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<TITLE>10-Q</TITLE>
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<H1 ALIGN=CENTER><FONT SIZE=3>UNITED STATES<BR>SECURITIES AND EXCHANGE COMMISSION</FONT></H1>
<H1 ALIGN=CENTER><FONT SIZE=3>Washington, D.C. 20549</FONT></H1>
<H1 ALIGN=CENTER><FONT SIZE=3>FORM 10-Q</FONT></H1>
<P>(Mark One)</P>
<P ALIGN=center>[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934<BR> For the quarterly period ended June 30, 1999<BR> OR<BR> [_]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE<BR> SECURITIES
EXCHANGE ACT OF 1934</P>
<H1 ALIGN=CENTER><FONT SIZE=3>Commission File Number 33-22603</FONT></H1>
<P ALIGN=center><B>BAYOU STEEL CORPORATION</B><BR> (Exact name of registrant as
specified in its charter)</P>
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<B>Delaware</B><BR>
(State of incorporation)</TD>
<TD WIDTH=50% ALIGN=CENTER><B>72-1125783</B><BR>
(I.R.S. Employer<BR>
Identification No.)</TD>
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<P ALIGN=center><B>138 Highway 3217, P.O. Box 5000, LaPlace, Louisiana 70069</B><BR>
(Address of principal executive offices)<BR>(Zip Code)</P>
<P ALIGN=center> <B>(504) 652-4900</B><BR>(Registrant’s telephone number, including
area code)</P>
<P>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, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]</P>
<P>Indicate the number of shares outstanding of each of the issuer’s classes of
common stock, as of the latest practicable date.</P>
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<TH COLSPAN="2"><FONT SIZE="-1">Class</FONT><HR WIDTH=100% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT SIZE="-1">Shares Outstanding at<BR>June 30, 1999</FONT><HR WIDTH=90% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="72%" ALIGN="LEFT"><FONT SIZE="-1">Class A Common Stock, $.01 par value</FONT></TD>
<TD WIDTH="6%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE="-1">10,619,380</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">Class B Common Stock, $.01 par value</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2,271,127</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">Class C Common Stock, $.01 par value</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">100</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="4"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">12,890,607</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
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<TD COLSPAN="4"><HR NOSHADE SIZE="2"></TD></TR>
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<H1 ALIGN=CENTER><FONT SIZE=3> BAYOU STEEL CORPORATION</FONT></H1>
<H1 ALIGN=CENTER><FONT SIZE=3>INDEX</FONT></H1>
</TD>
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<TH COLSPAN="2"><FONT SIZE="-1"></FONT></TH>
<TH COLSPAN="2"><FONT SIZE="-1">Page<BR>Number</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="92%" ALIGN="LEFT"><FONT SIZE="-1"><B>PART I. FINANCIAL INFORMATION</B></FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="2%" ALIGN="RIGHT"><FONT SIZE="-1"></FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD> </td></tr>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Item 1. Financial Statements</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Consolidated Balance Sheets– June 30, 1999 and</FONT></TD><TD ALIGN="LEFT">
<FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> September 30, 1998</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">3</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Consolidated Statements of Operations -- Three</FONT></TD><TD ALIGN="LEFT">
<FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> and Nine Months Ended June 30, 1999 and 1998</FONT></TD><TD ALIGN="LEFT"><FONT
SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">5</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Consolidated Statements of Cash Flows -- Nine Months</FONT></TD><TD ALIGN="LEFT">
<FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Ended June 30, 1999 and 1998</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1">
</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">6</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Notes to Consolidated Financial Statements</FONT></TD><TD ALIGN="LEFT"><FONT
SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">7</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD> </td></tr>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Item 2. Management’s Discussion and Analysis of Financial</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1">
</FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Condition and Results of Operations</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1">
</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">10</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Results of Operations</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT>
</TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">10</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Liquidity and Capital Resources</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1">
;</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">13</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD> </td></tr>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"><B>PART II. OTHER INFORMATION</B></FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Item 6. Exhibits and reports on Form 8-K</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">15</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
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<BR><BR><BR>
<P ALIGN=center>Page 2</P>
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<H1 align=center><FONT SIZE=3>PART I - FINANCIAL INFORMATION</FONT></H1>
<H2 ALIGN=LEFT><FONT SIZE=3>Item 1. FINANCIAL STATEMENTS</FONT></H2>
<H1 align=center><FONT SIZE=3>BAYOU STEEL CORPORATION<BR>CONSOLIDATED BALANCE
SHEETS</FONT></H1>
<H1 align=center><FONT SIZE=3>ASSETS</FONT></H1>
</TD>
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<TH COLSPAN="2"><FONT SIZE="-1"></FONT></TH>
<TH COLSPAN="2"><FONT SIZE="-1">(Unaudited)<BR>June 30,<BR>1999</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT SIZE="-1">(Audited)<BR>September 30,<BR>1998</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="63%" ALIGN="LEFT"><FONT SIZE="-1">CURRENT ASSETS:</FONT></TD>
<TD WIDTH="3%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE="-1"></FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE="-1"></FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD> </td></tr>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Cash and temporary cash investments</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 25,470,374</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 34,028,855</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Receivables, net of allowance for doubtful</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> accounts of $928,918 and $773,948, respectively</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">23,392,150</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">27,194,660</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Inventories</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">83,343,254</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">83,756,111</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Deferred income taxes and other</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">5,860,966</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">5,913,865</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Total current assets</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">138,066,744</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">150,893,491</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD> </td></tr>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">PROPERTY, PLANT AND EQUIPMENT:</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD> </td></tr>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Land</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">3,790,399</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">3,790,399</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Machinery and equipment</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">125,842,528</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">114,165,843</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Plant and office building</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">23,237,397</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">22,867,334</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">152,870,324</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">140,823,576</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Less-Accumulated depreciation</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(54,756,763</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(50,707,711</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Net property, plant and equipment</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">98,113,561</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">90,115,865</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">DEFERRED INCOME TAXES</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">3,485,011</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">5,282,549</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">OTHER ASSETS</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2,976,860</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">3,205,550</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Total assets</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 242,642,176</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 249,497,455</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="2"></TD></TR>
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<TR>
<TD>
<BR><BR><BR>
<P ALIGN=center> <FONT SIZE=-1>The accompanying notes are an integral part of
these consolidated statements.</FONT></P>
<BR><BR>
<P ALIGN=center>Page 3</P>
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<TD>
<H1 align=center><FONT SIZE=3> BAYOU STEEL CORPORATION<BR>CONSOLIDATED BALANCE
SHEETS</FONT></H1>
<H1 align=center><FONT SIZE=3>LIABILITIES AND STOCKHOLDERS’ EQUITY</FONT></H1>
</TD>
</TR>
</TABLE>
<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT SIZE="-1"></FONT></TH>
<TH COLSPAN="2"><FONT SIZE="-1">(Unaudited)<BR>June 30,<BR>1999</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT SIZE="-1">(Audited)<BR>September 30,<BR>1998</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="66%" ALIGN="LEFT"><FONT SIZE="-1">CURRENT LIABILITIES:</FONT></TD>
<TD WIDTH="3%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE="-1"></FONT></TD>
<TD WIDTH="3%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE="-1"></FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD> </td></tr>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Accounts payable</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 13,976,670</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 20,298,386</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Interest payable</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1,488,333</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">4,116,667</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Accrued liabilities</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">5,839,270</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">8,843,864</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Total current liabilities</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">21,304,273</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">33,258,917</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">LONG-TERM DEBT</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">118,984,533</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">118,898,853</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">COMMITMENTS AND CONTINGENCIES</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD> </td></tr>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">STOCKHOLDERS’ EQUITY:</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD> </td></tr>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Common stock, $.01 par value -</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Class A: 24,271,127 authorized and 10,619,380</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> outstanding shares</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">106,194</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">106,194</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Class B: 4,302,347 authorized and 2,271,127</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> outstanding shares</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">22,711</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">22,711</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Class C: 100 authorized and outstanding shares</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Total common stock</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">128,906</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">128,906</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD> </td></tr>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Paid-in capital</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">47,795,224</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">47,795,224</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Retained earnings</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">54,429,240</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">49,415,555</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Total common stockholders’ equity</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">102,353,370</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">97,339,685</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Total liabilities and common stockholders’ equity</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$242,642,176</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$249,497,455</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="2"></TD></TR>
</TABLE>
<TABLE WIDTH=600>
<TR>
<TD>
<BR><BR>
<P ALIGN=center><FONT SIZE=-1>The accompanying notes are an integral part of
these consolidated statements.</FONT></P>
<BR><BR>
<P ALIGN=center>Page 4</P>
</TD>
</TR>
</TABLE>
<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 5, page: 5" -->
<HR SIZE=5 NOSHADE>
<TABLE WIDTH=600>
<TR>
<TD>
<H1 align=center><FONT SIZE=3>BAYOU STEEL CORPORATION<BR>CONSOLIDATED STATEMENTS
OF OPERATIONS<BR>(Unaudited)</FONT></H1>
</TD>
</TR>
</TABLE>
<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT SIZE="-1"></FONT></TH>
<TH COLSPAN="4"><FONT SIZE="-1">Three Months Ended<BR>June 30,</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="4"><FONT SIZE="-1">Nine Months Ended<BR>June 30,</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT SIZE="-1"></FONT></TH>
<TH COLSPAN="2"><FONT SIZE="-1">1999</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT SIZE="-1">1998</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT SIZE="-1">1999</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT SIZE="-1">1998</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="27%" ALIGN="LEFT"><FONT SIZE="-1">NET SALES</FONT></TD>
<TD WIDTH="3%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE="-1">$ 54,825,470</FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE="-1">$ 59,605,831</FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE="-1">$ 152,128,492</FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE="-1">$ 191,789,177</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">COST OF SALES</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">48,609,612</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">50,156,816</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">131,977,923</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">165,772,916</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="10"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">GROSS PROFIT</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">6,215,858</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">9,449,015</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">20,150,569</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">26,016,261</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">SELLING, GENERAL AND</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> ADMINISTRATIVE</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1,768,392</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1,659,135</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">5,315,948</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">4,892,182</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="10"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">OPERATING INCOME</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">4,447,466</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">7,789,880</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">14,834,621</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">21,124,079</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="10"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">OTHER INCOME (EXPENSE):</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Interest expense</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(2,682,918</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(2,299,705</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(8,245,488</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(6,432,782</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Interest income</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">319,569</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">649,967</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1,069,914</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">828,492</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Miscellaneous</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">55,909</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(1,292,664</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">55,866</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(1,156,047</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD></TR>
<TR>
<TD COLSPAN="10"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(2,307,440</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(2,942,402</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(7,119,708</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(6,760,337</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD></TR>
<TR>
<TD COLSPAN="10"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">INCOME BEFORE INCOME</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> TAXES AND</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> EXTRAORDINARY ITEM</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2,140,026</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">4,847,478</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">7,714,913</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">14,363,742</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">PROVISION FOR</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> INCOME TAXES</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">750,016</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">100,511</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2,701,228</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">298,040</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="10"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">INCOME BEFORE</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> EXTRAORDINARY ITEM</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1,390,010</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">4,746,967</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">5,013,685</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">14,065,702</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">EXTRAORDINARY ITEM</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">–</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(5,506,885</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">–</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(5,506,885</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD></TR>
<TR>
<TD COLSPAN="10"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">NET INCOME (LOSS)</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1,390,010</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(759,918</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">5,013,685</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">8,558,817</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">LOSS ON REDEMPTION OF</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> PREFERRED STOCK</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">–</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(2,429,105</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">–</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(2,429,105</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">DIVIDENDS ACCRUED AND</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> ACCRETION ON</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> PREFERRED STOCK</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">–</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(563,690</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">–</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(1,868,118</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD></TR>
<TR>
<TD COLSPAN="10"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">INCOME (LOSS)</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> APPLICABLE TO</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> COMMON AND COMMON</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> EQUIVALENT SHARES</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 1,390,010</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(3,752,713</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 5,013,685</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 4,261,594</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="10"><HR NOSHADE SIZE="2"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">WEIGHTED AVERAGE COMMON</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> SHARES OUTSTANDING:</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Basic</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">12,890,607</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">12,884,607</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">12,890,607</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">12,884,607</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="10"><HR NOSHADE SIZE="2"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Diluted</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">13,713,029</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">13,750,154</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">13,713,029</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">13,738,944</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="10"><HR NOSHADE SIZE="2"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">INCOME (LOSS)</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> PER COMMON SHARE:</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Basic</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ .11</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ (.29</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ .39</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ .33</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="10"><HR NOSHADE SIZE="2"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Diluted</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ .10</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ (.29</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ .37</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ .31</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="10"><HR NOSHADE SIZE="2"></TD></TR>
</TABLE>
<TABLE WIDTH=600>
<TR>
<TD>
<BR><BR>
<P ALIGN=center><FONT SIZE=-1>The accompanying notes are an integral part of
these consolidated statements.</FONT></P>
<BR><BR>
<P ALIGN=center>Page 5</P>
</TD>
</TR>
</TABLE>
<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 6, page: 6" -->
<HR SIZE=5 NOSHADE>
<TABLE WIDTH=600>
<TR>
<TD>
<H1 align=center><FONT SIZE=3>BAYOU STEEL CORPORATION<BR>CONSOLIDATED STATEMENTS
OF CASH FLOWS<BR>(Unaudited)</FONT></H1>
</TD>
</TR>
</TABLE>
<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT SIZE="-1"></FONT></TH>
<TH COLSPAN="4"><FONT SIZE="-1"> Nine Months Ended<BR>June 30,</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT SIZE="-1"></FONT></TH>
<TH COLSPAN="2"><FONT SIZE="-1">1999</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT SIZE="-1">1998</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="63%" ALIGN="LEFT"><FONT SIZE="-1">CASH FLOWS FROM OPERATING ACTIVITIES:</FONT></TD>
<TD WIDTH="3%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE="-1"></FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE="-1"></FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD> </td></tr>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Net income</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 5,013,685</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 8,558,817</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Extraordinary item</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">–</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">5,506,885</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Depreciation</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">4,049,052</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">4,326,262</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Amortization</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">314,370</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">604,231</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Provision for losses on accounts receivable</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">154,970</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">116,836</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Deferred income taxes</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2,337,784</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">–</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Changes in working capital:</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Decrease in receivables</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">3,647,540</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">986,077</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Decrease (increase) in inventories</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">412,857</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(608,177</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> (Increase) decrease in prepaid expenses</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(487,347</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">25,812</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> (Decrease) in accounts payable</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(6,321,716</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(2,428,467</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> (Decrease) increase in interest payable</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> and accrued liabilities</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(5,632,928</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2,430,658</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Net cash provided by operations</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">3,488,267</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">19,518,934</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">CASH FLOWS FROM INVESTING ACTIVITIES:</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Purchases of property, plant and equipment</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(12,046,748</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(3,908,916</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">CASH FLOWS FROM FINANCING ACTIVITIES:</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Payments of long-term debt and early retirement cost</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">–</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(86,678,456</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Proceeds from issuance of long-term debt</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">–</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">108,952,800</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Payments of preferred stock, dividends</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> and early retirement cost</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">–</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(17,386,232</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Debt issue and other costs</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">–</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(3,250,000</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Net cash provided by financing activities</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">–</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1,638,112</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">NET (DECREASE) INCREASE IN CASH AND</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> TEMPORARY CASH INVESTMENTS</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(8,558,481</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">17,248,130</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">CASH AND TEMPORARY CASH INVESTMENTS,</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> beginning balance</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">34,028,855</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">971,477</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">CASH AND TEMPORARY CASH INVESTMENTS,</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> ending balance</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 25,470,374</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 18,219,607</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="2"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">SUPPLEMENTAL CASH FLOW DISCLOSURES:</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Cash paid during the period for:</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Interest (net of amount capitalized)</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 10,873,821</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 6,589,670</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> Income taxes</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 363,445</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 40,394</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
</TABLE>
<TABLE WIDTH=600>
<TR>
<TD>
<BR><BR>
<P ALIGN=center><FONT SIZE=-1>The accompanying notes are an integral part of
these consolidated statements.</FONT></P>
<P ALIGN=center><BR><BR> Page 6</P>
</TD>
</TR>
</TABLE>
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<!-- MARKER LABEL="sheet: 7, page: 7" -->
<HR SIZE=5 NOSHADE>
<TABLE WIDTH=600>
<TR>
<TD>
<H1 align=center><FONT SIZE=3> BAYOU STEEL CORPORATION<BR>NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS<BR>June 30, 1999<BR>(Unaudited)</FONT></H1>
<H2 ALIGN=LEFT><FONT SIZE=3>1) BASIS OF PRESENTATION</FONT></H2>
<P>The accompanying unaudited interim consolidated financial statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission (“SEC”). Certain information and note disclosures normally
included in annual financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to those
rules and regulations. However, all adjustments, which, in the opinion of
management, are necessary for fair presentation have been included except
adjustments related to inventory. The inventory valuations as of June 30, 1999
are based on last-in, first-out (“LIFO”) estimates of year-end levels and
prices. The actual LIFO inventories will not be known until year-end quantities
and indices are determined. It is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial statements
and notes thereto included in the Company’s Annual Report on Form 10-K filed
with the SEC as of and for the year ended September 30, 1998. </P>
<P>The accompanying financial statements include the consolidated accounts of
Bayou Steel Corporation (“Louisiana Facility”), Bayou Steel Corporation
(Tennessee) (“Tennessee Facility”), and River Road Realty Corporation
(collectively referred to herein as the “Company”) after elimination of all
significant intercompany accounts and transactions. The results for the nine
months ended June 30, 1999 are not necessarily indicative of the results to be
expected for the fiscal year ending September 30, 1999. </P>
<P>Certain reclassifications have been made in the prior period financial
statements to conform to the classifications used in the current year. </P>
<H2 ALIGN=LEFT><FONT SIZE=3>2) INVENTORIES</FONT></H2>
<P>Inventories consist of the following: </P>
</TD>
</TR>
</TABLE>
<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT SIZE="-1"></FONT></TH>
<TH COLSPAN="2"><FONT SIZE="-1">(Unaudited)<BR>June 30,<BR>1999</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT SIZE="-1">(Audited)<BR>September 30,<BR>1998</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="58%" ALIGN="LEFT"><FONT SIZE="-1">Scrap steel</FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE="-1">$ 2,340,718</FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE="-1">$ 3,131,848</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">Billets</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">10,689,676</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">12,001,153</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">Finished product</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">42,382,046</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">45,339,376</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">LIFO adjustments</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">6,595,914</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2,074,726</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">62,008,354</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">62,547,103</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">Mill rolls, operating supplies and other</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">21,334,900</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">21,209,008</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$83,343,254</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$83,756,111</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="2"></TD></TR>
</TABLE>
<TABLE WIDTH=600>
<TR>
<TD>
<BR>
<H2 ALIGN=LEFT><FONT SIZE=3> 3) LONG-TERM DEBT</FONT></H2>
<P>In May 1998 the Company issued $120 million of first mortgage notes bearing
interest at 9.5% (9.65% effective rate) due 2008 with semiannual interest
payments due May 15 and November 15 of each year. The proceeds of the first
mortgage notes were used to repay its previously existing first mortgage notes,
term loan and preferred stock and for working capital purposes. The notes were
issued at a discount which is being amortized over the life of the notes using
the straight line method which does not materially differ from the interest
method. The notes are a senior obligation of the Company, secured by a first
priority lien, subject to certain exceptions, on existing and future real
property, plant and equipment, and most additions or improvements thereto at
the Louisiana Facility. In connection with </P>
<P ALIGN=center><BR><BR> Page 7</P>
</TD>
</TR>
</TABLE>
<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 8, page: 8" -->
<HR SIZE=5 NOSHADE>
<TABLE WIDTH=600>
<TR>
<TD>
<P>the refinancing transaction, the Company paid certain prepayment penalties,
interest during the defeasment period and wrote-off deferred financing costs
the results of which are reflected as an extraordinary loss in the accompanying
statements of operations for the three and nine-month periods ended June 30,
1998. No income tax benefit has been provided against the extraordinary loss.</P>
<P>Bayou Steel Corporation (Tennessee) and River Road Realty Corporation
(collectively the “guarantor subsidiaries”), which are wholly owned by and
which comprise all of the direct and indirect subsidiaries of the Company,
fully and unconditionally guarantee the notes on a joint and several basis. The
following is summarized combined financial information of the guarantor
subsidiaries. Separate full financial statements and other disclosures
concerning each guarantor subsidiary have not been presented because, in the
opinion of management, such information is not deemed material to investors.
The indenture governing the notes provide certain restrictions on the ability
of the guarantor subsidiaries to make distributions to the Company. </P>
</TD>
</TR>
</TABLE>
<BR>
<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT SIZE="-1"></FONT></TH>
<TH COLSPAN="2"><FONT SIZE="-1">(Unaudited)<BR>June 30,<BR>1999</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT SIZE="-1">(Audited)<BR>September 30,<BR>1998</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="42%" ALIGN="LEFT"><FONT SIZE="-1">Current assets</FONT></TD>
<TD WIDTH="6%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="22%" ALIGN="RIGHT"><FONT SIZE="-1">$34,114,000</FONT></TD>
<TD WIDTH="6%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="22%" ALIGN="RIGHT"><FONT SIZE="-1">$29,992,000</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">Noncurrent assets</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">21,313,000</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">21,502,000</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">Current liabilities</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">29,994,000</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">26,489,000</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">Noncurrent liabilities</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">34,973,000</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">34,973,000</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
</TABLE>
<BR>
<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT SIZE="-1"></FONT></TH>
<TH COLSPAN="4"><FONT SIZE="-1">(Unaudited)<BR>Three Months Ended<BR>June 30,</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="4"><FONT SIZE="-1">(Unaudited)<BR>Nine Months Ended<BR>June 30,</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT SIZE="-1"></FONT></TH>
<TH COLSPAN="2"><FONT SIZE="-1">1999</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT SIZE="-1">1998</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT SIZE="-1">1999</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT SIZE="-1">1998</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="18%" ALIGN="LEFT"><FONT SIZE="-1">Net sales</FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE="-1">$14,553,000</FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE="-1">$12,757,000</FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE="-1">$36,138,000</FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE="-1">$39,413,000</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">Gross profit</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">589,000</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">833,000</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2,017,000</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2,009,000</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">Net income</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">88,000</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">488,000</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">427,000</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1,075,000</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
</TABLE>
<TABLE WIDTH=600>
<TR>
<TD>
<BR>
<H2 ALIGN=LEFT><FONT SIZE=3>4) INCOME TAXES</FONT></H2>
<P>As of June 30, 1999, for tax purposes, the Company had net operating loss
carryforwards (“NOLs”) of approximately $215 million available to utilize
against regular taxable income. The NOLs will expire in varying amounts through
fiscal 2010. A substantial portion of the available NOLs, approximately $124
million, expire by fiscal 2001. During the fourth quarter of fiscal 1998, the
Company reversed a portion of its valuation allowance associated with the NOLs.
Deferred income tax expense of approximately $0.8 million and $2.7 million was
recognized in the third quarter and the first nine months of fiscal 1999,
respectively, reflecting the utilization of a portion of the Company’s
available NOL’s to cover estimated taxable income. </P>
<H2 ALIGN=LEFT><FONT SIZE=3>5) PREFERRED STOCK AND WARRANTS</FONT></H2>
<P>The Company issued 15,000 shares of redeemable preferred stock and warrants
to purchase six percent of its Class A Common Stock (or 822,422 shares) at a
nominal amount. In connection with a refinancing transaction in the third
quarter of fiscal 1998, the preferred stock was redeemed but the warrants
remain outstanding. </P>
<H2 ALIGN=LEFT><FONT SIZE=3>6) EARNINGS PER SHARE</FONT></H2>
<P>The Company presents earnings per share in accordance with the provisions of
Financial Accounting Standards Board Statement No. 128, “Earnings Per Share.”
Basic earnings per share was computed by deducting dividends accrued and
accretion on preferred stock from net income then dividing this amount by the
weighted average number of outstanding common shares of 12,890,607 during the
nine months ended June 30, 1999 and 12,884,607 shares during the nine months
ended June 30, 1998. In connection with the issuance of redeemable preferred
stock discussed in Note </P>
<BR><BR>
<P ALIGN=center>Page 8</P>
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<P>5, the Company reserved 822,422 shares of its Class A Common Stock for
issuance upon exercise of the outstanding warrants at a nominal exercise price.
In addition, the Company maintains an incentive stock award plan for certain
key employees under which stock options to purchase 115,000 and 85,000 shares
of its Class A Common Stock at an exercise price of $4.375 and $4.75 per share,
respectively. Diluted earnings per share amounts were determined by assuming
that the outstanding warrants and stock options were exercised and considered
as additional common stock equivalents outstanding computed under the treasury
stock method. Additional common stock equivalents computed for purposes of the
diluted earnings per share computation were 822,422 and 865,547 for the
three-month periods and 822,422 and 854,337 for the nine-month periods ended
June 30, 1999 and 1998, respectively.</P>
<P>The effect of the extraordinary item connected with the refinancing
transaction in the prior year is as follows: </P>
</TD>
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<TH COLSPAN="2"><FONT SIZE="-1"></FONT></TH>
<TH COLSPAN="4"><FONT SIZE="-1">Three Months Ended<BR>June 30,</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="4"><FONT SIZE="-1">Nine Months Ended<BR>June 30,</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT SIZE="-1"></FONT></TH>
<TH COLSPAN="2"><FONT SIZE="-1">Basic</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT SIZE="-1">Diluted</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT SIZE="-1">Basic</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT SIZE="-1">Diluted</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="48%" ALIGN="LEFT"><FONT SIZE="-1">EPS before extraordinary item</FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE="-1">$ 0.14</FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE="-1">$ 0.14</FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE="-1">$ 0.76</FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE="-1">$ 0.71</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">Extraordinary item</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(0.43</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(0.43</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(0.43</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(0.40</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD></TR>
<TR>
<TD COLSPAN="10"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">EPS applicable to common</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1"> and common equivalent shares</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(0.29</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(0.29</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 0.33</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 0.31</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR>
<TD COLSPAN="10"><HR NOSHADE SIZE="2"></TD></TR>
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<TABLE WIDTH=600>
<TR>
<TD>
<H2 ALIGN=LEFT><FONT SIZE=3>7) COMMITMENTS AND CONTINGENCIES</FONT></H2>
<H2 ALIGN=LEFT><FONT SIZE=3>Environmental</FONT></H2>
<P>The Company is subject to various federal, state, and local laws and
regulations concerning the discharge of contaminants which may be emitted into
the air, discharged into waterways, and the disposal of solid and/or hazardous
wastes such as electric arc furnace dust. In addition, in the event of a
release of a hazardous substance generated by the Company, the Company could be
potentially responsible for the remediation of contamination associated with
such a release. In the past, the Company’s operations in certain limited
circumstances have been challenged with respect to some of the applicable
standards promulgated pursuant to such laws and regulations. During fiscal
1997, the United States Public Interest Research Group (“USPIRG”) filed a
lawsuit in Louisiana against the Company for alleged violations of air quality
regulations. During the quarter, the Company and USPIRG reached a settlement
agreement, the results of which were not material to the current period’s
reported financial position or the results of operations of the Company. The
Company believes that it is in compliance, in all material respects, with
applicable environmental requirements and that the cost of such continuing
compliance is not expected to have a material adverse effect on the Company’s
competitive position, operations or financial condition, or cause a material
increase in currently anticipated capital expenditures. The Company currently
has no mandated expenditures at its Louisiana Facility to address previously
contaminated sites and is not designated as a “Potential Responsible Party”
under the federal Superfund legislation. As of June 30, 1999 and September 30,
1998, the Company had accrued loss contingencies for certain environmental
matters and believes that it is presently in material compliance with all
environmental laws. </P>
<P>Tennessee Valley Steel Corporation (“TVSC”), the prior owners of the
Tennessee Facility, entered into a Consent Agreement and Order (the “TVSC
Consent Order”) with the Tennessee Department of Environment and Conservation
under its voluntary clean-up program. The Company, in acquiring the assets of
TVSC, entered into a Voluntary Consent Agreement and Order (the “Bayou Steel
Consent Order”) with the Tennessee Department of Environment and Conservation.
The Bayou Steel Consent Order is supplemental to the previous TVSC Consent
Order and does not affect the continuing validity of the TVSC Consent Order.
The ultimate remedy and clean-up goals will be dictated by the results of human
health and ecological risk assessments which are components of a required,
structured investigative, remedial, and assessment process. The definitive
asset purchase agreement between the Company and TVSC provided for certain
funds to be applied to costs incurred by the Company for activities pursuant to
the TVSC Consent Order. As of June 30, 1999, investigative, remedial, and risk
assessment activities have resulted in expenses of approximately $1.3 million
with approximately $0.6 million remaining to complete the remediation. At </P>
<BR><BR>
<P ALIGN=center>Page 9</P>
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<P>this time the Company does not expect the cost of resolution of the TVSC
Consent Order to exceed funds previously provided.</P>
<P>Environmental Laws have been enacted, and may in the future be enacted, to
create liability for past actions that were lawful at the time taken, but that
have been found to affect adversely the environment and to create rights of
action for environmental conditions and activities. Under some federal
legislation (sometimes referred to as Superfund legislation) a company that has
sent waste to a third party disposal site or elsewhere could be held liable for
some portion or all the cost of remediating such site regardless of fault or
the lawfulness of the original disposal activity and also for related damages
to natural resources. Many states, including Georgia, have enacted similar
legislation. The Company has been advised by the Georgia Department of Natural
Resources that it is a responsible party to a site where clean up costs have
been and are being expended. The Company has never used the site. It is alleged
that the predecessor corporation to TVSC generated materials that were
reportedly disposed at the site. The Company believes that information it has
submitted to the Georgia Department of Natural Resources addresses fully any
relationship between the Company, TVSC and the site. </P>
<H2 ALIGN=LEFT><FONT SIZE=3>Other</FONT></H2>
<P>There are various claims and legal proceedings arising in the ordinary
course of business pending against or involving the Company wherein monetary
damages are sought. It is management’s opinion that the Company’s liability, if
any, under such claims or proceedings would not materially affect its financial
position or results of operations. </P>
<H2 ALIGN=LEFT><FONT SIZE=3>Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS</FONT></H2>
<P>The following discussion and analysis should be read in conjunction with the
Management’s Discussion and Analysis of Financial Condition and Results of
Operations included as part of the Company’s Annual Report on Form 10-K filed
with the SEC as of and for the year ended September 30, 1998. </P>
<H2 ALIGN=LEFT><FONT SIZE=3>RESULTS OF OPERATIONS</FONT></H2>
<P>The Company reported $2.1 million of income before taxes in the third
quarter of fiscal 1999 (ended June 30, 1999) compared to $4.8 million in the
comparable period of fiscal 1998. The $2.7 million reduction in earnings was
due to several factors: increased conversion cost; reduced metal margin (the
difference between the average selling price and the net scrap cost); and
increased net interest expense. </P>
<P>In May, 1998, the Company completed a refinancing transaction whereby it
issued $120 million of first mortgage notes bearing interest at 9.5% (9.65%
effective rate) due 2008 to repay its previously existing first mortgage notes,
term loan and preferred stock and for working capital purposes. In connection
with this transaction, the Company paid prepayment penalties, interest during
the defeasment period and wrote-off deferred financing costs associated with
the transaction. This resulted in a $7.9 million charge made up of a $5.5
million extraordinary loss and a $2.4 million loss on redemption of preferred
stock for the three and nine-month periods ended June 30, 1998. </P>
<P>The Company reported $7.7 million of income before taxes for the first nine
months of fiscal 1999 compared to $14.4 million for the comparable period of
fiscal 1998. The $6.7 million decrease in earnings was due primarily to
decreased tons shipped, reduced metal margin, increased conversion cost at the
Louisiana Facility, and increased net interest expense. </P>
<BR><BR>
<P ALIGN=center>Page 10</P>
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<P> The following table sets forth shipment and sales data. </P>
</TD>
</TR>
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<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT SIZE="-1"></FONT></TH>
<TH COLSPAN="4"><FONT SIZE="-1">Three Months Ended<BR>June 30,</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT SIZE="-1"></FONT></TH>
<TH COLSPAN="2"><FONT SIZE="-1">1999</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT SIZE="-1">1998</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="60%" ALIGN="LEFT"><FONT SIZE="-1">Net Sales (in thousands)</FONT></TD>
<TD WIDTH="5%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE="-1">$ 54,825</FONT></TD>
<TD WIDTH="5%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE="-1">$ 59,606</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">Shape Shipment Tons</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">174,025</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">157,836</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">Average Shape Selling Price Per Ton</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 312</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 370</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
</TABLE>
<BR>
<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT SIZE="-1"></FONT></TH>
<TH COLSPAN="4"><FONT SIZE="-1">Nine Months Ended<BR>June 30,</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT SIZE="-1"></FONT></TH>
<TH COLSPAN="2"><FONT SIZE="-1">1999</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT SIZE="-1">1998</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="60%" ALIGN="LEFT"><FONT SIZE="-1">Net Sales (in thousands)</FONT></TD>
<TD WIDTH="5%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE="-1">$152,128</FONT></TD>
<TD WIDTH="5%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE="-1">$191,789</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">Shape Shipment Tons</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">466,421</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">520,545</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT SIZE="-1">Average Shape Selling Price Per Ton</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 322</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 363</FONT></TD>
<TD ALIGN="LEFT"><FONT SIZE="-1"> </FONT></TD></TR>
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<TD>
<H2 ALIGN=LEFT><FONT SIZE=3>A. Sales</FONT></H2>
<P>Net sales for the quarter decreased by 8% resulting from a 16% reduction in
the average selling price offset somewhat by a 10% increase in tons shipped
compared to the prior year period. For the first nine months of fiscal 1999,
net sales decreased by 21% on a 10% decrease in tons shipped and a 11% decrease
in the average selling price compared to the same period of fiscal 1998. </P>
<P>The decrease in the average selling price for the three and nine month
periods was the result of direct competition from low priced imports within the
Company’s product range. The price increase previously announced and effective
early summer was only minimally realized. The Company responded to competitive
pricing situations created by the overhang of imports. While year-to-date tons
shipped were impacted by imports, record shipments from the Tennessee Facility
during the quarter and shipments slightly ahead of the prior year quarter at
the Louisiana Facility offset the adverse impact of imports in the current
quarter. The record shipments from the Tennessee Facility was due to larger
orders from targeted original equipment manufacturers as the production cycle
matched well with the demand and as the Company became a much more reliable
supplier. Imports had a negative impact on the Company’s shipments beginning in
the latter part of the first quarter. Steel service centers, the principal
customers of the Company, reacted to the increased supply of foreign steel as
well as their own record high inventory levels by reducing orders from domestic
mills and buying cheap imports. In efforts to stimulate shipments and to
compete with the imports, the domestic mills reduced prices throughout the
first six months of this fiscal year. Managing the decreased shipment levels,
the Company reduced operations at its Tennessee rolling mill during the second
quarter and at its Louisiana rolling mill in the third quarter. As a result,
finished goods inventories were reduced by $6.6 million in the third quarter. </P>
<P>The demand for the Company’s products at the end-user level is steady, but
it is not expected to match the record shipment levels of the prior year. Since
inventories have decreased to acceptable levels, the Company is considering
increasing its operating level. However, a further slowdown in the economy or
additional imports in the Company’s product range could further affect
shipments or operations. Supply could also be impacted by a competitor who is
commissioning a mill capable of producing many of the same products as the
Company. </P>
<H2 ALIGN=LEFT><FONT SIZE=3>B. Cost of Goods Sold</FONT></H2>
<P>Cost of goods sold was 89% of sales for the quarter compared to 84% of sales
for the prior year period. Although the selling price decrease was the largest
contributor to this change, it was minimized by a decrease in the cost of scrap
metal and additive, alloy and flux (major components of cost of goods sold).
For the nine-month period, cost of goods sold was 87% of sales in fiscal 1999
compared to 86% for the same period of fiscal 1998. </P>
<BR><BR>
<P ALIGN=center>Page 11</P>
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<P> Scrap is used in the melting operations at the Louisiana Facility and is a
significant component of the cost of billets purchased for the Tennessee
Facility. Scrap cost in the third quarter and the first nine months of fiscal
1999 decreased 25% and 30%, respectively, compared to the same periods of last
year. The market for scrap metal has softened significantly since June of last
year when export demand decreased sharply allowing for a greater domestic
supply and lower prices. Scrap prices have recently increased slightly but
appear to be trending upward. Additive, alloys and flux cost decreased by 11%
in the third quarter and 13% in the nine-month period of fiscal 1999 compared
to the same periods of last year due to price changes caused by increased
supply. </P>
<P>Conversion cost includes labor, energy, maintenance materials, and supplies
used to convert raw materials into billets and billets into shapes. Conversion
cost per ton for the Louisiana Facility increased by 4% in both the three and
nine months ended June 30, 1999 compared to the same periods in the prior year
largely because of the reduced mode of operation in the Louisiana rolling mill.
During the third quarter, problems were experienced with recently installed
capital in the melt shop which adversely affected conversion cost because of
increased maintenance spending and lower production. The Company has started
its backup furnace because the equipment has failed before the replacement
equipment was ready. The backup furnace is not as efficient as the main furnace
and production should be lower while conversion cost should be higher. The
Company may need to run the backup furnace for approximately one month. The
Company estimates that production with the backup furnace will result in an
increased cost per ton of approximately $5 per ton until the main furnace is
redeployed. </P>
<P>The Tennessee Facility’s conversion cost per ton increased by 11% in the
third quarter of fiscal 1999 due to the reduced mode of operations which
resulted in fewer tons produced. For the first nine months of fiscal 1999,
conversion cost decreased by 6% due to improved productivity and cost
containment as the facility attained record productivity during the period. </P>
<H2 ALIGN=LEFT><FONT SIZE=3>C. Selling, General and Administrative Expense</FONT></H2>
<P>Selling, general and administrative expense in the third quarter was
consistent with the same period of last year but increased $0.4 million for the
nine-month period. The change is primarily due to an increase in legal and
consulting activities in the current year. </P>
<H2 ALIGN=LEFT><FONT SIZE=3>D. Other Income (Expense)</FONT></H2>
<P>Net interest expense increased $0.7 million and $1.6 million for the three
and nine months ended June 30, 1999 compared to the same periods last year due
to a refinancing transaction in May 1998 in which the Company extinguished its
existing debt and preferred stock and issued one instrument with a greater face
value but lower interest rate and less restrictive covenants. </P>
<P>Included in miscellaneous expense for the three and nine-month periods ended
June 30, 1998 is $1.3 million of costs related to a terminated merger agreement. </P>
<H2 ALIGN=LEFT><FONT SIZE=3>E. Income Taxes</FONT></H2>
<P>As a result of the Company’s improved profitability, a steady long-term
economic outlook, expiration of certain tax benefits derived from a tax-favored
lease agreement and its internal projections for the near future, the Company
reversed approximately $16.5 million of a deferred tax valuation allowance in
the fourth fiscal quarter of 1998. Accordingly, the Company has provided for
income taxes at statutory rates approximating 35%. The net effect of this item
on earnings was $0.8 million and $2.7 million for the three and nine months
ended June 30, 1999, respectively, the impact of which was substantially
non-cash. In the prior year, the Company provided for income taxes at the
alternative minimum tax rate of 2% which is approximately the cash tax expended. </P>
<BR><BR>
<P ALIGN=center>Page 12</P>
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<H2 ALIGN=LEFT><FONT SIZE=3>F. Net Income</FONT></H2>
<P>Income before taxes decreased $2.7 million and $6.7 million in the third
quarter and first nine months of fiscal 1999, respectively, compared to fiscal
1998 due primarily to a reduction in shipments and the average selling price
and increased conversion cost. </P>
<H2 ALIGN=LEFT><FONT SIZE=3>LIQUIDITY AND CAPITAL RESOURCES</FONT></H2>
<H2 ALIGN=LEFT><FONT SIZE=3>A. Cash and Working Capital</FONT></H2>
<P>The Company ended the third fiscal quarter with $25.5 million in cash and
temporary cash investments. In the first nine months of fiscal 1999, cash
provided by operations was $3.5 million compared to $19.5 million last year.
Contributing to the change was $12.0 million used in payables, accrued
liabilities and interest payments as well as lower earnings. </P>
<P>At June 30, 1999, current assets exceeded current liabilities by a ratio of
6.48 to 1.00. Working capital decreased by $0.8 million to $116.8 million
during the nine-month period. </P>
<H2 ALIGN=LEFT><FONT SIZE=3>B. Capital Expenditures</FONT></H2>
<P>Capital expenditures amounted to $12.0 million in the first nine months of
fiscal 1999. The increased activity is directed towards cost reduction,
productivity enhancements, plant maintenance and safety and environmental
programs. Depending on market conditions, the Company expects to spend
approximately $18 million on various capital projects during the next twelve
months. Included in this is $3 million of a $7 million project to increase
melting capacity by 20% to 30%. The Company is considering spending $15 - $20
million over several years to increase its Louisiana finished goods capacity by
20% to 30%. </P>
<H2 ALIGN=LEFT><FONT SIZE=3>C. Financing</FONT></H2>
<P>During fiscal 1998, the Company completed a refinancing transaction whereby
it issued $120 million of first mortgage notes due in 2008. The proceeds were
used to repay its previously existing first mortgage notes and term loan and
redeem its preferred stock and for working capital purposes. The Company has a
$50 million line of credit which is available for general corporate purposes. </P>
<H2 ALIGN=LEFT><FONT SIZE=3>OTHER COMMENTS</FONT></H2>
<H2 ALIGN=LEFT><FONT SIZE=3>Year 2000</FONT></H2>
<P>The Company has completed the implementation and testing phase of its
organized program to assure that its electronic data processing, automated
operating systems and other information systems will be year 2000 compliant.
The program commenced in June 1997 and is complete. The program was divided
into four major areas including: (1) business systems, (2) commercial systems,
(3) process control or manufacturing systems, and (4) facility support systems.
Each system was throughly audited by the Company’s management information
systems department and a detailed plan for year 2000 compliance was developed,
executed and tested. The Company believes that it has completed its internal
year 2000 readiness program and has performed the necessary testing via various
routines including simulation. The Company has spent less than $1.5 million and
does not expect any significant additional expenditures. </P>
<P>The Company’s year 2000 program also included investigation of major
vendors’ and customers’ year 2000 readiness. The Company used questionnaires
and inquiries to determine their readiness in addition to contacting, for
example, the energy provider and its phone and data line service vendors to
determine their status. If any such vendors indicated that they will not be
compliant, contingency plans were developed to address the issue, which may
include </P>
<BR><BR>
<P ALIGN=center>Page 13</P>
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<P>changing vendors. The Company has also contacted all electronic data
interchange customers to determine their status and to identify issues and
alternatives, if required. The Company has been assured by its key financial
institutions that they are year 2000 compliant or will be compliant in 1999.</P>
<P>Because there is no generally accepted definition of “Year 2000 Compliant”
and because the ability of any organization’s systems to operate reliably after
midnight on December 31, 1999 is dependent upon factors that may be outside the
control of, or unknown to, that organization, no “certification” of compliance
is possible by any business. For example, in Securities and Exchange Commission
(SEC) Staff Legal Bulletin No. 5, the SEC opined that, “It is not, and will
not, be possible for any single entity or collective enterprise to represent
that it has achieved complete year 2000 compliance and thus to guarantee its
remediation efforts. The problem is simply too complex for such a claim to have
legitimacy. Efforts to solve year 2000 problems are best described as “risk
mitigation”.” Consequently, the Company cannot so “certify” either. </P>
<P>Although management does not believe that it will be necessary, a
contingency plan has been developed whereby the Company’s disaster recovery
plan will be implemented for any systems that fail to meet year 2000
compliance. This contingency plan relies on manual processes and low technology
to operate the Company’s facilities until the damaged systems can be repaired. </P>
<P>The foregoing assessment of the impact of the year 2000 issues on the
Company is based on management’s estimates at the present time. The assessment
is based upon assumptions of future events and there can be no assurance that
these estimates and assumptions will prove accurate, and the actual results
could differ materially. To the extent that year 2000 issues cause significant
delays in production or limitation of sales, the Company’s results of
operations and financial position would be materially adversely affected. </P>
<H2 ALIGN=LEFT><FONT SIZE=3>Forward-looking Information</FONT></H2>
<P>This document contains various “forward-looking” statements which represent
the Company’s expectation or belief concerning future events. The Company
cautions that a number of important factors could, individually or in the
aggregate, cause actual results to differ materially from those included in the
forward-looking statements including, without limitation, the following:
changes in the price of supplies, power, natural gas, or purchased billets;
changes in the selling price of the Company’s finished products or the purchase
price of scrap; changes in demand due to imports or a general economic
downturn; cost overruns or start-up problems with capital expenditures; weather
conditions in the market area of the finished product distribution; unplanned
equipment outages; internal or external year 2000 compliance matters; and
changing laws affecting labor, employee benefit costs and environmental and
other governmental regulations. </P>
<H2 ALIGN=LEFT><FONT SIZE=3>Other</FONT></H2>
<P>There are various claims and legal proceedings arising in the ordinary
course of business pending against or involving the Company wherein monetary
damages are sought. It is management’s opinion that the Company’s liability, if
any, under such claims or proceedings would not materially affect its financial
position. </P>
<H2 ALIGN=LEFT><FONT SIZE=3>Inflation</FONT></H2>
<P>The Company is subject to increases in the cost of energy, supplies,
salaries and benefits, additives, alloy and scrap due to inflation. Shape
prices are influenced by supply, which varies with steel mill capacity and
utilization, and market demand. </P>
<BR><BR>
<P ALIGN=center>Page 14</P>
</TD>
</TR>
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<TR>
<TD>
<H1 align=center><FONT SIZE=3>PART II - OTHER INFORMATION</FONT></H1>
<H2 ALIGN=LEFT><FONT SIZE=3>Item 6. EXHIBITS AND REPORTS ON FORM 8-K</FONT></H2>
</TD>
</TR>
</TABLE>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=3%></TD>
<TD WIDTH=5%>(a)
</TD>
<TD WIDTH=92%><P>Exhibits </P></TD></TR></TABLE>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=3%></TD>
<TD WIDTH=5%>
</TD>
<TD WIDTH=92%><P>None were filed during the third
quarter of fiscal year 1999. </P></TD></TR></TABLE>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=3%></TD>
<TD WIDTH=5%>(b)
</TD>
<TD WIDTH=92%><P>Reports on Form 8-K </P></TD></TR></TABLE>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=3%></TD>
<TD WIDTH=5%>
</TD>
<TD WIDTH=92%><P>None were filed during the third
quarter of fiscal year 1999. </P></TD></TR></TABLE>
<BR><BR><BR><BR><BR><BR>
<TABLE WIDTH=600>
<TR>
<TD>
<P ALIGN=center>Page 15</P>
</TD>
</TR>
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<TD>
<H1 align=center><FONT SIZE=3> SIGNATURE</FONT></H1>
<P>Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. </P>
<H2 ALIGN=LEFT><FONT SIZE=3>BAYOU STEEL CORPORATION</FONT></H2>
</TD>
</TR>
</TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR>
<TD width=100%>
By <U>/s/ Richard J. Gonzalez </U>
<BR> Richard J. Gonzalez
<BR> Vice President, Chief Financial Officer,
<BR> Treasurer, and Secretary</TD>
</TR>
</TABLE>
<TABLE>
<tr>
<td>
<P>Date: August 3, 1999</P>
<BR><BR>
<P ALIGN=center>Page 16</P>
</TD>
</TR>
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM BAYOU STEEL CORPORATION CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED
STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 25,470,374
<SECURITIES> 0
<RECEIVABLES> 24,321,068
<ALLOWANCES> 928,918
<INVENTORY> 83,343,254
<CURRENT-ASSETS> 138,066,744
<PP&E> 152,870,324
<DEPRECIATION> 54,756,763
<TOTAL-ASSETS> 242,642,176
<CURRENT-LIABILITIES> 21,304,273
<BONDS> 118,984,533
<COMMON> 128,906
0
0
<OTHER-SE> 102,353,370
<TOTAL-LIABILITY-AND-EQUITY> 242,642,176
<SALES> 54,825,470
<TOTAL-REVENUES> 54,825,470
<CGS> 48,609,612
<TOTAL-COSTS> 50,378,004
<OTHER-EXPENSES> (102,765)
<LOSS-PROVISION> 46,856
<INTEREST-EXPENSE> 2,682,918
<INCOME-PRETAX> 2,140,026
<INCOME-TAX> 750,016
<INCOME-CONTINUING> 1,390,010
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,390,010
<EPS-BASIC> .11
<EPS-DILUTED> .10
</TABLE>
