SECURITIES AND EXCHANGE COMMISSION

(Mark One)

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

For the fiscal year ended December 31, 2004

OR

o	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: 001-13122

RELIANCE STEEL & ALUMINUM CO.

350 South Grand Avenue, Suite 5100
Los Angeles, California 90071
(213) 687-7700
(Address of principal executive offices and telephone number)

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

     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 þ No o

     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 the registrant’s knowledge, in definitive proxy of information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes þ No o

     The aggregate market value of the voting stock held by non-affiliates of the registrant, based on the closing price on the New York Stock Exchange on June 30, 2004 was $1,256,530,424.

     As of February 28, 2005, 32,855,774 shares of the registrant’s common stock, no par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the registrant’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 18, 2005 (the “Proxy Statement”) are incorporated by reference into Part III of this report.

INDEX

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SAFE HARBOR STATEMENT UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

     This Annual Report on Form 10-K and the documents incorporated in this Annual Report on Form 10-K by reference contain forward-looking statements. You should read carefully any statements containing the words “expect,” “believe,” “anticipate,” “project,” “estimate,” “predict,” “intend,” “should,” “could,” “may,” “might,” or similar expressions or the negative of any of these terms.

     Forward-looking statements involve known and unknown risks and uncertainties. Various factors, such as the “Risk Factors” listed below, may cause our actual results, performance, or achievements to be materially different from those expressed or implied by any forward-looking statements. Among the factors that could cause our results to differ are the following:

	•	Our interest rates on our debt could change. Our variable rate debt is currently at relatively low historical levels and rates, and we anticipate that these rates will continue to increase through 2005.
	•	Foreign currency exchange rates could change, which could affect the price we pay for metals and the results of our foreign operations.
	•	Our acquisitions might fail to perform as we anticipate. This could result in an impairment charge to write off some or all of the goodwill for that entity.
	•	Our future operating results depend on a number of factors beyond our control, such as the prices for and the availability of metals, which could cause our results to fluctuate significantly over time. During periods of low customer demand, it could be more difficult for us to pass through price increases to our customers, which could reduce our gross profit and net income. The costs of certain metals increased significantly in 2004 and although we were able to pass through most of the increase in costs to our customers in 2004, we may not be successful in doing so in future periods. In addition, because of increased foreign demand and closings of some domestic mill capacity, lead times have lengthened and supply tightened significantly in 2004 for many of the products that we sell, which contributed to our ability to pass through our increased costs to our customers. Although raw materials for the mills are still in tight supply globally, foreign demand for the products that we sell has reduced somewhat. Changes in foreign demand can cause significant fluctuations in both availability and cost of the products we sell. A significant or rapid decline in costs from current levels could have a severe negative impact on our gross profit.
	•	We service industries that are highly cyclical, and any further downturn in our customers’ industries could reduce our revenue and profitability.
	•	The success of our business is affected by general economic conditions and, accordingly, our business was adversely impacted by the economic slowdown or recession in 2003, 2002 and 2001. This could occur in future periods.
	•	Our business is very competitive and increased competition could reduce our gross profit margins and net income. The low demand levels in 2003 increased competitive pricing pressures and lowered our gross profit margins. If availability of metals increases over 2004 levels, our gross profit margins could decline due to competitive pressures.
	•	As a decentralized business, we depend on both senior management and our operating employees; if we are unable to attract and retain these individuals, our results of operations may decline.
	•	We may not be able to consummate future acquisitions, and those acquisitions that we do complete may be difficult to integrate into our business.
	•	We are subject to various environmental and other governmental regulations which may require us to expend significant capital and incur substantial costs.
	•	If existing shareholders sell their shares, the market price of our common stock could be depressed.
	•	Principal shareholders who own a significant number of our shares may have interests that conflict with yours.
	•	We have implemented a staggered or classified Board that may adversely impact your rights as a shareholder.
	•	We may discover internal control deficiencies in our decentralized operations or in an acquisition that must be reported in our SEC filings, which may result in a negative reaction that adversely impacts our stock price.

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     Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future performance or results. We are not obligated to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should consider these risks when reading any forward-looking statements.

This Annual Report on Form 10-K includes trademarks, trade names and service marks of the Company and its subsidiaries.

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PART I

Item 1. Business

     We are one of the five largest metals service center companies in the United States. Our network of 24 divisions, 19 operating subsidiaries and one 50.5%-owned company operates more than 100 locations in 30 states, Belgium, France and South Korea. Through this network, we provide metals processing services and distribute a full line of more than 90,000 metal products, including alloy, aluminum, brass, copper, carbon steel, titanium, stainless steel and specialty steel products, to more than 95,000 customers in a broad range of industries. Many of our metals service centers provide processing services for specialty metals only. We deliver products from facilities in Alabama, Arizona, California, Colorado, Florida, Georgia, Idaho, Indiana, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Missouri, Montana, Nevada, New Jersey, New Mexico, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah and Washington. One of our subsidiaries has international locations that serve the European and Asian semiconductor markets. Another subsidiary opened a metals service center in Belgium in January 2003 to service the European aerospace market.

     Our primary business strategy is to enhance our operating results through strategic acquisitions, expansion of our existing operations and improved operating performance at our locations. This strategy and our proven operating methods have enabled us to outperform most of our competitors in the metals service center industry. Following the economic recession in 2001, 2002 and 2003, our industry experienced a significant and unprecedented upturn. In 2004, we had record net sales of $2.9 billion and record net income of $170 million. Supply limitations and improved demand resulted in significantly higher prices for certain of our products, which allowed us to produce these record financial results.

Industry Overview

     Metals service centers acquire products from primary metals producers and then process carbon steel, aluminum, stainless steel and other metals to meet customer specifications, using techniques such as blanking, leveling (or cutting-to-length), sawing, shape cutting, shearing and slitting. These processing services save our customers time, labor, and expense and reduce their overall manufacturing costs. Specialized equipment used to process the metals requires high-volume production to be cost effective. Many manufacturers are not able or willing to invest in the necessary technology, equipment, and inventory to process the metals for their own manufacturing operations. Accordingly, industry dynamics have created a niche in the market. Metals service centers purchase, process, and deliver metals to end-users in a more efficient and cost-effective manner than the end-user could achieve by dealing directly with the primary producer or with an intermediate steel processor. Industry analysts estimate that, historically in the United States, based on tonnage, metals service centers and processors annually purchase and distribute approximately:

	•	30% of all carbon industrial steel products produced in the United States;
	•	45% of all stainless steel produced in the United States; and
	•	36% of all aluminum sold in the mill/distributor shared markets (which excludes that sold for aluminum cans, among other things).

     These percentages have not changed significantly in the last five years. In the May 2004 issue, the magazine, Purchasing, reported that the North American metals distribution industry was estimated to generate about $58.35 billion in revenues in 2003 (the latest year for which such information is available), down from $72 billion in 2000, and that shipments of steel, aluminum, copper metals and superalloys to domestic buyers in 2003 increased by 3% from 2002 which was the first tonnage pick-up in three years.

     The metals service center industry is highly fragmented and intensely competitive within localized areas or regions. Many of our competitors operate single stand-alone service centers. According to industry sources, the number of intermediate steel processors and metal center facilities in North America has decreased from approximately 7,000 locations in 1980 to approximately 3,500 locations operated by more than 1,300 companies in 2003 (Purchasing, May 2003). This consolidation trend creates opportunities for us to make acquisitions.

     Metals service centers are generally less susceptible to market cycles than producers of the metals, because service centers are usually able to pass on all or a portion of increases in metal costs to their customers. In 2002 and 2003, it was more difficult for our industry to pass through price increases of certain carbon steel products, as the increased costs resulted from supply constraints rather than customer demand, which is more typical. In 2004, these dynamics changed significantly as domestic mill shutdowns and increased global demand limited availability of several carbon steel products. This limited supply, along with somewhat improved U.S. demand, allowed service centers to increase their selling prices and pass these costs on to their customers. We believe that service centers with the most rapid inventory turnover are generally the least vulnerable to changing metals prices.

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     Customers purchase from service centers to obtain value-added metals processing, readily available inventory, reliable and timely delivery, flexible minimum order size, and quality control. Many customers deal exclusively with service centers because the quantities of metal products that they purchase are smaller than the minimum orders specified by mills or because those customers require intermittent deliveries over long or irregular periods. Metals service centers respond to a niche market created because of the focus of the capital goods and related industries on just-in-time inventory management and materials management outsourcing, and because integrated mills have reduced in-house direct sales efforts to small sporadic purchasers to enhance their production efficiency.

History of Reliance

     Reliance Steel & Aluminum Co. was organized as a California corporation on February 3, 1939, and commenced business in Los Angeles, California fabricating steel reinforcing bar. Within ten years, we had become a full-line distributor of steel and aluminum, operating a single metals service center in Los Angeles. In the early 1950’s, we automated our materials handling operations and began to provide processing services to meet our customers’ requirements. In the 1960’s, we began to acquire other companies to establish additional service centers, expanding into other geographic areas.

     In the mid-1970’s, we began to establish specialty metals centers stocked with inventories of selected metals such as aluminum, stainless steel, brass, and copper, and equipped with automated materials handling and precision cutting equipment. We have continued to expand our network, with a focus on servicing our customers as opposed to merely distributing metal. In 2003, we acquired a company that processes metal for a fee without taking ownership of the metal. We have not diversified outside of our core business and we strive to consistently perform as one of the best in our industry. We operate metals service centers under the following trade names:

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     We serve our customers primarily by providing quick delivery, metals processing and inventory management services. We purchase a variety of metals from primary producers and sell these products in small quantities based on our customers’ needs. For about 45% of our sales, we perform metals processing services, or first-stage processing, before distributing the product to manufacturers and other end-users, often within 24 hours from receipt of an order, if the order does not require extensive or customized processing. These services save time, labor, and expense for our customers and reduce their overall manufacturing costs. During 2004, we handled approximately 9,300 transactions per business day, with average revenues of approximately $1,260 per transaction. Our average order size is up 48% from our 2003 average order size but this is due to the impact of price increases rather than an increase in the volume of metal per transaction. Our total revenues for 2004 were $2.9 billion. We believe that our focus on small orders with quick turnaround differentiates us from many of the other large public metals service center companies and allows us to generate higher profits than those companies.

     Historically, we have expanded both through acquisitions and internal growth. Since our initial public offering in September 1994, we have successfully purchased more than 30 businesses including our largest acquisition to date in 2003. From 1984 to September 1994, we acquired 20 businesses.

Acquisitions

     On July 1, 2003, we acquired all of the outstanding stock of Precision Strip, Inc., a privately-held metals processing company, and its related entity, Precision Strip Transport, Inc. (collectively “Precision Strip”), for approximately $220 million in cash, plus the assumption of approximately $26 million of debt. In 2004, we made an additional payment of $16 million to the Precision Strip sellers to reimburse them for additional income taxes related to a tax election that we made. Precision Strip’s processing activities consist primarily of slitting and blanking flat-rolled products, approximately 58% of which are carbon steel products, 22% aluminum products and 20% stainless steel products on a “toll” basis, processing the metal for a fee without taking ownership of the metal. Precision Strip is headquartered in Minster, Ohio with additional facilities in Kenton, Middletown and Tipp City, Ohio; Anderson and Rockport, Indiana; Bowling Green, Kentucky; and Talladega, Alabama. Precision Strip had net sales of approximately $132 million for the twelve months ended December 31, 2004. Based on the volume of metal processed, we estimate that Precision Strip processed more than $2.5 billion of metal in 2004.

     We continue to evaluate acquisition opportunities and expect to continue to grow our business through acquisitions.

Recent Developments

     Valex Corp., our 97%-owned subsidiary, is a leading domestic manufacturer of electropolished stainless steel tubing and fittings primarily used in the construction and maintenance of semiconductor manufacturing plants. Valex formed a joint venture in 1999 establishing a Korean company, Valex Korea Co., Ltd. In 2003, Valex Corp. increased its ownership interest in Valex

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Korea to 69.5% from 66.5%, and in 2004, Valex purchased the remaining interest in Valex Korea owned by its original partner increasing its current ownership to 99%. Valex Korea benefited from significantly improved demand in the Asian market in 2004 and is servicing the growing semiconductor market in China through a third-party warehouse provider. Valex SARL reduced the size of its French operation in 2004 due to reduced European demand, and now maintains a sales office and stocks product with a third-party warehouse provider.

     In 2005 AMI Metals Europe, SPRL, opened a sales office in France and is in the process of expanding its warehouse facility in Belgium to better service its increased share of the European aerospace business. Pacific Metal Company relocated its Portland headquarters and service center to a newly-built, state-of-the-art facility in May 2004 to better support its customers in that area and realize operating efficiencies. PDM Steel Service Centers, Inc. moved its Las Vegas operation to a larger facility to meet their customers’ needs. The Las Vegas operation opened in 2003 to penetrate that market and quickly outgrew the initial facility.

     Our Arrow Metals facility near Dallas, Texas and our Reliance Metalcenter facility in Wichita, Kansas began operating as part of Bralco Metals in mid-2004. This change expanded the product offerings of these locations and allowed them to benefit from the strong reputation of Bralco Metals in the marketplace.

     Central Plains Steel Co. increased its processing capabilities with an additional slitter in its Kansas City, Kansas facility that was transferred from Pacific Metal Company. Phoenix Metals Company added a precision blanking line at its newly built Nashville, Tennessee location, as well as a stainless steel polishing line at its Norcross (Atlanta), Georgia operation. Precision Strip, Inc. increased its oscillate slitting capacity with the addition of a new line at its Tipp City, Ohio facility.

     We formed RSAC Management Corp., a California corporation, in 1999 to operate as a holding company for our subsidiaries and to provide administrative and management services to our metals service centers. Our executive officers maintain a control environment that is focused on integrity and ethical behavior, establish general policies and operating guidelines and monitor adherence to proper financial controls, while our division managers and subsidiary officers have virtual autonomy with respect to day-to-day operations. This balanced, yet entrepreneurial, management style has enabled us to improve the productivity and profitability both of acquired businesses and of our own expanded operations. Division managers and other management personnel are eligible for incentive compensation based, in part, on the profitability of their particular division or subsidiary and, in part, on our overall profitability.

     We seek to increase our profitability by expanding our existing operations and acquiring businesses that diversify or enhance our customer base, product range, processing services and geographic coverage. We have developed and maintain an excellent reputation in the industry for our integrity and the quality and timeliness of our service to customers.

Customers

     Our customers purchase from us and other metals service centers to obtain value-added metals processing, readily available inventory, reliable and timely delivery, flexible minimum order size and quality control. Many of our customers deal exclusively with service centers because the quantities of metal products that they purchase are smaller than the minimum orders specified by mills, or because those customers require intermittent deliveries over long or irregular periods, or because those customers require specialized processing services. We believe that metals service centers have also enjoyed an increasing share of total metal shipments because of the focus of the capital goods and related industries on just-in-time inventory management and materials management outsourcing, and because metal producers have reduced in-house direct sales efforts to small sporadic purchasers in order to enhance their production efficiency.

     We have more than 95,000 metals service center customers in various industries. In 2004, no single customer accounted for more than 1.5% of our sales, and more than 85% of our orders were from repeat customers. Our customers are manufacturers and end-users in the general manufacturing, construction (both commercial and residential), transportation (rail, truck and auto), aerospace, and semiconductor fabrication industries. In 2003, many of our suppliers also became our customers as a result of our purchase of Precision Strip, which typically sells processing services to larger customers, such as mills and OEM’s, and in larger annual volumes than we have experienced historically. Precision Strip has also indirectly increased our participation in the auto and appliance end markets. Our metals service centers wrote and delivered over 2,345,000 orders during 2004 at an average price of approximately $1,260. Most of our metals service center customers are located within a 200-mile radius of the metals service center serving them. The proximity of our centers to our customers helps us provide just-in-time delivery to our customers. With our fleet of approximately 775 trucks (some of which are leased), we are able to service many smaller customers. Moreover, our computerized order entry system and flexible production scheduling enable us to meet customer requirements for short lead times and just-in-time delivery. Less than 3% of our sales were to international customers in 2004, with approximately 50% of these sales from our AMI Metals and Valex international locations serving the European and Asian markets.

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     We believe that our long-term relationships with many of our customers significantly contribute to the success of our business. Providing prompt and efficient services and quality products at reasonable prices are important factors in maintaining these relationships. In 2004, limited supply of certain metals became a factor for our customers. We believe that our strong relationships with our suppliers allowed us to obtain higher allocations of these metals than many of our competitors. This allowed us to continue to meet the needs of our long-term customers and to be selective in the sale of any excess metal to provide for enhanced profitability.

     Our customers’ demand may change from time to time based on, among other things, general economic conditions and industry capacity. Many of the industries in which our customers compete are cyclical in nature. Because we sell to a wide variety of customers in several industries, we believe that the effect of such changes on us is significantly reduced. However, from 2001 through August 2003, we experienced lower sales levels due to a broad-based economic downturn that affected all industries. We experienced lower demand in each successive year from 2000 until September 2003 when we experienced an improvement in our customer demand as well as pricing for most of the products we sell. Customer demand levels continued to increase through March 2004 when demand peaked. We believe our customers were attempting to purchase metal in advance of the continuous carbon steel price increases from the mills that were announced beginning in the first quarter of 2004. Demand on a volume basis was strong through the remainder of 2004 compared to recent years, but is still below year 2000 levels. Demand for aluminum and stainless steel products improved steadily throughout 2004.

     Pricing for carbon steel products increased to record highs in 2004, primarily due to raw material shortages for the mills that increased their costs, and due to reduced supply resulting from the shutdown of some domestic capacity and from increased global demand. The amount of import material available earlier in 2004 in the U.S. declined as it was re-routed to strong foreign markets such as China. The most significant mill price increases occurred in the second and third quarters of 2004. Due to tight supply, we were able to pass these increases through to our customers, typically at the time the mill announced the increase. In the 2004 fourth quarter, costs for carbon steel products decreased somewhat, as we expected, primarily due to more availability as some import material started arriving in the U.S. Pricing for aluminum and stainless steel products increased steadily throughout the year as demand increased, especially for aerospace products.

     California was our largest market for many years, but we have expanded our geographic coverage in recent years and the Southeast region of the United States was our largest market in 2004 and 2003. Although our sales dollars in each of these regions have increased, the percent of total sales in each region have changed due to the Company’s growth. California represented 23% of our 2004 sales, which was a significant decrease from 45% of our 1997 sales. The Southeast region of the United States represented 26% of our 2004 sales compared to 18% of our 1997 sales, and the Midwest region, which we entered in 1999, represented 20% of our 2004 sales.

Suppliers

     We purchase our inventory from the major metals mills, both domestic and foreign, and have multiple suppliers for all of our product lines. Our major suppliers of domestic carbon steel products include California Steel Industries, Inc., International Steel Group, Inc., IPSCO, Inc., Nucor Corporation, Oregon Steel Mills, United States Steel Corporation and USS-POSCO Industries. Allegheny Technologies Incorporated, International Stainless Steel Co. and North American Stainless supply stainless steel products. We are a recognized distributor for various major aluminum companies, including Alcoa Inc, Alcan Aluminum Limited, Aleris International, Inc. (formerly Commonwealth Aluminum Corp.), Kaiser Aluminum Corp., Ormet Aluminum Mill Products Corporation and Pechiney Rolled Products.

     During the 2001 through 2003 period, many domestic steel mills entered bankruptcy proceedings and certain of those mills temporarily closed a portion of their production capacity. Beginning in 2003 and continuing into 2004, many of the bankrupt mill facilities were acquired and some production was re-started. Mill pricing for steel products stabilized in mid-2003 mainly because of the consolidation that occurred at the mill level that improved capacity and mill-pricing discipline. Beginning in late 2003, steel mills began to experience significant increases in their raw material costs due to shortages caused by increased global demand. In 2004 they instituted surcharges on top of base price increases and consistently implemented significant increases through most of 2004. Costs for aluminum and stainless steel products began to increase in the second half of 2003 and continued to increase steadily throughout 2004.

     Because of our total volume of purchases and our long-term relationships with our suppliers, we believe that we were able to purchase inventory at the best prices offered by the suppliers, given the order size. We believe that we are not dependent on any one of our suppliers for metals and that our relationships with our suppliers are very strong. We have worked closely with our suppliers in order to become an important customer for each major supplier of metals for our core product lines. In 2004, when carbon steel supply was tight, we believe that these relationships provided an advantage to us in our ability to source product and have it available for our customers. However, if the significant increase in global steel usage and raw material shortages continue, along with supply constraints for aluminum and stainless steel, this may cause difficulties for metals service centers,

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including us, and their customers, in obtaining the volume of metal desired. In addition, mill consolidation has somewhat reduced the number of suppliers available to us.

Backlog

     Because of the just-in-time delivery policy, and the short lead-time nature of our business, we do not believe the information on backlog of orders is material to an understanding of our metals service center business.

Products and Processing Services

     We provide a wide variety of processing services to meet each customer’s specifications and deliver products to fabricators, manufacturers and other end users. We maintain a wide variety of products in inventory. For orders other than those requiring extensive or specialized processing, we often deliver to the customer within 24 hours after receiving the order. Our 2004 sales were comprised of the following approximate percentages:

	•	12% carbon steel plate
	•	10% carbon steel structurals
	•	10% carbon steel tubing
	•	9% stainless steel plate, sheet and coil
	•	9% galvanized steel sheet and coil
	•	8% heat-treated aluminum plate, sheet and coil
	•	7% carbon steel bar
	•	7% hot rolled steel sheet and coil
	•	6% common alloy aluminum plate, sheet and coil
	•	5% miscellaneous, including brass, copper and titanium
	•	4% aluminum bar and tube
	•	4% stainless steel bar and tube
	•	4% cold rolled steel sheet and coil
	•	4% toll processing of aluminum, carbon steel and stainless steel
	•	1% electropolished stainless steel tubing and fittings

     We do not depend on any particular customer group or industry because we process a variety of metals. Because of this diversity of product type and material, we believe that we are less exposed to fluctuations or other weaknesses in the financial or economic stability of particular customers or industries. We also are less dependent on particular suppliers.

     For our largest product type (sheet and coil), we purchase coiled metal from primary producers in the form of a continuous sheet, typically 36 to 60 inches wide, between .015 and .25 inches thick, and rolled into 3- to 20-ton coils. The size and weight of these coils require specialized equipment to move and process the coils into smaller sizes and various products. Few of our customers have the capability of processing the metal into the desired products.

     After receiving an order, we enter it into our computerized order entry system, select appropriate inventory and schedule the processing to meet the specified delivery date. About 50% of the orders specify delivery within 24 hours. We attempt to maximize the yield from the various metals that we process by combining customer orders to use each purchased product to the fullest extent practicable.

     Few metals service centers offer the full scope of processing services and metals that we provide. In 2004, approximately 45% of our sales orders required us to perform processing services. Our primary processing services are described below:

	•	Bar turning involves machining a metal bar into a smaller diameter.
	•	Bending is the forming of metals into various angles.
	•	Blanking is the cutting of metals into close-tolerance square or rectangular shapes.
	•	Deburring is the process used to smooth the sharp, jagged edges of a cut piece of metal.
	•	Electropolishing is the process used on stainless steel tubing and fittings to simultaneously smooth, brighten, clean and passivate the interior surfaces of these components. Electropolishing is an electrochemical removal process that selectively removes a thin layer of metal, including surface flaws and imbedded impurities. Electropolishing is a required surface treatment for all ultra high-purity components used in the gas distribution systems of semiconductor manufacturers worldwide and many sterile water distribution systems of pharmaceutical and biotechnology companies.

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	•	Fabricating includes performing second- and/or third-stage processing per customer specifications, typically to provide a part, casing or kit which is used in the customer’s end product.
	•	Forming involves bending and forming plate or sheet products into customer-specified shapes and sizes with press brakes.
	•	Grinding or blanchard grinding involves grinding the top and/or bottom of carbon or alloy steel plate or bars into close tolerance.
	•	Leveling (cutting-to-length) involves cutting metal along the width of a coil into specified lengths of sheets or plates.
	•	Machining refers to performing multiple processes to a piece of metal to produce a customer-specified component part.
	•	Oscillate slitting involves slitting the metal into specified widths and then oscillating the slit coil when it is wound. The oscillated coil winds the strip metal similar to the way fishing line is wound on a reel rather than standard ribbon winding. An oscillate coil can typically hold five to six times more coil than a standard coil, which allows customers to achieve longer production run times by reducing the number of equipment shut-downs to change coils.
	•	Pipe threading refers to the cutting of threads around the circumference of the pipe.
	•	Polishing changes the texture of the surface of the metal to specific finishes in accordance with customer specifications.
	•	Precision plate sawing involves sawing plate (primarily aluminum plate products) into square or rectangular shapes to tolerances as close as 0.003 of an inch.
	•	Punching is the cutting of holes into carbon steel beams or plates by pressing or welding per            customer specifications.
	•	Routing produces various sizes and shapes of aluminum plate according to customer-supplied drawings through the use of CNC controlled machinery.
	•	Sawing involves cutting metal into customer-specified lengths, shapes or sizes.
	•	Shape cutting, or burning, can produce various shapes according to customer-supplied drawings through the use of CNC controlled machinery. This procedure can include the use of oxy-fuel, plasma, high-definition plasma, laser burning or water jet cutting for carbon, aluminum and stainless steel sheet and plate.
	•	Shearing is the cutting of metal into small, precise pieces.
	•	Skin milling grinds the top and/or bottom of a large aluminum plate into close tolerance.
	•	Slitting involves cutting metal to specified widths along the length of the coil.
	•	Tee splitting involves splitting metal beams. Tee straightening is the process of straightening split beams.
	•	Twin milling grinds one or all six sides of a small square or rectangular piece of aluminum plate into close tolerance.
	•	Welding is the joining of one or more pieces of metal.
	•	Wheelabrating, shotblasting and bead-blasting involve pressure blasting metal grid into carbon steel products to remove rust and scale from the surface.

     We generally process specific metals to non-standard sizes only at the request of customers pursuant to purchase orders. We do not maintain an inventory of finished products, but we carry a wide range of metals to meet the short lead time and just-in-time delivery requirements of our customers. Each of our metals service centers maintains inventory and equipment selected to meet the needs of that facility’s customers.

Marketing

     We have approximately 760 sales personnel located in 36 states, Belgium, France, South Korea and the United Kingdom that provide marketing services throughout each of those and nearby locations. The sales personnel are organized by division or subsidiary among our profit centers and are divided into two groups. We consider those sales personnel who travel throughout a specified geographic territory to maintain relationships with our existing customers and develop new customers our outside sales personnel. Those sales personnel who remain at the facilities to write and price orders are our inside sales personnel. The inside sales personnel generally receive incentive compensation, in addition to their base salary, based on the gross profit or pretax profit of their particular profit center. The outside sales personnel generally receive incentive compensation based on the gross profit from their particular geographic territories.

50.5%-Owned Company

     Beginning July 1, 1995, we owned 50% and had operational control of American Steel, L.L.C., a limited liability company. Effective May 1, 2002, we increased our ownership interest to 50.5% and amended the Operating Agreement to eliminate all super-majority and unanimous voting rights, among other things. There was no cost involved in this transaction, which was completed to facilitate the renewal of American Steel’s credit agreement. In November 2003, we terminated the American Steel

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credit agreement and paid off the outstanding balance of approximately $20 million with borrowings from Reliance’s syndicated credit facility. American Steel operates metals service centers in Portland, Oregon, and Kent, Washington. American Industries, Inc. owns the other 49.5% of American Steel. We are entitled to purchase the remaining 49.5% of American Steel during the 90 days following the earlier of the death of the owner of American Industries or April 1, 2006, and are required to purchase the remaining 49.5% of American Steel if American Industries so elects during the 90 days following the earlier of the death of the owner of American Industries or January 1, 2006. From July 1, 1995 through April 30, 2002, we accounted for our 50% investment in American Steel by the equity method, and included 50% of American Steel’s earnings in our net income and earnings per share amounts. Beginning May 1, 2002, we consolidate American Steel’s financial results and record American Industries’ 49.5% ownership as minority interest.

Industry and Market Cycles

     We distribute metal products to our customers in a variety of industries, including manufacturing, construction, transportation, aerospace and semiconductor fabrication. Many of the industries our customers compete in are cyclical in nature and are subject to changes in demand based on general economic conditions. We sell to a wide variety of customers in diverse industries to reduce the effect of changes in these cyclical industries on our results. During the 2001 and 2002 years and until September 2003, all of the industries that we sell to experienced low demand levels due to the poor economic conditions in the U.S. Demand for our products improved beginning in September 2003 and the improvement continued through most of 2004 with a peak in the March period. Demand levels did decline somewhat in the 2004 fourth quarter, which we believe was due to normal seasonal patterns. Our results were significantly impacted by the economic downturn from 2001 through 2003, but reacted positively to the favorable pricing environment in 2004 resulting in record profitability. If the current pricing levels or somewhat improved demand ends, this could result in a negative impact to our financial results. However, if current pricing levels do not change significantly and demand improves, our financial results could be positively impacted.

     The semiconductor fabrication industry, aerospace industry and truck trailer and rail car industries have historically experienced cycles that may have an impact on our results. The semiconductor fabrication industry is highly cyclical in nature and is subject to changes in demand based on, among other things, general economic conditions and industry capacity. After a substantial period of growth from 1993 to 1996, this industry experienced a significant slowdown from mid-1996 through mid-1999. In the second half of 1999, the semiconductor industry began to improve and provided strong demand throughout 2000. In early 2001, there was a sudden and significant decline in demand from the semiconductor and related industries. This demand continued to decline throughout 2001 and remained at these low levels during 2002 and 2003. In late 2003 we did experience slight improvement that increased throughout 2004. We believe that there is room for some further improvement in this market but expect a slower rate of growth in 2005 than we experienced in 2004.

     The aerospace industry experienced a substantial slowdown during 1999 and the first nine months of 2000 from its strong markets during 1997 and 1998. The slowdown in the aerospace industry that began in 1999 resulted primarily from decreased buying patterns of certain of the major aerospace companies due to overcapacity of existing commercial planes and lower demand for new planes. This trend continued into 2000 with an increase in demand experienced in the fourth quarter of 2000 that continued through 2001 until the tragic events of September 11^th. Aerospace demand declined in the fourth quarter of 2001 and continued to decline further in each quarter of 2002. In 2003, demand remained fairly consistent with the low levels experienced in 2002 but in 2004 we experienced steady improvement throughout the year. We anticipate that aerospace demand will remain strong and continue to increase through 2005.

     The heavy truck, truck trailer and rail car industries experienced a substantial slowing in demand beginning in 2000 that continued through 2002, which materially impacted our operations in the Pacific Northwest. We did experience some improvement for short periods during 2003 and saw significant improvements in truck trailer demand throughout 2004 that we expect to continue into 2005.

     Fluctuations in the cost of our materials also affect the prices we can charge to our customers. By selling a diverse product mix, we are able to somewhat offset fluctuations in our costs of materials. However, during 2001, metals costs of most products reached their lowest levels experienced in over 20 years. This occurred due to overcapacity at the producer level in both domestic and foreign markets, along with the weak demand experienced in 2001. Due to the continued low demand, costs of most metals remained at or near the 2001 levels throughout 2002 and most of 2003. However, costs of carbon steel flat-rolled products increased significantly in the second half of 2002 due to supply constraints, as certain producers reduced capacity and because of government restrictions on foreign imports. These increased costs began to decline slightly near the end of 2002 and early 2003 because of the continued low end-user demand. In the second half of 2003, costs for carbon steel products again increased significantly and rapidly due to increased scrap, raw material and energy costs for steel producers. This trend continued through most of 2004, with pricing at all time highs. Increased global demand limited availability of many of these products in the U.S. allowing the significant increases in costs. During the fourth quarter of 2004, increased amounts of import material arrived in the U.S. putting some downward pressure on pricing for carbon steel products. Costs for aluminum and

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stainless steel products also increased in the second half of 2003 and throughout 2004 due to supply constraints and improved customer demand.

     We have historically been able to pass increases in metal costs on to our customers as costs typically increase due to strong demand. However, the carbon steel flat-rolled cost increases in 2002 occurred while demand for these products declined and although we were able to pass on most of these cost increases to our customers, we did experience some gross profit margin pressure. As carbon steel pricing stabilized and demand improved somewhat, we were able to increase our gross profit margin levels in the second half of 2003. In 2004, the supply limitations allowed us to pass through significant cost increases well in advance of our receipt of the higher cost material, which resulted in significantly higher gross profit margins in the 2004 second quarter. Our gross profit margins declined somewhat from that level in the second half of 2004, as the rate of price increases slowed and we received the higher cost material in our inventory. We cannot guarantee that the margin between our metal costs and selling prices will remain at the levels experienced during 2004, especially if demand does not improve and if domestic carbon steel costs decline due to increased availability or reduced global demand. If metals costs and related selling prices remain at current levels or increase, this should allow us to record increased revenue and gross profit dollars on a consistent volume basis.

Competition

     The metals distribution industry is highly fragmented and competitive. We have numerous competitors in each of our product lines and geographic locations, although competition is most frequently local or regional. Most of our competitors are smaller than we are, but we still face strong competition from national, regional and local independent metals distributors and the producers themselves, some of which have greater resources than us. As reported in the May 2003 issue of Purchasing magazine, it is estimated that there were approximately 3,500 intermediate steel processors and metals service center facilities in North America in 2003. Industry magazines have identified us as the second largest metals service center company in North America (based upon 2003 revenue). According to the May 2004 issue of the magazine, the 2003 (most recent year available) revenues for the five largest North American metals service center companies ranged from $1.3 billion to $2.2 billion for total revenues of $8.7 billion, which represents approximately 15% of the estimated $58.35 billion of total revenue for the metals service center industry in 2003. Reliance’s 2003 sales of $1.9 billion represented approximately 3% of the estimated $58.35 billion industry total. We compete with other companies on price, service, quality and availability of products. We maintain centralized relationships with our major suppliers and a decentralized operational structure. We believe that this division of responsibility has increased our ability to obtain competitive prices of metals and to provide more responsive service to our customers. In addition, we believe that the size of our inventory, the different metals and products we have available, and the wide variety of processing services we provide distinguish us from our competition. We believe that we have increased our market share during recent years due to our strong financial condition, as many of our competitors were facing capital constraints.

Quality Control

     Procuring high quality metal from suppliers on a consistent basis is critical to our business. We have instituted strict quality control measures to assure that the quality of purchased raw materials will enable us to meet our customers’ specifications and to reduce the costs of production interruptions. We perform physical and chemical analyses on selected raw materials to verify that their mechanical and dimensional properties, cleanliness and surface characteristics meet our requirements. We conduct similar analyses on selected processed metal before delivery to the customer. We believe that maintaining high standards for accepting metals ultimately results in reduced return rates from our customers.

     Nineteen divisions and six subsidiaries of Reliance, at a total of 31 facilities, have maintained ISO 9002 certifications and were recertified for ISO 9001-2000, but we have determined not to obtain the certification for any additional facilities at this time. As of December 15, 2003, ISO 9001-2002 replaced ISO 9002. The ISO 9001-2000 quality standard has added a matrix to record and review customer satisfaction and has reorganized the requirements for the quality standard from 20 elements to eight elements. The certification takes approximately one year to obtain. Each facility seeking ISO certification is required to establish a quality system that is documented in a quality control manual, and that affects all aspects of the facility’s operations, including sales, product inspections, product storage, delivery and documentation. A certifying agent performs a physical audit of each facility every six months to determine that the facility is in fact following the procedures set forth in the quality control manual. A recertification is required for each facility every three years. Initially in 1996, when we first began the certification process, we expected that more customers would require such certification, but we have learned that for the types of products and services which most of our facilities provide, very few of our customers require such certification and most of our customers have responded that they would purchase products from Reliance or its subsidiaries regardless of such certification. However, we believe that going through the certification process allowed our facilities to improve their efficiency and the quality of products and services provided to our customers.

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     In addition, our subsidiary Precision Strip, Inc. maintains ISO 9002 and QS-9000 certifications at its eight operations. Quality System Requirements QS-9000 (“QS-9000”) is the common quality standard for automotive suppliers and is based upon the 1994 edition of ISO 9001, with additional requirements specific to the automotive industry. The International Automotive Sector Group is an international ad hoc working group that monitors interpretation issues related to the standard.

Systems

     We have converted our Reliance divisions and certain of our subsidiaries from various software programs to the StelplanÔ manufacturing and distribution information system. StelplanÔ is a registered trademark of Invera, Inc. StelplanÔ is an integrated business application system with functions ranging from order entry to the generation of financial statements. StelplanÔ was developed specifically for the metals service center and processor industry. StelplanÔ also provides information in real time, such as inventory, availability, location and cost. With this information, our marketing and sales personnel can respond to our customers’ needs more efficiently and more effectively, and quickly provide product prices.

     Certain of our subsidiaries use other vendor or in-house developed systems to support their operation. The basic functionality of the software is similar to StelplanÔ. A common financial reporting system is used company-wide.

Government Regulation

     Our metals service centers are subject to many federal, state and local requirements to protect the environment, including hazardous waste disposal and underground storage tank regulations. The only hazardous wastes that we use in our operations are lubricants and cleaning solvents. We frequently examine ways to minimize any impact on the environment and to effect cost savings relating to environmental compliance. We pay state-certified private companies to haul and dispose of our hazardous waste.

     Our operations are also subject to laws and regulations relating to workplace safety and worker health, principally the Occupational Health and Safety Act and related regulations, which, among other requirements, establish noise, dust and safety standards. We have a very strict safety policy, which we believe is one of the best in the industry. We are in material compliance with applicable laws and regulations and do not anticipate that future compliance with such laws and regulations will have a material adverse effect on our results of operations or financial condition.

Environmental

     We have no material outstanding unresolved issues with environmental regulators, and our products and processes present no environmental concerns. We do not expect any material expenditures to meet environmental requirements. Some of the properties we own or lease are located in industrial areas, however, with histories of heavy industrial use. We may incur some environmental liabilities because of the location of these properties. Any such liabilities would arise from causes other than our operations, but we do not expect that these liabilities would have a material adverse impact on our results of operations, financial condition or liquidity.

Employees

     As of December 31, 2004, we had approximately 5,400 employees. Approximately 738 employees are covered by collective bargaining agreements, which expire at various times over the next five years. We have entered into collective bargaining agreements with 22 union locals at 22 of our locations. These collective bargaining agreements have not had a material impact either favorably or unfavorably on our revenues or profitability at our various locations. We have always maintained excellent relations with our employees. We had work stoppages at two of our locations in 2002 and one in 2003, but these were short-term and did not have a material impact on our operations at these locations. We have never experienced a significant work stoppage.

Available Information

     We file annual, quarterly and current reports, proxy statements and other documents with the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, as amended (“the Exchange Act”). The public may read and copy any materials that the Company files with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains a website that contains reports, proxy information statements and other information regarding issuers, including our Company, that file electronically with the SEC. The public can obtain any documents that we file with the SEC at http://www.sec.gov.

     We also make available free of charge on or through our Internet website (http://www.rsac.com) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

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Item 2. Properties.

     We maintain more than 100 metals service center processing and distribution facilities in 30 states, and in Belgium and South Korea, and sales offices in France, plus our corporate headquarters. All of our service center facilities are in good or excellent condition and are adequate for our existing operations. These facilities generally operate at about 60% of capacity based upon a 24-hour seven-day week, with each location averaging slightly less than two shifts operating at full capacity for a five-day work week. Thirty-six of these facilities are leased. In addition, we lease our corporate headquarters in Los Angeles, California. Siskin leases a portion of its facilities in Chattanooga, Tennessee, and Liebovich leases a portion of its facilities in Rockford, Illinois. AMI Metals leases its corporate office space in Brentwood, Tennessee. Our international sales offices are also leased. The lease terms expire at various times through 2016 and the aggregate monthly rent amount is approximately $950,000. We own all other properties.

     In the first half of 2004, we relocated our Pacific Metal Company Portland location to a newly-built, state-of-the-art facility that we lease. We also relocated our recently opened PDM Steel Service Centers, Inc. Las Vegas location to a larger facility to better support its increased business in that area. During 2004 we purchased the Allegheny Steel Distributors, Inc. and the Engbar Pipe & Steel Co. facilities that were previously leased. We have begun the expansion of our AMI Metals Europe SPRL warehouse in Belgium and opened a sales office in France to meet our growing customer demand in Europe, and are in the process of purchasing land to construct a new, more efficient facility for Georgia Steel Supply Company (a division of Siskin Steel & Supply Company, Inc.). We expect to purchase land and build facilities to expand current operating capacity and efficiencies for other operations during 2005. Due to reduced customer demand, we vacated our leased Valex SARL distribution facility in France and now lease a sales office and stock material at a third-party warehouse. In early 2005, we sold our Chatham Steel Corporation facility in Jacksonville, Florida that closed its operations in mid-2002. A facility in Houston, Texas that was previously leased to a third party and about nine acres of vacant land in Tampa, Florida were sold in 2004. The following table sets forth certain information with respect to each facility.

FACILITIES AND PLANT SIZE

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Item 3. Legal Proceedings.

     From time to time, we are named as a defendant in legal actions. Generally, these actions arise out of our normal course of business. We are not a party to any pending legal proceedings other than routine litigation incidental to the business. We expect that these matters will be resolved without having a material adverse effect on our results of operations or financial condition. We maintain liability insurance against risks arising out of our normal course of business.

Item 4. Submission of Matters to a Vote of Security Holders.

     No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year.

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PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters.

     Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “RS” and was first traded on September 16, 1994. The following table sets forth the high and low reported closing sale prices of the common stock on the NYSE Composite Tape for the stated calendar quarters.

     As of March 1, 2005, there were 261 record holders of our common stock.

     We have paid quarterly cash dividends on our common stock for 45 years. In Feburary 2005 the regular quarterly dividend was increased 29% from $.07 to $.09 per share of common stock. This follows a 17% increase during the third quarter of 2004, when the quarterly dividend was increased from $.06 per share to $.07 per share. Our Board of Directors has increased the quarterly dividend rate on a periodic basis. The Board may reconsider or revise this policy from time to time based on conditions then existing, including our earnings, cash flows, financial condition and capital requirements, or other factors the Board may deem relevant. We expect to continue to declare and pay dividends in the future, if earnings are available to pay dividends, but we also intend to continue to retain a portion of earnings for reinvestment in our operations and expansion of our business. We cannot assure you that either cash or stock dividends will be paid in the future or that, if paid, the dividends will be at the same amount or frequency as paid in the past.

     The private placement debt agreements for our senior notes and our syndicated credit facility contain covenants which, among other things, require us to maintain a minimum net worth and limit cash dividends based upon our earnings, which may restrict our ability to pay dividends. Since our initial public offering in September 1994 through 2004, we have paid between 5% and 25% of earnings to our shareholders as dividends. In 2003, our dividend payments represented 22% of our earnings due to the low earnings in 2003 as a result of the poor economic conditions. In 2004, our dividend payments represented 5% of earnings due to our record profitability.

     The following table sets forth certain information with respect to our cash dividends declared during the past two fiscal years:

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     Although we have not offered any securities for sale in the last three years, other than through a registered offering, we have issued restricted stock on exercise of stock options granted pursuant to the Directors’ Stock Option Plan, which was approved by shareholders. Proceeds from the exercise of these options were used for working capital. Shares of our common stock was issued only to directors in the following transactions exempt from registration under Sections 4(2) and 4(6) of the Securities Act:

     Restricted shares of common stock were also issued under the Key-Man Incentive Plan, which was approved by the shareholders. There were no proceeds received from the restricted stock granted under the Key-Man Incentive Plan. Shares of our common stock were issued only to a limited number of key employees in the following transactions exempt from registration under sections 4(2) and 4(6) of the Securities Act:

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Item 6. Selected Financial Data.

     We have derived the following selected summary financial and operating data for the five years ended December 31, 2004 from our audited consolidated financial statements. You should read the information below with our Consolidated Financial Statements, including the notes related thereto, and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

SELECTED CONSOLIDATED FINANCIAL DATA

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(4)

EBITDA is defined as the sum of income before interest expense, income taxes, depreciation expense and amortization of intangibles (including goodwill). We believe that EBITDA is commonly used as a measure of performance for companies in our industry an is frequently used by analysts, investors, lenders and other interested parties to evaluate a company’s financial performance and its ability to incur and service debt while providing useful information. EBITDA should not be considered in isolation or as a substitute for consolidated statements of income and cash flows data prepared in accordance with accounting principles generally accepted in the United States and should not be construed as an indication of a company’s operating performance or as a measure of liquidity. EBITDA as measured in this Annual Report on Form 10-K is not necessarily comparable with similarly titled measures for other companies.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

Overview

     The 2004 year was unlike any other that we have seen for the metals service center industry. We experienced unprecedented high prices for most carbon steel products, along with higher prices for stainless steel and aluminum products, coupled with improved demand from our customers. This environment allowed Reliance and many other metals service center companies to generate record financial results.

     Demand for most of our products improved modestly in 2004 from 2003 levels. Customer demand was at low levels for most products that we sell from 2001 through 2003 primarily related to the economic downturn experienced in the United States during that period. In 2004 there was a significant increase in global demand that impacted supply levels in the United States; however, we believe that domestic demand is still well below peak levels for most of our products. Aerospace is the one area where demand increased consistently during 2004, and we expect it to continue through 2005. We expect modest increases, if any, in demand for other products in 2005.

     Pricing for carbon steel products increased significantly and rapidly in 2004, especially in the first half of the year. This resulted mainly from supply limitations due to shortages of raw materials at the mill level because of increased global demand for these raw materials, due to lower domestic capacity as some mill capacity was shut down during 2002 and 2003, and due to reduced quantities of import material entering the United States because of higher pricing levels in other parts of the world, especially China. Aluminum and stainless steel costs increased consistently during most of 2004 due to improved demand and some supply limitations. Aluminum products used by the aerospace industry are in tight supply and prices for these products are expected to continue to increase into 2005. Because of the improved demand in 2004, we were typically able to increase our selling prices for most products at a rate equal to or above our cost increases. Because of the reduced supply of carbon steel products, in the first half of the year we were able to increase our selling prices for these products prior to receiving the higher cost metal into our inventory. These significant increases resulted in higher gross profit margins than we have experienced in recent years.

     Although we are extremely proud of our record 2004 financial results, we are also proud of our ability to consistently generate profitable returns even during the poor economic environment experienced from 2001 through 2003. In addition to profitability, we focus on working capital management which allows us to generate cash flow to further expand and strengthen our business and reduce debt during most environments. Although we did not complete any acquisitions in 2004, we continued to evaluate opportunities that would allow us to improve our profitability. We reviewed acquisition opportunities, but did not complete any as we continued to apply our strict criteria. We also identified opportunities to expand our existing operations and took actions to allow for this profitable future growth. In 2003 we completed our largest acquisition to-date that has contributed significantly to our financial results; however, this acquisition required us to increase our leverage and to provide security under our credit agreements. As a result of our strong earnings and resulting cash flow in 2004, we have reduced our leverage to a level that will allow this security interest to be released in the first quarter of 2005.

     We believe that the steps that we took during the difficult years of 2001 through 2003 positioned us to take full advantage of the improved economic conditions we experienced in 2004. However, as evidenced by our performance during the difficult years, we take the necessary actions to allow us to operate efficiently and profitably even in less favorable economies. We believe this is because of our focus on cost controls and inventory turnover and our product, customer and geographic diversification. In the fourth quarter of 2004 we experienced some softening of carbon steel prices that we believe was due to the normal seasonal slowdown along with higher inventory levels at many of our competitors. This caused our gross margin levels to reduce somewhat. However, we believe that the current pricing levels for carbon steel products makes for a very attractive operating environment. Our product and geographic diversification should benefit us in 2005, as we expect demand and pricing for certain aluminum and stainless steel products to continue to increase above 2004 levels. We are optimistic about business conditions in 2005, and while we do not expect the benefit of rapidly accelerating prices as we experienced in 2004, we do expect 2005 to be a strong year for Reliance when compared to all years except 2004, although we cannot provide any assurance that it will be. Significant declines in demand or pricing for our products could reduce our gross margins. Also, if we cannot obtain a sufficient supply of metals for our customers in 2005, or if domestic availability of our products increases significantly in 2005, this could negatively impact our 2005 financial results, especially as compared to our 2004 results.

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     Customer demand can have a significant impact on our results of operations. When volume increases, our revenue dollars increase, which contributes to increased gross profit dollars. Variable costs may also increase with volume including increases in our warehouse, delivery, selling, general and administrative expenses. Conversely, when volume declines, we typically produce fewer revenue dollars which can reduce our gross profit dollars. We can reduce certain variable expenses when volumes decline, but we cannot easily reduce our fixed costs.

     Pricing for our products can have a more significant impact on our results of operations than customer demand levels. As pricing increases, so do our revenue dollars. Our pricing usually increases when the cost of our materials increases. If prices increase and we maintain the same gross profit percentage, we generate higher levels of gross profit and pre-tax income dollars. Conversely, if pricing declines, we will typically generate lower levels of gross profits and pre-tax income dollars. Because changes in pricing do not require us to adjust our expense structure, the impact on our results of operations is much greater than the effect of volume changes.

     Also, when volume or pricing increases, our working capital requirements typically increase, which may require us to increase our outstanding debt. This could increase our interest expense. When our customer demand falls, we can typically generate strong levels of cash flow from operations as our working capital needs decrease.

Recent Developments

     We continue to evaluate acquisition opportunities and expect to continue to grow our business in part through acquisitions. Although we did not complete any acquisitions in 2004, we did expand certain of our existing operations. We relocated two operations into larger and more efficient facilities and we added processing equipment in certain facilities to expand or enhance their processing services. In 2003 we completed our largest acquisition to-date. Through that transaction, we entered into new geographic markets in Indiana and Kentucky, strengthened our presence in the Midwest region of the United States, and expanded our service offerings. The acquisition made in 2003 of a metals processor did not result in a new segment.

     On July 1, 2003, we purchased all of the outstanding stock of Precision Strip, Inc. and its related entity, Precision Strip Transport, Inc. (collectively “Precision Strip”) for $220 million in cash, plus the assumption of approximately $26 million of debt. In 2004, we made an additional payment of $16 million to the Precision Strip sellers to reimburse them for increased income taxes related to a tax election that we made. Precision Strip is a privately-held metals processing company founded in 1977 whose processing activities consist primarily of slitting and blanking carbon steel, stainless steel and aluminum flat-rolled products on a “toll” basis, that is, processing the metal for a fee without taking ownership of the metal. Precision Strip’s revenues for the twelve months ended December 31, 2004 were $132 million. The business has facilities in Minster, Kenton, Middletown and Tipp City, Ohio; Anderson and Rockport, Indiana; Bowling Green, Kentucky; and Talladega, Alabama. Precision Strip’s customers include carbon steel, stainless steel and aluminum mills, as well as companies in the automotive, appliance, metal furniture and capital goods industries. Based on the volume of metal processed, we estimate that Precision Strip processed more than $2.5 billion of metal in 2004.

Results of Operations

     The following table sets forth certain income statement data for each of the three years in the period ended December 31, 2004 (dollars are shown in thousands and certain amounts may not calculate due to rounding):

(1)	Excludes other income, amortization expense, equity in earnings of 50%–owned company, minority interest, interest expense and income tax expense.

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Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

     Net Sales. Our 2004 consolidated net sales were a record $2.94 billion, an increase of 56.3%, compared to $1.88 billion in 2003. This increase includes the additional sales from Precision Strip that we acquired in July 2003. Our increased sales include an increase in our tons sold of 4.3% and an increase in the average selling price per ton sold of 47.6% (the tons sold and average selling price per ton sold exclude amounts related to Precision Strip). The increase in our tons sold is mainly due to somewhat improved customer demand in all markets in 2004 as compared to 2003 levels. We began to experience higher sales volumes in September 2003 that continued through the first nine months of 2004. This included a peak in the March 2004 period, which we believe was due in part to increased buying by our customers to beat announced mill price increases. In the fourth quarter of 2004, we experienced a slight slowdown from earlier in the year, which we believe was mainly due to the typical seasonal slowdown during this period.

     The increase in our average selling price per ton sold of 47.6% resulted mainly from significant increases in our costs of carbon steel products along with limited supply during most of 2004. Carbon steel costs increased significantly in the first nine months of 2004, with the most rapid and pronounced increases in the first half of the year. Supply was limited due to raw material shortages at the mill level resulting from increased global demand, especially China, and reduced domestic capacity. This resulted in increased costs from the mills and an environment that allowed us to pass through our increased costs to our customers. In some cases, we were able to pass through the significant cost increases before we received the higher cost metal in our inventory. Carbon steel costs are still at high levels, however we did experience some softening of carbon steel prices in the fourth quarter of 2004. Our prices for aluminum and stainless steel products increased consistently during most of 2004 due to reduced supply and improved customer demand, especially for aerospace products.

     Gross Profit. Our total gross profit of $832.2 million increased 63.0% from 2003 mainly because of the increased pricing levels of our products in 2004. Our gross profit as a percentage of sales was 28.3% in 2004, up from 27.1% in 2003. The improvement in our gross profit percentage resulted from the improved business conditions discussed above that allowed us to pass through our cost increases to our customers, especially in the first half of 2004 when we were able to increase our selling prices before we received the higher cost metal in our inventory. Due to the increased cost of our metals, our 2004 cost of sales includes $110.8 million of LIFO expense, compared to $0.9 million of LIFO expense in 2003. LIFO expense reduces our gross profit.

     Expenses. Warehouse, delivery, selling, general and administrative expenses (“S,G&A expenses”) for 2004 increased $88.0 million, or 22.2% from 2003. This increase includes a full year of S,G&A expenses of Precision Strip, along with increased expenses to support our higher sales levels, including higher incentives and bonuses due to the record profit levels achieved at many of our operations. Our S,G&A expenses represented 16.4% of sales in 2004, down from 21.0% in 2003. The improvement as a percentage of sales was mainly because of the significant increases in our average selling price per ton sold, which did not require us to change our expense structure.

     Depreciation expense increased $6.9 million in 2004 over 2003 mainly because of the additional expense related to Precision Strip.

     Operating Profit. Operating profit, calculated as gross profit less S,G&A expenses and depreciation expense, was $306.9 million in 2004, resulting in an operating profit margin of 10.4%, compared to 2003 operating profit of $80.1 million and an operating profit margin of 4.3%. The significant improvement occurred because of the improved business conditions, especially the favorable pricing, discussed above.

     Other Income and Expense. Interest expense was $28.7 million in 2004 compared to $26.7 million in 2003. The increase was mainly due to increased borrowing levels to fund our increased working capital needs in 2004 and to fund the acquisition of Precision Strip on July 1, 2003. Although variable interest rates increased in 2004, we were able to offset the effect of this as the pricing on our borrowings declined due to our improved profitability.

     Minority interest expense increased in 2004 compared to 2003 mainly due to the improved operating performance at our 50.5%-owned company, American Steel, L.L.C., that sells primarily carbon steel plate products. Minority interest also includes expense related to Valex Korea during the first seven months of 2004 that is attributable to our 30.5% partner. In July 2004 we purchased the remaining interest in Valex Korea from our partner. Valex Korea’s performance benefited from a strong Asian market for semiconductor products in 2004.

     Income Tax Rate. Our effective income tax rate was 37.1% in 2004, down from 38.0% in 2003, mainly due to shifts in the geographic composition of our 2004 income, lower income tax rates from our foreign operations that were profitable in 2004 and benefits from state and city income tax credits.

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Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

     Net Sales. Our 2003 consolidated net sales were $1.88 billion, an increase of 7.9%, compared to $1.75 billion in 2002. This increase includes the additional sales from the companies we acquired in 2002 and 2003. Our tons sold decreased 1.1% and our average selling price per ton sold increased 5.7% (the tons sold and average selling price per ton sold exclude amounts related to Precision Strip). The decrease in our tons sold is mainly due to reduced customer demand in all markets through the first eight months of 2003. Our sales volumes continued at the low levels experienced in the second half of 2002 until September 2003, when we began to experience some improvement in demand across most product and customer markets. This improvement continued through the remainder of 2003.

     The increase in our average selling price per ton sold of 5.7% resulted mainly from costs of carbon steel flat-rolled products increasing in the second half of 2002 due to supply constraints resulting from the temporary closure of a few mills and due to tariffs placed on imports. These prices remained high in early 2003 and then declined somewhat until late in the third quarter of 2003 when carbon steel costs began to increase due to a shortage of scrap and other raw materials and high energy costs for the producers. The scrap shortage is a result of the increase in global steel demand, especially in China. The costs for carbon steel continued to increase very rapidly in the fourth quarter of 2003, and we increased our selling prices accordingly. We also increased our prices for aluminum and stainless steel products due to reduced supply and improved customer demand that resulted in increased costs in the second half of 2003.

     Our same-store sales (excludes sales of businesses we acquired in 2003 and 2002) increased $10.1 million, or 0.6%, with year 2003 tons sold declining 3.8% as compared to 2002, and the average selling price per ton sold increasing by 3.8%. These changes were due to the factors discussed above.

     Gross Profit. Our total gross profit of $510.6 million increased 7.1% from 2002 mainly because of our increase in sales due to our 2003 and 2002 acquisitions and due to our increased selling prices. Our gross profit as a percentage of sales was 27.1% in 2003 compared to 27.3% in 2002. The decline in our gross profit margin occurred primarily due to competitive pressures resulting from low levels of customer demand in the first half of 2003 when we reduced our selling prices at a more rapid rate than our material costs were declining. This resulted in lower gross profit margins. Beginning in September 2003, we experienced improved customer demand that allowed us to increase our selling prices and expand our gross profit margins.

     Expenses. Our 2003 S,G&A expenses increased $16.6 million, or 4.4%, from 2002. This increase includes the S,G&A expenses of the company we acquired in 2003 plus a full year of expenses for our 2002 acquisitions. We were able to reduce our same-store S,G&A expenses by $3.2 million in 2003 as compared to 2002. These expenses represented 21.0% and 21.7% of sales in 2003 and 2002, respectively. The improvement as a percentage of sales resulted from our continued focus on expense reduction and an increase in our average selling price per ton sold.

     Depreciation expense increased $7.4 million for 2003 compared to 2002 because of the inclusion of depreciation expense related to the companies we acquired in 2003 and 2002.

     Operating Profit. Operating profit increased $9.9 million, or 14.0%, in 2003 compared to 2002. This occurred mainly due to the operating profit from our 2003 acquisition.

     Other Income and Expense. Interest expense of $26.7 million increased by 18.3% in 2003 compared to 2002, due to increased borrowing levels to fund our acquisition of Precision Strip for $220 million plus the assumption of approximately $26 million of outstanding debt on July 1, 2003.

     Because of our increased ownership interest in American Steel, we began to consolidate its results beginning May 1, 2002. Prior to that date, we accounted for our investment using the equity method. On our income statement, the 2002 equity in earnings of 50%-owned company represents our 50% of American Steel’s net income from January 1 through April 30^th. The minority interest amount represents 49.5% of American Steel’s net income or loss beginning May 1, 2002 for the portion that we do not own. Minority interest also includes the net income or loss from the 30.5% interest in Valex Korea Co,. Ltd. and the 3% interest in Valex Corp. that we do not own. American Steel incurred a loss in 2003 due to the continued depressed economic conditions in the northwest region of the United States, including the loss of certain large carbon steel customers in that area over the past few years.

     Income Tax Rate. Our effective income tax rate decreased from 39.3% in 2002 to 38.0% in 2003, mainly due to shifts in the geographic composition of our 2003 income, and due to the resolution of open tax issues.

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Liquidity and Capital Resources

     At December 31, 2004, our working capital was $444.4 million, up from $341.8 million at December 31, 2003. The increase was primarily due to an increase in our accounts receivable of $108.2 million and an increase in our inventory of $61.7 million resulting from our improved sales levels, offset by an increase in our accounts payable and accrued expenses of $67.7 million due to our increased costs of inventory. Our current debt maturities also increased by $24.0 million at December 31, 2004 over the prior year end. To manage our working capital, we focus on our days sales outstanding to monitor accounts receivable and on our inventory turnover rate to monitor our inventory levels, as receivables and inventory are our two most significant elements of working capital. Although the amount of our accounts receivable increased significantly in 2004 due to the higher pricing levels, our accounts receivable days sales outstanding rate at December 31, 2004 was 41 days, improved from our December 31, 2003 rate of 44 days. (We calculate our days sales outstanding as an average of the most recent two-month period.) Our inventory turnover rate improved to about 5.1 times in 2004 from about 4.7 times in 2003. The increase in our accounts payable balance was mainly due to the increased costs for the metals we purchased in 2004. As demand and pricing for our products increase or decrease, our working capital needs increase or decrease, respectively. We expect to finance increases in our working capital needs through operating cash flow or with borrowings on our syndicated credit facility.

     Our primary sources of liquidity are generally from our internally generated funds from operations and our revolving line of credit. Our operations provided cash of $121.8 million in 2004 compared to $107.8 million in 2003. Although our working capital needs increased in 2004, our strong earnings and effective working capital management provided cash flow from operations. The cash generated from operations in 2004 was also used to fund our capital expenditures, to pay an additional amount due for the reimbursement of the tax differential for our election of Section 338(h)(10) treatment related to our 2003 acquisition and to pay down debt.

     During 2004, we made net debt repayments of $64.4 million, including payment of $22.0 million of private placement notes upon their maturity. This resulted in a net debt-to-capital ratio of 33.6% at December 31, 2004 compared to 43.1% at December 31, 2003. Our debt-to-EBITDA ratio, calculated as defined by our syndicated credit facility, decreased to 1.3 at December 31, 2004 from 3.6 at December 31, 2003.

     Our syndicated credit facility allows for $335 million in borrowings. As of December 31, 2004, $30 million was outstanding under this credit facility. The $335 million five-year secured syndicated credit facility, as amended effective December 6, 2004, is with 10 banks and may be increased to $400 million. At December 31, 2004, we had $15.9 million of letters of credit outstanding under our syndicated credit facility. On January 2, 2005 (date of maturity), we paid off $23.0 million of private placement notes with borrowings on our syndicated credit facility.

     At December 31, 2004, we had outstanding with insurance companies senior secured notes in the aggregate amount of $393.0 million. These privately placed senior notes have maturity dates ranging from 2005 to 2013, and bear interest at an average rate of 6.2% per annum. In 2005, $46.0 million of these notes mature, including the $23.0 million note paid off in January 2005, and we expect to pay these amounts with cash generated from operations or borrowings on our syndicated credit facility.

     The syndicated credit facility and senior note agreements were amended effective July 1, 2003 to provide, among other things, for our Company to grant a security interest in certain personal property to the lenders named therein. The security interest was structured to terminate automatically when we meet certain conditions, including a required leverage ratio. As of December 31, 2004, we have satisfied the conditions for the security interest to be released and expect this to occur in the first quarter of 2005. The syndicated credit facility and senior note agreements, as amended, also require that we maintain a minimum net worth and interest coverage ratio, and a maximum leverage ratio, and include restrictions on the amount of cash dividends we may pay. In December 2004 we amended our syndicated credit facility to increase the maximum amount of cash dividends that we could pay to our shareholders during the last six months of 2004.

     Our net capital expenditures, excluding acquisitions, were $36.0 million for the 2004 year. We had no material commitments for capital expenditures or capital leases as of December 31, 2004. Our 2005 capital expenditures are currently budgeted at $57 million. Historically, our actual capital expenditures have been less than our budgeted amount. Any capital expenditure commitments that existed at December 31, 2004 are included in the below table of contractual obligations. Our operating lease commitments are discussed in Note 11 of the Notes to Consolidated Financial Statements. Our capital requirements are primarily for working capital, acquisitions, and capital expenditures for continued improvements in plant capacities and materials handling and processing equipment.

     We anticipate that funds generated from operations and funds available under our line of credit will be sufficient to meet our working capital, capital expenditure and senior debt repayment needs for the foreseeable future. We also anticipate that we will

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be able to fund acquisitions with borrowings under our line of credit. However, the acquisition of a significant company may require that we raise additional capital beyond our currently available instruments.

     The following table summarizes our contractual cash obligations as of December 31, 2004. Certain of these contractual obligations are reflected on our balance sheet, while others are disclosed as future obligations under accounting principles generally accepted in the United States.

     Contractual obligations for purchases of goods or services are defined as agreements that are enforceable and legally binding on our Company and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Our purchase orders are based on our current needs and are typically fulfilled by our vendors within short time horizons. In addition, some of our purchase orders represent authorizations to purchase rather than binding agreements. We do not have significant agreements for the purchase of goods specifying minimum quantities and set prices that exceed our expected requirements for three months. Therefore, agreements for the purchase of goods and services are not included in the table above.

     The expected timing of payments of the obligations above is estimated based on current information. Timing of payments and actual amounts paid may be different, depending on the time of receipt of goods or services, or changes to agreed-upon amounts for some obligations.

     On August 31, 1998, our Board of Directors amended our Stock Repurchase Plan and approved the purchase of up to an additional 3,750,000 shares of our outstanding common stock through this plan, for a total of 6,000,000 shares. Since inception of the Stock Repurchase Plan, we have purchased a total of 5,538,275 shares of our common stock, at an average purchase price of $14.94 per share, as of December 31, 2004, all of which are being treated as authorized but unissued shares. In 2004 and 2003, we did not repurchase any shares of our common stock. We believe such purchases, given appropriate circumstances, enhance shareholder value and reflect our confidence in the long-term growth potential of our Company.

Inflation

     Our operations have not been, and we do not expect them to be, materially affected by general inflation. Historically, we have been successful in adjusting prices to our customers to reflect changes in metal prices.

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Seasonality

     Some of our customers may be in seasonal businesses, especially customers in the construction industry. As a result of our geographic, product and customer diversity, however, our operations have not shown any material seasonal trends. Revenues in the months of November and December traditionally have been lower than in other months because of a reduced number of working days for shipments of our products and holiday closures of some of our customers. We cannot assure you that period-to-period fluctuations will not occur in the future. Results of any one or more quarters are therefore not necessarily indicative of annual results.

Goodwill

     Goodwill, which represents the excess of cost over the fair value of net assets acquired, amounted to $341.8 million at December 31, 2004, or approximately 21.9% of total assets or 41.6% of consolidated shareholders’ equity. Under Statement of Financial Accounting Standards (“SFAS” or “Statement”) No. 142, Goodwill and Other Intangible Assets, goodwill deemed to have indefinite lives is no longer amortized but is subject to annual impairment tests in accordance with the Statement. Other intangible assets continue to be amortized over their useful lives. We review the recoverability of goodwill annually or whenever significant events or changes occur which might impair the recovery of recorded costs. We measure possible impairment based on either significant losses of an entity or the ability to recover the balance of the long-lived asset from expected future operating cash flows on an undiscounted basis. If impairment is identified, we would calculate the amount of such impairment based upon the discounted cash flows or the market values as compared to the recorded costs. We have performed tests of goodwill as of November 1, 2003 and 2004, and believe that the recorded amounts for goodwill are recoverable and that no impairment currently exists.

Critical Accounting Estimates

     Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. When we prepare these consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Some of our accounting policies require that we make subjective judgments, including estimates that involve matters that are inherently uncertain. Our most critical accounting estimates include those related to accounts receivable, inventories, income taxes, goodwill and intangible assets and long-lived assets. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.

     We believe the following critical accounting estimates, as discussed with our Audit Committee, affect our more significant judgments and estimates used in preparing our consolidated financial statements. (See Note 1 of the Notes to Consolidated Financial Statements for our Summary of Significant Accounting Policies.) There have been no material changes made to the critical accounting estimates during the periods presented in the Consolidated Financial Statements. We also have other policies that we consider key accounting policies, such as for revenue recognition, however these policies do not require us to make subjective estimates or judgments.

Accounts Receivable

We maintain an allowance for doubtful accounts to reflect our estimate of the uncollectibility of accounts receivable based on an evaluation of specific potential customer risks. Assessments are based on legal issues (bankruptcy status), our past collection history, current financial and credit agency reports, and the experience of our credit personnel. Accounts which we determine to be uncollectible are reserved for or written off in the period in which the determination is made. Additional reserves are maintained based on our historical and estimated future bad debt experience. If the financial condition of our customers were to deteriorate beyond our estimates, resulting in an impairment of their ability to make payments, we might be required to increase our allowance for doubtful accounts.

Inventories

We maintain allowances for estimated obsolescence or unmarketable inventory to reflect the difference between the cost of inventory and the estimated market value based on an evaluation of slow moving products and current replacement

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costs. If actual market conditions are less favorable than those anticipated by management, additional allowances may be required.

Income Taxes

We currently have significant deferred tax assets, which are subject to periodic recoverability assessments. Realizing our deferred tax assets principally depends upon our achieving projected future taxable income. We may change our judgments regarding future profitability due to future market conditions and other factors. We may adjust our deferred tax asset balances if our judgments change.

For information regarding our provision for income taxes as well as information regarding differences between our effective tax rate and statutory rates, see Note 7 of the Notes to Consolidated Financial Statements. Our tax rate may be affected by future acquisitions, changes in the geographic composition of our income from operations, changes in our estimates of credits or deductions including those that may result from the American Jobs Creation Act of 2004, and the resolution of issues arising from tax audits with various tax authorities.

Goodwill and Intangible Assets

In assessing the recoverability of our goodwill and other intangibles we must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. We have performed impairment testing in accordance with SFAS No. 142. We perform an annual review in the fourth quarter of each year, or more frequently if indicators of potential impairment exist, to determine if the carrying value of the recorded goodwill is impaired. Our impairment review process compares the fair value of the reporting unit in which goodwill resides to its carrying value. We estimate the reporting unit’s fair value based on a discounted future cash flow approach that requires us to estimate income from operations based on historical results and discount rates based on a weighted average cost of capital of comparable companies. A key assumption made is that, in general, our revenues will grow at 3% to 5% per year, adjusted for the current economic outlook. If these estimates or their related assumptions change in the future, we may be required to record impairment charges for these assets not previously recorded.

Long-Lived Assets

We review the recoverability of our long-lived assets as required by SFAS No. 144 and must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. If these estimates or their related assumptions change in the future, we may be required to record impairment charges for these assets not previously recorded.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

     In the ordinary course of business, we are exposed to various market risk factors, including changes in general economic conditions, domestic and foreign competition, foreign currency exchange rates, and metals pricing and availability. Additionally, we are exposed to market risk primarily related to our fixed rate long-term debt. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates. Decreases in interest rates may affect the market value of our fixed-rate debt. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes. Based on our debt, we do not consider the exposure to interest rate risk to be material. Our fixed-rate debt obligations are not callable until maturity.

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Item 8. Financial Statements and Supplementary Data.

RELIANCE STEEL & ALUMINUM CO.

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     All other schedules are omitted because either they are not applicable, not required or the information required is included in the Consolidated Financial Statements, including the notes thereto.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors
Reliance Steel & Aluminum Co.

     We have audited the accompanying consolidated balance sheets of Reliance Steel & Aluminum Co. and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2004. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

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

     In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Reliance Steel & Aluminum Co. and subsidiaries at December 31, 2004 and 2003, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

     We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Reliance Steel & Aluminum Co.’s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 11, 2005 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Los Angeles, California
March 11, 2005

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RELIANCE STEEL & ALUMINUM CO.

CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)

See accompanying notes to consolidated financial statements.

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RELIANCE STEEL & ALUMINUM CO.

CONSOLIDATED STATEMENTS OF INCOME
(In thousands except share and per share amounts)

See accompanying notes to consolidated financial statements.

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RELIANCE STEEL & ALUMINUM CO.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands except share and per share amounts)

See accompanying notes to consolidated financial statements.

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RELIANCE STEEL & ALUMINUM CO.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)