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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

(Mark One)

	ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2000

or

	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to                               .

Commission File Number 000-22715

SCHUFF STEEL COMPANY

(602) 252-7787

Securities registered pursuant to Section 12(b) of the Act:

None.

Securities registered pursuant to Section 12(g) of the Act:

Common stock, $0.001 Par Value Per Share

      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   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.  

      At March 9, 2001, the aggregate market value of voting stock held by non-affiliates of the Registrant was $11,431,258 based on the closing market price of the Common Stock on such date, as reported by the American Stock Exchange.

      The number of shares of the Registrant’s Common Stock outstanding at March 9, 2001 was 7,203,876.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the Registrant’s definitive Proxy Statement relating to its annual meeting of stockholders to be held on May 21, 2001, are incorporated by reference into Part III hereof to the extent provided herein. Except as specifically incorporated by reference herein, the Proxy Statement is not deemed filed as part of this Annual Report on Form 10-K.

TABLE OF CONTENTS

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PART I

Item 1 — Business

General

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

      The Company currently operates primarily in the southwestern and southeastern United States with a concentration in Arizona, Nevada, Texas, Florida, Georgia and southern California, with international operations in South America and Mexico. The Company has experienced significant growth in revenues over the past five years. Revenues have grown from $103.9 million in 1996 to $278.1 million in 2000.

      The Company provides its integrated steel services primarily to general contractors and engineering firms, including, among others, Fluor Daniel, Inc., Bechtel Group Inc. and Perini Corporation, that focus on a wide variety of projects, including hotels and casinos, office complexes, hospitals, mining facilities, manufacturing plants, shopping malls and centers, sports stadiums, large diameter water pipes, power plants, dams, bridges, restaurants, convention facilities, entertainment complexes, airports, schools, churches and warehouses. Representative projects include: New Mile High Stadium, future home of the National Football League’s Denver Broncos; the Riverside Badlands Tunnel project, consisting of 7.5 miles of 12 foot diameter pipe for the Metropolitan Water District of Southern California; the Large Binocular Telescope on Mount Graham in Arizona; the Assembly Building for the Church of Jesus Christ of Latter Day Saints in Salt Lake City, Utah; Bank One Ballpark, a state-of-the-art baseball stadium featuring a fully retractable steel roof constructed for Major League Baseball’s Arizona Diamondbacks franchise; Sherman Oaks Galleria, Phase II, a new, state-of-the-art stadium-seating theater complex with attached dining and retail space in southern California; Novartis Institute for Functional Genomics Inc., consisting of six separate three-story steel framed buildings in San Diego, California; MGM Grand Hotel & Casino in Las Vegas, one of the world’s largest hotels and casinos; Paris Hotel and Casino, a hotel and casino with a scale replica of the Eiffel Tower; several projects for Disney’s new California Adventure in Anaheim, California and Walt Disney World and Universal Studios in Orlando, Florida; and Bajo de la Alumbrera in Argentina, one of the largest copper and gold mines in the world. The Company maintains relationships with a number of national and multi-national general contracting and engineering firms and is a preferred subcontractor to companies such as PETsMART, Inc. and Albertson’s, Inc.

      The Company was incorporated in Arizona in 1976 and was reincorporated in Delaware in 1997. The Company’s principal executive offices are located at 1841 West Buchanan Street, Phoenix, Arizona 85009, and its telephone number is (602) 252-7787.

      On June 4, 1998, the Company acquired all of the capital stock of Addison Structural Services, Inc. (“ASSI”), a privately held holding company headquartered in Albany, Georgia. The aggregate purchase price was $59.5 million, of which approximately $56.3 million was paid in cash at closing and $3.2 million was paid in the form of a promissory note. ASSI, through its wholly owned operating subsidiaries Addison Steel, Inc. (“Addison”) and Quincy Joist Company (“Quincy”), provides structural steel fabrication and detailing services and manufactures short and long span joists, trusses and girders for commercial and light industrial projects. Addison and Quincy operate primarily in the southeastern United States with a concentration in

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      On August 31, 1998, the Company acquired all of the capital stock of Six Industries, Inc. (“Six”), a privately held company headquartered in Houston, Texas. Six and its subsidiary, Aitken, Inc., offer a wide array of steel fabrication services and products to the oil, gas, and petro chemical industries, which include structural steel for large industrial contractors in Houston and other locations situated near the Gulf of Mexico; strainers, filters, separators and other types of measuring equipment; and pressure vessels. The aggregate purchase price was $18.2 million, of which $16.7 million was paid in cash at closing and $1.5 million was paid in the form of a promissory note.

      On October 15, 1998, the Company acquired all of the capital stock of Bannister Steel, Inc. (“Bannister”), a privately held company headquartered in National City, California. Bannister provides structural steel fabrication services for industrial and commercial projects in the southern California construction market. The aggregate purchase price was $16.8 million, of which $15.8 million was paid in cash at closing and $1.0 million was paid in the form of a promissory note.

      The acquisitions have enabled the Company to broaden its geographic reach, access joist manufacturing, increase its customer base, diversify and expand its revenue stream and leverage operating capabilities .

Overview of Industry

      Companies engaged in the steel fabrication and erection industry prepare detailed shop drawings, fabricate and erect structural steel and steel plate weldments, and perform related engineering services for the construction of various facilities. The primary customers for these services include private developers, general contractors, engineering firms and governmental agencies involved in a variety of large scale construction projects. Historically, these customers have relied on multiple subcontractors to perform various services to complete a single project, primarily because few companies in this industry offer fully integrated engineering, detailing, fabrication and erection services. Schuff Steel Company is one such fully integrated player in its industry, although the Company’s Addison, Bannister and Six subsidiaries offer erection capabilities through subcontractors.

      The Company’s Quincy subsidiary manufactures short- and long-span joists and girders. Customers include the Company and other steel fabricators and contractors throughout the U.S.

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

      At the same time, the Company believes it is well positioned to complete smaller, less-complex projects throughout the U.S. Sunbelt. The vast majority of projects that come up for bid are such smaller commercial projects between $200,000 and $5 million. The Company believes that its technology leadership in the industry, among other factors, has enabled it to realize efficiencies that make it more competitive in this higher-margin, faster-turnaround segment of the industry.

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

Business Strategy

      The Company’s objective is to achieve and maintain a leading position in the geographic and project markets in which it competes by providing timely, high-quality services to its customers, continuing to grow internally and generating stable and predictable annual revenue and earnings growth. The Company is pursuing these objectives with a strategy comprised of the following components:

      Selectively Pursue Large, Complex Projects. Although the Company will continue to pursue fast track, design-as-you-go projects as an important part of its overall business, it will do so with a focus on realizing attractive margins and profits on such projects. The Company’s unique ability to offer a full range of steel services and project management capabilities makes it a preferred subcontractor for fast track projects in the markets it serves. This capability often enables the Company to compete against a few, select firms in a less traditional, more negotiated selection process on these projects, thereby allowing the Company to realize attractive margins while providing overall cost savings and project flexibility and efficiencies to its customers.

      Expand and Diversify Revenue Base. The Company is seeking to expand and diversify its revenue base by leveraging its long-term relationships with national and multi-national construction and engineering firms, national and regional accounts and other customers. The Company also intends to continue to grow its operations by targeting smaller projects that carry higher margins and less risk of large margin fluctuations. The Company believes that continuing to diversify its revenue base by completing smaller projects, such as low-rise office buildings, power plants and other commercial and industrial structures, will reduce the impact of periodic adverse market or economic conditions as well as potential margin slippage that may accompany larger projects.

      Manage Capacity Through Outsourcing. The Company increases its project capacity by outsourcing certain amounts of its detailing, fabrication and erection work to reputable subcontractors. Outsourcing has enabled the Company to effectively increase the capacity of its fabrication facilities while usually maintaining margins comparable to in-house services. The Company believes outsourcing will play a key role in its strategy to continue to expand its presence in selected markets, where it typically provides design engineering, fabrication and project management services and utilizes local subcontractors for erection. The ability to expand or contract capacity through the use of outsourcing provides the Company flexibility to meet changing market demands in a cost-effective manner.

      Evaluate Strategic Acquisitions. The Company intends to continue to evaluate highly targeted, opportunistic acquisitions that offer the Company (i) strategically located facilities, (ii) expansion into new geographic markets, (iii) access to new domestic and international customers and (iv) penetration of new product market segments. Such acquisitions may also provide the additional benefits of increasing purchasing efficiencies with respect to steel and other raw materials, bonding and insurance, more efficiently allocating and utilizing its resources and integrating the “best practices” of the Company and acquired companies throughout the combined organization.

      Maintain Entrepreneurial Environment. The Company believes its management and operating structure, which emphasizes quality, innovation, flexibility, performance and safety, has contributed significantly to profitability and the ability to develop new business in competitive or difficult economic environments. The Company’s operating structure provides incentives to employees at all levels to focus on pursuing profitable growth opportunities, attaining financial objectives and delivering superior customer service.

      Emphasize Innovative Services. The Company focuses its engineering, detailing, fabrication, joist manufacturing and erection expertise on distinct product segments requiring unique or innovative techniques, where the Company typically experiences less competition and more advantageous negotiated contract opportunities. The Company has extensive experience in providing services requiring complex fabrication and

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      Diversify Customer and Product Base. Although the Company seeks to garner a leading share of the geographic and product markets in which it competes, it also seeks to diversify its construction projects across a wide range of commercial, industrial, and specialty projects. The following chart sets forth the percentage of revenues attributable to the Company’s various principal geographic and project markets for 2000 and 1999:

      For additional information regarding the breakdown of revenues and operating results for the Company and its subsidiaries, see Note 14 to the Consolidated Financial Statements appearing elsewhere in this report.

      The Company believes that its combined diversification into new geographic regions and specific product types has enabled and will continue to enable it to expand its revenue base and to reduce the impact of periodic market or economic conditions adversely impacting one or more of its market segments.

Growth Strategy

      The Company believes that the steel fabrication and erection industry consists of large, complex, fast track projects and smaller projects that offer less risk and a more stable source of revenue. Both project types favor companies with extended financial, operational and technical capabilities. The Company intends to take advantage of these trends by utilizing its integrated service capabilities and financial and management strength. Furthermore, the Company intends to leverage its joist manufacturing capabilities in the southeastern and southwestern U.S. to provide these high-margin products to steel fabricators and contractors throughout the U.S. The Company seeks to achieve continued growth and earnings stability and diminish the impact of business and economic cycles by pursuing a growth strategy consisting of the following components:

      Promote Internal Growth. The Company intends to pursue continued internal growth by adding sales and marketing personnel to dedicated, fast-growing markets in which the Company is actively pursuing new projects, by further developing its engineering and design capabilities and fabrication capacity, and by continually updating its fabrication and detailing equipment and technologies. The Company believes that these efforts will enhance its market share, revenues, and operating income in its existing and targeted principal markets and improve its operating capacity. The Company invested $5.8 million in 1999 and $6.4 million in 2000, and intends to invest approximately $3.5 million in 2001, in new fabrication equipment and technologies. In March 2000, the Company completed construction of a second joist manufacturing plant located in Buckeye, Arizona to be operated by its Quincy unit. The Company is also considering the expansion of certain of its other facilities and production capacities, which would increase 2001 estimated capital expenditures.

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      Create Additional Project Opportunities. The Company believes that its ability to efficiently coordinate and implement numerous design and logistical changes on large or more complex fast track projects, combined with its established long term relationships with key national and multi-national general contractors and other customers, will provide the Company with opportunities to market its services in a number of markets in which the Company has not yet achieved a leading position or conducted significant operations. The Company will also seek to capture significant market share in selected product markets such as sports stadiums, airports, mining and smaller commercial and industrial construction projects throughout the U.S. Sunbelt by increasing sales and marketing efforts generally in these regions.

Primary Markets and Products

      The Company’s current principal geographic markets include the southwestern United States, primarily Arizona, Nevada, Texas and southern California, and the southeastern United States, primarily Florida and Georgia. The Company has also provided its services in other regions of the western United States, such as Utah, New Mexico and Colorado, as well as in selected international markets.

      Southwestern and Western U.S. Markets. The Company is the leading steel fabrication and erection firm in Arizona and has been a prominent participant in many of Arizona’s largest and most visible public and private projects. The Company has completed projects in Arizona in a variety of industries, including the semiconductor and computer chip industry and the copper and other mining industries. The Company also has maintained a strong presence in the California market and intends to achieve a greater share of this geographic market because of its acquisition of Bannister and as it experiences an increase in new construction activity. The Company’s typical projects in California include the fabrication and erection of new and expanded hospital facilities, large shopping malls, and commercial and industrial manufacturing, distribution and warehouse facilities, including those for several national and multinational customers.

      Within the southwestern and western United States geographic markets, the Company has also developed a market share in distinct product segments, particularly in the construction of large diameter water pipes used in governmental aqueduct systems. These projects require the complex formation and welding of steel plate into large diameter pipe sections that are used to transport water from major supply sources to various population centers. The Company has developed in-house specialized fabrication equipment used to construct and weld these pipe sections, a unique coal tar and fiberglass enamel application system used to coat the pipe, and customized transportation equipment necessary to deliver the system to its ultimate destination. With the Six acquisition in Texas, the Company has developed a market share in the oil, gas, and petro-chemical industries by providing structural steel; strainers, filters, separators and other types of measuring equipment; and pressure vessels. The Company has also expanded its market share into Utah with the fabrication and erection of the new assembly building for the Church of Jesus Christ of Latter Day Saints and into Colorado with the fabrication and erection of the New Mile High Stadium.

      Southeastern U.S. Markets. The Company is a leading steel fabrication, erection and joist manufacturing firm in Central Florida and Georgia. Many of the Company’s projects in these areas are in the commercial and industrial markets and typically range in size from $50,000 to $1.0 million for structural steel fabrication projects and from $5,000 to $500,000 for steel joist manufacturing products. The Company has completed several steel fabrication and erection and joist manufacturing projects, both in the southeastern United States and nationwide, for a variety of national and regional retail, grocery, restaurant and similar customers.

      International Markets. In South America, the Company’s projects have been focused on large copper, gold and aluminum mining and related projects, primarily in Argentina and Chile. In addition, the Company has completed construction of several airport concourse and terminal facilities in the Caribbean as well as manufacturing facilities in Mexico.

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Representative Projects

      Among the Company’s noteworthy or recently completed or awarded projects and key national and regional customers are the following:

	•	New Mile High Stadium. The Company began erection of this $360 million facility in February 2000, and completed its portion of the project in early 2001. This future home of the Denver Broncos NFL team will seat over 78,000 for football games, and is expected to require approximately 10,000 tons of structural steel, more than 100,000 shop fabrication hours and more than 60,000 field erection hours.
	•	Large Binocular Telescope (LBT) Project. This project is part of the Mount Graham International Observatory and is being built in Arizona at an elevation of 10,000 feet above sea level. The Company’s responsibilities on this project included construction of the base of the observatory structure, fabrication and erection of the rotating structure, and installation of four 84,000 pound steel wheel assemblies upon which the telescope housing will rotate. When completed, the telescope will see further into space and make sharper images than any other optical telescope.
	•	LDS Assembly Building. Completed in 2000 for the Church of Jesus Christ of Latter Day Saints in Salt Lake City, Utah, this structure features a “King Pin Truss” weighing approximately 340 tons and 10 radial trusses weighing approximately 277 tons each, all of which support the main roof of the building. The entire project required approximately 11,300 tons of structural steel.
	•	Bank One Ballpark. In 1995, the Company was awarded a contract to provide steel fabrication and erection services for the Bank One Ballpark in Phoenix, a state of the art baseball stadium for Major League Baseball’s Arizona Diamondbacks franchise that features a fully retractable roof consisting of steel components detailed, fabricated and erected by the Company. The stadium contract represented a total of approximately $61 million in revenues to the Company. The stadium required over 20,000 tons of structural steel and employed approximately 160 iron workers at the peak of construction.
	•	Sherman Oaks Galleria, Phase II. Completed in May 2000, the project consisted of a new, state-of-the-art stadium-seating theater complex with attached dining and retail space at the existing Sherman Oaks Galleria in southern California. Phase II required approximately 3,900 tons of structural steel.
	•	Novartis Institute for Functional Genomics Inc. Awarded in 2000, this project involves the construction of six separate three-story steel framed buildings in San Diego, California totaling 198,500 square feet with a trellised walkway connecting the buildings. The project will require approximately 1,500 tons of structural steel.
	•	Bajo de la Alumbrera. The Company provided the design consultation, fabrication and delivery of approximately 7,200 tons of structural steel for the Bajo de la Alumbrera mining project in Argentina, which is one of the largest copper mines in the world.
	•	MGM Grand Hotel and Casino and Convention Center Renovation. This structure is presently one of the world’s largest hotels and casinos with approximately 5,000 hotel rooms and one million square feet of retail and casino space. The Company’s participation included the fabrication and erection of the main hotel and casino as well as the completion of a facade renovation and the provision of fabrication and erection services for the new MGM Convention Center, which consists of over 250,000 square feet of convention area.
	•	New York, New York Hotel and Casino. The Company was the fabricator and erector for the New York, New York Hotel and Casino, which required approximately 6,500 tons of structural steel. The hotel was constructed to resemble the New York City skyline, including replicas of the Statue of Liberty, the Brooklyn Bridge and other New York City landmarks.
	•	Paris Hotel & Casino. The Company was awarded three contracts for the fabrication and erection of the structural steel for the new Paris Hotel and Casino in Las Vegas. The project included a 1.2 million square foot low-rise area and a 34-story tower, which includes hotel, casino, showroom, convention

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		center and retail shopping areas as well as a 540 foot tall scale replica of the Eiffel Tower which was built over and penetrated into the casino based on the original engineering drawings for the Eiffel Tower.
	•	Riverside Badlands Tunnel. The Company is in the process of performing a contract for the fabrication of 7 1/2 miles of 12-foot diameter pipe for the Riverside Badlands Tunnel Project of the Metropolitan Water District of Southern California.
	•	Salt River Siphon Replacement Project. The Company served as the fabricator and erector for the Salt River Siphon Replacement project, a project requiring the fabrication of over 8,500 feet of 21-foot diameter pipe for the U.S. Bureau of Reclamation. The system transports water from the Salt River near Phoenix, Arizona to the major population centers of Arizona.
	•	Walt Disney World Projects. The Company has provided the structural steel fabrication and erection services for several Walt Disney World projects in Orlando, Florida, including the United Kingdom and Canada Pavilion’s at Epcot Center, the Splash Mountain amusement park ride and the Planet Hollywood Restaurant and Bar, which involved the fabrication of a unique multi-leg spherical steel crown covering the main building.
	•	Orange County, Florida Convention Center. The Company provided the steel fabrication and erection services and manufactured and erected the steel joists and trusses for Phases II and III of this one million square foot modern convention center, a complex multi-level facility recently constructed in the Orlando, Florida area. The Company was also awarded the steel fabrication contract for Phase IV of this project. The project is expected to require 6,000 tons of structural steel and is scheduled to begin in March  2001.
	•	Tropicana Storage Facility. The Company provided the fabrication and erection of the structural steel housing facility for several one-million gallon steel fruit juice storage tanks for Tropicana Products, Inc.’s juice storage center in Fort Pierce, Florida.
	•	Universal Studios. The Company was a steel fabricator and joist manufacturer for the Universal Studios complex in Orlando, Florida, a large working movie studio and tourist attraction.
	•	National and Regional Customers. The Company is a preferred subcontractor for steel fabrication and erection services and joist products on a variety of projects for several national and regional customers, including PETsMART, Inc. and Albertson’s, Inc.

Business Operations

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

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

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      Shop Fabrication. The Company’s fabrication services consist of the procurement from steel producers of raw steel shapes in different sizes and lengths. These shapes vary in cross-section from I-beams to angle, channel, tube, pipe, and plate. Upon delivery of these steel shapes, and prior to fabrication, the Company prepares load lists that identify the sequence and date that each individual piece of steel is required on a project, a procedure that reduces the handling of and the need to store materials in the field. Upon completion of detail shop drawings, the Company’s fabrication shop cuts the raw steel pieces to length, drills and punches holes through the use of numerically controlled beam lines, and completes coping and beveling with its numerically controlled machinery and automated burning equipment. The Company then fabricates fittings and completes welding and inspection of each finished structural piece. The Company utilizes advanced technologies to inspect weld seams, which significantly reduces costs, fabrication hours, and the likelihood of structural defects. After the completion of processing to customer specifications, finished pieces are loaded for shipment to the construction site, often pursuant to just-in-time delivery schedules. The Company also manufactures steel joists and girders in lengths ranging from five to 300 feet with a highly efficient and computerized process. The steel joist system is the one of the most economical roof systems for most buildings including office buildings, schools, churches, shopping centers and warehouses.

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

Project Management

      All contract awards to the Company are assigned a project number which is used to track each steel component and man-hour associated with the project through the entire construction process. All project drawings, specifications, and completion schedules on a project are reviewed by the Company’s senior management and all projects are assigned to one or more Project Managers who assume primary responsibility for all aspects of the project. Often a Project Manager assigned to a given project will have significant experience in similar projects. A Project Manager generally will be responsible for one to five projects in various stages of completion at any given time, depending on the scope, complexity, and geographic location of such projects. Each project is divided into critical sequences of steel groups that follow the anticipated erection or fabrication path. Each sequence follows a timeline and the status is continually monitored. Project Managers coordinate and manage design changes or other changes in scheduled completion deadlines in an effort to minimize overall project delays. The Company provides production bonuses to its Project Managers based on, among other factors, the achievement of lower costs on a project than the estimated costs used to formulate the initial bid or prices of subsequent change orders, and the ability to minimize costs or cost overruns on particularly complex projects or on projects that exceed initial cost estimates.

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

Safety and Quality Assurance

      The Company has adopted and maintains important safety policies that are administered and enforced by the Company’s top management. The Company considers workplace accident prevention to be of primary

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      The Company uses advanced welding and fabrication technologies and all of the Company’s products are fabricated in accordance with applicable industry and specific customer standards and specifications. The Company has achieved and maintains a level three certification by the American Institute of Steel Construction (AISC) with respect to its fabrication operations, the highest level of certification available from AISC. In addition, the Company’s welding employees are certified in accordance with the American Society of Mechanical Engineers (ASME) Section IX, Non-Destructive Examination Inspector Certification to Society Non-Destructive Testing TC-IA Standards. The Company has developed project-specific and Company-wide quality assurance and quality control programs, and utilizes sophisticated x-ray and ultra-sonic systems to inspect weld seams. Substantially all joist manufacturing projects require companies to be members of the Steel Joist Institute (SJI). The Company is one of only 17 companies nationwide that belong to the SJI.

Sales and Estimating

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

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

      Upon selection of projects to bid or price, the Company’s estimating division reviews and prepares projected costs of shop, field, detail drawing preparation and crane hours, steel and other raw materials, and other costs. On bid projects, a formal bid is prepared detailing the specific services and materials to be provided by the Company, payment terms and project completion timelines. Upon acceptance, the Company’s bid proposal is finalized in a definitive contract.

Contracting Methods and Performance Bonding

      The Company’s projects are awarded through a competitive bid process or are obtained through negotiation, in either case generally using one of three types of contract pricing approaches: fixed price, cost-plus pricing or unit cost pricing. Under the fixed price approach, the Company receives the price fixed in the contract, subject to adjustment only for change orders placed by the customer. As a result, the Company retains all cost savings but is also responsible for cost overruns. Historically, the majority of the Company’s contracts have been fixed price arrangements. Under the cost-plus arrangement, the Company receives a specified fee in excess of its direct labor and material cost, up to a maximum amount, and thus seeks to gain protection against cost overruns and sometimes benefits directly from cost savings. Under unit cost pricing, the Company receives a specified fee based on pounds or tons of fabricated steel shipped. Such fee includes all material, labor, overhead and profit mark-ups to prepare the steel to the customer’s requirements. Steel fabricated and shipped in excess of quantities quoted is billed to the customer at the original unit cost price per pound or ton.

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

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

Backlog

      The Company considers backlog an important indicator of its operating condition because its engineering, detailing, fabrication, and erection services are characterized by long lead times for projects and orders. The Company defines its backlog of contract commitments as the potential future revenues to be recognized upon performance of contracts awarded to the Company. Backlog increases as new contract commitments are obtained, decreases as work is performed and the related revenues are recognized, and increases or decreases as modifications in work are performed under a contract. As of December 31, 2000, the Company’s backlog was $130.5 million, of which approximately $8.4 million was attributable to one project for a single customer in Arizona, and approximately $19.1 million was attributable to one project in Florida. Backlog at December 31, 1999 was $165.4 million. The Company expects most of its backlog as of December 31, 2000 to be recognized as revenues in 2001.

Competition

      The principal geographic and product markets served by the Company are highly competitive. The Company competes with other contractors on a local, regional, or national basis, and in certain cases, on an international basis. The Company has different competitors for each of its services and product segments and within each geographic market served by the Company. The Company believes that it can compete effectively for new projects both nationally and internationally and that it is among the largest competitors in its industry. Among the principal competitive factors within the industry are price, timeliness of completion of projects, quality, reputation, and the desire of customers to utilize specific contractors with whom they have favorable relationships and prior experience. Certain of the Company’s competitors have financial and operating resources greater than those of the Company.

Governmental Regulation

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

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

Environmental Regulation

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

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

Employees

      As of December 31, 2000, the Company employed approximately 1,400 people. The number of persons employed by the Company on an hourly basis fluctuates directly in relation to the amount of business performed by the Company. Certain of the fabrication and erection personnel employed by the Company are represented by the United Steelworkers of America, the International Association of Bridge, Structural and Ornamental Iron Workers Union, the International Union of Operating Engineers, and the International Brotherhood of Boilermakers, Iron Shipbuilders, Blacksmiths, Forgers and Helpers Union. The Company is a party to several separate collective bargaining agreements with such unions in certain of the Company’s current operating regions, which expire (if not renewed) at various times in the future. Most of the Company’s collective bargaining agreements are subject to automatic annual or other renewal unless either party elects to terminate the agreement on the scheduled expiration date. The Company considers its relationship with its employees to be good and, other than sporadic and unauthorized work stoppages of an immaterial nature, none of which have been related to the Company’s own labor relations, the Company has not experienced a work stoppage or other labor disturbance.

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

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Suppliers

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

Item 2 — Properties

      The Company’s manufacturing facilities and executive and administrative offices are located at the following sites:

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

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Item 3 — Legal Proceedings

      Construction in general and the fabrication and erection of structural steel and heavy steel plate in particular involve a high degree of operational risk. Adverse weather conditions, operator and other error, and other unforeseen factors can cause personal injury or loss of life, severe damage to or destruction of property and equipment, and suspension of operations. Litigation arising from such occurrences may result in the Company being named as a party to lawsuits asserting substantial claims or to administrative or criminal actions that may involve substantial monetary penalties or the restriction of the Company’s operations in one or more jurisdictions. The Company is a defendant in lawsuits from time to time, including lawsuits arising in the normal course of its business. While it is impossible at this time to determine with certainty the ultimate outcome of these lawsuits, the Company’s management believes that the ultimate outcome will not have a material adverse effect on the operations or liquidity of the Company.

      The Company maintains workers compensation insurance that provides full coverage of statutory workers compensation benefits. The Company also maintains employer liability insurance in its principal geographic markets in amounts of $1,000,000 per accident for bodily injury by accident and $1,000,000 per employee (and as a policy limit) for bodily injury from disease and contractors commercial general liability insurance in the amount of $1,000,000. In addition, the Company maintains umbrella coverage limits of $30,000,000. The Company also maintains insurance against property damage caused by fire, flood, explosion and similar catastrophic events that may result in physical damage or destruction of the Company’s facilities and property. All policies are subject to various deductibles and coverage limitations. Although management of the Company believes that the Company’s insurance is adequate for its present needs, there can be no assurance that the Company will be able to maintain adequate insurance at premium rates that management considers commercially reasonable, nor can there be any assurance that such coverage will be adequate to cover all claims that may arise.

      The Company periodically reviews the need to maintain a litigation reserve. Currently, the Company does not believe any reserves for its ongoing litigation are required. The Company seeks to mitigate the effects of loss or damage through the maintenance of risk management, insurance, and safety programs. There can be no assurance, however, that the Company’s efforts to mitigate losses will be successful or that any losses incurred will not exceed the Company’s insurance or estimated reserves thereon.

      During 1998, the Company filed a claim in the Superior Court of the State of Arizona for the County of Maricopa against the Arizona Professional Baseball Team Limited Partnership and related parties for approximately $8.6 million for additional reimbursement for work the Company believes was billable under the terms of the related contract with respect to changes made in completing certain aspects of the Bank One Ballpark project. The Company’s claim was filed with that of the general contractor of the project, Perini/ Tutor-Saliba, along with several other project subcontractors. The Company has incurred and expensed substantially all of the costs related to this claim. On October 4, 2000, the Company reached a settlement with the Arizona Professional Baseball Team Limited Partnership and related parties with respect to this claim. The Company received an initial payment of approximately $2.4 million and expects to receive a second and final payment in the second quarter of 2001.

      On March 10, 2000, the Company recorded a Notice of Lien in Salt Lake City, Utah against the Assembly Building project recently completed by the Company for the Church of Jesus Christ of Latter Day Saints and Legacy Constructors, the general contractor on the project. The Company claimed it was owed approximately $4.5 million for additional steel provided and for additional work performed in the erection of structural steel on the project due to changes made by the owner and general contractor and which the Company believes is billable under the terms of its contract with the general contractor. The Company has incurred and expensed all of the costs related to this claim. On July 6, 2000, the Company announced that it had reached a confidential settlement in the second quarter of 2000 with the Church of Jesus Christ of Latter-day Saints relating to the Company’s recorded Notice of Lien.

      On March 9, 2001, the Company filed a claim in the Superior Court of the State of California for the County of Orange against the Hyperion Theatre project recently completed by the Company for Disney’s California Adventure and Bernards Bros. Construction, the general contractor on the project. The Company

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      The Company did not submit any matter to a vote of its security holders during the fourth quarter of 2000.

      Since July 15, 1999, the Company’s Common Stock has been traded on the American Stock Exchange under the symbol “SHF.” Prior to that date, the Company’s Common Stock was traded on the Nasdaq National Market under the symbol “SHUF.” The Common Stock commenced public trading on July 1, 1997 in connection with the Company’s initial public offering. The following table sets forth the high and low last sale prices of the Common Stock, as reported by the American Stock Exchange and the Nasdaq National Market, for the periods indicated:

      As of March 9, 2001, the Company believes there were approximately 1,600 beneficial owners of the Company’s Common Stock.

      Except for certain distributions to its then current shareholders while the Company was subject to taxation under subchapter S of the Internal Revenue Code of 1986 and certain other distributions, including those made in connection with the closing of the Company’s initial public offering in July 1997 to the Company’s shareholders prior to the offering, the Company has not made distributions or declared dividends on its Common Stock and does not anticipate doing so in the foreseeable future. It is the current policy of the Company’s Board of Directors to retain its earnings, if any, to finance the operation and expansion of the Company’s business. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

Factors That May Affect Future Stock Performance

      The performance of the Company’s Common Stock is dependent upon several factors including those set forth below and in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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  Control by Majority Shareholders; Ability to Issue Preferred Stock

      Mr. David A. Schuff, the Company’s Chairman and co-founder, and Mr. Scott A. Schuff, the Company’s President, Chief Executive Officer, co-founder and a member of its Board of Directors, collectively control the voting of approximately 70% of the outstanding Common Stock. As a result, these individuals control the vote on all matters requiring approval of the stockholders, including causing or restricting the sale or merger of the Company. In addition, the Company’s Certificate of Incorporation authorizes the Company to issue shares of “blank check” preferred stock, the designation, number, voting powers, preferences, and rights of which may be fixed or altered from time to time by the Board of Directors. Accordingly, the Board of Directors has the authority, without stockholder approval, to issue preferred stock with rights that could adversely affect the voting power or other rights of the holders of the Common Stock.

  Volatility of Stock Price

      The stock market has experienced price and volume fluctuations that have affected the market for many companies and have often been unrelated to the operating performance of such companies. The market price of the Common Stock is also subject to significant fluctuations in response to variations in the Company’s quarterly operating results, analyst reports, announcements concerning the Company, legislative or regulatory changes or the interpretation of existing statutes or regulations affecting the Company’s business, litigation, general trends in the industry and other events or factors. In July 1997, the Company completed an initial public offering of its Common Stock for $8 per share. Since that time, the Company’s Common Stock has traded as low as $2.25 per share and as high as $15.625 per share. The market price for the Company’s Common Stock remains volatile and there is no assurance that the market price will not experience significant changes in the future.

  Shares Eligible for Future Sale

      There were 7,203,876 shares of Common Stock outstanding as of March 9, 2001. Of these shares, 2,181,676 shares of Common Stock are freely tradable. The 5,022,200 remaining shares of Common Stock are beneficially held by Messrs. David A. Schuff and Scott A. Schuff and are “restricted securities” as that term is defined under Rule 144 promulgated under the Securities Act of 1933 (the “Securities Act”). In general, under Rule 144 as currently in effect, subject to the satisfaction of certain other conditions, if one year has elapsed since the later of the date of acquisition of restricted shares from either an issuer or an affiliate of an issuer, the acquirer or subsequent holder is entitled to sell in the open market, within any three-month period, a number of shares that does not exceed the greater of one percent of the outstanding shares of the same class or the average weekly trading volume during the four calendar weeks preceding the filing of the required notice of sale. Of the “restricted securities” outstanding, all of these shares have been held for the one-year holding period required under Rule 144. No predictions can be made with respect to the effect, if any, that sales of Common Stock in the market or the availability of shares of Common Stock for sale under Rule 144 will have on the market price of Common Stock prevailing from time to time. Sales of substantial amounts of Common Stock in the open market could adversely affect the prevailing market price of the Common Stock and may make it more difficult for the Company to sell its equity securities in the future on terms it deems appropriate.

      The following sets forth selected historical consolidated financial data of the Company for each of the years in the five-year period ended December 31, 2000. The selected annual historical consolidated statement of income and balance sheet data is derived from the Company’s Consolidated Financial Statements audited by independent auditors. For additional information, see the Consolidated Financial Statements of the Company and Notes thereto included elsewhere in this report. The following table should be read in conjunction with Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and is qualified by reference thereto and to the Company’s Consolidated Financial Statements and Notes thereto.

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	an effective tax rate of 40%. Provision for income taxes for 1997 includes credits of $300,000 to income recorded upon revocation of the Company’s S  corporation election in June 1997.
(4)	Backlog is the amount of potential future revenues to be recognized upon performance of contracts awarded to the Company. Backlog increases as new contract commitments are received, decreases as revenues are recognized, and increases or decreases to reflect modifications in the work to be performed under a contract. Of the Company’s $130.5 million backlog as of December 31, 2000, approximately $8.4 million was attributable to one project for a single customer in Arizona and approximately $19.1 million was attributable to one project for a single customer in Florida.
(5)	Restricted funds on deposit represent funds on deposit in interest bearing escrow accounts, which are maintained in lieu of retention for specific contracts. Retentions on contract receivables are amounts due which are withheld until the completed project has been accepted by the customer in accordance with the contract. See Note 1 to the Consolidated Financial Statements appearing elsewhere in this report.
(6)	The Company recognizes revenues and costs from construction projects using the percentage of completion accounting method. Under this method, revenues are recognized based upon the ratio of the costs incurred to date to the total estimated costs to complete the project, commencing when progress is sufficient to estimate final results with reasonable accuracy, which typically occurs when fabricated product is shipped to the project site or when erection of the project commences. Construction contracts with customers generally provide that billings are to be made monthly in amounts which are commensurate with the extent of performance under the contracts. Costs and recognized earnings in excess of billings on uncompleted contracts primarily represent revenues earned under the percentage of completion method which have not been billed, and also include costs incurred in excess of billings on contracts for which sufficient work has not been performed to allow for recognition of revenues. Billings in excess of costs and recognized earnings on uncompleted contracts represent amounts billed on contracts in excess of the revenues allowed to be recognized under the percentage of completion method on those contracts, or the costs incurred on contracts for which sufficient work has not been performed to allow for recognition of revenues.

      The following discussion and analysis provides information regarding the Company’s financial position as of December 31, 1999 and 2000, and its results of operations for the years ended December 31, 1998, 1999, and 2000. This discussion should be read in conjunction with the preceding “Selected Financial Data” and the Company’s Consolidated Financial Statements and related Notes thereto appearing elsewhere in this report.

Introduction

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

      The Company believes that there is an ongoing trend in the steel fabrication and erection industry to design and build large, complex projects according to accelerated time schedules. With many projects, only a portion of the detail design drawings are completed when construction begins. The remaining drawings are completed, with numerous design changes being implemented, throughout the construction process. These fast track, “design-as-you-go” projects are well-suited to integrated contractors that can (i) reduce the logistical and coordination problems inherent in the use of multiple subcontractors to complete a large, complex project and (ii) more efficiently respond to rapid and multiple design changes while minimizing project delays and cost overruns commonly associated with such changes. The complexity and size of these projects require subcontractors possessing extended financial and operational capabilities. Individual large

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      At the same time, the Company believes that the majority of projects that come up for bid are smaller commercial and industrial projects of between $200,000 and $5 million. The Company believes that its technology leadership in the industry, among other factors, has enabled it to realize efficiencies that make it more competitive in this more stable, faster-turnaround segment of the industry.

      The Company obtains contracts through competitive bidding or negotiation, which generally are either fixed price, cost-plus or unit cost arrangements. During 2000, 1999 and 1998, most of the Company’s revenues were derived from projects performed pursuant to fixed price contracts. In bidding or negotiating contracts, the Company must estimate its costs, including projected increases in labor, material, and service costs. Project duration typically lasts from one to twelve months.

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

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

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

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

      On June 4, 1998, the Company acquired all of the issued and outstanding capital stock of ASSI. As a result of such purchase, the Company acquired indirect ownership of the assets of ASSI’s wholly owned operating subsidiaries, Addison Steel, Inc. and Quincy Joist Company. The aggregate purchase price was approximately $59.5 million, of which approximately $56.3 million was paid in cash and $3.2 million was paid in the form a promissory note secured by a letter of credit. On August 31, 1998, the Company acquired all of the issued and outstanding capital stock of Six. The aggregate purchase price was approximately $18.2 million, of which approximately $16.7 million was paid in cash and $1.5 million was paid in the form of a promissory note. On October 15, 1998, the Company acquired all of the issued and outstanding capital stock of Bannister. The aggregate purchase price was approximately $16.8 million, of which approximately $15.8 million was paid in cash and a $1.0 million in the form of a promissory note secured by a letter of credit.

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      The acquisitions have been accounted for using the purchase method of accounting, and accordingly, the purchase prices have been allocated to the assets and liabilities acquired based on the fair value at the date of the acquisition with the excess of the purchase price over net assets acquired being recorded as goodwill. The operating results of Addison, Quincy, Six, and Bannister have been included in the Company’s Consolidated Financial Statements from the closing date of each of the acquisitions.

Results of Operations

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

  Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

      Revenues. Revenues increased by 17.4% to $278.1 million in 2000 from $236.8 million in 1999. The increase in revenues was primarily a result of additional revenues generated by the parent company from a greater number of projects. The average revenues for the Company’s ten largest revenue generating projects were $9.5 million in 2000 versus $6.7 million in 1999. This increase was primarily due to one project in Colorado that generated approximately $29.4 million of revenue in 2000.

      Gross profit. Gross profit increased 22.8% to $55.6 million in 2000 from $45.2 million in 1999 due primarily to the 17.4% increase in revenues coupled with an increase in gross profit percentage. Approximately $2.0 million of the increase was the result of the settlement with the Arizona Professional Baseball Team Limited Partnership received in the fourth quarter of 2000. As a percentage of revenues, gross profit increased to 20.0% in 2000 from 19.1% in 1999, primarily due to higher average margins achieved by Schuff and Six. Excluding the above settlement, gross profit would have been 19.4% in 2000.

      General and administrative. General and administrative expenses increased by 23.5% to $29.8 million in 2000 from $24.1 million in 1999, and to 10.7% of 2000 revenues compared to 10.2% of revenues in 1999. The increase in general and administrative expenses was largely attributable to the write-off of capitalized costs associated with computer software developed for internal use, additional general and administrative costs required to support the revenue growth of the companies, the costs associated with the Company’s new joist manufacturing facility in Buckeye, Arizona and increased legal fees associated with the settlement of pending claims. General and administrative expenses include those for contract bids, estimating, sales and marketing, facilities, project management, and support services.

      Goodwill amortization. Goodwill amortization was $2.2 million for the years ended December 31, 2000 and 1999. Goodwill amortization represents the amortization of the excess of cost over the fair value of net assets acquired from the Addison, Quincy, Six, and Bannister business combinations. The goodwill is amortized on a straight-line basis over 25 years.

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      Interest expense. Interest expense was $11.7 million in 2000 and $11.8 million in 1999. The interest expense is primarily attributable to the Company’s $100.0 million 10 1/2% Senior Notes issued in June 1998 and the Company’s use of the available line of credit.

      Other income. Other income decreased 15.5% to $1.1 million in 2000 from $1.3 million in 1999. The decrease in other income was attributable primarily to a decrease in cash available for investment during the first three quarters of 2000.

      Income tax expense. Income tax expense for 2000 was $5.5 million which represents an effective tax rate of approximately 42.2% compared to $3.4 million in 1999 which represented a 39.8% effective tax rate on earnings. The effective tax rate is higher than the federal statutory rates primarily because of state income taxes and the amortization of goodwill, which is not deductible for tax purposes. The increase in the effective tax rate from 1999 to 2000 is primarily due to a decrease in income tax credits recognized in 2000 which were attributable to qualifying research and experimentation expenses associated with the Company’s engineering, detailing and software development activities.

      Net income. As a result of the factors discussed above, net income increased by 46.2% to $7.5 million in 2000 from $5.2 million in 1999.

      Backlog. Backlog decreased by 21.1% to $130.5 million at December 31, 2000 compared to $165.4 million at December 31, 1999. The $34.9 million decrease in backlog compared to December 31, 1999 was the result of job mix based on selected targeted projects. The Company has made an effort to focus on bidding a greater number of projects with shorter duration to maximize efficiencies and reduce risk. Of the backlog at December 31, 2000, approximately $8.4 million was attributable to one project in Arizona and approximately $19.1 million was attributable to one project in Florida.

  Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

      Revenues. Revenues increased by 24.7% to $236.8 million in 1999 from $189.9 million in 1998. The increase in revenues was primarily a result of an additional $80.4 million of revenues being generated by ASSI, Six, and Bannister following their acquisitions by the Company in June 1998, August 1998, and October 1998, respectively. This increase was offset by a $33.5 million decrease in revenues generated by Schuff due to a decrease in contracts awarded to Schuff in 1999. The average revenues for the Company’s ten largest revenue generating projects were $6.7 million in 1999 versus $8.4 million in 1998.

      Gross profit. Gross profit increased 54.5% to $45.2 million in 1999 from $29.3 million in 1998 due primarily to the 24.7% increase in revenues coupled with an increase in gross profit percentage. As a percentage of revenues, gross profit increased to 19.1% in 1999 from 15.4% in 1998, primarily due to higher average margins achieved by Addison, Quincy, Six and Bannister.

      General and administrative. General and administrative expenses increased by 55.4% to $24.1 million in 1999 from $15.5 million in 1998, and to 10.2% of 1999 revenues compared to 8.2% of revenues in 1998. Of the $8.6 million increase in 1999, approximately $6.8 million was attributable to additional general and administrative expenses resulting from the inclusion of such costs incurred by Addison, Quincy, Six and Bannister for the entire 1999 fiscal year. The remainder of the increase in general and administrative expenses was due primarily to increased administrative expenses associated with these acquisitions. General and administrative expenses include those for contract bids, estimating, sales and marketing, facilities, project management, and support services.

      Goodwill amortization. Goodwill amortization increased 131.6% to $2.2 million in 1999 from $931,000 in 1998 due to recognition of amortization expense over the entire year of 1999 versus a partial year in 1998. Goodwill amortization represents the amortization of the excess of cost over the fair value of net assets acquired from the Addison, Quincy, Six, and Bannister business combinations. The goodwill is amortized on a straight-line basis over 25 years.

      Interest expense. Interest expense increased 72.5% to $11.8 million in 1999 from $6.8 million in 1998. The increase in interest expense was attributable primarily to the full year of interest costs incurred in 1999

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      Other income. Other income decreased 24.6% to $1.3 million in 1999 from $1.7 million in 1998. The decrease in other income was attributable primarily to a decrease in earnings on funds invested from the cash proceeds of the Company’s $100.0 million 10 1/2% Senior Notes issued in June 1998.

      Income tax expense. Income tax expense for 1999 was $3.4 million which represents an effective tax rate of approximately 39.8% compared to $3.5 million in 1998 which represented a 44.4% effective tax rate on earnings. The decrease in the effective tax rate was due primarily to income tax credits recognized in 1999 which were attributable to qualifying research and experimentation expenses associated with the Company’s engineering, detailing and software development activities.

      Net income. As a result of the factors discussed above, net income increased by 19.2% to $5.2 million in 1999 from $4.3 million in 1998.

      Backlog. Backlog increased by 24.4% to $165.4 million at December 31, 1999 compared to $132.9 million at December 31, 1998. The $32.5 million increase in backlog compared to December 31, 1998 was the result of additional contracts awarded to the Company. Of the backlog at December 31, 1999, approximately $16.1 million was attributable to one project in California and approximately $21.8 million was attributable to one project in Colorado.

Liquidity and Capital Resources

      The Company attempts to structure the payment arrangements under its contracts to match costs incurred under the project. To the extent the Company is able to bill in advance of costs incurred, it generates working capital through billings in excess of costs and recognized earnings on uncompleted contracts. To the extent the Company is not able to bill in advance of costs, it relies on its credit facilities to meet its working capital needs. At December 31, 2000, the Company had no outstanding borrowings under its line of credit, with approximately $13.6 million available for borrowings, and working capital of approximately $62.1 million. The Company believes that it has sufficient liquidity through its present resources and the existence of its bank credit facility to meet its near term operating needs.

      The Company’s short-term cash needs are primarily for working capital to support operations including receivables, inventories, and other costs incurred in performing its contracts. Operating activities provided cash flows of $17.2 million and $1.7 million for the years ended December 31, 2000 and 1999, respectively. For the year ended December 31, 2000, operating cash flows were more than net income primarily due to a $6.5 million decrease in costs and recognized earnings in excess of billings on uncompleted contracts and a $3.8 million increase in billings in excess of costs and estimated earnings on uncompleted contracts. These working capital changes were offset by $6.5 million of depreciation and amortization and other changes in working capital. For the year ended December 31, 1999, operating cash flows were less than net income primarily due to a $4.2 million increase in costs and recognized earnings in excess of billings on uncompleted contracts and a $4.7 million increase in receivables resulting from increased revenues. These working capital changes were offset by $5.7 million of depreciation and amortization and other changes in working capital. Cash used in investing activities totaled $8.0 million for the year ended December 31, 2000 and $9.4 million for the year ended December 31, 1999, including purchases of property and equipment of $8.5 million in 2000 and $7.7 million in 1999. Financing activities required $5.0 million and $940,000 for the years ended December 31, 2000 and 1999, respectively.

      The Company renewed its bank credit facility in September 2000 and voluntarily reduced the facility from $25 million to $15 million. The credit facility now matures on June 30, 2002, and is available for working capital and general corporate purposes. The credit facility is secured by a first priority, perfected security interest in all assets of the Company and its present and future subsidiaries. The Company will be eligible for reductions in the interest rates on the credit facility if the Company achieves certain leverage ratio targets. The interest rates, based on the leverage ratio achieved, can range from a minimum of LIBOR plus 2.25% or prime to a maximum of prime plus 1.50% or LIBOR plus 3.50%. At December 31, 2000, there was approximately

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      The credit facility also requires that the Company maintain specified leverage ratios, interest coverage ratios, fixed charge coverage ratios and a specified minimum EBITDA. The credit facility also contains other covenants that, among other things, limit the Company’s ability to pay cash dividends or make other distributions, change its business, merge, consolidate or dispose of material portions of its assets. The security agreements pursuant to which the Company’s assets are pledged prohibit any further pledge of such assets without the written consent of the bank.

      On June 4, 1998, the Company completed a private placement of $100.0 million in principal amount of its 10 1/2% Senior Notes due 2008 (“Senior Notes”). Net proceeds of the Senior Notes were used to repay certain indebtedness of the Company and to pay the cash portions of the purchase price for the Company’s acquisitions of Addison, Quincy, Six and Bannister. The Senior Notes are redeemable at the option of the Company in whole or in part, beginning in 2003 at a premium declining ratably to par by 2006. By 2001, the Company may redeem up to 35.0% of the Senior Notes at a premium with the proceeds of an equity offering, provided that at least 65.0% of the aggregate amount of the Senior Notes originally outstanding remain outstanding. The Senior Notes contain covenants that, among other things, provide limitations on additional indebtedness, sale of assets, change of control and dividend payments. The Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis by the Company’s current and future, direct and indirect subsidiaries.

      The Company has two other long-term debt commitments that are related to notes payable generated from the Company’s acquisitions in 1997 and 1998. The balance of these notes was $1.4 million at December 31, 2000 with interest rates of 5.73% and prime less 1.00% and maturing in the years 2001 and 2002. One of the notes payable is secured by a letter of credit totaling $1.1 million. See Note 6 to the Consolidated Financial Statements appearing elsewhere in this report.

      The Company leases some of its fabrication and office facilities from a partnership in which the principal beneficial stockholders of the Company and their family members are the general and limited partners. The Company has three leases with the partnership for its principal fabrication and office facilities, the property and equipment acquired in the 1997 acquisition of B&K Steel, and additional office facilities adjacent to the Company’s principal office and shop facilities. Each lease has a 20 year term and is subject to increases every five years commencing in 2002 pursuant to a Consumer Price Index formula. The Company’s annual rental payments for the three leases were $1.1 million in 2000 and each year thereafter during the remaining terms of the leases. See Item 2. “Properties.”

      The Company estimates that its capital expenditures for 2001 will be approximately $4.3 million, which includes improvements at two of its plants. The Company is also considering the expansion of certain of its facilities and production capacities, which would increase the 2001 estimated capital expenditures. The Company believes that its available funds, cash generated by operating activities and funds available under its bank credit facilities will be sufficient to fund these capital expenditures and its working capital needs. However, the Company may expand its operations through future acquisitions and may require additional equity or debt financing.

Accounting Pronouncements

      In June 1998, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 133, Accounting for Derivative Instruments and Hedging Activities, which establishes revised accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity measure all derivative instruments at fair value and recognize such instruments as either assets or liabilities in the consolidated statements of financial condition. The accounting for changes in the fair value of a derivative instrument will depend on the intended use of the derivative as either a fair value hedge, a cash flow hedge or a foreign currency hedge. The effect of the changes in fair value of the derivatives and, in certain cases, the hedged items are to be reflected in either the consolidated statements of income or as a component of other comprehensive income, based upon the resulting designation.

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Factors That May Affect Future Results and Financial Condition

      The Company’s future operating results and financial condition are dependent on a number of factors that the Company must successfully manage in order to achieve favorable future operating results and financial condition. The following potential risks and uncertainties, together with those mentioned elsewhere herein, including in Item 5. “Market for Registrant’s Common Equity and Related Stockholder Matters,” could affect the Company’s future operating results, financial condition, and the market price of its Common Stock.

  Substantial Leverage and Ability to Service Debt

      With the Company’s 10 1/2% Senior Notes, existing line of credit facility and other positionings, the Company is highly leveraged with substantial debt service in addition to operating expenses and planned capital expenditures. The Company’s 10 1/2% Senior Notes permit the Company to incur additional indebtedness, subject to certain limitations, including additional secured indebtedness under existing credit facilities. The Company’s level of indebtedness will have several important effects on its future operations, including, without limitation, (i) a substantial portion of the Company’s cash flow from operations must be dedicated to the payment of interest and principal on its indebtedness, reducing the funds available for operations and for capital expenditures, including acquisitions, (ii) covenants contained in the Senior Notes or the credit facility or other credit facilities will require the Company to meet certain financial tests, and other restrictions will limit its ability to borrow additional funds or to dispose of assets, and may affect the Company’s flexibility in planning for, and reacting to, changes in its business, including possible acquisition activities, (iii) the Company’s leveraged position will substantially increase its vulnerability to adverse changes in general economic, industry and competitive conditions, (iv) the Company’s ability to obtain additional financing for working capital, capital expenditures, acquisitions, general corporate and other purposes may be limited and (v) the Company’s leveraged position and the various covenants contained in the Senior Notes and the credit facility may place the Company at a relative competitive disadvantage as compared to certain of its competitors. The Company’s ability to meet its debt service obligations and to reduce its total indebtedness will be dependent upon the Company’s future performance, which will be subject to general economic, industry and competitive conditions and to financial, business and other factors affecting the operations of the Company, many of which are beyond its control. There can be no assurance that the Company’s business will continue to generate cash flow at or above current levels. If the Company is unable to generate sufficient cash flow from operations in the future to service its debt, it may be required, among other things, to seek additional financing in the debt or equity markets, to refinance or restructure all or a portion of its indebtedness, including the Senior Notes, to sell selected assets, or to reduce or delay planned capital expenditures and growth or business strategies. There can be no assurance that any such measures would be sufficient to enable the Company to service its debt, or that any of these measures could be effected on satisfactory terms, if at all.

  Dependence on Construction Industry

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

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  Fluctuating Quarterly Results of Operations

      The Company has experienced, and in the future is expected to continue to experience, substantial variations in its results of operations from quarter to quarter as a result of a number of factors, many of which are outside the Company’s control. In particular, the Company’s operating results may vary because of downturns in one or more segments of the building construction industry, changes in economic conditions, the Company’s failure to obtain, or delays in awards of, major projects, the cancellation of major projects, or the Company’s failure to timely replace projects that have been completed or are nearing completion. In addition, from time to time the Company has disputes with its customers concerning change orders to its contracts. To the extent such disputes are not resolved on a timely basis, the Company’s results of operations may be affected. Any of the foregoing factors could result in the periodic inefficient or underutilization of the Company’s resources and could cause the Company’s operating results to fluctuate significantly from period to period, including on a quarterly basis.

  Revenue Recognition Estimates

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

  Variations in Backlog; Dependence on Large Contracts

      The Company’s backlog can be significantly affected by the receipt, or loss, of individual contracts. For example, approximately $27.5 million, representing 21.1% of the Company’s backlog at December 31, 2000, was attributable to two contracts. In the event one or more large contracts were terminated or their scope reduced, the Company’s backlog could decrease substantially. The Company’s future business and results of operations may be adversely affected if it is unable to replace significant contracts when lost or completed, or if it otherwise fails to maintain a sufficient level of backlog. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business — Backlog.”

  Fixed Price Contracts

      Of the Company’s $130.5 million backlog at December 31, 2000, most consisted of projects being performed on a fixed price basis. In bidding on projects, the Company estimates its costs, including projected increases in costs of labor, material and services. Despite these estimates, costs and gross profit realized on a fixed price contract may vary from estimated amounts because of unforeseen conditions or changes in job conditions, variations in labor and equipment productivity over the terms of contracts, higher than expected increases in labor or material costs and other factors. These variations could have a material adverse effect on the Company’s business, financial condition and results of operations for any period.

  Geographic Concentration

      The Company’s fabrication and erection operations currently are conducted primarily in Arizona, Nevada, Florida, Georgia, California and Texas, states in which the construction industry has experienced substantial growth during recent years. Because of this concentration, future construction activity and the Company’s business may be adversely affected in the event of a downturn in economic conditions existing in these states and in the southwestern and southeastern United States generally. Factors that may affect economic conditions include increases in interest rates or limitations in the availability of financing for

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  Competition

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

  Substantial Liquidity Requirements

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

  Capacity Constraints; Dependence on Subcontractors

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

  Dependence Upon Key Personnel

      The Company’s success depends on the continued services of the Company’s senior management and key employees as well as the Company’s ability to attract additional members to its management team with experience in the steel fabrication and erection industry. The unexpected loss of the services of any of the Company’s management or other key personnel, or its inability to attract new management when necessary, could have a material adverse effect upon the Company.

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  Union Contracts

      The Company currently is a party to a number of collective bargaining agreements with various unions representing some of the Company’s fabrication and erection employees. These contracts expire or are subject to expiration at various times in the future. The inability of the Company to renew such contracts could result in work stoppages and other labor disturbances, which could disrupt the Company’s business and adversely affect the Company’s results of operations.

  No Assurance of Successful Acquisitions

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

      The acquisitions of Addison, Quincy, Six, and Bannister have consumed and will continue to consume substantial management attention and resources of the Company and will require substantial efforts and entail certain risks in the integration of their operations. There can be no assurance that anticipated cost savings or synergies will be achieved. The Company will be dependent on the retention and future performance of key officers and employees of Addison, Quincy, Six, and Bannister for day-to-day management and future operating results.

  Operating Risks; Litigation

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

  Potential Environmental Liability

      The Company’s operations and properties are affected by numerous federal, state and local environmental protection laws and regulations, such as those governing discharges to air and water and the handling and disposal of solid and hazardous wastes. Compliance with these laws and regulations has become increasingly stringent, complex and costly. There can be no assurance that such laws and regulations or their interpretation will not change in a manner that could materially and adversely affect the Company. Certain environmental laws, such as the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and its state law counterparts, provide for strict and joint and several liability for investigation and remediation of spills and other releases of toxic and hazardous substances. These laws may apply to conditions at properties

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  Governmental Regulation

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

  Risks of International Operations

      The Company currently operates in selected international markets and is seeking to further expand its presence in these markets. Less than 1% of the Company’s revenues in 2000, however, were related to projects outside the United States. The Company’s international operations are subject to certain political, economic and other uncertainties, including risks of war, nationalization of assets, renegotiation or nullification of existing contracts, changing political conditions, changing laws and policies affecting trade and investment, and overlap of different tax structures. Although the Company currently attempts to limit its exposure to currency fluctuations by dealing solely in United States dollars, there can be no assurance that the Company’s international operations will escape the risks of fluctuating currency values, hard currency shortages, or controls on currency exchange.

  Write-off of Impaired Asset

      In December 1999, the Company temporarily suspended its efforts to install new financial accounting software. Included in Other Assets on the Company’s Balance Sheet at December 31, 1999 were $2.2 million of cumulative related costs. Capitalized software costs are evaluated for impairment in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 121, Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. Impairment is recognized when there are indicators of impairment and it is determined there is little or no remaining utility to the software or that it is no longer probable that the computer software being developed will be completed or placed in service. During the year ended December 31, 2000, management wrote off the remaining $1.8 million of accumulated costs. The costs are included in general and administrative expenses on the consolidated income statement for the year ended December 31, 2000.

  Forward Looking Statements

      This Annual Report on Form 10-K, including Item 1. “Business,” Item 3. “Legal Proceedings,” the Notes to the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements. Among other matters, this Annual Report on Form 10-K includes forward-looking statements relating to the Company’s backlog, improvement in gross margins, and anticipated business in future periods. Additional written or oral forward-looking statements may be made by the Company from time to time in filings with the Securities and Exchange Commission, in its press releases, or otherwise. The words “believe,” “expect,” “anticipate,” “intends,” “forecast,” “project,” and similar expressions identify forward-looking statements. Such statements

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      Forward-looking statements reflect the Company’s current views with respect to future events and financial performance and speak only as of the date the statements are made. Such forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. Statements in this Annual Report on Form 10-K, including Item 1. “Business,” Item 3. “Legal Proceedings,” the Notes to the Consolidated Financial Statements and in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” describe factors, among others, that could contribute to or cause such differences. In addition, new factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from forward looking statements. The Company undertakes no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future events, or otherwise.

Item 7A — Quantitative and Qualitative Disclosures About Market Risk

Derivative Financial Instruments, Other Financial Instruments, and Derivative Commodity Instrument

      During 1999 and 2000, the Company did not participate in any derivative financial instruments.

Primary Market Risk Exposure

      The Company is exposed to market risk from changes in interest rates associated with its holding variable rate debt ($1.1 million outstanding balance at December 31, 2000). Assuming an identical outstanding balance for all of 2000, a hypothetical immediate 100 basis point increase in interest rates would increase interest expense for the year by approximately $110,000.

      The Company is potentially exposed to market risk associated with changes in interest rates primarily as a result of its $100.0 million 10 1/2% fixed rate Senior Notes, which were issued on June 4, 1998. Specifically, the Company is exposed to changes in the fair value of its $100.0 million Senior Notes. At December 31, 2000, the fair value of the Senior Notes was approximately 70% of par or $70 million. From January 1, 2000 to December 31, 2000, the Senior Notes had a fair value that was as low as 59% of par and as high as 82% of par. The variation in fair value is a function of market interest rate changes and the investor perception of the investment quality of the Senior Notes.

Item 8 — Financial Statements and Supplementary Data

      The Independent Auditors’ Report and Consolidated Financial Statements of the Company, including the Notes to such statements, are set forth on pages F-1 through F-25.

Item 9 — Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

      The Company has had no disagreements with its independent accountants in regard to accounting and financial disclosure and has not changed its independent accountants during the two most recent fiscal years.

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PART III

Item 10 — Directors and Executive Officers of the Registrant

      Information regarding (i) directors and executive officers of the Company is set forth under the caption “Information Concerning Directors and Executive Officers” and (ii) compliance with Section 16(a) is set forth under the caption “Section 16(a) Beneficial Ownership Reporting Compliance,” in the Company’s Proxy Statement relating to its 2001 Annual Meeting of Stockholders (the “2001 Proxy Statement”) and is incorporated by reference into this Form 10-K Report, which will be filed with the Commission in accordance with Rule 14a-6 promulgated under the Exchange Act. With the exception of the foregoing information and other information specifically incorporated by reference into this report, the Company’s 2001 Proxy Statement is not being filed as a part hereof.

Item 11 — Executive Compensation

      Information regarding executive compensation is set forth under the caption “Executive Compensation” in the 2001 Proxy Statement, which information is incorporated herein by reference; provided, however, that the “Report of the Compensation Committee on Executive Compensation” and the “Stock Price Performance Graph” contained in the 2001 Proxy Statement are not incorporated by reference herein.

Item 12 — Security Ownership of Certain Beneficial Owners and Management

      Information regarding security ownership of certain beneficial owners and management is set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” in the 2001 Proxy Statement, which information is incorporated herein by reference.

Item 13 — Certain Relationships and Related Transactions

      Information regarding certain relationships and related transactions of management is set forth under the caption “Certain Transactions and Relationships” in the 2001 Proxy Statement, which information is incorporated herein by reference.

PART IV

Item 14 — Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)(1) Consolidated Financial Statements

      The following documents are filed as part of this Annual Report on Form 10-K:

(a)(2)  Financial Statement Schedules

      The financial statement schedules have been omitted since they are either not applicable or the information required to be set forth therein is contained elsewhere herein.

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(a)(3) Exhibits

      The following exhibits are filed as part of this Annual Report on Form 10-K.

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(1)	Incorporated by reference to the Company’s Registration Statement on Form S-1 (Registration No. 333-26711), effective June 26, 1997.
(2)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
(3)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1997.
(4)	Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997.
(5)	Incorporated by reference to the Company’s Current Report on Form 8-K/ A, filed June 19, 1998.
(6)	Incorporated by reference to the Company’s Current Report on Form 8-K, filed August 27, 1998.
(7)	Incorporated by reference to the Company’s Current Report on Form 8-K, filed September 4, 1998.
(8)	Incorporated by reference to the Company’s Proxy Statement for its 1998 Annual Meeting of Stockholders, filed May 28, 1998 (File No 0-22715).
(9)	Incorporated by reference to the Company’s Registration Statement on Form S-4 (Registration No. 333-58123), effective July 21, 1998.

(10)	Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998.
(11)	Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999.

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SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SCHUFF STEEL COMPANY,
	a Delaware corporation

	By:	/s/SCOTT A. SCHUFF

	Scott A. Schuff
	President and Chief Executive Officer

Date: March 19, 2001

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

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REPORT OF INDEPENDENT AUDITORS

Board of Directors

      We have audited the accompanying consolidated balance sheets of Schuff Steel Company as of December 31, 2000 and 1999, and the related consolidated statements of income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

      We conducted our audits in accordance with 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Schuff Steel Company at December 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 December 31, 2000, in conformity with accounting principles generally accepted in the United States.

	/s/ ERNST & YOUNG LLP

Phoenix, Arizona

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SCHUFF STEEL COMPANY

CONSOLIDATED BALANCE SHEETS