UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

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 INTERNATIONAL, INC.

(602) 252-7787
Registrant’s Telephone Number, Including Area Code

     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.

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

     Indicate the number of shares of each of the issuer’s classes of common stock, as of the latest practical date: As of November 12, 2004, there were 7,063,122 shares of Common Stock, $.001 par value per share, outstanding.

SCHUFF INTERNATIONAL, INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SCHUFF INTERNATIONAL, INC.

See notes to consolidated financial statements.

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SCHUFF INTERNATIONAL, INC.

See notes to consolidated financial statements.

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SCHUFF INTERNATIONAL, INC.

See notes to consolidated financial statements.

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Schuff International, Inc.

Three and Nine Months Ended September 30, 2004 and 2003

1. Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The balance sheet at December 31, 2003 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

2. Stock Options

The Company has a stock-based employee compensation plan. The Company generally grants stock options for a fixed number of shares to employees and directors with an exercise price equal to the fair market value of the shares at the date of grant. The Company accounts for stock option grants to employees and directors under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, as amended by Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure. Accordingly, no compensation cost has been recognized for these stock option grants. Awards under the plan vest over periods ranging from immediate vesting to five years, depending upon the type of award. The following table illustrates the effect on net income and earnings per share if the fair value based method had been applied to all outstanding and unvested awards in each period presented, using the Black-Scholes valuation model.

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3. Reclassifications

Certain amounts in the 2003 consolidated financial statements have been reclassified to conform with the 2004 presentation.

4. New Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board (“FASB”) issued FIN 46, Consolidation of Variable Interest Entities, which was amended in December 2003, as FIN 46R. In general a variable entity is a corporation, partnership, trust, or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN 46R requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. The consolidation requirements of FIN 46R apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements apply to transactions entered into prior to February 1, 2003 in the first fiscal year or interim period beginning after June 15, 2003, which was subsequently delayed until the fourth quarter of 2003. Certain of the disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. The adoption of the interpretation did not have any impact on the consolidated financial statements.

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5. Receivables

Receivables consist of the following at:

6. Accounts Payable

Accounts payable consists of the following at:

7. Inventories

Inventories consist of the following at:

8. Line of Credit

On August 13, 2003, the Company entered into a Credit and Security Agreement with Wells Fargo Credit, Inc. (“Wells Fargo”), pursuant to which Wells Fargo agreed to advance up to a maximum aggregate amount of $15.0 million to the Company and cause the issuance of letters of credit in the maximum amount of $11.5 million for the Company’s account. The facility under the Credit and Security Agreement replaced the Company’s credit facility under the Credit Agreement, dated June 30, 1998, as amended, between the Company and Wells Fargo Bank, N.A. The credit facility is primarily maintained to enable the Company to issue letters of credit to its performance bond surety and workers compensation insurance carrier. On July 16, 2004, the Company amended the credit facility to allow it to issue up to $14.5 million in letters of credit. At September 30, 2004, the Company had no borrowings but had $12.9 million of outstanding letters of credit issued under its line of credit. These letters of credit are

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collateralized by cash held in an escrow account, which is classified as restricted funds on deposit on the September 30, 2004 balance sheet.

The credit facility is secured by a first priority, perfected security interest in all of the Company’s assets and its present and future subsidiaries. The interest rate is prime plus 1.50%. The credit facility contains covenants that, among other things, limit the Company’s ability to pay cash dividends or make other distributions; repurchase its Senior Notes; incur additional indebtedness; change its business; and 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.

The credit facility requires that the Company maintain a specified Debt Service Coverage Ratio (defined as the sum of net income, depreciation and amortization, interest expense and unfinanced capital expenditures divided by the sum of current maturities of long-term debt and interest expense), a minimum book net worth, a minimum monthly stop loss (defined as a net loss not exceeding $500,000 in any one month and $1.0 million in any two consecutive months) and maximum capital expenditures.

9. Income (Loss) Per Share

The following table sets forth the computation of basic and diluted income (loss) per share:

Options to purchase 964,000 shares of common stock at prices ranging from $1.30 to $13.75 were outstanding during the three and nine months ended September 30, 2004 but were not included in the computation of diluted income per share because the weighted average share price was less than the option price. Options to purchase 1,011,326 shares of common stock at prices ranging from $1.30 to $13.75 were outstanding during the three and nine months ended September 30, 2003 but were not included in the computation of diluted loss per share because the options would be anti-dilutive due to the net loss.

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10. Gains on Extinguishment of Debt

The Company recognized a gain of $182,000 (included in other income) during the nine months ended September 30, 2003 due to the repayment of $1.0 million of the Company’s 10-1/2% Senior Notes at a 20.25% discount, net of the write-off of related unamortized debt issue costs.

11. Contingent Matters

The Company is currently and from time to time involved through the ordinary course of business in certain claims, litigation and assessments. Various claims include one matter in which backcharges in the amount of $500,000 have been asserted against our subsidiary, Schuff Steel-Atlantic, by a general contractor. Due to the nature of the construction industry, the Company’s employees from time to time become subject to injury, or even death, while employed by the Company. The Company does not believe any new contingencies arose during the three and nine months ended September 30, 2004.

On April 2, 2003, Evans Welding Services Inc. brought suit in the General Court of Justice, Superior Court Division, County of Mecklenburg, North Carolina against the Company’s subsidiary, Addison Steel, Inc., its surety bond, the general contractor J.A. Jones Construction Company and its surety bonds and Starport I, LLC, the owner of the new Westin Hotel in Charlotte, North Carolina. J.A. Jones was the general contractor to the owner, Starport. Addison Steel was the structural steel subcontractor to J.A. Jones and Evans Welding was Addison’s erection subcontractor. Evans Welding’s claim was for approximately $300,000 of additional work on the project. Addison Steel filed a cross claim and its own action, which was consolidated with the Evans Welding lawsuit. Addison Steel sought to enforce its lien and bond rights and was owed approximately $2.4 million from J.A. Jones for unpaid contract work, retention, change orders and claims. On September 25, 2003, J.A. Jones filed for bankruptcy. However, Addison Steel continued to pursue its lien and bond rights against the owner and J.A. Jones’ sureties. The sureties asserted backcharges against Addison Steel for approximately $1.0 million. On April 9, 2004, the Company reached a settlement in which the sureties paid Addison Steel approximately $1.5 million on May 14, 2004. As part of the settlement, Addison Steel paid Evans Welding Services $100,000 on April 15, 2004.

On February 13, 2002, our subsidiary, Schuff Steel Company, instituted a lien foreclosure lawsuit against general contractor Peck/Jones Construction Company, OC America and others (“Peck/Jones”), in Los Angeles County Court, State of California relating to structural steel work done on the Sherman Oaks Galleria Project in Sherman Oaks, California. Schuff Steel was owed the principal sum in excess of approximately $1.4 million in unpaid contract balance, retention and/or unpaid change orders by the general contractor for a total claim in excess of $2.4 million. Schuff Steel was also seeking interest, penalty interest, additional disruption costs, and attorneys’ fees and costs against this general contractor. Until February 2003, no back-charges had been claimed against Schuff Steel, and Peck/Jones represented that it was simply in close–out negotiations with the owner. Peck/Jones purportedly closed-out the project with the owner, and asserted for the first time back-charges in excess of $1.0 million dollars against Schuff Steel Company. After a five-week jury trial, the Company obtained a jury verdict in its favor against Peck/Jones in the principal amount of $1.7 million. The Company has filed a motion for an award of prejudgment interest, penalty interest, attorneys’ fees, expert fees and other costs totaling over $1.8 million. The Defendants have challenged the Company’s right to entitlement of the majority of the amount claimed and a hearing is set before the trial court on November 23, 2004. The Company expects the trial court to render a final judgment in the matter by year-end 2004.

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12. Segment Information