STEEL DYNAMICS INC, 10-K405, 2000-03-29

STEEL DYNAMICS INC
10-K405, 2000-03-29
STEEL WORKS, BLAST FURNACES & ROLLING MILLS (COKE OVENS)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1999

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

Commission File Number 0-21719

STEEL DYNAMICS, INC.
(Exact name of registrant as specified in its charter)

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INDIANA 35-1929476
(State or other jurisdiction of incorporation or organization) (IRS employer identification No.)

7030 POINTE INVERNESS WAY, SUITE 310, FORT WAYNE, IN 46804
(Address of principal executive offices) (Zip code)
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Registrant's telephone number, including area code: (219) 459-3553

Securities registered pursuant to Section 12(b) of the Act:
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Title of each class Name of each exchange on which registered
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NONE NONE
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days

Yes [x] No[ ]

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

The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of Common Stock of $13.38 on March
24, 2000 as reported on the Nasdaq National Market, was approximately,
$410,152,380.

As of March 24, 2000, Registrant had outstanding 48,018,683 shares of Common
Stock.

DOCUMENTS INCORPORATED BY REFERENCE

The information required to be furnished pursuant to Item 10, Item 11 and Item
12 of Part III will be set forth in, and incorporated by reference from, the
company's definitive Proxy Statement for the Annual Meeting of Stockholders to
be held May 18, 2000, (the "1999 Proxy Statement"), which will be filed with the
Securities and Exchange Commission not later than 120 days after the end of the
fiscal year ended December 31, 1999.

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STEEL DYNAMICS, INC.

TABLE OF CONTENTS

Part 1
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Page
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Item 1. Business................................................................. 1
Item 2. Properties............................................................... 32
Item 3. Legal Proceedings........................................................ 33
Item 4. Submission of Matters to a Vote of Security Holders...................... 34

Part II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.... 34
Item 6. Selected Financial Data.................................................. 36
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.................................................. 38
Item 7A. Quantitative and Qualitative Disclosures About Market Risk............... 42
Item 8. Consolidated Financial Statements........................................ 43
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.......................................... 61

Part III

Item 10. Directors and Executive Officers of the Registrant....................... 61
Item 11. Executive Compensation................................................... 61
Item 12. Security Ownership of Certain Beneficial Owners and Management........... 61
Item 13. Certain Relationships and Related Transactions........................... 61

Part IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K......... 65
</TABLE>

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PART I

ITEM 1. BUSINESS

THIS REPORT CONTAINS FORWARD LOOKING STATEMENTS.

Throughout this report, or in other reports or registration statements filed
from time to time with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, or under the Securities Act of 1933, as well as
in press releases or oral statements made to the market by our officers or
representatives, we may make statements that express our opinions, expectations,
or projections regarding future events or future results, in contrast with
statements that reflect historical facts. These expressions, which we generally
precede or accompany by such typical conditional words as "anticipate,"
"intend," "believe," "estimate," "plan," "seek," "project" or "expect," or by
the words "may," "will," or "should," are intended to operate as "forward
looking statements" of the kind permitted by the Private Securities Litigation
Reform Act of 1995. That legislation protects such predictive statement by
creating a "safe harbor" in the event that a particular prediction does not turn
out as anticipated.

Accordingly, many of the statements in this Annual Report on Form 10-K regarding
our business plans, our construction projects, our product developments, our
anticipated financial needs or our financings, especially but not exclusively in
the sections entitled "Company Overview" (page 2), "Competitive Strengths" (page
3), "Business Strategy" (page 5), "Existing Projects" (page 6) and "Description
of Business" (page 9), including the subsection therein entitled "Risk Factors
That May Affect Future Operating Results" (pages 18-24), and in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operation" section (pages 38-42) are forward looking statements. By their very
nature, forward looking statements involve some known and many unknown risks and
uncertainties. Therefore, actual results, performance, or achievements may
differ materially from those that may have been expressed or implied in such
forward looking statements. While we always intend to express our best judgment
when we make statements about what we believe will occur in the future, and
although we base these statements on circumstances that we believe to be
reasonable when made, things can happen to cause our actual results and
experience to differ materially from those we thought would occur.

The following listing represents some, but not necessarily all of the factors
that may cause actual results to differ from those predicted:

- cyclical changes in market supply and demand for steel; general economic
conditions; U.S. or foreign trade policy affecting steel imports or
exports; and governmental monetary or fiscal policy in the U.S. and other
major international economies;

- risks and uncertainties involving new technologies, in which the process
itself or certain critical elements thereof may not work at all, may not
work as well as expected, or may turn out to be uneconomic;

- cyclical effects of changes in the availability and costs of steel scrap,
steel scrap substitute materials and other raw materials or supplies which
we use in our production processes, as well as availability and cost of
electricity and other utilities;

- unanticipated and extraordinary operating expenses, unplanned equipment
failures and plant outages;

- actions by our domestic and foreign competitors, loss of business from our
major customers and new or existing production capacities that enter or
leave the marketplace;

- labor unrest, work stoppages and/or strikes involving our own workforce,
those of our important suppliers or customers, or those affecting the
steel industry in general;

- the effect of the elements upon our production or upon our important
suppliers or customers;

- the impact of changes in environmental laws or in the application of other
legal and regulatory requirements, including actions by government
agencies on pending or future environmentally related construction or
operating permits;

- pending, anticipated or unanticipated private or governmental claims or
litigation, or the impact of any adverse outcome of any such litigation
on the adequacy of our reserves, the adequacy or availability of insurance
coverage, or on our very business and assets;

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- changes in interest rates or other borrowing costs, or the availability of
credit;

- changes in our business strategies or development plans, and any
difficulty or inability to successfully consummate or implement as
planned any of our projects, acquisitions, joint ventures or strategic
alliances;

- the impact of governmental approvals, litigation, construction delays,
cost overruns or technology risk upon our ability to complete or start-up
a project when expected, or to operate it as anticipated;

- potential failure of our computer systems or those of our major suppliers,
customers or service providers to be Year 2000 compliant in all respects.

We also believe that the discussion we have placed under the subsection entitled
"Risk Factors That May Affect Future Operating Results" at pages 18 through 24
of this Form 10-K should be read in conjunction with and to better understand
the risks and uncertainties underlying any forward looking statements.

Any forward looking statements which we make in this report or in any other
report, press releases, or oral statement speak only as of the date of such
statement, and we undertake no ongoing obligation to update such statements.
Comparisons of results for current and any prior periods are not intended to
express any future trends or indications of future performance, unless expressed
as such, and should only be viewed as historical data.

(a) COMPANY OVERVIEW

We are one of the fastest growing and most profitable electric furnace mini-mill
steel producers in the United States. Since 1996, our compounded annual growth
rates for revenues and EBITDA have been approximately 43% and 60%, respectively.
In addition, our 1998 EBIT and EBITDA margins were approximately 14% and 20%,
among the best in the industry. In 1998, we had net sales of $514.8 million and
EBITDA of $100.8 million. In 1999, we had net sales of $618.8 million and EBITDA
of $125.9 million.

We currently operate two facilities and are preparing to build a third. Our
primary facility is a technologically advanced flat rolled steel mini-mill on an
840-acre site in Butler, Indiana, which began commercial production in January
1996. Our Butler mill has an annual production capacity of 2.2 million tons, and
produces a broad range of high quality flat rolled carbon steel products.

We sell a large variety of hot rolled, cold rolled and coated steel products,
including:

- mild and medium carbon hot rolled bands;

- high strength low alloy hot rolled bands;

- high strength low alloy 80,000 minimum yield hot rolled sheet;

- hot rolled and cold rolled hot dipped galvanized sheet; and

- fully processed cold rolled sheet.

WE SELL OUR PRODUCTS DIRECTLY TO END USERS AND THROUGH STEEL SERVICE CENTERS
PRIMARILY IN THE MIDWESTERN UNITED STATES. OUR PRODUCTS ARE USED IN NUMEROUS
SECTORS, INCLUDING:

- automotive;

- appliance;

- manufacturing;

- consumer durable goods; and

- industrial machinery

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Our second facility is operated by our subsidiary, Iron Dynamics, Inc. and is
contiguous to our Butler mill. It is a 520,000 metric tonne annual capacity
plant equipped to produce direct reduced iron. We will then convert this direct
reduced iron into approximately 470,000 metric tonnes of liquid pig iron, which
we will then combine with scrap to produce high quality steel for use in our
Butler mill's meltshop. Construction of this facility began in October 1997. We
produced our first direct reduced iron material in November 1998, produced our
first tap of liquid pig iron in March 1999 and commenced initial production in
August 1999. During preliminary start-up, however, we encountered a number of
unanticipated delays, primarily attributable to some equipment failures or
design deficiencies, and this has required us to undertake certain redesign
work and to effect some equipment replacement or retrofitting. Much of this
work has been accomplished, but some of it remains to be done. While this
corrective work is being done, however, we are operating the facility at
substantially reduced levels. We estimate that the necessary remaining redesign
and equipment replacement or retrofitting will continue throughout 2000 and
should be completed during the fourth quarter of 2000.

Our third planned facility is a structural and rail mill to be located in
Whitley County, Indiana. Our financing is in place, all plans are ready to go,
most of the equipment has been ordered and much of it has already arrived, and
virtually all preparatory site work has been done. However, we have been unable
to formally commence actual plant construction due to the continued pendency of
several appeals of the government's approval of our required construction
permit by certain groups that are opposed to our structural mill
project. We continue to remain optimistic that our opponents' appeal, which has
been fully briefed and ready for decision for many months, will not be
successful and that the permit will be issued promptly. Our current estimate is
that we should be able to complete the structural and rail mill in the first
half of 2001. We plan to manufacture structural steel beams, pilings and
trusses, as well as roof and floor decking materials for the construction
markets and steel rails for the railroad industry.

December 1999, we terminated our advisory and technical assistance relationship
with Nakornthai Strip Mill Public Company, Ltd, a Thailand mini-mill steelmaker.
While we retained our 10% equity interest in that facility during 1999, it
retains minimal value in light of the financial restructuring of that facility's
debt that has been recently effected among its banks, bondholders and other
creditors. We have also been sued in a number of different actions, together
with certain of the investment banks that assisted NSM in its issuance of bonds
during March 1998, by certain bondholders who purchased bonds in that offering
and who are claiming, based on various legal theories, that we are jointly and
severally liable to make good their losses. We have denied liability in each of
such cases and are defending ourselves against such claims. See "Legal
Proceedings" under "Risk Factors That May Affect Future Operating Results" in
this Item 1 and again at Item 3 of this Report.

In September 1999, we acquired a controlling interest in New Millennium Building
Systems, LLC, a new Indiana enterprise, which is in the process of building a
manufacturing facility in Butler, Indiana for the production of steel joists,
girders and trusses, as well as steel roof and floor decking materials for use
primarily in the construction of commercial, industrial and institutional
buildings. An unrelated company, New Process Steel Holding Co., Inc. also
acquired a voting interest. The balance of New Millennium's ownership is
non-voting and is in the hands of New Millennium's management. New Millennium
estimates a completion and start-up for this new 250,000 square foot facility
to be during the first half of 2000.

(b) COMPETITIVE STRENGTHS

We believe that we have certain competitive strengths that help distinguish us
from other steelmakers. These include:

HIGHLY SUCCESSFUL EARLY STAGE PERFORMANCE

Our financial and operational results have been among the strongest in the
industry over the past 24 months:

- in 1999, our revenue increased approximately 20% over 1998;

- in 1999, we were able to produce steel using only 0.41 man-hours per ton,
while in 1998, our man-hours per ton was 0.55, already one of the lowest
in the industry;

- in 1998, our revenue growth rate increased approximately 23%; and

- in 1999, our operating profit per ton shipped was $58, and for 1998, our
operating profit per ton shipped was $50, one of the best in the industry.

This performance occurred despite the significant stresses in both the domestic
and foreign steel industry in 1998 and early 1999 caused by the impact of
illegal dumping and the resulting decline in steel prices.

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Additionally, our new cold mill ran at its capacity of approximately 1.0 million
tons per year for a good part of 1999. It is being fully supported by our second
furnace battery, caster, tunnel furnace and coiler, all of which ran at near
capacity. We also produced at capacity in our hot mill for most of 1999. Also,
during 1999, we had an increase in cold mill and in hot mill production of
approximately 43% and 36%, respectively. We are continuing to use a greater
portion of hot band production for the cold mill, producing higher value-added
cold rolled and coated products.

We believe that our financial and operational performance should continue to
improve as a result of what we view as increased demand for domestic steel as
well as the cost efficiencies that we anticipate from using scrap substitutes
from our Iron Dynamics facility once it is fully operational.

LEADING MINI-MILL MANAGEMENT TEAM

Our senior management team, which consists of Keith E. Busse, Mark D. Millett
and Richard P. Teets, Jr., pioneered the development of thin-slab flat rolled
technology and directed the construction and successful operation in the late
1980s of the world's first thin-slab flat rolled mini-mill in Crawfordsville,
Indiana. After founding Steel Dynamics in 1993, our senior management team
designed, built and started-up our Butler mini-mill under budget and in fourteen
months, which we believe is the shortest construction period for a facility of
this kind. They followed this by just as efficiently and under budget designing,
building and successfully starting up a cold finishing facility addition to our
Butler plant, which became fully operational in January 1998. This management
team brought our Butler mini-mill to a positive cash flow position in April
1996, just four months after start-up, and brought our facility to a positive
after tax net income position in July 1996, just seven months after start-up. As
a general matter, we believe that our senior management team's extensive
experience within the thin-slab flat-rolled compact strip production or "CSP"
technology arena enables us to design and build CSP mini-mill plants and to
operate them with greater efficiency, at lower costs and yielding higher quality
production than our competitors.

We have also recruited, trained and placed into critical divisional and
operational management positions an exceptionally talented group of senior and
mid-level managers, many of whom have come to us with extensive mini-mill
experience. In addition, our four most senior managers are substantial
shareholders of our company.

RELIABLE ACCESS TO LOW COST METALLICS

We have two primary raw material needs: steel scrap and steel scrap substitute
material. Our principal raw material is steel scrap, which represented
approximately 50% of our total cost of goods sold during 1998 and 49% of our
total cost of goods sold during 1999. We secure steel scrap and plan to secure
our steel scrap substitute material through two primary sources. First, we have
a long-term steel scrap purchasing agreement with OmniSource Corporation, one of
the largest scrap processors and brokers in the Midwest, which requires
OmniSource to obtain scrap for us at the lowest available market prices. Second,
as an assumed lower cost substitute for and alternative to scrap, our Iron
Dynamics facility adjacent to our Butler mill plans to produce liquid pig iron
for direct feed into our electric furnaces. This liquid pig iron has many
benefits over traditional scrap, such as low sulfur, residuals and nitrogen
levels. In addition, it will allow us to reduce the time we must keep the power
on in our meltshop by, on average, more than one-third. This vertical
integration of a critical raw material resource, through our Iron Dynamics
facility, will enable us to better control a significant portion of our
potentially volatile resource costs. In addition, we believe that these dual
sources of steel scrap and steel scrap substitutes will enable us to maintain
the lowest overall raw material costs relative to our competitors.

STRATEGIC LOCATIONS

Our Butler mill is located within 300 miles of our major steel customers, steel
service centers and other end users. This location gives us numerous pricing
advantages as a result of freight savings, including inbound scrap and other raw
material resources as well as outbound steel products destined for our
customers. Of our total net sales during 1999, approximately 69% were to
customers within 300 miles of our Butler mill. In addition, seven of the top ten
structural steel consuming states are located within a 500-mile radius of our
planned Whitley County structural mill. Both of these facilities are located
within a seven-state region that accounts for a majority of the total scrap
produced in the U.S., which results in scrap cost advantages due to freight
savings. All of our production sites have excellent access to highway and rail
transportation networks and are also in areas of reasonably priced and available
energy supplies. The Butler mini-mill and Iron Dynamics facility have access to
the east-west and the north-south rail lines of Norfolk Southern Corporation and
the east-west lines of the CSX Transportation railway through our internal
railroad infrastructure. The planned Whitley County structural mill will have
access to the CSX Transportation and the Norfolk Southern Corporation railways.

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A SOLID BASELOAD OF HOT BAND SALES

In order to ensure consistent and efficient hot band plant utilization, we have
entered into a multi-year "off-take" sales and distribution agreement with
Heidtman Steel Products, Inc. This agreement guarantees us a minimum sale of
30,000 tons of flat-rolled products per month at prevailing market prices.
During 1999, Heidtman purchased approximately 402,000 tons of flat-rolled steel
products, which amounted to 22% of our total net tons shipped for that period.
During 1998, Heidtman's purchases amounted to approximately 333,000 tons of
flat-rolled steel products, or 24% of our total net tons shipped for that
period. Through our distribution relationship with Heidtman, we have also been
able to access the automobile market by having our products sold to automobile
manufacturers, such as Daimler Chrysler, Inc.

The principal components of our business strategy are as follows.

ACHIEVE THE LOWEST CONVERSION COSTS IN THE INDUSTRY

Due to our pioneering and successful mini-mill experience, we have been able to
build facilities with lower capital costs that incorporate technological
innovation in thin-slab electric furnace steelmaking. We have also developed
extensive operational know-how and have implemented an entrepreneurial
management style that rewards initiative, teamwork and efficiency. These
capabilities have allowed us to continue to focus on low cost, highly efficient
operations, thereby helping us achieve what we believe is a lower cost of
converting scrap and scrap substitutes into high quality steel than most of our
competitors.

FOCUS ON HIGHER MARGIN VALUE-ADDED PRODUCTS

Due in part to our start-up of a seventh stand in our rolling mill in early
1999, we can now produce low and medium-carbon as well as high strength low
alloy 80,000 minimum yield steel products with a higher quality and lighter
gauge than many other mills. Our steel has consistently better shape
characteristics than most other flat-rolled products and competes favorably with
certain more expensive cold rolled products. Furthermore, since the completion
of our cold mill in 1998, we are increasingly dedicating a substantial portion
of our hot rolled products to the production of higher margin, value-added
coated products, as well as thinner gauge cold rolled products. During 1998,
approximately 681,000 tons, or 48% of our hot band production went into our cold
mill, while during 1999, approximately 997,000 tons, or 51% of our hot band
production went into our cold mill. We are continuing to focus on dedicating a
growing portion of our hot rolled products to the cold rolled mill, thereby
enhancing our overall operating margin and further differentiating the quality
of our products. We believe that this ongoing shift to more value-added steel
production will result in higher overall margins and greater cash flow in the
future.

OFFER SUPERIOR PRODUCT QUALITY

We believe that product quality is a key factor in the selection of a
flat-rolled product supplier. Our commitment to quality is evidenced by the fact
that we were the first flat-rolled mini-mill to achieve ISO 9002 and QS 9000
certifications. These certifications enable us to target a broader range of
customers and end users, including larger automotive companies, such as General
Motors, and appliance companies, which historically have been almost exclusively
serviced by integrated steel producers. During 1998, our percentage of prime
grade material to off-quality material, or "seconds," was 95.3%. During 1999 it
was 94.2%. We believe that this relatively constant rate represents one of the
highest "prime-ton percentages" in the mini-mill sector.

PROVIDE BROAD EMPLOYEE INCENTIVES

100% of our employees participate in incentive plans designed to enhance overall
productivity. Our incentive plans utilize bonuses based on criteria specific to
an employee's position and area of expertise.

The productivity of our employees is measured by focusing on groups of employees
and not individual performance. Three groups of employees participate in the
bonus program: production, administrative and clerical. Our department managers
and officers are also eligible to participate. Each group of employees has its
own bonus program or programs.

Production employees are eligible to participate in two cash bonus programs, the
production bonus and the conversion cost bonus programs. The production bonus is
based on the quantity of prime product produced in a given week. The conversion
cost bonus is determined and paid on a monthly basis based on the costs of
converting raw materials into finished product. The program is intended to
reward employee efficiency in converting raw materials into finished steel, or,
in the case of cold mill employees, converting hot rolled bands into value-added
products.

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We also have a cash bonus plan for non-production employees, including
accountants, engineers, secretaries, accounting clerks and receptionists.
Bonuses under this plan are based on our divisional return on assets. We believe
that this compensation structure more clearly aligns our employees' interests
with ours, unlike many of our competitors. In addition, these bonuses comprise a
significant portion of our employees' compensation: more than 40% of an
employee's total compensation may be performance based.

PURSUE FUTURE GROWTH OPPORTUNITIES.

We plan to continue to develop our business through greenfield projects, joint
ventures, strategic alliances or acquisitions in order to secure long-term
future growth and profitability. We also believe that due to our management
team's established reputation within the steel industry, we benefit from a
broader range of external growth opportunities than many of our competitors. We
further believe that ongoing developments in technology as well as current
market conditions, provide significant opportunities for internal growth. These
opportunities include penetrating new markets, such as markets for roof and
deck, structural, special bar quality, stainless and other specialty steels.

(d) 1999 DEVELOPMENTS

EXISTING PROJECTS

SEVENTH FINISHING STAND. In January 1999, we completed the installation and
start-up of a seventh finishing stand in our hot rolling mill. This allows us to
reduce the rolling loads among the six other finishing stands, while enabling us
to produce steel with even better shape and profile performance. It also allows
us to roll considerably lighter gauges than was previously possible.

IRON DYNAMICS. During preliminary start-up testing during 1999, we encountered a
number of design deficiencies or equipment failures that combined to delay our
projected ramp-up to full production by more than a year from what we originally
anticipated and resulted in excess capital costs over those originally budgeted
of approximately $12.0 million. Many of these problems, such as various material
handling issues at the rotary hearth furnace and thus related to the production
of direct reduced iron, have already been resolved.

Our submerged arc furnace, however, which is essential in the conversion of the
direct reduced iron into liquid pig iron, our intended end product, has required
some critical design modifications and equipment replacements or retrofitting
primarily involving vessel lining and cooling concerns, in order to attain full
functionality. This process has been ongoing for several months, the result of
extensive additional research and development activities based upon our actual
experience in the field, and we believe that these changes, when implemented,
should enable us to achieve the output and the product quality that we
originally sought. This redesign and replacement work is expected to continue
throughout 2000, culminating in a planned shutdown of the submerged arc furnace
during the fourth quarter of 2000 in order to permit us to install and
commission the replacement equipment. In the meantime, we are producing direct
reduced iron and liquid pig iron in a curtailed mode, approximately 7,600 tons
of liquid pig iron in February 2000 and a targeted average of 14,200 tons for
March through August. We plan to continue in this mode until completion of the
repair and redesign work. Product quality and metallization rates appear to be
excellent. We have also ordered two briquetters, and we expect to install and
commission these briquetters during the fourth quarter of 2000. The briquetters
will enable us to compress the direct reduced iron into a solid, dense
briquette, which, contrary to loose direct reduced iron, will not re-oxidize.
The solid briquettes can therefore be stored until needed for direct
introduction in our electric arc furnaces, or sold on the open market as a
commodity to other users of direct reduced iron. The addition of the briquetters
will allow Iron Dynamics to bypass the submerged arc furnace without losing
valuable production during its planned down time for repairs in the fourth
quarter of 2000, as well as during any future down time.

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OUR STRUCTURAL AND RAIL MILL

We expect to commence construction as soon as our "Prevention of Significant
Deterioration" construction permit or ("air permit") becomes final, which will
not occur until after disposition of appeals lodged by opponents of the project,
including United Association of Plumbers & Steamfitters, Local Union 166 and
Citizens Organized Watch, Inc. The Indiana Department of Environmental
Management issued our permit on July 7, 1999. Three appeals by opponents were
lodged and are now pending before the Indiana Department of Environmental
Adjudication in Indianapolis, Indiana, and two additional appeals are pending
before the federal Environmental Appeal Board in Washington, D.C.

The issues raised before the Environmental Appeal Board have been heavily
briefed by the parties. On December 7, 1999, the Environmental Appeal Board
entered an order stating that as of December 20, 1999, the matter will be
considered fully briefed and that no further briefing would be allowed except by
order of the Board. Accordingly, barring any special circumstances warranting
additional filings, we are now awaiting a decision as to whether the
Environmental Appeal Board will grant or deny review of United Association of
Plumbers & Steamfitters, Local Union 166's and Citizens Organized Watch, Inc.'s
request for review. The permit will become effective if the Environmental Appeal
Board denies review, although judicial review of that decision is also
available. Unfortunately, the Environmental Appeal Board is not constrained by
any deadlines and is not required to indicate how or when it will rule and,
therefore, while we are hopeful that a favorable decision is imminent, there is
no way to accurately predict when any decision will be rendered. However, we
believe that the permit was properly issued and that the issuance of the permit
will be upheld on appeal.

The Indiana Department of Environmental Adjudication is presently deferring its
full consideration of the issues until the Environmental Appeal Board rules.
However, on January 19, 2000, the Indiana Department of Environmental
Adjudication entered an order granting our motion to dismiss the United
Association of Plumbers & Steamfitters, Local Union 166's and Citizens Organized
Watch, Inc.'s request for a state stay of the permit's effectiveness. On
February 16, 2000, the United Association of Plumbers & Steamfitters, Local
Union 166 filed a petition for judicial review of the Department of
Environmental Adjudication's order, and on February 18, 2000, the Citizens
Organized Watch, Inc. filed a similar petition. These petitions are currently
pending before a Marion County, Indiana, court. As with the Environmental Appeal
Board action, we cannot accurately predict when the decision will be rendered.
However, we believe that the permit was properly issued and that the issuance of
the permit will be upheld on appeal.

We anticipate that final disposition of the administrative appeals will occur
sometime within the next two to three months, although it could take longer. As
soon as the appeal process has been concluded and assuming that our permit has
become final, we will immediately commence construction of this mill.
Construction is expected to take approximately 13 to 14 months. Accordingly, we
still hope to be able to produce our first products in the first half of 2001.

We also anticipate that the structural mill will have a capital cost of
approximately $265 million. We plan to produce a broad range of structural
products, primarily aimed at the construction market. Contracts for the major
pieces of equipment have long since been awarded, including the electric arc
furnace and transformers, the ladle furnaces, the three-strand caster, reheat
furnace, rolling mill, rolling mill electrical package, charge and ladle cranes,
overhead cranes, and the level II computer system. In all, total expended
capital costs on the structural mill, as of December 31, 1999, was approximately
$132 million.

In addition, once we are able to proceed, we intend to construct a $40-$50
million rail manufacturing addition to our planned structural mill, which will
enable us to take advantage of additional available melting capacity in our
structural mill meltshop. The rail addition is in the design, preliminary
engineering and equipment specification and selection phase. We anticipate that
this process will take approximately six months, after which we plan to place
equipment orders and begin construction work on this additional facility. This
additional facility will not necessitate further permits. Completion of the rail
manufacturing addition is not a precondition for the start-up and commencement
of operations of our structural mill, and we anticipate a start-up for the rail
project shortly following the start-up of the structural mill.

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METALSITE, LP

In November 1998, we acquired a minority limited partnership interest in
MetalSite, LP, a Delaware limited partnership. At the time, Weirton Steel Corp.
owned a controlling interest in the limited partnership and LTV Steel Company,
Inc. was another minority interest limited partner. Since that time, other steel
companies such as Bethlehem Steel and Ryerson-Tull, and investors such as
Internet Capital Group have acquired equity interests in the venture. We also
plan to increase our minority ownership interest by exercising a warrant that
was issued to us upon formation of MetalSite, LP

MetalSite is a new electronic Web-based marketplace for the on-line purchase of
metal products from various sources. Initially, MetalSite dealt primarily with
secondary and excess prime steel, both hot and cold rolled. Since then,
MetalSite has expanded its scope to include all kinds of steel and other metals.
MetalSite has indicated that it will be open to any seller who wishes to become
authorized to sell on-line. Buyers will eventually be able to access a
multi-company catalog of products. There is also an on-line auction service
through which a seller may solicit bids for a particular product, privately
review the bids, and then award the sale.

NEW PROJECTS

NEW MILLENNIUM BUILDING SYSTEMS, LLC. In September 1999, we and New Process
Steel Holding Co., Inc., a major processor and distributor of coated flat-rolled
products, each acquired a 50% voting interest in New Millennium Building
Systems, LLC, an Indiana limited liability company that was organized on June
25, 1999. However, pursuant to the Operating Agreement, our vote is
determinative on all material matters requiring an affirmative vote, except for
certain matters specifically requiring a unanimous vote.

In 1999, New Millennium purchased approximately 74 acres of land from us,
located near our flat-rolled mini-mill in Butler, Indiana, and it purchased
approximately 22 acres from a third party. New Millennium is in the process of
building a 225,000 square foot manufacturing facility and an approximately
16,000 square foot office building on that site. Construction of the facility
began in late fall 1999 and as of March 1, 2000, construction was 60% complete.
New Millennium has indicated an anticipated completion of the manufacturing
facility in late April 2000, completion of the office building in June 2000, and
a start-up date for production in June 2000.

New Millennium plans to purchase flat-rolled steel from us and other steel
manufacturers and processors, including Heidtman Steel. The New Millennium
facility will have direct rail deliveries from our mill as well as from Heidtman
Steel. New Millennium will process that steel to manufacture steel joists,
girders and trusses, as well as steel roof and floor decking material. These
products will be used primarily in the construction of commercial, industrial
and institutional buildings, such as factories, warehouses, shopping centers and
schools.

We presently anticipate that a significant portion of New Millennium's sales
will be out-of-state, with a concentration in the Upper Midwest area of the
United States. The Upper Midwest presently enjoys the highest non-residential
building spending in the country. New Millennium's main competitors at a
national level are expected to be Vulcraft, a division of Nucor; Canam; and,
SML, a division of Commercial Metals. New Millennium also has a number of
competitors on a regional basis, located in the Upper Midwest, including Canam,
Socar and Gooder-Henderson, as well as several local suppliers with facilities
located in Pittsburgh, Cleveland, Detroit, Indianapolis, Chicago and Milwaukee.
However, New Millennium believes that it will have several advantages over its
competitors, including low material costs and low freight costs, as well as
excellent product quality.

The project is expected to create 235 new jobs and represents a total capital
investment of approximately $22.5 million. We anticipate this project will begin
generating substantial cash flow for itself within four years of commencement of
its operations. New Millennium has indicated that it plans to use that cash flow
to expand and target other centers of high construction activity, to add other
complementary metal building components to its product mix, and to provide a
return to investors.

(e) INDUSTRY SEGMENTS

Under Statement of Financial Accounting Standards No. 131 "Disclosures About
Segments of an Enterprise and Related Information," we operate in two business
segments: "Steel Operations" and "Steel Scrap Substitute Operations."

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(f) DESCRIPTION OF BUSINESS

INDUSTRY OVERVIEW

The steel industry has historically been and continues to be highly cyclical in
nature, influenced by a combination of factors, including periods of economic
growth or recession, strength or weakness of the U.S. dollar, worldwide
production capacity and levels of steel imports and applicable tariffs. The
industry has also been affected by various company-specific factors such as a
company's ability or inability to adapt to technological change, plant
inefficiency and high labor costs. Steelmaking companies are particularly
sensitive to trends in the automotive, oil and gas, gas transmission,
construction, commercial equipment, rail transportation, agriculture and durable
goods industries. These industries are significant markets for steel products
and are themselves highly cyclical. Steel, regardless of product type, is a
commodity affected by supply and demand. Steel prices have been and may continue
to be volatile and fluctuate in reaction to general and industry specific
economic conditions. Under such conditions, a steel company, if it is to survive
and prosper, must constantly strive to be and remain a high quality low cost
producer.

Domestic steel producers, including us, have historically faced significant
competition from foreign producers. From time to time, as occurred during 1998
and is continuing, albeit to a lesser extent today, the domestic steel producers
have been adversely affected by what we believe was and continues to be unfairly
traded imports. The intensity of this foreign competition is also substantially
affected by the relative strength of foreign economies and fluctuation in the
value of the United States dollar against foreign currencies, with steel imports
tending to increase when the value of the dollar is strong in relation to
foreign currencies (some of which were significantly devalued during 1998 and
1999). The situation was exacerbated by reason of a weakening of certain
economies during 1998 and 1999, particularly in Eastern Europe, Asia, and in
Latin America. Because of the ownership, control or subsidization of some
foreign steel producers by their governments, decisions by such producers with
respect to their production and sales are often influenced to a greater degree
by political and economic policy consideration then by prevailing market
conditions.

Imports of flat-rolled products increased significantly during each of the last
three years, surging to record levels during 1998, before declining in 1999 as a
result of the successful trade cases in which we participated and which are
discussed below. Based on AISI reports for 1998 and 1997, imports of flat-rolled
products (excluding semi-finished steel) totaled 20 million and 14 million tons,
respectively, or approximately 25% of total domestic steel consumption in 1998
and approximately 19% in 1997.

In September 1998, complaints were filed with the U.S. International Trade
Commission and the U.S. Department of Commerce by a number of U.S. steel
companies, including us, as well as the United Steel Workers of America, seeking
determinations that Japan, Brazil and Russia were dumping hot rolled carbon
steel in the U.S. market at below fair market prices. In April 1999, the
Department of Commerce issued a final determination that imports of hot rolled
steel from Japan were dumped at margins ranging from 17% to 65%, and in June,
the U.S. International Trade Commission reached a final determination that
imports of hot rolled sheet from Japan caused injury to the U.S. steel industry.
In July 1999, the Department of Commerce issued suspension agreements and final
dumping duty determinations as to imports of hot rolled sheet from Brazil and
Russia, and a suspension agreement and final countervailing duty determination
as to imports of hot rolled sheet from Brazil. The DOC also announced
countervailing duty findings of approximately 7%, and anti-dumping duties of
approximately 40%, as to imports from Brazil. The U.S. International Trade
Commission made a final affirmative injury determination. The Department of
Commerce also announced final dumping duties ranging from 57% to 157% and the
suspension agreement against Brazil and Russia will remain in effect for five
years.

We expect that the success of these hot rolled cases will curtail imports from
these countries from 7 million tons in 1998 to between 500,000 and 1 million
tons per year for 1999 and the five following years. However, it is possible
that imports of hot rolled sheet from other countries will increase
significantly. We and other petitioners in the suits plan to continue to
vigorously monitor such imports and plan to take further action if warranted.

On June 2, 1999, we, together with other domestic producers and the United Steel
Workers of America, also filed a complaint with the U.S. International Trade
Commission and Department of Justice seeking determination that cold rolled
steel products from Argentina, Brazil, China, Indonesia, Japan, Slovakia, South
Africa, Taiwan, Thailand, Turkey, and Venezuela, were being dumped in the U.S.
market at below fair market prices. On July 19, 1999, the U.S. International
Trade Commission made unanimous affirmative preliminary determinations of a
reasonable indication of injury by reason of such imports. The Department of
Commerce announced preliminary dumping determinations, which required the
posting of dumping duties in November and December of 1999. In January 2000, the
Department of Commerce issued a determination that imports of cold rolled steel
from six

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of the countries were dumped at margins ranging from 17% to 81%. We were
ultimately not successful in these cold rolled cases, however, and on March 3,
2000, the U.S. International Trade Commission made negative final injury
determinations against these six countries, and we expect final negative
determinations in all six cases. Therefore, these negative outcomes are likely
to result in a continuation of the depressed cold rolled prices caused by these
unfair practices.

The Flat Rolled Market

The flat rolled market represents the largest steel product group, accounting
for approximately 62% of the total 1998 U.S. steel shipments of approximately
102.4 million tons. Flat rolled products consist of hot rolled, cold rolled and
coated sheet and coil. The following table shows the U.S. flat rolled shipments,
in net tons, by hot rolled, cold rolled and coated production, as reported by
the AISI, for the last five years.

YEAR ENDED DECEMBER 31,

1994 1995 1996 1997 1998
---- ---- ---- ---- ----
(MILLIONS OF TONS)

<S> <C> <C> <C> <C> <C>
Hot Rolled (1) 24.6 26.8 27.0 29.0 25.3
Cold Rolled (2) 14.7 14.1 15.8 15.2 15.8
Coated (3) 20.2 19.9 19.7 22.0 22.8
---- ---- ---- ---- ----
Total 59.5 60.8 62.5 66.2 63.9
==== ==== ==== ==== ====
% Total Steel Shipments 62.6% 62.4% 61.9% 62.5% 62.4%
</TABLE>

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

(1) Includes pipe/tube, sheet, strip and plate in coils.

(2) Includes blackplate, sheet, strip and electrical.

(3) Includes tin coated, hot dipped, galvanized, electrogalvanized and all other
metallic coated.

Hot Rolled Products. All coiled flat rolled steel is initially hot rolled, a
process that consists of passing an ingot or a cast slab through a multi-stand
rolling mill to reduce its thickness to less than 1/2 inch. Hot rolled steel is
minimally processed steel coil that is used in the manufacture of various
non-surface critical applications such as automobile suspension arms, frames,
wheels, and other unexposed parts in auto and truck bodies, agricultural
equipment, construction products, machinery, tubing, pipe, tools, lawn care
products and guard rails. The U.S. market for hot rolled steel in 1998 was
approximately 25.3 million tons, excluding imports.

Aggregate domestic shipments of hot rolled steel for 1998 and for the two prior
years, according to AISI, were approximately 25.3, 29.0 and 27.0 million tons,
respectively. For the same period, imports of hot rolled steel increased
substantially, from approximately 9.9 million tons in 1996 to 11.1 million tons
in 1997, reaching 17.5 million tons in 1998. Largely as a result of the trade
cases brought by us and certain other producers of flat rolled steel against
illegally dumped hot rolled steel from Japan, Russia, and Brazil, imports from
these three countries decreased from their 1998 levels.

Cold Rolled Products. Cold rolled steel is hot rolled steel that has been
further processed through a pickler and then successively passed through a
rolling mill without reheating until the desired gauge, or thickness, and other
physical properties have been achieved. Cold rolling reduces gauge and hardens
the steel and, when further processed through an annealing furnace and a temper
mill, improves uniformity, ductility and formability. Cold rolling can also
impart various surface finishes and textures. Cold rolled steel is used in
applications that demand higher quality or finish, such as exposed automobile
and appliance panels. As a result, cold rolled prices are typically higher than
hot rolled. The U.S. market for cold rolled steel in 1998 was approximately 15.8
million tons, excluding imports.

Aggregate domestic shipments of cold rolled steel for 1998 and for the two prior
years, according to AISI, were approximately 15.8, 15.2 and 15.8 million tons,
respectively. For the same period, imports of cold rolled steel increased
substantially, from approximately 3.4 million tons in 1996 to 4.2 million tons
in 1997, reaching 4.6 million tons in 1998.

Coated Products. Coated steel substrate can be either hot rolled or cold rolled
steel that has been coated with zinc to render it corrosion-resistant and to
improve its paintability. Hot-dipped galvanized, galvannealed, electrogalvanized
and aluminized products are types of coated steels. These are also the highest
value-added sheet products because they require the greatest degree of
processing and tend to have the strictest quality requirements. Coated steel is
used in high volume applications such as automotive, household appliances,
roofing and siding, heating and air conditioning equipment, air ducts, switch
boxes, chimney flues, awnings, garbage cans and food containers. The use of
coated steels in the U.S. has increased dramatically over the last 40 years. The
U.S. market for coated steels in 1998 was approximately 22.8 million tons,
excluding imports.

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Aggregate domestic shipments of coated steel for 1998 and for the two prior
years, according to AISI, were approximately 22.8, 22.0 and 19.7 million tons,
respectively. For the same period, imports of coated steel increased from
approximately 2.3 million tons in 1996 to 2.5 million tons in 1997, reaching 2.6
million tons in 1998.

The Structural and Rail Market

Structural Products. The U.S. market for the structural shapes and products that
we intend to produce in our planned Whitley County structural mill amounted to
approximately 5.6 million tons, excluding imports, for 1998.

Rail Products. The marketplace for steel rails in the U.S. and Canada is
relatively small and specialized, with only approximately six railroad
purchasers: Burlington Northern/Santa Fe, Union Pacific, Canadian Pacific
Railway, Norfolk Southern, CSX Transportation and Canadian National Railway.
These purchasers control an aggregate of approximately 150,000 miles of track in
North America. The annual tonnage of rails sold in the U.S. and Canada averaged
approximately 1.0 million tons for the past three years. It is further estimated
that approximately 45% of that tonnage was for "premium" rail.

OUR PRODUCTION PROCESSES

There are generally two kinds of primary steel producers, "integrated mills" and
"mini-mills."

Steel manufacturing by an "integrated" producer involves a series of distinct
but related processes, often separated in time and in plant geography. The
process involves ironmaking, followed by steelmaking, followed by billet or slab
making, followed by reheating and further rolling into steel plate or bar, or
flat-rolling into sheet steel or coil. These processes may be followed by
various finishing processes, including cold rolling, or various coating
processes, including galvanizing. With integrated producer steelmaking, coal is
converted to coke in a coke oven, then combined in a blast furnace with iron
ore/pellets and limestone to produce pig iron, which is then combined with scrap
in a "basic oxygen" or other furnace to produce raw or liquid steel. Once
produced, the liquid steel is metallurgically refined and then either poured as
ingots for later reheating and processing or transported to a continuous caster
for casting into a billet or slab. It is then reheated and hot rolled into its
final form. Typically, though not always, and whether by design or as a result
of downsizing or re-configuration, many of these processes take place in
separate facilities.

In contrast, a mini-mill uses an electric arc furnace to directly melt scrap or
scrap substitutes, thus entirely eliminating the energy-intensive blast furnace.
A mini-mill unifies the melting, casting, and in many cases, the hot rolling,
into a continuous process.

As a group, mini-mills are generally characterized by lower costs of production
and higher productivity than integrated mills. This is due, in part, to lower
capital costs and to lower operating costs resulting from their streamlined
melting process and smaller, more efficient plant layouts. Moreover, mini-mills
have tended to employ a management culture, such as ours, that emphasizes
flexible, incentive-oriented non-union labor practices and have tended to be
more willing to adapt to newer, more innovative and aggressive management
styles, featuring decentralized decision-making. The smaller plant size of a
mini-mill also permits greater flexibility in the choice of location for
locating the mill in order to optimize access to scrap supply, energy costs,
infrastructure and markets, as is the case with our Butler mill, our Iron
Dynamics facility and our planned Whitley County structural and rail mill, our
Iron Dynamics facility and our planned Whitley County structural and rail mill.
Furthermore, a mini-mill's more efficient plant size and layout, which
incorporates the melt shop, metallurgical station, casting, and rolling in a
unified continuous flow under the same roof, have reduced or eliminated costly
re-handling and re-heating of partially finished product. They have also adapted
quickly to the use of new and cost effective equipment, thereby translating
technological advances in the industry into efficient production.

THE HOT MILL

Our Butler mill's melting process begins with the charging of a furnace vessel
with scrap steel, carbon and lime, or with a combination of scrap and a scrap
substitute or alternative iron product. The vessel's top is swung into place,
the electrodes lowered into the furnace through holes in the roof, and
electricity is then applied to melt the scrap. To the extent any liquid pig iron
or other scrap substitutes are used, such material is typically injected
directly into the melt mix. The liquid steel is then checked for chemistry and
the necessary metallurgical adjustments are made, typically while the steel is
still in the melting furnace but, as is the case in our Butler mill, which has a
separate metallurgical adjustment area, the material is transported in a ladle
by overhead crane to an area commonly known as the ladle metallurgy station.
There, the steel is kept in a molten state, while metallurgical testing,
refining, alloying and desulfurizing takes place. The liquid steel is then
transported to the casting deck, where it is emptied into a reservoir, which
controls the flow of the liquid steel into the water-cooled copper-lined mold
from which it exits as an externally solid billet or slab.

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In an integrated mill, where the slab is cast, the billet is then cut to length
and either shipped as billets or stored until needed for further rolling or
processing, or it may be sent directly into the rolling process, after which it
may then be cut to length, straightened, or stacked and bundled. In the case of
mini-mill thin-slab casting, however, and, in particular, in our Butler mill,
the less than 2 inch thick ribbon or slab proceeds directly into a tunnel
furnace, which maintains and equalizes the slab's temperature and then, after
descaling, the slab is transported into the first stand of the rolling mill
operation. In this rolling process, the steel is progressively reduced in
thickness. The sheet steel is then wound into coils and measured for thickness
and flatness. For part of our "hot band" production, the steel coils or hot
bands are sold either directly to end users or to intermediate steel processors
or service centers, where they may be pickled, cold rolled, annealed, tempered,
or galvanized. For the rest of our hot band output, however, the hot band coils
are directed through our cold mill where we add value to this product through
our own pickling, cold rolling, annealing, tempering, or galvanizing processes.

THE COLD MILL

Typically, products produced in our cold mill are those that require gauges,
properties or surfaces that cannot be achieved in our Butler hot mill mini-mill.
Cold rolled sheet produced in our Butler mini-mill is hot rolled sheet that has
been further processed through a continuous pickle line and then successively
passed through a rolling mill without reheating until the desired gauge and
other physical properties have been achieved. Cold rolling reduces gauge and
hardens the steel and, when further processed through an annealing furnace and
temper mill, improves uniformity, ductility and formability. Cold rolling can
also add a variety of finishes and textures to the surface of the steel.

Our cold mill consists of a continuous pickle line, a two-stand reversing mill,
thirty-two batch anneal bases, a single-stand temper mill, a cold rolled
galvanizing line and a hot rolled galvanizing line. The continuous pickle line
begins at the existing hot strip mill building and delivers pickled product to a
coil storage facility centrally located in the cold rolling and processing
facility. Configuring the facility in this manner eliminates the need for
equipment to transfer coils to the cold rolling facility. At the entry end of
the continuous pickle line, we have two reels to unwind coils and a welder to
join the coils together. We unwind the coils on alternate reels and attach them
end to end by the welder, creating a continuous strip through the pickle tanks.
The center section of the 700-foot pickle line consists of a scale
breaker/tension leveler, the pickling tanks where the strip moves through a bath
of hydrochloric acid that thoroughly cleans the strip in preparation for
galvanizing and rolling operations, and the rinse tanks. At the delivery end of
the line there is a reel for recoiling the pickled product. After recoiling,
each coil is stored in the central coil storage facility.

From the central coil storage area, we move our coils in either of two
directions. We immediately galvanize some coils on the hot rolled galvanizing
line. The ability of the hot rolling mill to produce steel strip that is
extremely thin allows for immediate galvanizing without the need for further
rolling in the cold rolling mill. The hot rolled galvanizing line is designed to
efficiently handle this type of material. We also process hot rolled coils that
are not intended for immediate galvanizing on the cold rolling mill.

We move cold rolled product that requires galvanizing to the cold rolled
galvanizing line, where it is annealed and coated. We heat the cold rolled coil
in an annealing furnace and we dip the coil while still hot into a pot of molten
zinc. As the coil leaves the pot, various coating controls ensure that the
product matches the customer's requirements. We transport cold rolled product
that does not require galvanizing directly to the batch annealing furnaces. The
batch annealing furnaces heat and then cool the coils in a controlled manner to
reduce the hardness of the steel that is created in the cold rolling process. We
then temper-roll this product from the annealing furnaces. The temper mill
introduces additional hardness into the product and further ensures the overall
flatness and surface quality of the product.

We deliver product from both galvanizing lines and the temper mill directly from
these processes to a common coil storage area, where it is then shipped by
either truck or rail.

As in our hot mill, we have linked all facilities in the cold mill by means of
business and process computers. We expanded our business systems to comprehend
order entry of the additional cold mill products, and we accomplish all of our
line scheduling in the business computer systems through schedules transmitted
to the appropriate process related computers. We collect operating and quality
data for analysis and quality control purposes, and for reporting product data
to customers.

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THE IRON DYNAMICS FACILITY

Our Iron Dynamics process, which utilizes state-of-the-art technology and some
processes which we are developing ourselves, is composed of five process areas:

- raw material receiving;

- coal pulverizing;

- ore preparation and pelletizing;

- rotary hearth drying and reduction; and

- submerged arc furnace smelting.

We receive our iron ore concentrate from Eastern Canada. We feed the iron ore
into a silo and then convey it to an ore dryer where we reduce its moisture
content. We then beneficiate the ore, a process involving the reduction of the
percentage of silica in the ore using magnetic separators and screens. We then
feed the beneficiated ore into a roll press, where it is ground, after which we
feed it into a storage bin and prepare it for mixing with coal from the Pinnacle
Mine in West Virginia. We then feed the coal into a silo and convey it to the
pulverizer. We mix the ground ore, coal and fluxstone with additional binders
and water and feed the mixture into one of two disk pelletizers. We produce
pellets with an average diameter of 11 mm and feed them into the pellet dryer.

We dry the wet pellets and then preheat to 150(degrees)C in a circular grate
dryer. A vibrating conveyor charging system receives the dried pellets and
layers them onto the rotary hearth furnace. The rotary hearth furnace then
processes the dried pellets and discharges the hot direct reduced iron into one
of three transport bottles on a rotating turntable. An additive facility
introduces flux, coke, silica or other materials to the transport bottles to
control slag chemistry in the submerged arc furnace.

We then transport the bottles from the rotary hearth furnace to the submerged
arc furnace by means of a laser guided crane. The bottles discharge the hot
direct reduced iron into the bins above the submerged arc furnace, at which time
the feed mix falls into the slag layer by gravity and smelting takes place. We
tap the molten iron into iron ladles and desulfurize it prior to transporting it
to our Butler mill's meltshop, where we pour the liquid pig iron into our
electric arc melting furnaces.

We anticipate that our liquid pig iron will have a chemistry of approximately
96% average metallic iron, in comparison with approximately 94%-95% iron content
for standard pig iron and approximately 91% average iron content for direct
reduced iron material. We also intend that our liquid pig iron will not contain
any appreciable sulfur or gangue, in comparison with approximately 6%-7% gangue
for direct reduced iron material.

Additionally, our planned use of liquid pig iron should enable us to lower
electrical consumption in our steel manufacturing process, due primarily to the
delivery of the already molten liquid pig iron to our electric arc furnaces,
with an associated reduction in electrode consumption and increased unit
productivity. We estimate these electricity consumption savings at approximately
15% to 20%, assuming a 25% pig iron input. Further, we expect that our liquid
pig iron will not contain any iron oxide, which takes energy to reduce, in
contrast to direct reduced iron which contains between 6% and 20% iron oxide.
Other advantages which we believe are inherent in our Iron Dynamics process
include the ability to use high or low silica fines, which are the cheapest iron
ore units available, the lack of any necessity to have the fines sized or
graded, in contrast to certain other alternative processes, and the use of coal
as the reductant, which is an abundant raw material not affected by global
shortages of gas (a primary input in certain other alternative iron processes).
In addition, our Iron Dynamics process may allow for the cost effective use of
steel mill by-products as raw material inputs, such as electric arc furnace dust
and mill scale. In fact, we may also be able to procure steel mill by-products
from other area mini-mills. Mill scale itself is a potentially excellent source
of iron, with a 70% to 75% iron content, which is higher than most ores.

In connection with the development of our Iron Dynamics process, we have applied
for and have been granted some U.S. and international patents and are awaiting
action on others. The construction of our first Iron Dynamics facility in
Butler, Indiana, has not, however, been without its hurdles and pitfalls. We
have been delayed by approximately a year from our original timetable and have
incurred some $12.0 million in extra capital costs that we did not anticipate,
primarily because of some equipment failures that have required down time,
redesign and replacement of various parts of our system. In several instances,
we believe that the cause of the problem lies with our vendor and supplier, and
we have aggressively pursued, and believe that we will be successful in
recovering, a substantial portion of our direct costs in effecting the
corrections. In others, however, we recognize that we are

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<PAGE> 16

learning as we go and are developing a better process, with an advanced
"learning curve," which will enable us to build subsequent systems more cheaply
and efficiently. On the whole, we remain optimistic that we are pioneering some
refinements in ironmaking technology that will meet or exceed our original
expectations.

THE PLANNED STRUCTURAL AND RAIL MILL

The planned Whitley County structural mill will be a mini-mill. As such, we will
melt scrap and scrap substitutes in much the same way as in our Butler mill.
After the heat from the electric arc furnace has been tapped, we will transport
the molten metal to a separate ladle metallurgy furnace where, as in the Butler
mill, we will adjust the mix for temperature and chemistry. However, we will
then take the liquid steel to the continuous casting machine, where we will
convert it into various semi-finished cast shapes rather than into a single
ribbon or slab as in our Butler mill. After exiting the mold, the multiple
strands will continue through a series of sprays and roller supports to
precisely cool and contain the cast product. Straightener rolls will then unbend
the curved strands onto a horizontal pass-line, where they will be cut to length
by automatic torches. The cast pieces will then be weighed and will be able to
travel directly to the rolling mill via the reheat furnace or into the storage
area for rolling at a later time. Once the pieces are sent to the rolling mill,
they will be transferred on a roller table through a box to remove scale. The
product will then pass through a breakdown stand for up to seven passes,
depending upon the product, before being transferred to the tandem mill.
Downstream of the tandem mill, a hot saw will cut the product to a maximum 24
inch length before entering the cooling bed. From there, the product will be
straightened on a roller straightener, cut to length, and then piled and
bundled.

For production of standard and premium rail products, the planned Whitley County
structural mill will require additional finishing and handling equipment.
Currently, the mill is designed to be capable of rolling widely consumed rail
sections. However, to produce premium rail, we will be required to acquire head
hardening equipment for our mill.

TECHNOLOGY AND EQUIPMENT

THE BUTLER MILL

Our flat-rolled steel mini-mill manufactures hot rolled, cold rolled and coated
steel products. We commenced construction of our 1.4 million ton capacity steel
mini-mill in October 1994. The mini-mill was commissioned in December 1995 and
on January 2, 1996, our mill began production of commercial quality steel. The
construction costs of this mini-mill were $280.0 million, which we believe to
have been approximately $75.0 million, or 20%, less than the cost of comparable
facilities.

At the end of 1997, we completed construction of a 550,000 square foot cold
finishing facility contiguous to our Butler hot mill, with a 1.0 million ton
annual capacity. We began design work and equipment specification for this
project in November 1995 and began actual foundation work in August 1996. We
completed work on this $180.0 million facility in 14 months.

In July 1998, we completed construction, installation and start-up of a second
twin-shell melting furnace battery, thin-slab caster, tunnel furnace, and
coiler, with necessary modifications to our meltshop buildings. This project,
which we previously referred to as our "caster project," was completed in 11
months at a cost of $99.4 million, expanding our annual melting capacity of hot
rolled steel from 1.4 million tons to approximately 2.2 million tons. This
additional production capacity of hot rolled steel allows us to take full
advantage of the 1.0 million ton rolling and finishing capacity of our cold
mill.

In January 1999, we completed the installation and start-up of a seventh
finishing stand in our hot rolling mill. This allows us to reduce the rolling
loads among the other six finishing stands and enables us to produce steel with
better shape and profile performance. It also allows us to roll considerably
lighter gauges than was previously possible.

(a) THE HOT MILL

The principal steelmaking equipment in our thin-slab flat-rolling plant consists
of two twin-shell electric arc melting furnaces, three ladle metallurgy
stations, turrets, and thin-slab casters, two tunnel furnaces, and our rolling
mill.

- - Electric Arc Furnaces. Both of our furnace batteries are twin-shell 165-ton
capacity tap weight, i.e. 195-ton gross weight with a 30-ton "hot heel",
furnaces. Each battery consists of two melting hearths working off of a
single power source. The furnaces are high reactance AC-powered units, which
save approximately 30% in energy costs over a DC-type unit and are designed
to use smaller and less expensive electrodes. Furthermore, electrode
consumption by our furnaces, a substantial operating cost, is designed to be
less than a DC-powered unit. Our two furnace batteries have a combined annual
production capacity of 2.4 million tons.

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Our twin-shell furnace design results in virtually continuous melting and
reduces tap-to-tap time, i.e. the length of time between successive melting
cycles or "heats", thus yielding more heats and greater productivity per shift.
While melting is being done on one side, the other vessel can be tapped and then
refilled and readied for the next melt. For a small incremental capital cost of
the second shell or melting vessel, there is an approximate 20% increase in
overall productivity. Preheating of the scrap occurs in the idle vessel with
both oxygen and natural gas, at a fairly low cost, and melting is further aided
and electrical consumption reduced by a 30-ton "hot heel" of melted scrap which
remains in the idle vessel after tapping. We expect to realize a further
reduction in electrical consumption, electrode use and tap-to-tap time with the
introduction of our Iron Dynamics liquid pig iron directly into the melt mix,
because this additional molten material will further accelerate the scrap
melting process. An additional feature of our twin-shell design is that if there
is a maintenance problem requiring work on one vessel, melting can proceed in
the other vessel without interruption.

- - Ladle Metallurgy Station. We have three (3) separate ladle metallurgy
stations consisting of three (3) Fuchs furnaces and two (2) desulfurization
stations. A separate ladle metallurgy station located away from our arc
furnaces, allows metallurgical adjustments to be effected, while still
maintaining the steel at a sufficiently high temperature during the refining
stage at the ladle metallurgy station. This maximizes the time that the arc
furnaces can be used for scrap melting, while enabling the molten steel to
continue through metallurgical testing, stirring, alloying, desulfurization,
reheating and other adjustments at the ladle metallurgy stations. Once the
adjustment process has been completed, the refined metal is then transported
by overhead crane to the casting deck where it is injected directly into the
mold of the casting machine.

- - Thin-Slab Caster. Our continuous thin-slab casters were built by SMS
Schloemann-Siemag AG and have a combined annual casting capacity of 2.3
million tons. The casters are equipped with a newly designed submerged entry
nozzle, known as "SEN", the device which transfers the liquid steel into the
mold. This new design permits the walls of the SEN to be thicker, resulting
in longer SEN life and, in turn, enables us to run a "string" of up to 12
heats before the SEN requires replacement. These advantages are directly
reflected in increased productivity. Within the newly designed SEN, we have
also incorporated a new baffle design to modify the fluid flow of molten
steel into the mold cavity, which slows and more evenly distributes the
molten steel into the mold as compared to previous designs. This results in a
quieter top surface of the liquid steel in the mold, a more uniform
solidification of the shell and significantly reduces sub-surface inclusions.

- - Rolling Mill. Our rolling mill consists of two tunnel furnaces, a
seven-stand rolling mill and two down coilers. The tunnel furnaces heat and
transport the cast slabs from the casting machines to the hot rolling mill.
The furnaces reheat the steel to approximately 2,000 degreesF while ensuring
the slab is evenly heated through out its length. Our tunnel furnaces also
restore heat lost during the casting process.

The rolling mill is a seven-stand rolling mill built by SMS Schloemann-Siemag
AG. Each rolling stand is driven by a high-powered 10,000 horsepower mill drive
motor. The hot rolling mill is equipped with a high pressure water descaling
system to remove the mill scale after the steel emerges from the tunnel furnace
just before entering the rolling mill. This system provides a clean surface
while minimizing the cooling of the 2,000 degreesF slab. The rolling mill is
equipped with the latest electronic and hydraulic controls to control such
things as exit speeds of the steel strip as it moves along the run-out table to
help prevent thinner steel strip from cobbling. Our newly added seventh rolling
stand now allows us to further roll our sheet steel to even thinner gauges, down
to 1 mm, with excellent surface quality, which will enable us to access markets
previously available only to more costly cold finished material.

After existing the rolling mill, the strip is transported by a roller table
through a water cooling zone to the down coilers. There, it is wrapped around a
rotating mandrel. The coil form allows the strip to be easily handled and
transported.

Throughout the rolling process, laser optical measuring equipment and multiple
x-ray devices measure all strip dimensions, allowing adjustments to occur
continuously and providing feedback information to the mill process controls and
computers. The entire production process is monitored and controlled by both
business and process computers. Production schedules are created based on order
input information and transmitted to the mill computers by the plant business
system. As the material is processed, operating and quality data are gathered
and stored for analysis of operating performance and for documentation of
product parameters to the customer. The system then coordinates and monitors the
shipping process, and prints all relevant paper work for shipping when the coil
leaves the plant.

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(b) THE COLD MILL

The cold mill is located adjacent to the hot mill and has a 1.0 million ton
annual production capacity. The cold mill consists of a continuous pickle line,
a two-stand reversing cold rolling mill, thirty-two batch annealing bases, a
single-stand temper mill, a cold rolled galvanizing line, and a hot rolled
galvanizing line. The continuous pickle line consists of a dual payoff system, a
scale, a breaker/tension leveler, a shallow bath pickling section, a rinse
section, side trimmers and recoiler. The design of the pickle line allows for
the production of a wide combination of gauges and widths, highlighted by its
outstanding performance on the light gauge steel supplied by the hot mill. The
terminal equipment was supplied by Davy International, while the polypropolene
pickling tanks were supplied by Allegheny Plastics.

Hot rolled coils that are not intended for immediate galvanizing are processed
on the cold rolling mill. Our cold rolling mill is unique in that it is a
semi-tandem two-stand reversing cold rolling operation. This configuration
provides considerably higher throughput than a conventional single-stand
reversing mill, yet also takes advantage of considerably lower equipment costs
than the conventional four to six-stand tandem cold rolling mill. The rolling
mill is configured with multiple x-ray gauges, hydraulic bending systems,
rolling solution controls, gauge controls and strip flatness controls used to
produce an extremely high level of product quality parameters. The cold rolling
mill also uses a process control computer using sophisticated mathematical
models to optimize both quality and throughput. The cold reversing mill was
supplied by Schloemann-Siemag AG (SMS).

The cold rolled galvanizing line is quite similar to the hot rolled galvanizing
line, but has a more elaborate and larger strip heating furnace. This larger
furnace is required to anneal cold rolled product, which is not necessary on hot
rolled product. Designing the pickle line and the two galvanizing lines
concurrently and procuring the equipment from the same manufacturer has allowed
a high degree of commonality of parts between the three lines. This provides a
high degree of flexibility and cost savings in the management of spare parts.

Cold rolled product that does not require galvanizing then proceeds to the batch
annealing furnaces. The batch annealing furnaces heat and then cool the coils in
a controlled manner to reduce the hardness of the steel that is created in the
cold rolling process. The batch annealing furnaces heat the steel in a hydrogen
environment that optimizes the efficiency of the heating process and produces a
product that is superior to conventional batch annealing with regard to
cleanliness and uniform metallurgical characteristics. Computer models heat and
cool the coils based on current knowledge of heat transfers and steel
characteristics.

Product from the annealing furnaces is then temper-rolled. The temper-rolling
facility is a single stand four-high rolling mill designed for relatively light
reduction of the product. The temper mill introduces a small amount of hardness
into the product and further enhances the overall flatness and surface quality
of the product. The temper mill also has an x-ray gauge to monitor strip
thickness. This mill was purchased concurrently with the two-stand cold rolling
mill from the same manufacturer. This provides a high degree of flexibility and
cost savings with regard to management of spare parts.

Product from both galvanizing lines and the temper mill is delivered directly
from the processes to a common coil storage area, where it is then shipped by
either truck or rail.

As in its hot mill, all facilities in the cold mill are linked by means of
business and process computers. Business systems were expanded to comprehend
order entry of the additional cold mill products and all line scheduling is
accomplished in the business computer systems, with schedules transmitted to the
appropriate process related computers. Operating and quality data are also
collected for analysis and quality control purposes, and for reporting product
data to customers.

This facility is contiguous to the Butler mill. It is a projected 520,000 metric
tonne annual capacity plant equipped to produce direct reduced iron, which we
will convert into approximately 470,000 metric tonnes of liquid pig iron. We
intend to use this product as a high quality scrap substitute in our Butler
mill's meltshop. Construction of this facility began in October 1997. We
produced our first direct reduced iron material in November 1998 and produced
our first tap of liquid pig iron in March of 1999. However, during preliminary
start-up during 1999, it was determined that certain design modifications and
equipment replacements would be required in order to attain full operating
functionality. Accordingly, while Iron Dynamics has begun to achieve some stable
operating results, these results are currently at lower than expected volumes
due to the time frame that remains to fix the problems. We believe we have
identified the necessary modifications to correct the problems, which includes
some redesigning and replacement of equipment. We plan to perform the necessary
redesign and equipment replacement throughout 2000, and we expect to shut down
the submerged arc furnace during the fourth quarter of 2000 to install and
commission the replacement

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equipment. We believe that our equipment suppliers will absorb much of the cost
of the equipment redesign and replacement. We anticipate operating in a
curtailed mode until the completion of the redesign and repairs. However, we
have also ordered two briquetters and we expect to install and commission the
briquetters during the fourth quarter of 2000. The briquetters will compress the
direct reduced iron into a solid, dense briquette. The solid briquettes can be
stored, used by us for direct introduction in its electric arc furnace, or sold
on the open market. The addition of the briquetters will allow Iron Dynamics to
bypass the submerged arc furnace during its planned down time in the fourth
quarter of 2000, as well as during any future down time. Other significant
problems with the mixer, balling operations and rotary hearth furnace have been
stabilized, with good metallurgical results to date. When the submerged arc
furnace issues are resolved, we are optimistic that the process will yield
excellent production with good economics. As of December 31, 1999, the total
amount expended for our new Iron Dynamics facility was $101.3 million.

We expect that our process will be able to produce liquid pig iron at a pricing
structure that is relatively fixed and is likely to be considerably less than
prevailing scrap prices in all anticipated markets. If the plant proves to be
successful, we would consider building a "next generation" Iron Dynamics process
direct reduced iron/liquid pig iron plant adjacent to our planned Whitley County
structural mill and would consider similar units as ancillary scrap substitute
sources adjacent or in close proximity to other steelmaking meltshops that we
might construct or acquire in the future. In addition, we have entered into a
License Agreement with Sumitomo Corporation of America under the terms of which
Sumitomo, in return for a royalty, is licensed to use the Iron Dynamics process
in constructing its own scrap substitute facilities within its designated
territory, which is worldwide except for the U.S. and Canada. In addition, it
may sublicense others within the designated territory to do the same. We have
retained the sole and exclusive right to use the Iron Dynamics process for our
own facilities, now or in the future, or to license others to use it within the
U.S. and Canada.

The Iron Dynamics process combines state-of-the-art grinding technology, using a
high pressure roll press to grind iron ore, proven coal pulverizing equipment
from William Patent Crusher Company, our own proprietary ore beneficiation
technology, conventional disk pelletizing equipment, specialized designs for
feeding and removing the materials from the rotary hearth, thermally efficient
use of the rotary hearth furnace "off gases", and novel solutions to the
scale-up challenges presented by the world's largest rotary hearth furnace. We
have also adapted automated crane technology from the ocean shipping industry to
perform the task of hot direct reduced iron transfer between the rotary hearth
furnace and our submerged arc furnace, where the direct reduced iron is
converted into liquid pig iron. The submerged arc furnace technology used is
well developed from the ferralloy industries. Thermal efficiency is achieved by
the hot transfer of direct reduced iron between the rotary hearth furnace and
the submerged arc furnace.

In addition, the off gas system removes heat, dust, sulfur dioxide and nitrous
oxides from the flue gas. An afterburner combusts any remaining carbon monoxide.
The off gas is used to preheat combustion air, supply heat to the ore and coal
dryers and to dry the pellets in the pellet dryer.

THE STRUCTURAL MILL

Our planned structural and rail manufacturing mini-mill will be located on a
470-acre site immediately south of U.S. Highway 30 between County Road 700 East
and County Road 800 East in Whitley County. This mill is expected to have an
annual production capacity of between 900,000 and 1,100,000, tons depending on
product mix, for the manufacture of structural steel beams and pilings for the
construction market. We expect to commence construction once our "Prevention of
Significant Deterioration" or "air" construction permit becomes final, which
will not occur until after disposition of appeals lodged by opponents of the
project. The Indiana Department of Environmental Management issued the permit on
July 7, 1999. As discussed in more detail earlier in this Report, three appeals
are pending before the Department of Environmental Adjudication in Indianapolis,
Indiana, and two additional appeals are pending before the federal Environmental
Appeal Board in Washington, D.C. We believe that the permit was properly issued
and that the issuance of the permit will be upheld on appeal. Presently, we are
hopeful that final disposition of the administrative appeals will occur sometime
within the next two or three months, although it could take longer. As soon as
the appeal process has been concluded and our permit has become final, we will
commence construction of this mill and expect to be able to produce our first
structural steel product in the first half of 2001.

We intend to construct a $40 million to $50 million rail manufacturing addition
to our planned structural mill that will enable us to take advantage of extra
available melting capacity in our structural mill meltshop. The rail addition is
in the design, preliminary engineering and equipment specification and selection
phase. We anticipate that this process will take approximately six months, after
which we plan to place equipment orders and begin construction work on this
additional facility. Completion of the rail manufacturing addition is not a
precondition for the start-up and commencement of operations of our structural
mill, and we anticipate a start-up for the rail project shortly following the
start-up for the structural mini-mill.

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The combined structural mill and rail manufacturing facility will have a
meltshop annual capacity of between 1.0 and 1.2 million tons, depending on
product mix between structural and rail products. It will be able to produce a
varying combination of structural and rail products to fit the market demand for
each of these types of products, including structural shapes serving the
building and construction, bridge construction, railroad car, barge and ship
building, and machinery industries. We believe that this production flexibility
will enable us to tailor our product output to the demands and opportunities of
the marketplace.

- - Electric Arc Furnace. Scrap will be melted in much the same way as in
our Butler mill's hot mill meltshop, except that the electric arc furnace for
our structural mill will be of a single shell AC-powered design with a
120-ton tap capacity. While we plan to use 100% scrap as the primary raw
material, the system will be configured to accept liquid pig iron product
should we decide to place an Iron Dynamics module at the Whitley County plant
site. The electric arc furnace, manufactured by Mannesmann-Demag, will be
equipped with water-cooled sidewalls and a combination of five injection
capable oxy-fuel burners and a supersonic water-cooled sidewall lance capable
of operation in the conventional "pre-heat" firing mode to provide a
concentrated stream of oxygen that deeply penetrates the liquid steel bath
for purposes of decarburization but capable, also, of powdered carbon
injection for foamy slag. This combination will enable us to create and
sustain a foamy slag over more of the bath area than is otherwise possible
and will permit us to employ a melting practice which is more thermally
efficient. The furnace will also feature a removable shell that will enable
us to do off-line repair and refractory relining, will come equipped with a
unique quick-change roof configuration and will also feature a fast tap hole
tube change configuration that will speed this periodic replacement process.

- - Caster. The caster will be built by SMS-Concast. Unlike our Butler mill
that produces a single strand or ribbon of flat stock, our structural mill's
machine will cast three strands, expandable to four, of blooms and beam
blanks. The caster will utilize a curved mold, that will produce five sizes
of material -- one bloom, which is rectangular shaped, and four beam blanks,
which are dog bone shaped, in varying lengths of 17-46 feet. The caster is
expected to be capable of producing 1.2 million tons per year in our initial
set-up.

Our new caster design will feature a quick change nozzle system to optimize the
continuous casting process to achieve the lowest possible operational costs per
ton. Our tundish bottoms are designed to change from a bloom opening to any of
four beam blank sizes to allow greater flexibility in product choice. We will
have the ability to run different product sizes simultaneously on the caster to
allow some product to be hot charged and other product to be placed on a storage
bed for processing by the rolling mill during times when the meltshop is
performing maintenance or is otherwise down. The caster service crane will also
provide a dual hoist system to speed size change turn around by allowing two
strands to be changed at one time.

- - Rolling Mill. Cast pieces exiting the casting machine will either be
able to travel directly to the rolling mill or into a storage area for
rolling at a later time. The reheat furnace, a 300 ton per hour hot charge
"walking beam" furnace supplied by A.C. Leadbetter, will have a deep charge
capability that will enable it to be used as a "buffer" for roll changes and
mill delays.

Our rolling mill is an advanced four-stand (all reversing) mill built by SMS-AG,
designed with an annual capacity of 1.6 million tons, capable of producing wide
flange beams 6x4 inches to 36x12 inches, standard beams, piling sections,
M-shape sections, sheet piling, channels, car building shapes, bulb angles and
zee's. The selection of product mix will influence annual production; therefore,
by rolling a larger share of heavier products, the annual production will be
proportionately greater.

Once the bloom or beam blank is discharged from the reheat furnace it will be
transferred on a roller table through a box to remove scale. The product will
then pass through a breakdown stand for up to seven passes, depending upon the
product, before being transferred to the 3-stand tandem mill. Between the
breakdown mill and the tandem mill is a hot saw for cropping off the leading end
if required. The tandem mill will consist of a universal rougher, an edger, and
a universal finisher. The mill will be capable of operating in two modes,
universal and two-high. In the universal mode the X-H rolling method will be
used. The rougher stand will have an X-shape pass design and the finisher stand
will have an H-shape depending upon the final product. The edger mill stand will
be shiftable, which will allow for more than a single pass on a roll. The mill
has been designed for quick roll changes of less than 25 minutes. In the 2-high
mode, channels, angles and sheet piling will be rolled utilizing two pass lines
within the tandem mill.

(d) RISK FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

This Form 10-K Annual Report contains numerous forward-looking statements, in
addition to historical information. Such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties. Our actual
results could differ materially from the results anticipated or expected by such
forward-looking statements. See also the discussion on Forward-Looking
Statements in this Item 1 at pages 1-2. Additional factors that could cause or
contribute to such differences include the following:

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FACTORS RELATING TO OUR COMPANY

OPERATING AND START-UP RISKS ASSOCIATED WITH OUR SCRAP SUBSTITUTE AND STRUCTURAL
MILL PROJECTS COULD IMPEDE OR PREVENT US FROM REALIZING THE ANTICIPATED BENEFITS
FROM THESE PROJECTS

Our scrap substitute project is the first of its kind, involves processes that
are based on various technical assumptions and new applications of technologies
and has not yet been commercially proven. We only began producing direct reduced
iron and converting it into liquid pig iron in our Iron Dynamics facility in
August 1999. Since that time, we have encountered various problems, including
equipment failures and design deficiencies, which have required time and
additional expense to fix, and we are operating in a limited mode pending
certain additional repairs later this year. As a result, we cannot provide any
assurance that our proprietary technology will work or that our Iron Dynamics
facility will be able to produce the direct reduced iron and liquid pig iron in
the quantities and at the favorable cost levels that we have anticipated. If we
are unable to do so, we will have to obtain direct reduced iron, liquid pig iron
or other scrap substitutes and/or additional scrap from alternate sources, and
we cannot be assured that we will be able to access such sources or obtain such
materials in the appropriate quantities or at a favorable cost, if at all. Other
companies with resources greater than ours have tried and failed to develop a
workable and cost effective scrap substitute, and those technologies that are
operational throughout the world today are not the ones we are employing in our
Iron Dynamics facility. In addition, because of equipment failure and related
structural damage suffered in our Iron Dynamics facility during its initial
start-up, we incurred significant costs due to the consequential shutdown of and
related repair expenditures to this facility. We have no assurance that as our
Iron Dynamics facility commences production on a commercial basis we will not
experience additional material shutdowns or equipment failures or that any such
shutdown or failure would not have a material adverse effect on our business,
financial condition or results of operations.

We have not yet begun construction of our Whitley County structural steel mill
because of pending appeals of the issuance of the air permit required for us to
operate the facility. This action is only the latest in a series of actions over
approximately the past twelve months in which various parties have sought to
block or delay the project. We cannot be assured that the legality of the
issuance of the air permit will be upheld on appeal or, even if this does occur,
that there will not be additional delays or other actions that could threaten
this project. Further delays could also result in increased construction costs.

If or when we are permitted to commence construction on this project, we will be
subject to the risks associated with building, starting up and operating any new
facility, such as construction delays, cost overruns or start-up difficulties
beyond those normally encountered during a start-up process. We could also
experience operational difficulties after start-up that could result in our
inability to operate the facility at full or near-full capacity or at all. Any
of these difficulties, to the extent they materialize, could adversely affect
our business, results of operations and financial condition.

WE HAVE SUBSTANTIAL DEBT AND DEBT SERVICE REQUIREMENTS AND THIS MAY ADVERSELY
AFFECT OUR FINANCIAL AND OPERATING FLEXIBILITY

We now have and expect to continue to have, a significant amount of
indebtedness. At December 31, 1999, we had $449.9 million of indebtedness under
our Steel Dynamics senior secured credit facility and Iron Dynamics separate
credit facility.

Subject to the limitations contained in our credit agreements, we may incur
additional indebtedness and, subject to lender approval, we may be able to make
further borrowings at the subsidiary level.

The amount of our indebtedness could have important consequences. For example,
it could:

- make it more difficult for us to perform our obligations with respect to
payments on our secured bank indebtedness;

- increase our vulnerability and limit our ability to react to general
adverse economic and industry conditions;

- limit our ability to use operating cash flow to fund operating expenses,
working capital, capital expenditures and other general corporate purposes
because we must dedicate a substantial portion of our cash flow to make
payments on our debt;

- place us at a competitive disadvantage compared to some of our competitors
that have less debt; and

- limit our ability to borrow additional funds.

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Our ability to satisfy our debt obligations will depend upon our future
operating performance, which in turn depends upon the successful implementation
of our strategy and upon financial, competitive, regulatory, technical and other
factors, many of which are beyond our control. If we are not able to generate
sufficient cash from operations to make payments under our credit agreements or
to meet our other debt service obligations, we will need to refinance our
indebtedness. Our ability to obtain such financing will depend upon our
financial condition at the time, the restrictions in the agreements governing
our indebtedness and other factors, including general market and economic
conditions. If such refinancing were not possible, we could be forced to dispose
of assets at unfavorable prices. Even if we could obtain such financing, we
cannot assure you that it would be on terms that are favorable to us. In
addition, we could default on our debt obligations.

WE FACE LITIGATION RISKS IN CONNECTION WITH OUR TERMINATED THAILAND ADVISORY
TRANSACTION

We have been sued in a total of eight separate but related lawsuits (one of
which is a duplicative filing) in either state or federal courts in California,
New York, New Jersey, Minnesota, Connecticut and Illinois, by various
institutional investors which purchased certain high risk notes or "junk bonds"
issued in March 1998 by two affiliates of Nakornthai Strip Mill Public Company,
Ltd., or "NSM," a Thailand owner and operator of a steel mini-mill project. Our
president, Keith E. Busse, has also been named as a defendant in the New Jersey
and Connecticut (duplicative) cases. Under our company's bylaws and pursuant to
authorization of our board of directors, Mr. Busse is entitled to be indemnified
by us for any costs or expenses that he may incur, as well as in respect of any
judgments that may be rendered against him in connection with this litigation,
subject to applicable legal procedures required by the Securities and Exchange
Commission for submission of any such indemnity claim, if asserted, to a court
of appropriate jurisdiction for a determination of whether such indemnity claim
is against public policy as expressed in the Securities Act of 1933. NSM has
defaulted on the bonds.

Plaintiffs purchased some U.S. $240 million of a U.S. $452 million privately
placed non-registered "Regulation D" offering to "Qualified Institutional
Buyers," in which NatWest Capital Markets Limited, McDonald & Company
Securities, Inc., PaineWebber Incorporated and ECT Securities Corp. acted as
"initial purchasers" of the notes and then resold them to the plaintiffs and
others pursuant to "Rule 144A."

Although we were neither an issuer, a guarantor, a seller or an investment
banker with respect to these notes, did not draft any offering materials in
connection with the offering, were not listed as an expert, did not render any
reports or evaluations of NSM prior to the offering, and only had a contractual
relationship with the NSM mini-mill project--as a technical advisor and
consultant, with duties commencing only after conclusion of the note
offering--we have nonetheless been named as a defendant in each of these cases
on the basis of a variety of alleged state or federal common law or statutory
claims, including fraud claims, that posit that the plaintiffs were misled into
purchasing and overpaying for the notes by reason of various alleged
misrepresentations or omissions either in the offering materials or at one or
more "road shows" in connection with the offering.

We deny any liability in connection with these cases, believe we have ample
legal and factual defenses, and will defend ourselves in each such case to the
limit of our ability.

While we believe that the plaintiffs' claims are without factual or legal merit,
we have no assurance that the courts will grant any of our currently pending or
future pre-trial motions to dismiss, for judgment on the pleadings, for summary
judgment or any other dispositive motions that we may file, or that the cases
will eventually in fact be dismissed, or that, if not dismissed, eventual trials
will result in verdicts in our favor. In addition, defending these lawsuits will
be exceedingly costly and time consuming and, regardless of whether the outcome
is favorable to us, will divert substantial financial, management and other
resources from our business. It is possible that a judgment could be rendered
against us for all or a substantial portion of the $240 million in the
plaintiffs' claimed losses. Because we do not have applicable insurance coverage
for this kind of claim, our business, results of operations and financial
condition would be materially adversely affected in the event of such an
outcome.

For additional details regarding these cases, as well as the identity of each of
the cases, see Item 3, "Legal Proceedings" of this Form 10-K.

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OUR DEBT AGREEMENTS CONTAIN OPERATING AND FINANCIAL RESTRICTIONS AND THESE MAY
ADVERSELY AFFECT OUR FINANCIAL FLEXIBILITY

The operating and financial restrictions and covenants in our credit agreements
and any future financing agreements may adversely affect our ability to finance
future operations or capital needs or to engage in other business activities.
Specifically, these debt agreements may restrict our ability to:

- incur additional indebtedness;

- pay dividends or make distributions with respect to our capital stock;

- repurchase or redeem capital stock;

- make investments;

- create liens and enter into sale and leaseback transactions;

- make capital expenditures;

- enter into transactions with affiliates or related persons;

- issue or sell stock of certain subsidiaries;

- sell or transfer assets; and

- participate in joint ventures, acquisitions or mergers.

Our ability to comply with these and other provisions of our credit agreements,
and of any future financing agreements may be adversely affected by changes in
business conditions or results of operations, adverse regulatory developments,
or other events beyond our control. A breach of any of the restrictions or
covenants in our debt agreements could trigger defaults under such agreements
even though we might otherwise be able to meet our debt service obligations.

WE RELY UPON A SMALL NUMBER OF MAJOR CUSTOMERS FOR A SUBSTANTIAL PERCENTAGE OF
OUR SALES AND OUR MAIN CUSTOMER IS A RELATED PARTY

We have a long-term "off-take" contract with Heidtman Steel Products, Inc.
pursuant to which Heidtman has agreed to purchase an aggregate of at least
30,000 tons of our steel products each month. For the year ended December 31,
1998, Heidtman accounted for 21% of our total net sales, and our top five
customers accounted for approximately 45% of our total net sales. For 1999,
Heidtman accounted for 19% of our total net sales. Although we expect to
continue to depend upon a small number of customers for a significant percentage
of our net sales of flat rolled steel, we cannot be assured that any of them
will continue to purchase steel from us. A loss of any such customer or group of
customers could have a material adverse effect on our results of operations and
financial condition. Heidtman is an affiliate of one of our large stockholders
and the President and Chief Executive Officer of Heidtman serves as one of our
directors. If the terms of the "off-take" contracts are or become burdensome to
Heidtman, or if a dispute arises over the contract, Heidtman could be viewed as
having a conflict of interest between what they perceive to be best for it as an
"off-take" buyer and what is best for us as the product seller.

UNEXPECTED EQUIPMENT FAILURES MAY LEAD TO PRODUCTION CURTAILMENTS OR SHUTDOWNS

Our manufacturing processes are dependent upon critical pieces of steelmaking
equipment, such as our furnaces, continuous casters and rolling equipment, as
well as electrical equipment, which on occasion may be out of service due to
routine scheduled maintenance or as the result of unanticipated equipment
failures. We have experienced and may in the future experience material plant
shutdowns in connection with equipment failures. For example, our Iron Dynamics
subsidiary suffered a "breakout" in its submerged arc furnace in May 1999,
and, although not our fault, caused delays and expense that have been
frustrating and costly. Similarly, in August 1999, our cold mill suffered a
catastrophic motor failure, again not our fault but costly in time and lost
production, even though our motor vendor promptly repaired the motors and we
were able to recoup some of our loss through insurance. Such interruptions in
our production capabilities will inevitably adversely affect our results of
operations.

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<PAGE> 24

WE COULD EXPERIENCE SYSTEM FAILURES AND SERVICE DISRUPTIONS AS A RESULT OF THE
YEAR 2000 PROBLEM

The year 2000 problem results from the fact that computer programs,
microprocessors and embedded date reliant systems use two digits rather than
four to define the applicable year. Some of these systems and processors may
interpret "00" incorrectly as the year 1900 instead of the year 2000. The
failure of any of these systems to appropriately interpret the upcoming calendar
year 2000 could result in major systems failures or miscalculations. We are
highly dependent upon our own, our vendors' and customers' computer software
programs and operating systems. If our efforts to address the Year 2000
compliance issues prior to year-end 1999, or our current efforts to continue to
address these issues are not successful, or if our suppliers, customers and
service providers have not fully addressed these issues, our business, results
of operations and financial condition could be materially adversely affected.

WE RELY ON OUR KEY PERSONNEL AND WE MAY BE UNABLE TO REPLACE KEY EXECUTIVES IF
THEY LEAVE

Our operations and prospects depend in large part on the performance of our
senior management team, including Keith E. Busse, President and Chief Executive
Officer, Mark D. Millett, Vice President and General Manager of our Flat Roll
Division, Richard P. Teets, Jr., Vice President and General Manager of our
Structural Division, Tracy L. Shellabarger, Vice President and Chief Financial
Officer, John Nolan, Vice President, Sales and Marketing, and Larry Lehtinen,
Vice President and General Manager of Iron Dynamics. Although these senior
managers all have employment agreements with and are stockholders of Steel
Dynamics, we cannot be assured that such individuals will remain with us as
employees. In addition, we cannot be assured that we would be able to find
qualified replacements for any of these individuals if their services were no
longer available. The loss of the services of one or more members of our senior
management team or our inability to attract, retain and maintain additional
senior management personnel could have a material adverse effect on our
business, financial condition and results of operations.

WE MAY FACE RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS, JOINT VENTURES OR
STRATEGIC ALLIANCES

As part of our strategy, we may acquire other businesses, enter into joint
ventures, or form strategic alliances that we believe will complement our
existing business. These transactions will likely involve some or all of the
following risks:

- the difficulty of assimilating the acquired operations and personnel;

- the potential disruption of our ongoing business;

- the diversion of resources;

- the possible inability of management to maintain uniform standards,
controls, procedures and policies;

- the possible difficulty of managing our growth and information systems;

- the risk of entering markets in which we have little experience;

- the inability to work efficiently with joint venture or strategic alliance
partners; and

- the difficulties of terminating joint ventures or strategic alliances.

These transactions might be required for us to remain competitive. We might not
be able to obtain required financing for such transactions. Such transactions
might not occur, and any that do might not be successfully integrated with our
existing business or might not achieve expected results.

WE MAY MAKE SIGNIFICANT ADDITIONAL CAPITAL EXPENDITURES

Our business is capital intensive and will require substantial expenditures for,
among other things, the purchase and maintenance of equipment used in our
steelmaking and finishing operations and compliance with environmental laws. We
may also require additional financing in the event we decide to enter into
strategic alliances or joint ventures, make acquisitions or build additional
plants. The extent of any additional financing will depend upon the success of
our business. Borrowings under our credit agreement are conditioned upon our
compliance with various financial and other covenants and other conditions set
forth therein. As a result, there can be no assurance that such financing or
additional financing, if needed, will be available to us or, if available, that
it can be obtained on terms acceptable to us and within the limitations
contained in our credit agreement or any future financing.

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<PAGE> 25

FACTORS RELATING TO THE STEEL INDUSTRY

THE STEEL INDUSTRY IS CYCLICAL, SUBJECT TO PERIODIC MARKET FLUCTUATIONS AND
DEPENDENT UPON OTHER INDUSTRIES

The steel industry is highly cyclical in nature, sensitive to general economic
conditions and dependent upon the continued operations and health of certain
other industries. The price of steel and steel products may fluctuate
significantly as a result of general economic conditions and other factors
beyond our control. The demand for steel products is generally affected by
macroeconomic fluctuations in the U.S. and global economies in which steel
companies sell their products. From 1990 to 1992, substantial excess worldwide
manufacturing capacity for steel products, combined with a worldwide economic
slowdown, resulted in a substantial decrease in the demand for steel products,
increased competition and a decline in the financial performance of the steel
industry. In addition, during 1998, and for a good part of 1999, substantial
excess worldwide manufacturing capacity for steel products combined with
substantially high levels of steel imports into the U.S. adversely affected the
prices for U.S. steel products, including ours. We are also particularly
sensitive to trends and other factors such as strikes and labor unrest that may
affect the automotive, oil and gas, gas transmission, construction, commercial
equipment, rail transportation, appliance, agricultural and durable goods
industries, because these industries are significant markets for our products
and are themselves highly cyclical. A disruption in the business of any of these
industries could have a material adverse effect upon our production, our sales,
and our financial condition and results of operations.

Future economic downturns, increased productivity, a stagnant economy, a change
in trade policy or practice, currency fluctuations or a disruption in critical
sources of supply or in the level of steel ordered by or able to be transported
to certain significant customers may again adversely affect domestic selling
prices for steel products.

INTENSE COMPETITION IN THE STEEL INDUSTRY MAY CONTINUE TO EXERT DOWNWARD
PRESSURE ON OUR PRICING

Competition within the steel industry, both domestically and worldwide, is
intense and it is expected to remain so. We compete primarily on the basis of
price, quality and the ability to meet our customers' product needs and delivery
schedules. Our primary competitors are other mini-mills, which have cost
structures and management cultures similar to ours. We also compete with many
integrated producers of hot rolled, cold rolled and coated products, which are
larger and have substantially greater capital resources. Over the last half of
the decade, new mini-mills, some integrated mill expansions and improved
production efficiencies have led to domestic steel manufacturing overcapacity
and, especially during the latter half of 1998, the existing downward pressure
on steel prices, including the prices of our products, brought about by this
overcapacity was significantly exacerbated by a substantial increase in the
level of imported steel. This downward pressure on prices resulted in a
narrowing of gross margins in the steel industry. Although we do not expect
steel prices to experience a further downward pressure over the next few years,
as competition increases, we cannot assure you that such price declines will not
again occur, or, if they occur, that steel prices will not decline more quickly
than our production costs, which could have a substantial adverse effect on our
gross margins. In addition, in the cases of certain product applications, steel
competes with other materials, including plastic, aluminum, graphite composites,
ceramics, glass, wood and concrete.

WE CANNOT CONTROL THE COST OF SCRAP AND OTHER RAW MATERIALS

Our principal raw material is scrap metal derived primarily from junked
automobiles, industrial scrap, railroad cars and railroad track materials,
agricultural machinery and demolition scrap from obsolete structures, containers
and machines. The prices for scrap are subject to market forces largely beyond
our control, including demand by U.S. and international steel producers, freight
costs and speculation. The prices for scrap have varied significantly and may
vary significantly in the future. In addition, our operations require
substantial amounts of other raw materials, including various types of pig iron,
alloys, refractories, oxygen, natural gas and electricity, the price and
availability of which are also subject to market conditions. We may not be able
to adjust our product prices, especially in the short-term, to recover the costs
of increases in scrap and other raw material prices. Our future profitability
may be adversely affected to the extent we are unable to pass on higher raw
material and energy costs to our customers.

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<PAGE> 26

ENVIRONMENTAL REGULATION IMPOSES SUBSTANTIAL COSTS AND LIMITATIONS ON OUR
OPERATIONS

We are subject to various federal, state and local environmental laws and
regulations concerning such issues as air emissions, wastewater discharges and
solid and hazardous waste disposal. These regulations are increasingly
stringent. While we believe that our facilities are and will continue to be in
material compliance with all applicable environmental laws and regulations, it
is possible that future conditions may develop, arise or be discovered that
create substantial environmental compliance or remediation liabilities and
costs. For example, our steelmaking operations produce certain waste products,
such as electric arc furnace dust, which is classified as hazardous waste and
must be properly disposed of under applicable environmental laws. These laws
impose clean up liability on generators of hazardous waste and other hazardous
substances which are shipped off-site for disposal, regardless of fault or the
legality of the disposal activities. While we believe that we can comply with
environmental legislation and regulatory requirements and that the costs of
doing so have been included within our budgeted cost estimates, it is possible
that such restrictions will prove to be more limiting and costly than
anticipated. In addition to potential liability for violation of applicable
laws, regulations or administrative conditions, we may be subject to substantial
monetary fines and penalties. We may also be subject from time to time to legal
proceedings brought by private parties or governmental agencies with respect to
environmental matters. In particular, opponents of our planned Whitley County,
Indiana structural and rail facility have waged a battle to try to defeat or
discourage us by mounting various challenges before state and federal
governmental authorities over issuance of our required "air" permit.

UNPREDICTABLE MARKET CONDITIONS MAY LEAD TO UNCERTAIN FINANCIAL RESULTS

Our operations are substantially affected by variations in the realized sales
prices of our products, which in turn depends on prevailing market prices for
steel and actual demand for particular products. Operating results have been,
and in the future will be, affected by numerous factors including the prices and
availability of raw materials, particularly scrap and scrap substitutes, the
demand for and prices of our products, the level of competition, the level of
unutilized production capacity in the steel industry, our product mix, the
timing and pricing of large orders and start-up difficulties and costs
associated with new projects. These factors and other events or circumstances,
such as seasonal factors like weather, disruptions in transportation,
availability or cost of energy, downturns in our larger customers' business or
industries, a general economic downturn or labor unrest could adversely affect
our business, results of operations and financial condition.

PRODUCTS AND CUSTOMERS

EXISTING PRODUCTS AND CUSTOMERS

During 1999, our Butler facility produced hot rolled products that included a
variety of high quality mild and medium carbon and high strength low alloy hot
rolled bands in 40 inch to 62 inch widths and in thicknesses from .500 inch down
to .040 inch. We also produced an array of lighter gauge hot rolled products,
such as high strength low alloy, including 80,000 minimum yield and medium
carbon steels made possible by the addition of a seventh hot rolling stand.
These products are suitable for automobile, truck, trailer and recreational
vehicle parts and components, mechanical and structural tubing, gas and fluid
transmission piping, metal building systems, rail cars, ships, barges, and other
marine equipment, agricultural equipment and farm implements, lawn, garden, and
recreation equipment, industrial machinery and shipping containers. We believe
that our basic production hot band material has shape characteristics that
exceed those of the other thin-slab flat-rolled mini-mills and compares
favorably with those of the integrated mills. In addition, as a result of our
lighter gauge hot rolling capabilities, we are now able to produce hot rolled
hot-dipped galvanized and galvannealed steel products. These products are
capable of replacing products that have traditionally only been available as
more costly cold rolled galvanized or cold rolled galvannealed steel.

The products produced in our cold mill during 1999, included:

- hot rolled pickled and oiled;

- hot rolled hot dipped galvanized;

- hot rolled galvannealed;

- cold rolled hot dipped galvanized;

- cold rolled galvannealed; and

- fully processed cold rolled sheet.

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<PAGE> 27

The addition of our cold rolled facility to our already-existing advanced
flat-rolled hot mill in 1998 has enabled us to manufacture products for many new
commercial, appliance, and automotive markets that were not previously available
to us.

Our cold mill was designed to produce a high grade, high quality product at the
lowest possible cost, and results during 1999 indicate that our two-stand
reversing cold mill technology has exceeded the equipment's guarantees on strip
gauge control, flatness, and yield loss. The mill was designed to produce gauges
as light as .015 inch, but we have rolled gauges as light as .011 inch with
excellent profile and shape performance.

Based on information we have gathered from our customers, the following chart
represents our 1998 and 1999 flat rolled shipments, by market classification,
according to the ultimate end user:

<TABLE>
<CAPTION>
PERCENTAGE FOR YEAR PERCENTAGE FOR YEAR
ENDED DECEMBER 31, ENDED DECEMBER 31,
END USER INDUSTRY 1998 1999 TYPICAL APPLICATIONS
----------------- ---- ---- --------------------
<S> <C> <C> <C>
Automotive 29% 24% Safety restraints,
Suspension, frames

Construction 17% 7% Metal buildings,
safety grating, pilings

Commercial 13% 9% Racks, shelving,
office furniture

HVAC 10% 5% Heating and air
conditioning systems

Pipe and tube 9% 7% Structural and
mechanical tubing

Culvert pipe and guard rails 5% -% Highway and road
construction

Agricultural 5% 2% Equipment, feeders
and bins

Residential 5% 8% Lawn and garden
equipment, furniture

Other 7% 38% Galvanizing, converters,
miscellaneous metal work,
service centers
------------ -----------
100% 100%
</TABLE>

(e) NEW PRODUCTS

DIRECT REDUCED IRON AND LIQUID PIG IRON

We recently completed the basic plant construction of our new Iron Dynamics
facility, which is designed for the production of direct reduced iron and the
conversion of that product in a submerged arc furnace into liquid pig iron.
Limited Production of liquid pig iron began in August 1999. Once operational,
after currently ongoing modifications to certain equipment has been completed,
we plan on consuming all of Iron Dynamics' liquid pig iron output (estimated at
470,000 metric tonnes) in our own steelmaking operations at our Butler mill.

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<PAGE> 28

STRUCTURAL AND RAIL SHAPES

When our planned structural mill is completed in Whitley County, which, if
actual construction is able to commence within the next two or three months, we
estimate will be during the first half of 2001, we intend to produce various
structural steel products such as wide flange beams, American Standard beams,
miscellaneous beams, "H" Piling material, sheet piling material, American
Standard and miscellaneous channels, bulb angles, and "Zee's." The following
listing shows each of our proposed structural mill products and their intended
markets:

<TABLE>
<CAPTION>
PROPOSED PRODUCT PROPOSED MARKET
---------------- ---------------
<S> <C>
Wide flange, American Standard, and framing and structural girders
miscellaneous beams columns, bridge stringers, ribs or
stiffeners, machine bases or skids, truck
parts, and construction equipment parts

"H" Piling foundational supports

Sheet Piling temporary or permanent bulkhead walls, cofferdams,
shore protection structures, dams and core walls

Channel sections diaphragms, stiffeners, ribs and
components in built-up sections

Bulb angles and Zee's steel building components
</TABLE>

When our new rail manufacturing component of our Whitley County structural mill
is completed, which we estimate will be during the first half of 2001, we
intend to produce various rail products for use by domestic and Canadian
railroads. Steel rail is typically sold "as rolled" to exacting dimensional
tolerances in lengths of 80 feet. These lengths are then welded into quarter
mile "strings" or "ribbons" and shipped in specialized rail trains to the point
of installation. Rails for heavy payload and high speed service, or those for
severe service applications such as eight degrees or more of curved trackage,
can be "head hardened" during the manufacturing stage and are sold as "premium"
rail in the marketplace.

Of our total net sales for 1999, 1998 and 1997, approximately 81%, 84% and 63%,
respectively, were to steel processors or service centers. These steel
processors and service centers typically act as intermediaries between primary
steel producers and the various end user manufacturers that require further
processing of hot bands. The additional processing performed by the intermediate
steel processors and service centers include pickling, galvanizing, cutting to
length, slitting to size, leveling, blanking, shape correcting, edge rolling,
shearing and stamping. Even with the completion of our cold mill project, and
our increased utilization in our cold finishing facility of a considerable
portion of our hot band production, we expect that our intermediate steel
processor and service center customers will remain an integral part of our
future customer base and we plan to continue to sell our hot bands and other
products to these customers.

Typically, our backlog and order book does not extend beyond the current
quarter, if assessed early in the quarter, or beyond the following quarter, if
assessed midway through or toward end of a quarter. As result, we tend to
experience relatively little delay in realizing price changes occurring in the
marketplace.

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<PAGE> 29

SOURCES AND AVAILABILITY OF RAW MATERIALS

Our principal raw material is scrap metal derived, among other sources, from
junked automobiles, industrial scrap, railroad cars and railroad track
materials, agricultural machinery and demolition scrap from obsolete structures,
containers and machines. The prices for scrap, which typically include freight,
are subject to market conditions beyond our control, including fluctuating
demand by U.S. and international steel producers against available supply,
affected occasionally by speculation. Historically, the prices for scrap have
varied significantly and may vary significantly in the future. In addition, our
operations require substantial amounts of other raw materials, including various
types of pig iron, alloys, refractories, oxygen, natural gas and electricity,
the price and availability of which are also subject to market conditions. We
may not be able to adjust our product prices, especially in the short-term, to
recover the costs of periodic increases in scrap and other raw material prices.
Our future profitability may be adversely affected to the extent we are unable
to pass on higher raw material and energy costs to our customers.

Scrap is the single most important raw material used in our steelmaking process,
representing approximately 52% of the direct cost of a ton of hot rolled steel
coil during 1999. The percentage of scrap used in our steelmaking operations may
decline somewhat in future years, depending upon the proportion of liquid pig
iron from our Iron Dynamics operations or other purchased scrap substitutes that
may be used from time to time.

As it relates to final product quality, electric arc furnace steel producers,
such as us, and without regard to the usage of purer forms of scrap substitutes
such as liquid pig iron, can normally only tolerate a maximum .2% level of
residual materials such as non-ferrous metallic contamination such as copper,
nickel, tin, chromium, and molybdenum, which, once having been dissolved into
steel cannot be refined out. In order for the scrap melt to provide this level
of quality under present circumstances, the mill must use approximately 60% of
"low residual" scrap or an equivalent material. Such low residual scrap
generally takes the form of No. 1 dealer bundles, No. 1 factory bundles,
busheling, and clips. We may then use various grades of higher residual, and
thus less expensive, scrap, which it can then blend with its low residual scrap
to keep within impurity tolerances. Many variables impact scrap prices, the most
critical of which is U.S. steel production.

Generally, as steel demand increases, so does scrap demand and resulting prices.
The reverse is also normally true, with scrap prices following steel prices
downward where supply exceeds demand. During 1998 and 1999, this was
particularly true, as the flood of imported steel, much of it unfairly traded,
resulted in sharply reduced new steel production with corresponding decreases in
the need for scrap. This corresponding decrease in the price of scrap mitigated
somewhat the impact of sharply declining prices for our new steel products
during 1998and 1999 and enabled us to maintain some modest profit margins
despite the severe market dislocation. The precipitous decline in scrap prices
in 1998 and 1999 caused dealers to retain their inventories and to withhold them
from sale, thus causing some short-term supply shortages even in the face of a
supply/demand inversion at the consumer levels.

Nonetheless, we believe that the demand for low residual scrap will rise more
rapidly than the supply in the coming years, especially with the increased
number of electric arc furnace mini-mills that have been built or commenced
operations in recent years. As a result, in order to maintain an available
supply of scrap at competitive market prices, we are attempting to secure a
strong and dependable source through which to purchase scrap of all grades,
including low residual scrap, and to develop our own "captive" scrap substitutes
supply. We have accomplished these objectives through a long-term scrap purchase
agreement with OmniSource Corporation and through the development of our Iron
Dynamics direct reduced iron/liquid pig iron project. Although in the future the
price of low residual scrap may approach or drop below the cost of production of
various scrap substitutes, we anticipate that the manufacturing costs and level
of purity of our Iron Dynamics liquid pig iron will cause it to be a lower cost
and attractive scrap substitute.

SCRAP

We have a long-term contract with OmniSource Corporation, which extends to 2001.
Pursuant to this agreement, OmniSource has agreed to act as our exclusive scrap
purchaser and to use its best efforts to locate and secure for us such scrap
supplies as we may from time-to-time wish to purchase, at the lowest then
available market prices for material of like grade, quantity and delivery dates.
The cost to us of OmniSource-owned scrap is the price at which OmniSource, in
bona fide market transactions, can actually sell material of like grade, quality
and quantity. With respect to general market scrap, the cost to us is the price
at which OmniSource can actually purchase that scrap in the market, without
mark-up or any other additional cost. For its services, OmniSource receives a
commission per gross ton of scrap received by us at our mini-mill. All final
decisions regarding scrap purchases belong to us, and we maintain the sole right
to determine our periodic scrap needs, including the extent to which we may
employ scrap substitutes in lieu of or in addition to scrap. No commission is
payable to OmniSource for scrap substitutes purchased or manufactured by us.

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<PAGE> 30

During 1999, 1998 and 1997, we purchased approximately 1.3 million tons of scrap
or 89% of our total scrap needs, 1.2 million tons of scrap or 74% of our
total scrap needs, and 933,000 tons of scrap or 70% of our total scrap needs,
respectively, from OmniSource. As a result of the completion of our caster
project our total output in tons of flat rolled steel coil increased from 1.4
million to approximately 2.2 million. However, we expect that the availability
of substantial quantities of scrap substitutes will somewhat mitigate our
continued dependency on low residual scrap. We believe that our scrap purchasing
relationship with OmniSource provides us with excellent access to available
scrap within our primary scrap generation area.

IRON DYNAMICS LIQUID PIG IRON

We are building a state-of-the-art facility for the production of direct reduced
iron and liquid pig iron. Direct reduced iron is a metallic product made from
iron ore or iron ore "fines" that have been treated in a "direct reduction"
furnace with either natural gas or coal to reduce the iron oxide to metallic
iron, and liquid pig iron is a pure metal product intended to be produced by
smelting the direct reduced iron in a submerged arc furnace. We recently
completed the basic plant construction of our new Iron Dynamics facility, which
is designed for the production of direct reduced iron and the conversion of that
product in a submerged arc furnace into liquid pig iron, and are in the process
of conducting limited production while we await completion of some necessary
equipment replacement or retrofitting. We produced a limited amount of liquid
pig iron in August 1999. We currently plan on consuming all of Iron Dynamics'
liquid pig iron output, estimated at 470,000 tonnes, in our own steelmaking
operations at our Butler mill, once full scale production commences, anticipated
to be in the fourth quarter of 2000.

ENERGY RESOURCES

ELECTRICITY

During 1998, we modified our electric service contract with American Electric
Power, known as "AEP" that extends through 2006. The contract designates only
200 hours annually as "interruptible service" and establishes an agreed fixed
rate for the rest of our electrical usage. Interruptible service subjects us to
the risk of interruption at any time in the operation of the AEP system, whether
as a result of an AEP peak demand, or even if AEP were able to obtain a higher
market price from an alternate buyer. Under our old contract, we had only the
option of matching the spot market price of the alternate buyer in order to
avoid interruption, and that price could be much higher than our normal rate. In
prior years, due to the extremely hot weather and the unavailability of certain
nuclear power and coal based generating facilities, our Butler mill was forced
to cut back to a nighttime operating mode on a number of days throughout the
summer because of the unacceptably high rates per kilowatt hour created by these
extremes in overall demand for electricity in tandem with the reduced
availability of supply. Our renegotiated electrical supply agreement with AEP
greatly reduces our exposure to such uncertainties because it is a fixed price
contract with a maximum of 200 hours per year of interruptiblility. The contract
also provides us that the circumstances necessary to warrant any of the annual
200 hours of service interruptions must be of an emergency nature and not
related to price and demand. We believe that this new contractual arrangement
will substantially mitigate the dangers of such production cutbacks in the
future.

GAS

We use approximately 8,000 decatherms of natural gas per day. A decatherm is
equivalent to 1 million BTUs or 1,000 cubic feet of natural gas. We have a
delivery contract on the Panhandle Eastern Pipeline that extends through April
2008. We are also currently negotiating a delivery contract with
NIPSCO/NIFL/Crossroads that will extend through October 2005.

We maintain a liquid propane storage facility on site with sufficient reserves
to sustain operations at the Butler mill for approximately one week in the event
of an interruption in the natural gas supply.

OTHER

We use oxygen, nitrogen and argon for production purposes, which we purchase
from Air Products and Chemicals, Inc., which built a plant on land adjacent to
our Butler mill. Air Products uses its plant not only to supply us, but also to
provide oxygen and other gases to other industrial customers. As a result, we
have been able to effect very favorable oxygen and other gas purchase prices on
the basis of Air Products' volume production.

PATENTS AND TRADEMARKS

We have a trademark for the mark "SDI" and an accompanying design of a steel
coil and a chevron.

Our Iron Dynamics subsidiary has filed five patent applications with the U.S.
Patent and Trademark Office relating to its methods of producing low sulfur
liquid pig iron.

28
<PAGE> 31

KEY CUSTOMERS

Our largest customers were, Heidtman Steel Products, Inc. and Preussag AG.
Together they accounted for approximately 41%, 27% and 27% of our total net
sales in 1997, 1998, and 1999, respectively. Heidtman accounted, individually,
for more than 10% of our net sales in 1997, 1998 or 1999. Preussag individually
accounted for more than 10% of our net sales in 1997.

Steel processors and service centers typically act as intermediaries between
primary steel producers, such as us, and the many end user manufacturers that
require further processing of hot bands. The additional processing performed by
the intermediate steel processors and service centers include pickling,
galvanizing, cutting to length, slitting to size, leveling, blanking, shape
correcting, edge rolling, shearing and stamping. Notwithstanding the completion
of our cold mill and our increased utilization in our own cold finishing
facility of a considerable portion of our hot band production, we expect that
our intermediate steel processor and service center customers will remain an
integral part of our future customer base.

COMPETITION

The steel industry has historically been and continues to be highly cyclical in
nature, influenced by a combination of factors, including periods of economic
growth or recession, strength or weakness of the U.S. dollar, worldwide
production capacity and levels of steel imports and applicable tariffs. The
industry has also been affected by various company-specific factors such as
ability or inability to adapt to technological change, plant inefficiency and
high labor costs. Steelmaking companies are particularly sensitive to trends in
the automotive, oil and gas, gas transmission, construction, commercial
equipment, rail transportation, agriculture and durable goods industries. These
industries are significant markets for steel products and are themselves highly
cyclical. Steel, regardless of product type, is a commodity affected by supply
and demand. Steel prices have been and may continue to be volatile and fluctuate
in reaction to general and industry specific economic conditions. Under such
conditions, a steel company must be a high quality low cost producer.

Domestic steel producers, including us, have historically faced significant
competition from foreign producers. From time to time, as occurred during 1998
and is continuing, the domestic steel producers have been adversely affected by
what we believe was unfairly traded imports. The intensity of this foreign
competition is also substantially affected by the relative strength of foreign
economies and fluctuation in the value of the United States dollar against
foreign currencies, with steel imports tending to increase when the value of the
dollar is strong in relation to foreign currencies, some of which were
significantly devalued during 1998 and 1999. The situation was exasperated by
reason of a weakening of certain economies during 1998 and 1999, particularly in
Eastern Europe, Asia, and in Latin America. Because of the ownership, control or
subsidation of some foreign steel producers by their governments, decisions by
such producers with respect to their production and sales are often influenced
to a greater degree by political and economic policy consideration then by
prevailing market conditions.

Imports of flat-rolled products increased significantly during each of the last
several years, surging to record levels during 1998, before declining in 1999 as
a result of the successful cases detailed below. Based on AISI reports during
1998 and 1997, imports of flat-rolled products (excluding semi-finished steel)
totaled approximately 20 million and 14 million tons, respectively, or
approximately 25% of total domestic steel consumption in 1998 and approximately
19% in 1997.

In September 1998, complaints were filed with the U.S. International Trade
Commission and the U.S. Department of Commerce by a number of U.S. steel
companies, including us, as well as the United Steel Workers of America seeking
determinations that Japan, Brazil and Russia were dumping hot rolled carbon
steel in the U.S. market at below fair market prices. In April 1999, the
Department of Commerce issued a final determination that imports of hot rolled
steel from Japan were dumped at margins ranging from 17% to 65%, and in June,
the U.S. International Trade Commission reached a final determination of imports
of hot rolled sheet from Japan caused injury to the U.S. steel industry. In July
1999, the Department of Commerce issued suspension agreements and final dumping
duty determinations as to imports of hot rolled sheet from Brazil and Russia,
and a suspension agreement and final countervailing duty determination as to
imports of hot rolled sheet from Brazil. The Department of Commerce also
announced countervailing duty findings of approximately 7%, and anti-dumping
duties of approximately 40%, as to imports from Brazil. The U.S. International
Trade Commission made a final affirmative injury determination. The Department
of Commerce also announced final dumping duties ranging from 57% to 157%, and
the suspension agreement against Brazil and Russia will remain in effect for 5
years.

The success of these hot rolled cases will curtail imports from these countries
from 7 million tons in 1998, to between 500,000 and 1 million tons for 1999 and
for the next five years. However, it is possible that imports of hot rolled
sheet from other countries will increase significantly. We and other petitioners
in the suits plan to continue to vigorously monitor such imports and will take
further action if warranted.

29
<PAGE> 32

On June 2, 1999, we, together with other domestic producers and the United Steel
Workers of America, filed a complaint with the U.S. International Trade
Commission and Department of Commerce seeking determination that cold rolled
steel products from Argentina, Brazil, China, Indonesia, Japan, Slovakia, South
Africa, Taiwan, Thailand, Turkey, and Venezuela, were being dumped in the U.S.
market at below fair market prices. On July 19, 1999, the U.S. International
Trade Commission made unanimous affirmative preliminary determinations of a
reasonable indication of injury by reason of such imports. The Department of
Commerce announced preliminary dumping determinations, which required the
posting of dumping duties in November and December of 1999. In January 2000, the
Department of Commerce issued a determination that imports of cold rolled steel
from six countries were dumped at margins ranging from 17% to 81%. On March 3,
2000, however, the U.S. International Trade Commission ruled against us, making
negative final injury determinations against these six countries, and we expect
negative determinations in all six cases. These negative outcomes are likely to
result in a continuation of the depressed prices caused by these unfair
practices.

GEOGRAPHIC MARKETPLACE FOR FLAT-ROLLED PRODUCTS

UNITED STATES. Our products compete with many integrated hot rolled coil
producers, such as National Steel Corp.'s Great Lakes Steel Division, LTV Steel
Co., Inc., Ispat/Inland Steel Co., Bethlehem Steel Corp., AK Steel, U.S. Steel,
Acme Steel Co. and Beta Steel Corp., as well as a growing number of hot rolled
mini-mills, such as Nucor's Crawfordsville, Indiana and Hickman, Arkansas
facilities, Gallatin Steel Company's mini-mill in Ghent, Kentucky,
BHP/Northstar's facility in Delta, Ohio and TRICO Steel's mini-mill in Alabama.
These mini-mills have low cost structures and flexible production capabilities
more closely akin to ours than to the integrated producers. Despite significant
reductions in steel production capacity by major U.S. producers over the last
decade, the U.S. industry continues to be adversely affected, from time to time,
by excess world capacity. Recent improved production efficiencies also have
further increased overall production capacity in the U.S. Increased industry
overcapacity, coupled with economic recession, could intensify an already
competitive environment.

Over the last decade, extensive downsizings have necessitated costly
restructuring charges that, when combined with highly competitive market
conditions, have resulted at times in substantial losses for some U.S. steel
producers. A number of U.S. steel producers have gone through bankruptcy
reorganization. These reorganizations have resulted in somewhat reduced capital
costs for these producers and may permit them to price their steel products at
levels below those that they could have otherwise maintained.

Our penetration into the total flat-rolled steel market is limited by geographic
considerations, to some extent by gauge and width of product specifications, and
by metallurgical and physical quality requirements. Based on product type and
geographic location, we believe that we most closely compete with the following
mini-mills: Nucor's Crawfordsville, Indiana facility, Gallatin Steel's Ghent,
Kentucky facility, BHP/Northstar's Delta, Ohio facility, and, to a more limited
extent, Nucor's Hickman, Arkansas facility, Nucor's Berkeley County, South
Carolina facility, and TRICO Steel's facility in northern Alabama. Each of these
mills will produce hot rolled product. However, only an affiliate of
BHP/Northstar in Delta, Ohio is producing hot rolled galvanized product, and
only Nucor's Crawfordsville, Indiana facility is producing cold rolled and cold
rolled galvanized products.

NON-UNITED STATES. Our products compete with many foreign producers. Competition
from foreign producers is typically strong, but during 1998 and 1999, domestic
steel producers, including us, have been adversely affected by illegally dumped
imports. As previously described herein, a number of U.S. steel companies,
including us, as well as the United Steelworkers of America, filed complaints
with the U.S. International Trade Commission and the U.S. Department of Commerce
seeking determinations that hot rolled carbon steel and cold rolled steel
products from various countries were being dumped in the U.S. market at below
fair market prices. We were successful with respect to the hot rolled cases and
as a result, we expect imports from Japan, Brazil and Russia to decrease from
approximately 7 million tons in 1998, to between 500,000 and 1 million tons for
1999 and the next five years. We were unsuccessful with respect to the cold
rolled cases and on March 3, 2000, the ITC made negative final injury
determinations. These negative outcomes are likely to result in a continuation
of the depressed prices caused by these unfair practices.

GEOGRAPHIC MARKETPLACE FOR STRUCTURAL PRODUCTS

UNITED STATES. Our structural products will compete with a sizable number of
electric furnace steelmakers, some of which have cost structures and flexible
management cultures similar to our own. Notable competitors include Nucor Steel
in Berkeley, South Carolina; Nucor-Yamato Steel in Blytheville, Arkansas;
TXI-Chapparal Steel in Midlothian, Texas and in Petersburg, Virginia; Birmingham
Steel in Cartersville, Georgia; and Northwestern Steel and Wire in Sterling,
Illinois. Unlike the market for flat rolled products, in which mills typically
sell a higher percentage of their products in close proximity to the mill, the
market for structural products is considered national in nature.

30
<PAGE> 33

NON-UNITED STATES. During the late 1980's, structural steel imports
averaged 1.7 million tons annually. While that average volume declined to less
than 0.7 million tons during the first half of the 1990's, structural steel
imports have risen steadily in recent years to 2.1 million tons in 1998 of which
1.6 million tons were imported from Germany, Japan, South Korea and Spain. The
impact of these imports, and the question of whether these imports were traded
fairly, has been directed to the International Trade Commission and the
Department of Commerce by Nucor-Yamato Steel, Northwestern Steel and
TXI-Chapparal Steel in a recently filed antidumping suit.

GEOGRAPHIC MARKETPLACE FOR RAIL

UNITED STATES. The rail market is presently served by two producers: Rocky
Mountain Steel, a division of Oregon Steel Mills, Inc. in Pueblo, Colorado, and
Pennsylvania Steel Technologies, a subsidiary of Bethlehem Steel Corporation in
Steelton, Pennsylvania. Each of these producers has the capability to produce
either standard or premium rail. Our rail products would compete with these
producers.

NON-UNITED STATES. Our rail products would compete with similar products from a
number of high quality integrated and electric furnace steel producers in Europe
and Asia, including British Steel and Nippon Steel.

ENVIRONMENTAL MATTERS

Our operations are subject to substantial and evolving environmental laws and
regulations concerning, among other things, emissions to the air, discharges to
surface and ground water, noise control and the generation, handling, storage,
transportation, treatment and disposal of toxic and hazardous substances. In
particular, we are dependent upon both state and federal permits regulating
discharges into the air or into the groundwater in order to be permitted to
operate our facilities. Presently, we are not able to commence construction of
our planned structure and rail mill facility in Whitley County, Indiana because
opponents of that facility have appealed the issuance of a key air permit to us
and we are not permitted to proceed until those appeals have been adjudicated.
We believe that in all current respects our facilities are in material
compliance with all provisions of federal and state laws concerning the
environment and we do not believe that future compliance with such provisions
will have a material adverse effect on our results of operations, cash flows or
financial condition. Since environmental laws and regulations are becoming
increasingly stringent, our environmental capital expenditures and costs for
environmental compliance may increase in the future. In addition, due to the
possibility of unanticipated regulatory or other developments, the amount and
timing of future environmental expenditures may vary substantially from those
currently anticipated. The cost for current and future environmental compliance
may also place U.S. steel producers at a competitive disadvantage with respect
to foreign steel producers, which may not be required to undertake equivalent
costs in their operations.

Under CERCLA, the Environmental Protection Agency, known as the "EPA," has the
authority to impose joint and several liability for the remediation of
contaminated properties upon generators of waste, current and former site owners
and operators, transporters and other potentially responsible parties,
regardless of fault or the legality of the original disposal activity. Many
states, including Indiana, have statutes and regulatory authorities similar to
CERCLA and to the EPA. We have a hazardous waste hauling agreement with Autumn
Industries. We also have a hazardous waste disposal agreement with Environsafe
Services of Ohio, Inc. to properly dispose of our flue dust, ash, and other
waste products of steelmaking, which are classified as hazardous, but there can
be no assurance that, even though there has been no fault by us, we may not
still be cited as a waste generator by reason of an environmental clean up at a
site to which our waste products were transported.

EMPLOYEES

Our work force consisted of 644 employees at December 31, 1999, of which 62 were
employed by Iron Dynamics. Our employees are not represented by labor unions. We
believe that our relationship with our employees is excellent.

FOREIGN EXPORT SALES

Of our total net sales in 1999, 1998 and 1997, sales outside the continental
United States accounted for less than 1%. We appointed Salzgitter AG, a
successor to Preussag Stahl AG, as our preferred distributor for all sales to
customers outside the United States, Canada and Mexico. Under the Salzgitter
Purchasing Agreement, if we wish to sell in the Export Territory, we must notify
Salzgitter of the products available for sale and the price of these products.
Salzgitter must then use its best efforts to solicit these sales and to present
us with any purchase orders for the product, which we may then accept or reject.
Sales within the Export Territory are for Salzgitter's own account, regardless
of whether Salzgitter is purchasing for its use or for resale. If we receive an
unsolicited offer to purchase any products from a prospective customer in the
Export Territory, we must notify Salzgitter of the terms and Salzgitter has a
right of first refusal to effect the purchase. For sales in the Export
Territory, Salzgitter is entitled to a sales commission in addition to any other
applicable discounts or rebates.

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<PAGE> 34

We have also entered into a "second look" export sales agreement for such
international sales with Sumitomo Corporation of America ("Sumitomo") for export
sales not handled by Salzgitter. Sumitomo is also a stockholder in our company.
Sumitomo has also entered into an agreement with our Iron Dynamics subsidiary
under which Iron Dynamics has agreed to sell to or through Sumitomo up to 50% of
any direct reduced iron that it manufactures starting in 1998 and which we do
not retain for our own consumption.

In addition, our Iron Dynamics subsidiary has entered into a license agreement
with Sumitomo pursuant to which Sumitomo is authorized, on an exclusive
world-wide basis (except for the U.S. and Canada), and subject to certain
exception, to sub-license others or to use any proprietary know-how or other
intellectual property related to the project. Such license rights contemplate
that Sumitomo will build and construct plants using this technology for itself
or for others.

ITEM 2. PROPERTIES

NEW CORPORATE OFFICES

We currently lease 5,611 square feet of office space at 7030 Pointe Inverness
Way, Suite 310, Fort Wayne, Indiana, on a year-to-year lease, as a corporate
headquarters. During 1998, we purchased a 10-acre tract of land at the junction
of Interstate 69 and Indiana State Road 14 in Aboite Township on the southwest
side of Fort Wayne, on which we anticipate locating our new corporate offices.
Recently, the building moratorium affecting all new construction in Aboite
Township, relating to the current inadequacy of water and sewage service in the
area, was lifted and we commenced construction in the fourth quarter of 1999 of
a planned 50,000 square foot multi-story office building, of which we anticipate
utilizing approximately 10,000 square feet for our own corporate purposes and
leasing out the balance to commercial tenants. We anticipate completion of
construction in the second half of 2001.

BUTLER MILL

Our plant and administrative offices that serve our Butler mill are located on
approximately 840 acres, in Butler, DeKalb County, Indiana. The production
facilities consist of a series of contiguous buildings that represent distinct
production activities. The meltshop portion of the building consists of
approximately 140,000 square feet and houses the melting and casting operations.
The tunnel furnace consists of approximately 54,500 square feet, and the hot
mill building that houses the rolling operations consists of approximately
290,000 square feet. The continuous pickle line building, which connects the hot
mill building and the cold mill building, consists of approximately 51,000
square feet. The remaining portion of the cold mill building that houses two
hot-dipped galvanizing lines, a semi-tandem two-stand reversing mill, batch
annealing furnaces and a temper mill encompasses over 516,000 square feet. An
addition to the meltshop building was added in 1998 to accommodate our second
caster, a second tunnel furnace and coiler, and various other peripheral
equipment.

Office buildings on site consist of a general administrative office building, a
building for hot rolling, engineering and safety employees, a cold mill office
building, a melting/casting office building, a shipping office and an employee
services building.

Other support facilities include a bag house and a water treatment system with
buildings located at various places in the plant. The bag house captures the
gasses from the melting operation and cleans them to comply with all federal
emission standards. The water treatment system cleans, cools and recirculates
the water used by the plant in various processes.

We consider its manufacturing and operating facilities adequate for our needs
for the foreseeable future.

IRON DYNAMICS FACILITY

Iron Dynamics's facility is located on approximately 26 acres that are leased
from us under a long-term lease at nominal consideration. In addition, Iron
Dynamics internally has constructed approximately two miles of railroad tracks,
approximately one mile of which is devoted to creating a loop track so that an
entire unit train, consisting of engines and no less than eighty rail cars, can
cost effectively service the site.

There are five main buildings that comprise the Iron Dynamics facility. They are
the coal plant, consisting of 6,500 square feet, the ore plant consisting of
30,000 square feet, the rotary hearth/submerged arc furnace building consisting
of 75,000 square feet, and the utilities building which consists of 15,000
square feet. The rotary hearth furnace/submerged arc furnace building is served
by an automated 100-ton capacity crane.

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<PAGE> 35

ADDITIONAL LAND IN BUTLER, INDIANA

Over the past year, we have purchased additional unimproved farmland contiguous
or in close proximity to our Butler mill. This additional land consists of 135
acres.

WHITLEY COUNTY STRUCTURAL MILL

Our proposed Whitley County structural mill will be situated on a 470-acre tract
of land in Whitley County, 30 acres of which have been set aside for use as
wetland mitigation for the project. The new site is immediately south of U.S.
Highway 30 between County Road 700 East and County Road 800 East. The southern
boundary of the site is a CSX Transportation railroad line with access rights
allowed to the Norfolk Southern Corporation railway.

The structural mill facility, when completed, will consist of two main buildings
that will comprise the structural mill itself. The meltshop building will
contain seven bays and is planned to be approximately 200,000 square feet. The
meltshop building will contain the electric arc furnaces, ladle metallurgical
furnaces and the caster. The meltshop building will be connected to the rolling
mill building that will contain four bays and consist of approximately 500,000
square feet. The reheat furnace and the heavy section rolling mill will be
located within the rolling mill building.

The rail manufacturing facility, when completed, will be added to the rolling
mill building. We estimate that the additional facilities to house the rail
manufacturing operation will consist of approximately 200,000 square feet.

Additional buildings planned for the structural mill include an administration
office building and an employee service building, all of which are in the
process of being designed.

ITEM 3. LEGAL PROCEEDINGS

We have been sued in a total of eight separate but related lawsuits, aggregating
approximately $240 million in claims (one of which is a duplicative filing) in
either state or federal courts in California, New York, New Jersey, Minnesota,
Connecticut and Illinois. The suits have been brought by various institutional
investors which purchased certain high risk notes or "junk bonds" issued in
March 1998 by two affiliates of Nakornthai Strip Mill Public Company, Limited,
or "NSM," a Thailand owner and operator of a steel mini-mill project. Our
president, Keith E. Busse, has also been named as a defendant in the New Jersey
and Connecticut (duplicative) cases. Under our company's bylaws and pursuant to
authorization of our board of directors, Mr. Busse is entitled to be indemnified
by us for any costs or expenses that he may incur, as well as in respect of any
judgments that may be rendered against him in connection with this litigation,
subject to applicable legal procedures required by the Securities and Exchange
Commission for submission of any such indemnity claim, if asserted, to a court
of appropriate jurisdiction for a determination of whether such indemnity claim
is against public policy as expressed in the Securities Act of 1933.

The purchases were part of a U.S. $452 million financing marketed and sold to
these and other institutional investors in a privately placed non-registered
offering, pursuant to the SEC's Regulation D, and then resold by NatWest Capital
Markets Limited, McDonald & Company Securities, Inc., PaineWebber Incorporated
and ECT Securities Corp. pursuant to SEC Rule 144A.

Although we were neither an issuer, a guarantor, a seller or an investment
banker with respect to these notes, did not draft any of the offering materials
in connection with the offering, were not listed as an expert, did not render
any reports or evaluations of NSM prior to the offering; and only had a
contractual relationship with the NSM mini-mill project--as a technical and
operational advisor and consultant from and after the close of the financing--we
have nonetheless been named as defendants on the basis of a variety of alleged
state or federal statutory and common law fraud and related claims that posit
that the plaintiffs were misled into purchasing and overpaying for the notes by
reason of various alleged misrepresentations or omissions in the offering
materials, or at one or more of the "road shows" in connection with the offering
(some of which were attended by Mr. Busse).

We deny any liability in connection with these cases, believe that we have ample
legal and factual defenses and will defend ourselves in each such case to the
limit of our ability.

The eight pending lawsuits include Farallon Capital Partners, LP, et al v.
Gleacher & Co., Inc., et al filed in the Superior Court of the State of
California for the County of Los Angeles - Central District in August 1999 as
Case No. BC 215260 (involving a $33 million claim); Merrill Lynch Global
Allocation Fund, Inc., et al v. Natwest Finance, Inc., et al filed in the
Superior Court of New Jersey, Law Division - Middlesex County, as Case No.
MID-L-8457-99 in September 1999 (involving an $85 million claim), which also
names a number of individuals as defendants, including our president, Keith E.
Busse; a duplicative lawsuit covering

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<PAGE> 36

approximately half of the claims in the Merrill Lynch New Jersey lawsuit, filed
in the Superior Court for the Judicial District of Fairfield at Bridgeport,
Connecticut, also in September 1999, under the caption Turnberry Capital
Partners, LP, et al v. Natwest Finance, Inc. et al, which we anticipate will
either be dismissed in its entirety or, if it proceeds, would transfer $42
million of the Merrill Lynch claims to Turnberry and would reduce the claim in
the Merrill Lynch New Jersey litigation to $43 million; Zuri-Invest AG v. Nat
West Finance, Inc., et al, filed in the United States District Court for the
District of Minnesota, Fourth Division, as Civil File No. 99-CV-1452 DWF/AJB in
September 1999 (involving an approximate $2 million claim); IDS Bond Fund, Inc.,
et al v. Gleacher Natwest, Inc., et al, also filed in the United States District
Court for the District of Minnesota, Fourth Division, as Civil File No. 99-116
MJD/JGL (involving a $62 million claim); Gabriel Capital, LP, et al v. Natwest
Finance, Inc., et al, filed in the United States District Court for the Southern
District of New York in October 1999 as Cause No. 99-CV-10488 (SAS) (involving
an approximate $15 million claim); Legg Mason Income Trust, Inc., et al v.
Gleacher & Co., Inc., et al, filed in October 1999 in the Superior Court of the
State of California for the County of Los Angeles - Central District as Case No.
BC 218294 (a $5 million claim); and Kemper High Yield Series - Kemper High Yield
Fund, et al v. Gleacher Natwest, Inc., et al, filed November 24, 1999 in the
Circuit Court of Cook County, Illinois as Cause No. 99L13363 (a $42 million
claim).

There is also a peripheral lawsuit pending in the Court of Common Pleas of
Cuyahoga County (Cleveland) Ohio, as Case No. 385421, in which John W. Schultes,
the former president and chief executive officer of NSM, has sued both McDonald
and us for damages "in excess of $25,000," alleging that we bear contractual
responsibility for causing his termination of employment and that we slandered
his reputation. We deny that we have any liability to Mr. Schultes in connection
with this lawsuit.

In several unrelated matters, our Iron Dynamics subsidiary has brought several
lawsuits relating to the construction of its plant facility in Butler, Indiana:

In February 1999, we brought a lawsuit in the Superior Court of DeKalb County,
Indiana, against Taft Contracting Company, Inc. The complaint is for damages and
for a declaration of rights that a mechanic's lien for approximately $1.0
million filed in November 1998 by Taft, a former contractor working on the Iron
Dynamics plant construction project, is invalid and should be declared null and
void. The Taft lien covers alleged "extras," which Iron Dynamics contends are
unsupportable under the contract, and we consider the lien to be entirely
without merit. The lien was subsequently bonded and discharged.

Also, in January 2000, we brought a lawsuit in the United States District Court,
Northern District of Indiana, Fort Wayne Division, against Dover Conveyer, Inc.
The complaint is for damages and for a declaration that the iron ore, coal and
limestone conveying system manufactured by Dover does not comply with
contractual specifications. We seek an order requiring Dover to honor its
warranty and cure the defects. Dover has filed a counterclaim for damages
totaling approximately $200,000 for retainages and out-of-pocket expenses. Iron
Dynamics contends that Dover's counterclaim is entirely unsupportable under the
contract.

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

None.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

Our common stock trades on The Nasdaq Stock Market under symbol STLD. The table
below sets forth, for the calendar quarters indicated, the reported high and low
sales prices of the common stock:

<TABLE>
<CAPTION>
1999 High Low
---- ----------- -------

<S> <C> <C>
First Quarter $17.125 $11.750
Second Quarter 21.250 14.750
Third Quarter 18.250 14.750
Fourth Quarter 18.000 12.438

1998 High Low
---- ----------- -------
First Quarter $21.813 $16.000
Second Quarter 23.750 13.625
Third Quarter 15.438 10.500
Fourth Quarter 15.375 9.375
</TABLE>

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<PAGE> 37

As of March 24, 2000 we had 48,018,683 shares of common stock outstanding and
held beneficially by approximately 16,550 stockholders. Because many of the
shares were held by depositories, brokers and other nominees, the number of
registered holders (approximately 900) is not representative of the number of
beneficial holders.

On December 11, 1997, the Board of Directors authorized us to repurchase up to
5% of its Common Stock. Under the program, shares may be purchased from time to
time at prevailing market prices. As of March 24, 2000, we had repurchased
1,294,100 shares at an average price of approximately $15 per share of which
1,219,100 shares were purchased during 1998. No shares were purchased during
1999.

We have never declared or paid cash dividends on our Common Stock. We anticipate
all future earnings will be retained to finance the expansion of our business
and do not anticipate paying cash dividends on our Common Stock in the
foreseeable future. Any determination to pay cash dividends in the future will
be at the discretion of our Board of Directors, after taking into account
various factors, including our financial condition, results of operations,
outstanding indebtedness, current and anticipated cash needs and plans for
expansion. In addition, pursuant to our restated Credit Agreement dated as of
June 30, 1997, with Mellon Bank, N.A. and other participating banks, we may only
pay dividends in an aggregate cumulative amount not exceeding cumulative net
income for the period from January 1, 1997 through the then most recently
completed fiscal quarter.

In addition, Iron Dynamics, Inc., our wholly-owned subsidiary, is restricted
pursuant to its credit agreement from declaring or making any dividends except
in the event certain covenants are met, and then only in certain amounts.

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<PAGE> 38

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth our audited consolidated financial data as of and
for each of the five years in the period ended December 31, 1999. You should
read the following data in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our consolidated
financial statements appearing elsewhere in this Form 10-K.

You should read the following information in conjunction with the data in the
table on the following page:

- Commercial grade production began January 2, 1996.

- Our 1996 extraordinary loss of $7.3 million consisted of prepayment
penalties and the write off of capitalized financing costs associated with
prepayment of our outstanding subordinated notes.

- Our 1997 extraordinary loss of $7.6 million (net of tax benefit of $5.1
million) consisted of prepayment penalties and the write off of
capitalized financing costs associated with the amendment of our credit
facility, effective June 30, 1997.

- Operating profit per ton represents operating income before start-up costs
divided by net ton shipments.

- Hot band production refers to our total production of finished coiled
product. Prime tons refer to hot bands produced, which meet or exceed
quality standards for surface, shape and metallurgical properties.

- Yield percentage refers to tons of finished product divided by tons of raw
materials.

- Effective capacity utilization is the ratio of tons produced for the
operational month to the operational month's capacity. For the data
disclosed in the periods ended December 31, 1996 and 1997, we used an
annual capacity of 1.4 million tons for this calculation. For the data
disclosed in the periods ended December 31, 1998 and 1999, we used an
annual capacity of 2.2 million tons.

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<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE DATA)

STATEMENT OF OPERATIONS DATA:

<S> <C> <C> <C> <C> <C>
Net sales .................................. $ 618,821 $ 514,786 $ 420,132 $ 252,617 $ 137
Cost of goods sold ......................... 487,629 428,978 330,529 220,563 3,169
--------- --------- --------- --------- ---------
Gross profit (loss) .................... 131,192 85,808 89,603 32,054 (3,032)
Selling, general and administrative expenses 42,441 20,637 24,449 13,838 13,580
--------- --------- --------- --------- ---------
Income (loss) from operations .......... 88,751 65,171 65,154 18,216 (16,612)

Interest expense ........................... (22,178) (17,538) (7,697) (22,684) (564)
Other income (expense) ..................... (1,294) 4,993 1,914 1,909 (2,712)
--------- --------- --------- --------- ---------
Income (loss) before income taxes
and extraordinary loss ............... 65,279 52,626 59,371 (2,559) (19,888)
Income tax expense ......................... 25,849 20,942 7,813 - -
--------- --------- --------- --------- ---------
Income (loss) before extraordinary loss 39,430 31,684 51,558 (2,559) (19,888)
Extraordinary loss, net of tax ............. - - (7,624) (7,271) -
--------- --------- --------- --------- ---------
Net Income (loss) ...................... $ 39,430 $ 31,684 $ 43,934 $ (9,830) $ (19,888)
========= ========= ========= ========= =========

BASIC EARNINGS PER SHARE:

Income (loss) before extraordinary loss .... $ 0.82 $ 0.65 $ 1.07 $ (0.07) $ (0.62)
Extraordinary loss ......................... - - (0.16) (0.21) -
========= ========= ========= ========= =========
Net income (loss) .......................... $ 0.82 $ 0.65 $ 0.91 $ (0.28) $ (0.62)
========= ========= ========= ========= =========

DILUTED EARNINGS PER SHARE:

Income (loss) before extraordinary loss .... $ 0.82 $ 0.65 $ 1.06 $ (0.07) $ (0.62)
Extraordinary loss ......................... - - (0.16) (0.21) -
========= ========= ========= ========= =========
Net income (loss) .......................... $ 0.82 $ 0.65 $ 0.90 $ (0.28) $ (0.62)
========= ========= ========= ========= =========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
BALANCE SHEET DATA (IN THOUSANDS):

<S> <C> <C> <C> <C> <C>
Cash and cash equivalents ...........................................$ 16,615 $ 5,243 $ 8,618 $ 57,460 $ 6,884
Working capital ..................................................... 155,226 162,117 58,774 95,873 (14,488)
Net property, plant and equipment ................................... 742,787 665,872 491,859 339,263 274,197
Total assets ........................................................ 991,556 907,470 640,882 522,291 320,679
Long-term debt (including current maturities) ....................... 505,963 483,946 219,541 207,343 223,054
Stockholders' equity ................................................ 391,370 351,065 337,595 264,566 62,972

OTHER DATA:

Operating profit per net ton shipped ................................$ 58 $ 50 $ 61 $ 23
Shipments (net tons) ................................................ 1,869,714 1,416,950 1,205,247 793,848
Hot band production (net tons) ...................................... 1,938,234 1,425,699 1,181,983 814,561
Prime ton percentage - hot band ..................................... 94.2 95.3 95.3 89.0
Yield percentage - hot band ......................................... 87.8 87.7 89.0 87.4
Effective capacity utilization - hot band ........................... 88.1 79.2 84.4 58.2
Man-hours per hot band net ton produced ............................. .41 .55 .56 .71
Shares outstanding at year end, net of shares held in treasury (000s) 47,971 47,864 49,056 47,803
Number of employees ................................................. 644 591 425 293
</TABLE>

37
<PAGE> 40

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

The following discussion contains forward-looking statements that involve risks
and uncertainties, and our actual results could differ materially from those
discussed in the forward-looking statement. Some of these risks and
uncertainties are enumerated in the discussion under the headings "Forward
Looking Statements" and "Risk Factors That May Affect Future Operations" set
forth in Item 1, of this Report as well as incorporated by reference herein from
"Exhibit 99.1" to this Report. You should also read the following discussion in
conjunction with "Selected Financial Data" and our consolidated financial
statements appearing elsewhere in this filing.

OVERVIEW

We operate a technologically advanced flat-rolled steel mini-mill in Butler,
Indiana with an annual production capacity of 2.2 million tons. We manufacture
and market a broad range of high quality flat-rolled carbon steel products. We
sell hot rolled, cold rolled and coated steel products, including high strength
low alloy and medium carbon steels. We sell these products directly to end users
and through steel service centers primarily in the Midwestern United States. Our
products are used for various applications, including automotive, appliance,
manufacturing, consumer durable goods, industrial machinery and various other
applications.

In addition to our flat-rolled mini-mill, we are completing a second facility,
preparing to build a third and investing in a steel fabrication plant. Our
second facility, operated by our subsidiary, Iron Dynamics Inc., involves the
pioneering of a process to produce direct reduced iron, which is then converted
into liquid pig iron, a high quality, lower-cost steel scrap substitute for use
in our flat-rolled facility. Iron Dynamics is contiguous to our flat rolled
mini-mill. During 1999, we determined that Iron Dynamics would require design
modifications to obtain its fully intended operating functionality. The
modifications are planned to occur during the second half of 2000, until which
time Iron Dynamics will operate at limited production levels.

Our third facility, a planned structural and rail mill, and an investment in New
Millennium Building Systems, LLC, (NMBS) provide an opportunity for further
product diversification and market penetration. Upon completion of the
structural and rail mill, which we estimate to be in the first half of 2001, we
plan to manufacture structural steel beams, pilings and rails for the
construction and railroad markets. In addition, our investment in New Millennium
provides a like opportunity for our steel to access the non-residential
construction markets with steel joists, trusses and girders and roof and floor
decking products.

NET SALES

Our sales are a factor of net tons shipped, product mix and related pricing. Our
net sales are determined by subtracting product returns, sales discounts, return
allowances and claims from total sales. We charge premium prices for certain
grades of steel, dimensions of product, or certain smaller volumes, based on our
cost of production. We also provide further value-added products from our Cold
Mill. These products include hot-rolled and cold-rolled galvanized products,
along with cold-rolled products, allowing us to charge marginally higher prices
compared to hot-rolled products.

In order to ensure consistent and efficient hot band plant utilization, we have
entered into a multi-year "off-take" sales and distribution agreement with
Heidtman Steel Products, Inc. which accounts for approximately 30,000 tons of
our monthly flat-rolled production at prevailing market prices. We do not enter
into material fixed price, long-term, exceeding one calendar quarter, contracts
for the sale of steel. Although fixed price contracts may reduce risks related
to price declines, these contracts may also limit our ability to take advantage
of price increases.

COST OF GOODS SOLD

Our cost of goods sold represents all direct and indirect costs associated with
the manufacture of our flat- rolled carbon steel, and hot-rolled, cold-rolled
and coated products. The principal elements of these costs are:

- Alloys - Electricity
- Natural gas - Oxygen
- Argon - Electrodes
- Steel scrap and scrap substitutes - Depreciation
- Direct and indirect labor and benefits

Steel scrap and scrap substitutes represent the most significant component of
our cost of goods sold.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

Selling, general and administrative expenses are comprised of all costs
associated with the sales, finance and accounting, materials and transportation,
and administrative departments. These costs include labor and benefits,
professional services, financing cost amortization, property taxes, profit
sharing expense and start-up costs associated with new projects.

38
<PAGE> 41

INTEREST EXPENSE

Interest expense consists of interest associated with our senior credit facility
and other debt agreements as described in our notes to financial statements, net
of capitalized interest costs that are related to construction expenditures
during the construction period of capital projects.

OTHER INCOME (EXPENSE)

Other income consists of interest income earned on our cash balance and any
other non-operating income activity. Other expense consists of any non-operating
costs, including permanent impairments of reported investments.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

Net Sales. Our net sales were $618.8 million, with shipments of 1.9 million net
tons for the year ended December 31, 1999, as compared to net sales of $514.8
million, with shipments of 1.4 million net tons for the year ended December 31,
1998, an increase in net sales of $104.0 million, or 20%. These increases were
attributable in part to increased volumes of 453,000 net tons, or 32%, which
were offset by a decrease of approximately $32, or 9% in our average price per
ton, for the year ended December 31, 1999, as compared to the same period in
1998.

Approximately 19% and 21% of our net sales for 1999 and 1998, respectively, were
purchased by Heidtman Steel Products, Inc. (or affiliates).

Cost of Goods Sold. Cost of goods sold was $487.6 million for the year ended
December 31, 1999, as compared to $429.0 million for the year ended December 31,
1998, an increase of $58.6 million, or 14%. This increase was primarily
attributable to increased volumes. Steel scrap represented approximately 49% and
50% of our total cost of goods sold for the year ended December 31, 1999 and
1998, respectively. Our costs associated with steel scrap averaged $25 per ton
less during 1999 than during 1998; however, we began to experience rising scrap
prices during the fourth quarter of 1999. As a percentage of net sales, cost of
goods sold represented approximately 78% and 83% for the years ended December
31, 1999 and 1998, respectively, reflecting our constant focus on production
efficiencies and cost savings.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $42.4 million for the year ended December 31, 1999,
as compared to $20.6 million for the year ended December 31, 1998, an increase
of $21.8 million, or 106 %. This increase was partially attributable to an
increase in start-up costs related to our expansion projects. Start-up costs
related to our structural mill project, NMBS project and IDI were $19.0 million
for the year ended December 31, 1999, as compared to $5.8 million for the year
ended December 31, 1998, an increase of $13.2 million.

In March 1998, we entered into a ten-year Reciprocal License and Technology
Sharing Agreement with NSM. This agreement provided NSM with the right to use
our technology in exchange for shares and warrants of NSM valued at $15.5
million and reimbursement for our costs related to withholding taxes of
approximately $3.0 million. We deferred the income related to these agreements
to be recognized into income ratably over the ten-year term of the agreements.
Concurrently, we entered into a ten-year Management Advisory and Technical
Assistance Agreement to provide training and advice to a management company
under contract with NSM to manage NSM's mill. We were to receive $2.0 million
annually for this service. This fee was recorded as a reduction to selling,
general and administrative costs to offset our out-of-pocket expense incurred in
performing these services. Effective December 31, 1998, we terminated our
agreements with NSM, resulting in our recognition of the associated deferred
revenue. At the same time, we recorded an impairment loss due to a decrease in
the value of our NSM stock at December 31, 1998. The net effect of these
transactions was immaterial to our results of operations during 1998. Our
relationship with Nakornthai Strip Mill Public Co. Limited (NSM) also accounted
for a $5.2 million nonrecurring reduction of 1998 selling, general and
administrative expenses.

As a percentage of net sales, selling, general and administrative expenses
represented approximately 7% and 4% for the years ended December 31, 1999 and
1998, respectively.

Interest Expense. Interest expense was $22.2 million for the year ended December
31, 1999, as compared to $17.5 million for the year ended December 31, 1998, an
increase of $4.7 million, or 27%. This increase was the direct result of
increased borrowings utilized to finance our past expansion projects and was
partially offset by an increase in capitalized interest of $6.2 million, or 89%,
for the year ended December 31, 1999 as compared to the same period in 1998.

Other Income (Expense). For the year ended December 31, 1999, other income was
$818,000, as compared to $5.0 million for the year ended December 31, 1998, a
decrease of $4.2 million, or 84%. This decrease represented 1998 non-recurring
fees received by us in connection with NSM. We terminated our agreements with
NSM in December 1998.

39
<PAGE> 42

For the year ended December 31, 1999, other expense was $2.1 million, of which
$1.8 million represented the write off of our cost-basis investment in Qualitech
Steel Corporation (Qualitech). Qualitech filed a petition for relief under
Chapter 11 of the Bankruptcy Code on March 22, 1999. It is our belief that our
investment in Qualitech was permanently and fully impaired at June 30, 1999.

Federal Income Taxes. Our federal income tax provision was $25.8 million for the
year ended December 31, 1999, as compared to $20.9 million for the year ended
December 31, 1998. This tax provision reflects income tax expense at the
statutory income tax rate.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

Net Sales. Our net sales were $514.8 million, with shipments of 1.4 million net
tons for the year ended December 31, 1998, as compared to net sales of $420.1
million, with shipments of 1.2 million net tons for the year ended December 31,
1997, an increase in net sales of $94.7 million, or 23%. The increase in net
sales is attributable to increased volumes of 212,000 tons, or 18%, and an
increase in our average price per ton of $16, or 4%, for the year ended December
31, 1998 as compared to the same period in 1997.

Approximately 27% and 41% of our net sales for 1998 and 1997, respectively, were
purchased by Heidtman Steel Products, Inc. (or affiliates) and Salzgitter AG (or
affiliates).

Cost of Goods Sold. Cost of goods sold was $428.9 million for the year ended
December 31, 1998, as compared to $330.5 million for the year ended December 31,
1997, an increase of $98.4 million, or 30%. This increase was attributable to
increased volumes and an increase in steel scrap prices during the first three
quarters of 1998. Our costs associated with steel scrap increased almost $3 per
ton during the first three quarters of 1998, then decreased in the fourth
quarter.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $20.6 million for the year ended December 31, 1998,
as compared to $24.4 million for the year ended December 31, 1997, a decrease of
$3.8 million, or 16%. This decrease was partially attributable to a decrease in
start-up costs related to our expansion projects. Start-up costs related to our
cold mill project, caster project and IDI were $5.8 million for the year ended
December 31, 1998, as compared to $6.9 million for the year ended December 31,
1997, a decrease of $1.1 million. Our relationship with NSM also accounted for a
$5.2 million nonrecurring reduction of 1998 expense. As a percentage of net
sales, selling, general and administrative expenses represented approximately 4%
and 6% for the years ended December 31, 1998 and 1997, respectively.

Interest Expense. Interest expense was $17.5 million for the year ended December
31, 1998, as compared to $7.7 million for the year ended December 31, 1997, an
increase of $9.8 million, or 128%. This increase was the direct result of
increased borrowings utilized to finance our past expansion projects, in
conjunction with a $1.1 million decrease in related interest capitalization.

Other Income (Expense). Other income was $5.0 million for the year ended
December 31, 1998, as compared to $1.9 million for the year ended December 31,
1997, an increase of $3.1 million, or 161%. This increase was primarily the
result of $4.6 million in fees we received for nonrecurring services provided in
connection with the NSM agreements.

Federal Income Taxes. Our federal income tax provision was $20.9 million for the
year ended December 31, 1998, as compared to $7.8 million for the year ended
December 31, 1997, an increase of $13.1 million. The tax provision for 1998
reflected income tax expense at the maximum statutory income tax rates, whereas
the provision for 1997 reflects income tax expense at 13%, as a result of the
reduction in our deferred tax valuation allowance.

Extraordinary Loss. During 1997 we incurred an extraordinary loss of
approximately $7.6 million, net of tax benefit of approximately $5.1 million, in
connection with an amendment to our credit agreement, which we entered into on
June 30, 1994. Effective June 30, 1997, this agreement was amended to replace
our existing $345.0 million credit facility with a new $450.0 million facility.
The extraordinary loss consisted of prepayment penalties and the write off of
the capitalized financing costs associated with our originally negotiated credit
facility.

LIQUIDITY AND CAPITAL RESOURCES

Our business is capital intensive and requires substantial expenditures for,
among other things the purchase and maintenance of equipment used in our
steelmaking and finishing operations and to remain compliant with environmental
laws. Our short-term and long-term liquidity needs arise primarily from capital
expenditures, working capital requirements and principal and interest payments
related to our outstanding indebtedness. We have met these liquidity
requirements with cash provided by operations, equity, long-term borrowings,
state and local grants and capital cost reimbursements.

40
<PAGE> 43

For the year ended December 31, 1999, we received benefits from state and local
governments in the form of real estate and personal property tax abatements
resulting in a net income effect of approximately $3.5 million. Based on our
current abatements, we estimate the remaining annual effect on future
operations, net of income tax, to be approximately $3.3 million, $2.8 million,
$2.6 million, $2.3 million, $1.9 million, $953,000, $474,000, $358,000,
$137,000, for the years ended December 31, 2000 through 2008, respectively.

For the year ended December 31, 1999, cash provided by operating activities was
$114.8 million, as compared to cash used in operating activities of $51.1
million for the year ended December 31, 1998, an increase of $165.9 million.
Decreased inventory levels, which were the result of elevated 1998 raw material
levels, primarily drove this increase. Cash used in investing activities was
$126.3 million, of which $126.7 represented capital investments, for the year
ended December 31, 1999, as compared to $197.0 million, of which $194.1 million
represented capital investments, for the year ended December 31, 1998.
Approximately 64% of our capital investment costs incurred during 1999 were
utilized in site preparation and other pre-construction activities for the
structural mill. Cash provided by financing activities was $22.9 million for the
year ended December 31, 1999, as compared to $244.7 million for the year ended
December 31, 1998. This decrease in funds provided was the direct result of our
utilization of increased cash from operations in relation to our additional
borrowings.

At December 31, 1999, our amended credit agreement consisted of a $450.0 million
credit facility, comprised of a $250.0 million five-year revolving credit
facility (which is subject to a borrowing base), and two $100.0 million
five-year term loans amortizable in eight equal quarterly installments beginning
September 30, 2002.

During the first half of 1999, we received approval from our bank group to loan
an additional $25.0 million to IDI for costs related to both the facility's
completion and repairs and improvements resulting from the submerged arc furnace
breakout which occurred in May 1999. As of December 31, 1999, we had distributed
these approved funds to IDI in their entirety.

IDI has a credit agreement with a group of banks, consisting of a $65.0 million
credit facility, as last amended in the "Fifth Amendment and Waiver to Credit
Agreement" dated March 29, 2000, comprised of a $10.0 million, three-year
revolving credit facility, subject to a borrowing base, and a $55.0 million
eight-year senior term loan facility.

We have other various financing arrangements totaling $56.1 million at December
31, 1999, which are composed of state government municipal bond issues, electric
utility development loans and other equipment obligation loans.

We believe the liquidity of our existing cash and cash equivalents, cash from
operating activities and our available credit facilities will provide sufficient
funding for our working capital and capital expenditure requirements during
2000. However, we may, if we believe circumstances warrant, increase our
liquidity through the issuance of additional equity or debt to finance growth or
take advantage of other business opportunities.

We have not paid dividends on our common stock.

INFLATION

We believe that inflation has not had a material effect on our results of
operation.

ENVIRONMENTAL AND OTHER CONTINGENCIES

We have incurred, and in the future will continue to incur, capital expenditures
and operating expenses for matters relating to environmental control,
remediation, monitoring and compliance. We believe, apart from our dependence on
environmental construction and operating permits for our existing and proposed
manufacturing facilities, such as our planned structural and rail mill
project in Whitley County, Indiana, that compliance with current environmental
laws and regulations is not likely to have a material adverse effect on our
financial condition, results of operations or liquidity; however, environmental
laws and regulations have changed rapidly in recent years and we may become
subject to more stringent environmental laws and regulations in the future.

RECENT ACCOUNTING PRONOUNCEMENTS

Statement of Financial Standards No. 133 (SFAS No. 133), "Accounting for
Derivative Instruments and Hedging Activities," was originally issued in June
1998 and then was amended by SFAS No. 137 in June 1999. SFAS No. 137 deferred
the effective date of SFAS No. 133 to all fiscal quarters of all fiscal years
beginning after June 15, 2000. (See Note 1 in the Notes to the Consolidated
Financial Statements for further discussion).

41
<PAGE> 44

IMPACT OF YEAR 2000

We did not experience any material adverse issues or business interruptions
arising from the date change to January 1, 2000. During 1999, we completed the
process of preparing for Year 2000 issues. As a result of our efforts to date,
we have not incurred any material costs and do not expect to incur any future
material costs in addressing the Year 2000 issue related to either our products
or our business and process control systems, operating equipment with embedded
chips or software and third party interfaces.

We have devoted and will continue to devote the resources necessary to ensure
that all Year 2000 issues, if any should arise, are properly addressed. However,
there can be no assurance that all Year 2000 issues have been detected. Although
considered unlikely, unanticipated problems in our mission critical operating
systems, including problems associated with non-compliant third parties and
disruptions to our customers and suppliers could still occur despite efforts to
date.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISK

In the normal course of business our market risk is limited to changes in
interest rates. We utilize long-term debt as a primary source of capital. A
portion of our debt has an interest component that resets on a periodic basis to
reflect current market conditions. The following table represents the principal
cash repayments and related weighted average interest rates by maturity date for
our long-term debt as of December 31, 1999 (in millions):

<TABLE>
<CAPTION>
INTEREST RATE RISK
---------------------------------------------------------------------------------------
FIXED RATE VARIABLE RATE
--------------------------------------- ---------------------------------------
AVERAGE AVERAGE
Expected Maturity Date: PRINCIPAL RATE PRINCIPAL RATE
--------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
2000............... $ 5.2 7.6% $ 2.7 7.0%
2001............... 2.8 8.0 16.2 7.0
2002............... 3.0 8.0 58.3 7.0
2003............... 3.5 8.1 108.3 7.0
2004............... 3.8 8.2 247.9 7.0
Thereafter......... 37.8 8.2 16.5 7.0
------------ ------------
Total................... $ 56.1 $ 449.9
============ ============

Fair Value.............. $ 56.1 $ 449.9
============ ============
</TABLE>

We manage exposure to fluctuations in interest rates through the use of an
interest rate swap. We agree to exchange, at specific intervals, the difference
between fixed rate and floating rate interest amounts calculated on an agreed
upon notional amount. This interest differential paid or received is recognized
in the consolidated statements of operations as a component of interest expense.

At December 31, 1999, we had an interest rate swap agreement with a notional
amount of $100.0 million. We agreed to make fixed rate payments at 6.935%, for
which we will receive LIBOR payments. The maturity date of the interest rate
swap agreement is July 2, 2001. A counter party has the right to extend the
maturity date to July 2, 2004 at pre-determined interest rates. The fair value
of the interest rate swap agreement was estimated to be a liability of $2.0
million, which represents the amount we would have to pay to enter into an
equivalent agreement at December 31, 1999.

42
<PAGE> 45

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----

<S> <C>
Independent Auditors' Reports................................................ 44

Consolidated Balance Sheets as of December 31, 1999 and 1998................. 46

Consolidated Statements of Income for each of the
three years in the period ended December 31, 1999......................... 47

Consolidated Statements of Stockholders' Equity
for each of the three years in the period ended December 31, 1999......... 48

Consolidated Statements of Cash Flows for each of the
three years in the period ended December 31, 1999......................... 49

Notes to Consolidated Financial Statements................................... 50
</TABLE>

43
<PAGE> 46

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Steel Dynamics, Inc.

We have audited the consolidated balance sheet of Steel Dynamics, Inc. as of
December 31, 1999, and the related consolidated statements of income,
stockholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the 1999 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Steel Dynamics,
Inc. at December 31, 1999 and the consolidated results of its operations and its
cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States.

/S/ Ernst & Young LLP
Fort Wayne, Indiana
January 26, 2000,
except for Note 3, as to which the date is
March 29, 2000

44
<PAGE> 47

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Steel Dynamics, Inc.

We have audited the accompanying consolidated balance sheets of Steel Dynamics,
Inc. (the "Company") as of December 31, 1998, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the two
years in the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Steel Dynamics, Inc. as of December
31, 1998, and the results of their operations and their cash flows for each of
the two years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles.

/S/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Indianapolis, Indiana
February 1, 1999

45
<PAGE> 48
STEEL DYNAMICS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1999 1998
-------- --------
<S> <C> <C>
ASSETS

CURRENT ASSETS:

Cash and cash equivalents ........................................................... $ 16,615 $ 5,243
Accounts receivable, net of allowance for doubtful accounts of
$1,319 and $1,004 as of December 31, 1999 and 1998, respectively .............. 74,642 52,143
Accounts receivable-related parties ................................................. 12,007 13,812
Inventories ......................................................................... 106,742 126,706
Deferred income taxes ............................................................... 10,987 15,134
Other current assets ................................................................ 4,808 9,675
-------- --------
Total current assets .................................................... 225,801 222,713

PROPERTY, PLANT, AND EQUIPMENT, NET ....................................................... 742,787 655,872

RESTRICTED CASH ........................................................................... 6,696 12,857

OTHER ASSETS .............................................................................. 16,272 16,028
-------- --------

TOTAL ASSETS ............................................................ $991,556 $907,470
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable .................................................................... $ 19,622 $ 24,850
Accounts payable-related parties .................................................... 18,014 9,592
Accrued interest .................................................................... 4,941 3,267
Other accrued expenses .............................................................. 20,077 15,954
Current maturities of long-term debt ................................................ 7,921 6,933
-------- --------
Total current liabilities ............................................... 70,575 60,596

LONG-TERM DEBT, less current maturities ................................................... 498,042 477,013

DEFERRED INCOME TAXES ..................................................................... 29,774 18,796

MINORITY INTEREST ......................................................................... 1,795 -

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:

Class A common stock voting, $.01 par value; 100,000,000 shares
authorized; 49,265,078 and 49,158,279 shares issued and outstanding
as of December 31, 1999 and 1998, respectively ................................ 493 492
Treasury stock, at cost; 1,294,100 shares ........................................... (19,650) (19,650)
Additional paid-in capital .......................................................... 335,237 334,363
Retained earnings ................................................................... 75,290 35,860
-------- --------
Total stockholders' equity .............................................. 391,370 351,065
-------- --------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .............................. $991,556 $907,470
======== ========
</TABLE>

See notes to consolidated financial statements.

46
<PAGE> 49
STEEL DYNAMICS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------------------
1999 1998 1997
-------------- -------------- -------------
<S> <C> <C> <C>
Net sales:

Unrelated parties.................................. $ 498,723 $ 374,329 $ 246,465
Related parties.................................... 120,098 140,457 173,667
------------- ------------- -------------
Total net sales....................................... 618,821 514,786 420,132
Cost of goods sold....................................... 487,629 428,978 330,529
------------- ------------- -------------
Gross profit ....................................... 131,192 85,808 89,603
Selling, general and administrative expenses............. 42,441 20,637 24,449
------------- ------------- -------------
Operating income...................................... 88,751 65,171 65,154

Interest expense ....................................... (22,178) (17,538) (7,697)
Other income (expense)................................... (1,294) 4,993 1,914
------------- -------------- -------------
Income before income taxes and extraordinary loss..... 65,279 52,626 59,371
Income tax expense....................................... 25,849 20,942 7,813
------------- ------------- -------------
Income before extraordinary loss...................... 39,430 31,684 51,558
Extraordinary loss, net of $5,083 deferred tax benefit... - - (7,624)
------------- ------------- -------------
Net income............................................ $ 39,430 $ 31,684 $ 43,934
============= ============= =============

BASIC EARNINGS PER SHARE:

Income before extraordinary loss...................... $ 0.82 $ 0.65 $ 1.07
Extraordinary loss.................................... - - (0.16)
------------- ------------- -------------
Net income............................................ $ 0.82 $ 0.65 $ 0.91
============= ============= =============
Weighted average common shares outstanding............... 47,914 48,462 48,343
============= ============= =============

DILUTED EARNINGS PER SHARE:

Income before extraordinary loss...................... $ 0.82 $ 0.65 $ 1.06
Extraordinary loss.................................... - - (0.16)
------------- ------------- -------------
Net income............................................ $ 0.82 $ 0.65 $ 0.90
============= ============= =============
Weighted average common shares and
share equivalents outstanding...................... 48,153 48,868 48,843
============= ============= =============
</TABLE>

See notes to consolidated financial statements.

47
<PAGE> 50
STEEL DYNAMICS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED TREASURY
SHARES STOCK CAPITAL EARNINGS STOCK TOTAL
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1997 ............ 47,803 $ 478 $ 303,846 $ (39,758) $ - $ 264,566

Issuance of shares (net of expenses) and
exercise of stock options, including
related tax effect ................... 1,328 13 30,318 - - 30,331
Purchase of treasury stock ............. (75) - - - (1,236) (1,236)
Net income ............................. - - - 43,934 - 43,934
--------- --------- --------- --------- --------- ---------

BALANCES AT DECEMBER 31, 1997 .......... 49,056 491 334,164 4,176 (1,236) 337,595

Exercise of stock options, including
related tax effect ................... 27 1 199 - - 200
Purchase of treasury stock ............. (1,219) - - - (18,414) (18,414)
Net income ............................. - - - 31,684 - 31,684
--------- --------- --------- --------- --------- ---------

BALANCES AT DECEMBER 31, 1998 .......... 47,864 492 334,363 35,860 (19,650) 351,065

Exercise of stock options, including
related tax effect ................... 107 1 874 - - 875
Net income ............................. - - - 39,430 - 39,430
--------- --------- --------- --------- --------- ---------

BALANCES AT DECEMBER 31, 1999 .......... 47,971 $ 493 $ 335,237 $ 75,290 $ (19,650) $ 391,370
========= ========= ========= ========= ========= =========
</TABLE>

See notes to consolidated financial statements.

48
<PAGE> 51

STEEL DYNAMICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------
1999 1998 1997
--------- --------- ---------

OPERATING ACTIVITIES:

<S> <C> <C> <C>
Net income .......................................................... $ 39,430 $ 31,684 $ 43,934
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:

Depreciation and amortization ................................. 39,269 30,675 24,051
Loss on disposal of property, plant and equipment ............. 115 - -
Deferred income taxes ......................................... 15,125 9,989 (6,326)
Minority interest ............................................. 1,795 - -
Extraordinary loss ............................................ - - 11,019
Changes in certain assets and liabilities:

Accounts receivable ..................................... (20,694) (21,280) (12,215)
Inventories ............................................. 19,964 (66,543) 5,748
Other assets ............................................ 10,816 (18,863) (819)
Accounts payable ........................................ 3,194 (20,258) 13,513
Accrued expenses ........................................ 5,797 3,536 6,749
--------- --------- ---------
Net cash provided by (used in) operating activities 114,811 (51,060) 85,654
--------- --------- ---------

INVESTING ACTIVITIES:

Purchases of property, plant and equipment .......................... (126,673) (194,131) (175,193)
Proceeds from sale of property, plant and equipment ................. 374 - -
Other ............................................................... - (2,836) 36
--------- --------- ---------
Net cash used in investing activities ............. (126,299) (196,967) (175,157)
--------- --------- ---------

FINANCING ACTIVITIES:

Issuance of long-term debt .......................................... 40,042 270,045 17,079
Repayments of long-term debt ........................................ (18,025) (5,721) (5,030)
Purchase of treasury stock .......................................... - (18,414) (1,236)
Issuance of common stock (net of expenses) and proceeds
and tax benefits from exercise of stock options ................... 875 200 30,331
Debt issuance costs ................................................. (32) (1,458) (483)
--------- --------- ---------
Net cash provided by financing activities ......... 22,860 244,652 40,661
--------- --------- ---------

Increase (decrease) in cash and cash equivalents .......................... 11,372 (3,375) (48,842)
Cash and cash equivalents at beginning of year ............................ 5,243 8,618 57,460
--------- --------- ---------
Cash and cash equivalents at end of year .................................. $ 16,615 $ 5,243 $ 8,618
========= ========= =========
</TABLE>

See notes to consolidated financial statements.

49
<PAGE> 52

STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

Steel Dynamics, Inc. (SDI), together with its subsidiaries (the company) is a
domestic manufacturer of steel products with operations in the following
businesses.

Steel Operations. The company's core business operates a technologically
advanced flat rolled steel mini-mill in Butler, Indiana with an annual
production capacity of 2.2 million tons of high quality flat rolled carbon steel
products, including hot rolled, galvanized and cold rolled products. The company
distributes these products directly to end-users and through steel service
centers located primarily in the Midwestern United States. In addition to the
Butler facility, the company is constructing a structural and rail mill in
Whitley County, Indiana. The company plans to manufacture structural steel
beams, pilings and rails for the construction and railroad markets in this
facility.

Steel Scrap Substitute and Other Operations. The company's wholly owned
subsidiary, Iron Dynamics, Inc. (IDI), produces direct reduced iron, which is
then converted into liquid pig iron. Liquid pig iron is a high quality steel
scrap substitute used in the company's flat rolled steel mini-mill. During
preliminary start-up in 1999, it was determined that IDI would require design
modifications to attain its fully intended operating functionality. These
modifications are planned to occur during the second half of 2000, until which
time IDI will operate at limited production levels. Other steel processing
services related to the production of steel joists, trusses, girders, and roof
and floor decking will operate through the company's consolidated subsidiary,
New Millennium Building Systems, LLC (NMBS), which is currently under
construction and is expected to begin production in the first half of 2000.

SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation. The consolidated financial statements of the
company include the accounts of SDI and its subsidiaries after elimination of
the significant intercompany accounts and transactions. Minority interest
represents the minority shareholders' proportionate share in the equity or
income of NMBS.

Use of Estimates. The financial statements are prepared in conformity with
generally accepted accounting principles and, accordingly, include amounts that
are based on management's estimates and assumptions that affect the amounts
reported in the financial statements and in the notes thereto. Actual results
could differ from these estimates.

Revenue Recognition. Revenues from sales and allowances for estimated costs
associated with returns from these sales are recognized upon shipment.

Cash and Cash Equivalents. Cash and cash equivalents include all highly liquid
investments with a maturity of three months or less at the date of acquisition.
Restricted cash is held by trustees in debt service funds for the repayment of
principal and interest related to the company's municipal bonds and for use in
certain property, plant and equipment purchases related to the company's revenue
bonds.

Derivative Financial Instruments. The company has limited involvement with
derivative financial instruments and does not use them for trading purposes. In
an effort to manage the company's exposure to fluctuations in interest related
to certain debt facilities, the company employs an interest rate swap agreement.
The cost associated with the interest rate swap agreement is recognized as
interest expense over the term of the hedged obligation.

Inventories. Inventories are stated at lower of cost (principally standard cost
which approximates actual cost on a first-in, first-out basis) or market.
Inventory consisted of the following at December 31 (in thousands):

<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Raw materials............... $ 46,171 $ 78,351
Supplies.................... 39,981 26,849
Work in progress............ 3,754 7,449
Finished goods.............. 16,836 14,057
-------------- --------------
$ 106,742 $ 126,706
============== ==============
</TABLE>

50
<PAGE> 53

STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property, Plant and Equipment. Property, plant and equipment are stated at cost,
which includes capitalized interest on construction-in-progress and is reduced
by proceeds received from state and local government grants and other capital
cost reimbursements. Depreciation is provided utilizing the units-of-production
method for manufacturing plant and equipment and the straight-line method for
non-manufacturing equipment. The estimated useful lives of assets range from 12
to 30 years. Repairs and maintenance are expensed as incurred.

In accordance with the methodology described in FAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
the company reviews long-lived assets for impairment whenever events or changes
in circumstances indicate the carrying amount of such assets may not be
recoverable. Impairment losses are recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amounts. The impairment loss is measured by comparing the fair value of
the asset to its carrying amount.

Foreign Currency Transactions. Realized gains and losses from foreign currency
transactions incurred for the purchase of equipment denominated in a foreign
currency are recorded in results from operations.

Concentration of Credit Risk. Financial instruments that potentially subject the
company to significant concentrations of credit risk principally consist of
temporary cash investments and accounts receivable. The company places its
temporary cash investments with high credit quality financial institutions and
limits the amount of credit exposure from any one institution. Generally, the
company does not require collateral or other security to support customer
receivables.

Earnings Per Share. Diluted earnings per share amounts are based upon the
weighted average number of common and common equivalent shares outstanding
during the year. Common equivalent shares are excluded from the computation in
periods in which they have an anti-dilutive effect. The difference between basic
and diluted earnings per share, for the company, is solely attributable to stock
options. For the years ended December 31, 1999, 1998 and 1997, options to
purchase 767,000, 669,000 and 107,000 shares, respectively, were excluded from
diluted earnings per share because they were anti-dilutive.

Reclassifications. Certain reclassifications have been made to prior year
financial statements to conform to the 1999 presentation, including changes in
segment information. These reclassifications had no effect on net income as
previously reported.

New Accounting Pronouncements. Statement of Financial Standards No. 133 (SFAS
No. 133), "Accounting for Derivative Instrument and Hedging Activities," was
issued in June 1998 and then was amended by SFAS No. 137 in June 1999. SFAS No.
137 deferred the effective date of SFAS No. 133 to all fiscal quarters of all
fiscal years beginning after June 15, 2000. This statement establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial condition and measure those
instruments at fair value. If certain conditions are met, a derivative may be
specifically designated as a fair value hedge, a cash flow hedge, or a hedge of
foreign currency exposure. The accounting for changes in the fair value of a
derivative (that is, gains and losses) depends on the intended use of the
derivative and the resulting designation. Management has not yet quantified the
effect, if any, of the new standard on the financial statements.

NOTE 2. PROPERTY, PLANT AND EQUIPMENT

The company's property, plant and equipment at December 31, consisted of the
following (in thousands):

<TABLE>
<CAPTION>
1999 1998
------------- --------

<S> <C> <C>
Land and improvements.............................. $ 23,170 $ 17,999
Buildings and improvements......................... 70,219 57,661
Plant, machinery and equipment..................... 617,618 509,177
Construction in progress........................... 140,422 140,572
------------- -------------
851,429 725,409
Less accumulated depreciation...................... 108,642 69,537
------------- -------------
Property, plant, and equipment, net........ $ 742,787 $ 655,872
============= =============
</TABLE>

51
<PAGE> 54

STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3. DEBT

The company's borrowings at December 31, consist of the following (in
thousands):

<TABLE>
<CAPTION>
1999 1998
------------- --------------

<S> <C> <C>
SDI senior secured notes payable................................................... $ 386,890 $ 362,032
IDI senior secured notes payable................................................... 63,000 60,000
Municipal bond..................................................................... 18,600 19,500
Revenue bond....................................................................... 10,000 10,000
Electric utility, transmission facility and other equipment obligation loans....... 27,473 32,414
------------- --------------
Total debt................................................................. 505,963 483,946
Less current maturities............................................................ 7,921 6,933
------------- --------------
Long-term debt............................................................ $ 498,042 $ 477,013
============= ==============
</TABLE>

SDI Senior Secured Financing. The company has a $450.0 million bank credit
agreement (SDI bank credit facility) with a syndicate of financial institutions
and certain other lenders. The SDI bank credit facility is comprised of:

- a $250.0 million five-year revolving facility (subject to a borrowing
base), which will mature on June 30, 2002, subject to the company's option
to extend this maturity date to June 30, 2003, and then further to June
30, 2004, dependent upon certain leverage ratio restrictions.

- two $100.0 million five-year term loan facilities, each payable in eight
equal quarterly installments beginning September 30, 2002, with the final
installments due June 30, 2004.

Borrowings under the SDI bank credit facility bear interest at floating rates.
The weighted average interest rate was 7.0% and 7.3% for the year ended December
31, 1999 and 1998, respectively. The company entered into an interest rate swap
agreement with a notional amount of $100.0 million pursuant to which the company
has agreed to make fixed rate payments at 6.935% and will receive LIBOR
payments. The maturity date of the interest rate swap agreement is July 2, 2001.
The counterparty has the right to extend the maturity date to July 2, 2004 at
predetermined interest rates. The SDI bank credit facility is secured by liens
on substantially all of the company's assets (other than those permitted to be
excluded in order to secure the financing for IDI).

As a result of substantial modifications to the SDI credit agreement during
1997, the company incurred an extraordinary loss of approximately $7.6 million
(net of a tax benefit of approximately $5.1 million) related to prepayment
penalties and the accelerated amortization of the capitalized financing costs
associated with the originally negotiated credit facility.

IDI Senior Secured Financing. IDI has a $65.0 million bank credit agreement with
a syndicate of financial institutions and certain other lenders. This $65.0
million facility, as last amended in the "Fifth Amendment and Waiver to Credit
Agreement" dated March 29, 2000, is comprised of:

- a $10.0 million three-year revolving facility (subject to a borrowing
base), which matures on May 31, 2001, at which time IDI, subject to
meeting certain requirements, may convert the revolving credit facility to
a term loan, payable in 19 equal quarterly installments beginning May 30,
2001, with the final installment due November 30, 2005.

- a $55.0 million eight-year term loan facility, which is payable in
semi-annual installments beginning November 30, 2000, with the final
installment due November 30, 2005.

Borrowings under the IDI $65.0 million credit agreement bear interest at
floating rates. The weighted average interest rate was 7.3% for the years ended
December 31, 1999 and 1998. The IDI bank credit agreement is secured by liens on
substantially all of IDI's assets and is further supported by an off-take
agreement with SDI for all of IDI's direct reduced iron production, which
expires June 30, 2007.

52
<PAGE> 55

STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

State Government Municipal Bond Issues. In May 1995, the company entered into a
bond purchase agreement with the Indiana Development Finance Authority, under
which was issued $21.4 million of bonds to finance, among other things, the
acquisition, construction and equipment for certain sewage works, improvements,
waste and water system improvements and other related facilities located at the
Butler, Indiana mini-mill. The bonds bear interest at 8.01%, with payments of
principal and interest due monthly through final maturity in August 2015.
Approximately $3.0 million and $3.1 million, as of December 31, 1999 and 1998,
respectively, of the bond proceeds is held by the bond trustee in a debt service
reserve fund and is recorded as restricted cash. At December 31, 1999 and 1998,
a $22.0 million stand-by letter of credit relating to the municipal bonds was
outstanding.

In November 1998, the company received $10.0 million from Whitley County,
Indiana representing proceeds from solid waste and sewage disposal revenue bonds
to be used to finance certain solid waste and sewage disposal facilities located
at the planned Whitley County, Indiana structural and rail mill. The bonds bear
interest at 7.25%, with interest payable semi-annually and principal payments
commencing November 2003 through final maturity in November 2018. At December
31, 1999 and 1998, respectively, approximately $3.7 million and $9.8 million of
the bond proceeds are held by the bond trustee in a debt service reserve fund
and is recorded as restricted cash.

Electric Utility Development Loan. In June 1994, the company entered into a loan
agreement with Indiana Michigan Power Company for approximately $13.0 million to
finance the company's portion of the cost to construct a substation at the
Butler, Indiana facility. The loan bears interest at 8.0%, with equal monthly
principal and interest payments required in amounts sufficient to amortize the
substation facility loan over a period of 15 years. The outstanding principal
balance on the substation facility loan was $11.6 million and $12.2 million, as
of December 31, 1999 and 1998, respectively.

In addition, the company entered into another loan agreement with Indiana
Michigan Power Company for approximately $7.8 million to finance the company's
portion of the cost to construct a transmission line and certain related
facilities. The loan bears interest at 8.0%, with equal monthly principal and
interest payments required in amounts sufficient to amortize the transmission
facility loan over a period of 20 years. The outstanding principal balance on
the transmission facility loan was $7.1 million and $7.3 million as of December
31, 1999 and 1998, respectively.

During 1998, IDI entered into an agreement with American Electric Power
Financial Services to provide a $6.5 million eight-year loan. This electric
utility loan is secured by on-site power distribution and related equipment. The
related interest rate is tied to 90-day commercial paper rates with an option to
establish a fixed interest rate based on an average of the interest rates
applicable to one, three and five year U.S. Treasuries. The weighted average
interest rate was 7.8% and 7.1% for the years ended December 31, 1999 and 1998,
respectively. The outstanding principal balance on the on-site power
distribution facility was $6.2 million and $5.1 million as of December 31, 1999
and 1998, respectively.

The above credit agreements contain customary representations and warranties and
affirmative and negative covenants, including, among others, covenants relating
to financial and compliance reporting, capital expenditures, restricted dividend
payments, maintenance of certain financial ratios, incurrence of liens, sale or
disposition of assets and incurrence of other debt.

Maturities of outstanding debt as of December 31, 1999 are as follows (in
thousands):

<TABLE>
<CAPTION>
AMOUNT
------

<S> <C>
2000................................ $ 7,921
2001................................ 19,038
2002................................ 61,270
2003................................ 111,786
2004................................ 251,700
Thereafter.......................... 54,248
------------
$505,963
============
</TABLE>

The company capitalizes interest on construction-in-progress assets. For the
years ended December 31, 1999, 1998 and 1997, total interest costs incurred were
$35.4 million, $23.4 million and $15.8 million, respectively, of which $13.2
million, $7.0 million and $8.1 million, respectively, were capitalized. Cash
paid for interest was $33.7 million, $24.6 million and $13.8 million for the
years ended December 31, 1999, 1998 and 1997, respectively.

53
<PAGE> 56

STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4. INCOME TAXES

The company files a consolidated federal income tax return. Cash paid for taxes
was $12.6 million, $17.5 million and $8.7 million for the years ended December
31, 1999, 1998 and 1997, respectively. Included in cash paid for taxes for the
year ended December 31, 1998 was a $3.0 million foreign withholding tax payment,
which was substantially utilized as an alternative minimum tax foreign tax
credit on the company's federal income tax return for 1998. The current and
deferred federal and state income tax expense for the years ended December 31,
are as follows (in thousands):

<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Current income tax provision........... $ 12,201 $ 10,912 $ 8,675
Deferred income tax provision.......... 13,648 10,030 (862)
------------ ------------ ------------
Total income tax provision............. $ 25,849 $ 20,942 $ 7,813
============ ============ ============
</TABLE>

At December 31, 1996, recorded deferred tax assets were offset by a valuation
allowance of $15.8 million. Due to the company's profitability in 1997 and
future projected profitability, the company reversed this valuation allowance
resulting in a corresponding reduction in tax expense for 1997.

A reconciliation of the statutory tax rates to the actual effective tax rates
for the years ended December 31, are as follows:

<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------

<S> <C> <C> <C>
Statutory federal tax rate ..................... 35.0% 35.0% 35.0%
State income taxes, net of federal benefit 4.5 4.2 4.4
Other permanent differences .............. 0.1 0.6 0.3
Reversal of valuation allowance .......... - - (26.5)
------ ------ ------
Effective tax rate ............................. 39.6% 39.8% 13.2%
====== ====== ======
</TABLE>

Significant components of the company's deferred tax assets and liabilities at
December 31 are as follows (in thousands):

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
DEFERRED TAX ASSETS:

Net operating loss and credit carryforwards $ 13,075 $ 13,923
Alternative minimum tax carryforwards ..... 26,925 19,587
Capitalized start-up costs ................ 17,516 12,050
Tax assets expensed for books ............. 11,824 9,939
Investment valuation differences .......... 1,525 6,345
Other accrued expenses .................... 1,136 3,033
-------- --------
Total deferred tax assets ....................... 72,001 64,877
-------- --------

DEFERRED TAX LIABILITIES:

Depreciable assets ........................ (88,567) (66,619)
Amortization of fees ...................... (1,934) (1,741)
Other ..................................... (287) (179)
-------- --------
Total deferred tax liabilities .................. (90,788) (68,539)
-------- --------

Net deferred tax liability ...................... $(18,787) $ (3,662)
======== ========
</TABLE>

54
<PAGE> 57

STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The deferred tax assets and liabilities reflect the net tax effects of temporary
differences that are derived from the cumulative taxable or deductible amounts
recorded in the consolidated financial statements in years different from that
of the income tax returns. As of December 31, 1999, the company had available
net operating loss carryforwards of approximately $25.0 million for federal
income tax purposes, which expire in 2011. Also as of December 31, 1999, the
company had available foreign tax credit carryforwards of approximately $3.0
million for federal income tax purposes, which expire in 2003.

NOTE 5. COMMON STOCK

During 1997, the company raised approximately $29.6 million, net of expenses, in
a secondary public equity offering by issuing 1,255,971 shares at a net offering
price of $24 per share. The offering was consummated as a result of registration
rights that were exercised by original shareholders. Existing shareholders sold
7,144,029 shares and the over-allotment was exercised by the underwriting group,
which allowed existing shareholders to sell 369,000 additional shares.

In 1997, the board of directors also authorized the company to repurchase up to
5% of the company's common stock. At December 31, 1999, the company had acquired
1,294,100 shares of the company's common stock in open market purchases at an
average price per share of approximately $15, of which 1,219,100 shares were
purchased during 1998 and 75,000 shares were purchased during 1997. The
repurchased shares represent approximately 2.6% of the company's total issued
shares. No additional shares were repurchased during 1999.

NOTE 6. INCENTIVE STOCK OPTION PLANS

1994 and 1996 Incentive Stock Option Plans. The company has reserved 2,505,765
shares of Class A Common Stock for issuance upon exercise of options or grants
under the 1994 Incentive Stock Option Plan (1994 Plan) and the 1996 Incentive
Stock Option Plan (1996 Plan). The 1994 Plan was adopted for certain key
employees who are responsible for management of the company. Options granted
under the 1994 Plan vest two-thirds six months after the date of grant and
one-third five years after the date of grant, with a maximum term of ten years.
All the company's employees are eligible for the 1996 Plan, with the options
vesting 100% six months after the date of grant, with a maximum term of five
years. Both plans grant options to purchase the company's Class A Common Stock
at an exercise price of at least 100% of fair market value on the date of grant.

The company's combined stock option activity for the 1994 Plan and the 1996 Plan
is as follows:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
------- --------------
<S> <C> <C>
Balance outstanding at January 1, 1996............................................. 739,791 $ 5.95
Granted....................................................................... 490,838 20.99
Exercised..................................................................... (71,961) 4.29
Forfeited..................................................................... (2,441) 18.54

Balance outstanding at December 31, 1997........................................... 1,156,227 12.44
Granted....................................................................... 405,556 16.71
Exercised..................................................................... (27,006) 5.54
Forfeited..................................................................... (17,294) 15.73

Balance outstanding at December 31, 1998........................................... 1,517,483 13.66
Granted....................................................................... 426,258 15.51
Exercised..................................................................... (106,799) 5.32
Forfeited..................................................................... (97,060) 18.77

Balance outstanding at December 31, 1999........................................... 1,739,882 14.34
</TABLE>

55
<PAGE> 58

STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes certain information concerning the company's
outstanding options as of December 31, 1999:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
REMAINING
RANGE OF OUTSTANDING CONTRACTUAL LIFE WEIGHTED AVERAGE EXERCISABLE WEIGHTED AVERAGE
EXERCISE PRICE OPTIONS (YEARS) EXERCISE PRICE OPTIONS EXERCISE PRICE
--------------------- --------------- ------------------- ------------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
$3 to $10 380,321 5.3 $ 3.54 268,083 $ 3.48
$10 to $15 496,724 4.7 13.31 230,735 13.06
$15 to $20 500,035 4.4 18.03 456,070 17.97
$20 to $30 362,802 4.8 22.00 313,222 21.78
</TABLE>

Officer and Manger Cash and Stock Bonus Plan. Officers and managers of the
company are eligible to receive cash bonuses based on predetermined formulas
designated in the Officer and Manager Cash and Stock Bonus Plan. In the event
the cash portion of the bonus exceeds the predetermined maximum cash payout, the
excess bonus is distributed as common stock of the company. Any common stock
issued pursuant to this plan vests ratably over four years from the date of
distribution. A total of 450,000 shares have been reserved under this plan and
as of December 31, 1999, no shares have been issued.

The company has elected to follow Accounting Principles Board Opinion (APB) No.
25, "Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock options. Under APB No. 25, no compensation expense is
recognized for the plans because the exercise price of the company's employee
stock options equals the market price of the underlying stock on the date of
grant. However, SFAS No. 123, "Accounting for Stock-Based Compensation",
requires presentation of pro forma information as if the company had accounted
for its employee stock options granted subsequent to December 31, 1994, under
the fair value method. For purposes of pro forma disclosure, the estimated fair
value of the options is amortized to expense over the vesting period. Under the
fair value method, the company's net income and earnings per share would have
been as follows (in thousands):

<TABLE>
<CAPTION>
1999 1998 1997
------------ -------------- -----------
<S> <C> <C> <C>
Net income:

As reported................ $ 39,430 $ 31,684 $ 43,934
Pro forma.................. 37,712 29,391 41,080
Diluted earnings per share:

As reported............... $ . 82 $ . 65 $ . 90
Pro forma................. . 78 . 60 . 85
</TABLE>

The estimated weighted average fair value of the individual options granted
during 1999, 1998 and 1997 was $6.97, $6.93, and $6.94, respectively, on the
date of grant. The fair values at the date of grant were estimated using the
Black-Scholes option-pricing model with the following assumptions:
no-dividend-yield, risk-free interest rates from 5.5% to 7.1%, expected
volatility from 30% to 53% and expected lives from one and one-half to eight
years.

NOTE 7. COMMITMENTS AND CONTINGENCIES

The company has executed a raw material supply contract with OmniSource
Corporation (OmniSource) for the purchase of steel scrap resources (see Note 8).
Under the terms of the contract, OmniSource will locate and secure, at the
lowest then-available market price, steel scrap for the company in grades and
quantities sufficient for the company to meet substantially all of its
production requirements. The initial term of the contract is through October
2001. The company retains the right to acquire scrap from other sources if
certain business conditions are present.

The company has executed finished goods off-take contracts with Heidtman Steel
Products (Heidtman) and Preussag AG (Preussag) (see Note 8). Under the terms of
the contracts, the company retains the right to sell its hot-rolled coils in the
open market; however, the company is required to sell, and Heidtman and Preussag
are required to purchase, a minimum of 30,000 and 12,000 tons, respectively,
each month at the then-current market price the company is charging for similar
products. The company is required to provide Heidtman and Preussag with a volume
discount for all tons purchased each month in which Heidtman and Preussag
purchase the minimum tons from the company. The initial term of the contracts
for Heidtman and Preussag are through December 2001.

56
<PAGE> 59

STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The company purchases its electricity pursuant to a contract, which extends
through 2005. Under the contract the company is subject to a monthly minimum
charge. At December 31, 1999, the company's fixed and determinable purchase
obligations for electricity are $7.5 million annually through 2005.

IDI has executed long-term requirements based raw material supply and
transportation contracts for iron ore and coal. Purchases under the iron ore,
coal, rail transportation and vessel transportation contracts were $447,000,
$268,000, $232,000 and $213,000, respectively, during 1999 and $3.3 million, $.3
million, $.3 million and $1.4 million during 1998, respectively.

The company has outstanding construction-related commitments of $69.8 million at
December 31, 1999, related to the Structural Mill Project.

During March 1998, the company entered into a ten-year Reciprocal License and
Technology Sharing Agreement (the License Agreement) with Nakornthai Strip Mill
Public Co. Limited (NSM) to provide NSM with the right to use the company's
technology in exchange for equity ownership in NSM. Concurrently, the company
entered into a ten-year Management Advisory and Technical Assistance Agreement
(the Technical Assistance Agreement) in exchange for an annual management fee.
Effective December 31, 1998, the company terminated the License and Technical
Assistance Agreements in accordance with the company's termination rights under
the provisions of these agreements. During 1999, the company was named a
defendant, together with NSM's investment bankers and others, in eight separate
lawsuits in state or federal courts in California, New Jersey, Connecticut (a
duplicative filing), Minnesota, New York and Illinois, by various note-holders
who purchased some $240.0 million of high risk "junk bonds" issued by affiliates
of NSM in a privately placed non-registered offering by NSM and its investment
bankers pursuant to SEC Rule 144A. The plaintiffs generally seek reversionary
damages based upon their allegations of both common law and statutory securities
fraud and other related theories, but the company denies all liability to all
plaintiffs in each of these cases. The company was neither an issuer, guarantor,
underwriter or seller of any of the notes, nor did the company draft any of the
offering material or render any pre-offering reports, evaluations or opinions
regarding NSM's plans or operations. While the company believes that it has
ample legal and factual defenses to these claims and while it does not believe
that these lawsuits will have a material adverse effect on the company's
consolidated financial position or future operating results, there can be no
assurance as to the ultimate outcome with respect to such lawsuits.

NOTE 8. TRANSACTIONS WITH AFFILIATED COMPANIES

The company sells hot-rolled coils to Heidtman and affiliates of Preussag, and
purchases steel scrap resources from OmniSource. Heidtman and OmniSource are
stockholders of the company. Preussag was a stockholder of the company during
1997 and a portion of 1998. Transactions with these affiliated companies for the
years ended December 31 are as follows (in millions):

<TABLE>
<CAPTION>
1999 1998 1997
------------------------------------ ------------------------------------ ----------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE
AMOUNT OF TOTAL SALES AMOUNT OF TOTAL SALES AMOUNT OF TOTAL SALES
--------------- ------------------ --------------- ------------------ --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Sales:

Heidtman..........$ 120.1 19% $ 109.0 21% $ 131.9 31%
Preussag.......... - - 31.5 6 41.8 10
Accounts receivable:

Heidtman.......... 12.0 13.8 6.9
Preussag.......... - - 4.3
Purchases:

OmniSource........ 154.3 164.5 128.3
Accounts payable:
OmniSource........ 17.1 9.5 15.2
</TABLE>

NOTE 9. FINANCIAL INSTRUMENTS

The carrying amounts of financial instruments including cash and cash
equivalents, accounts receivable and accounts payable approximate fair, because
of the relatively short maturity of these instruments. The carrying value of
long-term debt, including the current portion, approximates fair value due to
interest being at variable rates. The fair value of the interest rate swap
agreement was estimated to be a liability of $2.0 million and an asset of $9.3
million at December 31, 1999 and 1998, respectively. The fair values are
estimated by the use of quoted market prices, estimates obtained from brokers,
and other appropriate valuation techniques based on references available.

57
<PAGE> 60

STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. RETIREMENT PLANS

The company sponsors a 401(k) retirement savings plan for eligible employees,
which is a "qualified plan" for federal income tax purposes. There are no
service requirements for employees to become eligible to participate in the
retirement savings plan. Generally, employees may elect to contribute up to 8%
of their eligible compensation on a pre-tax basis, and the company matches
employee contributions in an amount based on the company's return on assets,
with a minimum contribution of 5% and a maximum contribution of 50%, subject to
certain applicable tax law limitations. Employees are immediately 100% vested
with respect to their contributions and the company's matching contributions,
which were $132,000, $165,000 and $65,000 for the years ended December 31, 1999,
1998 and 1997, respectively.

The company also established a profit sharing plan for eligible employees, which
is a "qualified plan" for federal income tax purposes. Employees are eligible to
participant upon completion of thirty days of employment and are entitled to the
company's contribution allocation, if that person has worked at least 1,000
hours during the plan year. Each year, the company allocates an amount equal to
5% of the company's pre-tax profits to a profit sharing pool, which is used to
fund the profit sharing plan as well as a separate cash profit sharing bonus,
which is paid to employees in March of the following year. The allocation
between the profit sharing plan contribution and the cash bonus amount is
determined by the board of directors each year. The amount allocated to the
profit sharing plan is subject to a maximum legally established percentage of
compensation paid to participants. The company's total expense for the plan was
$3.5 million, $2.5 million and $3.1 million for the years ended December 31,
1999, 1998 and 1997, respectively.

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<PAGE> 61

NOTE 11. SEGMENT INFORMATION

The company has two operating segments: Steel Operations and Steel Scrap
Substitute Operations. Steel Operations include all revenues from the flat
rolled steel mini-mill facility, which produces and sells hot rolled, cold
rolled and galvanized sheet steel; and also includes all start-up costs
associated with the structural and rail mill, which will produce structural
steel and rail products. Steel Scrap Substitute Operations include revenues from
IDI, which will provide liquid pig iron to the company. In addition, Corporate
and Eliminations include certain unallocated corporate accounts, such as SDI
senior bank debt and certain other investments, which include the start-up
operations of NMBS. The company's operations are primarily organized and managed
by operating segment. The company evaluates performance and allocates resources
based on operating profit or loss before income taxes. The accounting policies
of the operating segments are consistent with those described in Note 1 to the
financial statements. Intersegment sales and transfers are accounted for at
standard prices and are eliminated in consolidation. Segment results for the
years ended December 31 are as follows (in thousands):

<TABLE>
<CAPTION>
1999 1998
----------------- ----------------
<S> <C> <C>
STEEL OPERATIONS

Net sales
External $ 618,821 $ 514,786
Other segments - -
Operating income 111,977 72,104
Depreciation and amortization 38,577 30,630
Assets 837,645 782,443
Liabilities 98,582 101,992
Capital expenditures 107,382 119,553
- --------------------------------------------------------------------------------------
STEEL SCRAP SUBSTITUTE OPERATIONS

Net sales
External $ - $ -
Other segments 1,171 -
Operating income (13,504) (4,327)
Depreciation and amortization 583 45
Assets 121,097 97,430
Liabilities 102,602 70,863
Capital expenditures 14,596 74,578
- --------------------------------------------------------------------------------------
CORPORATE AND ELIMINATIONS

Net sales
External $ - $ -
Other segments (1,171) -
Operating income (9,722) (2,606)
Depreciation and amortization 109 -
Assets 32,814 27,597
Liabilities 399,002 383,550
Capital expenditures 4,695 -
- --------------------------------------------------------------------------------------
CONSOLIDATED

Net sales
External $ 618,821 $ 514,786
Operating income 88,751 65,171
Depreciation and amortization 39,269 30,675
Assets 991,556 907,470
Liabilities 600,186 556,405
Capital expenditures 126,673 194,131
- --------------------------------------------------------------------------------------
</TABLE>

59
<PAGE> 62

STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During 1997, the company had only one reportable segment, Steel Operations. The
external net sales of the company's steel operations include sales to non-U.S.
companies of $8.5 million, $2.3 million and $25.1 million, for the years ended
December 31, 1999, 1998 and 1997, respectively.

NOTE 12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED, IN THOUSANDS)

<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1999:

Net sales ......... $117,453 $166,661 $158,724 $175,983
Gross profit ...... 18,381 38,862 34,024 39,925
Operating income .. 10,282 27,943 23,200 27,326
Net income ........ 2,970 12,140 10,518 13,802
Earnings per share
Basic ....... .06 .25 .22 .29
Diluted ..... .06 .25 .22 .29

1998:

Net sales ......... $118,462 $121,042 $140,958 $134,324
Gross profit ...... 14,979 19,201 26,066 25,562
Operating income .. 11,082 15,992 20,068 18,029
Net income ........ 7,597 7,492 8,498 8,097
Earnings per share:

Basic ....... .16 .15 .18 .17
Diluted ..... .15 .15 .18 .17
</TABLE>

Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share may not equal
the total for the year.

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<PAGE> 63

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

The appointment of Ernst & Young LLP, as independent auditors to conduct the
company's Annual Audit for the fiscal year ending December 31, 1999 was approved
by stockholders at our 1999 Annual Meeting.

The 1997 and 1998 Annual Audits were conducted by Deloitte & Touche LLP. On
April 19, 1999, however, Deloitte & Touche LLP was dismissed as the Company's
independent auditors for the 1999 Annual Audit, and the dismissal was approved
by the Audit Committee. The reports of Deloitte & Touche LLP for the past two
fiscal years did not contain any adverse opinion or any disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope, or accounting
principles. Furthermore, in connection with the audits of the Company" financial
statements for the two fiscal years ended December 31, 1997 and December 31,
1998 and during the interim period through April 19, 1999, there were no
disagreements with Deloitte & Touche LLP on any matter of accounting principles
or practices, financial statement disclosures, or auditing scope or procedure.
The Company did not at any time during the foregoing period prior to Ernst &
Young's engagement consult with that firm regarding the application of any
accounting principles to any specified transaction, the type of audit opinion
that might be rendered, or with respect to any matter that was either the
subject of a disagreement with the Company's prior auditors or that would
constitute a reportable event within the scope of Item 304(a) of SEC Regulation
S-K.

Reference is made hereby to Exhibit 16 attached to the company's Report on Form
8K/A, dated April 26, 1999, the same being a letter dated April 27, 1999 from
Deloitte & Touche LLP, addressed to the Commission, setting forth their
agreement with the manner in what we characterized the dismissal, as well as
acknowledging that the company had requested it to furnish the required letter.
Said Exhibit 16 is hereby incorporated by reference from such Form 8K/A into
this Report on Form 10-K.

ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required to be furnished pursuant to this item will be set forth
under the caption "Nominees (including all executive officers) for election of
Directors and alternate Directors" in the 1999 Proxy Statement, which will be
filed not later than 120 days after the end of our fiscal year with the
Securities and Exchange Commission, and is incorporated herein by reference.

ITEM 11: EXECUTIVE COMPENSATION

The information required to be furnished pursuant to this item will be set forth
under the caption "Executive Compensation" in the 1999 Proxy Statement, which
will be filed not later than 120 days after the end of our fiscal year with the
Securities and Exchange Commission, and is incorporated herein by reference.

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required to be furnished for this item will be provided under
the caption "Security Ownership" of certain beneficial owners and management in
the 1999 Proxy Statement, which will be filed not later than 120 days after the
end of our fiscal year with the Securities and Exchange Commission, and is
incorporated herein by reference.

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

For the years ended December 31, 1999, 1998 and 1997, we sold 402,000 tons,
333,000 tons and 378,000 tons, respectively, of our hot bands to Heidtman Steel
Products, Inc. (and its affiliated companies) for $120.1 million, $109.0 million
and $131.9 million, respectively. These sales were effected pursuant to a
six-year "off-take" agreement that expires in 2001. John Bates, a member of our
board of directors, is the President and Chief Executive Officer of Heidtman and
owns a controlling interest in Keylock Investments Limited, one of our
substantial stockholders. Under the "off-take" agreement, Heidtman is obligated
to buy, and we are obligated to sell to Heidtman, at least 30,000 tons of our
hot band products per month. Heidtman also has priority purchase rights to our
secondary and field claim material. Our pricing to Heidtman is determined by
reference to the lowest prices charged by other thin-slab mini-mills or
conventional mills for the same products, and we cannot charge Heidtman higher
prices than the lowest prices at which we offer our products to any other
customer. In 1995, we sold approximately 32 unimproved acres of our plant site
to Heidtman for $96,000, which was used by Heidtman for the construction of a
steel service center.

Pursuant to a scrap purchasing agreement with OmniSource Corporation, we
purchased an aggregate of 1.3 million tons, 1.2 million tons and 933,000 tons of
steel scrap in 1999, 1998 and 1997, respectively. OmniSource was paid $154.3
million, $164.5 million and $128.3 million in 1999, 1998 and 1997, respectively.
Leonard Rifkin is the Chairman of the Board of OmniSource and is a member of our
board of directors. OmniSource is also one of our substantial stockholders as of
December 31, 1999. Pursuant to the OmniSource scrap purchasing agreement,
OmniSource acts as the exclusive scrap purchasing agent for our scrap, which may
involve sales of OmniSource's own scrap, at the prevailing market prices which
OmniSource can get for the same product, or it

61
<PAGE> 64

may involve brokering of general market scrap, for which we pay whatever is the
lowest market price for which OmniSource can purchase that product. OmniSource
is paid a commission per gross ton of scrap received by us. In addition,
OmniSource maintains a scrap handling facility, with its own equipment and
staff, on our plant site. OmniSource does not pay rent for this facility.

Iron Dynamics has entered into a license agreement with Sumitomo Corporation of
America, pursuant to which Sumitomo is authorized, on an exclusive world-wide
basis, except for the U.S. and Canada, and except for additional plants that
Iron Dynamics may wish to construct for its own use or for our use, to
sublicense to others or to use certain proprietary know-how or other
intellectual property that constitutes Iron Dynamics' scrap substitute
manufacturing process and which may be developed by Iron Dynamics in connection
with the manufacture of direct reduced iron or liquid pig iron. Such license
rights provide that Sumitomo will build and construct plants for the production
of Direct reduced iron and liquid pig iron either for itself or for others
within the licensed territory, for which Iron Dynamics is entitled to receive a
one-time license fee from Sumitomo, based on each plant's rated production
capacity, plus a negotiated royalty fee for the use of any Iron Dynamics' or our
patents or certain know-how or processes that are not included within the
one-time fee license grant. Any underlying royalties or fees that might have to
be paid to third parties by Iron Dynamics or us would be passed through to
Sumitomo or to its sublicensees. Iron Dynamics has also agreed to afford
Sumitomo an opportunity to provide various raw materials and equipment supplies
to Iron Dynamics, on a competitive basis that is intended to secure for Iron
Dynamics the lowest and best prices for such supplies and products. As of
December 31, 1999, Sumitomo had not licensed or sublicensed any facilities. Iron
Dynamics has also agreed to sell to or through Sumitomo up to 50% of any Direct
reduced iron that Iron Dynamics may manufacture and which we do not retain for
our own consumption. Such sales would be at the then prevailing market prices,
either for Sumitomo's own account or on a sales commission basis for sales to
third parties. We also have a "second-look" export sales agreement with Sumitomo
and its parent, Sumitomo Corporation of Japan, under which it has certain rights
to handle export sales that we do not effect through another designated party.
As of December 31, 1999, we had not effected any export sales of any kind.
Sumitomo Corporation of America and Sumitomo Corporation was a substantial
stockholder as of December 31, 1999. Mr. Kazuhiro Atsushi, who is a Vice
President and General Manager of the Chicago Office and a Deputy General Manager
of the Rolled Steel & Ferrous Raw Materials Division of Sumitomo Corporation of
America, is a member of our board of directors.

We believe that all of the transactions described above are on terms no less
favorable to us than could be obtained from unaffiliated third parties.

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<PAGE> 65

SIGNATURES

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

March 24, 2000

STEEL DYNAMICS, INC.

By: /S/ KEITH E. BUSSE
-------------------------
KEITH E. BUSSE
PRESIDENT AND CHIEF EXECUTIVE OFFICER

POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints
Keith E. Busse and Tracy L. Shellabarger, either of whom may act without the
joinder of the other, as his true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him, and in his name, place
and stead, in any and all capacities to sign any and all amendments, and
supplements to this 1999 Annual Report on Form 10-K, filed pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended, and to file the
same, with all exhibits thereto, and all other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and performs each
and every act and thing requisite and necessary to be done, as full to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue thereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS 1999 ANNUAL REPORT ON FORM 10-K HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS ON BEHALF OF STEEL DYNAMICS, INC. AND IN THE CAPACITIES AND ON THE DATES
INDICATED.

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C>

/S/ KEITH E. BUSSE
- -------------------------------------------------
KEITH E. BUSSE President & Chief Executive Officer and Director
(Principal Executive Officer)

/S/ TRACY L. SHELLABARGER
- -------------------------------------------------
TRACY L. SHELLABARGER Vice President & Chief Financial Officer and Director
(Principal Financial and Accounting Officer)

/S/ MARK D. MILLETT
- -------------------------------------------------
MARK D. MILLETT Vice President

/S/ RICHARD P. TEETS, JR.
- -------------------------------------------------
RICHARD P. TEETS, JR. Vice President
</TABLE>

63
<PAGE> 66

<TABLE>
<S> <C>
/S/ LEONARD RIFKIN
- -------------------------------------------------
LEONARD RIFKIN Director

JOHN C. BATES Director
- -------------------------------------------------

JURGEN KOLB Director
- -------------------------------------------------

KAZUHIRO ATSUSHI Director
- -------------------------------------------------

/S/ JOSEPH RUFFOLO
- -------------------------------------------------
JOSEPH RUFFOLO Director
</TABLE>

64
<PAGE> 67

PART IV

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

(a.) The following documents are filed as part of this Report:
I. Financial Statements:

See the Audited Consolidated Financial Statements of Steel Dynamics
Inc. attached hereto and described in the Index on page 44 of this
Report.

II. Financial Statement Schedules:
None

III. Exhibits:

Exhibit No.

3.1a Amended and Restated Articles of Incorporation of Steel
Dynamics, Inc. Filed as Exhibit 3.1 to the Company's
Registration Statement on Form S-1, SEC File No. 333-12521,
effective November 21, 1996 ("1996 Form S-1") and incorporated
by reference herein.

3.1b Articles of Incorporation of Iron Dynamics, Inc. Filed as
Exhibit 3.1b to Registrant's 1996 Annual Report on Form 10-K,
SEC File No. 0-21719 ("1996 Form 10-K"), filed March 31, 1997,
and incorporated by reference herein.

3.2a Bylaws of Steel Dynamics, Inc. Filed as Exhibit 3.2 to the
Company's 1996 Form S-1 and incorporated by reference herein.

3.2b Bylaws of Iron Dynamics, Inc. Filed as Exhibit 3.1b to
Registrant's 1996 Annual Report on Form 10-K, SEC File No.
0-21719 ("1996 Form 10-K"), filed March 31, 1997, and
incorporated by reference herein.

*10.1a(1) Amended and Restated Credit Agreement between Steel Dynamics,
Inc. and Mellon Bank, N.A., et al. dated May 4, 1998.

10.1b Credit Agreement between IDI and Mellon Bank, N.A., et al.,
dated December 31, 1997. Filed as Exhibit 10.1b to
Registrant's 1997 Annual Report on Form 10-K, SEC File No.
0-21719 ("1997 Form 10-K") filed March 25, 1998, and
incorporated by reference herein.

10.1b(1) Amended and Restated Credit Agreement between IDI and Mellon
Bank, N.A., et al; dated June 10, 1998. Filed as Exhibit
10.1b(1) to Registrant's March 31, 1999 Form 10-Q, SEC file
No. 0-21719 ("March 1999 Form 10-Q") filed May 7, 1999, and
incorporated by reference herein.

10.1b(2) Second Amended and Restated Credit Agreement between IDI and
Mellon Bank, N.A., et al; dated March 15, 1999. Filed as
Exhibit 10.1b(2) to Registrant's March 31, 1999 Form 10-Q, SEC
file No. 0-21719 ("March 1999 Form 10-Q") filed May 7, 1999,
and incorporated by reference herein.

10.1b(3) Third Amendment and Waiver to Credit Agreement between IDI and
Mellon Bank, N.A., et al; dated June 30, 1999. Filed as
Exhibit 10.1b(3) to Registrant's June 30, 1999 Form 10-Q, SEC
file No. 0-21719 ("June 1999 Form 10-Q") filed August 10,
1999, and incorporated by reference herein.

*10.1b(4) Fourth Amendment and Restated Credit Agreement between IDI
and Mellon Bank, N.A., et al; dated December 21, 1999.

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<PAGE> 68

*10.1b(5) Fifth Amendment and Restated Credit Agreement between IDI and
Mellon Bank, N.A., et al; dated March 29, 2000.

10.2 Loan Agreement between Indiana Development Finance Authority
and Steel Dynamics, Inc. re Taxable Economic Development
Revenue bonds, Trust Indenture between Indiana Development
Finance Authority and NBD Bank, N.A., as Trustee re Loan
Agreement between Indiana Development Finance Authority and
Steel Dynamics, Inc. Filed as the identically numbered exhibit
to the Company's 1996 Form S-1 and incorporated by reference
herein.

10.3 Contract for electric Service between Steel Dynamics, Inc. and
American Electric Power Company Filed as the identically
numbered exhibit to the Company's 1996 Form S-1 and
incorporated by reference herein.

10.4 Industrial Gases Supply Agreement between Steel Dynamics, Inc.
and Air Products and Chemicals, Inc. dated August 5, 1994
Filed as the identically numbered exhibit to the Company's
1996 Form S-1 and incorporated by reference herein.

10.5 Interruptible Gas Supply Contract between Steel Dynamics, Inc.
and Northern Indiana Trading Co. dated February 27, 1995 Filed
as the identically numbered exhibit to the Company's 1996 Form
S-1 and incorporated by reference herein.

10.6 Gas Services Agreement between Steel Dynamics, Inc. and
Northern Indiana Fuel & Light Company, Inc. dated April 3,
1995 Filed as the identically numbered exhibit to the
Company's 1996 Form S-1 and incorporated by reference herein.

10.7 Gas Services Agreement between Steel Dynamics, Inc. and
Northern Indiana Trading Co. dated April 3, 1995 Filed as the
identically numbered exhibit to the Company's 1996 Form S-1
and incorporated by reference herein.

10.8 Gas Services Agreement between Steel Dynamics, Inc. and
Crossroads Pipeline Company dated April 3, 1995 Filed as the
identically numbered exhibit to the Company's 1996 Form S-1
and incorporated by reference herein.

10.9 Panhandle Eastern Pipeline Agreement dated July 22, 1996 Filed
as the identically numbered exhibit to the Company's 1996 Form
S-1 and incorporated by reference herein.

10.10 Natural Gas Purchase Agreement between Steel Dynamics, Inc.
and PanEnergy Trading and Market Services, Inc. dated August
8, 1996 Filed as the identically numbered exhibit to the
Company's 1996 Form S-1 and incorporated by reference herein.

10.11 Agreement for Wastewater Services between the City of Butler,
Indiana and Steel Dynamics, Inc. dated September 5, 1995 Filed
as the identically numbered exhibit to the Company's 1996 Form
S-1 and incorporated by reference herein.

10.12 Slag Processing Agreement between Steel Dynamics, Inc. and
Butler Mill Service Company dated February 3, 1995

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<PAGE> 69

Filed as the identically numbered exhibit to the Company's
1996 Form S-1 and incorporated by reference herein.

10.13 Agreement to provide Scrap Purchasing Services between Steel
Dynamics, Inc. and OmniSource Corporation dated October 29,
1993
Filed as the identically numbered exhibit to the Company's
1996 Form S-1 and incorporated by reference herein.

10.14 Purchasing Agreement between Steel Dynamics, Inc. and Heidtman
Steel Products, Inc. dated October 29, 1993
Filed as the identically numbered exhibit to the Company's
1996 Form S-1 and incorporated by reference herein.

10.15 Iron Carbide Off Take Agreement between Steel Dynamics, Inc.
and Qualitech Steel Corporation dated June 29, 1996 Filed as
the identically numbered exhibit to the Company's 1996 Form
S-1 and incorporated by reference herein.

10.16 Purchasing, Domestic Sales and Export Distribution Agreement
between Steel Dynamics, Inc. and Preussag AG dated December
14, 1995
Filed as the identically numbered exhibit to the Company's
1996 Form S-1 and incorporated by reference herein.

10.17 Reciprocal Patent and Technical Information Transfer and
License Agreement between Steel Dynamics, Inc. and Preussag AG
dated December 14, 1995
Filed as the identically numbered exhibit to the Company's
1996 Form S-1 and incorporated by reference herein.

10.18 1994 Incentive Stock Option Agreement, as needed
Filed as the identically numbered exhibit to the Company's
1996 Form S-1 and incorporated by reference herein.

10.19 1996 Incentive Stock Option Agreement
Filed as the identically numbered exhibit to the Company's
1996 Form S-1 and incorporated by reference herein.

10.20 Employment Agreement between Steel Dynamics, Inc. and Keith
Busse
Filed as the identically numbered exhibit to the Company's
1996 Form S-1 and incorporated by reference herein.

10.21 Employment Agreement between Steel Dynamics, Inc. and Mark D.
Millett
Filed as the identically numbered exhibit to the Company's
1996 Form S-1 and incorporated by reference herein.

10.22 Employment Agreement between Steel Dynamics, Inc. and Richard
P. Teets, Jr.
Filed as the identically numbered exhibit to the Company's
1996 Form S-1 and incorporated by reference herein.

10.23 1996 Officer and Manager Cash and Stock Bonus Plan
Filed as the identically numbered exhibit to the Company's
1996 Form S-1 and incorporated by reference herein.

10.24 Employment Agreement between Steel Dynamics, Inc. and Tracy L.
Shellabarger Tracy L. Shellabarger Promissory Note and Stock
Pledge Agreement
Filed as the identically numbered exhibit to the Company's
1996 Form S-1 and incorporated by reference herein.

10.25 "Second Look" Export Distribution Agreement between Steel
Dynamics, Inc. and Sumitomo Corporation of America
Filed as the identically numbered exhibit to the Company's
1996 Form S-1 and incorporated by reference herein.

67
<PAGE> 70

10.26 Sale of Excess Product Agreement between Iron Dynamics, Inc.
and Sumitomo Corporation of America
Filed as the identically numbered exhibit to the Company's
1996 Form S-1 and incorporated by reference herein.

10.38 Employment Agreement between Iron Dynamics, Inc. and Larry
Lehtinen.
Filed as Exhibit 10.38 to the Registrant's 1996 Form 10-K
and incorporated by reference herein.

10.39 License Agreement between Iron Dynamics, Inc. and Sumitomo
Corporation and Sumitomo Corporation dated June 5, 1997.
Filed as Exhibit 10.39 to Registrant's 1997 Form S-1 and
incorporated by reference herein.

*21.1 List of Registrants' Subsidiaries

*23.1 Consent of Ernst & Young LLP

*23.1a Consent of Deloitte & Touche LLP

*24.1 Power of Attorney (included in Signature pages)

*27.1 Financial Data Schedule

*99.1 Risk Factors That May Affect Future Operations

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

* Filed herewith

<PAGE> 1
EXHIBIT 10.1a(1)

FIRST AMENDMENT TO CREDIT AGREEMENT

THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as
of May 4, 1998, by and among STEEL DYNAMICS, INC., an Indiana corporation
(the "Borrower"), the lenders listed on the signature pages hereof and
MELLON BANK, N.A., a national banking association, as agent for the Lenders
under the Credit Agreement (Amended and Restated) referred to below (the
"Agent").

RECITALS:

WHEREAS the Borrower, certain lenders, the Agent, Mellon Bank, N.A.,
as Issuing Bank, and certain Co-Agents entered into a Credit Agreement
(Amended and Restated), dated as of June 30, 1994 and amended and restated
as of June 30, 1997 (as so amended and restated, the "Original Agreement"),
pursuant to which the Lenders have extended credit to the Borrower;

WHEREAS, the Borrower and the Lenders (as defined in the Original
Agreement) desire to amend the Original Agreement to make certain changes
therein;

WHEREAS, capitalized terms not otherwise defined herein shall have
the meanings assigned thereto in the Original Agreement.

NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally
bound hereby agree as follows:

Section 1. Amendments. (a) Section 6.03 of the Original Agreement
is hereby amended by deleting the word "and" appearing at the end of
paragraph (g) thereof, by replacing the period at the end of paragraph (h)
thereof with "; and", and by adding at the end thereof, as a new paragraph
(i), the following:

(i) Indebtedness of IDI (x) pursuant to, or otherwise
permitted under Section 6.03 of, the Credit Agreement, dated as
of December 31, 1997, among IDI, the Lenders party thereto and
Mellon Bank, N. A., as agent, as the same may be amended or
modified from time to time, (y) pursuant to lending
arrangements with General Electric Capital Corporation or
another lender arranged by American Electric Power Company in

<PAGE> 2

a principal amount not exceeding $6,500,000 and (z) to the Borrower
in a principal amount not exceeding $75,000,000.

(b) Section 6.05(g) of the Original Agreement is hereby amended to
read in its entirety as follows:

(g) An equity investment in IDI in an aggregate amount
of $30,000,000, to be made prior to the funding of indebtedness
of IDI pursuant to its Credit Agreement referred to in Section
6.03(i) and additional investments in IDI, not to exceed
$75,000,0000 in the aggregate, which may be either equity
investments or loans (which loans may be subordinated to other
Indebtedness of IDI) and which shall include any extraordinary
legal costs paid by SDI for the benefit of IDI under the
Administration Agreement between SDI and IDI.

(c) Section 6.10 of the Original Agreement is here amended by
deleting the word "and" at the end of paragraph (b) thereof, by replacing
the period at the end of paragraph (c) thereof with "; and" and by adding
at the end thereof a new paragraph (d) to read as follows:

(d) The Borrower may transfer to IDI a tract of real
property, constituting a portion not exceeding approximately
seventy-five acres of the Borrower's premises in Butler,
Indiana, together with easements, rights of way and other
property rights over the remainder of such premises, which the
Borrower deems appropriate for the construction and operation
of IDI's iron making facilities.

(d) Section 6.12(c) of the Original Agreement is hereby amended to
read in its entirety as follows:

(c) The Borrower may enter into with IDI, and perform,
the Tax Sharing Agreement dated as of December 31, 1996, the
Administration Agreement dated on or about May 4, 1998 and the
Offtake Agreement dated on or about May 4, 1998 and, so long as
IDI is a wholly-owned Subsidiary of the Borrower, the Borrower
may enter into such other transactions (not prohibited by other
provisions of this Agreement) with, or for the benefit of, IDI
as the Borrower deems necessary or desirable for the interests
of the Borrower; and

-2-
<PAGE> 3

(e) Section 6.15 of the Original Agreement is hereby amended by
replacing the period at the end of paragraph (b) thereof with "; and" and
by adding at the end thereof a new paragraph (c) to read as follows:

(c) Restrictions applicable to IDI pursuant to IDI's
Credit Agreement referred to in Section 6.03(i) hereof or
pursuant to documentation governing the Indebtedness of IDI
referred to in clause (y) or Section 6.03(i) hereof.

Section 2. Consents and Directions to Agent. By execution of this
First Amendment, the Lenders hereby (i) consent to the release from the
Mortgage of the real property and interests therein to be transferred by
the Borrower to IDI as contemplated by the amendment made by Section 1(c)
of this First Amendment (it being understood that easements and other
rights in real property being retained by the Borrower will remain subject
to the Mortgage); (ii) consent to the release of the IDI Guaranty and the
IDI Security Agreement; and (iii) authorize and direct the Agent to execute
and deliver the releases referred to in the foregoing clauses (i) and
(ii).

Section 3. Miscellaneous. (a) This First Amendment shall become
effective upon execution and delivery hereof by all of the Lenders, the
Borrower and the Agent.

(b) The Original Agreement, as amended by this Amendment, is in all
respects ratified, approved and confirmed and shall, as so amended, remain
in full force and effect. From and after the date hereof, all references
to the "Agreement" in the Original Agreement and in the other Loan
Documents shall be deemed to be references to the Original Agreement as
amended by this Amendment.

(c) This Amendment shall be deemed to be a contract under the laws
of the State of New York and for all purposes shall be governed by and
construed and enforced in accordance with the laws of said State.

(d) This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which,
when so executed, shall be deemed an original, but all such counterparts
shall constitute but one and the same instrument.

-3-
<PAGE> 4

IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed and delivered this Amendment as of the date
first above written.

STEEL DYNAMICS, INC.

By /s/ Tracy L. Shellabarger
----------------------------
Title:

MELLON BANK, N.A., as Lender
and as Agent

By /s/
----------------------------
Title:

KREDITANSTALT FUR WIEDERAUFBAU

By /s/
----------------------------
Title:

BANQUE NATIONALE DE PARIS

By /s/
----------------------------
Title:

COMERICA BANK

By /s/
----------------------------
Title:

-4-
<PAGE> 5

NBD BANK, N.A.

By /s/
----------------------------
Title:

THE INDUSTRIAL BANK OF JAPAN,
LIMITED

By /s/
----------------------------
Title:

BANK AUSTRIA AKTIENGESELLSCHAFT

By /s/
----------------------------
Title:

THE CHASE MANHATTAN BANK

By /s/
----------------------------
Title:

HARRIS TRUST AND SAVINGS BANK

By /s/
----------------------------
Title:

-5-
<PAGE> 6

NATIONAL CITY BANK, INDIANA

By /s/
----------------------------
Title:

WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH

By /s/
----------------------------
Title:

SUNTRUST BANK, CENTRAL FLORIDA, N.A.

By /s/
----------------------------
Title:

NORTHERN TRUST COMPANY

By /s/
----------------------------
Title:

FORT WAYNE NATIONAL BANK

By /s/
----------------------------
Title:

-6-
<PAGE> 7

ENRON CAPITAL & TRADE RESOURCES
CORP.

By /s/
----------------------------
Title:

FIRST UNION NATIONAL BANK

By /s/
----------------------------
Title:

THE HUNTINGTON NATIONAL BANK

By /s/
----------------------------
Title:

-7-

<PAGE> 1
EXHIBIT 10.1b(4)

FOURTH AMENDMENT TO CREDIT AGREEMENT

THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Agreement"),
dated as of December 21, 1999, by and among IRON DYNAMICS, INC., an Indiana
corporation (the "Borrower"), the lenders listed on the signature pages
hereof and MELLON BANK, N.A., a national banking association, as agent for
the Lenders under the Credit Agreement referred to below (the "Agent").

RECITALS:

WHEREAS the Borrower, certain lenders, the Agent and Mellon
Bank, N.A., as Issuing Bank, entered into a Credit Agreement, dated as of
December 31, 1997, as amended by the Amendment and Waiver, dated as of June
10, 1998 and by the Second Amendment to Credit Agreement, dated as of March
15, 1999, and the Third Amendment and Waiver to Credit Agreement, dated as
of June 30, 1999 (as so amended, the "Credit Agreement"), pursuant to which
the Lenders have extended credit to the Borrower;

WHEREAS, the Borrower has requested the Lenders to effect
certain amendments and waivers to the Credit Agreement and the Required
Lenders are willing to do so to the extent provided herein;

WHEREAS, capitalized terms not otherwise defined herein shall
have the meanings assigned thereto in the Credit Agreement.

NOW, THEREFORE, the parties hereto, in consideration of their
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby agree as follows:

Section 1. Amendment to Section 6.03(h) of the Credit
Agreement. Section 6.03(h) of the Credit Agreement is hereby amended by
changing the words "Unsecured Indebtedness of the Borrower to SDI in an
aggregate principal amount not exceeding $25,000,000 at any time
outstanding" to read "Unsecured Indebtedness of the Borrower to SDI in an
aggregate principal amount not exceeding $55,000,000 at any time
outstanding".

Section 2. Directions to Agent. The Required Lenders hereby
direct the Agent to execute and deliver this Agreement.

<PAGE> 2

Section 3. Miscellaneous. (a) This Agreement shall become
effective, as of its date, upon (i) the execution and delivery hereof by
the Required Lenders, the Borrower and the Agent and (ii) the delivery to
the Agent of a fully executed copy of an SDI Subordination Agreement in the
form of Exhibit GG to the Credit Agreement (or an amendment to the existing
SDI Subordination Agreement in such form) covering the full amount of the
$55 million referred to in Section 1 above, to which there has been
attached a copy of a Subordinated Promissory Note in the principal amount
of $55 million delivered by IDI to SDI in the form of Exhibit FF attached
to the Third Amendment to the Credit Agreement.

(b) The Credit Agreement, as amended or modified by this
Agreement, is in all respects ratified, approved and confirmed and shall,
as so amended and modified, remain in full force and effect. From and
after the date hereof, all references to the "Agreement" in the Credit
Agreement and in the other Loan Documents shall be deemed to be references
to the Credit Agreement as amended and modified by this Agreement.

(c) This Agreement shall be deemed to be a contract under the
laws of the State of New York and for all purposes shall be governed by and
construed and enforced in accordance with the laws of said State.

(d) This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts,
each of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto, by their

-2-
<PAGE> 3

officers thereunto duly authorized, have executed and delivered
this Agreement as of the date first above written.

IRON DYNAMICS, INC.

By /s/ Tracy L. Shellabarger
----------------------------
Title:

MELLON BANK, N.A., as Lender,
as Issuing Bank and as Agent

By /s/
----------------------------
Title:

KREDITANSTALT FUR WIEDERAUFBAU

By /s/
----------------------------
Title:

COMERICA BANK

By /s/
----------------------------
Title:

NATIONAL CITY BANK, INDIANA

By /s/
----------------------------
Title:

-3-
<PAGE> 4

NATIONAL CITY BANK, INDIANA, f/n/a
FORT WAYNE NATIONAL BANK

By /s/
----------------------------
Title:

LASALLE BANK NATIONAL
ASSOCIATION

By /s/
----------------------------
Title:

-4-

<PAGE> 5

[BARRETT & MCNAGNY LETTERHEAD]

March 29, 2000

VIA EDGAR

Securities & Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549

RE: Steel Dynamics, Inc.
Annual Report on Form 10-K
(Securities Exchange Act of 1934 - Commission file #0-21719)

Gentlemen/Ladies:

Transmitting herewith via EDGAR is the Form 10-K Annual Report of Steel
Dynamics, Inc. If there are any questions please contact the undersigned at
219-423-8905.

Sincerely,

Barrett & McNagny

/S/ ROBERT S. WALTERS

Robert S. Walters

<PAGE> 1
Exhibit 10.1 (b) 5

FIFTH AMENDMENT AND WAIVER TO CREDIT AGREEMENT

THIS FIFTH AMENDMENT AND WAIVER TO CREDIT AGREEMENT (this
"Agreement"), dated as of March 29, 2000, by and among IRON DYNAMICS, INC., an
Indiana corporation (the "Borrower"), the lenders listed on the signature pages
hereof and MELLON BANK, N.A., a national banking association, as agent for the
Lenders under the Credit Agreement referred to below (the "Agent").

RECITALS:

WHEREAS the Borrower, certain lenders, the Agent and Mellon Bank,
N.A., as Issuing Bank, entered into a Credit Agreement, dated as of December
31, 1997, as amended by the Amendment and Waiver, dated as of June 10, 1998, by
the Second Amendment to Credit Agreement, dated as of March 15, 1999, the Third
Amendment and Waiver to Credit Agreement, dated as of June 30, 1999 and the
Fourth Amendment to Credit Agreement, dated as of December 21, 1999 (as so
amended, the "Credit Agreement"), pursuant to which the Lenders have agreed to
extend credit to the Borrower;

WHEREAS, the Borrower has requested the Lenders to effect certain
amendments and waivers to the Credit Agreement and the Required Lenders are
willing to do so to the extent provided herein;

WHEREAS, capitalized terms not otherwise defined herein shall have the
meanings assigned thereto in the Credit Agreement.

NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally
bound hereby agree as follows:

Section 1. Amendments to Credit Agreement.

(a) Definitions. Section 1.01 of the Credit Agreement is hereby
amended by amending the definitions of "Financial Covenant Date" and "Revolving
Credit Maturity Date" appearing therein to read, in each case in its entirety,
as follows:

"Financial Covenant Date" shall mean the earlier of (a) the last day
of the first fiscal quarter after the Final Acceptance Date and (b)
June 30, 2001.

<PAGE> 2

"Revolving Credit Maturity Date" shall mean May 1, 2001.

and by amending the definition of "Project" by adding thereto, prior to the
words "and related improvements" appearing therein, the following:

"and the related hot briquetted iron facility consisting of at least
two briquetters yielding an aggregate of approximately 70 metric tons
per hour of sustained production of hot briquetted iron of a quality
acceptable for use to feed SDI's furnaces"

(b) Preliminary Acceptance Date. For the purpose of extending the
deadline for achieving the Preliminary Acceptance Date, the date "March 31,
2000" appearing in each of the following Sections of the Credit Agreement is
hereby changed to "March 31, 2001":

Section 3.26, titled "Project Compliance With Laws; Permits"

Section 5.01(j)(viii), titled "Notice of Certain Events"

Section 5.14, titled "Construction of the Project"

Section 6.19, titled "Change Orders"

Section 7.01(q) and 7.01(v), titled "Events of Default"

(c) Applicability of Borrowing Base. For the purpose of determining
the first date on which the Borrowing Base requirement will be applicable, the
words "Following the date that is 90 days after the Preliminary Acceptance
Date" appearing in Section 2.01(a) of the Credit Agreement are hereby amended
to read "Following the Preliminary Acceptance Date".

(d) Final Acceptance Date. For the purpose of extending the deadline
for achieving the Final Acceptance Date, the date "December 31, 2000" appearing
in each of the following Sections of the Credit Agreement is hereby changed to
"September 30, 2001":

Section 5.01(j)(viii), titled "Notice of Certain Events"

Section 5.14, titled "Construction of the Project"

-2-

<PAGE> 3

Section 6.19, titled "Change Orders"

Section 7.01(q) and 7.01(v), titled "Events of Default"

(e) Construction Progress Reports. Section 5.01(o) of the Credit
Agreement is hereby amended by adding at the end thereof the following:

"The furnishing of such reports shall continue from the date of the
Fifth Amendment to this Agreement until the Final Acceptance Date,
including with respect to the addition of briquetters to the Project,
any modification of the submerged arc furnace and any other related or
appropriate items."

(f) Additional Project Information. Section 5.01 of the Credit
Agreement is hereby amended by adding at the end thereof a new Section 5.01(q)
to read as follows:

"(q) Additional Project Information. The Borrower shall promptly
furnish to the Agent, on a weekly basis (or such other basis as the
Agent shall approve), such engineering, financial and other
information, and in such form, as the Agent or the Required Lenders
shall reasonably request from time to time, including but not limited
to advance notice of significant engineering decisions and changes and
weekly production reports (including volumes and compositions) for pig
iron, direct reduced iron and briquettes.

(g) Tangible Net Worth. Section 6.01(a) of the Credit Agreement is
hereby amended by adding at the end thereof the following:

"For purposes of this Section 6.01(a), Tangible Net Worth shall be
calculated by treating the amount of Indebtedness of the Borrower to
SDI outstanding in accordance with Section 6.03(h) hereof as equity of
the Borrower and not a liability of the Borrower."

(h) Negative EBITDA. Section 6.01(c) of the Credit Agreement is hereby
amended to read in its entirety as follows:

"(c) Negative EBITDA. During the period from January 1, 1998 through
the Financial Covenant Date cumulative negative EBITDA of the Borrower
at the end of any fiscal quarter shall not exceed $35,000,000."

-3-

<PAGE> 4

(i) Indebtedness of the Borrower to SDI. Section 6.03(h) of the Credit
Agreement is hereby amended by adding at the end thereof the following:

"Any other provision hereof or of the SDI Subordination Agreement or
of the SDI Loan Documentation referred to therein to the contrary not
withstanding, no payment of interest on the principal amount of such
Indebtedness owing to SDI under this Section 6.03(h) shall be paid
prior to the later of (x) October 1, 2000 and (y) the first date
following the date on which the Borrower shall have achieved positive
EBITDA for each of three consecutive months."

Section 2. Amendments Related to IDI Mergers.

(a) Definitions. Section 1.01 of the Credit Agreement is hereby
amended by adding thereto in the proper alphabetical order the following
definitions:

"SDI Investment Company" shall mean a passive investment company
formed or to be formed as a wholly-owned subsidiary of SDI to which
SDI proposes to transfer all of its intellectual property.

"SDI Organizational Restructuring" shall mean the completion, on a
substantially contemporaneous basis and pursuant to documentation in
form and substance satisfactory to the Agent, of each of the following
transactions:

(a) SDI will cause the formation of two Indiana corporations,
each of which will be a wholly-owned Subsidiary of SDI, one of
which ("SDILP") will be named Steel Dynamics LP, Inc. or some
other corporate name chosen by SDI and the other of which
("SDIGP") will be named Steel Dynamics GP, Inc. or some other
corporate name chosen by SDI;

(b) All of the properties, assets (except intellectual
property, the stock of SDI Investment Company and a certain amount
of cash) and operations of SDI (the "SDI Operating Assets") will
be transferred to SDILP in exchange for 100% of the issued and
outstanding shares of SDILP and the assumption by SDILP of all the
liabilities of SDI. SDI will contribute to SOTGP all of its cash
not transferred to SDILP

-4-

<PAGE> 5

in exchange for all of the issued and
outstanding shares of SDIGP;

(c) SDIGP and SDILP will then form Steel Dynamics, LP, an
Indiana limited partnership (the "Partnership"), with SDILP
contributing the SDI Operating Assets (subject to SDI's
liabilities, which will be assumed by the Partnership) in exchange
for a 99% limited partnership interest, and SDIGP contributing its
cash for a 1% general partnership interest, in the Partnership.
All the employees of SDI immediately prior to the consummation of
the Organizational Restructuring will become employees of the
Partnership upon such consummation;

(d) SDI will also form a new Delaware subsidiary corporation,
into which Iron Dynamics, Inc. will be merged, with the survivor
being a wholly-owned Delaware subsidiary of SDI. Immediately
following such merger, such Delaware subsidiary will be merged
into a newly formed Delaware limited liability company ("Iron
Dynamics, LLC"), which will be wholly-owned by the Partnership.

"IDI Mergers" shall mean the completion, in connection with the SDI
Organizational Restructuring, on a substantially contemporaneous basis
and pursuant to documentation in form and substance satisfactory to
the Agent of each of the following transactions:

(a) SDI will also form a new Delaware subsidiary corporation,
into which Iron Dynamics, Inc. will be merged, with the survivor
being a wholly-owned Delaware subsidiary of SDI.

(b) Immediately following such merger, such Delaware
subsidiary will be merged into a newly formed Delaware limited
liability company ("Iron Dynamics, LLC"), which will be
wholly-owned by the Partnership with the result that Iron
Dynamics, LLC, as successor by merger to Iron Dynamics, Inc.,
will be the Borrower under this Agreement.

(b) Ownership and Control of Borrower. On the date of the
effectiveness of the IDI Mergers, Schedule 3.15 to the

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<PAGE> 6

Credit Agreement shall be amended and restated and replaced by Schedule 3.15
attached to this Agreement and made a part hereof.

(c) Preservation of Corporate Status. Section 5.04 of the Credit
Agreement is hereby amended by adding at the beginning thereof the words
"Except for the IDI Mergers,".

(d) Consolidated Tax Return. Section 5.11 of the Credit Agreement is
hereby amended and restated in its entirety to read as follows:

"5.11. Consolidated Tax Return. The Borrower shall not, and shall
not permit any other Loan Party to, file or consent to the filing of
any consolidated income tax return with any Person other than a Loan
party, SDI, the currently existing subsidiaries of SDI (which are New
Millennium Building Systems, LLC and SDI Investment Company) and the
other subsidiaries of SDI to be formed in connection with the SDI
Organizational Restructuring."

(e) Mergers, Acquisitions, etc. Section 6.09 of the Credit Agreement
is hereby amended by adding at the beginning thereof the words "Except for the
IDI Mergers,".

(f) Dealings With Affiliates. Section 6.12 of the Credit Agreement is
hereby amended by adding at the end thereof a new Section 6.12(e) to read as
follows:

"(e) The IDI Mergers."

(g) Identity of Borrower. Upon the effectiveness of the IDI Mergers,
the Borrower under the Credit Agreement shall become and be Iron Dynamics, LLC
and all references to "Borrower" in the Credit Agreement, the Notes and the
other Loan Documents shall mean Iron Dynamics, LLC.

SECTION 2. WAIVER WITH RESPECT TO EBITDA. The Required Lenders hereby
waive (a) any requirement of Section 6.01(c) of the Credit Agreement with
respect to the cumulative negative EBITDA of the Borrower at the end of the
fiscal quarter ended December 31, 1999, and (b) any Event of Default and any
Potential Default which may have arisen pursuant to Section 7.01(d) of the
Credit Agreement as a result of the failure of the Borrower to comply with such
requirement of Section 6.01(c) at the end of such fiscal quarter in the absence
of the foregoing waiver.

SECTION 4. REPRESENTATIONS AND WARRANTIES. The Borrower has furnished
to the Agent and each Lender a detailed

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<PAGE> 7

work schedule for Completion of the Project, including the briquetters,
modifications to the submerged arc furnace and other capital expenditures, and
projections demonstrating the projected financial condition and results of
operations of the borrower (giving effect to such work schedule) for the period
commencing on January 1, 2000 and ending on December 31, 2002, which
projections are accompanied by a written statement of the assumptions and
estimates underlying such projections. Such projections were prepared on the
basis of such assumptions and estimates. Such projections, assumptions and
estimates and such work schedule, as of the date of preparation thereof and as
of the date of this Agreement, are reasonable, are made in good faith,
represent the Borrower's best judgment as to such matters on the date thereof
and do not contain assumptions or methods of calculation which are inconsistent
with the requirements of the Loan Documents as amended by this Agreement.
Nothing contained in this Section constitutes a representation or warranty that
such future financial performance or results of operations will in fact be
achieved.

SECTION 5. DIRECTIONS TO AGENT. The Required Lenders hereby direct the
Agent to execute and deliver this Agreement and each document and instrument
referred to in Section 6 hereof to which the signature of the Agent is
necessary or appropriate.

SECTION 6. EFFECTIVENESS. (a) The terms of this Agreement other than
the terms of Section 2 hereof shall become effective, as of the date of this
Agreement, upon the execution and delivery hereof by the Borrower, the Agent,
each Revolving Credit Lender and such additional Lenders as shall, together
with the Revolving Credit Lenders, constitute the Required Lenders.

(b) The terms of Section 2 of this Agreement shall become effective
upon the first date on which each of the following conditions shall have been
satisfied:

(i) Each of the conditions set forth in Section 6(a) hereof shall
have been satisfied;

(ii) The Agent shall have received, together with copies for each
Lender, an omnibus amendment to the Credit Agreement, the Security
Documents and such other Loan Documents as the Agent shall request,
duly executed and delivered by Iron Dynamics, LLC, whereby Iron
Dynamics, LLC confirms that it is the Borrower under the Credit
Agreement, the Notes and the other Loan Documents, assumes all
obligations, liabilities and duties of the Borrower thereunder,
confirms the Liens thereunder and agrees to be bound thereby;

-7-

<PAGE> 8

(iii) The Agent shall have received replacement Notes duly
executed by and naming Iron Dynamics, LLC as payor thereunder;

(iv) The Agent shall have received such additional financing
statements and/or amendments to financing statements with respect to
the Collateral and naming Iron Dynamics, LLC, as Debtor, as the Agent
shall request;

(v) The Agent shall have received an amendment, in recordable
form, to the lease with respect to the Project Site whereby Steel
Dynamics, LP becomes the lessor thereunder and Iron Dynamics, LLC
confirms that it is the lessee thereunder and each agrees to be bound
thereby;

(vi) The Agent shall have received an amendment, in recordable
form, to the Mortgage with respect to the Project Site whereby Iron
Dynamics, LLC confirms that it is the Mortgagor thereunder, assumes
all obligations, liabilities and duties of the mortgagor thereunder,
confirms the Liens thereunder and agrees to be bound thereby;

(vii) The Agent shall have received a copy of an agreement
whereby SDI and Steel Dynamics, LP each agrees and confirms that all
obligations, liabilities and duties of SDI to the Borrower immediately
prior to the SDI Organizational Restructuring, pursuant to all
agreements and documents between SDI and the Borrower immediately
prior to the SDI Organizational Restructuring, shall survive and
continue as joint and several obligations, liabilities and duties of
SDI and Steel Dynamics, LP to and for the benefit of Iron Dynamics,
LLC;

(viii) The Agent shall have received the agreement in writing of
each of SDI, Steel Dynamics, LP and Iron Dynamics, LLC to, at any time
and from time to time whether before or after the SDI Organizational
Restructuring, upon request of the Agent, duly execute and deliver any
and all such further documents, agreements and instruments and take
any and all such further actions as the Agent may reasonably request
in order to obtain for the Agent and the Lenders the full benefit of
the terms of this Section 5 and the rights, powers and remedies
conveyed under or pursuant to this Section 6;

-8-

<PAGE> 9

(ix) Each of the documents, agreements and instruments referred
to in this Section 6(b) shall be in form and substance satisfactory to
the Agent.

SECTION 7. MISCELLANEOUS. (a) The Credit Agreement, as amended or
modified by this Agreement, is in all respects ratified, approved and confirmed
and shall, as so amended and modified, remain in full force and effect. From
and after the date hereof, all references to the "Agreement" in the Credit
Agreement and in the other Loan Documents shall be deemed to be references to
the Credit Agreement as amended and modified by this Agreement.

(b) This Agreement shall be deemed to be a contract under the laws of
the State of New York and for all purposes shall be governed by and construed
and enforced in accordance with the laws of said State.

(c) This Agreement may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which, when
so executed, shall be deemed an original, but all such counterparts shall
constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed and delivered this Agreement as of the date
first above written.

IRON DYNAMICS, INC.

By /s/ Tracy L Shellabarger
--------------------------------
Title:

MELLON BANK, N.A., as Lender,
as Issuing Bank and as Agent

By /s/
--------------------------------
Title:

-9-

<PAGE> 10

KREDITANSTALT FUR WIEDERAUFBAU

By
--------------------------------
Title:

COMERICA BANK

By
--------------------------------
Title:

NATIONAL CITY BANK, INDIANA

By /s/
--------------------------------
Title:

LASALLE BANK NATIONAL ASSOCIATION

By
--------------------------------
Title:

-10-

<PAGE> 1

EXHIBIT 21.1

List of Registrant's Subsidiaries

Iron Dynamics, Inc.

<PAGE> 1

EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-19541) pertaining to the 1996 Incentive Stock Option Plan, of our
report dated January 26, 2000 (except for Note 3, as to which the date is March
29, 2000), with respect to the consolidated financial statements of Steel
Dynamics, Inc. included in the Annual Report (Form 10-K) for the year ended
December 31, 1999.

/S/ Ernst & Young LLP
Fort Wayne, Indiana
March 29, 2000

<PAGE> 1

EXHIBIT 23.1A

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statement No.
333-19541 of Steel Dynamics, Inc. and subsidiary on Form S-8 of our report dated
February 1, 1999, appearing in the Annual Report on Form 10-K of Steel Dynamics,
Inc. for the year ended December 31, 1999.

/S/ Deloitte & Touche LLP
Indianapolis, Indiana
March 29, 2000

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLILDATED BALANCE SHEET OF STEEL DYNAMICS, INC. AT DECEMBER 31, 1999 AND THE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRELY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 16,614,585
<SECURITIES> 0
<RECEIVABLES> 86,649,357
<ALLOWANCES> 1,319,382
<INVENTORY> 106,742,403
<CURRENT-ASSETS> 225,800,624
<PP&E> 742,787,196
<DEPRECIATION> 108,642,168
<TOTAL-ASSETS> 991,555,737
<CURRENT-LIABILITIES> 70,574,533
<BONDS> 498,042,157
0
0
<COMMON> 492,651
<OTHER-SE> 390,877,893
<TOTAL-LIABILITY-AND-EQUITY> 991,555,737
<SALES> 618,821,483
<TOTAL-REVENUES> 618,821,483
<CGS> 487,629,327
<TOTAL-COSTS> 530,069,827
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 314,995
<INTEREST-EXPENSE> 22,177,808
<INCOME-PRETAX> 65,279,709
<INCOME-TAX> 25,849,634
<INCOME-CONTINUING> 39,430,075
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,430,075
<EPS-BASIC> .82
<EPS-DILUTED> .82

</TABLE>

<PAGE> 1
EXHIBIT 99.1

RISK FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

In our reports filed time to time with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, in registration statements and other
filings under the Securities Act of 1933, or in press releases and in oral
statements made to the market by our officers or representatives, there may be
various forward-looking statements, within the meaning of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995. Such
statements are predictive statements or statements that express opinions,
expectations or projections regarding future events or anticipated future
results. Such forward-looking statements, however, are not guarantees of future
performance and involve risks and uncertainties. Our actual results, performance
or achievements could differ materially from the results anticipated or
expressed by such forward-looking statements. The following enumerates some, but
not necessarily all of the factors that may cause actual results to differ from
those predicted:

FACTORS RELATING TO OUR COMPANY

OPERATING AND START-UP RISKS ASSOCIATED WITH OUR SCRAP SUBSTITUTE AND STRUCTURAL
MILL PROJECTS COULD IMPEDE OR PREVENT US FROM REALIZING THE ANTICIPATED BENEFITS
FROM THESE PROJECTS

Our scrap substitute project is the first of its kind, involves processes that
are based on various technical assumptions and new applications of technologies
and has not yet been commercially proven. We only began producing direct reduced
iron and converting it into liquid pig iron in our Iron Dynamics facility in
August 1999. Since that time, we have encountered various problems, including
equipment failures and design deficiencies, which have required time and
additional expense to fix, and we are operating in a reduced mode pending
certain additional repairs later this year. As a result, we cannot provide any
assurance that our proprietary technology will work or that our Iron Dynamics
facility will be able to produce the direct reduced iron and liquid pig iron in
the quantities and at the favorable cost levels that we have anticipated. If we
are unable to do so, we will have to obtain direct reduced iron, liquid pig iron
or other scrap substitutes and/or additional scrap from alternate sources, and
we cannot be assured that we will be able to access such sources or obtain such
materials in the appropriate quantities or at a favorable cost, if at all. Other
companies with resources greater than ours have tried and failed to develop a
workable and cost effective scrap substitute, and those technologies that are
operational throughout the world today are not the ones we are employing in our
Iron Dynamics facility. In addition, because of equipment failure and related
structural damage suffered in our Iron Dynamics facility during its initial
stage of production, we incurred significant costs due to the consequential
shutdown of and related repair expenditures to this facility. We have no
assurance that as our Iron Dynamics facility commences production on a
commercial basis we will not experience additional material shutdowns or
equipment failures or that any such shutdown or failure would not have a
material adverse effect on our business, financial condition or results of
operations.

<PAGE> 2

WE HAVE SUBSTANTIAL DEBT AND DEBT SERVICE REQUIREMENTS AND THIS MAY ADVERSELY
AFFECT OUR FINANCIAL AND OPERATING FLEXIBILITY

Subject to the limitations contained in our credit agreements, we may incur
additional indebtedness and, subject to lender approval, we may be able to make
further borrowings at the subsidiary level.

The amount of our indebtedness could have important consequences. For example,
it could:

- make it more difficult for us to perform our obligations with respect to
payments on our secured bank indebtedness;

- increase our vulnerability and limit our ability to react to general adverse
economic and industry conditions;

- place us at a competitive disadvantage compared to some of our competitors
that have less debt; and

- limit our ability to borrow additional funds.

WE FACE LITIGATION RISKS IN CONNECTION WITH OUR TERMINATED THAILAND ADVISORY
TRANSACTION

<PAGE> 3

We deny any liability in connection with these cases, believe we have ample
legal and factual defenses, and will defend ourselves in each such case to the
limit of our ability.

For additional details regarding these cases, as well as the identity of each of
the cases, see Item 3, "Legal Proceedings" of this Form 10-K.

OUR DEBT AGREEMENTS CONTAIN OPERATING AND FINANCIAL RESTRICTIONS AND THESE MAY
ADVERSELY AFFECT OUR FINANCIAL FLEXIBILITY

- incur additional indebtedness;

- pay dividends or make distributions with respect to our capital stock;

- repurchase or redeem capital stock;

- make investments;

- create liens and enter into sale and leaseback transactions;

- make capital expenditures;

- enter into transactions with affiliates or related persons;

- issue or sell stock of certain subsidiaries;

- sell or transfer assets; and

- participate in joint ventures, acquisitions or mergers.

<PAGE> 4

WE RELY UPON A SMALL NUMBER OF MAJOR CUSTOMERS FOR A SUBSTANTIAL PERCENTAGE OF
OUR SALES AND OUR MAIN CUSTOMER IS A RELATED PARTY

UNEXPECTED EQUIPMENT FAILURES MAY LEAD TO PRODUCTION CURTAILMENTS OR SHUTDOWNS

Our manufacturing processes are dependent upon critical pieces of steelmaking
equipment, such as our furnaces, continuous casters and rolling equipment, as
well as electrical equipment, which on occasion may be out of service due to
routine scheduled maintenance or as the result of unanticipated equipment
failures. We have experienced and may in the future experience material plant
shutdowns in connection with equipment failures. For example, our Iron Dynamics
subsidiary suffered a "breakout" in its submerged arc furnace in [May 1999],
and, although not our fault, caused delays and expense that have been
frustrating and costly. Similarly, in August 1999, our cold mill suffered a
catastrophic motor failure, again not our fault but costly in time and lost
production, even though our motor vendor promptly repaired the motors and we
were able to recoup some of our loss through insurance. Such interruptions in
our production capabilities will inevitably adversely affect our results of
operations.

WE COULD EXPERIENCE SYSTEM FAILURES AND SERVICE DISRUPTIONS AS A RESULT OF THE
YEAR 2000 PROBLEM

The year 2000 problem results from the fact that computer programs,
microprocessors and embedded date reliant systems use two digits rather than
four to define the applicable year. Some of these systems and processors may
interpret "00" incorrectly as the year 1900 instead of the year 2000. The
failure of any of these systems to appropriately interpret the upcoming calendar
year 2000 could result in major systems failures or miscalculations. We are
highly dependent upon our own, our vendors' and customers' computer software
programs and operating systems. If our efforts to address the Year 2000
compliance issues prior to year_end 1999, or our current efforts to continue to
address these issues are not successful, or if our suppliers, customers and
service providers have not fully addressed these issues, our business, results
of operations and financial condition could be materially adversely affected.

<PAGE> 5

WE RELY ON OUR KEY PERSONNEL AND WE MAY BE UNABLE TO REPLACE KEY EXECUTIVES IF
THEY LEAVE

Our operations and prospects depend in large part on the performance of our
senior management team, including Keith E. Busse, President and Chief Executive
Officer, Mark D. Millett, Vice President and General Manager of our Flat Roll
Division, Richard P. Teets, Jr., Vice President and General Manager of our
Structural Division, Tracy L. Shellabarger, Vice President and Chief Financial
Officer, and Larry Lehtinen, Vice President and General Manager of Iron
Dynamics. Although these senior managers all have employment agreements with and
are stockholders of Steel Dynamics, we cannot be assured that such individuals
will remain with us as employees. In addition, we cannot be assured that we
would be able to find qualified replacements for any of these individuals if
their services were no longer available. The loss of the services of one or more
members of our senior management team or our inability to attract, retain and
maintain additional senior management personnel could have a material adverse
effect on our business, financial condition and results of operations.

WE MAY FACE RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS, JOINT VENTURES OR
STRATEGIC ALLIANCES

- the difficulty of assimilating the acquired operations and personnel;

- the potential disruption of our ongoing business;

- the diversion of resources;

- the possible inability of management to maintain uniform standards,
controls, procedures and policies;

- the possible difficulty of managing our growth and information systems;

- the risk of entering markets in which we have little experience;

- the inability to work efficiently with joint venture or strategic alliance
partners; and

- the difficulties of terminating joint ventures or strategic alliances.

WE MAY MAKE SIGNIFICANT ADDITIONAL CAPITAL EXPENDITURES

<PAGE> 6

FACTORS RELATING TO THE STEEL INDUSTRY

THE STEEL INDUSTRY IS CYCLICAL, SUBJECT TO PERIODIC MARKET FLUCTUATIONS AND
DEPENDENT UPON OTHER INDUSTRIES

INTENSE COMPETITION IN THE STEEL INDUSTRY MAY CONTINUE TO EXERT DOWNWARD
PRESSURE ON OUR PRICING

<PAGE> 7

WE CANNOT CONTROL THE COST OF SCRAP AND OTHER RAW MATERIALS

ENVIRONMENTAL REGULATION IMPOSES SUBSTANTIAL COSTS AND LIMITATIONS ON OUR
OPERATIONS

UNPREDICTABLE MARKET CONDITIONS MAY LEAD TO UNCERTAIN FINANCIAL RESULTS