability to meet
customer imposed project schedules are the principal factors on which the
Company obtains contracts. Generally, the Company's contracts and projects vary
in length from three to twelve months depending on the size and complexity of
the project, project owner demands, and other factors.

The Company's contract arrangements with customers sometimes require the
Company to provide payment and performance bonds and, in selected cases
typically associated with international projects, letters of credit, to
partially secure the Company's obligations under its contracts. Bonding
requirements typically arise in connection with public works projects and
sometimes with respect to certain private contracts. The Company's payment and
performance bonds are obtained through surety companies and typically cover the
entire contract price on a project. The Company believes that its bonding
capacity provides a competitive advantage in some cases due to the Company's
ability to obtain large bonds and to negotiate more favorable pricing of bonds.

BACKLOG

The Company considers backlog an important indicator of its operating
condition because its engineering, detailing, fabrication, and erection services
are characterized by long lead times for projects and orders. The Company
defines its backlog of contract commitments as the potential future revenues to
be recognized upon performance of contracts awarded to the Company. Backlog
increases as new contract commitments are obtained, decreases as work is
performed and the related revenues are recognized, and increases or decreases as
modifications in work are performed under a contract. As of December 31, 1996,
the Company's backlog was $67.3 million. As of March 31, 1996 and 1997, the
Company's backlog was $126.1 million and $65.6 million, respectively. Of the
Company's $67.3 million backlog as of December 31, 1996, approximately $13.1
million was attributable to three projects for a single customer in Las Vegas,
Nevada, and approximately $34.3 million was attributable to the Bank One
Ballpark project in Phoenix, Arizona. Of the Company's $65.6 million backlog as
of March 31, 1997, approximately $15.9 million was attributable to two projects
for a single customer in Las Vegas, and approximately $26.8 million was
attributable to the Bank One Ballpark project. The Company expects approximately
97% of its backlog as of December 31, 1996, and approximately 97% of its backlog
as of March 31, 1997, to be recognized as revenues in 1997.

COMPETITION

The principal geographic and product markets served by the Company are
highly competitive. The Company competes with other contractors on a local,
regional, or national basis, and, in certain cases, on an international basis.
The Company has different competitors for each of its services and product
segments and within each geographic market served by the Company. The Company
believes that it can compete effectively for new projects both nationally and
internationally and that it is among the largest competitors in its industry.
Among the principal competitive factors within the industry are price,
timeliness of completion of projects,

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<PAGE> 37

quality, reputation, and the desire of customers to utilize specific contractors
with whom they have favorable relationships and prior experience. Certain of the
Company's competitors have financial and operating resources greater than those
of the Company.

GOVERNMENTAL REGULATION

The Company's operations are governed by and subject to government
regulations in the United States and in foreign countries in which the Company
operates, including laws and regulations relating to workplace safety and worker
health, principally the Occupational Safety and Health Act and regulations
thereunder in the United States. With respect to its international operations,
the Company is subject to a number of laws and regulations, including those
relating to taxation of its earnings and earnings of its personnel and its use
of local personnel and suppliers. The Company's operations are subject to the
risk of changes in federal, state, and local laws and policies which may impose
restrictions on the Company, including trade restrictions, expropriation or
nationalization decrees, confiscatory tax systems, primary or secondary boycotts
or embargos directed at specific countries, import restrictions or other trade
barriers, and mandatory sourcing rules, any of which could, if adopted or
implemented, materially and adversely affect the Company. The Company believes
that it is in material compliance with the laws and regulations under which it
and its operations are currently governed and does not believe that future
compliance with such laws and regulations will have a material and adverse
effect on it. The Company cannot determine, however, to what extent future
operations and earnings of the Company may be affected by new legislation, new
regulations, or changes in or new interpretations of existing regulations.

The Company is subject to licensure and holds or has applied for licenses
in each of the states in the United States in which it operates and in certain
local jurisdictions within such states. The Company believes that it is in
material compliance with all contractor licensing requirements in the various
states in which it operates. The loss or revocation of any license or the
limitation on any of the Company's primary services thereunder in any state in
which the Company conducts substantial operations could prevent the Company from
conducting further operations in such jurisdiction and would have a material
adverse effect on the Company.

ENVIRONMENTAL REGULATION

The Company's operations and properties are affected by numerous federal,
state, and local environmental protection laws and regulations, such as those
governing discharges into air and water, and the handling and disposal of solid
and hazardous waste. The requirements of these laws and regulations have become
increasingly stringent, complex, and costly to comply with. In addition, the
Company may be subject to claims alleging personal injury or property damage as
a result of alleged exposure to hazardous substances. The Company is not aware
of any non-compliance with environmental laws that could have a material adverse
effect on the Company's business or operations. There can be no assurance,
however, that such laws, regulations, or their interpretation will not change in
the future in a manner that could materially and adversely affect the Company.

Certain environmental laws, such as CERCLA, provide for strict and joint
and several liability for investigation and/or remediation of spills and other
releases of hazardous substances. Such laws may apply to conditions at
properties presently owned or operated by the Company or its predecessors, as
well as to conditions at properties at which waste or other contamination
attributable to an entity or its predecessors come to be located. The Company's
facilities have been operated for many years, and substances that are or might
be considered hazardous were used at such locations. The Company does not
anticipate incurring material capital expenditures for environmental controls or
for investigation or remediation of environmental conditions during the current
or succeeding fiscal year. Nevertheless, the Company can give no assurance that
it, or entities for which it may be responsible, will not incur liability in
connection with the investigation and remediation of facilities it currently
owns or operates or other locations in a manner that could materially and
adversely affect the Company.

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EMPLOYEES

As of March 31, 1997, the Company employed approximately 765 people. The
number of persons employed by the Company on an hourly basis fluctuates directly
in relation to the amount of business performed by the Company. Certain of the
fabrication and erection personnel employed by the Company are represented by
the United Steelworkers of America, the International Association of Bridge,
Structural and Ornamental Iron Workers Union, the International Union of
Operating Engineers, and the International Brotherhood of Boilermakers, Iron
Shipbuilders, Blacksmiths, Forgers and Helpers Union. The Company is a party to
several separate collective bargaining agreements with such unions in certain of
the Company's current operating regions, which expire (if not renewed) at
various times in the future. Most of the Company's collective bargaining
agreements are subject to automatic annual or other renewal unless either party
elects to terminate the agreement on the scheduled expiration date. The Company
considers its relationship with its employees to be good and, other than
sporadic and unauthorized work stoppages of an immaterial nature, none of which
have been related to the Company's own labor relations, the Company has not
experienced a work stoppage or other labor disturbance. See "Risk
Factors -- Union Contracts."

The Company utilizes third-party fabrication subcontractors on many of its
projects and also subcontracts detailing services from time to time when it
lacks available in-house capacity for such services. The Company's inability to
engage fabrication and detailing subcontractors on terms favorable to the
Company could limit the Company's ability to complete projects in a timely
manner or compete for new projects and could have a material adverse effect on
the Company. See "Risk Factors -- Dependence on Subcontractors."

PROPERTIES

The Company's primary fabrication facilities consist of over 400,000 square
feet of shop space under roof on approximately 26 acres in Phoenix, Arizona.
These facilities also house the Company's executive and administrative offices
and engineering and detailing division and are leased by the Company from a
partnership owned by certain affiliates of the Company. This lease was recently
amended as of March 1, 1997 and expires on February 28, 2017. Annual rent under
the lease totaled $252,000 and $264,000 for 1995 and 1996, respectively, and
will be $292,000 in 1997, $414,000 in 1998, $556,000 in 1999, $601,000 in 2000,
and $605,000 in each year thereafter during the remaining term of the lease,
subject to increase every five years commencing in 2002 pursuant to a Consumer
Price Index formula. See "Certain Relationships and Related Transactions."

With the acquisition of B&K Steel, the Company added approximately 145,000
square feet of covered fabrication, office, engineering and detailing facilities
on approximately 23 acres in Gilbert, Arizona. The property on which B&K Steel's
facilities are located was acquired by a partnership owned by certain affiliates
of the Company and is leased to the Company by that partnership. This lease
commenced on March 1, 1997 and expires on February 28, 2017. Annual rent under
the lease is estimated to be $283,000 in 1997 and $340,000 in each year
thereafter, subject to increase every five years commencing in 2002 based on a
Consumer Price Index formula. See "Certain Relationships and Related
Transactions."

A partnership owned by certain affiliates of the Company has acquired and
is leasing to the Company additional facilities consisting of approximately
22,000 square feet of office space adjacent to its existing principal
fabrication and office facilities. This lease commenced on May 1, 1997 and
expires April 30, 2017. Annual rent under the lease will be $90,000 in 1997 and
$135,000 in each year thereafter, subject to increase every five years based on
a Consumer Price Index formula. The Company anticipates that a portion of the
premises will be subleased. See "Certain Relationships and Related
Transactions."

Under each of the foregoing leases, the Company also is obligated to pay
all taxes, insurance and maintenance costs.

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<PAGE> 39

SUPPLIERS

The Company currently purchases a majority of its steel and steel
components from several domestic and foreign steel producers and suppliers.
However, steel is readily available from numerous foreign and domestic steel
producers. The Company is not dependent on any one supplier. The Company
believes that its relationships with its suppliers are good and has no long term
commitments with any of its suppliers.

LEGAL PROCEEDINGS AND INSURANCE

Construction in general and the fabrication and erection of structural
steel and heavy steel plate in particular involve a high degree of operational
risk. Adverse weather conditions, operator and other error, and other unforeseen
factors can cause personal injury or loss of life, severe damage to or
destruction of property and equipment, and suspension of operations. Litigation
arising from such occurrences may result in the Company being named as a party
to lawsuits asserting substantial claims or to administrative or criminal
actions that may involve substantial monetary penalties or the restriction of
the Company's operations in one or more jurisdictions.

The Company is a defendant in lawsuits from time to time, including
lawsuits arising in the normal course of its business. While it is impossible at
this time to determine with certainty the ultimate outcome of these lawsuits,
the Company's management believes that the ultimate outcome will not have a
material adverse effect on the Company.

The Company maintains workers compensation insurance that provides full
coverage of statutory workers compensation benefits. The Company also maintains
employer liability insurance in its principal geographic markets in amounts of
$1,000,000 per accident for bodily injury by accident and $1,000,000 per
employee (and as a policy limit) for bodily injury by disease and contractors
commercial general liability insurance in the amount of $1,000,000. In addition,
the Company maintains umbrella coverage limits of $14,000,000. The Company also
maintains insurance against property damage caused by fire, flood, explosion and
similar catastrophic events that may result in physical damage or destruction of
the Company's facilities and property. All policies are subject to various
deductibles and coverage limitations. Although management of the Company
believes that the Company's insurance is adequate for its present needs, there
can be no assurance that the Company will be able to maintain adequate insurance
at premium rates that management considers commercially reasonable, nor can
there be any assurance that such coverage will be adequate to cover all claims
that may arise.

Currently, the Company does not maintain any reserves for its ongoing
litigation, and expenses litigation costs as incurred. The Company periodically
reviews the need to maintain a litigation reserve. The Company seeks to mitigate
the effects of loss or damage through the maintenance of risk management,
insurance, and safety programs. There can be no assurance, however, that the
Company's efforts to mitigate losses will be successful or that any losses
incurred will not exceed the Company's insurance or estimated reserves therefor.
See "Risk Factors -- Operating Risks."

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<PAGE> 40

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

In connection with the closing of this offering, the Company intends to
expand the size of its Board of Directors and has nominated five additional
directors to fill the resulting newly created directorships, including three
non-employee director-nominees. The Company's directors and executive officers
are elected annually. Information concerning the Company's current directors and
executive officers, and persons nominated to become directors upon the closing
of this offering, is set forth below:

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- --------------------------------- --- --------------------------------------------
<S> <C> <C>
David A. Schuff.................. 65 Chairman of the Board of Directors
Scott A. Schuff.................. 38 President and Chief Executive Officer,
Director
Dennis F. Randall................ 52 Vice President and General Manager,
Director -- Nominee
Kenneth F. Zylstra............... 55 Vice President and Chief Financial Officer,
Director -- Nominee
Edward M. Carson................. 67 Director -- Nominee
H. Wilson Sundt.................. 64 Director -- Nominee
Dennis DeConcini................. 60 Director -- Nominee
</TABLE>

David A. Schuff has served as the Chairman of the Board of Directors since
its inception and is a co-founder of the Company. Mr. Schuff served as President
and Chief Executive Officer of the Company from its founding in 1976 to 1995.
Mr. Schuff has been involved in the steel fabrication and erection business in a
number of capacities since 1958. David A. Schuff is the father of Scott A.
Schuff.

Scott A. Schuff is the President and Chief Executive Officer of the
Company, a co-founder of the Company, and a member of its Board of Directors.
Mr. Schuff has served in numerous capacities with the Company since its founding
in 1976, and has been a member of the Board of Directors since 1976 and has been
the President and Chief Executive Officer since 1995.

Dennis F. Randall has served as Vice President and the General Manager of
the Company since 1993. Prior to 1993, Mr. Randall was President, Chief
Executive Officer and a director of Havens Steel Company. Mr. Randall holds a
B.E.S. degree in Civil Engineering from Brigham Young University and completed
the Advanced Management Program at Harvard University. Mr. Randall has been
nominated and has agreed to serve as a director of the Company upon the closing
of this offering.

Kenneth F. Zylstra has served as Vice President and Chief Financial Officer
of the Company since 1983, and has been an officer of Schuff since 1979. Prior
to 1979, Mr. Zylstra was associated with Ernst & Young (then Ernst & Ernst). Mr.
Zylstra received a B.B.A. Degree in Public Accounting from Loyola University --
Chicago, and is a member of the American Institute of Certified Public
Accountants, the Illinois CPA Society, and the Construction Financial Management
Association. Mr. Zylstra has been nominated and has agreed to serve as a
director of the Company upon the closing of this offering.

Edward M. Carson has been nominated and has agreed to serve as a director
of the Company upon the closing of this offering. Mr. Carson was the Chairman of
the Board of Directors of First Interstate Bancorp, a bank holding company, from
1990 through April 1995, and was its Chief Executive Officer from 1990 through
1994. Mr. Carson currently is a director of Wells Fargo & Co., one of the
largest bank holding companies in the western United States. Mr. Carson also
serves as a director of Aztar Corporation, Castle & Cooke, Inc., and Terra
Industries, Inc.

H. Wilson Sundt has been nominated and has agreed to serve as a director of
the Company upon the closing of this offering. Mr. Sundt has served as the
Chairman of the Board of Directors and Chief Executive Officer of Sundt Corp., a
privately held general construction contracting firm, since 1976, and served as
its President from 1979 through 1983. Mr. Sundt also serves as a director of
Tucson Electric Power Company, an electric utility based in Tucson, Arizona. Mr.
Sundt has been active in the construction industry since 1957.

40
<PAGE> 41

Dennis DeConcini has been nominated and has agreed to serve as a director
of the Company upon the closing of this offering. Mr. DeConcini is a former
United States Senator for Arizona and currently is a partner of Parry and Romani
Associates, Inc., a consulting firm based in Washington, D.C., and is a partner
of DeConcini McDonald Yetwin & Lacy, P.C., a law firm with offices in Tucson and
Phoenix, Arizona, and in Washington, D.C. Mr. DeConcini also serves by
appointment of the President of the United States on the Board of Directors of
the Federal Home Loan Mortgage Corporation (Freddie Mac), a federally chartered
mortgage finance corporation.

Donald T. Engler has served as Vice President -- Marketing of the Company
since 1994, and in that capacity is primarily responsible for the Company's
industrial and foreign sales. From 1991 to 1994, Mr. Engler served as Vice
President -- Plate Division of the Company. Mr. Engler is a registered engineer.

Randy J. Eskelson has served as Vice President -- Estimating and Sales of
the Company since 1988. Mr. Eskelson is primarily responsible for sales in
Arizona, California, New Mexico, Hawaii, Washington, Oregon and Utah.

Leslie R. Dias has served as Vice President -- Industrial Sales for the
Company since 1985. Mr. Dias joined the Company in 1985 after the Company's
acquisition of Marathon Steel Company.

Michael T. Wittig has served as Vice President -- Manufacturing and
Engineering since 1993, and in that capacity, is primarily responsible for
implementation of new technologies in the Company's detailing and manufacturing
operations. Prior to 1993, Mr. Wittig was a systems coordinator with the
Company.

Donald T. Pekau has served as Vice President -- Project Coordination since
1991, and in that capacity supervises a number of the Company's Project
Managers.

Forrest Paysnoe has served as Vice President -- Field Operations since
1992, and in that capacity is responsible for all aspects of field operations
and is the safety coordinator on each of the Company's job sites.

Scott Esmeier has served as Plant Superintendant of the Company's principal
fabrication facilities since 1995. Prior to that time, Mr. Esmeier was a Plant
Superintendant of Able Steel Fabricators, Inc., a privately held steel
fabrication company located in Mesa, Arizona.

Richard M. Hampton has served as Purchasing Manager since 1992. Prior to
that time, Mr. Hampton was employed by Able Steel Fabricators, Inc. in Mesa,
Arizona.

Daniel T. Kneifl has served as Vice President and General Manager of B&K
Steel since its acquisition by the Company in January 1997. Prior to that time,
Mr. Kneifl, a co-founder of B&K Steel, was a director and the President of B&K
Steel since 1994, and a director and Vice President since 1984.

COMMITTEES OF THE BOARD OF DIRECTORS

Effective upon the closing of this offering, the Company will establish a
Compensation Committee and an Audit Committee. The Compensation Committee, all
of the members of which will be non-employee directors, will review executive
salaries and administer any bonus, incentive compensation, and stock option
plans of the Company. In addition, the Compensation Committee will consult with
management of the Company regarding compensation policies and practices of the
Company. The Audit Committee, all of the members of which also will be
non-employee directors, will review the professional services provided by the
Company's independent auditors, the annual consolidated financial statements of
the Company and the Company's system of internal controls.

DIRECTOR FEES

The Company's non-employee directors will be compensated for attendance at
meetings of the Board of Directors and at meetings of committees of the Board of
Directors of which they are members, and will be reimbursed for reasonable
travel expenses incurred in connection with attendance at each Board and
committee meeting pursuant to policies to be established by the Board of
Directors. Each non-employee director will receive options to purchase 7,500
shares of Common Stock upon the closing of this offering with

41
<PAGE> 42

an exercise price equal to the initial public offering price of the Common
Stock. All of the stock options will vest one year after the date of grant.
Directors who are also officers of the Company will not be compensated for their
services as directors.

SUMMARY OF EXECUTIVE COMPENSATION

The table below sets forth information concerning the annual and long term
compensation for services rendered in all capacities to the Company during the
fiscal year ended December 31, 1996, of those persons who were, at December 31,
1996: (i) the chief executive officer of the Company and (ii) each of the other
executive officers of the Company whose total annual salary and bonus exceeded
$100,000 (the "Named Executive Officers"):

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ---------------------------------------------------
--------------------------------- RESTRICTED
OTHER ANNUAL STOCK SECURITIES LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS UNDERLYING PAYOUTS COMPENSATION(1)
PRINCIPAL POSITION ($) ($) ($) ($) OPTIONS(#) ($) ($)
- ---------------------- --------- -------- ------------ ---------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Scott A. Schuff....... 260,008 22,000 5,069 -- -- -- --
President and Chief
Executive Officer
David A. Schuff....... 296,411 22,825 4,890 -- -- -- --
Chairman of the Board
of Directors
Dennis Randall(2)..... 118,088 33,225 3,955 -- -- -- 739
Vice President and
General Manager
Kenneth F.
Zylstra(2).......... 111,155 51,025 4,615 -- -- -- 1,218
Vice President and
Chief Financial
Officer
</TABLE>

- ---------------
(1) The amounts shown in this column represent the dollar value of 401(k) plan
contributions made by the Company for the benefit of the Named Executive
Officers. See "Management -- 401(k) Plan."

(2) The amounts shown exclude $62,445 set aside for each of Messrs. Randall and
Zylstra pursuant to the Company's Supplemental Retirement and Deferred
Compensation Plan more fully described below, which will be paid in 1997.
This plan has since been terminated. See "Management -- Deferred
Compensation Plan."

1997 STOCK OPTION PLAN

In February 1997, the Company's Board of Directors and stockholders
approved the Schuff Steel Company 1997 Stock Option Plan (the "Option Plan").
Under the Option Plan, the Company may grant incentive stock options or
non-qualified stock options to directors, employees, consultants, and advisors
of the Company. The Company believes that the Option Plan promotes the success
and enhances the value of the Company by linking the personal interests of
participants to those of the Company's stockholders and providing participants
with an incentive for outstanding performance. The total number of shares of
Common Stock available for awards under the Option Plan is 600,000, subject to a
proportionate increase or decrease in the event of a stock split, reverse stock
split, stock dividend, or other adjustment to the Company's total number of
issued and outstanding shares of Common Stock.

Following this offering, the Option Plan will be administered by the Board
of Directors or a committee that is appointed by, and serves at the discretion
of, the Board of Directors consisting solely of non-employee directors. The
Board of Directors or the committee, as the case may be, will have the exclusive
authority to administer the Option Plan, including the power to determine
eligibility, the type and number of awards to be granted, and the terms and
conditions of any award granted, including the price and timing of awards. As of
the date of this Prospectus, the Company has granted options to purchase 345,500
shares of Common Stock to various of its employees. Generally, such options are
subject to vesting over a five-year period, with 20% of the

42
<PAGE> 43

options becoming exercisable by the holder thereof on each successive
anniversary date of the grant. The exercise price of the options granted to date
is $5.00 per share.

401(k) PLAN

Under the Company's 401(k) retirement savings plan, eligible employees may
direct that a portion of their compensation, up to a maximum of $9,500 per year,
be withheld by the Company and contributed to their account. All 401(k) plan
contributions are placed in a trust fund to be invested by the 401(k) plan's
trustee, except that the 401(k) plan may permit participants to direct the
investment of their account balances among mutual or investment funds available
under the plan. The 401(k) plan permits the Company to provide discretionary
matching contributions not to exceed 25% of the amount deferred up to 5% of a
participant's compensation. Amounts contributed to participant accounts under
the 401(k) plan and any earnings or interest accrued on the participant accounts
are generally not subject to federal income tax until distributed to the
participant and may not be withdrawn until death, retirement, or termination of
employment.

DEFERRED COMPENSATION PLAN

In 1996, the Company maintained a Supplemental Retirement and Deferred
Compensation Plan, pursuant to which it contributed on a discretionary basis to
certain key employees 10% of annual net profits, which amount was allocated
among participants in accordance with individual agreements between the Company
and such participants. In 1996, the Company recorded expenses of $528,900 in
accordance with this Plan. This Plan was terminated in 1997 and the Company is
considering alternative bonus arrangements for certain key employees.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

For the year ended December 31, 1996, the Company's Board of Directors
established levels of compensation for certain of the Company's executive
officers without the involvement of the Compensation Committee, which had not
yet been formed. David A. Schuff and Scott A. Schuff, the Company's Chairman and
President/Chief Executive Officer, respectively, participated in the
deliberations regarding executive compensation that occurred during 1996. The
Board of Directors will select members of the Compensation Committee following
the closing of this offering, each of which will be a non-employee member of the
Company's Board of Directors.

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<PAGE> 44

PRINCIPAL STOCKHOLDERS

As of April 30, 1997, the outstanding shares of the Company's Common Stock
were beneficially owned by the persons listed below. To the knowledge of the
Company, all persons listed below have sole voting and investment power with
respect to their shares, except to the extent that authority is shared by their
respective spouses under applicable law.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING(1) AFTER OFFERING(1)
--------------------- ---------------------
NAME OF BENEFICIAL OWNER(2) NUMBER PERCENT NUMBER PERCENT
- --------------------------------------------------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C>
David A. Schuff and Nancy A. Schuff(3)............. 2,550,000 51.0% 2,550,000 36.4%
Scott A. Schuff(4)................................. 2,450,000 49.0% 2,450,000 35.0%
All directors, director-nominees and executive
officers as a group (7 persons).................. 5,000,000 100% 5,000,000 71.4%
</TABLE>

- ---------------

(1) A person is deemed to be the beneficial owner of securities that can be
acquired within 60 days from the date set forth above through the exercise
of any option, warrant, or right. Shares of Common Stock subject to options,
warrants, or rights that are currently exercisable or exercisable within 60
days are deemed outstanding for the purpose of computing the percentage of
the person holding such options, warrants, or rights, but are not deemed
outstanding for computing the percentage of any other person. The amounts
and percentages are based upon 5,000,000 shares of Common Stock outstanding
as of April 30, 1997, and 7,000,000 shares of Common Stock outstanding as of
the closing of this offering, respectively.

(2) The address of each of the listed stockholders is 420 South 19th Avenue,
Phoenix, Arizona 85009.

(3) 2,050,000 of these shares are owned by the Schuff Family Trust Under Trust
Agreement dated June 28, 1983, as amended, and 500,000 of these shares are
owned by the Schuff Irrevocable Trust Under Trust Agreement Dated December
31, 1996. David A. Schuff and Nancy A. Schuff are co-trustees of each of the
trusts and exercise voting and investment power over such shares.

(4) 2,250,000 of these shares are owned by the Scott A. Schuff Family Trust
Under Trust Agreement dated March 12, 1992, as amended, and 200,000 of these
shares are owned by the Scott A. Schuff Irrevocable Trust Under Trust
Agreement dated December 31, 1996, as amended. Scott A. Schuff is the
trustee of each of these trusts and exercises voting and investment power
over such shares.

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<PAGE> 45

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Since its inception, the Company has maintained business relationships and
engaged in certain transactions with the affiliated companies and parties
described below. In the future, any transactions between the Company and its
affiliated entities, executive officers, directors, or significant stockholders
will require the approval of a majority of the non-employee directors of the
Company and will be on terms that will be no less favorable to the Company than
the Company could obtain from non-affiliated parties.

The Company and B&K Steel lease their respective fabrication and office
facilities from 19th Avenue/ Buchanan Limited Partnership, an Arizona limited
partnership (the "Schuff Partnership"). The general and limited partners of the
Schuff Partnership are David A. Schuff, Scott A. Schuff, and certain of their
family members. David A. Schuff is a co-founder and the Chairman of the Board of
Directors of the Company, and Scott A. Schuff is a Director and the President
and Chief Executive Officer of the Company. David A. Schuff and Scott A. Schuff
presently are the beneficial owners of 100% of the outstanding Common Stock of
the Company and it is estimated that after this offering they will own
beneficially approximately 71.4% of the issued and outstanding Common Stock of
the Company (or approximately 68.5% if the Underwriters' over-allotment option
is exercised). See "Management" and "Principal Stockholders."

In March 1997, the Company entered into a new lease agreement with the
Schuff Partnership with respect to its primary fabrication facilities. These
facilities include approximately 400,000 square feet of shop space under roof
situated on approximately 26 acres. This new lease agreement was based upon a
third party appraisal of the property and an assumed annual rate of return of
10%, which took into account the location and use of the property, potential
tenants, comparable returns on similar properties, and other relevant factors.
The new lease increased the Company's annual rent payments from $264,000 in 1996
to $292,000 for 1997, $414,000 for 1998, $556,000 for 1999, $601,000 for 2000,
and $605,000 for each year thereafter, subject to increase in 2002 and every
five years thereafter based on a Consumer Price Index formula, which represents
an annual rent per square foot of improved space of $0.66, $0.73, $1.04, $1.39,
$1.50 and $1.51, respectively. The agreement also enabled the Company to extend
the lease term to 20 years. The Company also is obligated under the lease to
reimburse the Schuff Partnership an additional amount equal to any taxes
incurred by it in connection with the lease payments, and is obligated to pay
insurance and maintenance expenses. The term of this lease expires on February
28, 2017.

In March 1997, the Company also entered into a lease agreement with the
Schuff Partnership with respect to the recently acquired B&K Steel property,
consisting of approximately 145,000 square feet of covered fabrication, office,
engineering and detailing facilities on approximately 23 acres. Based upon the
same methodology described above, the Company entered into a lease with
substantially similar terms for the property and equipment with annual rent
payments of approximately $340,000 over 20 years, subject to increase every five
years based on a Consumer Price Index formula, representing an annual rent per
square foot of improved space of approximately $2.34. The rent was based upon a
recent appraisal of the underlying property. The Company also is obligated to
reimburse the Schuff Partnership for taxes incurred by it in connection with the
lease payments. The term of the lease expires on February 28, 2017.

Effective May 1, 1997, the Schuff Partnership leased to the Company
approximately 22,000 square feet of additional office facilities adjacent to the
Company's existing principal office and shop facilities. Based upon the same
methodology described above, the Company entered into a lease with substantially
similar terms for the property with annual rent payments of $135,000 over 20
years, subject to increase every five years based on a Consumer Price Index
formula, representing an annual rent per square foot of improved space of
approximately $6.14. The rent was based upon the purchase price of the property,
which was determined by arm's-length negotiation with the seller. The Company is
also obligated to reimburse the Schuff Partnership for taxes incurred by it in
connection with the lease and is obligated to pay insurance and maintenance
costs. This lease expires on April 30, 2017. See "Business -- Properties."

In 1989, the Schuff Partnership borrowed $5,000,000 from a commercial bank
in connection with its refinancing of the property on which the Company's
principal facilities are located (the "Partnership Loan"). The Schuff
Partnership in turn loaned $4,249,062 to the Company and the Company delivered
to the Schuff Partnership a subordinated promissory note in that amount (the
"Subordinated Loan"). As of March 31,

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<PAGE> 46

1997, the principal balance of the Subordinated Loan was $2,265,016. In April
1996, in connection with the refinancing of the Partnership Loan, the Company
guaranteed repayment of the Schuff Partnership's indebtedness under that loan,
which guarantee is anticipated to be released following the closing of this
offering.

Mr. David A. Schuff, Mrs. Nancy A. Schuff, his wife, and Mr. Scott A.
Schuff have personally guaranteed the Company's indebtedness under its revolving
credit and equipment purchase facilities.

The Company historically has made cash advances to its principal
stockholders. Such advances have been evidenced by recourse promissory notes
that are payable on demand after one year. As of March 31, 1997, there were no
amounts owed by David A. Schuff and Scott A. Schuff under such notes. The
Company does not intend to continue the practice of advancing funds to its
stockholders after this offering.

The Company currently purchases a portion of its steel inventory from
Arizona Steel, Inc., an Arizona corporation ("Arizona Steel"), in which Scott A.
Schuff owns a 75% interest. Arizona Steel is a steel distribution center formed
in January 1997 that sells steel pieces to a number of fabrication contractors,
one of approximately twenty from which the Company purchases steel from time to
time. The Company purchases most of its steel inventory directly from various
steel mills but from time to time purchases small quantities of steel from local
steel distribution centers as a result of special needs that do not permit the
lead time or volumes normally associated with mill purchases. The Company
currently includes Arizona Steel among its list of suppliers, all of which bid
for purchase orders by the Company on the basis of cost, availability and
delivery. It is the Company's policy not to make purchases from Arizona Steel
unless it offers the most competitive terms based on the factors listed above.
In the first four months of 1997, the Company purchased approximately $47,000 of
steel from Arizona Steel, representing less than 0.5% of the steel purchased
from all suppliers during that period.

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<PAGE> 47

DESCRIPTION OF CAPITAL STOCK

The following description of the Company's capital stock does not purport
to be complete and is subject in all respects to applicable Delaware law and to
the provisions of the Company's Certificate of Incorporation and Bylaws, copies
of which have been filed as exhibits to the Registration Statement of which this
Prospectus is a part.

The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock, par value $.001 per share, and 1,000,000 shares of Preferred
Stock, par value $.001 per share. Immediately following the completion of this
offering, 7,000,000 shares of Common Stock will be issued and outstanding and no
shares of Preferred Stock will be issued and outstanding.

COMMON STOCK

Holders of Common Stock are entitled to one vote for each share held of
record on all matters on which stockholders are entitled to vote. Holders of
Common Stock do not have cumulative voting rights, and therefore holders of a
majority of the shares voting for the election of directors can elect all of the
directors. Holders of Common Stock are entitled to receive such dividends as may
be declared from time to time by the Board of Directors out of funds legally
available therefor. The Company does not anticipate declaring cash dividends in
the foreseeable future. See "Dividend Policy." In the event of liquidation,
dissolution, or winding up of the Company, the holders of Common Stock are
entitled to share ratably in any corporate assets remaining after payment of all
debts, subject to any preferential rights of any outstanding Preferred Stock.
Holders of Common Stock have no preemptive, conversion, or redemption rights and
are not subject to further calls or assessments by the Company. All of the
outstanding shares of Common Stock are, and the shares offered by the Company
hereby will be, if issued, validly issued, fully paid, and nonassessable. As of
the date of this Prospectus, there are four record holders of Common Stock.

PREFERRED STOCK

The Board of Directors of the Company has the authority, without further
action by the Company's stockholders, to issue from time to time up to 1,000,000
shares of Preferred Stock in one or more series and to fix the number of shares,
designations, voting powers, preferences, optional and other special rights, and
the restrictions or qualifications thereof. The rights, preferences, privileges,
and restrictions or qualifications of different series of Preferred Stock may
differ with respect to dividend rates, amounts payable on liquidation, voting
rights, conversion rights, redemption provisions, sinking fund provisions, and
other matters. The issuance of Preferred Stock could: (i) decrease the amount of
earnings and assets available for distribution to holders of Common Stock; (ii)
adversely affect the rights and powers, including voting rights, of holders of
Common Stock; and (iii) have the effect of delaying, deferring, or preventing a
change in control of the Company. The Company has no present plans to issue any
shares of Preferred Stock.

ANTI-TAKEOVER LAW

The Company is subject to Section 203 of the General Corporation Law of the
State of Delaware ("Section 203"), which restricts certain transactions and
business combinations between a corporation and an "Interested Stockholder"
owning 15% or more of the corporation's outstanding voting stock for a period of
three years from the date the stockholder becomes an Interested Stockholder.
Subject to certain exceptions, unless the transaction is approved by the board
of directors or the holders of at least two-thirds of the outstanding voting
stock of the corporation (excluding shares held by the Interested Stockholder),
Section 203 prohibits significant business transactions such as a merger with,
disposition of assets to, or receipt of disproportionate financial benefits by
the Interested Stockholder, or any other transaction that would increase the
Interested Stockholder's proportionate ownership of any class or series of the
corporation's stock. The statutory ban does not apply if, upon consummation of
the transaction in which any person becomes an Interested Stockholder, the
Interested Stockholder owns at least 85% of the outstanding voting stock of the
corporation (excluding shares held by persons who are both directors and
officers or by certain employee stock plans).

47
<PAGE> 48

LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Certificate of Incorporation provides that to the fullest
extent permitted by Delaware law, a director of the Company shall not be
personally liable to the Company or its stockholders for monetary damages for
breach of such director's fiduciary duty, except for liability: (i) for any
breach of the director's duty of loyalty to the Company or its stockholders;
(ii) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law; (iii) in respect of certain unlawful
dividend payments or stock redemptions or repurchases; and (iv) for any
transaction from which the director derives an improper benefit. The effect of
the provision of the Company's Certificate of Incorporation is to eliminate the
rights of the Company and its stockholders (through stockholders' derivative
suits on behalf of the Company) to recover monetary damages against a director
for breach of the fiduciary duty of care as a director (including breaches
resulting from negligent or grossly negligent behavior), except in the
situations described in clauses (i) through (iv) above. This provision does not
limit or eliminate the rights of the Company or any stockholder to seek
nonmonetary relief such as an injunction or rescission in the event of a breach
of a director's duty of care. In addition, the Company's Certificate of
Incorporation provides that the Company shall indemnify any person who is or was
a director, officer, employee, or agent of the Company, or who is or was serving
at the request of the Company as a director, officer, employee, or agent of
another corporation or entity, against expenses, liabilities, and losses
incurred by any such person by reason of the fact that such person is or was
acting in such capacity. The Company's Certificate of Incorporation also permits
it to secure insurance on behalf of any director, officer, employee, or agent of
the Company for any liability arising out of such person's actions in such
capacity.

The Company contemplates entering into agreements to indemnify its
directors. These agreements would, among other things, indemnify the Company's
directors for certain expenses (including attorneys' fees), judgments, fines,
and settlement amounts incurred by any such person in any action or proceeding,
including any action by or in the right of the Company, arising out of such
person's services as a director of the Company, any subsidiary of the Company,
or any other company or enterprise to which such person provides services at the
request of the Company. To the extent that the Board of Directors or the
stockholders of the Company may in the future wish to limit or repeal the
ability of the Company to provide indemnification as set forth in the Company's
Certificate of Incorporation, such repeal or limitation may not be effective as
to directors or others who are parties to the indemnification agreements because
their rights to full protection would be contractually assured by such
agreements. It is anticipated that similar contracts may be entered into, from
time to time, with future directors of the Company. The Company believes that
the indemnification provisions in its Certificate of Incorporation and in the
indemnification agreements are necessary to attract and retain qualified persons
as directors.

CERTAIN BYLAW PROVISIONS

The Company's Bylaws contain several provisions that regulate the
nomination of directors and the submission of proposals in connection with
stockholder meetings. The Company's Bylaws require that any stockholder desiring
to propose business or nominate a person to the Board of Directors at an annual
stockholders meeting must give notice of any proposals not less than 90 days
prior to the anniversary date of the immediately preceding annual meeting,
subject to certain exceptions. Such notice is required to contain certain
information as set forth in the Bylaws. No business matter shall be transacted
nor shall any person be eligible for election as a director of the Company
unless proposed or nominated, as the case may be, in strict accordance with this
procedure set forth in the Company's Bylaws.

Although the Bylaws do not give the Board of Directors any power to approve
or disapprove of stockholder nominations for the election of directors or of any
other business desired by stockholders to be conducted at an annual or any other
meeting, the Bylaws may have the effect of precluding a nomination for the
election of directors or the conduct of business at a particular annual meeting
if the proper procedures are not followed or may discourage or deter a third
party from conducting a solicitation of proxies to elect its own slate of
directors or otherwise attempting to obtain control of the Company, even if the
conduct of such solicitation or such attempt might be beneficial to the Company
and its stockholders. The Company's procedures with respect to all stockholder
proposals and the nomination of directors will be conducted in

48
<PAGE> 49

accordance with Section 14 of the Securities Exchange Act of 1934, as amended,
and the rules promulgated thereunder.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock of the Company is
Harris Trust Company of California, 601 S. Figueroa, Los Angeles, California
95517.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have outstanding
7,000,000 shares of Common Stock. Of these shares, the 2,000,000 shares of
Common Stock sold in this offering, plus any additional shares sold upon
exercise of the Underwriters' over-allotment option, will be freely tradeable
without restriction under the Securities Act. Commencing 180 days following the
date of this Prospectus, 5,000,000 shares of Common Stock held by existing
stockholders will become eligible for sale under Rule 144, subject to compliance
with the volume limitations and other requirements of Rule 144.

In general, under Rule 144 persons (or persons whose shares are aggregated)
who have beneficially owned "restricted" shares for at least one year, including
persons who are "affiliates" of the Company, as that term is defined under Rule
144, are entitled to sell (in accordance with the provisions specified in the
rule) within any three-month period a number of shares that does not exceed the
greater of one percent of the then outstanding shares of the Company's Common
Stock (70,000 shares immediately following this offering assuming no exercise of
the Underwriters' over-allotment option) or the average weekly trading volume of
the Common Stock during the four calendar weeks preceding the date on which
notice of the sale is filed with the Commission. All of the 5,000,000 shares
presently outstanding are "restricted" shares and have been beneficially owned
by persons who are "affiliates" of the Company for more than one year.

The Company, its existing stockholders, directors, director-nominees and
officers have agreed with the Underwriters that, except in certain
circumstances, they will not issue, offer to sell, sell, contract to sell, or
otherwise dispose of any shares of Common Stock or any shares convertible or
exchangeable into any shares of Common Stock for a period of 180 days after the
date of this Prospectus without the prior written consent of the
Representatives.

Prior to this offering, there has been no public market for the Company's
Common Stock and no prediction can be made of the effect, if any, that market
sales of shares or the availability of such shares for sale will have on the
market price prevailing from time to time. Nevertheless, sales of substantial
amounts of the Common Stock in the public market could adversely affect
prevailing market conditions and could impair the Company's future ability to
raise capital through the sale of its equity securities. See "Risk Factors --
Shares Eligible for Future Sale."

49
<PAGE> 50

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters") for whom Principal Financial
Securities, Inc. and Cruttenden Roth Incorporated are acting as representatives
(the "Representatives"), have severally agreed to purchase from the Company, and
the Company has agreed to sell to the Underwriters, the respective number of
shares of Common Stock set forth opposite each Underwriter's name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------------------------------------------------------------ ---------
<S> <C>
Principal Financial Securities, Inc. ............................. 466,750
Cruttenden Roth Incorporated...................................... 466,750
ABN AMRO Chicago Corporation...................................... 68,000
A.G. Edwards & Sons, Inc. ........................................ 68,000
Oppenheimer & Co., Inc. .......................................... 68,000
Robert W. Baird & Co. Incorporated ............................... 45,500
George K. Baum & Company.......................................... 45,500
J.C. Bradford & Co. .............................................. 45,500
Dain Bosworth Incorporated ....................................... 45,500
Equitable Securities Corporation ................................. 45,500
EVEREN Securities, Inc. .......................................... 45,500
Hanifen, Imhoff Inc. ............................................. 45,500
McDonald & Company Securities, Inc. .............................. 45,500
Morgan Keegan & Company, Inc. .................................... 45,500
Piper Jaffray Inc. ............................................... 45,500
Rauscher Pierce Refsnes, Inc. .................................... 45,500
The Robinson-Humphrey Company, Inc. .............................. 45,500
Scott & Stringfellow, Inc. ....................................... 45,500
Van Kasper & Co. ................................................. 45,500
Wheat, First Securities, Inc. .................................... 45,500
Allen C. Ewing & Co. ............................................. 22,500
First Analysis Securities Corporation............................. 22,500
Huntleigh Securities Corporation.................................. 22,500
C.L. King & Associates, Inc. ..................................... 22,500
Peacock, Hislop, Staley & Given, Inc.............................. 22,500
Sanders Morris Mundy.............................................. 22,500
Southwest Securities, Inc. ....................................... 22,500
H.G. Wellington & Co. Inc. ....................................... 22,500
---------
TOTAL................................................... 2,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to certain conditions precedent, including
the absence of any material adverse change in the Company's business and the
receipt of certain certificates, opinions, and letters from the Company and its
respective counsel and the Company's independent certified public accountants.
The nature of the Underwriters' obligation is such that they are committed to
purchase and pay for all the shares of Common Stock if any are purchased. In the
event of a failure by any Underwriter to purchase its portion of the Common
Stock, the Underwriting Agreement provides, depending upon the total number of
shares of Common Stock involved in the default, that the purchase commitments of
the other Underwriters may be increased or that the Underwriting Agreement may
be terminated, without prejudice to the right of any party as against any
defaulting Underwriter.

The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock directly to the public at the
initial public offering price set forth on the cover page of this Prospectus and
to certain securities dealers at such price less a concession not in excess of
$0.32 per share. The Underwriters may allow, and such selected dealers may
reallow, a discount not in excess of $0.10 per share to certain brokers and
dealers. After the initial public offering of the shares, the public offering
price and other selling terms may be changed by the Representatives. No change
in such terms shall change the amount of proceeds to be received by the Company
as set forth on the cover page of this Prospectus.

50
<PAGE> 51

The Representatives are permitted to engage in certain transactions that
stabilize the price of the Common Stock. Such transactions consist of bids or
purchases for the purpose of fixing or maintaining the price of the Common
Stock. If the Underwriters create a short position in the Common Stock in
connection with this offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the Representatives may
reduce that short position by purchasing Common Stock in the open market. The
Representatives may also elect to reduce any short position by exercising all or
part of the over-allotment option described below. The Representatives may also
impose a penalty bid on certain Underwriters. This means that if the
Representatives purchase shares of Common Stock in the open market to reduce the
Underwriters' short position or to stabilize the price of the Common Stock, they
may reclaim the amount of the selling concession from the Underwriters who sold
those shares as part of this offering. In general, purchases of a security for
the purpose of stabilization or to reduce a short position could cause the price
of the security to be higher than it might be in the absence of such purchases.
The imposition of a penalty bid might also have an effect on the price of a
security to the extent that it discourages resales of the security. Neither the
Company nor any of the Underwriters makes any representation or prediction as to
the direction or magnitude of any effect that the transactions described above
may have on the price of the Common Stock. In addition, neither the Company nor
any of the Underwriters makes any representation that the Representatives will
engage in such transactions or that such transactions, once commenced, will not
be discontinued without notice.

The Company has granted an option to the Underwriters, exercisable for a
period of 30 days after the date of this Prospectus, to purchase up to an
additional 300,000 shares of Common Stock at the public offering price set forth
on the cover page of this Prospectus, less the underwriting discounts and
commissions. The Underwriters may exercise this option only to cover
over-allotments, if any. To the extent that the Underwriters exercise this
option, each of the Underwriters will be committed, subject to certain
conditions, to purchase such additional shares of Common Stock in approximately
the same proportion as set forth in the above table.

Prior to this offering, there has been no established trading market for
the Common Stock. Consequently, the initial public offering price for the Common
Stock offered hereby has been determined by negotiation among the Company and
the Representatives. Among the factors considered in such negotiations were the
preliminary demand for the Common Stock, the prevailing market and economic
conditions, the Company's results of operations, estimates of the business
potential and prospects of the Company, the present state of the Company's
business operations, an assessment of the Company's management, the
consideration of these factors in relation to the market valuation of comparable
companies in related businesses, the current condition of the markets in which
the Company operates, and other factors deemed relevant. There can be no
assurance that an active trading market will develop for the Common Stock or
that the Common Stock will trade in the public market subsequent to this
offering at or above the initial public offering price.

The Underwriting Agreement provides that the Company will indemnify the
Underwriters and their controlling persons against certain liabilities under the
Securities Act or will contribute to payments the Underwriters and their
controlling persons may be required to make in respect thereof. The Company has
been advised that, in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.

The foregoing is a brief summary of certain provisions of the Underwriting
Agreement and does not purport to be a complete statement of its terms and
conditions. A copy of the Underwriting Agreement is on file with the Commission
as an exhibit to the Registration Statement of which this Prospectus forms a
part. See "Additional Information."

CONSULTING AGREEMENT

The Company has executed a consulting agreement with Mr. D. Ronald Yagoda
dated as of January 15, 1997. Pursuant to this agreement, Mr. Yagoda agreed to
assist the Company in developing its business plan and corporate structure,
interviewing and selecting investment bankers, meeting with investment bankers,
security analysts, portfolio managers, stockbrokers, and others and, based upon
such review and services, to

51
<PAGE> 52

provide consultation services for purposes of assisting the Company in
connection with an initial public offering. Under the agreement, as of April 27,
1997, the Company has paid Mr. Yagoda $15,000 in fees for services rendered by
Mr. Yagoda, and has agreed to pay Mr. Yagoda a fee equal to 0.5% of the proceeds
of this offering. The agreement terminates on January 15, 1998. Mr. Yagoda is
not affiliated or associated with the Representatives or the Underwriters.

LEGAL MATTERS

The validity of the shares offered hereby is being passed upon for the
Company by Snell & Wilmer L.L.P., Phoenix, Arizona. Certain legal matters will
be passed upon for the Underwriters by Blackwell Sanders Matheny Weary &
Lombardi LLP, Kansas City, Missouri.

EXPERTS

The financial statements of Schuff Steel Company at December 31, 1996 and
1995, and for each of the three years in the period ended December 31, 1996,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act of 1933 with respect to the Common Stock offered
hereby. This Prospectus constitutes a part of the Registration Statement and
does not contain all of the information set forth therein and in the exhibits
thereto, certain portions of which have been omitted as permitted by the rules
and regulations of the Commission. For further information with respect to the
Company and the Common Stock offered hereby, reference is hereby made to such
Registration Statement and exhibits. Statements contained in this Prospectus as
to the contents of any document are not necessarily complete and in each
instance are qualified in their entirety by reference to the copy of the
appropriate document filed with the Commission. The Registration Statement,
including the exhibits thereto, may be examined without charge at the
Commission's public reference facility at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. In addition, copies of all or any part of
the Registration Statement, including such exhibits thereto, may be obtained
from the Commission at its principal office in Washington, D.C., upon payment of
the fees prescribed by the Commission. The Commission maintains a World Wide Web
site (http://www.sec.gov) that contains reports, proxy statements, and other
information regarding registrants, such as the Company, that file electronically
with the Commission.

The Registration Statement and the reports and other information to be
filed by the Company following this offering in accordance with the Securities
Exchange Act of 1934, as amended, can be inspected and copied at the principal
office of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington D.C. 20549, and at the following regional offices of the Commission:
7 World Trade Center, New York, NY 10048, and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, IL 60601. Copies of such material may
be obtained from the Public Reference Section of the Commission at its principal
office at 450 Fifth Street, N.W., Washington D.C. 20549, upon payment of the
fees prescribed by the Commission.

The Company intends to provide its stockholders with annual reports
containing consolidated financial statements audited by independent auditors and
quarterly reports for the first three fiscal quarters of each year containing
unaudited summary consolidated financial information.

52
<PAGE> 53

SCHUFF STEEL COMPANY

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors...................................................... F-2
Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1995 and 1996, and March 31, 1997
(unaudited).................................................................... F-3
Consolidated Statements of Income for the years ended December 31, 1994, 1995, and
1996, and the three months ended March 31, 1996 and 1997 (unaudited)........... F-4
Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 1994, 1995, and 1996, and the three months ended March 31,
1997(unaudited)................................................................ F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995,
and 1996, and the three months ended March 31, 1996 and 1997 (unaudited)....... F-6
Notes to Consolidated Financial Statements.......................................... F-7
</TABLE>

F-1
<PAGE> 54

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Schuff Steel Company

We have audited the accompanying balance sheets of Schuff Steel Company as
of December 31, 1996 and 1995, and the related statements of income, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Schuff Steel Company at
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.

ERNST & YOUNG LLP

Phoenix, Arizona
March 21, 1997, except for Note 13
as to which the date is May 8, 1997

F-2
<PAGE> 55

SCHUFF STEEL COMPANY

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31
------------------- MARCH 31 PRO FORMA
1995 1996 1997 MARCH 31, 1997
------- ------- ----------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 289 $ 7,253 $ 4,750 $ 4,750
Restricted funds on deposit.................. 220 2,249 2,896 2,896
Receivables.................................. 11,287 16,885 18,654 18,654
Costs and recognized earnings in excess of
billings on uncompleted contracts......... 1,076 871 1,332 1,332
Inventories.................................. 7,770 11,311 14,164 14,164
Prepaid expenses............................. 218 178 504 504
------- ------- -------
TOTAL CURRENT ASSETS................. 20,860 38,747 42,300 42,300
Property and equipment......................... 12,325 14,274 15,253 15,253
Less amortization and accumulated
depreciation................................. 8,103 9,158 9,495 9,495
------- ------- -------
4,222 5,116 5,758 5,758
Intangible pension asset....................... 120 106 102 102
Other assets................................... 58 -- -- --
------- ------- -------
$25,260 $43,969 $48,160 $ 48,160
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................. $ 3,985 $ 4,043 $ 2,350 $ 2,350
Accrued payroll and employee benefits........ 933 1,539 2,830 2,830
Other accrued liabilities.................... 562 367 1,023 1,023
Stockholder distributions payable............ 1,071 4,555 4,775 11,775
Billings in excess of costs and recognized
earnings on uncompleted contracts......... 5,940 19,623 22,407 22,407
Current portion of long-term debt............ 404 144 317 317
------- ------- ----------- --------------
TOTAL CURRENT LIABILITIES............ 12,895 30,271 33,702 40,702
Long-term debt, less current portion........... 5,271 2,753 2,777 2,777
Accrued pension cost........................... 326 263 245 245
Stockholders' equity
Preferred Stock, $.001 par
value -- authorized 1,000,000 shares, none
issued.................................... -- -- -- --
Common Stock, $.001 par value -- authorized
20,000,000 shares, 5,000,000 shares issued
and outstanding........................... 5 5 5 5
Additional paid-in-capital................... 15 15 15 15
Unfunded pension losses...................... (426) (519) (541) (541)
Retained earnings............................ 7,174 11,181 11,957 4,957
------- ------- ----------- --------------
6,768 10,682 11,436 4,436
------- ------- ----------- --------------
$25,260 $43,969 $48,160 $ 48,160
======= ======= ========= ===========
</TABLE>

See accompanying notes.

F-3
<PAGE> 56

SCHUFF STEEL COMPANY

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
-------------------------------- -------------------
1994 1995 1996 1996 1997
------- ------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................................ $68,199 $62,090 $103,912 $10,410 $25,507
Cost of revenues........................ 58,874 54,222 86,998 8,418 21,655
------- ------- -------- ------- -------
GROSS PROFIT.................. 9,325 7,868 16,914 1,992 3,852
General and administrative expenses..... 4,915 5,284 6,715 1,357 2,081
------- ------- -------- ------- -------
OPERATING INCOME.............. 4,410 2,584 10,199 635 1,771
Interest expense........................ (718) (752) (452) (147) (95)
Other income............................ 67 618 303 52 96
------- ------- -------- ------- -------
NET INCOME.................... $ 3,759 $ 2,450 $ 10,050 $ 540 $ 1,772
======= ======= ======== ======= =======
Pro forma net income data (unaudited)
Net income as reported................ $ 10,050 $ 1,772
Pro forma tax provision............... 4,020 710
-------- -------
Pro forma net income.................. $ 6,030 $ 1,062
======== =======
Pro forma net income per share.......... $ 0.99 $ 0.17
======== =======
Shares used in computation.............. 6,071 6,071
======== =======
</TABLE>

See accompanying notes.

F-4
<PAGE> 57

SCHUFF STEEL COMPANY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNFUNDED
--------------- PAID-IN PENSION RETAINED
SHARES AMOUNT CAPITAL LOSSES EARNINGS TOTAL
------ ------ ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1994.................... 5,000 $5 $ 15 $ (536) $ 5,836 $ 5,320
Changes in unfunded pension losses....... -- -- -- (27) -- (27)
Distributions to stockholders............ -- -- -- -- (3,020) (3,020)
Net income............................... -- -- -- -- 3,759 3,759
--
----- --- ---- ------- -------
Balance December 31, 1994.................. 5,000 5 15 (563) 6,575 6,032
Changes in unfunded pension losses....... -- -- -- 137 -- 137
Distributions to stockholders............ -- -- -- -- (1,851) (1,851)
Net income............................... -- -- -- -- 2,450 2,450
--
----- --- ---- ------- -------
Balance December 31, 1995.................. 5,000 5 15 (426) 7,174 6,768
Changes in unfunded pension losses....... -- -- -- (93) -- (93)
Distributions to stockholders............ -- -- -- -- (6,043) (6,043)
Net income............................... -- -- -- -- 10,050 10,050
--
----- --- ---- ------- -------
Balance December 31, 1996.................. 5,000 5 15 (519) 11,181 10,682
Changes in unfunded pension losses
(unaudited)........................... -- -- -- (22) -- (22)
Distributions to stockholders
(unaudited)........................... -- -- -- -- (996) (996)
Net income (unaudited)................... -- -- -- -- 1,772 1,772
--
----- --- ---- ------- -------
Balance March 31, 1997 (unaudited)......... 5,000 $5 $ 15 $ (541) $ 11,957 $11,436
===== == === ==== ======= =======
</TABLE>

See accompanying notes.

F-5
<PAGE> 58

SCHUFF STEEL COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
------------------------------ ------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................... $ 3,759 $ 2,450 $ 10,050 $ 540 $ 1,772
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.............. 1,248 1,248 1,267 297 361
Gain on disposal of property and
equipment............................... (10) (20) (13) (9) (12)
Changes in operating assets and
liabilities:
Restricted funds on deposit............. -- (220) (2,029) -- (647)
Receivables............................. 248 4,092 (5,598) (1,264) (522)
Costs and recognized earnings in excess
of billings on uncompleted
contracts............................. 79 (1,014) 205 1,015 137
Inventories............................. (1,104) (2,461) (3,541) (4,496) (2,757)
Prepaid expenses........................ 80 47 40 (269) (233)
Accounts payable........................ 376 1,882 58 (3,558) (2,482)
Accrued payroll and employee benefits... 124 (322) 606 284 1,266
Other accrued liabilities............... (325) (362) (195) 4,105 627
Billings in excess of costs and
recognized earnings on uncompleted
contracts............................. 2,291 (566) 13,683 7,266 2,777
Accrued pension cost.................... (73) (97) (142) (31) (36)
-------- -------- -------- -------- -------
NET CASH PROVIDED BY OPERATING
ACTIVITIES....................... 6,693 4,657 14,391 3,880 251
INVESTING ACTIVITIES
Increase in receivables from stockholders.... (227) -- (185) -- --
Repayment of receivables from stockholders... 191 45 18 12 --
Acquisitions of property and equipment....... (1,615) (814) (2,337) (294) (310)
Proceeds from disposals of property and
equipment.................................. 21 30 189 13 32
Purchase of business......................... -- -- -- -- (427)
-------- -------- -------- -------- -------
NET CASH USED IN INVESTING
ACTIVITIES....................... (1,630) (739) (2,315) (269) (705)
FINANCING ACTIVITIES
Proceeds from revolving line of credit and
long-term borrowings....................... 67,977 64,558 33,500 16,025 --
Principal payments on revolving line of
credit and long-term debt.................. (70,553) (66,436) (36,278) (17,785) (1,273)
Cash distributions to stockholders........... (2,537) (1,814) (2,334) (586) (776)
-------- -------- -------- -------- -------
NET CASH USED IN FINANCING
ACTIVITIES....................... (5,113) (3,692) (5,112) (2,346) (2,049)
-------- -------- -------- -------- -------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................. (50) 226 6,964 1,265 (2,503)
Cash and cash equivalents at beginning of
period..................................... 113 63 289 289 7,253
-------- -------- -------- -------- -------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD........................... $ 63 $ 289 $ 7,253 $ 1,554 $ 4,750
======== ======== ======== ======== =======
</TABLE>

See accompanying notes.

F-6
<PAGE> 59

SCHUFF STEEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Schuff Steel Company ("the Company") is a steel fabrication and erection
contractor based in Phoenix, Arizona. The Company's construction projects are
located primarily in Arizona, Nevada, California and South America.

Principles of Consolidation

As more fully described in Note 13, the Company acquired B&K Steel
Fabrications, Inc. (B&K Steel) on January 31, 1997 and accounted for the
transaction using the purchase method. Effective as of that date, B&K Steel
became a wholly owned subsidiary of the Company. Accordingly, commencing with
the three month period ended March 31, 1997 the Company began consolidating the
financial statements of B&K Steel from the date of acquisition. All intercompany
transactions have been eliminated for the three months ended March 31, 1997.
Financial statements for the years ended December 31, 1994, 1995 and 1996 are
not consolidated since the Company had no subsidiaries during those periods.

Interim Financial Information

The consolidated financial statements for the three months ended March 31,
1996 and 1997 are unaudited but include all adjustments (consisting only of
normal recurring adjustments) that the Company considers necessary for a fair
presentation of financial position and results of operations. Operating results
for the three months ended March 31, 1997 are not necessarily indicative of the
results that may be expected for any future periods.

Operating Cycle

Balance sheet items expected to be paid or received within one year are
classified as current. Assets and liabilities relating to long-term construction
contracts are included in current assets and current liabilities in the
accompanying balance sheet, since they will be realized or liquidated in the
normal course of contract completion, although completion may require more than
one year.

Revenue and Cost Recognition

The Company performs its services primarily under fixed-price contracts and
recognizes revenues and costs from construction projects using the percentage of
completion method. Under this method, revenue is recognized based upon the ratio
of the costs incurred to date to the total estimated costs to complete the
project. Revenue recognition begins when progress is sufficient to estimate
final results with reasonable accuracy. Costs include all direct material and
labor costs related to contract performance, subcontractor costs, indirect
labor, and fabrication plant overhead costs, which are charged to contract costs
as incurred. Revenues relating to changes in the scope of a contract are
recognized when the customer has authorized the change, the work is commenced
and the Company has made an estimate of the amount that is probable of being
paid for the change. Revisions in estimates during the course of contract work
are reflected in the accounting period in which the facts requiring the revision
become known. Provisions for estimated losses on uncompleted contracts are made
in the period a loss on a contract becomes determinable.

Construction contracts with customers generally provide that billings are
to be made monthly in amounts which are commensurate with the extent of
performance under the contracts. Contract receivables arise principally from the
balance of amounts due on progress billings on jobs under construction.
Retentions on

F-7
<PAGE> 60

SCHUFF STEEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)

contract receivables are amounts due on progress billings which are withheld
until the completed project has been accepted by the customer.

Costs and recognized earnings in excess of billings on uncompleted
contracts primarily represent revenue earned under the percentage of completion
method which has not been billed, and also include costs incurred in excess of
the billings on contracts for which sufficient work has not been performed to
allow for the recognition of revenue. Billings in excess of related costs and
recognized earnings on uncompleted contracts represent amounts billed on
contracts in excess of the revenue allowed to be recognized under the percentage
of completion method on those contracts.

Cash and cash equivalents

Cash consists of cash in noninterest bearing checking accounts. Cash
equivalents consist of investments in a money market mutual fund which is
invested in financial instruments and securities issued and guaranteed by the
U.S. Treasury, the U.S. government or its agencies or instrumentalities. All
such investments are completely liquid and are made through the Company's bank
pursuant to an investment and custody agreement.

Restricted Funds on Deposit

Restricted funds on deposit represent funds in an interest bearing escrow
account which is maintained in lieu of contract receivable retentions for a
specific contract.

Inventories

Inventories, primarily steel components which have been charged to specific
contracts, are stated at the lower of cost or market under the first-in,
first-out method.

Property and Equipment

Property and equipment is stated at cost and is depreciated over the
estimated useful lives, which generally range from five to ten years, of the
related assets using the straight line method. Leasehold improvements are
amortized over the shorter of the lease term or the estimated useful life.
Amortization of leasehold improvements is included in depreciation and
amortization.

Income Taxes

In 1987, the stockholders of the Company elected under Subchapter S of the
Internal Revenue Code to include the Company's income in their own income for
federal and state income tax purposes. As a result, the Company was not subject
to federal or state income taxes at December 31, 1996. At December 31, 1996, the
Company's tax basis differed from the amounts used for financial reporting
purposes. The income tax basis was higher by approximately $750,000.
Accordingly, if the Company converted to a C corporation as of December 31,
1996, it would have recorded a net deferred tax asset of approximately $300,000
and recorded a deferred tax benefit of the same amount to reflect the tax effect
of cumulative differences at conversion. At December 31, 1996 and March 31,
1997, retained earnings included approximately $9,900,000 and $10,700,000,
respectively, of income taxed directly to stockholders.

Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments", requires that the Company disclose
estimated fair values of financial instruments. Cash and cash equivalents,
restricted funds on deposit, receivables, accounts payable, and other accrued
liabilities are

F-8
<PAGE> 61

SCHUFF STEEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)

carried at amounts that reasonably approximate their fair values. The Company
believes the carrying amount of their long-term debt approximates fair value at
December 31, 1996.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
receivables. The Company maintains cash and cash equivalents, restricted funds
on deposit and certain other financial instruments with large financial
institutions. The Company performs periodic evaluations of the relative credit
standing of those financial institutions that are considered in the Company's
investment strategy. Concentrations of credit risk with respect to receivables
are limited as the Company's customers tend to be larger general contractors on
adequately funded projects and the Company has certain lien rights.

Use of Estimates

The preparation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles necessarily requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the balance sheet date and the reported amounts of revenues and expenses during
the reporting period for long-term contracts.

The Company has a substantial history of making reasonably dependable
estimates of the extent of progress towards completion, contract revenues, and
contract costs on its long-term contracts. The estimates inherent in such
provisions are periodically evaluated and revisions are made as required to
reflect the most up-to-date information. However, due to uncertainties inherent
in the estimation process, actual results could differ materially from those
estimates.

Long-Lived Assets

The Company adopted the provisions of Financial Accounting Standards Board
Statement No. 121 (FAS 121), "Accounting for the Impairment of Long-Lived Assets
to Be Disposed Of", which requires impairment losses to be recorded on
long-lived assets used in operations, such as equipment and improvements and
intangible assets, when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the carrying amount of the assets. Based upon its assessment as of December 31,
1996 and March 31, 1997, management does not believe there are any adjustments
required to its long-lived assets as a result of implementing FAS 121.

Pro Forma Data

The pro forma consolidated balance sheet as of March 31, 1997 includes
adjustments to increase stockholder distributions payable and reduce retained
earnings by $7,000,000 to show the effect of the S corporation distribution
expected to be made from the proceeds of the Company's planned initial public
offering.

Pro forma net income per share is computed using weighted average common
shares outstanding and common stock equivalents if dilutive. Pro forma tax
provision is based on the effective tax rate that the Company believes would
have been incurred had the Company not been a S corporation for income tax
purposes. That rate of 40% is comprised of a 34% federal statutory rate plus an
effective state tax rate net of federal benefit of 6%. Under Securities and
Exchange Commission Staff Accounting Bulletin (SAB) 83, common stock equivalents
include the dilutive effect of stock options granted within one year of an
initial public offering at prices less than the anticipated offering price for
all years presented. Under SAB 55,

F-9
<PAGE> 62

SCHUFF STEEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)

common stock equivalents also include the number of shares expected to be issued
in an initial public offering for which the net offering proceeds will be used
to make stockholder distributions.

Impact of Recently Issued Accounting Standards

Statement of Financial Accounting Standards No. 128 (FAS 128), "Earnings
Per Share", issued by the Financial Accounting Standards Board in February 1997,
is effective for periods ending after December 15, 1997. At that time, the
Company will be required to change the method currently used to compute earnings
per share and to restate all prior periods. Under the new requirements for
calculating primary earnings per share, the dilutive effect of stock options
will be excluded. The impact is expected to result in an increase in pro forma
primary earnings per share for the year ended December 31, 1996 of $0.22 and for
the quarter ended March 31, 1997 of $0.04. The impact of FAS 128 on the
calculation of fully diluted pro forma earnings per share for these periods is
not expected to be material.

2. RECEIVABLES AND CONTRACTS IN PROGRESS

Receivables consist of the following at:

<TABLE>
<CAPTION>
DECEMBER 31
------------------- MARCH 31
1995 1996 1997
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Contract receivables:
Contracts in progress............................. $ 7,362 $11,566 $14,170
Unbilled retentions............................... 3,632 5,112 4,379
------- ------- -------
10,994 16,678 18,549
Notes receivable.................................... 125 65 49
Other receivables................................... 168 142 56
------- ------- -------
$11,287 $16,885 $18,654
======= ======= =======
</TABLE>

Substantially all of the Company's receivables are due from general
contractors located in Arizona, California and Nevada.

Costs and estimated earnings on completed and uncompleted contracts consist
of the following at:

<TABLE>
<CAPTION>
DECEMBER 31
--------------------- MARCH 31
1995 1996 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Costs incurred on completed and contracts in
progress......................................... $127,028 $162,648 $121,548
Estimated earnings................................. 18,324 23,058 17,285
-------- -------- --------
145,352 185,706 138,833
Less progress billings............................. 150,216 204,458 159,908
-------- -------- --------
$ (4,864) $(18,752) $(21,075)
======== ======== ========
Included in the accompanying consolidated balance
sheets under the following captions:
Costs and recognized earnings in excess of
billings on uncompleted contracts............. $ 1,076 $ 871 $ 1,332
Billings in excess of costs and recognized
earnings on uncompleted contracts............. (5,940) (19,623) (22,407)
-------- -------- --------
$ (4,864) $(18,752) $(21,075)
======== ======== ========
</TABLE>

F-10
<PAGE> 63

SCHUFF STEEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)

3. INVENTORIES

Inventories consist of the following at:

<TABLE>
<CAPTION>
DECEMBER 31
------------------ MARCH 31
1995 1996 1997
------ ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials........................................ $1,351 $ 665 $ 882
Fabrication in process............................... 6,052 10,032 12,668
Finished goods....................................... 367 614 614
------ ------- -------
$7,770 $11,311 $14,164
====== ======= =======
</TABLE>

The Company separately identifies and values the portion of its inventory
that is undergoing fabrication processes to prepare it for direct sale to a
customer or shipment to an erection site for use on a customer construction
project. Such amounts are reflected as fabrication in process inventory.

4. PROPERTY AND EQUIPMENT

Property and equipment consist of the following at:

<TABLE>
<CAPTION>
DECEMBER 31
------------------- MARCH 31
1995 1996 1997
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Property and equipment:
Leasehold improvements.............................. $ 1,498 $ 2,334 $ 2,388
Furniture and fixtures.............................. 91 91 189
Transportation equipment............................ 1,273 1,308 1,419
Machinery and equipment............................. 7,134 7,995 8,638
Cranes.............................................. 648 654 644
Office equipment.................................... 275 285 291
Detailing equipment................................. 83 83 83
EDP equipment....................................... 1,323 1,524 1,601
------- ------- -------
12,325 14,274 15,253
Less amortization and accumulated depreciation...... 8,103 9,158 9,495
------- ------- -------
$ 4,222 $ 5,116 $ 5,758
======= ======= =======
</TABLE>

F-11
<PAGE> 64

SCHUFF STEEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)

5. LONG-TERM DEBT

Long-term debt consists of the following at:

<TABLE>
<CAPTION>
DECEMBER 31
----------------- MARCH 31
1995 1996 1997
------ ------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Note payable to a bank under a revolving line of credit
agreement maturing in 1998, with interest payable
monthly at the bank's prime rate plus 0.25 percent.... $1,647 $ -- $ --
Subordinated note payable to a related party, payable in
monthly installments of $12,037, plus interest at the
bank's prime rate plus 2.50 percent, maturing in
1999.................................................. 3,053 2,897 2,265
Notes payable to individuals under a stock purchase
agreement payable in annual installments of $159,250
plus interest at 5.73 percent, maturing in 2002....... -- -- 796
Note payable to a bank, paid in full in 1996............ 975 -- --
Other................................................... -- -- 33
------ ------ ------
5,675 2,897 3,094
Less current portion.................................... 404 144 317
------ ------ ------
$5,271 $2,753 $2,777
====== ====== ======
</TABLE>

The Company's revolving line of credit agreement is subject to renewal on
June 30, 1998 and is collateralized by contract receivables, equipment and raw
materials inventory. This agreement permits the Company to borrow up to an
amount equal to 75 percent of qualifying contract receivables and in total shall
not exceed $6,500,000, with further reductions to availability based upon, among
other restrictions, billings in excess of costs levels. As of December 31, 1996
and March 31, 1997, there was no availability for future borrowings under the
Company's revolving line of credit agreement. On March 31, 1997, the Company
modified its revolving line of credit agreement to permit borrowings of up to
$1,000,000 regardless of availability under the formula. The agreement was
subsequently modified to temporarily increase the minimum borrowing permitted
regardless of the formula to $2,500,000 through July 31, 1997. The Company made
interest payments on its line of credit of $272,160, $271,653, and $63,798 for
the years ended December 31, 1994, 1995 and 1996, respectively, and $48,366 and
$4,701 for the three months ended March 31, 1996 and 1997, respectively.

The subordinated note payable to a related party is a long-term loan from a
partnership owned by related parties which include the Company's stockholders.
The partnership obtained the funds loaned to the Company from a bank under terms
similar to those included in the loan it made to the Company. In April 1996, the
partnership refinanced its loan with the same bank used by the Company. Under
the terms of the new loan agreement between the partnership and the bank, the
Company has guaranteed repayment of the partnership's loan, which amounted to
$2,921,736 at December 31, 1996 and $2,883,954 at March 31, 1997.

Principal amounts of long-term debt maturing subsequent to December 31,
1996 are: 1997 -- $144,444, 1998 -- $144,444 and 1999 -- $2,608,396. The Company
made interest payments of $402,959, $449,439 and $420,050 for the years ended
December 31, 1994, 1995 and 1996, respectively, and $133,747 and $55,419 for the
three months ended March 31, 1996 and 1997, respectively, on its long-term debt.

6. EMPLOYEE BENEFIT PLANS

The Company maintains a 401(k) retirement savings plan which covers
eligible employees and which permits participants to contribute to the plan,
subject to Internal Revenue Code restrictions. The plan also

F-12
<PAGE> 65

SCHUFF STEEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)

permits the Company to make discretionary matching contributions, which amounted
to $34,952 during the year ended December 31, 1996 (none in 1994 or 1995) and
$8,738 and $10,065 for the three month periods ended March 31, 1996 and 1997,
respectively.

In 1996, the Company adopted the "Supplemental Retirement and Deferred
Compensation Plan" for certain management employees. The Plan is an unfunded
deferred compensation plan whereby the Company contributes an amount equal to 10
percent of annual net profits after deducting distributions payable to
stockholders, as defined in the Plan. During the year ended December 31, 1996,
total expense recognized by the Company was $528,900, which is currently
scheduled for distribution to eligible employees in 1997. This plan was
terminated effective January 1, 1997.

Substantially all of the Company's fabrication and erection workforce is
subject to collective bargaining agreements. The Company made contributions to
union sponsored benefit plans of $764,013, $883,225 and $1,122,119 during the
years ended December 31, 1994, 1995 and 1996, respectively, and $176,572 and
$409,148 during the three months ended March 31, 1996 and 1997, respectively.
Information from the administrators of these plans is not available to permit
the Company to determine its share of accumulated benefits and related assets.

The Company has a 401(k) defined contribution retirement savings plan for
union steelworkers. Currently, only participants contribute to this plan on a
voluntary basis, subject to Internal Revenue Code restrictions. All account
balances are 100 percent vested.

The Company has a second noncontributory defined benefit plan that is
maintained for union steelworkers and provides for pension and disability
benefits. During 1989, the Company reached agreement with the local
representatives of the United Steelworkers of America to freeze all pension
credits effective December 31, 1988. All pension credits are 100 percent vested.
The unfunded portion of the plan is being reduced by continued contributions by
the Company. The Company currently contributes 60 cents for each hour worked by
each participant. The Company's funding policy is to make monthly contributions
to the plan sufficient to at least meet minimum funding amounts required by law.

Currently, the plan is party to an insurance contract whereby the insurer
provides benefits under the plan. Company contributions are held by the insurer
in a collective investment fund which is managed by the insurer and which is
invested in stocks, bonds and money market instruments. The net assets available
for plan benefits are reflected at contract value, which approximates market
value.

The Company accounts for pension expense under its noncontributory defined
benefit pension plan under the provisions of Statement of Financial Accounting
Standards No. 87, "Employers' Accounting for Pensions."

The weighted average discount rate used in determining the actuarial
present value of accumulated and projected benefit obligations was decreased
from 7.0 percent in 1995 to 6.5 percent in 1996. As a result of this change, the
projected benefit obligation increased by $207,242. The expected long-term rate
of return on plan assets was 8.5 percent in both 1995 and 1996. The weighted
average rate of compensation increase is not applicable because the benefit is
not pay related.

F-13
<PAGE> 66

SCHUFF STEEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)

The following table sets forth the funded status of the plan as provided by
consulting actuaries at December 31, 1995 and 1996 and as estimated by
management at March 31, 1997:

<TABLE>
<CAPTION>
DECEMBER 31
----------------- MARCH 31
1995 1996 1997
------ ------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Actuarial present value of accumulated and projected
benefit obligations, all of which are fully vested.... $1,752 $2,003 $ 2,051
Plan assets at fair value............................... 1,426 1,740 1,806
------ ------ ------
Funded status -- projected benefit obligation in excess
of plan assets........................................ $ 326 $ 263 $ 245
====== ====== ======
Comprised of:
Prepaid pension cost before adjustment to recognize
additional minimum liability....................... $ 220 $ 362 $ 399
Unrecognized net loss................................. (426) (519) (541)
Unrecognized net obligation........................... (120) (106) (103)
------ ------ ------
Adjustment to recognize minimum liability............... $ (326) $ (263) $ (245)
====== ====== ======
Net pension cost includes the following components:
Service costs......................................... $ 50 $ 50 $ 13
Interest cost on projected benefit obligation......... 118 122 32
Actual return on plan assets.......................... (291) (231) (45)
Net amortization and deferral......................... 223 128 14
------ ------ ------
Net period pension cost................................. $ 100 $ 69 $ 14
====== ====== ======
</TABLE>

7. STOCKHOLDERS' EQUITY

Due to the Company's income tax status as a qualified S corporation, only
one class of stock may be issued and outstanding, and all outstanding shares
must be identical as to the rights of the holders in the profits and assets of
the Company, although differences in voting rights are permitted.

The Company has the authority to issue a total of two hundred thousand
shares of no par value stock, of which fifty thousand shares must be Class A
Common Stock, fifty thousand shares must be Class B Common Stock, and one
hundred thousand shares must be Preferred Stock. The Class A Common Stock and
the Class B Common Stock are identical in all respects except that the holders
of the Class B Common Stock have no voting power for any purpose and are not
entitled to notice of any meeting of stockholders. As of December 31, 1995 and
1996, only Class A Common Stock had been issued (See Note 13).

The Company also has the authority to issue preferred stock in amounts with
such designations, preferences, voting rights, privileges and such other
restrictions and qualifications as the Board of Directors may, by resolution,
establish. The Company has not set aggregate or per share amounts at which
preferred shares may be called or are subject to redemption through sinking fund
operations or otherwise. No preferred stock has been issued.

It is the policy of the Company to also make distributions to stockholders
in such amounts as are required to enable them to pay income taxes attributable
to their allocable share of taxable income from the Company. Pursuant to
provisions in the Company's revolving line of credit agreement, the Company is
also permitted at its discretion to declare an annual dividend to the
stockholders providing the Company maintains certain financial criteria.

F-14
<PAGE> 67

SCHUFF STEEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)

Following is an analysis of stockholder distributions for the years ended
December 31, 1994, 1995 and 1996 and the three months ended March 31, 1996 and
1997:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31 MARCH 31
---------------------------- -----------------
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Stockholder distributions payable at
beginning of period................. $ 981 $1,297 $1,071 $1,071 $4,555
Additions (deductions):
Life insurance premiums............. 346 346 346 87 87
Current year income taxes........... 1,821 1,217 5,105 284 909
Prior year income taxes............. 35 (93) (73) -- --
Less: Prior year refunds applied to
current year taxes............... (17) (79) (35) -- --
Current year dividend............... 554 460 700 -- --
Prior year dividend................. 281 -- -- -- --
------ ------ ------ ------ ------
3,020 1,851 6,043 371 996
Cash distributions:
Life insurance premiums............. 226 226 226 57 57
Current year income taxes........... 1,111 369 925 -- --
Prior year income taxes............. 918 691 798 529 304
Current year dividend............... -- 128 185 -- --
Prior year dividend................. 282 400 200 -- 415
------ ------ ------ ------ ------
2,537 1,814 2,334 586 776
Noncash distributions applied to
receivables from stockholders....... 167 263 225 29 --
------ ------ ------ ------ ------
Stockholder distributions payable at
end of period....................... $1,297 $1,071 $4,555 $ 827 $4,775
====== ====== ====== ====== ======
</TABLE>

8. STOCK OPTIONS

The Company established a qualified stock option plan ("the Plan")
effective February 5, 1997. The exercise price of the options, as well as the
vesting period, are established by the Company's Board of Directors. A summary
of activity under the Plan is as follows:

<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
---------------------
SHARES WEIGHTED-
AVAILABLE AVERAGE
UNDER EXERCISE
OPTION NUMBER PRICE
--------- ------- ---------
<S> <C> <C> <C>
Balance at February 5, 1997 (inception of Plan)....... -- -- $ --
Authorized.......................................... 600,000 -- --
Granted............................................. -- 345,500 5.00
Exercised........................................... -- -- --
Canceled............................................ -- -- --
------- ------- -----
Balance at March 31, 1997............................. 600,000 345,500 $5.00
======= ======= =====
Exercisable at March 31, 1997......................... --
=======
</TABLE>

F-15
<PAGE> 68

SCHUFF STEEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)

All options granted in 1997 had an exercise price of $5.00 per share which
was equal to the fair value of the Company's common stock, at the date of grant,
as estimated by its Board of Directors. The weighted-average remaining
contractual life of those options is approximately five years.

The Company's 1997 Stock Option Plan has authorized the grant of options up
to 600,000 shares to officers, directors or key employees of the Company. All
options have ten year terms and generally vest ratably over five years from the
date of grant. The fair value of options granted during the three months ended
March 31, 1997 was $1.26.

The Company has elected to follow Accounting Principles Board Opinion
Number 25 (APB 25), "Accounting for Stock Issued to Employees", and related
interpretations in accounting for its stock options issued to employees because,
as discussed below, the alternative fair value accounting provided for under
Statement of Financial Accounting Standards No. 123 (FAS 123), "Accounting for
Stock-Based Compensation", requires use of option valuation models that were not
developed for use in valuing stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals the fair value of the
underlying stock on the date of grant, no compensation expense is recognized.

Pro forma information regarding net income and pro forma earnings per share
is required by FAS 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of FAS 123. The fair
value for these options was estimated at the date of grant using a Black Scholes
Option pricing model with the following weighted-average assumptions:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
1997
--------------
<S> <C>
Contractual term of the award................. 10 years
Expected life of award........................ 5 years
Volatility.................................... .01
Fair value of stock at grant date............. $5.00
Option exercise price......................... $5.00
Risk-free interest rate....................... 6 percent
</TABLE>

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models requires the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods. The Company's
pro forma net income under FAS 123 is not materially different from historical
results.

9. RELATED PARTY TRANSACTIONS

The Company leases certain property from a partnership owned by related
parties including the Company's stockholders. Effective March 1, 1997, the
Company terminated the existing lease and executed a new 20-year lease with the
same partnership. The lease requires monthly lease payments ranging from $24,611
in 1997 to $50,427 in 2000 and thereafter with additional stipulated rent
increases every five years based on the Consumer Price Index. The Company is
also obligated to pay the partnership any taxes related to the lease payments,
which are expected to approximate $132,000 in 1997. Rent expense under the
related party lease

F-16
<PAGE> 69

SCHUFF STEEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)

totaled $252,683, $263,561, and $273,570 for the years ended December 31, 1994,
1995 and 1996, respectively, and $68,699 and $69,104 for the three months ended
March 31, 1996 and 1997, respectively.

Effective March 1, 1997, the Company also executed a 20-year lease of
certain property with the partnership discussed above. Such property was part of
the acquisition discussed in Note 13. The lease requires monthly lease payments
of $28,333 with additional stipulated rent increases every five years based on
the Consumer Price Index. The Company is also obligated to pay the partnership
any taxes related to the lease payments, which are expected to approximate
$81,000 in 1997. The Company has guaranteed the debt of the partnership relating
to this property. The outstanding balance of such debt was $2,191,583 at March
31, 1997.

Future minimum rentals (excluding taxes), by year, and in the aggregate
under these noncancelable operating leases at December 31, 1996, are as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1997........................................... $ 575
1998........................................... 754
1999........................................... 896
2000........................................... 941
2001........................................... 945
Thereafter..................................... 14,335
-------
$ 18,446
=======
</TABLE>

The Company also leases certain property, vehicles, and equipment from
nonrelated parties for which it incurred rent expense of $158,506, $134,032 and
$232,955 for the years ended December 31, 1994, 1995 and 1996, respectively, and
$55,224 and $94,809 for the three months ended March 31, 1996 and 1997,
respectively.

10. SIGNIFICANT CUSTOMERS

The Company had revenues from certain customers that were in excess of 10
percent of the respective year's revenues as follows (for years in which the
respective customer's revenue were less than 10% no percentage is stated):

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31 ENDED MARCH 31
-------------------------- ---------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Customer A.............................. -- 11.2% -- -- --
Customer B.............................. -- -- 13.7% -- --
Customer C.............................. -- -- -- 25.5% --
Customer D.............................. 10.0% 10.4% 13.4% 28.7% 18.0%
Customer E.............................. -- -- 19.5% -- 35.4%
Customer F.............................. -- -- 11.5% -- --
Customer G.............................. 18.6% 14.4% -- -- --
</TABLE>

During the years ended December 31, 1995 and 1996 and the three months
ended March 31, 1997 the Company's revenues included approximately $1,894,000,
$14,280,000 and $2,328,000, respectively, relating to projects carried out
internationally for which approximately $0, $1,776,000 and $463,369 was in
accounts receivable at December 31, 1995, 1996 and March 31, 1997, respectively.

F-17
<PAGE> 70

SCHUFF STEEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)

11. OTHER INCOME

During 1995, the Company received $175,000 as a result of a settlement with
third parties relating to damages to Company equipment. In addition, the Company
received $371,194 from a claim related to misappropriation of funds by a former
employee.

12. CONTINGENCIES

The Company is involved from time to time through the ordinary course of
business in certain claims, litigation, and assessments. Due to the nature of
the construction industry, the Company's employees from time to time become
subject to injury, or even death, while employed by the Company. The Company
does not believe there are any such contingencies at December 31, 1996 or March
31, 1997 for which the eventual outcome would have a material adverse impact on
the Company.

During 1996, the primary contractor on the Company's largest contract has
claimed that the Company was liable under delay provisions and is seeking
damages. While the Company believes that the reasons for the delay were such
that the Company should not be liable, the Company has reduced expected revenues
by approximately $900,000 due to this uncertainty.

During 1996, the Company was named as a defendant in a lawsuit relating to
an incident at one of its worksites whereby one of its employees was killed in a
crane accident. The Company believes the loss, if any, relating to the incident
will be fully insured and does not expect the ultimate outcome of the matter to
have a material adverse impact on its financial position.

Relating to the incident set forth in the prior paragraph, the Company has
been named as a defendant in a lawsuit brought by the crane operator who claims
he was assaulted by employees of the Company after the incident. The Company's
insurance carrier has declined coverage. However, management does not expect the
amount of loss, if any, relating to the ultimate resolution of this matter to
have a material adverse impact on its financial position, regardless of whether
or not the insurance carrier ultimately provides coverage.

13. SUBSEQUENT EVENT

On January 31, 1997, the Company acquired 100 percent of the outstanding
capital stock of B&K Steel Fabrications, Inc. ("B&K"), a steel fabricator
located in Gilbert, Arizona, for $1,223,194, consisting of $426,944 in cash and
$796,250 in two promissory notes payable in annual installments over five years
including interest at 5.73 percent. In addition, the Company prepaid $1,090,000
of the subordinated note payable discussed in Note 5 to enable a related party
lessor to the Company to acquire the real property upon which B&K is located,
and certain equipment attached to the property. The acquisition was not
significant to the Company under the definitions used by the Securities and
Exchange Commission, and will be accounted for under the purchase method of
accounting. After assigning fair values to the tangible assets acquired, and
liabilities assumed, there was no goodwill generated by the purchase. The
results of operations of B&K will be included in those of the Company commencing
February 1, 1997. Had the purchase taken place as of January 1, 1996, the
combined business would have had revenues of $113,291,000, income before taxes
of $10,165,000, pro forma net income (using a 40 percent effective tax rate) of
$6,099,000 and pro forma net income per share of $1.00. However, such
information may not be indicative of future operations of the combined business.

Subsequent to March 31, 1997 the Company entered into a lease agreement
with a partnership owned by related parties including the Company's stockholders
for additional office space acquired by the partnership that is adjacent to the
Company's existing principal office and shop facilities. The lease commences May
1, 1997 and expires on April 30, 2017. The lease requires monthly rental
payments of $11,250, subject to increase every five years based on a Consumer
Price Index formula. The Company is also obligated to pay the

F-18
<PAGE> 71

SCHUFF STEEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)

partnership any taxes related to the lease payments, which are expected to
approximate $32,000 in 1997. In conjunction with the lease, the Company has
guaranteed the related debt incurred by the partnership to acquire the property
in the amount of $999,999.

On May 8, 1997, the Company effected a 50,000 for one common stock split.
Accordingly, all shares of common stock have been restated in the financial
statements to reflect the effect of this stock split. At the same time, the
Company also reincorporated in Delaware and changed its authorized shares and
classes of stock. The information set forth in the financial statements reflect
the authorized shares after having given effect to the reincorporation.

F-19
<PAGE> 72

======================================================

NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, ANY OF THE UNDERWRITERS, OR ANY OTHER
PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER
THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL.
------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 8
The Company........................... 13
S Corporation Distribution............ 14
Use of Proceeds....................... 15
Dividend Policy....................... 15
Capitalization........................ 16
Dilution.............................. 17
Selected Consolidated Financial and
Operating Data...................... 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 20
Business.............................. 27
Management............................ 40
Principal Stockholders................ 44
Certain Relationships and Related
Transactions........................ 45
Description of Capital Stock.......... 47
Shares Eligible for Future Sale....... 49
Underwriting.......................... 50
Legal Matters......................... 52
Experts............................... 52
Additional Information................ 52
Index to Consolidated Financial
Statements.......................... F-1
Report of Independent Auditors........ F-2
Consolidated Financial Statements..... F-3
</TABLE>

------------------------

UNTIL JULY 24, 1997 (25 CALENDAR DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSAC-
TIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION,
MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN
ADDITION TO THE OBLIGATIONS OF THE DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR ALLOTMENTS OR SUBSCRIPTIONS.
======================================================

======================================================
2,000,000 SHARES

[SCHUFF LOGO]

SCHUFF STEEL
COMPANY

COMMON STOCK

------------------------
PROSPECTUS
------------------------

PRINCIPAL FINANCIAL
SECURITIES, INC.

CRUTTENDEN ROTH
INCORPORATED

JUNE 30, 1997
======================================================