JORGENSEN EARLE M CO /DE/, 10-K405, 1999-06-25

JORGENSEN EARLE M CO /DE/
10-K405, 1999-06-25
METALS SERVICE CENTERS & OFFICES

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended March 31, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 1-7537

EARLE M. JORGENSEN COMPANY
(Exact name of registrant as specified in its charter)

DELAWARE 95-0886610
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

3050 EAST BIRCH STREET, BREA, CALIFORNIA 92821
(Address of principal executive offices) (Zip Code)

Registrant's telephone number: (714) 579-8823

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

State the aggregate market value of the voting stock held by non-affiliates of
the registrant. NONE

Number of shares outstanding of the registrant's common stock, par value $.01
per share at May 31, 1999 - 128 shares

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PART I

ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS REPORT
ARE CONSIDERED FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. THESE FORWARD-LOOKING STATEMENTS ARE
SUBJECT TO KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS SUCH AS
FLUCTUATIONS IN SUPPLY, DEMAND AND PRICES OF STEEL AND ALUMINUM PRODUCTS,
CHANGES IN THE INDUSTRIES THAT PURCHASE METAL PRODUCTS FROM THE COMPANY, SUCH AS
OIL SERVICES, AGRICULTURAL EQUIPMENT AND AEROSPACE, AND CHANGES IN THE GENERAL
ECONOMY. CHANGES IN SUCH FACTORS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE CONTEMPLATED IN SUCH FORWARD-LOOKING STATEMENTS. SEE "ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS". ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN
SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT
SUCH EXPECTATIONS WILL PROVE TO BE CORRECT. THE COMPANY UNDERTAKES NO OBLIGATION
TO RELEASE PUBLICLY ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS TO REFLECT
EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.

ITEM 1. BUSINESS

Earle M. Jorgensen Company (the "Company" or "EMJ") is one of the
largest distributors of metal products in the United States. The Company was
formed on May 3, 1990, when Kelso & Companies Inc. ("Kelso") and its affiliates
acquired control of and combined two leading metals distributors, EMJ (founded
in 1921) and Kilsby-Roberts Holding Co. ("Kilsby") (successor to C.A. Roberts
Company, founded in 1915). In connection with the combination of EMJ and Kilsby,
the Company became a wholly-owned subsidiary of Earle M. Jorgensen Holding
Company, Inc. ("Holding").

The Company carries over 30,000 different carbon, alloy, stainless and
aluminum bar, tubing and pipe, and plate and sheet metal products, and provides
value-added metals processing, such as cutting to length, burning, sawing,
honing, shearing, grinding, polishing, and other similar services, to most of
the metal products it sells. The Company conducts its business through a network
of 25 service centers, four plate processing centers, one cutting center, one
tube honing facility, three sales offices and a national merchandising office.

The Company sells its products and value-added processing services to
over 40,000 customers engaged in a wide variety of industries including
machinery manufacturing, transportation, fabricated metal products, aerospace,
oil tools, construction, shipbuilding, plastics, chemicals, petrochemicals, farm
equipment, food processing, energy and environmental control. The Company
accommodates its customers' demands by offering a reliable source of metal
products and related services and by providing timely delivery of product,
generally within 24 hours from receipt of an order. When needed, EMJ will also
provide its customers metals processing expertise and inventory management
services.

INDUSTRY OVERVIEW AND COMPETITION

The Company believes that metals service centers provide valuable
services that are needed by end users. Primary metals producers, which
manufacture and sell large volumes of steel, aluminum and specialty metals in
standard sizes and configurations, generally sell only to those large end users
and metals service centers who do not require processing of the products and who
can order in large quantities and tolerate relatively long lead times. Metals
service centers, which sell products in smaller quantities and offer services
ranging from pre-production processing in accordance with specific customer
requirements to storage and distribution of unprocessed metal products, function
as intermediaries between primary metals producers and end users.

The current trend among primary metals producers is to focus on their
core competency of high-volume production of a limited number of standardized
metal products. This change in focus has been driven by their need to develop
and improve efficient, volume-driven production techniques in order to remain
competitive.

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At the same time, most end users have recognized the economic
advantages associated with outsourcing their metal processing and inventory
management requirements. Outsourcing permits end users to reduce total
production cost by shifting the responsibility for pre-production processing to
metals service centers, whose higher efficiencies in performing these processing
services make the ownership and operation of the necessary equipment a better
investment. Inventory management and just-in-time delivery services provided by
metals service centers also enable end users to reduce material costs, decrease
capital required for inventory and equipment and save time, labor and other
expenses.

As a result of these trends, metals service centers play an
increasingly important role in all segments of the metals industry. Metals
service centers purchase and distribute about 30% of all carbon industrial
products and nearly 45% of all stainless steel products produced in the U.S.
Metals service centers are the single largest customer group of the U.S.
domestic steel industry and serve the metal supply needs of more than 300,000
manufacturers and fabricators through service center locations nationwide. The
metals distribution and processing industry generated an estimated $45 billion
in revenues in the U.S. in 1998. The Company believes that the metals service
center industry will continue to increase its role as a valuable intermediary
between primary metal producers and end users, primarily as a result of (i) the
metal producers efforts to increase sales to larger volume purchasers in order
to increase production efficiency and (ii) increased demand by end users for
outsourced metals processing, just-in-time inventory management and the other
value-added materials management services.

The metals service center industry is highly fragmented, consisting of
a large number of small companies, which are limited as to product line, size of
inventory and customers located within a specific geographic area, and a few
relatively large companies. In addition, the industry includes both general-line
distributors, which handle a wide range of metal products, and specialty
distributors, which specialize in particular categories of metal products.
Metals service centers range from nationwide to regional and local in geographic
coverage. Generally, the metals service center industry competes on price and
the ability to provide customers with value-added services such as product
availability, timely delivery, reliability, quality and processing capability.

There has been a trend toward consolidation in the industry in
recognition of the advantages of larger companies. According to industry
sources, the number of steel processors and metals service center companies in
the U.S. has been reduced from approximately 7,000 in 1980 to approximately
3,400 in 1997.

The larger and more sophisticated companies, such as EMJ, have certain
advantages over smaller companies, such as obtaining higher discounts associated
with volume purchases, the ability to service customers with operations in
multiple locations and the use of more sophisticated information systems.
Although the Company is one of the largest distributors of metals in the U.S.,
some of its competitors have greater financial resources and most of its
competitors are less leveraged than the Company.

OPERATING AND GROWTH STRATEGY

During the past several years, the Company has realigned its operations
and core competencies, and has improved its cost structure and profitability.
This was accomplished through two restructurings implemented in fiscal 1997 and
1996, that included selling unprofitable foreign operations, closing
non-strategic domestic distribution centers, consolidating or discontinuing
certain processing centers, and reducing the Company's workforce. In addition,
the Company wrote down or wrote off non-performing or impaired assets.

In fiscal 1998, the Company commenced several reengineering initiatives
to focus on improving customer service, process improvements and profitability.
Such initiatives included: (i) implementing direct sales capabilities, (ii)
enhancing sales of product and value-added services to new and existing
customers utilizing management information systems that provide improved
customer and market data, (iii) developing order management systems and
redesigning warehouse configurations to reduce inventory handling expenses and
to improve on-time delivery, (iv) developing logistics programs to reduce
transportation and freight costs, and (v) redeploying human resources to
value-added activities. Effective fiscal 1998, the Company also instituted a new
management incentive compensation plan to provide bonuses to branch and
corporate managers based on the achievement of certain branch operating and
corporate financial objectives. See "Item 11. Executive Compensation -
Management Incentive Compensation Plan".

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The Company believes that the restructuring plans and the reengineering
initiatives have substantially reduced costs since their commencement and have
resulted in, and will continue to contribute to, a downward trend in operating
expense ratios. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - General".

The Company's primary business goal is to improve its operating profits
and cash flows while expanding its market share and services to customers. Its
operating and growth strategy consists of the following elements:

CONTINUE COST REDUCTIONS AND PRODUCTIVITY IMPROVEMENTS. The Company
will continue to identify and implement reengineering initiatives to realize
cost savings and to improve profitability and cash flows. The Company believes
significant opportunities remain in the areas of delivery and inventory
handling, procurement of goods and services and customer service. The Company
seeks to increase asset and employee productivity and to further decrease unit
costs through initiatives intended to increase volume, thereby taking advantage
of economies of scale.

FOCUS ON HIGHER GROSS MARGIN VALUE-ADDED PRODUCTS AND SERVICES. The
Company seeks to maintain its gross margins and to expand its market share by
(i) making sales from inventory with value-added services as often as possible,
since such sales generally generate higher gross margins, and (ii) providing
inventory management and timely delivery services. Since the mid-1980's, the
Company has shifted its product mix away from commodity-like products such as
flat-rolled steel and has increased its sales of specialty products such as
carbon, alloy, stainless and aluminum bar and tubing that generally result in
higher gross margins. Although the Company continues to sell steel and aluminum
sheet products, it does so primarily in niche markets or as complementary
products to important customers that are significant purchasers of other higher
gross margin products.

REALIZE EFFICIENCIES FROM MANAGEMENT INFORMATION SYSTEM INVESTMENTS.
The Company has made and will continue to make investments in its management
information systems to improve customer service, optimize inventory levels,
achieve greater operational efficiencies, and to assist management in
identifying additional areas for operational improvement. Planned improvements
in the Company's management information system include: (i) an improved resale
pricing management system which allows EMJ to be more responsive to customer and
market pricing conditions, (ii) an internet based customer inquiry and order
system which provides for order entry and tracking, inventory availability, and
test report verification, (iii) improved production and transportation
scheduling capabilities to allow more accurate delivery commitments to
customers, and (iv) job costing functionality for contribution margin analysis.

PRODUCTS AND SUPPLIERS

The Company has designated certain carbon and alloy, aluminum, and
stainless products as core product offerings under its bar, tubing and pipe,
plate, and sheet product lines. The Company stocks a broad range of shapes and
sizes of each of these products in each service center (unless there is no
market for the product line at a particular location). Each service center
strives to be a market leader in the Company's core product lines in its
geographic area and will tailor its inventory to the customer and market
requirements of its geographic area.

Carbon steel bar products (hot-rolled and cold-finished) and carbon
plate and sheet are used in construction equipment, farm equipment, automotive
and truck manufacturing, shipbuilding and oil exploration as well as a wide
range of other products. Stainless steel bar, plate and sheet are used widely in
the chemical, petrochemical, and oil refining and biomedical industries where
resistance to corrosion is important. Aluminum bar, plate and sheet are
frequently used in aircraft and aerospace applications where weight is a factor.
Different tubing products are appropriate for particular uses based on different
characteristics of the tubing materials, including strength, weight, resistance
to corrosion and cost. Carbon tubing and pipe are used in general manufacturing.
Alloy tubing is used primarily in the manufacturing of oil field equipment and
farm equipment. Stainless steel tubing and pipe are used in applications
requiring a high resistance to corrosion, such as food processing. Aluminum
tubing and pipe are used in applications that put a premium on lightweight (such
as aerospace manufacturing).

The majority of the Company's procurement activities are from a
centralized merchandising office in Chicago where specialists in each of the
Company's major product lines make inventory purchases. The Company concentrates
on developing close working relationships with high-quality suppliers to ensure
quality and timely delivery.

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The vast majority of the Company's purchases are made by purchase order
and the Company has no significant supply contracts with periods in excess of
one year. The Company is not dependent on any single supplier for any product or
for a significant portion of its purchases, and in fiscal year 1999 no single
supplier represented more than 10% of the Company's total purchases. The Company
purchased approximately seven percent of its inventory requirements from
foreign-based suppliers in fiscal 1999.

The following table sets forth a percentage breakdown of domestic
revenues generated from sales of inventory maintained by the Company (referred
to as "stock sales" ) by product group for the fiscal years ended March 31,
1999, 1998 and 1997.

YEAR ENDED MARCH 31,
--------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
BARS:
Carbon and Alloy................................. 39.1% 37.0% 33.9%
Stainless........................................ 10.4 12.2 13.6
Aluminum......................................... 5.9 6.2 5.5
------- ------- -------
Total............................................ 55.4 55.4 53.0
------- ------- -------
TUBING AND PIPE:
Carbon and Alloy................................. 28.3 27.0 26.8
Stainless........................................ 3.2 3.6 3.7
Aluminum......................................... 3.2 3.3 3.6
------- ------- -------
Total............................................ 34.7 33.9 34.1
------- ------- -------
PLATE:
Carbon and Alloy................................. 5.5 5.5 5.6
Stainless........................................ 1.1 1.5 1.8
Aluminum......................................... 2.3 2.4 2.5
------- ------- -------
Total............................................ 8.9 9.4 9.9
------- ------- -------
SHEET:
Carbon and Alloy................................. 0.4 0.4 0.5
Stainless........................................ 0.3 0.3 0.6
Aluminum......................................... 0.2 0.5 1.8
------- ------- -------
Total............................................ 0.9 1.2 2.9
------- ------- -------
Other............................................ 0.1 0.1 0.1
------- ------- -------
100.0% 100.0% 100.0%
------- ------- -------
------- ------- -------
Revenues from stock sales as a percentage of
total revenues................................... 88.0% 87.2% 85.7
------- ------- -------
------- ------- -------

</TABLE>

CUSTOMERS AND MARKETS

The Company provides metal products and pre-production processing
services to over 40,000 active customers throughout the U.S. and Canada that do
business in a wide variety of industries, including machinery manufacturing,
transportation, fabricated metal products, aerospace, oil tools, construction,
shipbuilding, plastics, chemicals, petrochemicals, farm equipment, food
processing, energy and environmental control. The Company is not dependent on
any single customer or industry, and during fiscal 1999 no single customer
accounted for more than three percent of revenues.

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The vast majority of sales are from individual purchase orders and are
not subject to ongoing supply contracts; however, the Company sometimes enters
into contracts to purchase and supply specific products over a period of a year
or longer. Such contracts provide the customer with greater certainty as to
timely delivery, price stability and continuity of supply, and sometimes satisfy
particular processing or inventory management requirements. Such contracts have
resulted in new customer relationships and increased sales volumes for the
Company, but can have a slightly lower gross margin than ordinary sales. Such
contracts, in the aggregate, represented less than 15% of total revenues in
fiscal 1999.

Seasonal fluctuations in the Company's business generally occur in the
summer months and in November and December, when many customers' plants are
closed for vacations. Order backlog is not a significant, as orders are
generally filled within 24 hours.

During fiscal 1999, the Company handled approximately 7,200 sales
transactions per business day generating an average revenue of approximately
$505 per transaction. Sales of stock inventory generated approximately 88% of
the Company's total revenues in fiscal 1999. Special requirements of the
customer are met by arranging mill-direct sales and by making buy-outs from
other distributors of items the Company does not maintain as stock inventory.
Such sales generally have lower gross margins than stock sales, but provide a
valuable customer service.

COMPETITIVE STRENGTHS

The Company believes that the following factors contribute to its
success in the metals distribution industry:

MARKET POSITION. The Company is among the largest distributors of metal
products in the U.S. and believes that its broad product offerings, with a
specialization in higher margin bar and tubing (as compared to flat-rolled
products), along with its value-added processing capabilities have enabled it to
maintain its position among the market leaders and achieve gross margins that
are among the highest for comparable publicly-traded metals distribution
companies. Because of its significant purchasing volume and long-term
relationships developed with numerous metals producers, the Company believes it
can realize economies of scale and has access to a wide variety of metals and
new product and service ideas. Furthermore, the Company believes that its
salesforce is among the most experienced in the industry.

NETWORK OF STRATEGICALLY LOCATED FACILITIES. The Company's service
centers are strategically located throughout North America, generally within one
day's delivery time to almost all U.S. manufacturing centers, and is thereby
capable of increasing sales to national customers that currently buy metals from
various suppliers in different locations. The Company's facilities serve more
than 40,000 customers, with no single customer accounting for more than three
percent of the Company's gross revenues. Such diversification reduces the
Company's vulnerability to the financial or economic weakness of particular
customers, industries or regions.

SERVICE AND PRODUCT SELECTION. The Company specializes in higher gross
margin bar and tubing products that are not commonly sold directly by steel and
aluminum producers in small quantities. The Company serves the needs of its
customers by carrying a broad range of shapes and sizes in its core product
areas in large quantities, which allows the Company to deliver orders to
customers typically within 24 hours from receipt of an order. Each of the
Company's service centers strives to be a market leader in the Company's core
product lines in its geographic area. The Company benefits from an excellent
reputation for quality and service built over its 78 years in operation and has
received numerous quality and service awards from its customers. The Company was
among the first in the metals distribution industry to receive multi-site ISO
9002 certification and had the first metals service center to receive QS 9000
certification established by the automobile industry.

MANAGEMENT INFORMATION SYSTEMS AND INVENTORY PRACTICES. The Company has
invested and will continue to invest significant resources to upgrade or enhance
its management information and financial reporting systems. Such information
systems have integrated and comprehensive application programs that provide
databases used to perform detailed transaction analysis, including internal
benchmarking of profitability by customer and by product type, and tracking and
tracing inquiries by order and product. The Company believes its information
systems assist management in their efforts to purchase more effectively,
reallocate and optimize inventory among different locations and improve customer
service through better order and product reference data.

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EXPERIENCED MANAGEMENT WITH EQUITY OWNERSHIP. The Company's executives
and other members of its management have substantial experience in the metals
industry. In addition, the Company's employees directly, and indirectly through
the Jorgensen Employee Stock Ownership Plan (the "ESOP"), own in the aggregate
approximately 28.5% (20.9% on a diluted basis) of the outstanding Holding Common
Stock as of March 31, 1999.

IMPROVED COST STRUCTURES - The Company believes that the closure or
sale of underperforming operations and assets, the reduction in its workforce
and other restructuring and reengineering initiatives undertaken in recent years
have dramatically improved its cost structure and operating leverage. During
fiscal 1999, such initiatives and their impact on cost structures have enabled
the Company to maintain operating profit at prior year levels, despite general
weakness in the metals industry and specific weakness in key industries served
by the Company, including agricultural equipment, oil services and aerospace,
that resulted in lower revenues.

MANAGEMENT INFORMATION SYSTEMS

The Company's management information systems are designed to provide a
competitive advantage in managing activities affecting vendors, products,
customers and value-added services and to assist management in identifying
additional areas for operational improvement. The systems enhance the Company's
ability to utilize electronic commerce in dealing with its customers and
suppliers (including EDI, internet or remote inquiry and ordering), bar coding,
document imaging and other functions that can result in greater efficiencies and
increased productivity for all users. Planned improvements in the Company's
management information systems include: (i) an improved order processing system
which will allow its salespersons to access customer history and to improve
order throughput, (ii) a warehouse automation system to better control inventory
and shipment logistics, (iii) providing intranet systems for financial and
management reporting, planning and sales and gross profit analysis, (iv)
document imaging technology to facilitate processing, storage and retrieval of
transactional data, and (v) providing inventory inquiry and order processing via
the internet.

EMPLOYEES

As of March 31, 1999, the Company employed approximately 1,900 persons,
of whom approximately 1,100 were employed in production or shipping, 410 were
employed in sales and 390 served in executive, administrative or district office
capacities. Three different unions represented approximately 750 of the
Company's employees from 16 locations. The related collective bargaining
agreements expire on staggered dates between December 14, 1999 and April 30,
2003. The Company negotiated a collective bargaining agreement with 18 newly
organized employees of the Toronto facility in fiscal 1999. The Company believes
that it has a good overall relationship with its employees.

FOREIGN OPERATIONS

The Company maintains two metal service centers in Canada operating
through a wholly-owned subsidiary, Earle M. Jorgensen (Canada) Inc., a Canadian
limited liability company. On September 8, 1997, the Company sold its operations
in Mexico, and on January 29, 1998, the Company sold its operations in the
United Kingdom. For the fiscal years ended March 31, 1999, 1998 and 1997,
revenues from foreign operations totaled $31.1 million, $53.6 million and $63.8
million, respectively. Refer to Note 4 to Consolidated Financial Statements for
further information on the sale of foreign subsidiaries.

ENVIRONMENTAL MATTERS

The Company is subject to extensive and changing federal, state, local
and foreign laws and regulations designed to protect the environment and human
health and safety, including those relating to the use, handling, storage,
discharge and disposal of hazardous substances and the remediation of
environmental contamination. As a result, the Company is from time to time
involved in administrative and judicial proceedings and inquiries relating to
environmental matters.

During fiscal years 1999, 1998 and 1997, expenditures made in
connection with environmental matters totaled approximately $2.8 million, $0.4
million and $1.1 million, respectively, principally for settlement of claims,
and monitoring, remediation and investigation activities at sites with
contaminated soil and/or groundwater. As of March 31, 1999, the Company had
accrued approximately $0.5 million for future monitoring, investigation and
remediation expenditures that could be reasonably estimated related to the
following pending environmental matters.

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ALAMEDA STREET (LOS ANGELES). In February 1998, the Company was
notified that it had potential responsibility for the lead and copper soil
contamination of an undeveloped parcel that is adjacent to its Alameda Street
property. A remediation plan has been approved by local government agencies and
is being implemented.

FORGE (SEATTLE/KENT, WA). The Company indemnified the purchasers of its
former Forge facility for remediation of certain conditions at the facility and
at an off-site disposal site existing or subsequently determined to be existing
at the date of sale. No such claims were made within the timetables allowed
under the indemnification agreement. In November 1998, the Company paid $2.2
million to the current owner of the Forge property as a settlement for any and
all remaining or future liabilities related to the remediation of the facility.
The Company continues to monitor the disposal site for environmental conditions.

UNION (NEW JERSEY). During fiscal 1994, the Company was notified by the
current owner that it has potential responsibility for the environmental
contamination of a property formerly owned by a subsidiary and disposed of by
such subsidiary prior to its acquisition by the Company. The prior owner of such
subsidiary has also been notified of its potential responsibility. On March 27,
1997, the current owner of the property informed the Company that it estimated
the cost of investigation and cleanup of the property at $875,000 and requested
contribution to such costs from the Company and the prior owner. The Company has
contested responsibility and commented on the cleanup plan. The Company does not
have sufficient information to determine what potential liability it has, if
any.

Although it is possible that new information or future developments
could require the Company to reassess its potential exposure relating to all
pending environmental matters, management believes that, based upon all
currently available information, the resolution of such environmental matters
will not have a material adverse effect on the Company's financial condition,
results of operations or liquidity. The possibility exists, however, that new
environmental legislation and/or environmental regulations may be adopted, or
other environmental conditions may be found to exist, that may require
expenditures not currently anticipated and that may be material. See Note 9 to
Consolidated Financial Statements.

INTELLECTUAL PROPERTY AND LICENSES

EMJ(R) is a registered trademark and service mark in the U.S. and in
other countries where the Company does or expects to do business. The Company
considers certain information owned by it to be trade secrets and the Company
takes measures to protect the confidentiality and control the disclosure of such
information. The Company believes that these safeguards adequately protect its
proprietary rights. While the Company considers all of its intellectual property
rights as a whole to be important, the Company does not consider any single
right to be essential to its operations.

ITEM 2. PROPERTIES

The Company currently maintains 25 service centers, four plate
processing centers, one cutting center, one tube honing facility, three sales
offices and one merchandising office at various locations throughout the U.S.
and is headquartered in Brea, California. The Company's facilities are in good
condition and are equipped to provide efficient processing of customer orders.
The Company's facilities generally are capable of being utilized at higher
capacities, if necessary. Most leased facilities have initial terms of more than
one year and include renewal options. While some of the leases expire in the
near term, the Company does not believe that it will have difficulty renewing
such leases or finding alternative sites.

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Set forth below is a table summarizing certain information with respect
to the Company's facilities.

COUNTRY/CITY/STATE OWNED/ FACILITY
LEASED (SQ. FT.)
<S> <C> <C>
UNITED STATES:
Phoenix, Arizona................. Owned 72,200
Little Rock, Arkansas............ Leased 28,800
Hayward, California.............. Leased 86,000
Los Angeles, California.......... Owned 506,100
Los Angeles, California.......... Leased 83,600
Denver, Colorado................. Leased 78,800
Honolulu, Hawaii................. Owned 109,200
Chicago, Illinois................ Owned 554,000
Roselle, Illinois................ Leased 4,900
Plainfield, Indiana.............. Owned 142,700
Davenport, Iowa.................. Leased 59,200 (a)
Boston, Massachusetts............ Owned 64,200
Minneapolis, Minnesota........... Owned 160,000
Kansas City, Missouri............ Leased 120,400
St. Louis, Missouri.............. Leased 106,700
Charlotte, North Carolina........ Owned 178,200
Cincinnati, Ohio................. Leased 137,000
Cleveland, Ohio.................. Owned 199,600
Cleveland, Ohio.................. Owned 134,500
Tulsa, Oklahoma.................. Owned 106,500
Tulsa, Oklahoma.................. Owned 137,900
Portland, Oregon................. Leased 31,300
Philadelphia, Pennsylvania....... Leased 234,800
Memphis, Tennessee............... Leased 56,500
Dallas, Texas.................... Owned 132,200
Houston, Texas................... Owned 276,000
Kent, Washington................. Leased 83,700
CANADA:
Toronto, Ontario................. Leased 38,600
Montreal, Quebec................. Leased 57,000
OTHER PROPERTIES:
Brea, California (headquarters).. Leased 38,300

</TABLE>

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

(a) The Company has approved plans and expects to complete expansion to its
facilities in Davenport during fiscal 2000.

ITEM 3. LEGAL PROCEEDINGS

The Company and its subsidiaries and branches are occasionally involved
in ordinary, routine litigation incidental to their normal course of business,
none of which they believe to be material to their financial condition or
results of operations. The Company and its subsidiaries and branches maintain
various liability insurance coverages to protect their assets from losses
arising out of or involving activities associated with ongoing and normal
business operations. See also "Item 1. Business -- Environmental Matters".

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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PART II

ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY

The Company has 128 shares of common stock par value $.01 per share
outstanding, all of which are owned by Holding. For each of fiscal years ended
March 31, 1999, 1998 and 1997, the Company paid dividends totaling $17,701,000,
$11,469,000, and $5,552,000, respectively, to Holding in connection with the
repurchase of its capital stock from employees of the Company whose employment
had terminated, as required by the terms of Holding's Stockholders Agreement and
the ESOP. In addition, in fiscal 1998, the Company paid dividends of $45,419,000
to Holding in connection with the series of refinancing transactions. See "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations--Refinancing Transactions". The Company has not declared or paid any
dividends on its capital stock in the three years ended March 31, 1999.

ITEM 6. SELECTED FINANCIAL DATA

All information contained in the following table was derived from the
audited consolidated financial statements of the Company and should be read in
conjunction with "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" and with the consolidated financial
statements of the Company and the related notes thereto included elsewhere in
this Form 10-K.

YEAR ENDED MARCH 31,
-------------------------------------------------------------------------------------
(Dollars in thousands)
1999 1998 1997 1996 1995
--------------- -------------- --------------- -------------- --------------
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Revenues $ 915,811 $1,050,005 $1,023,565 $1,025,659 $1,022,884
Gross profit 265,960 294,624 280,739 261,021 305,909
Operating expenses exclusive of
restructuring and other non- 198,751 225,019 245,826 245,619 247,184
recurring charges
Restructuring and other non- --- 2,838 20,088 12,776 715
recurring charges
Income from operations 67,209 66,767 14,825 2,626 58,010
Net interest expense 41,181 41,059 40,880 40,874 34,604
Extraordinary loss (1) --- 9,075 --- --- ---
Net income (loss) 24,493 15,760 (26,556) (29,311) 19,919

BALANCE SHEET DATA:
Working capital $ 156,691 $ 157,784 $ 170,988 $ 166,587 $243,738
Net property, plant & equipment 102,776 106,643 120,050 134,259 139,705
Total assets 426,867 443,821 454,882 484,911 543,548
Long-term debt (including current 296,506 312,234 291,286 279,952 296,274
portion)
Stockholder's equity (28,020) (36,919) 1,927 25,141 76,400

OTHER SUPPLEMENTAL DATA:
Depreciation and amortization (2) $ 9,175 $ 9,475 $ 10,620 $ 12,022 $ 14,135
Non-cash ESOP expense (3) 2,994 2,788 3,102 3,401 7,694
Net cash interest expense (4) 40,689 39,993 37,747 37,310 31,592
Capital expenditures 8,957 7,264 4,449 16,658 16,177
Ratio of earnings to fixed charges (5) 1.55 1.54 --- --- 1.58
Dividends paid (6) 17,701 56,888 5,552 22,289 3,654
- ---------------
</TABLE>

9
<PAGE>

(1) The extraordinary loss of $9,075 includes the write-off of deferred
financing costs and payments of call premiums and other expenses in
connection with early retirement of debt. See Note 6 to Consolidated
Financial Statements.

(2) Depreciation and amortization excludes amortization of debt issue costs
aggregating $1,481, $1,757, $2,144, $2,114 and $2,117 for the years
ended March 31, 1999, 1998, 1997, 1996 and 1995, respectively, and debt
issue costs of $550 written off in connection with an amendment to the
Company's revolving loan agreement in fiscal 1996, reflected in the
Company's consolidated statements of operations as interest expense.

(3) Non-cash ESOP expense represents the amount of ESOP expense charged to
operations that were or will be funded in the form of Holding's equity
securities.

(4) Net cash interest expense represents net interest expense, including
interest expense associated with borrowings against cash surrender
value of life insurance policies maintained by the Company, adjusted to
exclude (i) the amortization and write-off of debt issue costs (see
note (2) above) and bond discount, and (ii) accrued interest.

(5) In computing the ratio of earnings to fixed charges, "earnings"
represents pre-tax income (loss) plus fixed charges except capitalized
interest, if any. "Fixed charges" represents interest whether expended
or capitalized, debt cost amortization, and 33% of rent expense, which
is representative of the interest factor. Earnings were sufficient to
cover fixed charges for the fiscal years ended March 31, 1999, 1998 and
1995. Earnings were insufficient to cover fixed charges for the fiscal
years ended March 31, 1997, and 1996 by $26,055 and $38,248,
respectively.

(6) Dividends paid to Holding in connection with the repurchase of its
capital stock from terminated employees. In fiscal 1998, the Company
also paid a dividend to Holding of $45,419 that was used to repay a
portion of Holding Notes (as defined below) and accrued interest. See
"Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations - Refinancing Transactions".

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with "Item 6.
Selected Financial Data" and the consolidated financial statements of the
Company, and the notes related thereto appearing elsewhere in this Form 10-K.

GENERAL

The Company was formed in May 1990 when Kelso and its affiliates
acquired control of and combined two leading metals distributors, EMJ (founded
in 1921) and Kilsby-Roberts Holding Co. (founded in 1915). Through its network
of 25 service centers strategically located throughout North America, the
Company distributes a broad line of bar, tubing and pipe, and plate and sheet
metal products to over 40,000 customers.

During the past several years, the Company has undergone substantial
changes, including the appointment of a new Chief Executive Officer in fiscal
1997 and the implementation of two restructuring programs in fiscal 1997 and
1996 designed to realign its operations and core competencies and to improve
operating earnings and cash flows. In March 1997, the Company recorded a $15.6
million restructuring charge that included selling two of its foreign
subsidiaries, closing four domestic distribution centers, and reducing the
Company's workforce. In addition, fiscal 1997 included a $4.5 million write-off
of certain costs related to its management information and reporting system. In
fiscal 1998, the Company also discontinued its flat-rolled processing center,
consolidated two honing operations, and completed the sale of two of its foreign
subsidiaries that generated net operating losses of $2.9 million during the
three fiscal years ended March 31, 1998.

10
<PAGE>

The Company is also addressing operational efficiencies and
improvements in customer service by: (i) providing incentives for service center
managers and salespersons based on branch operating achievements and corporate
financial objectives, and (ii) repositioning faster moving inventory from
facilities designated as depots to service centers.

The Company believes that the restructuring plans and the reengineering
initiatives have substantially reduced costs since their commencement and have
resulted in, and will continue to contribute to, a downward trend in operating
expense ratios. The Company's income from operations before restructuring and
other non-recurring charges was $67.2 million in fiscal 1999, $69.6 million in
fiscal 1998 and $34.9 million in fiscal 1997. The number of employees decreased
from approximately 2,600 on December 31, 1996 to approximately 1,900 on March
31, 1999, including the elimination of a number of corporate managerial
positions.

The metals service center industry has been historically cyclical (with
periods of strong demand and higher prices followed by periods of weaker demand
and lower prices), principally due to the nature of the industries in which the
largest consumers of metals operate. The domestic metals service center industry
cycle is based on the cycles for the U.S. industries that it services. The
Company believes its results have been less sensitive to economic trends than
some of its competitors due to its customer base, product mix and the variety of
industries served.

REFINANCING TRANSACTIONS

On March 24, 1998, the Company refinanced its indebtedness by: (i)
consummating the issuance and sale (the "Offering") of $105.0 million in
aggregate principal amount of 9 1/2% Senior Notes due 2005 (the "9 1/2% Senior
Notes"), (ii) replacing its existing revolving credit facility with an amended
and restated revolving credit facility (prior to and after such amendment and
restatement, the "Revolving Credit Facility"), and (iii) borrowing $100.0
million in aggregate principal amount under a variable rate term loan (the "Term
Loan"). The net proceeds of the Offering, the Term Loan and the Revolving Credit
Facility were used to (i) redeem $155.0 million in aggregate principal amount of
the Company's outstanding 10 3/4% Senior Notes (the "10 3/4% Notes" and together
with the 9 1/2% Senior Notes, the "Senior Notes") together with premium and
accrued interest thereon to the date of redemption, (ii) prepay approximately
$5.1 million in aggregate principal amount of purchase money indebtedness,
including premium and accrued interest thereon, and (iii) pay a dividend to
Holding in the amount of approximately $45.4 million used by Holding to (x)
redeem $40.0 million in principal amount of its senior indebtedness (the
"Holding Notes"), and (y) pay approximately $5.4 million of interest accrued as
of March 24, 1998 on the Holding Notes (collectively, the "Holding Prepayment").
The Holding Notes are owned by an affiliate of Kelso.

The Offering, borrowings under the Term Loan, the refinancing of the
Revolving Credit Facility, and the Holding Prepayment are referred to
collectively as the "Refinancing Transactions." See Note 6 to Consolidated
Financial Statements.

11
<PAGE>

STATEMENT OF OPERATIONS INFORMATION

The following table sets forth certain consolidated statement of
operations data for the Company. The historical consolidated financial data for
the fiscal years ended March 31, 1999, 1998 and 1997 are derived from the
historical consolidated financial statements included elsewhere herein.

Year Ended March 31,
---------------------------------------------------------
1999 % 1998 % 1997 %
---- - ---- - ---- -
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues.................... $915,811 100.0% $1,050,005 100.0% $1,023,565 100.0%
Gross profit................ 265,960 29.0 294,624 28.1 280,739 27.4
Operating expenses
exclusive of restructuring
and other non-recurring
expenses................... 198,751 21.7 225,019 21.4 245,826 24.0
Warehouse and delivery
expenses................... 120,687 13.2 128,495 12.2 135,287 13.2
Selling expenses............ 33,918 3.7 37,147 3.5 40,791 4.0
General and administrative
expenses................... 44,146 4.8 59,377 5.7 69,748 6.8
Income from operations...... 67,209 7.3 66,767 6.4 14,825 1.4
Net interest expense........ 41,181 4.5 41,059 3.9 40,880 4.0
Extraordinary loss.......... --- 9,075 0.9 ---
Net income (loss)........... 24,493 2.7 15,760 1.5 (26,556) (2.6)

</TABLE>

RESULTS OF OPERATIONS -- YEAR ENDED MARCH 31, 1999 COMPARED TO YEAR ENDED MARCH
31, 1998

REVENUES. Revenues for fiscal 1999 decreased 12.8% to $915.8 million,
compared to $1,050.0 million in fiscal 1998. Revenues from domestic operations
for fiscal 1999 decreased 11.2% to $884.7 million, compared to $996.4 million in
fiscal 1998. In general, fiscal 1999 revenues were adversely impacted by
weakened product demand in significant industries that the Company serves,
including agricultural equipment, oil services and aerospace, each suffering
from global economic uncertainty caused in part by the Asian crisis, and by
general decreases in metal commodity prices. Overall, fiscal 1999 revenues were
primarily impacted by a 7% decrease in tonnage shipped and a 5% reduction in
average selling price (material costs declined 3%) when compared to fiscal 1998.
Revenues from international operations decreased 42.0% to $31.1 million compared
to $53.6 million in fiscal 1998 due to the sale of the U.K. and Mexican
subsidiaries in fiscal 1998 (see Note 4 to Consolidated Financial Statements).

GROSS PROFIT. Gross profit decreased 9.7% to $266.0 million in fiscal
1999, compared to $294.6 million in fiscal 1998. Gross margin improved to 29.0%
when compared to 28.1% in fiscal 1998. Fiscal 1999 included a LIFO credit of
$2.9 million compared to a corresponding LIFO charge of $0.3 million in fiscal
1998. Gross profit and gross margin from foreign operations was $6.8 million and
22.0% in fiscal 1999, compared to $11.4 million and 21.3% in fiscal 1998.
Exclusive of foreign operations and LIFO, gross margin improved to 29.0% for
fiscal 1999, compared to 28.5% in fiscal 1998 primarily as the result of higher
contributions to gross profit from value-added products and services and
improved inventory management.

EXPENSES. Total operating expenses in fiscal 1999 were $198.8 million
compared to $227.9 million in fiscal 1998. As a percent of revenues, total
operating expenses were 21.7% in fiscal 1999 and fiscal 1998. Fiscal 1998
included a restructuring charge of $2.8 million representing the loss on sale of
the Company's U.K. and Mexican operations (see Note 4 to Consolidated Financial
Statements). Excluding such charges, operating expenses in fiscal 1998 would
have been $225.1 million, or 21.4% of revenues.

12
<PAGE>

Warehouse and delivery expenses decreased $7.8 million (6.1%) to $120.7
million in fiscal 1999 compared to $128.5 million in fiscal 1998. As a percent
of revenues, warehouse and delivery expenses were 13.2% in 1999 and 12.2% in
fiscal 1998. The decrease in expenses was primarily due to a 6% reduction in
compensation and related expenses resulting from a reduction in the number of
employees caused in part by the Company's reengineering and restructuring
efforts, including the sale of the Mexican and U.K. subsidiaries in fiscal 1998,
and a reduction in freight expenses attributable to the decrease in tonnage
volume shipped.

Selling, general and administrative expenses decreased $18.4 million
(19.1%) to $78.1 million in fiscal 1999 compared to $96.5 million in fiscal
1998. In fiscal 1999, selling expenses decreased $3.2 million (8.6%) to $33.9
million, compared to $37.1 million in fiscal 1998, and increased as a percent of
revenues to 3.7% from 3.5% in fiscal 1998. General and administrative expenses
decreased by $15.2 million (25.6%) to $44.2 million in fiscal 1999 compared to
$59.4 million in fiscal 1998, and to 4.8% of revenues from 5.7% in fiscal 1998.
The decreases in selling expenses and general and administrative expenses were
primarily due to a 10% and 13% reduction, respectively, in compensation and
related expenses resulting primarily from lower sales and lower incentive
payments and a reduction in headcount caused in part by the Company's
reengineering and restructuring efforts, including the sale of the Mexican and
U.K. subsidiaries in fiscal 1998. General and administrative expenses in fiscal
1999 were also impacted by lower expenses for professional services including
consulting charges incurred in connection with the reengineering projects
implemented in fiscal 1998, higher income recognized from life insurance
proceeds and growth in cash surrender value of the Company's life insurance
policies, offset by lower income realized on cash discounts taken on vendor
payments.

NET INTEREST EXPENSE. Net interest expense was $41.2 million in fiscal
1999 and $41.1 million in fiscal 1998. Such amounts include interest on the
Revolving Credit Facility, Senior Notes, Term Loan, and borrowings against the
cash surrender value of certain life insurance policies and the amortization of
debt issue costs ($1.5 million in fiscal 1999 and $1.8 million in fiscal 1998).

During fiscal 1999 the average outstanding indebtedness (excluding
borrowings against the cash surrender value of certain life insurance policies)
was $331.7 million versus $303.9 million in fiscal 1998. The weighted-average
interest rate on such indebtedness during fiscal 1999 was 8.61% versus 9.68% in
fiscal 1998. The changes in the average outstanding indebtedness and the average
interest rate was attributable to the Company's Revolving Credit Facility
borrowings and the impact of the Refinancing Transactions consummated in March
1998 (see also "---Liquidity and Capital Resources"). The average borrowings
under the Revolving Credit Facility decreased to $114.7 million from $127.3
million in fiscal 1998, and the average interest rate decreased to 7.43% in
fiscal 1999 from 8.65% in fiscal 1998.

The outstanding borrowings against the cash surrender value of life
insurance policies were $101.7 million at March 31, 1999 and $88.9 million at
March 31, 1998, and the total interest expense on such borrowings increased to
$10.9 million in fiscal 1999 compared to $9.4 million in fiscal 1998. Such
increases resulted from net borrowings of $12.8 million against the increased
cash surrender value of life insurance policies in November 1998 to pay annual
premiums on such policies and to pay interest on previous borrowings (see
"---Liquidity and Capital Resources"). As specified in the terms of the
insurance policies, the rates for dividends payable on the policies
correspondingly increase when borrowings are outstanding under the policies.
This increase in dividends is greater than the increase in the incremental
borrowing rate. Dividend income earned under the policies was $10.9 million in
fiscal 1999, $10.3 million in fiscal 1998 and $7.8 million in fiscal 1997 and is
reported as an offset to general and administrative expenses in the Company's
statements of operations.

The interest rates on the Senior Notes and on the life insurance policy
borrowings are fixed at 9.50% and 11.76%, respectively. The interest rates on
the Revolving Credit Facility and the Term Loan are floating rates (6.69% and
8.22%, respectively, as of March 31, 1999). In June 1998, the Company entered
into an interest rate swap agreement with Bankers Trust Company that effectively
fixed the interest rate on the Term Loans at approximately 9.05% through June
2003 (the "Fixed Rate"). Such agreement requires Bankers Trust Company to make
payments to the Company each quarter in an amount equal to the product of the
notional amount of $95 million and the difference between the sum of the three
month London Interbank Offered Rate plus 3.25% ("Floating LIBOR") and the Fixed
Rate, if the Floating LIBOR is greater than the Fixed Rate, on a per diem basis.
If Floating LIBOR is lower than the Fixed Rate, the Company is required to pay
Bankers Trust Company an amount equal to the product of the notional amount and
the difference between the Fixed Rate and Floating LIBOR on a per diem basis.
During fiscal 1999, the Company has paid Bankers Trust Company $0.2 million of
interest as calculated under the provisions described above.

13
<PAGE>

RESULTS OF OPERATIONS -- YEAR ENDED MARCH 31, 1998 COMPARED TO YEAR ENDED MARCH
31, 1997

REVENUES. Revenues for fiscal 1998 increased 2.6% to $1,050.0 million,
compared to $1,023.6 million in fiscal 1997. Revenues from domestic operations
for fiscal 1998 increased $36.6 million (3.8%) to $996.4 million compared to
$959.8 million in fiscal 1997. Domestic revenues in fiscal 1998 reflect a 9%
increase in tonnage volume offset by a 3% reduction in average selling price
(material costs declined 4%) compared to fiscal 1997. Revenues from
international operations decreased $10.2 million to $53.6 million due to the
sale of the U.K. and Mexican subsidiaries (see Note 4 to Consolidated Financial
Statements).

GROSS PROFIT. Gross profit increased $13.9 million to $294.6 million in
fiscal 1998 compared to $280.7 million in fiscal 1997 and gross margin increased
to 28.1% compared to 27.4%. Fiscal 1998 included a LIFO charge of $0.3 million
compared to a corresponding LIFO credit of $3.5 million in fiscal 1997. Gross
profit and gross margin from foreign operations was $11.4 million and 21.3% in
fiscal 1998, compared to $13.4 million and 21.0% in fiscal 1997. Exclusive of
foreign operations and LIFO, gross margin was 28.5% for fiscal 1998, compared to
27.5% in fiscal 1997. The increase of 1.0% is due to changes in product mix,
primarily higher bar tonnage shipped (18%) and higher average prices on tubular
products (3%) in fiscal 1998 compared to fiscal 1997. The Company believes such
changes were primarily due to changes in customer demand toward products with
higher margins, and not attributable to specific strategies or initiatives of
the Company. In addition, the shift in demand did not reflect an identifiable
trend in demand for product or by industry.

EXPENSES. Total operating expenses in fiscal 1998 were $227.9 million
compared to $265.9 million in fiscal 1997. Fiscal 1998 included a restructuring
charge of $2.8 million representing the loss on sale of the Company's U.K. and
Mexican operations (see Note 4 to Consolidated Financial Statements). Fiscal
1997 included a restructuring charge of $15.6 million and a non-recurring charge
for asset write-offs of $4.5 million (see Note 1 to Consolidated Financial
Statements). Excluding such charges, operating expenses in fiscal 1998 would
have been $225.1 million, or 21.4% of revenues, compared to $245.8 million, or
24.0% of revenues, in fiscal 1997.

Warehouse and delivery expenses decreased $6.8 million (5.0%) to $128.5
million in fiscal 1998 compared to $135.3 million in fiscal 1997. As a percent
of revenues, warehouse and delivery expenses were 12.2% in 1998 and 13.2% in
fiscal 1997. The decrease resulted from a 7% reduction in compensation and
related expenses resulting from a reduction in the number of employees,
including reductions from the closure of four domestic service centers and from
the sale of the Mexican and U.K. subsidiaries in August 1997 and January 1998,
respectively, partially offset by higher freight and shipping expenses
attributable to the 9% increase in tonnage volume shipped and repositioning
depot inventories.

Selling, general and administrative expenses decreased $14.0 million
(12.7%) to $96.5 million in fiscal 1998 compared to $110.5 million in fiscal
1997. In fiscal 1998 selling expenses decreased $3.7 million (9.1%) to $37.1
million, compared to $40.8 million in fiscal 1997, and decreased as a percent of
revenues to 3.5% from 4.0% in fiscal 1997 due to a 5% reduction in compensation
and related expenses resulting from the closure of four domestic service centers
and the sale of the Mexican and U.K. subsidiaries. General and administrative
expenses decreased by $10.4 million (14.9%) to $59.4 million in fiscal 1998, and
to 5.7% of revenues from 6.8% in fiscal 1997. The decrease in general and
administrative expenses was attributable to an 8% decrease in compensation and
related expenses resulting from the March 1997 restructuring, which included an
administrative workforce reduction, higher income from cash discounts taken on
vendor payments and gains from sales of surplus facilities.

NET INTEREST EXPENSE. Net interest expense was $41.1 million in fiscal
1998 and $40.9 million in fiscal 1997. Such amounts include interest on the
Revolving Credit Facility, Senior Notes, Term Loan (in fiscal 1998 only), and
borrowings against the cash surrender value of certain life insurance policies
and the amortization of debt issue costs ($1.8 million in fiscal 1998 and $2.1
million in fiscal 1997).

14
<PAGE>

During fiscal 1998 the average outstanding indebtedness (excluding
borrowings against the cash surrender value of certain life insurance policies)
was $303.9 million versus $304.5 million in fiscal 1997. The weighted-average
interest rate on such indebtedness during fiscal 1998 was 9.68% versus 9.62% in
fiscal 1997. The changes in the average outstanding indebtedness and the average
interest rate was attributable to the Company's Revolving Credit Facility
borrowings and the impact of the Refinancing Transactions consummated in March
1998 (see also "---Liquidity and Capital Resources"). The average borrowings
under the Revolving Credit Facility decreased to $127.3 million from $130.4
million in fiscal 1997, and the average interest rate increased to 8.65% in
fiscal 1998 from 8.54% in fiscal 1997.

The outstanding borrowings against the cash surrender value of life
insurance policies was $88.9 million at March 31, 1998 and $76.5 million at
March 31, 1997, and the total interest expense on such borrowings increased to
$9.4 million in fiscal 1998 compared to $8.6 million in fiscal 1997. Such
increases resulted from a borrowing of $12.4 million against the increased cash
surrender value of life insurance policies in November 1997 to pay annual
premiums on such policies and to pay interest on previous borrowings (see
"---Liquidity and Capital Resources"). As specified in the terms of the
insurance policies, the rates for dividends payable on the policies
correspondingly increase when borrowings are outstanding under the policies.
This increase in dividends is greater than the increase in the incremental
borrowing rate. Dividend income earned under the policies was $10.3 million in
fiscal 1998, $7.8 million in fiscal 1997 and $7.6 million in fiscal 1996 and is
reported as an offset to general and administrative expenses in the Company's
statements of operations.

EXTRAORDINARY LOSS. The extraordinary loss of $9,075,000 includes the
write-off of deferred financing costs and the payment of call premiums and other
expenses related to the early retirement of the Company's 10 3/4% Notes and
purchase money indebtedness as part of the Refinancing Transactions.

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital was $156.7 million at March 31, 1999
compared to $157.8 million at March 31, 1998. The Company's primary sources of
cash during fiscal 1999 consisted of: (i) funds provided by operations, $36.0
million; and (ii) proceeds from the sale of property, plant and equipment, $6.0
million. The Company's primary uses of cash in fiscal 1999 consisted of: (i)
dividends to Holding, $17.7 million; (ii) payments under revolving loan
agreements, $14.2 million,; and (iii) capital expenditures, $9.0 million.

Cash generated from operating activities was $36.0 million (3.9% of
revenues) in fiscal 1999 compared to $36.6 million (3.5% of revenues) in fiscal
1998. In fiscal 1997, cash used in operating activities was $6.0 million. The
improvement since fiscal 1997 reflects the impact from the Company's
restructuring and reengineering efforts and continued emphasis on managing
working capital.

During fiscal 1999, the Company redeemed $17.7 million of its capital
stock from retiring and terminated employees, as required by the terms of the
Company's ESOP and Holding's Stockholders Agreement. Such an amount includes
certain payments related to the workforce reductions resulting from the fiscal
1997 restructuring. The Company expects that such redemptions for fiscal 2000
will be approximately $11 million, although the timing of such expenditures is
not within the control of the Company and there can be no assurance in this
regard.

In fiscal 1998 the dividend payment to Holding of $45.4 million to
effect the Holding Prepayment (see "--Refinancing Transactions"), resulted in
tax losses reported by Holding in the amount of approximately $27.2 million.
Such tax losses are available to offset consolidated federal taxable income of
Holding and the Company and will reduce cash taxes payable by the Company under
the Tax Allocation Agreement between Holding and the Company (see Note 7 to
Consolidated Financial Statements).

15
<PAGE>

The Company's capital expenditures were $9.0 million in fiscal 1999,
$7.3 million in fiscal 1998 and $4.4 million in fiscal 1997. Capital
expenditures in fiscal 1999 were primarily for routine replacement of machinery
and equipment, facility improvements and expansions, and the purchase of
computer hardware and software. For fiscal 2000, the Company has planned
approximately $10.0 million of capital expenditures to be financed from
internally generated funds. Approximately $7.2 million is for routine
replacement of machinery and equipment and facility improvements and expansions,
and $2.8 million is for further additions and enhancements to the Company's
management information systems.

The Company's ongoing debt service obligations primarily consist of
interest payments under its Revolving Credit Facility, interest and principal
payments on the Term Loan, interest payments on the 9 1/2% Senior Notes and
principal and interest payments on the Company's industrial revenue bonds. As of
March 31, 1999, annual principal payments required by the Company's outstanding
industrial revenue bonds indebtedness amount to $0.5 million in fiscal 2000,
$1.4 million in fiscal years 2001 through 2004 and $6.2 million in the aggregate
thereafter through 2010. The Company will not be required to make any principal
payments in respect of the 9 1/2% Senior Notes until 2005. The Revolving Credit
Facility will mature in 2003 and the Term Loan will mature in 2004. The Term
Loan requires principal payments to be made in equal quarterly installments of
$250,000. The final installment due at maturity will repay in full all
outstanding principal. The Revolving Credit Facility, the Term Loan and 9 1/2%
Senior Notes have covenants in respect of maintenance of minimum working capital
and a fixed charge coverage ratio; and although compliance with such covenants
in the future is largely dependent on the future performance of the Company and
general economic conditions, for which there can be no assurance, the Company
expects that it will continue to be in compliance with all of its debt covenants
for the foreseeable future.

As of March 31, 1999, the Company's primary sources of liquidity were
available borrowings of approximately $88.3 million under the Revolving Credit
Facility, available borrowings of approximately $5.5 million against certain
life insurance policies and internally generated funds. Borrowings under the
Revolving Credit Facility are secured by the Company's domestic inventory and
accounts receivable, and future availability under the facility is determined by
prevailing levels of the Company's accounts receivable and inventory. The Term
Loan is secured by a first priority lien on a substantial portion of the
Company's current and future acquired unencumbered property, plant and
equipment. The life insurance policy loans are secured by the cash surrender
value of the policies and are non-recourse to the Company. The interest rate on
the life insurance policy loans is 0.5% greater than the dividend income rate on
the policies. As of March 31, 1999, there was approximately $18.5 million of
cash surrender value in all life insurance policies maintained by the Company,
net of borrowings.

The Company believes its sources of liquidity and capital resources are
sufficient to meet all currently anticipated operating cash requirements,
including debt service payments on the Revolving Credit Facility, the Term Loan
and the 9 1/2% Senior Notes prior to their maturities in 2003, 2004 and 2005,
respectively; however, the Company anticipates that it will be necessary to
replace or to refinance all or a portion of the Revolving Credit Facility, the
Term Loan and the 9 1/2% Senior Notes prior to their respective maturities,
although there can be no assurance on what terms, if any, the Company would be
able to obtain such refinancing or additional financing. The Company's ability
to make interest payments on the Revolving Credit Facility and the 9 1/2% Senior
Notes and principal and interest payments on the Term Loan will be dependent on
maintaining the level of performance reflected in the fiscal 1999 results, which
will be dependent on a number of factors, many of which are beyond its control,
and the continued availability of revolving credit borrowings. The Company's
earnings were sufficient to cover fixed charges for fiscal years 1999 and 1998.
Earnings were insufficient to cover fixed charges for fiscal 1997 by $26.1
million.

ENVIRONMENTAL CONTINGENCIES

The Company is currently involved with remediation and/or investigation
activities at several former facilities where soil and/or groundwater
contamination is present. As of March 31, 1999, reserves totaling $0.5 million
have been established to cover those future environmental costs that are known
or can be reasonably estimated. See Note 9 to the Company's Consolidated
Financial Statements included elsewhere herein for a more detailed discussion of
specific environmental contingencies.

16
<PAGE>

The Company's service centers are subject to many federal, state and
local requirements relating to the protection of the environment, including
hazardous waste disposal and underground storage tank regulations. The Company
believes that it is in material compliance with all applicable environmental
laws and that the Company's products and processes do not present any unusual
environmental concerns. The Company does not anticipate any material
expenditures or material recurring costs in the near future in connection with
pollution control.

Some of the properties owned or leased by the Company are located in
industrial areas with histories of heavy industrial use. Although the location
of these properties may result in the Company's incurring environmental
liabilities that arise from causes other than the operations of the Company, the
Company does not expect that any such liabilities will have a material adverse
impact on the Company's results of operations, financial condition or liquidity.
The Company does not carry environmental insurance coverage.

The Company's operations are also governed by laws and regulations
relating to workplace safety and worker health, principally the Occupational
Safety and Health Act and regulations thereunder, which, among other
requirements, establish noise, dust and safety standards. The Company believes
that it is in material compliance with applicable laws and regulations and does
not anticipate that future compliance with such laws and regulations will have a
material adverse effect on the results of operations or financial condition of
the Company.

FOREIGN EXCHANGE EXPOSURE

The functional currency for the Company's foreign subsidiaries is the
applicable local currency. Exchange adjustments resulting from foreign currency
transactions are recognized in net earnings, whereas adjustments resulting from
the translation of financial statements are included in accumulated other
comprehensive income (loss) within stockholder's equity. The Company does not
hedge its exposure to foreign currency fluctuations. Net foreign currency
transaction gains or losses have not been material in any of the years
presented. See "Item 1. Business--Foreign Operations". However, the 1995
devaluation of the Mexican peso and ongoing instability of the peso and the
Mexican economy had a negative impact on the Company's Mexican operations, which
generated operating losses aggregating $2.9 million for the three fiscal years
ended March 31, 1997.

In March 1997, the Company approved a restructuring plan that included
selling its foreign operations in the United Kingdom and Mexico. As a result of
this decision, the cumulative foreign currency translation losses for these
operations were recognized as part of the estimated loss on sale of these
operations. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations".

YEAR 2000 COMPLIANCE

IMPACT OF YEAR 2000 -The Year 2000 issue exists because many computer
systems, applications and embedded microprocessors use two rather than four
digit years to define the applicable year. Because this issue has the potential
to disrupt the Company's business operations, a company wide Year 2000 project
was initiated to identify and resolve the potential issues surrounding the Year
2000 problem. The Year 2000 project addresses the problems that may arise in
computer technologies, which include both information technology ("IT") and
non-IT systems, and those Year 2000 issues related to third parties that are
considered significant to the Company's business operations.

The Company named a project manager to coordinate Year 2000 issues and
compliance. The project manager's principal responsibilities include
identifying, assessing, remediating, testing, implementing and planning for
contingencies related to Year 2000 issues that could materially impact the
Company's results of operations, liquidity, or capital resources if failure
occurs.

17
<PAGE>

STATE OF READINESS -The Company's IT systems principally consist of
business information systems (such as mainframe computers and distributed
servers and associated business application software) and infrastructure (such
as personal computers, operating systems, networks and devices such as hubs,
switches, routers, and phone systems). As of June 1999, the Company has
completed a review of its business information systems and has determined that
most of the "business critical" systems are Year 2000 compliant. The Company is
currently upgrading or replacing those business critical systems that are not
Year 2000 compliant, and expects such work will be completed by the end of July
1999. A final test of the Company's business information systems will be
completed by the end of July 1999.

Non-IT systems are those business tools that may contain embedded
microprocessors, such as elevators, security systems, production equipment, and
climate control systems. The Company's branch operations management have been
directed to identify non-IT systems related to their respective facilities and
to determine the level of Year 2000 compliance or remediation required. This
process is currently underway and is expected to be completed by October 1999.

EXTERNAL RELATIONSHIPS - The Company also faces a potential risk should
one or more of its principal suppliers, service providers or other parties with
whom the Company has a material business relationship suffer a Year 2000 related
problem. The Company has identified key vendors whose Year 2000 compliance may
be critical to the Company, including those providing metal products, metal
processing services and transportation related services. Surveys assessing Year
2000 compliance have been distributed to these key vendors and their responses
are being compiled. The Company expects to complete its surveys and assessment
of risk by the end of June 1999 although it will perform additional selected
follow-up surveys during the balance of 1999. The Company will use the results
of these surveys to aid in contingency planning.

CONTINGENCY PLANNING - The Company recognizes the need for contingency
planning in those areas where it is known, or is reasonably likely that an event
or an uncertainty will create a Year 2000 system related failure with a
significant negative impact on its business operations. Contingency planning is
expected to be completed for IT and non-IT systems, and for principal suppliers
or service providers no later than October 1999, and will include among other
actions, manual workarounds and staffing reassignments.

COSTS - The Company has incurred less than $100,000 of costs through
June 1999 to address Year 2000 issues. The Company presently estimates that the
total cost of addressing its Year 2000 issues will be approximately $700,000.
This estimate was based on the known costs to upgrade Year 2000 deficient
business information systems and infrastructure components, such as time and
attendance applications and phone systems.

RISKS - The Company anticipates that it will complete the risk
assessment, remediation and contingency planning for its internal IT and non-IT
systems, and for those parties with whom the Company has a material business
relationship by October 1999. Although the Company believes it is unlikely, it
is possible the Company's results of operations or financial position could be
materially adversely impacted if the Company and its major customers or
suppliers do not adequately address Year 2000 issues. The Company believes its
"reasonable likely worst case scenario" would involve a partial failure in one
or more of the Company's systems, or systems maintained by principal suppliers,
service providers or other parties with whom the Company has a material business
relationship, which would require particular transactions or processes to be
handled manually, thereby causing delays and resulting in additional costs being
incurred until the problem is corrected. Furthermore, the price of metal
products purchased by the Company may increase if primary suppliers could not
provide product and the Company was forced to purchase from alternative sources.
In addition, interruptions in telecommunications, energy and transportation
services could also have an adverse impact on the results of operations or
financial position of the Company.

INFLATION

The Company's operations have not been, nor are they expected to be,
materially affected by inflation.

ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's exposure to market risk for changes in interest rates,
foreign currency exchange rates and commodity prices is not considered material
based on the nature and extent of its financial instruments, foreign operations
and related activities and normal business cycles.

18
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements and supplementary data required by this Item 8 are
set forth as indicated in Item 14(a)(1) and (2) below.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the name, age (at March 31, 1999),
principal occupation and business experience during the last five years of each
of the directors and executive officers of the Company and Holding. The
directors and executive officers of the Company and Holding are identical. The
executive officers serve at the pleasure of the Board of Directors of the
Company and Holding, respectively.

Each member of the Board of Directors of the Company and of Holding
holds office until the next annual meeting of the stockholders thereof or until
his successor is elected and qualified. The election of directors of Holding is
subject to the provisions of a Stockholders' Agreement described below.

Prior to January 1, 1998, non-officer directors, other than Messrs.
Schuchert and Nickell, were paid an annual retainer of $25,000 plus $1,000 for
each board meeting attended. Effective January 1, 1998 and January 1, 1999, each
of such non-officer directors (Messrs. Marquard and Rutledge) was granted
options to purchase 10,000 shares of Holding Common Stock at their fair market
value as established by the most recent appraisal available at the date of
grant. Such options will vest in four equal increments at the end of each
calendar quarter. Effective April 1, 1997, April 1, 1998 and April 1, 1999, in
consideration for his service as a director, Chairman of the Executive Committee
and Chairman of the Board, Mr. Roderick was granted options to purchase 20,000
shares of Holding Common Stock, in each case at their fair market value as
established by the most recent appraisal available at the date of the grant.
Such options are fully vested. The Company expects to continue the practice of
paying director's fees with grants of stock options.

In addition, all non-officer directors are reimbursed for all approved
out-of-pocket expenses related to meetings attended. The directors receive no
additional compensation for their services as directors of Holding. Officers of
the Company and Holding who serve as directors do not receive compensation for
their services as directors other than the compensation they receive as officers
of the Company and Holding.

There are no family relationships among directors and executive
officers of the Company and Holding. For information regarding the stock
ownership of Holding by the Company's and Holding's directors and executive
officers, see "Item 12. Security Ownership of Certain Beneficial Owners and
Management."

NAME AGE POSITION
---- --- --------
<S> <C> <C>
Earle M. Jorgensen 100 Chairman Emeritus and Director

David M. Roderick 75 Chairman of the Board and Chairman of The
Executive Committee and Director

Maurice S. Nelson, Jr. 61 President, Chief Executive Officer and
Chief Operating Officer and Director

William S. Johnson 41 Acting Vice President and Chief Financial Officer
(Principal Financial and Accounting
Officer) and Secretary

</TABLE>

19
<PAGE>

NAME AGE POSITION
---- --- --------
<S> <C> <C>
Frank D. Travetto 46 Vice President Merchandising

Kenneth L. Henry 52 Vice President Chicago Region

James D. Hoffman 40 Vice President Eastern Region

R. Neil McCaffery 49 Vice President Western Region

Mark R. McWhirter 39 Vice President and Chief Information Officer

Joseph S. Schuchert 70 Director

William A. Marquard 79 Director

Frank T. Nickell 51 Director

John Rutledge 50 Director

</TABLE>

EARLE M. JORGENSEN. Mr. Jorgensen founded EMJ and was Chairman of the
Board of EMJ and its successor, the Company, from 1924 until April 1994. He was
also Chairman of the Board of Holding from May 1990 until April 1994. Mr.
Jorgensen was Chief Executive Officer of EMJ from 1924 to June 1986. Until
February 1990, Mr. Jorgensen was a director of Northrop Corporation. Mr.
Jorgensen has been a director of Holding since May 1990. In April 1994, Mr.
Jorgensen became Chairman Emeritus of the Board of the Company and Holding.

DAVID M. RODERICK. Mr. Roderick became Chairman of the Board of the
Company and Holding on January 21, 1998. Mr. Roderick has also served as
Chairman of the Executive Committee of the Company and Holding since February 1,
1997. Before that, Mr. Roderick was Chairman of the Board of the Company and
Holding from April 1994. Mr. Roderick has been a director of the Company and
Holding since January 1994. Mr. Roderick also serves as director of American
Standard Companies Inc., Baron Enterprises and Kelso & Companies, Inc.
Previously, Mr. Roderick served as Director, Chairman, and Chief Executive
Officer of the USX Corporation. Mr. Roderick joined USX in 1959, was Chairman of
USX Finance Committee and a Director from 1973 to 1975, was President and
Director from 1975 until 1979 and was Chief Executive Officer and Chairman from
1979 to 1989.

MAURICE S. NELSON, JR. Mr. Nelson was elected President, Chief
Executive Officer and Chief Operating Officer and a director of the Company and
Holding effective February 1, 1997. Before that, Mr. Nelson served as President,
Chief Executive Officer and Chief Operating Officer of Inland Steel Company from
1992 until April 1996. Before that, Mr. Nelson was the President of the
Aerospace and Commercial division of the Aluminum Company of America (Alcoa)
from 1987 to 1992.

WILLIAM S. JOHNSON. Mr. Johnson has been the Company's Acting Vice
President and Chief Financial Officer and Secretary since January 1999.
Before that, Mr. Johnson was the Company's Controller since February 1995.
Before that, Mr. Johnson was the Company's Assistant Controller since
February 1994. Prior to that, Mr. Johnson was the Corporate Finance Manager
for Severin Montres, Ltd. since 1991. Severin Montres, Ltd., owned by Gucci
Group N.V., is the manufacturer and distributor of Gucci watches.

FRANK D. TRAVETTO. Mr. Travetto has been the Company's Vice President
Merchandising since March 1997. Before that, Mr. Travetto was the Company's Vice
President Western Region since 1996, the Company's Vice President Eastern Region
from 1992 to 1996, and the Company's Division President, Canadian Operations
from 1990 to 1992.

KENNETH L. HENRY. Mr. Henry has been the Company's Vice President
Chicago Region and has been responsible for operations of the Company's Chicago
facility since January 1998. Before that, Mr. Henry was the Company's Vice
President Central Region since October 1995. Before that, Mr. Henry was the
Company's Vice President Southern Region since 1994, and Vice President of the
Kilsby-Roberts Division of EMJ from April 1992 to 1994.

JAMES D. HOFFMAN. Mr. Hoffman has been the Company's Vice President
Eastern Region since July 1996. Before that, Mr. Hoffman was District Manager
for the Company's Cleveland and Buffalo operations since June 1992.

20
<PAGE>

R. NEIL MCCAFFERY. Mr. McCaffery has been the Company's Vice President
Western Region since March 1997. Before that, Mr. McCaffery was the Company's
Vice President Southern Region since April 1996, and was District Manager for
the Company's Los Angeles operations from 1991 to 1996.

MARK R. MCWHIRTER. Mr. McWhirter has been Vice President and Chief
Information Officer of the Company since February 1995. Before that, Mr.
McWhirter was an Account Manager at Electronic Data Systems since March 1988.

JOSEPH S. SCHUCHERT. Mr. Schuchert has been Chairman and a director of
Kelso & Companies, Inc. since March 1989 and was Chief Executive Officer from
March 1989 to August 1997. Kelso & Companies, Inc. is the general partner of
Kelso, a Delaware limited partnership. Before the formation of Kelso &
Companies, Inc. in 1989, Mr. Schuchert was Managing General Partner of Kelso.
Mr. Schuchert is a director of American Standard Companies Inc. Mr. Schuchert
has been a director of the Company since March 1990, and a director of Holding
since May 1990.

WILLIAM A. MARQUARD. Mr. Marquard has been a director of the Company
since March 1990, and a director of Holding since May 1990. Mr. Marquard also
serves as a director and Chairman of the Board of Arkansas Best Corporation and
Mosler, Inc., and as a director of Kelso & Companies, Inc., Treadco, Inc. and
EarthShell Container Corporation.

FRANK T. NICKELL. Mr. Nickell has served as director of the Company and
Holding since August 1993. He has been President and a director of Kelso &
Companies, Inc. since March 1989 and Chief Executive Officer of Kelso &
Companies, Inc. since September 1997. Kelso & Companies, Inc. is the general
partner of Kelso, a Delaware limited partnership. Before the formation of Kelso
& Companies, Inc., from 1984 to 1989, Mr. Nickell was a general partner of
Kelso. He is also a director of Peebles Inc. and The Bear Stearns Companies.

JOHN RUTLEDGE. Dr. Rutledge has been a director of the Company and
Holding since June 1992. Dr. Rutledge is the founder of Rutledge & Company,
Inc., a merchant banking firm, and has been Chairman since January 1991. He is
the founder of Claremont Economics Institute, and has been Chairman since
January 1979. Dr. Rutledge is also a director of Amerindo Investment Advisers,
Inc., Lazard Freres Funds, Fluidrive Inc., United Refrigerated Services, Inc.,
Adobe Air Inc. and CST Office Products, and is a consultant to Kelso and
StairMaster Sports/Medical Products, Inc.

STOCKHOLDERS' AGREEMENT

The Company's By-laws provide for one to ten directors. The Board of
Directors of the Company currently consists of seven directors. Certain of
Holding's shareholders have agreed, pursuant to the Stockholders' Agreement,
dated as of September 14, 1990, as amended (the "Stockholders' Agreement"), that
two directors shall be designated by the Management Stockholders (as defined in
the Stockholders' Agreement), so long as they are reasonably acceptable to
Kelso, and that at least five directors shall be designated by Kelso. Mr. Nelson
has been designated by the Management Stockholders and the remaining directors
were designated by Kelso. The holders of Series A Preferred Stock of Holding are
entitled to designate one director pursuant to the terms of the Series A
Preferred Stock. Such position is currently vacant. The Stockholders' Agreement
also provides that in the event of termination of employment, under certain
circumstances, each Management Stockholder is entitled to sell, and Holding can
require such a Management Stockholder to sell, their shares of Holding Common
Stock to Holding at their appraised Fair Market Value (as defined therein). The
Board of Directors of the Company has approved an extension of the term of the
Stockholders' Agreement to March 24, 2008.

ITEM 11. EXECUTIVE COMPENSATION

Set forth below is information concerning the compensation levels for
the executive officers of Holding and the Company serving as of March 31, 1999.
Officers of the Company receive no additional compensation for their services as
officers of Holding.

21
<PAGE>

CASH COMPENSATION. The following table sets forth compensation for the
three fiscal years ended March 31, 1999 for the Chief Executive Officer and the
five most highly compensated executive officers of the Company as of March 31,
1999.

SUMMARY OF COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
---------------------
ANNUAL COMPENSATION SECURITIES UNDERLYING
NAME AND ------------------------------ STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS (1) OPTIONS/SAR(#)(2) COMPENSATION (3)
- ------------------ ---- ------ --------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>

Maurice S. Nelson, Jr. 1999 $555,015 $352,013 --- $ 53,180
President, Chief Executive Officer 1998 550,020 591,111 --- 64,924
and Chief Operating Officer (4) 1997 --- 1,320,000 150,000
91,670

Charles P. Gallopo 1999 165,597 180,306 --- 534,814
Vice President, Chief 1998 209,701 --- 37,136
Financial 276,663
Officer and Secretary (5) 1997 196,470 84,714 --- 23,928

Frank D. Travetto 1999 211,274 115,920 25,000 17,789
Vice President, 1998 193,480 183,997 25,000 23,856
Merchandising 1997 162,008 --- --- 12,488

Kenneth L. Henry 1999 195,281 112,009 25,000 22,786
Vice President, 1998 161,561 150,050 25,000 60,973
Chicago Region 1997 135,627 --- --- 13,359

R. Neil McCaffery 1999 185,243 76,003 25,000 14,146
Vice President, 1998 154,447 146,859 25,000 14,989
Western Region 1997 131,336 17,009 --- 7,580

James D. Hoffman 1999 184,065 106,404 25,000 15,267
Vice President, 1998 152,052 142,108 25,000 14,366
Eastern Region 1997 121,019 23,229 --- 7,280

Mark R. McWhirter 1999 157,800 104,247 25,000 32,636
Vice President, 1998 143,972 144,082 25,000 14,429
Chief Information Officer 1997 128,849 17,843 --- 7,281

</TABLE>

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

(1) Amounts reflect cash compensation earned by executive officers in each
of the fiscal years presented, including amounts received after fiscal
year end, or deferred at the election of those officers. Bonus amounts
include (i) a cash bonus payable pursuant to the Company's Management
Incentive Compensation Plan, which became effective April 1, 1997, and
(ii) a cash bonus payable each year to all management investors
pursuant to the Company's Management Stock Bonus Plan (or, in the case
of Mr. Gallopo and Mr. McWhirter, an equivalent policy) in proportion
to their ownership of Holding Common Stock. The following bonuses were
paid to Messrs. Nelson, Gallopo, Travetto, Henry, McCaffery, Hoffman
and McWhirter under the Company's Management Incentive Compensation
Plan (a) in fiscal 1999: $352,013, $144,000, $115,920, $112,009,
$76,003, $106,404 and $96,600, respectively, (b) in fiscal 1998:
$591,111, $228,255, $183,997, $150,050, $146,859, $142,108 and
$133,886, respectively, (c) in fiscal 1997: none. The following bonuses
were paid to Messrs. Gallopo and McWhirter under the Company's
Management Stock Bonus Plan (a) in fiscal 1999: $36,306 and $7,647,
respectively, (b) in fiscal 1998: $48,408 and $10,196, respectively,
(c) in fiscal 1997: $84,714 and $17,843, respectively. Prior to fiscal
1998, Messrs. Travetto, Henry, McCaffery and Hoffman were participating
under a predecessor incentive plan based on the operating performance
of their respective regions and received the following payments in
fiscal 1997: none, except for Mr. McCaffery ($17,009) and Mr. Hoffman
($23,229).

22
<PAGE>

(2) Holding has granted Mr. Nelson and certain other executive officers
options to purchase shares of Holding Common Stock at their fair market
value on the date of grant. Mr. Nelson's options have an exercise price
of $5.41 per share; options granted to Messrs. Travetto, Henry,
McCaffery, Hoffman and McWhirter in fiscal years 1999 and 1998 have an
exercise price of $7.73 and $3.34 per share, respectively. See "Holding
Stock Option Plan" and "Stock Option Grants Table" below for further
information.

(3) Amounts shown include allocations to the accounts of each of the named
officers of contributions made by the Company to the ESOP and to the
Company's 401(a)(17) Supplemental Contribution Plan ("401(a)(17) Plan")
and of premiums paid by the Company for long-term disability and life
insurance policies. The following allocations were made in fiscal 1999
for Messrs. Nelson, Gallopo, Travetto, Henry, McCaffery, Hoffman and
McWhirter, respectively (i) ESOP --$8,000, $8,000, $8,000, $8,000,
$8,000, $8,000 and $7,882; (ii) 401(a)(17) Plan --$37,102, $10,548,
$8,171, $7,303, $5,572, $6,923 and $6,363; (iii) long term
disability--$7,285, 6,207, none, $5,908, none, none and none; (iv) life
insurance--$793, $2,574, $1,618, $1,574, $573, $344 and $1,565. In
fiscal 1998 to Messrs. Nelson, Gallopo, Travetto, Henry, McCaffery,
Hoffman and McWhirter, respectively: (i) ESOP--$8,000, $8,000, $8,000,
$7,875, $7,575, $7,481 and $7,190; (ii) 401(a)(17) Plan--$49,057,
$13,806, $10,710, $7,376, $6,918, $6,587 and $5,884; (iii) long term
disability--$7,285, $6,133, $3,745, $5,908, none, none and none; and
(iv) life insurance--$582, $9,197, $1,401, $1,362, $496, $298 and
$1,355. In fiscal 1997, the following allocations were made to Messrs.
Nelson, Gallopo, Travetto, Henry, McCaffery, Hoffman and McWhirter,
respectively: (i) ESOP--none, $7,500, $7,500, $6,600, $7,270, $7,094
and $6,435; (ii) 401(a)(17) Plan--none, $2,214, $540, none, none, none
and none; (iii) long term disability--none, $6,207, $3,573, $5,908,
none, none and none; and (iv) life insurance--none, $8,007, $875, $851,
$310, $186 and $846. The amounts in respect of life insurance represent
the estimated value of the premiums paid by the Company on certain
disability and life insurance policies covering each executive. Some of
the policies are managed on a split-dollar basis and the Company will
receive the premiums it has paid from the proceeds of such insurance.
In such cases the amount of the other compensation attributed to the
executive was calculated by treating the premiums paid by the Company
as a demand loan, and the amount of compensation is equal to the
imputed interest expense on the cumulative outstanding premiums paid by
the Company, assuming an interest rate equal to the short-term federal
funds rate, from time to time. Amounts shown also include consulting
fees and severance totaling $507,485 paid or payable to Mr. Gallopo in
fiscal years 1999 and 2000 (see note 5 below), vacation pay-out in
fiscal 1999 to Mr. McWhirter of $16,826, relocation payments of $38,452
to Mr. Henry in fiscal 1998 and a discretionary payment to Mr. Nelson
of $150,000 in fiscal 1997.

(4) Mr. Nelson joined the Company on February 1, 1997 and his compensation
in fiscal 1997 represents actual compensation for a period of two
months.

(5) Mr. Gallopo left the Company effective December 31, 1998 and is
currently under contract to serve as a consultant to the Company
through December 31, 2000. Compensation under the consulting contract
from January 1, 1999 through March 31, 1999 totaled $14,063, which
represents Mr. Gallopo's fiscal 1999 salary calculated on a pro-rata
basis, and is included in other compensation (see note 3 above).

HOLDING STOCK OPTION PLAN

Holding has adopted the Earle M. Jorgensen Holding Company, Inc. Stock
Option Plan (the "Stock Option Plan"). The Executive Committee of the Board of
Directors is authorized to grant options under the Stock Option Plan. Stock
options may be granted at not less than 100% of the fair market value of Holding
Common Stock on the date of grant and are generally exercisable for a period not
exceeding ten years. Option grants or the vesting of options may be contingent
upon such terms and conditions, such as the achievement of performance measures
or upon the passage of time, as the Executive Committee determines. The
Executive Committee will make grants under the Stock Option Plan to provide
executive officers with additional incentives for outstanding individual
performance and the opportunity to acquire an ownership stake in the Company,
thereby more closely aligning their interests with those of the stockholders.

The Executive Committee has the right, if the holders of options agree,
to grant replacement options which may contain terms more favorable than the
options they replace, such as a lower exercise price, and cancel the replaced
options.

The aggregate number of shares of Holding Common Stock available for
grants or subject to outstanding options, and the respective prices and/or
vesting criteria applicable to outstanding options will be proportionately
adjusted to reflect any stock dividend on the Holding Common Stock, or any
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase the
Holding Common Stock at a price substantially below its fair market value. To
the extent deemed appropriate by the Executive Committee, subject to any
required action by the stockholders, in any merger, consolidation,
reorganization, liquidation, dissolution, or other similar transaction, any
option granted under the Stock Option Plan shall pertain to the securities and
any other property to which a holder of the number of shares of Common Stock
covered by the option would have been entitled to receive in connection with
such event.

23
<PAGE>

Upon a Change of Control of Holding, with certain exceptions, all
outstanding stock options (whether or not then fully exercisable or vested) will
be cashed out at specified prices as of the date of the Change of Control,
except that any stock options outstanding for less than six months will not be
cashed out until six months after the applicable date of grant.

Generally, a participant who is granted a stock option will not be
subject to federal income tax at the time of grant and the Company will not be
entitled to a tax deduction by reason of such grant. Upon exercise of a
nonqualified option, generally the difference between the option price and the
fair market value of the Holding Common Stock on the date of exercise will be
considered ordinary income to the participant and generally the Company will be
entitled to a corresponding tax deduction.

Upon exercise of an incentive stock option, no taxable income will be
recognized by the participant and the Company is not entitled to a tax deduction
by reason of such exercise. However, if Holding Common Stock purchased pursuant
to the exercise of an incentive stock is sold within two years from the date of
grant or within one year after the transfer of such Holding Common Stock to the
participant, then the difference, with certain adjustments, between the fair
market value of the Holding Common Stock at the date of exercise and the option
price will be considered ordinary income to the participant and generally the
Company will be entitled to a corresponding tax deduction. If the participant
disposes of the Holding Common Stock after such holding periods, any gain or
loss upon such disposition will be treated as a capital gain or loss and the
Company will not be entitled to a deduction.

The maximum number of shares of Holding Common Stock reserved for
issuance under the Stock Option Plan is 1,700,000, subject to adjustment as
provided in the Stock Option Plan to reflect certain corporate transactions
affecting the number or type of outstanding shares.

STOCK OPTION GRANTS TABLE

The following table sets forth certain information concerning stock
options granted during fiscal 1999 by Holding to the Chief Executive Officer and
the next five most highly compensated executive officers of the Company. In
addition, there are shown hypothetical gains that could be realized for the
respective options, based on assumed rates of annual compound price appreciation
of 5% and 10% from the date the options are granted over the ten-year term of
the options. The actual gain, if any, realized upon exercise of the options will
depend upon the market price of Holding's Common Stock relative to the exercise
price of the option at the time the option is exercised. There is no assurance
that the amounts reflected in this table will be realized.

<TABLE>
<CAPTION>
OPTIONS GRANTED IN LAST FISCAL YEAR

INDIVIDUAL GRANTS
--------------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF ASSUMED ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL OPTIONS PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM
OPTIONS GRANTED EMPLOYEES IN PRICE EXPIRATION --------------------------------
NAME (#) (1) FISCAL YEAR ($/SH.) DATE 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
- ---- ------- ----------- ------- ---- ------ -------
Maurice S. Nelson, Jr. --- 0% N/A N/A N/A N/A
Kenneth L. Henry 25,000 20% $7.73 7/31/2008 $121,534 $307,991
Frank D. Travetto 25,000 20% 7.73 7/31/2008 121,534 307,991
R. Neil McCaffery 25,000 20% 7.73 7/31/2008 121,534 307,991
James D. Hoffman 25,000 20% 7.73 7/31/2008 121,534 307,991
Mark R. McWhirter 25,000 20% 7.73 7/31/2008 121,534 307,991

</TABLE>

- ---------------
(1) Holding has not granted any stock appreciation rights. All the options shown
above become exercisable on August 1, 2000. All outstanding stock options
shall become fully exercisable and shall be cancelled and exchanged for cash
in an amount equal to the excess of the Change in Control Price (as defined
in the Stock Option Plan as defined below) over the exercise price, in the
event of any transaction or series of transactions, other than a public
offering, where a person or a group, excluding Holding, any of its
subsidiaries and Kelso and its affiliates, is or becomes the beneficial
owner, directly or indirectly, of securities representing 35% or more of the
voting power of Holding's then outstanding securities (an "SOP Change of
Control"), unless the Executive Committee determines prior to the occurrence
of such SOP Change of Control that such options shall be honored, or assumed
or new rights (having substantially equivalent or better rights, terms and
conditions and economic value) substituted therefor.

24
<PAGE>

THE ESOP

The Company maintains an employee stock ownership plan (the "ESOP") in
respect of the Company's nonunion employees who meet certain service
requirements. The Company's annual contributions to the ESOP are a percentage
(5% plus additional amounts up to a maximum contribution of 10% pursuant to a
program established by the Board of Directors for fiscal 1999 and 2000 rewarding
the achievement of Company performance objectives) of total cash compensation
(as defined in the ESOP) and may be made by the Company in cash or by Holding in
shares of Holding capital stock. Participants become 20% vested in their account
balances after one year of continuous service. Participants vest an additional
20% for each year of service thereafter and become fully vested upon completion
of five years of service, retirement, disability or death. Following the
occurrence of a participant's termination of service (as defined in the ESOP),
retirement, disability, or death, the ESOP is required to either distribute the
vested balance in stock or cash. If stock is distributed, it is accompanied by a
put option to Holding under terms defined in the ESOP. At March 31, 1999, shares
of Holding's Series A and Series B Preferred Stock and Holding Common Stock
owned by the ESOP totaled 72,629, 24,262, 3,569,723 shares, respectively.
Contributions payable to the ESOP totaled $2,994,000, $2,788,000 and $3,102,000
as of March 31, 1999, 1998 and 1997, respectively, and have been or will be paid
in the form of Holding Common Stock.

Although Holding has not expressed any intent to terminate the ESOP, it
has the right to terminate or amend the provisions of the ESOP at any time. In
the event of any termination, participants become fully vested to the extent of
the balances in their separate accounts and receive put options with respect to
Holding stock allocated to their accounts.

In 1984, 1985 and 1986, Kilsby purchased life insurance policies to
provide, among other things, a separate source for funds to repurchase capital
stock, including capital stock distributed by the ESOP, from departing
employees. Certain of these policies allow the Company to borrow against the
cash surrender value of such policies. As of March 31, 1999, the Company has
borrowed $101.7 million against the cash surrender value of such policies to
fund renewal premiums, accrued interest on previous borrowings and working
capital needs. The net cash surrender value available for future borrowings was
approximately $5.5 million as of March 31, 1999. Other resources of the Company,
such as the Revolving Credit Facility, are available, subject to certain
limitations, to satisfy stock repurchase obligations as they arise. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations---Liquidity and Capital Resources".

The Internal Revenue Service (the "IRS") conducted an audit of the ESOP
for the fiscal years ended March 31, 1992 through March 31, 1996 and issued a
preliminary report to the Company in which the IRS asserted that certain
contributions of stock by Holding to the ESOP violated provisions of the
Internal Revenue Code. The U.S. Department of Labor (the "DOL") is investigating
the same transactions involving the ESOP and has come to conclusions similar to
those reached by the IRS. The Company believes the assertions of the IRS and the
DOL are incorrect and has responded accordingly. In accordance with its
investigation, the DOL and its advisors have also reviewed the valuation of
Holding's common and preferred stock prepared for the ESOP for fiscal 1997. The
Company does not have sufficient information to estimate its potential
liability; however, the Company believes that the IRS and DOL investigations
will be resolved in a manner that will not result in a material liability to the
Company.

SUPPLEMENTAL ESOP

In fiscal 1996, the Company adopted a supplemental ESOP contribution
plan ("Supplemental ESOP") for contributions not allowed under the ESOP pursuant
to limitations of Sections 401(a)(17) and 415 of the Internal Revenue Code of
1986, as amended. Participants in the Supplemental Plan include certain highly
compensated employees and other employees who are not eligible to participate in
the ESOP. Contributions payable, vesting and distributions under the
Supplemental Plan are comparable with those under the ESOP. Contributions under
the Supplemental Plan are made in cash and are held in an irrevocable trust.
Contributions payable totaled $99,000, $119,000, and $30,000 as of March 31,
1999, 1998 and 1997, respectively.

25
<PAGE>

MANAGEMENT INCENTIVE COMPENSATION PLAN

Effective April 1, 1997, the Company adopted a new Management Incentive
Compensation Plan (the "Incentive Plan"). The Incentive Plan provides for
payment of cash bonuses to senior executives and other key management employees
based on the achievement of certain operating profit and cash flow objectives
determined by the Board of Directors or the Executive Committee. Bonuses awarded
are determined on a sliding scale based on the percentage of the objectives
achieved. No bonus is payable unless at least 80% of the objectives are
achieved, and the maximum bonus would be awarded for achievement of 150% or more
of the established objectives. In addition, the Company's Chief Executive
Officer may award bonuses from a discretionary pool for exemplary service. The
Board of Directors ratified bonuses pursuant to the Incentive Plan aggregating
$4.6 million in fiscal 1999 and $6.9 million in fiscal 1998.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

David M. Roderick, Frank T. Nickell and Maurice S. Nelson, Jr. are
members of the Executive Committee, which succeeded the functions of the
Management and Compensation Committee of Holding and the Company on January 30,
1997.

Kelso affiliates beneficially own shares of the capital stock of
Holding as described under "Item 12. Security Ownership of Certain Beneficial
Owners and Management." Mr. Nickell and Mr. Schuchert are stockholders of Kelso
and general partners of Kelso Partners I, L.P. ("KP I"), Kelso Partners III,
L.P. ("KP III"), and Kelso Partners IV, L.P. ("KP IV"). KP I, KP III and KP IV
are the general partners of Kelso Investment Associates, Limited Partnership
("KIA I"), KIA III-Earle M. Jorgensen, L.P. ("KIA III-EMJ") and Kelso Investment
Associates IV, L.P. ("KIA IV"), respectively. Mr. Nickell and Mr. Schuchert are
directors of Holding and the Company and share investment and voting power with
respect to shares of the capital stock of Holding held by KIA I, KIA III-EMJ and
KIA IV as described under "Item 12. Security Ownership of Certain Beneficial
Owners and Management."

In connection with the Acquisition, the Company agreed to pay Kelso an
annual fee of $1,250,000 each year for financial advisory services and to
reimburse it for out-of-pocket expenses incurred in connection with rendering
such services. Two general partners of Kelso affiliates serve on the Boards of
Directors of the Company and Holding. The agreement for advisory services was
amended in September 1997 to provide such services at an annual fee of $625,000
for each of the fiscal years ended March 31, 1999 and 1998. For each of the
fiscal years 1999, 1998 and 1997, the Company paid Kelso the annual fee and
reimbursed Kelso $43,000, $62,000 and $393,000, respectively, for out-of-pocket
expenses.

Holding has issued to KIA IV two warrants, entitling KIA IV to purchase
2,937,915 shares of Holding Common Stock in the aggregate at a purchase price of
$.01 per share.

In January 1996, the Company amended its agreement with Kelso Insurance
Services, Inc. (an affiliate of Kelso) ("Kelso Insurance"), and American
Telephone and Telegraph Company ("AT&T") pursuant to which the Company as well
as certain other Kelso affiliated companies participates in a telecommunications
network under which AT&T provides communications services to the group at a
special tariff rate. Pursuant to such agreement, as amended, the Company has
guaranteed a minimum annual usage for communication services, and Kelso
Insurance has guaranteed the Company's minimum usage to AT&T. No fee was paid by
the Company to Kelso Insurance in connection with this transaction.

Effective each April 1, 1997, 1998 and 1999, in consideration for his service as
a director, Chairman of the Company's Executive Committee and Chairman of the
Board, the Company granted Mr. Roderick options to purchase 20,000 shares of
Holding Common Stock at a purchase price of $5.41 per share, $3.34 per share and
$7.73 per share, respectively, in each case, the fair market value as
established by the most recent appraisal available at the date of grant. Prior
to this grant, Mr. Roderick had a three-year incentive compensation agreement
with Holding which expired on March 31, 1997. Pursuant to such agreement, Mr.
Roderick was granted 50,000 shares of Holding Common Stock, 20,000 of which were
vested upon issuance and all or a portion of the remainder were to be vested
through fiscal 1997, if Holding achieved certain financial targets. A total of
34,000 shares were vested under the agreement when it expired on March 31,

26
<PAGE>

1997. Pursuant to the agreement, Mr. Roderick received a cash payment in
fiscal 1996 totaling $145,309, equal to the federal, state and local income
tax liability payable by him by reason of the value of the initial payment of
20,000 unrestricted shares of Holding Common Stock and such cash payment.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

COMMON STOCK OF THE COMPANY

All of the issued and outstanding voting stock of the Company,
consisting of 128 shares of common stock, is owned by Holding.

CAPITAL STOCK OF HOLDING

The following table sets forth information with respect to the
beneficial ownership of shares of Holding Common Stock and Series A Preferred
Stock as of March 31, 1999, by all stockholders of Holding known to be
beneficial owners of more than 5% of any such class, by each director, by each
executive officer of the Company named in the Summary Compensation Table and by
all directors and executive officers as a group as determined in accordance with
Rule 13d-3(i) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). As of March 31, 1999, 26,791 shares of Series B Preferred Stock
of Holding have been issued, of which 24,262 were owned by the ESOP and 2,523
were owned by Holding.

PERCENTAGE OF NUMBER OF PERCENTAGE OF
NUMBER OF SHARES OF SHARES SHARES OF SERIES
NAME AND ADDRESS OF SHARES OF COMMON STOCK OF SERIES A A PREFERRED STOCK
BENEFICIAL OWNER COMMON STOCK OUTSTANDING (A) PREFERRED STOCK OUTSTANDING (B)
- ---------------- ------------ --------------- --------------- ---------------
<S> <C> <C> <C> <C>

Kelso Investment Associates, IV, L.P. (c) 9,462,475 (d) 61.2% (d) 0 0.0%
KIA III - Earle M. Jorgensen, L.P. (c) 1,704,740 13.6% 0 0.0%
Joseph S. Schuchert (c) 11,167,215 (d)(e) 72.2% (d)(e) 24,519 (f) 21.7% (f)
Frank T. Nickell (c) 11,187,714 (d)(e) 72.3% (d)(e) 24,519 (f) 21.7% (f)
Michael B. Goldberg (c) 9,462,475 (d)(e) 61.2% (d)(e) 0 0.0%
George E. Matelich (c) 11,172,215 (d)(e) 72.2% (d)(e) 24,519 (f) 21.7% (f)
Thomas R. Wall, IV (c) 11,172,215 (d)(e) 72.2% (d)(e) 24,519 (f) 21.7% (f)
Frank K. Bynum (c) 11,167,215 (d)(e) 72.2% (d)(e) 0 0.0%
David I. Wahrhaftig (c) 11,167,215 (d)(e) 72.2% (d)(e) 0 0.0%
Earle M. Jorgensen (g) 200,000 1.6% 0 0.0%
Neven C. Hulsey (g) (m) 147,146 1.2% 10,678 9.4%
Maurice S. Nelson (g) 0 0.0% 0 0.0%
Charles P. Gallopo (g) (n) 0 0.0% 0 0.0%
Frank D. Travetto (g) 12,000 0.1% 0 0.0%
Kenneth L. Henry (g) 19,000 0.2% 704 0.6%
R. Neil McCaffery (g) 5,000 0.0% 0 0.0%
James D. Hoffman (g) 0 0.0% 0 0.0%
Mark R. McWhirter (g) 0 0.0% 0 0.0%
David M. Roderick (g) (l) 94,000 0.8% 0 0.0%
John Rutledge (h) (l) 17,500 0.1% 0 0.0%
William A. Marquard (c) (l) 22,500 0.2% 0 0.0%
Earle M. Jorgensen Company Employee
Stock Ownership Plan (g) 3,505,268 (i) 28.0% (i) 69,064 (i) 61.0% (i)
All directors and executive officers of
the Company as a group (l) 390,499 (j) 3.1% (j) 704 (k) 0.6% (k)

</TABLE>

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

27
<PAGE>

(a) The percentage of shares of Holding Common Stock outstanding for KIA IV,
and Messrs. Schuchert, Nickell, Wall, Matelich, Goldberg, Wahrhaftig and
Bynum was calculated assuming the total outstanding shares of Holding
Common Stock was 15,469,794, (i) including shares of Holding Common Stock
which would be outstanding assuming KIA IV exercised the two Warrants
referred to in note (d) below in succession and there had been no other
dilution events prior to such exercise, (ii) excluding 85,000 shares
subject to stock options referred to in note (l) below. The percentage of
shares of Holding Common Stock outstanding for all other holders was
calculated assuming the total outstanding shares of Holding Common Stock
was 12,531,879, excluding shares subject to stock options and shares
issuable upon the exercise of the Warrants held by KIA IV as of March 31,
1999.

(b) The percentage of shares of Series A Preferred Stock outstanding was
calculated assuming the total outstanding shares of Series A Preferred
Stock was 113,234, excluding 134,312 shares of Series A Preferred Stock
held in the Holding treasury as of March 31, 1999.

(c) The business address for such person(s) is c/o Kelso & Company, 320 Park
Avenue, 24th Floor, New York, New York, 10022. Kelso & Company is a private
investment firm.

(d) Includes 2,937,915 shares of the Holding Common Stock that KIA IV is
entitled to purchase pursuant to two Warrants issued to KIA IV. Each
Warrant entitles the holder to purchase up to 10% of the Holding Common
Stock on a fully-diluted basis at an exercise price of $.01 per share.

(e) Messrs. Schuchert, Nickell, Wall, Matelich, Goldberg, Wahrhaftig and Bynum
may be deemed to share beneficial ownership of shares of Holding Common
Stock owned of record by (i) KIA IV and an affiliated entity by virtue of
their status as general partners of KP IV, the general partner of KIA IV,
and such affiliate, and (ii) except Mr. Goldberg, KIA III-EMJ by virtue of
their status as general partners of KP III, the general partner of KIA
III-EMJ. Messrs. Schuchert, Nickell, Wall, Matelich, Goldberg, Wahrhaftig
and Bynum share investment and voting power with respect to securities
owned by the Kelso affiliates of which they are general partners. Messrs.
Nickell, Wall, Matelich, Goldberg, Wahrhaftig and Bynum disclaim beneficial
ownership of the shares of Holding Common Stock owned by the Kelso
affiliates.

(f) Messrs. Schuchert, Nickell, Wall and Matelich may be deemed to share
beneficial ownership of shares of Series A Preferred Stock owned of record
by KIA I by virtue of their status as general partners of KP I, the general
partner of KIA I. Messrs. Schuchert, Nickell, Wall and Matelich disclaim
beneficial ownership of the shares of Series A Preferred Stock owned by KIA
I.

(g) The business address of such person(s) or entity is 3050 East Birch Street,
Brea, California, 92821.

(h) The business address for Dr. Rutledge is One Greenwich Office Park,
Greenwich, Connecticut, 06831.

(i) Excludes 64,455 shares of Holding Common Stock and 3,565 shares of Series A
Preferred Stock held by the ESOP in directed accounts that are deemed to be
beneficially owned by any of the directors or executive officers or other
employees of the Company.

(j) Excludes (i) 11,167,215 shares of Holding Common Stock held by Kelso
affiliates that may be deemed to be beneficially owned by Mr. Schuchert and
Mr. Nickell, and (ii) shares held by the ESOP, except for shares held in
directed accounts that may be deemed to be beneficially owned by any of the
directors and executive officers of the Company.

(k) Excludes (i) 24,519 shares of Series A Preferred Stock held by KIA I that
may be deemed to be beneficially owned by Mr. Schuchert and Mr. Nickell,
and (ii) shares held by the ESOP, except for shares held in directed
accounts that may be deemed to be beneficially owned by any of the
directors or executive officers of the Company.

(l) Includes shares subject to stock options vested and exercisable as of April
1, 1999.

(m) Mr. Hulsey resigned as a director of the Company effective January 21, 1999.

(n) Mr. Gallopo left the Company effective December 31, 1998.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Kelso affiliates beneficially own shares of the capital stock of Holding as
described under "Item 12. Security Ownership of Certain Beneficial Owners and
Management." Messrs. Schuchert, Nickell, Wall, Matelich, Goldberg, Wahrhaftig
and Bynum are indirect stockholders of Kelso and general partners of KP I (other
than Messrs. Goldberg,

<PAGE>

Bynum and Wahrhaftig), KP III (other than Mr. Goldberg) and KP IV. KP I, KP III
and KP IV are the general partners of KIA I, KIA III-EMJ and KIA IV,
respectively. Messrs. Schuchert and Nickell are directors of Holding and the
Company. See "Item 12. Security Ownership of Certain Beneficial Owners and
Management."

The Company, Holding and Kelso and its affiliates entered into certain
agreements in connection with the Acquisition. Such agreements and transactions
are described under "Item 11. Executive Compensation---Compensation Committee
Interlocks and Insider Participation."

KIA IV is the holder of two Holding warrants, which are described under
"Item 11. Executive Compensation---Compensation Committee Interlocks and Insider
Participation."

Messrs. Gallopo and McWhirter borrowed $403,000 (in fiscal 1994) and
$92,300 (in fiscal 1995) from Holding by issuing notes to Holding in payment for
50,000 and 10,000 shares, respectively, of Holding Common Stock. In February
1999, the Company and Messrs. Gallopo and McWhirter agreed to adjust the
original purchase price of their respective shares to the current fair market
value and to surrender these shares in consideration for the notes issued to
Holding.

Mr. Gallopo received 16,000 phantom stock units, which vested on November
29, 1997. Each phantom stock unit entitled Mr. Gallopo to receive an amount
equal to the difference between the fair market value of a share of Holding
Common Stock on the date of redemption and a base price, subject to adjustment,
of $9.23. Upon Mr. Gallopo's termination from the Company effective December 31,
1998, such stock units expired without value.

Mr. Hulsey is a general partner of a California partnership, Kilsby-Roberts
Group ("KRG"), and has an interest in such partnership of 3.704%. Through
December 1996, KRG owned a facility leased to the Company and received
approximately $41,000 of rent monthly from the Company during fiscal 1997. The
Company believes such rent was a market rent and is not higher than would
otherwise be paid if such premises were leased from an independent third party.
In January 1997, KRG sold the facility to an independent third party.

Effective April 1, 1997, April 1, 1998 and April 1, 1999, in consideration
for his service as a director, Chairman of the Company's Executive Committee and
Chairman of the Board, the Company granted Mr. Roderick options to purchase
20,000 shares of Holding Common Stock at their fair market value as established
by the most recent appraisal available at the date of grant. Mr. Roderick also
had an incentive compensation agreement with Holding which expired on March 31,
1997. Such agreement is described under "Item 11. Executive
Compensation--Compensation Committee Interlocks and Insider Participation."

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1) FINANCIAL STATEMENTS.

See "Index to Financial Statements" (page F-1).

(a)(2) FINANCIAL STATEMENT SCHEDULES.

Schedule II - Valuation and Qualifying Accounts and Reserves

All other schedules have been omitted because the information is not applicable
or is not material or because the information required is set forth in the
financial statements or the notes thereto.

(a)(3) EXHIBITS.

See "Index to Exhibits" for listing of those exhibits included in this
filing.

29
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
3.1* Certificate of Incorporation of the Company. Incorporated by reference
to Exhibit 3.1 of the Company's Registration Statement on Form S-1 as
filed on January 15, 1993 (Registration No. 33-57134) (the "Company's
1993 Registration Statement").

3.2* By-laws of the Company. Incorporated by reference to Exhibit 3.2 of the
Company's 1993 Registration Statement.

4.1* Form of Indenture with respect to the Company's 91/2% Senior Notes.

4.2(a)* Form of Certificate for the Company's 91/2% Senior Notes, Series A,
$100,000,000.

4.2(b)* Form of Certificate for the Company's 91/2% Senior Notes, $4,350,000.

4.2(c)* Form of Certificate for the Company's 91/2% Senior Notes, Series A, $650,000.

4.3* Purchase Agreement, dated as of March 19, 1998, among the Company,
Donaldson, Lufkin & Jenrette Securities Corporation and BT Alex, Brown
Incorporated, for an aggregate of $105,000,000 in principal amount of
the Company's 9 1/2% Senior Notes due 2005.

4.4* Registration Rights Agreement, dated as of March 24, 1998, among the
Company, Donaldson, Lufkin & Jenrette Securities Corporation and BT
Alex, Brown Incorporated.

4.5* Amended and Restated Credit Agreement dated as of March 3, 1993,
amended and restated as of March 24, 1998, among the Company, Holding,
Various Financial Institutions, and BT Commercial Corporation, as
Agents (the "Agent").

4.6* Term Loan Agreement ("Term Loan Agreement"), dated as of March 24, 1998
among the Company, Various Financial Institutions, as the Lender, DLJ
Capital Funding, Inc., as the Syndication Agent for the Lenders,
Bankers Trust Company, as the Documentation Agent for the Lenders and
Fleet National Bank, as the Administrative Agent ("Administrative
Agent") for the Lenders.

4.7* Form of Restructuring Agreement among Holding, the Company and KIA IV.
Incorporated by reference to Exhibit 4.25 of Amendment No. 3 to the
Company's 1993 Registration Statement ("Amendment No. 3").

4.8* Amendment to Restructuring Agreement, dated as of March 3, 1993, by
and between Holding and KIA IV, amended as of March 24, 1998.

4.9* Form of Security Agreement between the Company and BT Commercial Corporation, as
Collateral Agent, Incorporated by Reference to Exhibit 4.27 of Amendment No. 3.

4.10* Form of Acknowledgement, Consent and Amendment, dated as of March 24, 1998,
between the Company and the Administrative Agent.

4.11* Form of Security Agreement, dated as of March 24, 1998 by the Company, in favor
of the Administrative Agent.

4.12* Form of Mortgage, dated as of March 24, 1998, made by the Company in favor of
the Administrative Agent.

4.13* Intercreditor Agreement, dated as of March 24, 1998, by and among Fleet
National Bank, as the Adminstrative Agent and BT Commercial
Corporation.

</TABLE>

30
<PAGE>

<TABLE>

<S> <C>
10.1* Stockholders Agreement, amended and restated as of September 14, 1990,
among Holding, KIA III-EMJ, KIA IV, Kelso Equity Partners II, L.P. and
the Management Stockholders and Other Investors named therein.
Incorporated by reference to Exhibit 4.1 of Holding's Post-Effective
Amendment No. 1 to the Form S-1 Registration Statement as filed with
the Commission on October 12, 1990 (Registration No. 33-35022)
("Holding's Post-Effective Amendment No. 1 to the 1990 Form S-1").

10.2* Amendment to the Stockholders Agreement, dated as of January 20, 1992.
Incorporated by reference to Exhibit 10.2 of the Company's 1993
Registration Statement.

10.3* Management Stockholders Bonus Plan. Incorporated by reference to
Exhibit 4.7 of Holding's Post-Effective Amendment No. 1 to the 1990
Form S-1.

10.4* Services Agreement, between Acquisition and Kelso, dated March 19,
1990. Incorporated by reference to Exhibit 10.2 of Holding's
Registration Statement on Form S-1 as filed May 30, 1990 with the
Commission (Registration No. 33-35022) ("Holding's 1990 Registration
Statement").

10.5* Trust Agreement applicable to the EMJ Employee Stock Ownership and
Capital Accumulation Plan, dated as of May 25, 1984, by and between
Crocker National Bank ("Crocker"), as Trustee, and EMJ. Incorporated by
reference to Exhibit 4.1 to Form 8 (Amendment No. 1 to EMJ's Annual
Report on Form 10-K, Registration No. L-7537, for the fiscal year ended
December 31, 1984) (the "Form 8").

10.6* Amendment 1985-I to the EMJ Employee Stock Ownership and Capital
Accumulation Plan effective as of January 1985. Incorporated by
reference to Exhibit 4.1 to Post-Effective Amendment No. 1 to EMJ's
Registration Statement on Form S-8, Registration No. 2-87991, filed
August 21, 1985.

10.7* Amendment 1986-I to the EMJ Employee Stock Ownership and Capital
Accumulation Plan and Plan Trust Agreement executed December 1986
between EMJ and Wells Fargo Bank, N.A., as Trustee (formerly Crocker).
Incorporated by reference to Exhibit 4.2 to the Form 8.

10.8* Amendment 1988-I to the EMJ Employee Stock Ownership and Capital
Accumulation Plan executed February 29, 1988. Incorporated by reference
to Exhibit (10)d to EMJ's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987.

10.9* Amendment 1988-II to the EMJ Employee Stock Ownership and Capital
Accumulation Plan executed June 22, 1988. Incorporated by reference to
Exhibit 8 to EMJ's Schedule 14D-9 filed on February 5, 1990 ("EMJ's
1990 Schedule 14D-9").

10.10* Amendment 1989-I to the EMJ Employee Stock Ownership and Capital
Accumulation Plan executed March 20, 1989. Incorporated by reference to
Exhibit 8 to EMJ's 1990 Schedule 14D-9.

10.11* EMJ Supplemental Benefit Plan 1989 Amendment in Toto. Incorporated by
reference to Exhibit (10)p to EMJ's 1989 Form 10-K.

10.12* Amendment 1989-II to the EMJ Employee Stock Ownership and Capital
Accumulation Plan executed December 29, 1989. Incorporated by reference
to Exhibit (10)q to EMJ's 1989 Form 10-K.

10.13* Amendment 1990-I to the EMJ Employee Stock Ownership and Capital
Accumulation Plan Trust Agreement executed March 19, 1990. Incorporated
by reference to Exhibit (10)r to EMJ's Annual Report on Form 10-K for
fiscal year ended December 31, 1989.

10.14* C. A. Roberts Pension Plan, amended and restated as of January 1, 1986,
with amendments thereto. Incorporated by reference to Exhibit 10.22 of
Holding's 1990 Registration Statement.

</TABLE>

31
<PAGE>

<TABLE>

<S> <C>
10.15* Kilsby Executive Life Insurance Plan. Incorporated by reference to
Exhibit 10.25 of Holding's 1990 Registration Statement.

10.16* Kilsby Executive Long-Term Disability Plan. Incorporated by reference
to Exhibit 10.26 of Holding's 1990 Registration Statement.

10.17* Holding's ESOP. Incorporated by reference to Exhibit 10.31 of Holding's
Annual Report on Form 10-K for the year ended March 31, 1991
(Registration No. 33-35022) ("Holding's Form 10-K").

10.18* Amendment No. 1 to Holding's ESOP, dated October 21, 1991. Incorporated
by reference to Exhibit 10.24 of the Company's 1993 Registration
Statement.

10.19* Amendment No. 2 to Holding's ESOP, dated October 21, 1991. Incorporated
by reference to Exhibit 10.25 of the Company's 1993 Registration
Statement.

10.20* Amendment No. 3 to Holding's ESOP, dated February 18, 1992.
Incorporated by reference to Exhibit 10.26 of the Company's 1993
Registration Statement.

10.21* Amendment No. 4 to Holding's ESOP, dated January 25, 1993. Incorporated
by reference to Exhibit No. 10.21 to Holding's Registration Statement
on Form S-1 as filed October 19, 1994 with the Commission (Registration
No. 33-85364) ("Holding's 1994 Registration Statement").

10.22* Amendment No. 5 to Holding's ESOP, dated January 25, 1993. Incorporated
by reference to Exhibit No. 10.22 to Holding's 1994 Registration
Statement.

10.23* Amendment No. 6 to Holding's ESOP, dated January 25, 1993. Incorporated
by reference to Exhibit No. 10.23 to Holding's 1994 Registration
Statement.

10.24* Amendment No. 7 to Holding's ESOP, dated January 25, 1993. Incorporated
by reference to Exhibit No. 10.24 to Holding's 1994 Registration
Statement.

10.25* Amendment No. 8 to Holding's ESOP, dated July 27, 1993. Incorporated by
reference to Exhibit No. 10.25 to Holding's 1994 Registration
Statement.

10.26* Amendment No. 9 to Holding's ESOP, dated October 7, 1994. Incorporated
by reference to Exhibit No. 10.26 to Holding's 1994 Registration
Statement.

10.27* Holding's ESOP Trust Agreement. Incorporated by reference to Exhibit
10.32 of Holding's Form 10-K.

10.28* Jorgensen Compensation Policy, dated as of April 1, 1991, including
description of Return on Net Operating Assets Incentive Plan.
Incorporated by reference to Exhibit 10.34 of Holding's 1991 Form 10-K.

10.29* Lease and Agreement, dated as of August 1, 1991, between Advantage
Corporate Income Fund L.P. and the Company, relating to the sale and
lease-back of Kilsby's Kansas City, Missouri property. Incorporated by
reference to Exhibit 10.30 of the Company's 1993 Registration
Statement.

10.30* Lease and Agreement, dated as of September 1, 1991, between Advantage
Corporate Income Fund L.P. and the Company, relating to the sale and
lease-back of the Cincinnati, Ohio property. Incorporated by reference
to Exhibit 10.31 of the Company's 1993 Registration Statement.

10.31* Industrial Building Lease, dated as of October 16, 1991, between Ira
Houston Jones and Helen Mansfield Jones, Roderick M. Jones and Cherilyn
Jones, Roger G. Jones and Norma Jean Jones, Robert M. Jones and Olga F.
Jones and the Company, relating to the sale and lease-back of the
Alameda Street property in Lynwood, California. Incorporated by
reference to Exhibit 10.32 of the Company's 1993 Registration
Statement.

</TABLE>

32
<PAGE>

<TABLE>

<S> <C>
10.32* Stock Purchase Agreement, dated as of January 21, 1992, between
McJunkin Corporation and the Company, relating to the sale of the
Company's Republic Supply division. Incorporated by reference to
Exhibit 10.33 of the Company's 1993 Registration Statement.

10.33* Contract of Sale, dated as of January 21, 1992, between the Company and
Hansford Associates Limited Partnership, relating to the sale of the
warehouse properties and the sale of the Company's Republic Supply
division. Incorporated by reference to Exhibit 10.34 of the Company's
1993 Registration Statement.

10.34* Stock Purchase Agreement, dated as of June 30, 1992, among Forge
Acquisition Corporation, The Jorgensen Forge Corporation and the
Company, relating to the sale of the Company's Forge division.
Incorporated by reference to Exhibit 10.35 of the Company's 1993
Registration Statement.

10.35* Industrial Real Estate Lease, dated June 25, 1992, between Paul
Nadzikewycz and the Company, relating to the sale and lease-back of
JSA's Denver, Colorado property. Incorporated by reference to Exhibit
10.36 of the Company's 1993 Registration Statement.

10.36* Industrial Real Estate Lease, dated October 19, 1992, between Fiorito
Enterprises, Inc. and the Company, relating to the sale and lease-back
of the Portland, Oregon facility. Incorporated by reference to Exhibit
10.27 of the Company's 1993 Registration Statement.

10.37* Truck Lease and Service Agreement, dated as of November 1, 1984,
between Ryder Truck Rental, Inc. ("Ryder") and EMJ and all amendments
thereto, between Ryder and the Company (amendments dated January 1,
1992, January 30, 1992 and undated (executed by the Company)).
Incorporated by reference to Exhibit 10.38 of the Company's 1993
Registration Statement.

10.38* Lease, dated July 30, 1982, between Republic Bank, Dallas N.A., as
Ancillary Trustee of the Fluor Employees' Trust Fund and Kilsby-Roberts
Co., relating to Kilsby's Houston, Texas property (the "Houston
Lease"). Incorporated by reference to Exhibit 10.42 of the Company's
1993 Registration Statement.

10.39* Amendment No. 1 to the Houston Lease, dated as of December 31, 1986,
among Barclays Bank of California, as Trustee for Republic Bank,
Dallas, N.A., as Ancillary Trustee of the Fluor Employees' Trust Fund,
KRG and Kilsby-Roberts Co. Incorporated by reference to Exhibit 10.43
of the Company's 1993 Registration Statement.

10.40* Form of Management Agreement between the Company and Holding.
Incorporated by reference to Exhibit 10.46 of Amendment No. 2 to the
Company's 1993 Registration Statement.

10.41* Form of Tax Allocation Agreement between the Company and Holding.
Incorporated by reference to Exhibit 10.47 of Amendment No. 3.

10.42* Earle M. Jorgensen Holding Company, Inc. Phantom Stock Plan adopted
January 11, 1995. Incorporated by reference to Exhibit 10.39 to
Amendment No.1 to Holding's 1994 Registration Statement as filed with
the commission on January 19, 1995 (Registration No. 33-85364)
("Amendment No. 1 to Holding's 1994 Registration Statement").

10.43* Industrial Real Estate Lease, dated July 15, 1993, between Jorgensen
and 58 Cabot L.P., relating to the Langhorne, Pennsylvania facility.
Incorporated by reference to Exhibit 10.27 to Holding's 1994
Registration Statement.

10.44* Amendment to the Stockholders Agreement, dated as of September 30,
1994. Incorporated by reference to Exhibit 10.41 to Amendment No. 1 to
Holding's 1994 Registration Statement.

10.45* Stock Compensation Agreement, dated as of December 13, 1994, between
Holding and David M. Roderick. Incorporated by reference to Exhibit
10.42 to Amendment No. 1 to Holding's 1994 Registration Statement.

</TABLE>

33
<PAGE>

<TABLE>

<S> <C>
10.46* Holding's 401(a)(17) Supplemental Contribution Plan, effective April 1,
1994. Incorporated by reference to Exhibit 10.54 to the Company's
Annual Report on Form 10-K, Commission File No. 5-10065 for the fiscal
year ended March 31, 1995 (the "Company's 1995 Form 10-K").

10.47* Holding's Deferred Compensation Plan, effective April 1, 1994.
Incorporated by reference to Exhibit 10.55 to the Company's 1995 Form
10-K.

10.48* Amendment No. 2 to the Earle M. Jorgensen Company Capital Accumulation
Plan and Trust dated as of May 3, 1996. Incorporated by reference to
Exhibit 10.55 to the Company's Annual Report on Form 10-K, Commission
File No. 5-10065 for the fiscal year ended March 31, 1996 (the
"Company's 1996 Form 10-K").

10.49* Earle M. Jorgensen Holding Company, Inc. Stock Option Plan effective
January 30, 1997. Incorporated by reference to Exhibit 10.57 to the
Company's Annual Report on Form 10-K, Commission File No. 5-10065 for
the fiscal year ended March 31, 1997 (the "Company's 1997 Form 10-K").

10.50* Form of Holding Incentive and Non-Qualified Stock Option Agreement.
Incorporated by reference to Exhibit 10.58 to the Company's 1997 Form
10-K.

10.51* Earle M. Jorgensen Holding Company, Inc. Stock Option Plan, as amended
July 21, 1997. Incorporated by reference to Exhibit 10.61 to the
Company's Quarterly Report on Form 10-Q, Commission File No. 5-10065
for the fiscal quarter ended September 29, 1997.

10.52* Earle M. Jorgensen Company Management Incentive Compensation Plan.
Incorporated by reference to Exhibit 10.62 to the Company's Quarterly
Report on Form 10-Q, Commission File No. 5-10065 for the fiscal quarter
ended December 31, 1997.

12.1** Statement of Computation of Number of Times Fixed Charges Earned.

21** Listing of the Company's subsidiaries.

27** Financial Data Schedule

</TABLE>

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

* Previously filed.
** Included in this filing.

(b) Reports on Form 8-K.

None

34
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Brea, State of
California, on the 24th of June, 1999.

EARLE M. JORGENSEN COMPANY

By /s/ William S. Johnson
-------------------------------------------
William S. Johnson
Acting Vice President and Chief Financial
Officer (Principal Financial and Accounting
Officer) and Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons in the capacities and
on the dates indicated.

SIGNATURES TITLE DATE
<S> <C> <C>
/s/Earle M. Jorgensen Director and Chairman Emeritus June 24, 1999
------------------------------------
Earle M. Jorgensen

/s/David M. Roderick Chairman of the Board and Chairman June 24, 1999
------------------------------------ of the Executive Committee and
David M. Roderick Director

/s/Maurice S. Nelson, Jr. President, Chief Executive Officer and June 24, 1999
------------------------------------ Chief Operating Officer and Director
Maurice S. Nelson, Jr.

/s/William S. Johnson Acting Vice President and Chief Financial June 24, 1999
------------------------------------ Officer (Principal Financial and
William S. Johnson Accounting Officer) and Secretary

/s/Joseph S. Schuchert Director June 24, 1999
------------------------------------
Joseph S. Schuchert

/s/William A. Marquard Director June 24, 1999
------------------------------------
William A. Marquard

/s/Frank T. Nickell Director June 24, 1999
------------------------------------
Frank T. Nickell

/s/John Rutledge Director June 24, 1999
------------------------------------
Dr. John Rutledge
</TABLE>

35
<PAGE>

FINANCIAL STATEMENTS

Page
----
<S> <C>
EARLE M. JORGENSEN COMPANY:

Report of Independent Auditors F-2

Consolidated Balance Sheets at March 31, 1999 and 1998 F-3

Consolidated Statements of Operations and Comprehensive Income
for the years ended March 31, 1999, 1998 and 1997 F-4

Consolidated Statements of Stockholder's Equity for the
years ended March 31, 1999, 1998 and 1997 F-5

Consolidated Statements of Cash Flows for the years ended
March 31, 1999, 1998, 1997 F-6

Notes to Consolidated Financial Statements F-8

</TABLE>

F-1
<PAGE>

Report of Independent Auditors

The Board of Directors and Stockholder
Earle M. Jorgensen Company

We have audited the accompanying consolidated balance sheets of Earle M.
Jorgensen Company as of March 31, 1999 and 1998, and the related consolidated
statements of operations and comprehensive income, stockholder's equity, and
cash flows for each of the three years in the period ended March 31, 1999. Our
audits also included the financial statement schedule listed in the index at
item 14(a)(2). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule 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 consolidated financial position of Earle M. Jorgensen
Company at March 31, 1999 and 1998, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
March 31, 1999 in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

/s/ ERNST & YOUNG LLP

Orange County, California
April 26, 1999

F-2
<PAGE>

Earle M. Jorgensen Company
Consolidated Balance Sheets
(dollars in thousands, except share and per share data)

March 31,
-----------------------
1999 1998
-----------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 17,860 $ 20,763
Accounts receivable, less allowance for doubtful accounts 91,356 105,303
Inventories 183,968 180,403
Other current assets 4,890 4,963
-----------------------
Total current assets 298,074 311,432
-----------------------

Net property, plant and equipment, at cost 102,776 106,643

Cash surrender value of life insurance policies 18,541 16,470
Debt issue costs, net of accumulated amortization 6,255 7,316
Other assets 1,221 1,960
-----------------------
Total assets $ 426,867 $ 443,821
-----------------------
-----------------------

LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities:
Accounts payable $ 87,108 $ 92,061
Accrued employee compensation and related taxes 9,732 12,587
Accrued employee benefits 9,402 10,004
Accrued interest 7,638 5,524
Other accrued liabilities 5,752 10,009
Deferred income taxes 20,251 21,963
Current portion of long-term debt 1,500 1,500
-----------------------
Total current liabilities 141,383 153,648
-----------------------

Long-term debt 295,006 310,734
Deferred income taxes 14,941 12,709
Other long-term liabilities 3,557 3,649
Commitments and contingencies -- --

Stockholder's equity
Preferred stock, $.01 par value; 200 shares authorized and unissued -- --
Common stock, $.01 par value; 2,800 share authorized; 128 shares
issued and outstanding -- --
Capital in excess of par value 102,082 116,789
Accumulated other comprehensive loss (1,165)
(278)
Accumulated deficit (128,937) (153,430)
-----------------------
Total stockholder's equity (28,020) (36,919)
-----------------------
Total liabilities and stockholder's equity $ 426,867 $ 443,821
-----------------------
-----------------------

</TABLE>

SEE ACCOMPANYING NOTES.

F-3
<PAGE>

Earle M. Jorgensen Company
Consolidated Statements of Operations
and Comprehensive Income
(dollars in thousands)

YEAR ENDED MARCH 31,
-----------------------------------------
1999 1998 1997
-----------------------------------------
<S> <C> <C> <C>
Revenues $ 915,811 $ 1,050,005 $ 1,023,565

Cost of sales 649,851 755,381 742,826
-----------------------------------------

Gross profit 265,960 294,624 280,739

Expenses:
Warehouse and delivery 120,687 128,495 135,287
Selling 33,918 37,147 40,791
General and administrative 44,146 59,377 69,748
Restructuring and consolidation expenses -- 2,838 15,638
Other non-recurring charges -- -- 4,450
-----------------------------------------
Total expenses 198,751 227,857 265,914
-----------------------------------------
Income from operations 67,209 66,767 14,825

Interest expense, net 41,181 41,059 40,880
-----------------------------------------

Income (loss) before income taxes and extraordinary item 26,028 25,708 (26,055)

Income tax provision 1,535 873 501
-----------------------------------------
Net income (loss) before extraordinary item 24,493 24,835 (26,556)
Extraordinary item, early retirement of debt -- 9,075 --
-----------------------------------------
Net income (loss) 24,493 15,760 (26,556)

Other comprehensive income (loss):
Foreign currency translation adjustment and write-off (585) (322) 5,792
Minimum pension liability (302) -- --
-----------------------------------------
Comprehensive income (loss) $ 23,606 $ 15,438 $ (20,764)
-----------------------------------------
-----------------------------------------

</TABLE>

SEE ACCOMPANYING NOTES.

F-4
<PAGE>

Earle M. Jorgensen Company
Consolidated Statements of Stockholder's Equity
(dollars in thousands, except share data)

COMMON STOCK CAPITAL ACCUMULATED OTHER
---------------- IN EXCESS COMPREHENSIVE ACCUMULATED
SHARES AMOUNT OF PAR VALUE INCOME (LOSS) DEFICIT TOTAL
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1996 128 $ -- $ 173,523 $ (5,748) $(142,634) $ 25,141
Dividend to Parent -- -- (5,552) -- -- (5,552)
Capitalization of ESOP
contribution, net -- -- 3,102 -- -- 3,102
Foreign currency
translation -- -- -- 5,792 -- 5,792
adjustment and write-off
Net loss -- -- -- -- (26,556) (26,556)
-----------------------------------------------------------------------------
Balance at March 31, 1997 128 -- 171,073 44 (169,190) 1,927
Dividend to Parent -- -- (56,888) -- -- (56,888)
Non-cash dividend to Parent -- -- (184) -- -- (184)
Capitalization of ESOP
contribution, net -- -- 2,788 -- -- 2,788
Foreign currency
translation -- -- -- (322) -- (322)
adjustment
Net income -- -- -- -- 15,760 15,760
-----------------------------------------------------------------------------
Balance at March 31, 1998 128 -- 116,789 (278) (153,430) (36,919)
Dividend to Parent -- -- (17,701) -- -- (17,701)
Capitalization of ESOP
contribution, net -- -- 2,994 -- -- 2,994
Foreign currency
translation -- -- -- (585) -- (585)
adjustment
Additional minimum pension
liability -- -- -- (302) -- (302)
Net income -- -- -- -- 24,493 24,493
-----------------------------------------------------------------------------
BALANCE AT MARCH 31, 1999 128 $ -- $ 102,082 $ (1,165) $(128,937) $ (28,020)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------

</TABLE>

SEE ACCOMPANYING NOTES.

F-5
<PAGE>

Earle M. Jorgensen Company
Consolidated Statements of Cash Flows
(dollars in thousands)

YEAR ENDED MARCH 31,
---------------------------------------------
1999 1998 1997
---------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $24,493 $15,760 $(26,556)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Write-off of foreign currency translation losses --- --- 5,345
Asset write-downs --- --- 4,450
Depreciation and amortization 9,175 9,475 10,620
Amortization of debt issue costs and discount on
senior notes included in interest expense 1,481 1,892 2,279
Write-off of debt issue costs and discount --- 3,225 ---
Accrued postretirement benefits 30 280 280
ESOP expense contributed to capital 2,994 2,788 3,102
Deferred income taxes 520 660 1,202
Gain on sale of property, plant and equipment (2,422) (2,480) (1,079)
Loss on sale of subsidiaries --- 2,838 ---
Provision for bad debts 549 414 1,817
Decrease (increase) in cash surrender value of life
insurance over premiums paid (1,338) 679 (1,798)
Changes in operating assets and liabilities (excluding
subsidiaries sold):
Decrease (increase) in accounts receivable 13,398 2,994 (1,697)
Decrease (increase) in inventories, excluding the
inventory adjustment above (3,565) (18,111) 14,407
Decrease (increase) in other current assets 73 943 635
Increase (decrease) in accounts payable and
accrued liabilities and expenses (9,617) 15,069 (19,428)
Other 264 176
470
---------------------------------------------
Net cash provided by (used in) operating activities 36,035 36,602 (5,951)
---------------------------------------------

INVESTING ACTIVITIES:
Additions to property, plant and equipment (8,957) (7,264) (4,449)
Proceeds from the sale of property, plant and equipment 6,044 12,534 4,630
Costs associated with sale of subsidiaries --- (1,739) ---
Proceeds from sale of subsidiaries --- 6,918 ---
Premiums paid on life insurance policies (1,576) (3,373) (2,345)
Proceeds from redemption of life insurance policies 843 479 1,484
---------------------------------------------
Net cash provided by (used in) investing activities (3,646) 7,555 (680)
---------------------------------------------
---------------------------------------------

</TABLE>

SEE ACCOMPANYING NOTES.

F-6
<PAGE>

Earle M. Jorgensen Company
Consolidated Statements of Cash Flows (continued)
(dollars in thousands)

YEAR ENDED MARCH 31,
---------------------------------------------
1999 1998 1997
---------------------------------------------
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Net borrowings (payments) under revolving loan agreements $(14,228) $(23,576) $12,149
Proceeds from issuance of senior notes and term loans --- 205,000 ---
Repayment of senior notes --- (155,000) ---
Costs associated with early retirement of debt --- (906) ---
Other debt payments, net (1,500) (5,868) (949)
Increase in debt issue costs (1,846) (7,277) (810)
Cash dividend to Parent (17,701) (56,888) (5,552)
---------------------------------------------
Net cash provided by (used in) financing activities (35,275) (44,515) 4,838
---------------------------------------------

Effect of exchange rate changes on cash (17) (356) 447
Net decrease in cash (2,903) (714) (1,346)
Cash at beginning of year 20,763 21,477 22,823
---------------------------------------------
Cash at end of year $17,860 $20,763 $21,477
---------------------------------------------
---------------------------------------------

</TABLE>

SEE ACCOMPANYING NOTES.

F-7
<PAGE>

Earle M. Jorgensen Company
Notes to Consolidated Financial Statements

March 31, 1999

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND CONSOLIDATION---The Company became a wholly-owned
subsidiary of Earle M. Jorgensen Holding Company, Inc. (the Parent) as the
result of a series of business combinations and mergers effective April 1, 1990.

The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries including Earle M. Jorgensen (U.K.)
Ltd (EMJ (UK)), Kilsby Jorgensen Steel & Aluminum S.A. de C.V. (EMJ (Mexico)),
and Earle M. Jorgensen (Canada) Inc. (EMJ (Canada)) and Stainless Insurance
Ltd., a captive insurance subsidiary (EMJ (Bermuda)) operating in the United
Kingdom, Mexico, Canada and Bermuda, respectively. Excluding EMJ (Bermuda), net
income from foreign operations totaled $4,600 in fiscal 1999. In fiscal 1998 and
1997, such foreign operations generated net losses of $95,000 and $3,516,000,
respectively. In fiscal 1999, 1998 and 1997, EMJ (Bermuda) generated $602,000,
$155,000 and $436,000 of net income, respectively, from investment income and
intercompany fees. In fiscal 1998, the Company sold its operations in the United
Kingdom and Mexico (see Note 4). All significant intercompany accounts and
transactions have been eliminated.

Certain amounts reported in prior years have been reclassified to conform to the
1999 presentation.

USE OF ESTIMATES---The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

REVENUE RECOGNITION---The Company recognizes revenue when products are shipped.

CONCENTRATION OF CREDIT RISK---The Company sells the majority of its products
throughout the United States and Canada. Sales to the Company's recurring
customers are generally made on open account terms while sales to occasional
customers are made on a C.O.D. basis. The Company performs periodic credit
evaluations of its ongoing customers and generally does not require collateral.
The Company establishes an allowance for potential credit losses based upon
factors surrounding the credit risk for specific customers, historical trends
and other information; such losses have been within management's expectations.
The Company's allowance for doubtful accounts at March 31, 1999 and 1998 was
$335,000 and $406,000, respectively. Management believes there are no
significant concentrations of credit risk as of March 31, 1999.

RESTRUCTURING---In March 1997, the Company approved a plan to restructure its
operations. The plan's major actions included selling the Company's foreign
operations in the United Kingdom and Mexico, closing four domestic distribution
centers whose sales territories are now serviced from other nearby facilities,
and reducing the Company's workforce by approximately 10%. As a result, a
restructuring charge of $15,638,000 was recorded to cover provisions for loss on
sale of foreign operations ($7,027,000, including the write-off of cumulative
translation adjustments of $5,345,000); costs of severance and other termination
benefits and related expenses associated with the reduction in workforce
($6,537,000); and costs directly related to the closure of facilities for which
there is no future economic value ($2,074,000).

During fiscal 1998, the restructuring plan was substantially completed,
including the sale of foreign operations in the United Kingdom and Mexico (see
Note 4) and the closure of three domestic facilities. As of March 31, 1999, all
costs associated with the 1997 restructuring had been incurred and no accrued
restructuring costs remain in the Company's consolidated balance sheet as of
March 31, 1999.

F-8
<PAGE>

Earle M. Jorgensen Company
Notes to Consolidated Financial Statements (continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

PROPERTY, PLANT AND EQUIPMENT---Property, plant and equipment is recorded at
cost. Additions, renewals and betterments are capitalized; maintenance and
repairs, which do not extend useful lives, are expensed as incurred. Gains or
losses from disposals are reflected in income and the related costs and
accumulated depreciation are removed from the accounts. Depreciation and
amortization is computed using the straight-line method over the estimated
useful lives of 10 to 40 years for buildings and improvements and three to 20
years for machinery and equipment. Leasehold improvements are amortized over the
terms of the respective leases.

The Company has adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which requires
impairment losses to be recorded on long-lived assets used in operations or are
expected to be disposed of, when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets. In fiscal 1997, the Company evaluated certain applications of its
management information and financial reporting systems and determined that such
applications would not be used in the future. Accordingly, the Company recorded
a non-recurring charge of $4,450,000 for the write-off of costs related to these
applications. There were no impairment losses recorded in fiscal 1999 and 1998.

In fiscal 1999, the Company adopted SOP-98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use", which requires
certain costs incurred during the development of software to be capitalized and
amortized over the estimated useful lives. Accordingly, the Company capitalized
$876,000 of such costs in fiscal 1999.

DEBT ISSUE COSTS---Debt issue costs are deferred and amortized to interest
expense over the life of the underlying indebtedness. The amortization of debt
issue costs aggregated $1,481,000, $1,757,000 and $2,144,000 for the years ended
March 31, 1999, 1998 and 1997, respectively. Accumulated amortization of debt
issue costs was $1,536,000 and $55,000 at March 31, 1999 and 1998, respectively.
In March 1998, the Company incurred $8,517,000 of costs related to the issuance
of indebtedness and wrote-off $2,966,000 of unamortized debt issue costs related
to retired debt in connection with a series of refinancing transactions (see
Note 6).

INCOME TAXES--- The Company is included in the consolidated tax returns of
Holding and calculates its tax provision as though it files on a separate basis.
The consolidated tax liability of the Company and Parent is allocated to each of
these entities pursuant to a Tax Allocation Agreement between the Company and
Parent ("Tax Allocation Agreement"). Under the Tax Allocation Agreement, Parent
pays all taxes and is reimbursed by the Company for the lesser of (i) the
Company's allocated portion of the taxes due, or (ii) the tax that would be
payable if the Company filed its own returns.

The Company records deferred taxes based upon differences between the financial
statement and tax basis of assets and liabilities pursuant to SFAS No. 109,
"Accounting for Income Taxes", as though it files on a separate basis. Any
differences in deferred taxes determined on a separate basis and the actual
payments made or received under the Tax Allocation Agreement are accounted for
as an equity adjustment between the Company and Parent. There were no such
differences in fiscal 1999. Deferred taxes are also recorded for the future
benefit of Federal and state tax losses and tax credit carryforwards. Deferred
tax assets have not been recognized for the loss carryforwards of the Company's
foreign subsidiaries. Consistent with SFAS No. 109, a valuation allowance has
been recognized for certain deferred tax assets, which management believes are
not likely to be realized.

FOREIGN CURRENCY TRANSLATION---The financial statements of foreign subsidiaries
have been translated in U.S. dollars in accordance with SFAS No. 52, "Foreign
Currency Translation". All balance sheet accounts have been translated into U.S.
dollars using the year-end exchange rates. Income statement amounts have been
translated at average exchange rates for each year. Adjustments resulting from
translation of foreign currency financial statements are included in accumulated
other comprehensive income (loss) in stockholder's equity. Exchange gains and
losses from foreign currency transactions are included in the consolidated
statements of operations in the period in which they occur.

F-9
<PAGE>

Earle M. Jorgensen Company
Notes to Consolidated Financial Statements (continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

CASH AND STATEMENTS OF CASH FLOWS---Cash includes disbursements and deposits not
yet funded by or applied to the Company's Revolving Credit Facility as of a
balance sheet date and $7,174,000 of cash and cash equivalents held by EMJ
(Bermuda) in connection with providing insurance to the Company. The Company
considers all highly liquid investments purchased with a maturity of three
months or less to be cash equivalents.

For the years ended March 31, 1999, 1998 and 1997 cash paid for interest on
borrowings was $40,689,000, $39,993,000 and $37,747,000, and cash paid for
income taxes was $141,000, $360,000 and $403,000, respectively.

COMPREHENSIVE INCOME---Effective April 1, 1998, the Company adopted SFAS No.
130, "Reporting Comprehensive Income", which establishes rules for the reporting
and disclosure of comprehensive income and its components. Components of the
Company's comprehensive income includes foreign currency translation adjustments
and additional minimum pension liability. Prior to the adoption of SFAS No. 130,
the Company's foreign currency translation adjustments were reported separately
in stockholder's equity. The adoption of SFAS No. 130 had no impact on the
Company's net income or stockholder's equity.

SEGMENT INFORMATION---The Company has adopted SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information". The Company has determined
it currently operates in one reportable segment.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivatives", which recognizes all derivatives on the balance
sheet at fair value. The Company will adopt this standard by fiscal 2001 and
does not believe such adoption will have a material impact to its financial
statements.

2. INVENTORIES

Substantially all inventories are held for sale at the Company's service center
locations and are valued at the lower of cost (using the last-in, first-out
(LIFO) method) or market. If the Company had used the first-in, first-out (FIFO)
method of inventory valuation, inventories would have been lower by $887,000 at
March 31, 1999 and higher by $2,046,000 at March 31, 1998.

In fiscal years 1999 and 1997, a reduction of LIFO inventory quantities carried
at costs lower or higher than costs prevailing in prior years occurred but did
not have a significant impact on the Company's gross profit.
There were no such reductions in fiscal 1998.

3. NET PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment and accumulated depreciation at March 31, 1999 and
1998 consisted of the following:

1999 1998
-------------------------------
<S> <C> <C>
Land $25,469,000 $27,732,000
Buildings and improvements 30,945,000 34,376,000
Machinery and equipment 97,767,000 97,920,000
---------------- --------------
154,181,000 160,028,000
Less accumulated depreciation 51,405,000 53,385,000
---------------- --------------

Net property, plant and equipment $102,776,000 $106,643,000
---------------- --------------
---------------- --------------

</TABLE>

F-10
<PAGE>

Earle M. Jorgensen Company
Notes to Consolidated Financial Statements (continued)

4. SALE OF FOREIGN OPERATIONS

In March 1997, the Company approved a plan to sell its foreign operations in the
United Kingdom and Mexico and accordingly recorded a charge of $7,027,000 for
the estimated loss on the sales, including the recognition of deferred foreign
currency translation losses. The Company sold its Mexican operations in August
1997 and sold its United Kingdom operations in January 1998. As a result of such
sales, the Company recognized a loss of $2,838,000 in fiscal 1998 that is
reflected as a restructuring charge in the accompanying statements of
operations.

For the fiscal years ended March 31, 1998 and 1997, combined revenues from these
foreign operations were $23,417,000 and $35,193,000; and combined losses from
operations were $233,000 and $2,935,000, respectively.

5. CASH SURRENDER VALUE OF LIFE INSURANCE

The Company is the owner and beneficiary of life insurance policies on all
former nonunion employees of a predecessor company including certain current
employees of the Company and its Parent. The Company is also the owner and
beneficiary of key man life insurance policies on certain current and former
executives of the Company and predecessor companies. These policies are designed
to provide cash to the Company to repurchase shares held by employees in the
ESOP and shares held individually by employees upon the termination of their
employment. Cash surrender value of the life insurance policies increase by a
portion of the amount of premiums paid and by dividend income earned under the
policies. Dividend income earned under the policies totaled $10,878,000 in
fiscal 1999, $10,274,000 in fiscal 1998 and $7,831,000 in fiscal 1997 and is
recorded as an offset to general and administrative expense in the accompanying
statements of operations.

The Company has borrowed against the cash surrender value of certain policies to
pay a portion of the premiums and accrued interest on those policies and to fund
working capital needs. Interest rates on borrowings under the life insurance
policies are fixed at 11.76%. As of March 31, 1999, approximately $5,500,000 was
available for future borrowings.

SURRENDER VALUE LOANS NET CASH
BEFORE LOANS OUTSTANDING SURRENDER VALUE
-----------------------------------------------------
<S> <C> <C> <C>
BALANCE AT MARCH 31, 1999 $120,242,000 $101,701,000 $18,541,000
Balance at March 31, 1998 105,350,000 88,880,000 16,470,000

</TABLE>

Interest on cash surrender value borrowings totaled $10,905,000, $9,354,000 and
$8,621,000 in fiscal 1999, 1998 and 1997, respectively, and is included in net
interest expense in the accompanying statements of operations.

F-11
<PAGE>

Earle M. Jorgensen Company
Notes to Consolidated Financial Statements (continued)

6. LONG-TERM DEBT

Long-term debt at March 31, 1999 and 1998 consisted of the following:

1999 1998
----------------------------------
<S> <C> <C>
Revolving Loans due March 24, 2003 $80,206,000 $94,434,000
Variable Rate Term Loan due March 24, 2004 99,000,000 100,000,000
9-1/2% Senior Notes due April 1, 2005 105,000,000 105,000,000
Industrial Development Revenue Bonds:
Payable in annual installments of $500,000
commencing June 1, 1998, interest at 9% 3,500,000 4,000,000
Payable in annual installments of $715,000
commencing December 1, 2004, interest at 5.25% 4,300,000 4,300,000
Payable in annual installments of $900,000
commencing September 1, 2000, interest at 8.5% 4,500,000 4,500,000
------------ ------------
296,506,000 312,234,000
Less current portion 1,500,000 1,500,000
------------ ------------
$295,006,000 $310,734,000
------------ ------------
------------ ------------

</TABLE>

Aggregate maturities of long-term debt are as follows: $1,500,000 in 2000;
$2,400,000 in 2001; $2,400,000 in 2002; $82,606,000 in 2003; $96,400,000 in
fiscal 2004; and $111,200,000 thereafter.

The fair value of the Company's Senior Notes and Term Loans at March 31, 1999
was $100,800,000 and $97,268,000, respectively, based on the quoted market
prices as of that date. The carrying values of all other long-term debt and
other financial instruments at March 31, 1999 approximate fair value.

On March 24, 1998, the Company consummated a series of refinancing transactions,
including the issuance of 9 1/2% Senior Notes totaling $105,000,000, borrowing
of $100,000,000 under a variable rate Term Loan, and the replacement of its
revolving credit facility. The proceeds from such transactions were used to
redeem $155,000,000 of 10 3/4% senior notes, plus call premium and accrued
interest, and to prepay $5,084,000 of purchase money indebtedness, including
call premium and accrued interest. Accordingly, the Company recorded an
extraordinary loss of $9,075,000 consisting of call premiums paid and other
expenses incurred, and the write-off of deferred financing costs, related to the
early retirement of debt.

CREDIT AGREEMENT

Effective March 24, 1998, the Company entered into an amended and restated
revolving credit facility ("Credit Agreement"), which allows maximum borrowings
of $220 million, including letters of credit ($656,000 outstanding at March 31,
1999). Borrowings under the Credit Agreement bear interest at a base rate
(generally defined as the bank's prime lending rate plus 0.5% or LIBOR plus
1.75%). At March 31, 1999, the bank's prime lending rate was 7.75% and LIBOR was
4.94%. In addition, borrowings under the revolving loans are limited to an
amount equal to 85% of eligible trade receivables plus 55% of eligible
inventories (as defined). Unused available borrowings under the revolving loans
totaled $88,346,000 at March 31, 1999. The revolving loans mature on March 24,
2003 and are secured by a lien on all domestic inventory and accounts receivable
of the Company.

Under the Credit Agreement the Company is obligated to pay certain fees
including an unused commitment fee of 3/8%, payable quarterly in arrears, and
letter of credit fees of 1 3/4% per annum of the maximum amount available to be
drawn under each letter of credit, payable quarterly in arrears, plus issuance,
fronting, amendment and other standard fees. The Company paid loan commitment
fees totaling $314,000 in 1999, $257,000 in 1998 and $305,000 in 1997.

F-12
<PAGE>

Earle M. Jorgensen Company
Notes to Consolidated Financial Statements (continued)

6. LONG-TERM DEBT (CONTINUED)

The Credit Agreement contains financial covenants in respect of maintenance of
minimum working capital and a fixed charge coverage ratio (as defined). The
Credit Agreement also limits, among other things, the incurrence of liens and
other indebtedness, mergers, consolidations, the sale of assets, annual capital
expenditures, advances, investments and loans by the Company and its
subsidiaries, dividends and other restricted payments by the Company and its
subsidiaries in respect to their capital stock, and certain transactions with
affiliates. On June 4, 1997, the Company received a waiver to fiscal 1997
financial covenants relating to consolidated net worth and fixed charge ratio
and received amendments to other financial covenants for future periods.

9-1/2% SENIOR NOTES AND VARIABLE RATE TERM LOAN

On March 24, 1998, the Company refinanced $155 million of 10 3/4% Senior Notes
by issuing $105 million of 9 1/2% Senior Notes and borrowing $100 million under
a variable rate Term Loan. The 9 1/2% Senior Notes were issued at par and
interest is payable each April 1 and October 1, commencing October 1, 1998. The
9 1/2% Senior Notes are unsecured obligations of the Company and may be redeemed
by the Company under certain conditions and with certain restrictions at varying
redemption prices. The Indenture to the 9 1/2% Senior Notes contains certain
covenants which limits, among other things, the incurrence of liens and other
indebtedness, mergers, consolidations, the sale of assets, investments and
loans, dividends and other distributions, and certain transactions with
affiliates. The Term Loan bears interest at either an Alternative Base Rate (as
defined) plus 2.0% or at LIBOR plus 3.25%.

In June 1998, the Company entered into an interest rate swap agreement with
Bankers Trust Company that effectively fixed the interest rate on the Term Loans
at approximately 9.05% through June 2003 (the "Fixed Rate"). Such agreement
requires Bankers Trust Company to make payments to the Company each quarter in
an amount equal to the product of the notional amount of $95 million and the
difference between the three month London Interbank Offered Rate and 3.25%
("Floating LIBOR") and the Fixed Rate, if the Floating LIBOR is greater than the
Fixed Rate on a per diem basis. If Floating LIBOR is lower than the Fixed Rate,
the Company is required to pay Bankers Trust Company an amount equal to the
product of the notional amount and the difference between the Fixed Rate and
Floating LIBOR on a per diem basis. During fiscal 1999, the Company has paid
Bankers Trust Company $231,000 of interest as calculated under the provisions
described above.

Excluding the effects of the interest rate swap agreement, the effective
interest rate under the Term Loan was 8.22% as of March 31, 1999. Amounts
outstanding under the Term Loan are secured by a first priority lien on
substantially all the existing and future acquired unencumbered property, plant
and equipment of the Company. Principal payments are required to be paid
quarterly in amounts equal to $250,000, commencing on June 30, 1998. The Term
Loan may be prepaid, subject to declining call premiums through fiscal 2001 and
is subject to prepayments at the option of the holder upon a Change in Control
(as defined) and with 100% of net proceeds from asset sales, as permitted.
Covenants under the Term Loan are similar to those under the 9 1/2% Senior
Notes.

OTHER

The Company issues industrial revenue bonds in connection with significant
facility improvements or construction projects. The purchase money financing
included borrowings under a loan agreement entered into on March 27, 1995 which
provided up to $7.5 million for the expansion or acquisition of facilities and
purchase of equipment. The outstanding borrowings required monthly payments of
principal of $79,112 plus interest (at one month LIBOR plus 3.25%) through July
2003 and were repaid on March 24, 1998.

F-13
<PAGE>

Earle M. Jorgensen Company
Notes to Consolidated Financial Statements (continued)

7. INCOME TAXES

Significant components of the provision for income taxes attributable to
continuing operations for the years ended March 31, 1999, 1998 and 1997 were as
follows:

1999 1998 1997
--------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 562,000 $ 88,000 $ --
State 453,000 125,000 403,000
------------ ------------ ------------
Total current 1,015,000 213,000 403,000
------------ ------------ ------------
Deferred:
Federal 6,784,000 (6,109,000) (11,716,000)
State 842,000 1,010,000 (2,497,000)

Valuation allowances (7,106,000) 5,759,000 14,311,000
------------ ------------ ------------
Total deferred 520,000 660,000 98,000
------------ ------------ ------------
$ 1,535,000 $ 873,000 $ 501,000
------------ ------------ ------------
------------ ------------ ------------

</TABLE>

The reconciliation of the income tax provision (benefit) differs from that which
would result from applying the U.S. statutory rate as follows:

1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Expected tax (benefit) at Federal statutory rate $ 8,876,000 $ 5,412,000 $ (9,119,000)
State tax expense (benefit), net of Federal taxes 840,000 657,000 (1,207,000)
Net increase in cash surrender values of life insurance (3,654,000) (2,851,000) (2,797,000)
State franchise and capital taxes 295,000 448,000 403,000
Foreign loss carryforward without tax benefit -- -- 1,078,000
Tax benefit of credit carryovers and carrybacks -- (5,796,000) (800,000)
Change in valuation allowance (7,106,000) 5,759,000 12,706,000
Capital loss on sale of subsidiaries -- (4,125,000) --
Other 2,284,000 1,369,000 237,000
------------ ------------ ------------
Income tax provision $ 1,535,000 $ 873,000 $ 501,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

The change of $7,106,000 in the valuation allowance for deferred tax assets as
of March 31, 1999 was due primarily to the utilization of the tax loss
carryforward.

Income before taxes consists primarily of income (loss) from the Company's
domestic operations and also includes pre-tax income (loss) of $619,000, $60,000
and $(3,080,000) from the Company's foreign operations for fiscal 1999, 1998 and
1997, respectively.

F-14
<PAGE>

Earle M. Jorgensen Company
Notes to Consolidated Financial Statements (continued)

7. INCOME TAXES (CONTINUED)

Significant components of the Company's deferred income tax assets and
liabilities at March 31, 1999 and 1998 were as follows:

1999 1998
----------------------------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation $ 8,984,000 $ 8,497,000
Purchase price adjustments 39,531,000 40,903,000
------------ ------------
Total deferred tax liabilities 48,515,000 49,400,000
------------ ------------

Deferred tax assets:
Net operating loss carryforwards 18,916,000 26,524,000
Capital loss carryforward 6,275,000 6,728,000
Other 11,096,000 11,546,000
Valuation allowance for deferred tax assets (22,964,000) (30,070,000)
------------ ------------
Net deferred tax assets 13,323,000 14,728,000
------------ ------------
Net deferred tax liabilities $ 35,192,000 $ 34,672,000
------------ ------------
------------ ------------

</TABLE>

At March 31, 1999, the Company had net operating loss carryforwards of
$48,000,000 for Federal income tax purposes. These carryforwards resulted from
the Company's losses during 1993 and 1996, and expire in years 2008 and 2011,
respectively. The ultimate realization of the benefits of these loss
carryforwards is dependent on future profitable operations. In addition, use of
the Company's net operating loss carryforwards and other tax attributes may be
substantially limited if a cumulative change in ownership of more than 50%
occurs within any three year period subsequent to a loss year.

8. EMPLOYEE BENEFIT PLANS

EMPLOYEE STOCK OWNERSHIP PLAN

The Company and its Parent have an Employee Stock Ownership Plan (ESOP) which
covers nonunion employees of the Company who meet certain service requirements.
The cost of the ESOP is borne by the Company through annual contributions to an
Employee Stock Ownership Trust (ESOT) in amounts determined by the Board of
Directors. Contributions may be made in cash or shares of the Parent's stock as
the Parent's Board of Directors may from time to time determine. Participants
vest at a rate of 20% per year of service and become fully vested upon
retirement, disability or death. Upon the occurrence of a participant's
termination (as defined), retirement, disability, or death, the ESOP is
required, by the terms of the ESOP, to either distribute the vested balance in
stock or to repurchase the vested balance for cash (as determined by the
Benefits Committee). If stock is distributed, it is accompanied by a put option
to the Parent under terms defined in the ESOP. Shares of the Parent's Series A
and B preferred and common stock owned by the ESOP totaled 72,629, 24,262 and
3,569,723 at March 31, 1999, respectively. Contributions payable to the ESOT
totaled $2,994,000, $2,788,000 and $3,102,000 in 1999, 1998 and 1997, which
represented 5% of eligible compensation for each of the respective years. Such
contributions have been or will be paid in the form of Holding's common stock.

F-15
<PAGE>

Earle M. Jorgensen Company
Notes to Consolidated Financial Statements (continued)

8. EMPLOYEE BENEFIT PLANS (continued)

EMPLOYEE STOCK OWNERSHIP PLAN (continued)

Although the Parent has not expressed any intent to terminate or amend the plan,
it has the right to do so at any time. In the event of any termination,
participants become fully vested to the extent of the balances in their separate
accounts and come under the put options as previously discussed.

PENSION PLANS

The Company maintains a noncontributory defined benefit pension plan covering
substantially all hourly union employees (the "Hourly Plan"). Benefits under the
Hourly Plan are vested after five years and are determined based on years of
service and a benefit rate that is negotiated with each union. The assets of the
Hourly Plan for participants are held in trust and consist of bonds, equity
securities and insurance contracts. The Company contributes at least the minimum
required annually under ERISA. The Company also maintains an unfunded
supplemental pension plan, which provides benefits to highly compensated
employees; this plan has been frozen to include only existing participants (the
"Supplemental Plan").

Components of net pension benefit cost associated with the Company's pension
plans for fiscal years 1999, 1998 and 1997 are as follows:

1999 1998 1997
--------------- -------------- ---------------
<S> <C> <C> <C>
Service cost of benefits earned during the period $604,000 $730,000 $509,000
Interest cost on projected benefit obligation 796,000 648,000 600,000
Expected return on plan assets (812,000) (685,000) (622,000)
Amortization of prior service cost 33,000 --- ---
Recognized net loss 20,000 18,000 ---
--------------- -------------- ---------------
$641,000 $711,000 $487,000
--------------- -------------- ---------------
--------------- -------------- ---------------

</TABLE>

The following provides a reconciliation of the changes in the benefit obligation
and fair value of plan assets, and the funded (unfunded) status of the pension
plans for the years ended March 31, 1999 and 1998.

1999 1998
--------------- ---------------
<S> <C> <C>
CHANGE IN PROJECTED BENEFIT OBLIGATION:
Benefit obligation at beginning of year $10,468,000 $8,837,000
Service cost 604,000 730,000
Interest cost 796,000 648,000
Plan amendments (1,348,000) ---
Change in assumptions 549,000 579,000
Merger with another plan 742,000 ---
Benefit payments (452,000) (390,000)
Actuarial (gains) losses (24,000) 64,000
--------------- ---------------
Benefit obligation at end of year 11,335,000 10,468,000
--------------- ---------------

CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year 10,333,000 8,714,000
Actual return on assets 2,760,000 1,940,000
Merger with another plan 524,000 ---
Benefit payments (452,000) (390,000)
Company contributions 94,000 94,000
Fees (43,000) (25,000)
--------------- ---------------
Fair value of plan assets at end of year 13,216,000 10,333,000
--------------- ---------------

</TABLE>

F-16
<PAGE>

Earle M. Jorgensen Company
Notes to Consolidated Financial Statements (continued)

8. EMPLOYEE BENEFIT PLANS (CONTINUED)

PENSION PLANS (CONTINUED)

<TABLE>

<S> <C> <C>
Funded (unfunded) $ 1,881,000 $ (135,000)
Unrecognized prior service cost (1,381,000) ---
Unrecognized net actuarial gain (2,143,000) (952,000)
----------- -----------
Net amount recognized $(1,643,000) $(1,087,000)
----------- -----------
----------- -----------
Amounts recognized in balance sheets consist of:
Prepaid cost $ -- $ --
Accrued benefit liability (1,945,000) (1,087,000)
Accumulated comprehensive loss - additional
minimum liability 302,000 --
----------- -----------
Net amount recognized $(1,643,000) $(1,087,000)
----------- -----------
----------- -----------
WEIGHTED-AVERAGE ASSUMPTIONS AS OF MARCH 31:
Discount rate 6.75% 7.00%
Expected return on assets 8.00% 8.00%
Rate of compensation increase -- 5.00%

</TABLE>

Effective January 1, 1998, benefit obligations and plan assets of another
defined benefit plan were merged with the Hourly Plan; and the benefits of the
other plan were increased via an amendment to the Hourly Plan. Effective January
1, 1999, the Hourly Plan was amended to change the benefit rates from a pay
related formula to a flat rate. The effect of these amendments was to reduce the
plan's benefit obligation by $1,348,000.

In accordance with union agreements, the Company also contributes to
multi-employer defined benefit retirement plans covering substantially all union
employees of the Company. Expenses incurred in connection with these plans
totaled $1,633,000, $1,615,000 and $1,753,000 in 1999, 1998 and 1997,
respectively.

POSTRETIREMENT BENEFIT PLAN

In addition to the Company's defined benefit pension plans, the Company sponsors
a defined benefit health care plan that provides postretirement medical and
dental benefits to eligible full time employees and their dependents (the
"Postretirement Plan"). The Postretirement Plan is fully insured, with retirees
paying a percentage of the annual premium. Such premiums are adjusted annually
based on age and length of service of active and retired participants. The
Postretirement Plan contains other cost-sharing features such as deductibles and
coinsurance. The Company recognizes the cost of future benefits earned by
participants during their working careers, as determined using actuarial
assumptions. Gains and losses realized from the remeasurement of the plan's
benefit obligation are amortized to income over three years.

Components of the net benefit cost associated with the Company's Postretirement
Plan for fiscal years 1999, 1998 and 1997 are as follows:

1999 1998 1997
-------------- ------------ -------------
<S> <C> <C> <C>
Service cost of benefits earned during the period $203,000 $239,000 $203,000
Interest cost on projected benefit obligation 193,000 216,000 211,000
Recognized net gain (366,000) (175,000) (134,000)
-------------- ------------ -------------
$ 30,000 $280,000 $280,000
-------------- ------------ -------------
-------------- ------------ -------------

</TABLE>

F-17
<PAGE>

Earle M. Jorgensen Company
Notes to Consolidated Financial Statements (continued)

8. EMPLOYEE BENEFIT PLANS (CONTINUED)

POSTRETIREMENT BENEFIT PLAN (CONTINUED)

The following tables provide a reconciliation of the changes in the benefit
obligation and the unfunded status of the Postretirement Plan for the years
ended March 31, 1999 and 1998.

1999 1998
--------------- ---------------
<S> <C> <C>
CHANGE IN PROJECTED BENEFIT OBLIGATION:
Benefit obligation at beginning of year $3,371,000 $3,108,000
Service cost 203,000 239,000
Interest cost 193,000 216,000
Change in assumptions 97,000 164,000
Benefit payments (140,000) (164,000)
Actuarial gains (576,000) (192,000)
--------------- ---------------
Benefit obligation at end of year 3,148,000 3,371,000
--------------- ---------------

Unfunded (3,148,000) (3,371,000)
Unrecognized prior service cost --- ---
Unrecognized net actuarial gain (396,000) (276,000)
--------------- ---------------
Accrued benefit cost $(3,544,000) $(3,647,000)
--------------- ---------------
--------------- ---------------
WEIGHTED-AVERAGE ASSUMPTIONS AS OF MARCH 31:
Discount rate 6.75% 7.00%
Healthcare cost trend rate 8.00% 8.50%

</TABLE>

The healthcare cost trend rate of 8.00% used in the calculation of net benefit
cost of the Postretirement Plan is assumed to decrease gradually to 5.5% by
March 2004.

Assumed healthcare trend rates have a significant effect on the amounts reported
for the Company's Postretirement Plan. A one-percentage-point change in assumed
healthcare cost trend rates would have the following effects:

1-PERCENTAGE-POINT 1-PERCENTAGE-POINT
INCREASE DECREASE
--------------------- ---------------------
<S> <C> <C>
Effect on total service and interest cost components $ 65,000 $ (54,000)
Effect on postretirement benefit obligation 449,000 (379,000)

</TABLE>

9. COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

The Company leases, under several agreements with varying terms, certain office
and warehouse facilities, equipment and vehicles. Rent expense totaled
$16,142,000, $17,412,000 and $18,859,000 for the years ended March 31, 1999,
1998 and 1997, respectively. The portion of rent expense paid to related parties
totaled none, none and $367,000 for the years ended March 31, 1999, 1998 and
1997, respectively. As of March 31, 1999 and 1998, there were no future lease
obligations with related parties. Minimum rentals of certain leases escalate
from time to time based on certain indices.

F-18
<PAGE>

Earle M. Jorgensen Company
Notes to Consolidated Financial Statements (continued)

9. COMMITMENTS AND CONTINGENCIES (CONTINUED)

LEASE COMMITMENTS (CONTINUED)

At March 31, 1999 the Company was obligated under noncancellable operating
leases for future minimum rentals as follows:

Fiscal year:
<S> <C>
2000 $13,056,000
2001 11,384,000
2002 9,311,000
2003 7,538,000
2004 6,183,000
Thereafter 31,786,000
-----------
Total $79,258,000
-----------
-----------

</TABLE>

OTHER COMMITMENTS

In connection with the 1990 merger, the Company agreed to pay Kelso & Companies,
Inc. (Kelso), affiliates of which own the majority of Parent's common stock, an
annual fee of $1,250,000 each year for financial advisory services and to
reimburse it for out-of-pocket expenses incurred in connection with rendering
such services. The Company also agreed to indemnify Kelso and its affiliates
against certain claims, losses, damages, liabilities, and expenses that may
arise in connection with the merger. The agreement for advisory services was
amended in September 1997 to provide such services at an annual fee of $625,000
for each of the fiscal years ending March 31, 1998 and 1999. Fees and expenses
paid to Kelso in connection with these agreements totaled $668,000, $687,000 and
$1,643,000 during the years ended March 31, 1999, 1998 and 1997, respectively.

ENVIRONMENTAL CONTINGENCIES

The Company is subject to extensive and changing federal, state, local and
foreign laws and regulations designed to protect the environment and human
health and safety, including those relating to the use, handling, storage,
discharge and disposal of hazardous substances and the remediation of
environmental contamination. As a result, the Company is from time to time
involved in administrative and judicial proceedings and inquiries relating to
environmental matters.

During fiscal years 1999, 1998 and 1997, expenditures made in connection with
environmental matters totaled $2,799,000, $388,000 and $1,053,000, respectively,
principally for settlement of claims, and monitoring, remediation and
investigation activities at sites with contaminated soil and/or groundwater,
including the sites discussed below. As of March 31, 1999, the Company had
accrued approximately $500,000 for future investigation and remediation
expenditures that could be reasonably estimated related to the following pending
environmental matters.

ALAMEDA STREET (LOS ANGELES). In February 1998 the Company was notified
that it had potential responsibility for the lead and copper soil contamination
of an undeveloped parcel that is adjacent to its Alameda Street property. A
remediation plan has been approved by local government agencies and is being
implemented.

F-19
<PAGE>

Earle M. Jorgensen Company
Notes to Consolidated Financial Statements (continued)

9. COMMITMENTS AND CONTINGENCIES (continued)

ENVIRONMENTAL CONTINGENCIES (continued)

FORGE (SEATTLE/KENT, WA). The Company indemnified the purchasers of its
former Forge facility for remediation of certain conditions at the facility and
at an off-site disposal site existing or subsequently determined to be existing
at the date of sale. No such claims were made within the timetables allowed
under the indemnification agreement. In November 1998 the Company paid
$2,250,000 to the current owner of the Forge property as a settlement for any
and all remaining or future liabilities related to the remediation of the
facility. The Company continues to monitor the disposal site for environmental
conditions.

Although it is possible that new information or future developments could
require the Company to reassess its potential exposure relating to all pending
environmental matters, management believes that, based upon all currently
available information, the resolution of such environmental matters will not
have a material adverse effect on the Company's financial condition, results of
operations or liquidity. The possibility exists, however, that new environmental
legislation and/or environmental regulations may be adopted, or other
environmental conditions may be found to exist, that may require expenditures
not currently anticipated and that may be material.

OTHER

The Company is involved in litigation in the normal course of business. In the
opinion of management, these matters will be resolved without a material impact
on the Company's financial position or results of operations.

F-20
<PAGE>

INDEX TO FINANCIAL STATEMENT SCHEDULES

Schedule Sequentially
Number Description of Schedules* Numbered Page
------- ------------------------- -------------
<S> <C> <C>
EARLE M. JORGENSEN COMPANY:

Schedule II Valuation and Qualifying Accounts and Reserves S-2

</TABLE>

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

* All other schedules are omitted as the required information is inapplicable
or the information is presented in the financial statements or related notes.

S-1
<PAGE>

EARLE M. JORGENSEN COMPANY

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
----------- ------------ ---------- ----------------- --------------
BALANCE AT CHARGES TO BAD DEBTS CHARGED
BEGINNING OF COSTS AND OFF (NET OF BALANCE AT
DESCRIPTION PERIOD EXPENSES RECOVERIES) END OF PERIOD
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
YEAR ENDED MARCH 31, 1999
Allowance for doubtful accounts..... $406,000 $549,000 $(620,000) $335,000

Year ended March 31, 1998
Allowance for doubtful accounts..... $963,000 $414,000 $(971,000) $406,000

Year ended March 31, 1997
Allowance for doubtful accounts..... $1,017,000 $1,817,000 $(1,871,000) $963,000

</TABLE>

S-2

<PAGE>

EXHIBIT 12.1

EARLE M. JORGENSEN COMPANY

STATEMENT OF COMPUTATION OF RATIO
OF EARNINGS TO FIXED CHARGES
(dollars in thousands)

<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------------
1999 1998 1997
---------- --------- ----------

<S> <C> <C> <C>
Income (loss) before income taxes $ 26,028 $ 25,708 $(26,055)

Fixed charges to be added back to earnings:
Interest and debt expense 41,751 41,521 41,223
Rentals (one-third of all rent and related costs
charged to income) 5,381 5,804 6,286
-------- -------- --------

Total fixed charges 47,132 47,325 47,509
-------- -------- --------

Earnings before income taxes and fixed charges $ 73,160 $ 73,033 $ 21,454
-------- -------- --------
-------- -------- --------

Ratio of earnings to fixed charges 1.55 1.54 --
-------- -------- --------
-------- -------- --------

Amount by which earnings are inadequate to cover fixed
charges $ -- $ -- $(26,055)
-------- -------- --------
-------- -------- --------

</TABLE>

<PAGE>

EXHIBIT 21

EARLE M. JORGENSEN COMPANY

LISTING OF THE COMPANY'S SUBSIDIARIES

DATE STATE/
NATURE OF ACQUIRED % COUNTRY OF
NAME BUSINESS OR CREATED OWNED INCORPORATION
- ---- --------- ---------- ----- -------------
<S> <C> <C> <C> <C>
Earle M. Jorgensen (Canada) Inc. (formerly Kilsby Metal 11/13/90 100% Canada
Jorgensen Steel & Aluminum Inc.) Distributor

Stainless Insurance Ltd. Captive 03/20/96 100% Bermuda
Insurance
</TABLE>

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS AND
COMPREHENSIVE INCOME AS OF AND FOR THE YEAR ENDED MARCH 31, 1999.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 17,860
<SECURITIES> 0
<RECEIVABLES> 91,691
<ALLOWANCES> 335
<INVENTORY> 183,968
<CURRENT-ASSETS> 298,074
<PP&E> 154,181
<DEPRECIATION> 51,405
<TOTAL-ASSETS> 426,867
<CURRENT-LIABILITIES> 141,383
<BONDS> 295,006
0
0
<COMMON> 0
<OTHER-SE> (28,020)
<TOTAL-LIABILITY-AND-EQUITY> 426,867
<SALES> 915,811
<TOTAL-REVENUES> 915,811
<CGS> 649,851
<TOTAL-COSTS> 649,851
<OTHER-EXPENSES> 120,687
<LOSS-PROVISION> 549
<INTEREST-EXPENSE> 41,181
<INCOME-PRETAX> 26,028
<INCOME-TAX> 1,535
<INCOME-CONTINUING> 24,493
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,493
<EPS-BASIC> 0
<EPS-DILUTED> 0

</TABLE>