JORGENSEN EARLE M CO /DE/, 10-K405, 2000-06-28

JORGENSEN EARLE M CO /DE/
10-K405, 2000-06-28
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, 2000

[ ] 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, 2000 - 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, a Delaware corporation (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").

EMJ 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. Our company conducts business through a
network of 31 service centers, including two in Canada, four plate processing
centers, one cutting center, and one tube honing facility that are supported
by a national merchandising office and four regional credit offices.

We sell our 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. We accommodate
our 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, we will also provide
our customers metals processing expertise and inventory management services.

INDUSTRY OVERVIEW AND COMPETITION

We believe 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 trend has been driven by the need to develop and improve
efficient, volume-driven production techniques in order to remain competitive.

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

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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. Some of our larger competitors are actively engaged in
acquisition activities as part of their overall growth strategies.

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, we have realigned our operations and
core competencies, and have improved our cost structure and profitability. This
was accomplished through two restructuring programs implemented in fiscal 1996
and 1997, that included closing non-strategic domestic distribution centers,
consolidating or discontinuing certain processing centers, selling unprofitable
foreign operations, and reducing workforce. In addition, we wrote down or wrote
off non-performing or impaired assets.

In fiscal 1998, we 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, we 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".

We believe that the restructuring programs 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".

Our primary business goal is to expand market share, increase services
to customers and to improve operating profits and cash flows. Our growth and
operating strategies consist of the following elements:

SATELLITE OPERATIONS. We believe a key aspect to growth in our industry
is having a physical presence in those markets requiring our service.
Accordingly, we have formalized a growth strategy to target those geographic
areas where we can justify opening a "satellite" location. These locations will
be run as small service center operations stocking only those

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core commodities needed to support targeted industries and customers, with
day to day activities managed by only local warehouse and delivery personnel,
and marketed by outside salespeople. However, each satellite operation will
be supported by inventory, inside salespeople and general management of a
core district responsible for the satellite's results of operations. We
opened our first satellite operation in Chattanooga, Tennessee during fiscal
2000 and will open several other locations during fiscal 2001.

LEVERAGING CORE COMMODITIES. We have historically been a major
purchaser and distributor of various "long" products, namely cold finished
carbon and alloy bars, mechanical tubing, stainless bars and shapes, aluminum
bars, shapes and tubes, and hot-rolled carbon and alloy bars. These specialty
core commodity products allow us to realize higher gross margins when compared
to gross margins from other commodity-like products, such as flat-rolled steel
and other sheet products. 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.

We believe we can significantly grow market share in our core
commodities by refocusing our efforts on aggressive procurement and marketing
strategies and inventory management. Leveraging our strength in core commodities
will establish competitive advantages in all of our local markets as well as
allow us to successfully compete for larger national programs with customers.

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. We believe customers will
continue to outsource certain processing activities, including those involving
plate processing, cutting and honing operations. Accordingly, we will focus on
increasing our efficiencies and capacities in these value-added operations and
in aggressively marketing these services. In addition, we recognize the need by
our customers to be assured of on-time delivery of high quality products and
services. Accordingly, we will focus on developing the business systems that
will allow us to offer customers "best in class" delivery service. We believe
our focus on on-time delivery service will immediately and significantly
differentiate us and our service capabilities from others in the industry who
generally offer only "best efforts" and less reliable delivery service.

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) a
customer relationship management system to further improve customer
satisfaction and sales productivity, (ii) additional functionality of our
electronic commerce capabilities for sales and supply chain activities (iii)
continued implementation of warehouse management information systems,
including activity-based costing and management systems, and (iv) other
system improvements to improve productivity and efficiency.

CONTINUE COST REDUCTIONS AND PRODUCTIVITY IMPROVEMENTS. The Company
will continue to identify and implement 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. We have already made significant progress in achieving these
goals with development and implementation of radio frequency and bar-coding
capabilities.

PRODUCTS AND SUPPLIERS

As a company, we have designated certain carbon and alloy, aluminum,
and stainless products as core product offerings under our bar, tubing and pipe,
plate, and sheet product lines. Each of our service centers stock a broad range
of shapes and sizes of each of these products (unless there is no market for the
product line at a particular location) in an effort to be a market leader in all
of the core product lines in 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

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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 our procurement activities are handled by a centralized
merchandising office in our Schaumburg, Illinois facility where specialists in
major product lines make inventory purchases. The Company concentrates on
developing close working relationships with high-quality suppliers to ensure
quality and timely delivery.

The vast majority of our inventory purchases are made by purchase
orders and we have no significant supply contracts with periods in excess of one
year. We are not dependent on any single supplier for any product or for a
significant portion of our purchases, and in fiscal year 2000 no single supplier
represented more than 10% of our total purchases. We purchased less than 10% of
our inventory requirements from foreign-based suppliers in fiscal 2000.

CUSTOMERS AND MARKETS

Our 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. We are not dependent on any single
customer or industry, and during fiscal 2000 no single customer accounted for
more than three percent of our total revenues.

The vast majority of our sales originate from individual purchase
orders and are not subject to ongoing supply contracts; however, we sometimes
enter 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, but can have
a slightly lower gross margin than our ordinary sales. We believe such
contracts, in the aggregate, represented less than 15% of our total revenues in
fiscal 2000.

Seasonal fluctuations in our 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 factor, as orders are generally
filled within 24 hours.

During fiscal 2000, we processed approximately 7,700 sales transactions
per business day generating an average revenue of approximately $487 per
transaction. Approximately 89% of our total revenues in fiscal 2000 were from
sales of stock inventory (generally our core product offerings). The balance of
revenues represents special customer requirements that are met by arranging
mill-direct sales and by making buy-outs from other distributors of inventory
items we do not maintain as stock inventory. Such non-stock sales generally have
lower gross margins than stock sales, but provide a valuable customer service.

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, 2000, 1999 and 1998.

Year Ended March 31,
-----------------------
2000 1999 1998
-----------------------
<S> <C> <C> <C>
BARS:
Carbon and Alloy................................. 39.7% 39.1% 37.0%
Stainless........................................ 10.5 10.4 12.2
Aluminum......................................... 7.2 5.9 6.2
------- ------- -------
Total............................................ 57.4 55.4 55.4

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------- ------- -------
TUBING AND PIPE:
Carbon and Alloy................................. 27.1 28.3 27.0
Stainless........................................ 2.6 3.2 3.6
Aluminum......................................... 3.6 3.2 3.3
------- ------- -------
Total............................................ 33.3 34.7 33.9
------- ------- -------
PLATE:
Carbon and Alloy................................. 4.7 5.5 5.5
Stainless........................................ 1.3 1.1 1.5
Aluminum......................................... 2.5 2.3 2.4
------- ------- -------
Total............................................ 8.5 8.9 9.4
------- ------- -------
SHEET:
Carbon and Alloy................................. 0.3 0.4 0.4
Stainless........................................ 0.3 0.3 0.3
Aluminum......................................... 0.2 0.2 0.5
------- ------- -------
Total............................................ 0.8 0.9 1.2
------- ------- -------
Other............................................ 0.0 0.1 0.1
------- ------- -------
100.0% 100.0% 100.0%
======= ======= =======
Revenues from stock sales as a percentage of
total revenues.................................. 89.2% 88.0% 87.2%
======= ======= =======

</TABLE>

COMPETITIVE STRENGTHS

We believe that the following factors contribute to our success in the
metals distribution industry:

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

NETWORK OF STRATEGICALLY LOCATED FACILITIES. Our service centers and
processing operations are strategically located, generally within one day's
delivery time to almost all U.S. manufacturing centers, which thereby gives us
the capability of increasing sales to national customers that currently buy
metals from various suppliers in different locations. Through these facilities,
we serve more than 40,000 customers, with no single customer accounting for more
than three percent of our total revenues. Such diversification reduces our
vulnerability to the financial or economic weakness of particular customers,
industries or regions.

SERVICE AND PRODUCT SELECTION. We specialize in higher gross margin
bar and tubing products that are not commonly sold directly by steel and
aluminum producers in small quantities. We serve the needs of our customers
by carrying a broad range of shapes and sizes in core products in large
quantities, which allows the Company to deliver orders to customers typically
within 24 hours from receipt of an order. Each of our service centers strives
to be a market leader in our core product lines in their geographic area. Our
company benefits from an excellent reputation for quality and service built
over its 79 years in operation and has received numerous quality and service
awards from its customers. EMJ 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. We have invested and will continue to
invest significant resources to upgrade or enhance our management information
systems. Such information systems have been designed to be fully integrated with
various application programs and can provide comprehensive databases and
reporting capabilities to assist management in

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their efforts to assess business conditions, monitor results of operations,
purchase more effectively, optimize inventory among different locations,
allocate resources and improve customer service through better order and
product reference data. We believe our information systems are among the best
in our industry and provide a competitive advantage.

EXPERIENCED MANAGEMENT WITH EQUITY OWNERSHIP. Executives and other
members of our management group have substantial experience in the metals
industry. In addition, our employees directly, and indirectly through the
Jorgensen Employee Stock Ownership Plan (the "ESOP"), own in the aggregate
approximately 29.2% (21.2% on a diluted basis) of the outstanding Holding Common
Stock as of March 31, 2000.

IMPROVED COST STRUCTURES. We believe that our efforts to realign
operations and core competencies, which included the closure or sale of
underperforming operations and assets and reductions in workforce, as well as
other restructuring and reengineering initiatives we have undertaken in
recent years have dramatically improved our cost structure and operating
leverage. We believe such initiatives and their impact on cost structures
have enabled our company to maintain historically high operating margins,
greater than most of our competitors, even during periods of general weakness
in the metals industry and specific weakness in key industries that we serve.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - General".

MANAGEMENT INFORMATION SYSTEMS

Our 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 our ability
to utilize electronic commerce in dealing with customers and suppliers,
including the use of bar coding, document imaging and other tools that can
result in greater efficiencies and increased productivity for all users.
Planned improvements in our management information systems include (i) a
customer relationship management system to further improve customer
satisfaction and sales productivity, (ii) additional functionality of our
electronic commerce capabilities for sales and supply chain activities, (iii)
continued implementation of warehouse management information systems,
including activity-based costing and management systems, and (iv) other
system improvements to improve productivity and efficiency.

EMPLOYEES

As of March 31, 2000, EMJ employed approximately 1,920 persons, of
whom approximately 1,150 were employed in production or shipping, 420 were
employed in sales and 350 served in executive, administrative or district
office capacities. Three different unions represented approximately 720 of
our employees from 15 locations. Our collective bargaining agreements expire
on staggered dates between August 31, 2000 and March 31, 2004. In March 2000,
we negotiated a new four-year agreement for the bargained employees in our
Schaumburg, Illinois facility, thus ending a two-week strike. We are
currently renegotiating several other agreements that have already expired
and expect to have such agreements signed by September 2000. We believe we
have a good overall relationship with our employees.

FOREIGN OPERATIONS

We maintain two service centers in Canada operating through a
wholly-owned subsidiary, Earle M. Jorgensen (Canada) Inc., a Canadian limited
liability company. On September 8, 1997, we sold our operations in Mexico, and
on January 29, 1998, we sold our operations in the United Kingdom as part of our
1997 restructuring plan. Refer to Note 4 to Consolidated Financial Statements
for further information on the sale of foreign subsidiaries. For the fiscal
years ended March 31, 2000, 1999 and 1998, revenues from our foreign operations
totaled $38.6 million, $31.1 million and $53.6 million, respectively.

ENVIRONMENTAL MATTERS

Our 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

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disposal of hazardous substances and the remediation of environmental
contamination. As a result, we are from time to time involved in
administrative and judicial proceedings and inquiries relating to
environmental matters.

During fiscal years 2000, 1999 and 1998, expenditures made in
connection with environmental matters totaled approximately $0.3 million, $2.8
million and $0.4 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, 2000, we had accrued
approximately $0.3 million for future monitoring, investigation and remediation
expenditures that could be reasonably estimated for the following pending
environmental matters.

ALAMEDA STREET (LOS ANGELES). In February 1998, we were notified that
our company had potential responsibility for the lead and copper soil
contamination of an undeveloped parcel that is adjacent to its Alameda Street
property. In March 2000, we completed an approved remediation plan and are
awaiting a closure letter from the appropriate governmental agencies.

FORGE (SEATTLE/KENT, WA). We indemnified the purchasers of our 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, we 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. We continue to monitor
the disposal site for environmental conditions in accordance with a consent
decree requiring such monitoring through 2001.

UNION (NEW JERSEY). During fiscal 1994, we were notified by the current
owner that our company has potential responsibility for the environmental
contamination of this property formerly owned by a subsidiary and disposed of by
such subsidiary prior to its acquisition by EMJ. 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 us that it estimated the cost
of investigation and cleanup of the property at $0.9 million and requested
contribution to such costs from EMJ and the prior owner. We have contested
responsibility and commented on the proposed cleanup plan and have not received
any further demands or notifications. We do not have sufficient information to
determine what potential liability EMJ has, if any.

Although it is possible that new information or future developments
could require our company to reassess its potential exposure relating to all
pending environmental matters, we believe that, based upon all currently
available information, the resolution of such environmental matters will not
have a material adverse effect on our 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-Registered Trademark- is a registered trademark and service mark in
the U.S. and in other countries where we do or expect to do business. We
consider certain information owned by us to be trade secrets, and we take
measures to protect the confidentiality and control the disclosure of such
information. We believe that these safeguards adequately protect our proprietary
rights. While we consider all of our intellectual property rights as a whole to
be important, we do not consider any single right to be essential to our
operations.

ITEM 2. PROPERTIES

Our service centers and value-added processing operations conduct
business at various locations throughout North America. 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

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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.

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

COUNTRY/CITY/STATE OWNED/ SIZE
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
Schaumburg, Illinois............. Owned 554,000
Plainfield, Indiana.............. Owned 142,700
Eldridge, Iowa................... Leased 91,600
Boston, Massachusetts............ Owned 64,200
Roseville, Michigan (a).......... Leased 28,740
Minneapolis, Minnesota........... Owned 160,000
Kansas City, Missouri............ Leased 120,400
St. Louis, Missouri.............. Leased 106,700
Brighton, New York (a)........... Leased 31,500
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
York, Pennsylvania (a)........... Leased 28,800
Chattanooga, Tennessee (a)....... Leased 27,000
Memphis, Tennessee............... Leased 56,500
Dallas, Texas.................... Owned 132,200
Houston, Texas................... Owned 276,000
Salt Lake City, Utah (a)......... Leased 25,400
Kent, Washington................. Leased 83,700
CANADA:
Toronto, Ontario (b)............. Leased 38,600
Montreal, Quebec................. Leased 57,000
OTHER PROPERTIES:
Brea, California (headquarters)...Leased 38,300

</TABLE>

----------------
(a) These locations are considered satellite operations.
(b) Plans have been approved to relocate the Toronto operations to a new and
larger leased facility during fiscal 2001.

ITEM 3. LEGAL PROCEEDINGS

We are occasionally involved in ordinary, routine litigation incidental
to their normal course of business, none of which we believe to be material to
our financial condition or results of operations. We maintain various liability
insurance coverages to protect our 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.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY

We have 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, 2000, 1999 and 1998, we paid cash dividends totaling $13,372,000,
$17,701,000

8
<PAGE>

and $11,469,000, respectively, to Holding in connection with the repurchase
of its capital stock from employees of EMJ whose employment had terminated,
as required by the terms of Holding's Stockholders Agreement and the ESOP. In
addition, in fiscal 1998, we paid cash 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".

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)
2000 1999 1998 1997 1996
--------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $ 938,252 $915,811 $1,050,005 $1,023,565 $1,025,659
Gross profit 275,449 265,960 294,624 280,739 261,021
Operating expenses exclusive of
restructuring and other non-
recurring charges 208,058 198,751 225,019 245,826 245,619
Restructuring and other non-
recurring charges --- --- 2,838 20,088 12,776
Income from operations 67,391 67,209 66,767 14,825 2,626
Net interest expense 41,595 41,181 41,059 40,880 40,874
Extraordinary loss (1) --- --- 9,075 --- ---
Net income (loss) 23,987 24,493 15,760 (26,556) (29,311)

</TABLE>

YEAR ENDED MARCH 31,
-------------------------------------------------------------------------------------
(Dollars in thousands)
2000 1999 1998 1997 1996
--------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital $ 165,148 $ 156,691 $ 157,784 $ 170,988 $166,587
Net property, plant & equipment 95,041 102,776 106,643 120,050 134,259
Total assets 464,374 426,867 443,821 454,882 484,911
Long-term debt (including current
portion) 285,547 296,506 312,234 291,286 279,952
Stockholder's equity (14,365) (28,020) (36,919) 1,927 25,141

OTHER SUPPLEMENTAL DATA:
Depreciation and amortization (2) $ 9,951 $ 9,175 $ 9,475 $ 10,620 $ 12,022
Non-cash ESOP expense (3) 2,638 2,994 2,788 3,102 3,401
Net cash interest expense (4) 43,649 40,689 39,993 37,747 37,310
Capital expenditures 9,525 8,957 7,264 4,449 16,658
Ratio of earnings to fixed charges (5) 1.54 1.55 1.54 --- ---
Dividends paid (6) 13,372 17,701 56,888 5,552 22,289

</TABLE>

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

<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 $1,482, $1,481, $1,757, $2,144 and $2,114 for the years
ended March 31, 2000, 1999, 1998, 1997 and 1996, 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, 2000, 1999 and
1998. 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 our network
of 37 service centers and value-added processing operations strategically
located throughout North America, we distribute a broad line of bar, tubing and
pipe, and plate and sheet metal products to over 40,000 customers.

During the past several years, our company has undergone substantial
changes. In fiscal 1996 and 1997, we implemented two restructuring programs
designed to realign our operations and core competencies and to improve
operating earnings and cash flows, which included selling two foreign
subsidiaries, closing four domestic distribution centers, discontinuing a
flat-rolled processing center, consolidating two honing operations, and reducing
workforce. In addition, fiscal 1997 included a write-off of certain costs
related to our management information and reporting system.

10
<PAGE>

We also addressed operational efficiencies and improvements in customer
service by: (i) providing incentives for our 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 those service centers requiring such inventory.

We believe that the restructuring programs 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. Our income from operations before restructuring and other
non-recurring charges was $67.4 million in fiscal 2000, $67.2 million in fiscal
1999 and $69.6 million in fiscal 1998. The number of employees decreased from
approximately 2,600 on December 31, 1996 to approximately 1,920 on March 31,
2000, 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. We believe our results have been less
sensitive to economic trends than some of our competitors due to our customer
base, product mix and the variety of industries served.

REFINANCING TRANSACTIONS

On March 24, 1998, we refinanced our 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 our 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
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.

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, 2000, 1999 and 1998 are derived from the
historical consolidated financial statements included elsewhere herein.

Year Ended March 31,
----------------------------------------------------
2000 % 1999 % 1998 %
---- - ---- - ---- -
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues.................... $938,252 100.0% $915,811 100.0% $1,050,005 100.0%
Gross profit................ 275,449 29.4 265,960 29.0 294,624 28.1
Operating expenses
exclusive of restructuring
and other non-recurring
expenses................... 208,058 22.2 198,751 21.7 225,019 21.4
Warehouse and
delivery expenses......... 123,566 13.2 120,687 13.2 128,495 12.2
Selling expenses.......... 34,147 3.6 33,918 3.7 37,147 3.5
General and administrative
expenses.................. 50,345 5.4 44,146 4.8 59,377 5.7
Income from operations...... 67,391 7.2 67,209 7.3 66,767 6.4
Net interest expense........ 41,595 4.4 41,181 4.5 41,059 3.9
Extraordinary loss.......... --- --- 9,075 0.9
Net income.................. 23,987 2.6 24,493 2.7 15,760 1.5

</TABLE>

11
<PAGE>

RESULTS OF OPERATIONS -- YEAR ENDED MARCH 31, 2000 COMPARED TO YEAR ENDED MARCH
31, 1999

REVENUES. Revenues for fiscal 2000 increased 2.5% to $938.3 million,
compared to $915.8 million in fiscal 1999. Revenues from our domestic operations
increased 1.7% to $899.7 million in fiscal 2000, compared to $884.7 million in
fiscal 1999 and reflect a 10% increase in tonnage shipped offset by an 8%
reduction in average selling prices (material costs declined 7%) when compared
to fiscal 1999 levels. Our domestic operations continued to be impacted by
weaker demand in certain core products and in key industries that we serve,
particularly agricultural equipment and aerospace, caused in part by global
economic conditions arising in connection with the Asian crisis in 1998.
Revenues from our international operations increased 24.1% to $38.6 million
compared to $31.1 million in fiscal 1999 as the result of strong local economic
conditions.

GROSS PROFIT. Gross profit increased 3.6% to $275.5 million in fiscal
2000, compared to $266.0 million in fiscal 1999. Gross margin improved to 29.4%
when compared to 29.0% in fiscal 1999. Fiscal 2000 included a LIFO credit of
$9.0 million compared to a corresponding LIFO credit of $2.9 million in fiscal
1999. Gross profit and gross margin from foreign operations was $8.7 million and
22.5% in fiscal 2000, compared to $6.8 million and 22.0% in fiscal 1999.
Exclusive of foreign operations and LIFO, gross margin was 28.6% in fiscal 2000,
compared to 29.0% in fiscal 1999.

EXPENSES. Total operating expenses in fiscal 2000 were $208.1 million
compared to $198.8 million in fiscal 1999. As a percent of revenues, total
operating expenses were 22.2% in fiscal 2000 and 21.7% in fiscal 1999.

Warehouse and delivery expenses increased $2.9 million (2.4%) to $123.6
million in fiscal 2000, compared to $120.7 million in fiscal 1999. As a percent
of revenues, warehouse and delivery expenses were 13.2% in fiscal 2000,
unchanged from fiscal 1999. The increase in these expenses was attributable to
higher compensation, lease, depreciation and other production expenses caused by
the increase in tonnage shipped and from added capacity and services. In
addition, fiscal 2000 included approximately $1.0 million of expenses incurred
as the result of a two-week strike impacting our Schaumburg, Illinois facility
in March 2000.

Selling, general and administrative expenses increased $6.4 million
(8.2%) to $84.5 million in fiscal 2000 compared to $78.1 million in fiscal
1999. Selling expenses increased $0.3 million (0.9%) to $34.2 million in
fiscal 2000, compared to $33.9 million in fiscal 1999, and decreased as a
percent of revenues to 3.6% from 3.7% in fiscal 1999. General and
administrative expenses, excluding gains or losses from the sale of fixed
assets, increased $1.4 million (3.0%) to $48.0 million in fiscal 2000,
compared to $46.6 million in fiscal 1999. As a percentage of revenues, these
expenses were 5.1% in fiscal years 2000 and 1999. The increase in general and
administrative expenses was primarily due to increased incentive
compensation, lower income earned on life insurance redemptions, higher
provisions for bad debt, and higher expenses related to outsourced logistics
services, partially offset by higher income recognized from growth in cash
surrender value of life insurance policies. Losses from sale of fixed assets,
including our Hawaiian operations, totaled $2.3 million in fiscal 2000,
compared to gains of $2.4 million in fiscal 1999.

NET INTEREST EXPENSE. Net interest expense was $41.6 million in fiscal
2000 and $41.2 million in fiscal 1999. 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 2000 and in fiscal 1999).

During fiscal 2000 the average outstanding indebtedness (excluding
borrowings against the cash surrender value of certain life insurance policies)
was $313.5 million versus $331.7 million in fiscal 1999. The weighted-average
interest rate on such indebtedness during fiscal 2000 was 8.54% versus 8.61% in
fiscal 1999. The average borrowings under the Revolving Credit Facility
decreased to $98.1 million from $114.7 million in fiscal 1999, and the average
interest rate decreased to 7.42% in fiscal 2000 from 7.43% in fiscal 1999.

The outstanding borrowings against the cash surrender value of life
insurance policies were $116.5 million at March 31, 2000 and $101.7 million at
March 31, 1999, and the total interest expense on such borrowings increased to
$12.6 million in fiscal 2000 compared to $10.9 million in fiscal 1999. Such
increases resulted from net borrowings of $14.8 million against the increased
cash surrender value of life insurance policies in November 1999 to pay annual
premiums on such policies and to pay interest on previous borrowings (see
"---Liquidity and Capital Resources"). As specified in the

12
<PAGE>

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
$14.0 million in fiscal 2000, $10.9 million in fiscal 1999 and $10.3 million
in fiscal 1998 and is reported as an offset to general and administrative
expenses in the consolidated 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 (7.82% and
9.44%, respectively, as of March 31, 2000). Pursuant to an interest rate swap
agreement we entered with Bankers Trust Company in June 1998, the interest rate
on the Term Loan was fixed at approximately 9.05% through June 2003 (the "Fixed
Rate"). Such agreement requires Bankers Trust Company to make payments to our
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, we are 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 2000, we
paid Bankers Trust Company $0.4 million and Bankers Trust Company paid us $0.1
million of interest as calculated under the provisions described above. Since
inception of the interest rate swap agreement, we have paid Bankers Trust
Company a net amount of $0.5 million through March 31, 2000.

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 our 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 we serve, 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 our 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 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.

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

13
<PAGE>

from a reduction in the number of employees caused in part by our
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 our 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 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 borrowings under our Revolving Credit
Facility 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 consolidated
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, we 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 our 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, we are 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, we paid Bankers Trust Company $0.2 million of interest as
calculated under the provisions described above.

14
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Working capital increased to $165.1 million at March 31, 2000 when
compared to $156.7 million at March 31, 1999. Primary sources of cash in fiscal
2000 consisted of: (i) funds provided by operations, $33.1 million; and (ii)
proceeds from the sale of fixed assets, including our Hawaiian operations, $6.6
million. Primary uses of cash in fiscal 2000 consisted of: (i) dividends to
Holding, $13.4 million; (ii) payments under revolving loan agreements, $9.7
million,; and (iii) capital expenditures, $9.5 million.

Cash generated from operating activities was $33.1 million (3.5% of
revenues) in fiscal 2000 compared to $36.0 million (3.9% of revenues) in fiscal
1999 and $36.6 million (3.5% of revenues) in fiscal 1998.

During fiscal 2000, we redeemed $13.4 million of our capital stock from
retiring and terminated employees, as required by the terms of our ESOP and by
Holding's Stockholders' Agreement. The amount of redemptions in fiscal 2000 was
higher than usual due to payments to a former executive officer with relatively
large stock holdings. We expect that such redemptions for fiscal 2001 will be
lower than those paid in fiscal 2000, although the amount or timing of such
expenditures is not within our control and there can be no assurance in this
regard.

Capital expenditures were $9.5 million in fiscal 2000, $9.0 million in
fiscal 1999 and $7.3 million in fiscal 1998. Capital expenditures in fiscal 2000
were primarily for routine replacement of machinery and equipment, facility
improvements and expansions, and the purchase of computer hardware and software.
For fiscal 2001, we have planned approximately $11.9 million of capital
expenditures to be financed from internally generated funds. Approximately $9.0
million is for routine replacement of machinery and equipment and facility
improvements and expansions, and $2.9 million is for further additions and
enhancements to our management information systems.

Ongoing debt service obligations primarily consist of interest payments
under our 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 industrial revenue bonds. As of March 31, 2000, annual principal
payments required by our outstanding industrial revenue bonds indebtedness
amount to $1.4 million in fiscal years 2001 through 2004, $2.1 in fiscal year
2005 and $4.1 million in the aggregate thereafter through 2011. We 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 our company and general economic conditions, for which there can
be no assurance, we expect to be in compliance with all of our debt covenants
for the foreseeable future.

As of March 31, 2000, our primary sources of liquidity were available
borrowings of approximately $120.2 million under the Revolving Credit Facility,
available borrowings of approximately $6.4 million against certain life
insurance policies and internally generated funds. Borrowings under the
Revolving Credit Facility are secured by our domestic inventory and accounts
receivable, and future availability under the facility is determined by
prevailing levels of such accounts receivable and inventory. The Term Loan is
secured by a first priority lien on a substantial portion of our 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. 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, 2000,
there was approximately $22.9 million of cash surrender value in all life
insurance policies maintained, net of borrowings. In addition, our Canadian
subsidiary has available its own credit facilities of up to CND$11.75 million,
including a revolving credit facility of CND$6.0 million, a financial credit
facility of CND$5.0 million, to be used for hedging foreign currency and rate
fluctuations, and a special credit facility of CND$0.75 million for letters of
guarantee in connection with a lease for a newly constructed facility in
Toronto. As of March 31, 2000, CND$296,000 (USD$204,000) was outstanding under
the revolving credit facility and the letter of guarantee for CND$0.75 million
was issued.

For fiscal 2000, EBITDA totaled $71.4 million (7.6% of revenues),
compared to $77.8 million (8.5% of revenues) in fiscal 1999. EBITDA, which
represents income from operations before net interest expense, taxes,
depreciation, amortization, LIFO adjustments, and certain other non-cash
expenses, including ESOP and post-retirement accruals, is

15
<PAGE>

provided as an important measure of our ability to service debt. However,
EBITDA should not be considered in isolation or as a substitute for
consolidated results of operations and cash flows data presented in the
accompanying consolidated financial statements.

We believe our 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, we anticipate 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, our company would be able to obtain such
refinancing or additional financing. Our 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 2000 results, which will be dependent on a
number of factors, many of which are beyond our control, and the continued
availability of revolving credit borrowings. Our earnings were sufficient to
cover fixed charges for fiscal years 2000, 1999 and 1998.

ENVIRONMENTAL CONTINGENCIES

There is currently remediation and/or investigation activities at
several former facilities where soil and/or groundwater contamination is
present. As of March 31, 2000, we have established reserves totaling $0.3
million to cover those future environmental costs that are known or can be
reasonably estimated. See Note 9 to Consolidated Financial Statements
included elsewhere herein for a more detailed discussion of specific
environmental contingencies.

Our 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. We believe that we are
in material compliance with all applicable environmental laws and that our
products and processes do not present any unusual environmental concerns. We do
not anticipate any material expenditures or material recurring costs in the near
future in connection with pollution control.

Some of our properties owned or leased are located in industrial areas
with histories of heavy industrial use. Although the location of these
properties may require us to incur expenditures and to establish environmental
liabilities for costs that arise from causes other than our operations, we do
not expect that any such liabilities will have a material adverse impact on our
results of operations, financial condition or liquidity. We do not carry
environmental insurance coverage.

Our 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. We believe that we are in material
compliance with applicable laws and regulations and do 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 our company.

Although it is possible that new information or future developments
could require us to reassess our potential exposure relating to all pending
environmental matters, we believe that, based upon all currently available
information, the resolution of such environmental matters will not have a
material adverse effect on our 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 "Item 1. Business--Environmental
Matters".

FOREIGN EXCHANGE EXPOSURE

The functional currency for our 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. We do not expect to
hedge our exposure to foreign currency fluctuations in the foreseeable future.
Net foreign currency transaction gains or losses have not been material in any
of the years presented.

16
<PAGE>

YEAR 2000 COMPLIANCE

During fiscal 2000, we completed a Year 2000 compliance initiative
designed to identify, assess, remediate, test, implement, and plan for
contingencies related to Year 2000 issues. Our Year 2000 compliance initiative
covered risk assessment, remediation and contingency planning for our internal
IT and non-IT systems, and for those parties with whom we have a material
business relationship. We determined that our "reasonable likely worst case
scenario" would have involved a partial failure in one or more of our systems,
or systems maintained by principal suppliers, service providers or other parties
with whom we have 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 us may have
increased if primary suppliers could not provide product and we were forced to
purchase from alternative sources. In addition, interruptions in
telecommunications, energy and transportation services could also have had an
adverse impact on our results of operations or financial position.

As of the date of this filing, we have not been affected by Year 2000
related failures that have had a significant negative impact on our business
operations.

As of March 31, 2000, we have spent approximately $500,000 to address
our Year 2000 issues. This amount included all costs to upgrade Year 2000
deficient business information systems and infrastructure components, such as
time and attendance applications and phone systems.

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. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Results of Operations -- Year Ended March 31, 2000 Compared to Year Ended March
31, 1999".

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, 2000),
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.

17
<PAGE>

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."

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, January 1, 1999 and
January 1, 2000, each of such non-officer directors 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, April 1, 1999 and April 1, 2000, 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.

NAME AGE POSITION
<S> <C> <C>
David M. Roderick 76 Chairman of the Board and Chairman of the
Executive Committee and Director

Maurice S. Nelson, Jr. 62 President, Chief Executive Officer and Chief Operating Officer,
Director and Member of the Executive Committee

William S. Johnson 42 Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer) and Secretary

Frank D. Travetto 47 Vice President Merchandising

Kenneth L. Henry 53 Vice President Chicago Region

James D. Hoffman 41 Vice President Eastern Region

R. Neil McCaffery 50 Vice President Western Region

Mark R. McWhirter 40 Vice President and Chief Information Officer

Joseph S. Schuchert 71 Director

William A. Marquard 80 Director and Chairman of the Audit Committee

Frank T. Nickell 52 Director and Member of the Executive Committee and the
Audit Committee

John Rutledge 51 Director and Member of the Audit Committee

G. Robert Durham 71 Director and Member of the Audit Committee

</TABLE>

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. 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

18
<PAGE>

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 Vice President
and Chief Financial Officer and Secretary since January 1999. Before that, Mr.
Johnson was the Company's Controller since February 1995 and 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.

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., The Bear Stearns Companies and
BlackRock, Inc.

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.

G. ROBERT DURHAM. Mr. Durham has been a director of the Company and
Holding since January 1999. Mr. Durham retired from Walters Industries, Inc. in
May 1996, after serving as chairman and chief executive officer since October
1995, and president and chief executive officer from June 1991. Mr. Durham also
serves as a director of The FINOVA Group Inc., Amphenol Corporation and The MONY
Group Inc.

STOCKHOLDERS' AGREEMENT

19
<PAGE>

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 and they have designated Mr. Durham. 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, 2000.
Officers of the Company receive no additional compensation for their services as
officers of Holding.

CASH COMPENSATION. The following table sets forth compensation for the
three fiscal years ended March 31, 2000 for the Chief Executive Officer and the
four most highly compensated executive officers of the Company as of March 31,
2000.

SUMMARY OF COMPENSATION TABLE

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. 2000 $555,567 $393,264 --- $ 53,166
President, Chief Executive Officer 1999 555,015 352,013 --- 53,180
and Chief Operating Officer 1998 550,020 591,111 --- 64,924

Frank D. Travetto 2000 220,215 134,316 10,000 20,325
Vice President, 1999 211,274 115,920 25,000 17,789
Merchandising 1998 193,480 183,997 25,000 23,856

Kenneth L. Henry 2000 209,808 127,920 10,000 26,192
Vice President, 1999 195,281 112,009 25,000 22,786
Chicago Region 1998 161,561 150,050 25,000 60,973

R. Neil McCaffery 2000 198,571 121,524 10,000 16,850
Vice President, 1999 185,243 76,003 25,000 14,146
Western Region 1998 154,447 146,859 25,000 14,989

James D. Hoffman 2000 198,079 121,524 10,000 16,455
Vice President, 1999 184,065 106,404 25,000 15,267
Eastern Region 1998 152,052 142,108 25,000 14,366

</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

20
<PAGE>

year to all management investors pursuant to the Company's Management
Stock Bonus Plan in proportion to their ownership of Holding Common
Stock. The following bonuses were paid to Messrs. Nelson, Travetto,
Henry, McCaffery and Hoffman, under the Company's Management Incentive
Compensation Plan (a) in fiscal 2000: $393,264, $134,316, $127,920,
$121,524 and $121,524, respectively, (b) in fiscal 1999: $352,013,
$115,920, $112,009, $76,003 and $106,404, respectively, (c) in fiscal
1998: $591,111, $183,997, $150,050, $146,859 and $142,108, respectively.

(2) Holding has granted 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 and Hoffman in fiscal years 2000,
1999 and 1998 have an exercise price of $5.51, $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 2000 for Messrs.
Nelson, Travetto, Henry, McCaffery and Hoffman, respectively (i) ESOP
--$8,000, $8,000, $8,000, $8,000, and $8,000; (ii) 401(a)(17) Plan
--$39,164, $9,531, $8,696, $7,861 and $7,861; (iii) long term
disability--$4,509, none, $6,779, none and none; (iv) life
insurance--$1,493, $2,794, $2,717, $989 and $594. The following allocations
were made in fiscal 1999 for Messrs. Nelson, Travetto, Henry, McCaffery and
Hoffman, respectively (i) ESOP --$8,000, $8,000, $8,000, $8,000, and
$8,000; (ii) 401(a)(17) Plan --$37,102, $8,171, $7,303, $5,572 and $6,923;
(iii) long term disability--$7,285, none, $5,908, none and none; (iv) life
insurance--$793, $1,618, $1,574, $573 and $344. In fiscal 1998 to Messrs.
Nelson, Travetto, Henry, McCaffery and Hoffman, respectively: (i)
ESOP--$8,000, $8,000, $7,875, $7,575 and $7,481; (ii) 401(a)(17)
Plan--$49,057, $10,710, $7,376, $6,918 and $6,587; (iii) long term
disability--$7,285, $3,745, $5,908, none, and none; and (iv) life
insurance--$582, $1,401, $1,362, $496 and $298. 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 a relocation payment of
$38,452 to Mr. Henry in fiscal 1998.

HOLDING STOCK OPTION PLAN

In fiscal 1998, Holding adopted the Earle M. Jorgensen Holding Company,
Inc. Stock Option Plan, as amended (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 and certain other managers
of the Company 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.

21
<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 2,100,000, 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 2000 by Holding to the Chief Executive Officer and
the next four 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.

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
Frank D. Travetto 10,000 13.3% $5.51 7/31/2009 $34,652 $87,815
Kenneth L. Henry 10,000 13.3% 5.51 7/31/2009 34,652 87,815
R. Neil McCaffery 10,000 13.3% 5.51 7/31/2009 34,652 87,815
James D. Hoffman 10,000 13.3% 5.51 7/31/2009 34,652 87,815

</TABLE>

---------------
(1) Holding has not granted any stock appreciation rights. All the options shown
above become exercisable on August 1, 2001. 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

22
<PAGE>

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.

AGGREGATED STOCK OPTION EXERCISES AND FISCAL YEAR-END STOCK OPTION VALUE TABLE

The following table sets forth certain information concerning stock
options exercised during fiscal 2000 by the Chief Executive Officer and the
next four most highly compensated executive officers of the Company, and the
value of their unexercised stock options as of March 31, 2000.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUES
------------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)
---------------------- -----------------------

SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Maurice S. Nelson, Jr -- -- 660,000/660,000 $66,000/$66,000
Frank D. Travetto -- -- 25,000/35,000 $54,250/$--
Kenneth L. Henry -- -- 25,000/35,000 $54,250/$--
R. Neil McCaffery -- -- 25,000/35,000 $54,250/$--
James D. Hoffman -- -- 25,000/35,000 $54,250/$--
</TABLE>

----------------
(1) Holding is a private company and its stock is not publicly traded. The
fair market value of Holding's common stock underlying the options shown
above is determined annually by a third party appraiser. The value of
in-the-money options shown above was calculated using the most recent
appraisal available which was as of March 31, 1999.

THE ESOP

Our company maintains an employee stock ownership plan (the "ESOP") in
respect of nonunion employees who meet certain service requirements. The amount
of annual contributions to the ESOP are calculated as a percentage (as
determined by the Board of Directors based on 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 at age 65 or 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, 2000, shares of
Holding's Series A and Series B Preferred Stock and Holding Common Stock owned
by the ESOP totaled 60,901, 24,956, 3,632,990 shares, respectively. For the
fiscal years ended March 31, 2000, 1999, and 1998, contributions payable to the
ESOP totaled $2,638,000, $2,994,000 and $2,788,000, 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 our company to borrow against the
cash surrender value of such policies. As of March 31, 2000, we have borrowed
$116.5 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 $6.4
million as of March 31, 2000. Our Revolving Credit Facility and other resources
are also 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".

23
<PAGE>

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. We believe the assertions of the IRS and the DOL are
incorrect and have 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. We do not have
sufficient information to estimate our potential liability; however, we believe
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, our 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. For
the fiscal years ended March 31, 2000, 1999, and 1998, contributions payable
totaled $93,000, $99,000 and $119,000, respectively.

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
$5.4 million in fiscal 2000, $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. 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. There was no annual fee payable for fiscal
year 2000. For each of the fiscal years 2000, 1999 and 1998, the Company paid
Kelso the annual fee and reimbursed Kelso $13,000, $43,000 and $62,000,
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.

24
<PAGE>

In January 1996, the Company amended an 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.

On April 1, 1998, 1999 and 2000, 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 $3.34 per share, $7.73 per share,
and $5.51 per share respectively, in each case, the fair market value as
established by the most recent appraisal available at the date of grant.

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, 2000, 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, 2000, 26,791 shares of Series B Preferred Stock
of Holding have been issued, of which 24,956 were owned by the ESOP and 1,827
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) 61.6% (d) 0 0.0%
KIA III - Earle M. Jorgensen, L.P. (c) 1,704,740 13.7% 0 0.0%
Joseph S. Schuchert (c) 11,167,215 (d)(e) 72.7% (d)(e) 24,519 (f) 26.3% (f)
Frank T. Nickell (c) 11,187,714 (d)(e) 72.8% (d)(e) 24,519 (f) 26.3% (f)
Michael B. Goldberg (c) 9,462,475 (d)(e) 61.6% (d)(e) 0 0.0%
George E. Matelich (c) 11,172,215 (d)(e) 72.7% (d)(e) 24,519 (f) 26.3% (f)
Thomas R. Wall, IV (c) 11,172,215 (d)(e) 72.7% (d)(e) 24,519 (f) 26.3% (f)
Frank K. Bynum (c) 11,167,215 (d)(e) 72.7% (d)(e) 0 0.0%
David I. Wahrhaftig (c) 11,167,215 (d)(e) 72.7% (d)(e) 0 0.0%
Maurice S. Nelson (g) (l) 660,000 5.3% 0 0.0%
Frank D. Travetto (g) (l) 37,000 0.3% 0 0.0%
Kenneth L. Henry (g) (l) 44,000 0.4% 704 0.8%
R. Neil McCaffery (g) (l) 30,000 0.2% 0 0.0%
James D. Hoffman (g) (l) 25,000 0.2% 0 0.0%
Mark R. McWhirter (g) (l) 25,000 0.2% 0 0.0%
David M. Roderick (g) (l) 94,000 0.8% 0 0.0%
John Rutledge (h) (l) 25,000 0.2% 0 0.0%
William A. Marquard (c) (l) 30,000 0.2% 0 0.0%

25
<PAGE>

G. Robert Durham (g) (l) 7,500 0.1% 0 0.0%
Earle M. Jorgensen Company Employee
Stock Ownership Plan (g) 3,601,628 (i) 29.0% (i) 59,761 (i) 64.1% (i)
All directors and executive officers of
the Company as a group (l) 997,999 (j) 8.0% (j) 704 (k) 0.8% (k)

</TABLE>

-------------
(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 15,369,402, (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 1,217,999 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 12,431,487, excluding shares subject to stock options and shares
issuable upon the exercise of the Warrants held by KIA IV as of March 31,
2000.

(b) The percentage of shares of Series A Preferred Stock outstanding was
calculated assuming the total outstanding shares of Series A Preferred
Stock was 93,253, excluding 154,293 shares of Series A Preferred Stock held
in the Holding treasury as of March 31, 2000.

(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 31,362 shares of Holding Common Stock and 1,140 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
March 31, 2000.

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, Bynum and Wahrhaftig), KP III (other
than Mr. Goldberg) and KP IV. KP I, KP III and KP IV are the general partners
of

26
<PAGE>

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."

Mr. McWhirter borrowed $92,300 in fiscal 1995 from Holding by issuing a
note to Holding in payment for 10,000 shares of Holding Common Stock. In
February 1999, the Company and Mr. McWhirter agreed to adjust the original
purchase price of the shares to the current fair market value and to surrender
these shares in consideration for the note issued to Holding.

On April 1, 1998, April 1, 1999 and April 1, 2000, 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.

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.

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 9 1/2% Senior Notes.

4.2(a)* Form of Certificate for the Company's 9 1/2% Senior Notes, Series A,
$100,000,000.

4.2(b)* Form of Certificate for the Company's 9 1/2% Senior Notes, $4,350,000.

4.2(c)* Form of Certificate for the Company's 9 1/2% Senior Notes, Series A,
$650,000.

27
<PAGE>

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.

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").

28
<PAGE>

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.

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.

29
<PAGE>

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.

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.

30
<PAGE>

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.

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.

10.53** Earle M. Jorgensen Company Employee Stock Ownership Plan, as amended
and restated effective as of April 1, 1999.

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

31
<PAGE>

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

32
<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 26th of June, 2000.

EARLE M. JORGENSEN COMPANY

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

Pursuant to the requirements of the Securities and 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/David M. Roderick Chairman of the Board and Chairman June 26, 2000
------------------------------------ of the Executive Committee and
David M. Roderick Director

/s/Maurice S. Nelson, Jr. President, Chief Executive Officer and June 26, 2000
------------------------------------ Chief Operating Officer and Director
Maurice S. Nelson, Jr.

/s/William S. Johnson Vice President and Chief Financial June 26, 2000
------------------------------------ Officer (Principal Financial and
William S. Johnson Accounting Officer) and Secretary

/s/Joseph S. Schuchert Director June 26, 2000
------------------------------------
Joseph S. Schuchert

/s/William A. Marquard Director June 26, 2000
------------------------------------
William A. Marquard

/s/Frank T. Nickell Director June 26, 2000
------------------------------------
Frank T. Nickell

/s/John Rutledge Director June 26, 2000
------------------------------------
Dr. John Rutledge

/s/G. Robert Durham Director June 26, 2000
------------------------------------
G. Robert Durham

</TABLE>

33
<PAGE>

FINANCIAL STATEMENTS

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

Report of Independent Auditors F-2

Consolidated Balance Sheets at March 31, 2000 and 1999 F-3

Consolidated Statements of Operations and Comprehensive Income
for the years ended March 31, 2000, 1999 and 1998 F-4

Consolidated Statements of Stockholder's Equity for the
years ended March 31, 2000, 1999 and 1998 F-5

Consolidated Statements of Cash Flows for the years ended
March 31, 2000, 1999, 1998 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, 2000 and 1999, 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, 2000. 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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, 2000 and 1999, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
March 31, 2000 in conformity with accounting principles generally accepted in
the United States. 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 27, 2000

F-2
<PAGE>

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

MARCH 31,
--------------------------------
2000 1999
--------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 21,660 $ 17,860
Accounts receivable, less allowance for doubtful accounts 108,247 91,356
Inventories 205,016 183,968
Other current assets 5,622 4,890
--------------------------------
Total current assets 340,545 298,074
--------------------------------
Net property, plant and equipment, at cost 95,041 102,776

Cash surrender value of life insurance policies 22,894 18,541
Debt issue costs, net of accumulated amortization 4,773 6,255
Other assets 1,121 1,221
--------------------------------
Total assets $464,374 $426,867
================================
LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities:
Accounts payable $119,499 $ 87,108
Accrued employee compensation and related taxes 12,411 9,732
Accrued employee benefits 8,927 9,402
Accrued interest 7,031 7,638
Other accrued liabilities 5,939 5,752
Current portion of long-term debt 2,604 1,500
Deferred income taxes 18,986 20,251
--------------------------------
Total current liabilities 175,397 141,383
--------------------------------
Long-term debt 282,943 295,006
Deferred income taxes 16,400 14,941
Other long-term liabilities 3,999 3,557

Commitments and contingencies --- ---

Stockholder's equity
Preferred stock, $.01 par value; 200 shares authorized and unissued --- ---
Common stock, $.01 par value; 2,800 shares authorized; 128 shares
issued and outstanding --- ---
Capital in excess of par value 91,348 102,082
Accumulated other comprehensive loss (763) (1,165)
Accumulated deficit (104,950) (128,937)
--------------------------------
Total stockholder's equity (14,365) (28,020)
--------------------------------
Total liabilities and stockholder's equity $464,374 $426,867
================================

</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,
---------------------------------------------
2000 1999 1998
---------------------------------------------
<S> <C> <C> <C>
Revenues $938,252 $915,811 $1,050,005

Cost of sales 662,803 649,851 755,381
---------------------------------------------
Gross profit 275,449 265,960 294,624

Expenses:
Warehouse and delivery 123,566 120,687 128,495
Selling 34,147 33,918 37,147
General and administrative 50,345 44,146 59,377
Restructuring --- --- 2,838
---------------------------------------------
Total expenses 208,058 198,751 227,857
---------------------------------------------
Income from operations 67,391 67,209 66,767

Interest expense, net 41,595 41,181 41,059
---------------------------------------------
Income before income taxes and extraordinary item 25,796 26,028 25,708

Income tax provision 1,809 1,535 873
---------------------------------------------
Net income before extraordinary item 23,987 24,493 24,835

Extraordinary item, early retirement of debt --- --- 9,075
---------------------------------------------
Net income 23,987 24,493 15,760
Other comprehensive income (loss):
Foreign currency translation adjustment and write-off 358 (585) (322)
Minimum pension liability 44 (302) ---
---------------------------------------------
Comprehensive income $ 24,389 $ 23,606 $ 15,438
=============================================

</TABLE>

SEE ACCOMPANYING NOTES.

F-4
<PAGE>

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

ACCUMULATED
COMMON STOCK CAPITAL 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, 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
adjustment --- --- --- (322) --- (322)
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
adjustment --- --- --- (585) --- (585)
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)
Dividend to Parent --- --- (13,372) --- --- (13,372)
Capitalization of ESOP
contribution, net --- --- 2,638 --- --- 2,638
Foreign currency
translation
adjustment --- --- --- 358 --- 358

Additional minimum pension
liability --- --- --- 44 --- 44
Net income --- --- --- --- 23,987 23,987
----------------------------------------------------------------------------------

BALANCE AT MARCH 31, 2000 128 $ --- $ 91,348 $(763) $(104,950) $(14,365)
==================================================================================

</TABLE>

SEE ACCOMPANYING NOTES.

F-5
<PAGE>

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

YEAR ENDED MARCH 31,
---------------------------------------------
2000 1999 1998
---------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $23,987 $24,493 $15,760
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 9,951 9,175 9,475
Amortization of debt issue costs and discount on
senior notes included in interest expense 1,482 1,481 1,892
Write-off of debt issue costs and discount --- --- 3,225
Accrued postretirement benefits 224 30 280
ESOP expense contributed to capital 2,638 2,994 2,788
Deferred income taxes 194 520 660
Loss (gain) on sale of property, plant and equipment 2,294 (2,422) (2,480)
Loss on sale of subsidiaries --- --- 2,838
Provision for bad debts 1,201 549 414
Decrease (increase) in cash surrender value of life
insurance over premiums paid (2,295) (1,338) 679
Changes in operating assets and liabilities (excluding
subsidiaries sold):
Decrease (increase) in accounts receivable (18,092) 13,398 2,994
Increase in inventories (22,221) (3,565) (18,111)
Decrease (increase) in other current assets (732) 73 943
Increase (decrease) in accounts payable and
accrued liabilities and expenses 34,219 (9,617) 15,069
Decrease in non-trade receivable 718 --- ---
Other (480) 264 176
---------------------------------------------
Net cash provided by operating activities 33,088 36,035 36,602
---------------------------------------------
INVESTING ACTIVITIES:
Additions to property, plant and equipment (9,525) (8,957) (7,264)
Proceeds from the sale of property, plant and equipment 6,633 6,044 12,534
Proceeds from sale of subsidiaries --- --- 6,918
Costs associated with sale of subsidiaries --- --- (1,739)
Premiums paid on life insurance policies (2,058) (1,576) (3,373)
Proceeds from redemption of life insurance policies --- 843 479
---------------------------------------------
Net cash provided by (used in) investing activities (4,950) (3,646) 7,555
---------------------------------------------

</TABLE>

SEE ACCOMPANYING NOTES.

F-6
<PAGE>

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

YEAR ENDED MARCH 31,
---------------------------------------------
2000 1999 1998
---------------------------------------------
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Net payments under revolving loan agreements $ (9,459) $(14,228) $(23,576)
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) (1,500) (5,868)
Increase in debt issue costs --- (1,846) (7,277)
Cash dividend to Parent (13,372) (17,701) (56,888)
---------------------------------------------
Net cash used in financing activities (24,331) (35,275) (44,515)
---------------------------------------------

Effect of exchange rate changes on cash (7) (17) (356)
Net increase (decrease) in cash 3,800 (2,903) (714)
Cash at beginning of year 17,860 20,763 21,477
---------------------------------------------

Cash at end of year $21,660 $17,860 $20,763
=============================================

</TABLE>

SEE ACCOMPANYING NOTES.

F-7
<PAGE>

Earle M. Jorgensen Company
Notes to Consolidated Financial Statements

March 31, 2000

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 $574,500 and $4,600 in fiscal 2000 and
1999, respectively. In fiscal 1998, such foreign operations generated net losses
of $95,000. In fiscal 2000, 1999 and 1998, EMJ (Bermuda) generated $333,300,
$602,000 and $155,000 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.

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, 2000 and 1999 was
$416,000 and $335,000, respectively. Management believes there are no
significant concentrations of credit risk as of March 31, 2000.

RESTRUCTURING---In March 1997, the Company approved a plan to restructure its
operations and recorded a restructuring charge of $15,638,000. 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%. 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, 2000, no accrued restructuring costs remain in the Company's
consolidated balance sheet.

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.

F-8
<PAGE>

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

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The Company reviews its long-lived assets pursuant to 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. There were no impairment losses recorded in
fiscal 2000, 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
$945,000 and $876,000 of such costs in fiscal 2000 and 1999, respectively.

DEBT ISSUE COSTS---Debt issue costs are deferred and amortized to interest
expense over the life of the underlying indebtedness. 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). For the
fiscal years ended March 31, 2000, 1999 and 1998, amortization of debt issue
costs aggregated $1,482,000, $1,481,000 and $1,757,000, respectively.
Accumulated amortization of debt issue costs was $3,018,000 and $1,536,000 at
March 31, 2000 and 1999, respectively.

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 2000. Deferred taxes are also recorded for
the future benefit of Federal and state tax losses and tax credit
carryforwards. 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.

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 $6,990,000 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, 2000, 1999 and 1998 cash paid for interest on
borrowings was $43,649,000, $40,689,000 and $39,993,000, and cash paid for
income taxes was $1,247,000, $141,000 and $360,000, respectively.

F-9
<PAGE>

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

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 include 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 Derivative Instruments and Hedging Activities". The statement
will require the Company to recognize all derivatives on the balance sheet at
fair value, offsets against the change in fair value must be adjusted through
income. The Company will adopt this standard in fiscal 2002 and is in the
process of assessing what impact, if any, this standard will have on its
consolidated 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 $9,909,000
and $887,000 at March 31, 2000 and March 31, 1999, respectively.

In fiscal 1999, 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 years 2000 and 1998.

3. NET PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment and accumulated depreciation at March 31, 2000 and
1999 consisted of the following:

2000 1999
---------------- ----------------
<S> <C> <C>
Land $20,699,000 $25,469,000
Buildings and improvements 27,896,000 30,945,000
Machinery and equipment 103,097,000 97,767,000
---------------- ----------------
151,692,000 154,181,000
Less accumulated depreciation 56,651,000 51,405,000
---------------- ----------------

Net property, plant and equipment $ 95,041,000 $102,776,000
================ ================

</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 year ended March 31, 1998, combined revenues from these foreign
operations were $23,417,000; and combined losses from operations were $233,000.

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 $14,029,000 in
fiscal 2000, $10,878,000 in fiscal 1999 and $10,274,000 in fiscal 1998 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, 2000, approximately $6,400,000 was
available for future borrowings.

Surrender value Loans Net cash
before loans outstanding surrender value
-----------------------------------------------------
<S> <C> <C> <C>
BALANCE AT MARCH 31, 2000 $139,379,000 $116,485,000 $22,894,000
Balance at March 31, 1999 120,242,000 101,701,000 18,541,000

</TABLE>

Interest on cash surrender value borrowings totaled $12,645,000, $10,905,000 and
$9,354,000 in fiscal 2000, 1999 and 1998, 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, 2000 and 1999 consisted of the following:

2000 1999
-----------------------------------
<S> <C> <C>
Revolving Loans due March 24, 2003, including $204,000
at March 31, 2000 related to a Canadian revolver $70,747,000 $80,206,000

Variable Rate Term Loan due March 24, 2004 98,000,000 99,000,000

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% 3,000,000 3,500,000
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

-----------------------------------
285,547,000 296,506,000
Less current portion 2,604,000 1,500,000
-----------------------------------
$282,943,000 $295,006,000
===================================

</TABLE>

Aggregate maturities of long-term debt are as follows: $2,604,000 in 2001;
$2,400,000 in 2002; $72,943,000 in 2003; $96,400,000 in fiscal 2004; $2,115,000
in fiscal 2005 and $109,085,000 thereafter.

The fair value of the Company's Senior Notes and Term Loans at March 31, 2000
was $96,600,000 and $97,510,000, 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, 2000 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 AGREEMENTS

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 ($350,000 outstanding at March 31,
2000). 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, 2000, the bank's prime lending rate was 9.0% and LIBOR was
6.13%. 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 $120,151,000 at March 31, 2000. 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 $478,000 in fiscal 2000, $314,000 in 1999 and $257,000 in 1998.

F-12
<PAGE>

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

6. LONG-TERM DEBT (CONTINUED)

CREDIT AGREEMENTS (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 November 16, 1999, the Company's Canadian subsidiary entered into a credit
facility (the "Canadian Facility") totaling CND$11,750,000, including (i) a
revolving credit facility of CND$6,000,000, (ii) a financial credit facility
of CND$5,000,000 for hedging foreign currency and rate fluctuations (unused
as of March 31, 2000), and (iii) a special credit facility for the issuance
of a letter of guarantee up to CND$750,000 in connection with a lease for a
newly constructed facility in Toronto. Borrowings under the revolving credit
facility are limited to an amount equal to 80% of eligible trade receivables
plus 40% of eligible inventories (as defined) and are repayable on demand.
Borrowings under the revolving credit facility bear interest at the bank's
annual prime lending rate plus 0.50%. At March 31, 2000, the interest rate on
the revolving credit facility was 7.50%.

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 limit, 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 Loan
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 2000 and 1999, net interest
expense of $331,000 and $231,000, respectively, was paid to Bankers Trust
Company 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 9.44% as of March 31, 2000. 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.

F-13
<PAGE>

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

6. LONG-TERM DEBT (CONTINUED)

OTHER

The Company's industrial revenue development bonds were issued in connection
with significant facility improvements or construction projects. In fiscal 1995
the Company obtained purchase money financing under a loan agreement which
provided up to $7.5 million for the expansion or acquisition of facilities and
purchase of equipment. This loan was repaid on March 24, 1998.

7. INCOME TAXES

Significant components of the provision for income taxes attributable to
continuing operations for the years ended March 31, 2000, 1999 and 1998 were as
follows:

2000 1999 1998
------------------ ----------------- ------------------
<S> <S> <C> <C>
Current:

Federal $601,000 $562,000 $88,000
State 674,000 453,000 125,000
Foreign 340,000 --- ---
------------------ ----------------- ------------------
Total current 1,615,000 1,015,000 213,000
------------------ ----------------- ------------------
Deferred:
Federal 3,061,000 6,784,000 (6,109,000)
State 466,000 842,000 1,010,000
Valuation allowances (3,333,000) (7,106,000) 5,759,000
------------------ ----------------- ------------------
Total deferred 194,000 520,000 660,000
------------------ ----------------- ------------------
$1,809,000 $ 1,535,000 $ 873,000
================== ================= ==================

</TABLE>

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

2000 1999 1998
---------------- ----------------- -------------------
<S> <C> <C> <C>
Expected tax at Federal statutory rate $ 8,642,000 $ 8,876,000 $ 5,412,000
State tax expense, net of Federal taxes 993,000 840,000 657,000
Net increase in cash surrender values of life insurance (4,910,000) (3,654,000) (2,851,000)
State franchise and capital taxes 438,000 295,000 448,000
Foreign loss carryforward without tax benefit --- --- ---
Tax benefit of credit carryovers and carrybacks --- --- (5,796,000)
Change in valuation allowance (3,333,000) (7,106,000) 5,759,000
Capital loss on sale of subsidiaries --- --- (4,125,000)
Other (21,000) 2,284,000 1,369,000
---------------- ----------------- -------------------
Income tax provision $ 1,809,000 $ 1,535,000 $ 873,000
================ ================= ===================

</TABLE>

The change of $3,333,000 in the valuation allowance for deferred tax assets as
of March 31, 2000 was due primarily to the utilization of the tax loss
carryforward.

Income before taxes consists primarily of income from the Company's domestic
operations and also includes pre-tax income of $1,248,000, $619,000 and $60,000
from the Company's foreign operations for fiscal 2000, 1999 and 1998,
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, 2000 and 1999 were as follows:

2000 1999
--------------------- --------------------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation $ 7,653,000 $ 8,984,000
Purchase price adjustments 38,151,000 39,531,000
--------------------- --------------------
Total deferred tax liabilities 45,804,000 48,515,000
--------------------- --------------------
Deferred tax assets:
Net operating loss carryforwards 19,193,000 18,916,000
Capital loss carryforward 5,153,000 6,275,000
Other 12,369,000 11,096,000
Valuation allowance for deferred tax assets (26,297,000) (22,964,000)
--------------------- --------------------
Net deferred tax assets 10,418,000 13,323,000
--------------------- --------------------
Net deferred tax liabilities $35,386,000 $35,192,000
===================== ====================

</TABLE>

At March 31, 2000, the Company had net operating loss carryforwards of
$52,100,000 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 at age 65 or
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 60,901, 24,956 and
3,632,990 at March 31, 2000, respectively. For fiscal years ended March 31,
2000, 1999 and 1998, contributions payable to the ESOT totaled $2,638,000,
$2,994,000 and $2,788,000, 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.

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.

F-15
<PAGE>

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

8. EMPLOYEE BENEFIT PLANS (CONTINUED)

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 2000, 1999 and 1998 are as follows:

2000 1999 1998
--------------- -------------- ---------------
<S> <C> <C> <C>
Service cost of benefits earned during the period $438,000 $604,000 $730,000
Interest cost on projected benefit obligation 739,000 796,000 648,000
Expected return on plan assets (999,000) (812,000) (685,000)
Amortization of prior service cost (111,000) 33,000 ---
Recognized net (gain) loss (84,000) 20,000 18,000
--------------- -------------- ---------------
$(17,000) $641,000 $711,000
=============== ============== ===============

</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, 2000 and 1999.

2000 1999
--------------- --------------
<S> <C> <C>
CHANGE IN PROJECTED BENEFIT OBLIGATION:
Benefit obligation at beginning of year $11,335,000 $10,468,000
Service cost 438,000 604,000
Interest cost 739,000 796,000
Plan amendments --- (1,348,000)
Change in assumptions (1,603,000) 549,000
Merger with another plan --- 742,000
Benefit payments (514,000) (452,000)
Actuarial gains (141,000) (24,000)
--------------- --------------
Benefit obligation at end of year 10,254,000 11,335,000
--------------- --------------
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year 13,216,000 10,333,000
Actual return on assets 1,280,000 2,760,000
Merger with another plan --- 524,000
Benefit payments (514,000) (452,000)
Company contributions 95,000 94,000
Fees (73,000) (43,000)
--------------- --------------
Fair value of plan assets at end of year 14,004,000 13,216,000
--------------- --------------

</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 $3,750,000 $1,881,000
Unrecognized prior service cost (1,270,000) (1,381,000)
Unrecognized net actuarial gain (4,002,000) (2,143,000)
--------------- ---------------
Net amount recognized $(1,522,000) $(1,643,000)
=============== ===============
Amounts recognized in balance sheets consist of:
Prepaid cost $ --- $ ---
Accrued benefit liability (1,780,000) (1,945,000)
Accumulated comprehensive loss - additional minimum
liability 258,000 302,000
--------------- ---------------
Net amount recognized $(1,522,000) $(1,643,000)
=============== ===============

WEIGHTED-AVERAGE ASSUMPTIONS AS OF MARCH 31:
Discount rate 7.75% 6.75%
Expected return on assets 8.00% 8.00%
Rate of compensation increase --- ---

</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 as of March 31, 1999.

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 $941,000, $1,633,000 and $1,615,000 in fiscal years 2000, 1999 and 1998,
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 2000, 1999 and 1998 are as follows:

2000 1999 1998
-------------- ------------ ---------------
<S> <C> <C> <C>
Service cost of benefits earned during the period $203,000 $203,000 $239,000
Interest cost on projected benefit obligation 189,000 193,000 216,000
Recognized net gain (168,000) (366,000) (175,000)
-------------- ------------ ---------------
$224,000 $30,000 $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, 2000 and 1999.

2000 1999
--------------- ---------------
<S> <C> <C>
CHANGE IN PROJECTED BENEFIT OBLIGATION:
Benefit obligation at beginning of year $3,148,000 $3,371,000
Service cost 203,000 203,000
Interest cost 189,000 193,000
Change in assumptions (351,000) 97,000
Benefit payments (114,000) (140,000)
Actuarial gains (343,000) (576,000)
--------------- ---------------
Benefit obligation at end of year 2,732,000 3,148,000
--------------- ---------------

Unfunded (2,732,000) (3,148,000)
Unrecognized prior service cost --- ---
Unrecognized net actuarial gain (923,000) (396,000)
--------------- ---------------
Accrued benefit cost $(3,655,000) $(3,544,000)
=============== ===============

WEIGHTED-AVERAGE ASSUMPTIONS AS OF MARCH 31:
Discount rate 7.75% 6.75%
Healthcare cost trend rate 7.50% 8.00%

</TABLE>

The healthcare cost trend rate of 7.50% 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 $64,000 $(54,000)
Effect on postretirement benefit obligation 369,000 (314,000)

</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
$16,572,000, $16,142,000 and $17,412,000 for the years ended March 31, 2000,
1999 and 1998, respectively. 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, 2000 the Company was obligated under noncancellable operating
leases for future minimum rentals as follows:

Fiscal year:
<S> <C>
2001 $14,476,000
2002 12,050,000
2003 10,025,000
2004 8,609,000
2005 6,526,000
Thereafter 43,333,000
-----------------
Total $95,019,000
=================

</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. There was no annual
fee payable for fiscal year 2000. Fees and expenses paid to Kelso in connection
with these agreements totaled $13,000, $668,000 and $687,000 during the years
ended March 31, 2000, 1999 and 1998, 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 2000, 1999 and 1998, expenditures made in connection with
environmental matters totaled $295,000, $2,799,000 and $388,000, 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, 2000, the Company had
accrued approximately $300,000 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. In
March 2000, the Company completed an approved remediation plan and is awaiting a
closure letter from the appropriate local governmental agencies.

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 in accordance with a consent decree requiring such monitoring through
2001.

F-19
<PAGE>

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

9. COMMITMENTS AND CONTINGENCIES (CONTINUED)

ENVIRONMENTAL CONTINGENCIES (CONTINUED)

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 and has not received
any further demands or notifications. 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.

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, 2000
Allowance for doubtful accounts..... $335,000 $1,201,000 $(1,120,000) $416,000

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

</TABLE>

S-2