ACME METALS INC /DE/, S-3/A, 1994-08-10

ACME METALS INC /DE/
S-3/A, 1994-08-10
STEEL WORKS, BLAST FURNACES & ROLLING MILLS (COKE OVENS)

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 10, 1994

REGISTRATION NO. 33-54095
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------

AMENDMENT NO. 1

TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ACME METALS INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 6719 36-3802419
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
13500 SOUTH PERRY AVENUE
RIVERDALE, ILLINOIS 60627
(708) 849-2500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
EDWARD P. WEBER, JR.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
ACME METALS INCORPORATED
13500 SOUTH PERRY AVENUE
RIVERDALE, ILLINOIS 60627
(708) 849-2500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
----------------
COPY TO:
ALTON B. HARRIS, ESQ.
HELEN LEVIN TOAL, ESQ.
JAMES T. EASTERLING, ESQ.
COFFIELD UNGARETTI & HARRIS
3500 THREE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60602
(312) 977-4400
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
CALCULATION OF REGISTRATION FEE
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $1.00 per
share.......................... 5,600,000 $22.375 $125,300,000 $43,206.90
- ---------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) The shares of Common Stock being registered hereby are issuable upon
exercise of outstanding Special Common Stock Purchase Warrants and are for
the account of security holders of the Company. No other shares of Common
Stock are being registered pursuant to this offering.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

5,600,000 SHARES

LOGO

COMMON STOCK

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

This Prospectus relates to 5,600,000 shares (the "Shares") of Common Stock of
Acme Metals Incorporated (the "Company") which are issuable without additional
payment upon the exercise of 5,600,000 special common stock purchase warrants
(the "Special Warrants") of the Company, all of which Shares are being offered
for sale by certain security holders of the Company. See "Selling
Stockholders." The Company will not receive any of the proceeds from the sale
of the Shares being offered hereby.

The Company has been advised by each of the Selling Stockholders that there
are no underwriting arrangements with respect to the sale of their respective
shares, that such shares will be sold from time to time in public sales in the
over-the-counter market at then prevailing prices or in private transactions at
negotiated prices, and that any brokerage fees will be paid by the Selling
Stockholders in connection therewith. See "Selling Stockholders."

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

SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECU-
RITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REP-
RESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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

The Company's Common Stock is traded under the symbol ACME on the Nasdaq
National Market. The closing price for such Common Stock was $25.250 per share
on August 5, 1994. .

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

The date of this Prospectus is August 10, 1994.
<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports, proxy material and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy material
and other information filed by the Company can be inspected and copied at the
offices of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 or
at its regional offices, 500 West Madison Street, Chicago, Illinois 60661 and 7
World Trade Center, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Such reports, proxy
material and other information concerning the Company also may be inspected at
the offices of The National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.

The Company has filed with the Commission a Registration Statement on Form S-
3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Common Stock. This Prospectus,
which constitutes a part of the Registration Statement, does not contain all
the information set forth in the Registration Statement, certain items of which
are contained in exhibits to the Registration Statement as permitted by the
rules and regulations of the Commission. Statements made in this Prospectus as
to the contents of any contract, agreement or other document referred to are
not necessarily complete. With respect to each such contract, agreement or
other document filed as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved, and
each such statement shall be deemed qualified in its entirety by such
reference.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents filed by the Company with the Commission pursuant to
the Exchange Act are hereby incorporated by reference in this Prospectus:

(i) the Annual Report on Form 10-K of the Company for the year ended
December 26, 1993;

(ii) the Quarterly Report on Form 10-Q of the Company for the quarter ended
March 27, 1994; and

(iii) the Quarterly Report on Form 10-Q of the Company for the quarter
ended June 26, 1994.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Common Stock offered hereby shall be deemed
to be incorporated by reference in this Prospectus. Any statement contained in
a document incorporated or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference in this Prospectus modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

The Company will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon the written or oral request of any such person, a
copy of any document described above (other than exhibits). Requests for such
copies should be directed to Edward P. Weber, Jr., Vice President, General
Counsel and Secretary, Acme Metals Incorporated, 13500 South Perry Avenue,
Riverdale, Illinois 60627 (telephone number (708) 849-2500).

2
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and notes thereto appearing
elsewhere in this Prospectus. References to fiscal years herein are references
to the Company's fiscal years which end on the last Sunday of the related
calendar year (for example, December 26, 1993). References to fiscal periods
herein are references to the Company's fiscal quarters which generally end on
the last Sunday of the last month of the related calendar period (for example,
December 26, 1993 or June 26, 1994).

Prior to this offering, the Company sold, by means of a private placement
(the "Special Warrant Offering"), $117,600,000 of special common stock purchase
warrants (the "Special Warrants"), the proceeds of which were placed in escrow
pending satisfaction of certain conditions. See "Special Warrant Offering."
Concurrently with this offering, the Company is separately offering
$125,000,000 aggregate principal amount of 12.5% senior secured notes due 2002
(the "Senior Secured Notes") and $117,958,000 aggregate principal amount of
13.5% senior secured discount notes due 2004 (the "Senior Secured Discount
Notes" and, together with the Senior Secured Notes, the "Notes") (the "Note
Offering"). Concurrently with the Note Offering, the Company is entering into a
$50,000,000 term loan facility (the "Term Loan Facility"), and the loans
thereunder (the "Term Loans") will be guaranteed jointly and severally by each
of the Company's subsidiaries. The Note Offering is conditioned upon, and
together with the registration of the Shares offered hereby, is a condition to
the release from escrow of the proceeds of sale of the Special Warrants. The
Term Loans will be funded concurrently with the closing of the Note Offering
and the Special Warrant Offering. For a description of the Notes, the Term Loan
Facility, the Special Warrant Offering and other financing arrangements, see
"Financing Plan," "Special Warrant Offering," "Description of Notes" and
"Description of Other Indebtedness."
THE OFFERING

This Offering consists of 5,600,000 shares of Common Stock of the Company
which are issuable without additional payment upon exercise of 5,600,000
Special Warrants previously issued and sold by the Company on a private
placement basis in Canada and Europe at a price of U.S. $21.00 per Special
Warrant, all of which Shares are being offered for sale by the several persons
whose respective names are set forth under "Selling Shareholders." The Company
will not receive any of the proceeds from the sale of shares of Common Stock by
the Selling Stockholders. The Company is not aware of any underwriting
arrangements with respect to the sale of any such shares. See "Selling
Stockholders."

THE COMPANY

Acme Metals Incorporated (the "Company"), based in Riverdale, Illinois, is a
fully integrated manufacturer and marketer of steel, steel strapping and
strapping tools, steel tubing and automotive and light truck jacks. The
Company's operations are divided into two primary segments, the "Steel Making
Segment" and the "Steel Fabricating Segment." Acme Steel Company ("Acme
Steel"), which is the Company's sole Steel Making Segment operating subsidiary,
accounted for 41% of the Company's consolidated net sales in 1993. The Steel
Fabricating Segment, consisting of Acme Packaging Corporation ("Acme
Packaging"), Alpha Tube Corporation ("Alpha Tube") and Universal Tool &
Stamping Company, Inc. ("Universal"), accounted for the remaining 59% of the
Company's consolidated net sales in 1993.

Over the past eight years, the Company has pursued a downstream integration
strategy, intended to enhance both the value and margins of its steel products.
This strategy, which included the acquisition of Universal and Alpha Tube and
of additional strapping facilities, has helped to moderate the impact of
fluctuating steel demand on Acme Steel's operations by creating captive
businesses that consume approximately 40% to 45% of Acme Steel's steel
production. These businesses allow the Company to sell fabricated steel
products that have a higher value added component. Having implemented its
downstream integration strategy, the Company is now pursuing a business
strategy consisting of the following key elements: reducing production costs,
expanding shipping capability and product range, increasing sales of specialty
products, and improving product quality and customer service.

3
<PAGE>

steel. Acme Steel attempts to utilize the flexibility of its small production
quantities by focusing on niche markets and targeting customers with small
order sizes and special metallurgical requirements such as high carbon, special
alloy and high-strength steels. The principal markets served by Acme Steel
include the agricultural equipment, automotive component, industrial equipment,
industrial fastener, pipe and tube, processor and tool manufacturing
industries.

Acme Packaging, which represented 33% of the Company's 1993 consolidated net
sales, is a U.S. producer of steel strapping and strapping tools. The Company
believes that Acme Packaging's strong market position is attributable to (i) a
broad product line, (ii) high quality, low cost strapping produced in modern
facilities, (iii) the location of its production facilities in close proximity
to a broad customer base and (iv) the benefits of a close relationship with
Acme Steel, which supplies virtually all of Acme Packaging's steel. Acme
Packaging's strapping products are principally used to unitize (i.e., bind)
products for the agricultural, automotive, brick, construction, fabricated and
primary metals, forest products, paper and wholesale industries.

Alpha Tube, which represented 16% of the Company's 1993 consolidated net
sales, is a U.S. producer of high quality welded carbon steel tubing used for
furniture, recreational, construction and automotive applications. Alpha Tube
has developed expertise in certain applications demanding light gauge tubing
and targets customers whose requirements match Alpha Tube's production
capabilities.

Universal, which accounted for 10% of the Company's 1993 consolidated net
sales, produces automotive and light truck jacks, tire wrenches and accessories
for the original equipment manufacturing ("OEM") market. Management estimates
that Universal currently holds a 30% share of the OEM market for auto and light
truck jacks in North America. The Company believes that Universal's strong
market position with U.S. and foreign transplant automotive manufacturers is
principally the result of its product development capability, high quality
products and just-in-time delivery capabilities.
MODERNIZATION AND EXPANSION PROJECT

In 1990 the Company began a study of available business strategies and
technological developments in light of its then operational and competitive
opportunities. In July 1992, the Board of Directors of the Company authorized a
study of the feasibility of constructing a continuous thin slab caster/hot
strip mill complex. In connection with this study, the Company received reports
from the management consulting firm of A.T. Kearney, Inc. Based on the
feasibility study, the Kearney reports and extensive additional analysis
performed by the Company of available technology, market opportunities and
construction requirements, the Board of Directors of the Company has authorized
construction of a new continuous thin slab caster/hot strip mill complex (the
"Modernization Project") at Acme Steel's Riverdale, Illinois plant subject to
the Special Warrant Offering and the Note Offering.

The Company believes that Acme Steel currently enjoys a position as a low
cost producer of high quality liquid steel. Although Acme Steel sells many of
its products for use in higher-priced specialty applications, its present ingot
pouring and rolling process results in finished steel production costs
significantly above those of certain of its competitors. The Company believes
the Modernization Project will allow Acme Steel to build on its strengths as a
low cost producer of liquid steel by significantly increasing its overall
efficiency and reducing its finished steel production costs, thereby improving
its gross margins. The Modernization Project should also result in finished
steel products with improved physical and metallurgical properties.

Based on the turnkey contract price of $364.2 million, without taking into
account financing costs or changes that may be requested by Acme Steel during
construction, management estimates that the cost of the Modernization Project,
including equipment, ancillary facilities, construction, and general contractor
fees, will not exceed $372 million. As a result of the Modernization Project,
the Company expects shipping capability to increase from approximately 720,000
tons per year to approximately 925,000 tons per year within two years of start-
up and to approximately 970,000 tons per year within four years of start-up.
When the Modernization Project is completed, the Company estimates that it will
provide savings in operating costs, based on full utilization of its expanded
shipping capability of approximately 970,000 tons per year and

4
<PAGE>

certain other material assumptions, of approximately $77 per ton, resulting
from the elimination of many of the production steps utilized in the existing
ingot pouring and rolling process, lower energy consumption, higher labor
productivity and increased production yields. See "Risk Factors--Modernization
and Expansion Project" and "Modernization and Expansion Project--Estimated
Costs and Savings."

FINANCING PLAN

The Company has adopted a plan of financing intended to provide the funds
necessary to complete the Modernization Project, to repay certain indebtedness
currently outstanding and to provide additional liquidity. The Company's plan
of financing includes the following: (i) the Note Offering, (ii) the Special
Warrant Offering, (iii) the Term Loan Facility, and (iv) the securing of a
working capital facility (the "Working Capital Facility"), which initially will
be undrawn. The Special Warrant Offering occurred prior to the Note Offering,
but the net proceeds of the Special Warrant Offering have been placed in
escrow. The Note Offering is conditioned upon and, together with the
registration of the Shares offered hereby, is a condition to the release from
escrow of the net proceeds of the Special Warrant Offering. The Term Loans will
be funded concurrently with the closing of the Note Offering. For a more
complete description of the material terms of the Notes, the Special Warrants
and the Shares offered hereby, see "Financing Plan," "Description of Other
Indebtedness," "Description of Capital Stock," "Description of Notes," and
"Special Warrant Offering."

The following table sets forth the Company's sources and immediate uses of
funds as if the foregoing transactions were completed on June 26, 1994:

<TABLE>
<CAPTION>
(DOLLARS
IN
THOUSANDS)
----------
<S> <C>
Sources of Funds
Senior Secured Notes......................................... $125,000
Senior Secured Discount Notes................................ 80,000
Term Loan Facility(1)........................................ 50,000
Special Warrant Offering..................................... 117,600
Working Capital Facility(2).................................. 0
--------
Total...................................................... $372,600
========
Uses of Funds
Increase in cash and cash equivalents(3)..................... $300,600
Repayment of 9.35% Senior Notes.............................. 50,000
Estimated fees and expenses(4)............................... 22,000
--------
Total...................................................... $372,600
========
</TABLE>
- --------

(1) The Term Loans to be made under the Term Loan Facility will be funded
concurrently with the closing of the Note Offering. The Term Loans will be
guaranteed by each of the Company's Subsidiaries on a senior basis and will
be secured equally and ratably by the collateral securing the Senior
Secured Notes and Senior Secured Discount Notes. See "Description of Other
Indebtedness--Term Loan Facility."

(2) The Company has obtained commitments for an $80 million Working Capital
Facility to provide for additional liquidity. The Working Capital Facility
initially will be undrawn. See "Description of Other Indebtedness--Working
Capital Facility."

(3) The increase in cash and cash equivalents, together with cash currently on
hand and cash flow from operations, will be used for the construction and
integration of the Modernization Project. At June 26, 1994 the Company had
cash equivalents of $73.7 million. Sources and Uses of Funds above do not
give effect to the proposed purchase by Raytheon Engineers to Constructors,
Inc. ("Raytheon") of $9 million of newly issued shares of Common Stock. See
"Modernization and Expansion Project--Engineering, Procurement and
Construction Contract."

(4) Estimated fees and expenses include financing fees for this Offering, the
Special Warrant Offering and the Note Offering, related offering expenses
and a prepayment penalty of $1.9 million, net of taxes, related to
repayment of the 9.35% Senior Notes.

5
<PAGE>

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA

The following table sets forth selected historical consolidated financal data
and operating data for the Company for the periods indicated. The Consolidated
Statements of Operations Data and Consolidated Balance Sheet Data for, and as
of the end of, each of the five years in the period ended December 26, 1993
were derived from the consolidated financial statements of the Company, which
have been audited by Price Waterhouse LLP, independent accountants. The
selected historical consolidated financial data for, and as of the end of, the
six months ended June 27, 1993 and June 26, 1994 were derived from unaudited
financial statements for the Company which, in the opinion of management,
reflect all adjustements which are of a normal recurring nature necessary for a
fair presentation of the results of such periods. Results for interim periods
are not necessarily indicative of the results to be expected for an entire
fiscal year. The following table should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements and notes thereto
appearing elsewhere herein.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER TON DATA)
FISCAL YEAR FIRST HALF
--------------------------------------------------- ------------------
1989 1990 1991 1992 1993 1993 1994
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Net sales................. $439,412 $446,042 $376,951 $391,562 $457,406 $225,032 $256,423
Cost of products sold..... 375,902 396,790 335,503 347,624 397,526 198,327 215,691
Depreciation expense...... 11,624 12,540 13,700 14,392 14,657 7,517 7,596
Selling and administrative
expense.................. 25,751 27,916 29,219 28,901 30,633 13,800 15,304
Restructuring/nonrecurring
charge................... -- -- -- 2,700(1) 1,925(2) -- --
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)... 26,135 8,796 (1,471) (2,055) 12,665 5,388 17,832
Interest expense, net..... (2,116) (4,178) (4,211) (3,869) (3,813) (1,993) (1,620)
Unusual income item....... -- 4,005 1,241 1,047 1,210 -- --
Other non-operating
income................... 2,107 765 1,391 355 370 222 1,211
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes and
cumulative effect of
changes in accounting
principles............... 26,126 9,388 (3,050) (4,522) 10,432 3,617 17,423
Income tax provision
(credit)................. 9,926 3,755 (732) (1,673) 4,173 1,447 6,969
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
cumulative effect of
changes in accounting
principles............... 16,200 5,633 (2,318) (2,849) 6,259 2,170 10,454
Cumulative effect of
changes in accounting
principles, net of taxes. -- -- -- (50,323)(3) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)......... $ 16,200 $ 5,633 $ (2,318) $(53,172) $ 6,259 $ 2,170 $ 10,454
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
CONSOLIDATED:
Ratio of earnings to fixed
charges(4)............... 7.5x 1.9x -- -- 2.5x 2.2x 6.9x
Per Share Data
Income (loss) before
extraordinary credit
and cumulative effect
of changes in
accounting principles.. $ 3.00 $ 1.05 $ (0.43) $ (0.53) $ 1.15 $ 0.40 $ 1.84
Cumulative effect of
changes in accounting
principles............. -- -- -- (9.32) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net Income (loss)....... $ 3.00 $ 1.05 $ (0.43) $ (9.85) $ 1.15 $ 0.40 $ 1.84
Pro forma assuming
exercise of Special
Warrants .............. -- -- -- -- 0.57 -- 0.92
EBITDA(5)................. $ 40,273 $ 22,592 $ 14,144 $ 15,705 $ 30,194 $ 13,441 $ 26,937
Pro forma total interest
expense(6)............... 33,329 16,483
Pro forma cash interest
expense(7)............... 20,484 10,243
Ratio of EBITDA to pro
forma total interest
expense(8)............... 0.9x 1.6x
Ratio of EBITDA to pro
forma cash interest
expense.................. 1.5x 2.6x
Capital expenditures...... $ 14,960 $ 28,604 $ 10,611 $ 7,557 $ 11,749 $ 4,305 $ 5,071
ACME STEEL COMPANY:
Tons shipped-external
customers................ 506,475 436,123 286,385 320,192 413,645 205,419 238,067
Tons shipped-intersegment. 233,374 259,243 273,177 289,946 284,361 154,219 144,063
-------- -------- -------- -------- -------- -------- --------
Total tons shipped........ 739,849 695,366 559,562 610,138 698,006 359,638 382,130
Average price per ton(8).. $ 417 $ 422 $ 423 $ 413 $ 426 $ 411 $ 444
Average production cost
per ton(8)............... 339 355 354 338 349 338 338
Raw steel to finished
product yield............ 76.1% 77.2% 78.0% 78.7% 78.6% 78.5% 78.6%
</TABLE>

6
<PAGE>

<TABLE>
<CAPTION>
JUNE 26, 1994
-----------------------
ACTUAL AS ADJUSTED(9)
-------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 73,651 $374,251
Total assets............................................ 350,628 658,104
Long-term debt (including current portion).............. 56,000 261,000
Stockholders' equity.................................... 96,209 200,909
</TABLE>
- --------
(1) See Restructuring Charge in the notes to the consolidated financial
statements.
(2) See Nonrecurring Charge in the notes to the consolidated financial
statements.
(3) Cumulative effect of changes in account principles, net of taxes, includes
the effects of adopting Financial Accounting Standard ("FAS") No. 106
"Accounting for Postretirement Benefits Other Than Pensions" and FAS No.
109 "Accounting for Income Taxes." See Postretirement Benefits Other Than
Pensions and Income Taxes in the notes to the consolidated financial
statements.

(4) The ratio of earnings to fixed charges is computed by dividing (i) the sum
of earnings from continuing operations before income taxes, interest
expense (including amortization of debt issuance costs), the interest
portion of rental expenses and the undistributed income of less than 50
percent owned persons accounted for by the equity method by (ii) fixed
charges, which consist of interest expense (including amortization of debt
issuance costs) and the interest portion of rental expenses. Earnings for
1992 and 1991 were insufficient to cover fixed charges by $4.5 million
($5.5 million if a non-recurring gain of $1 million before income taxes
related to the sale of the Company's interests in coal producing property
is excluded from earnings) and $4.3 million, respectively. Pro forma ratios
of earnings to fixed charges, giving effect solely to the refinancing of
the 9.35% Senior Notes (including the prepayment penalty) with a portion of
the Note Offering, would have been 5.3x and 2.0x for the first half of 1994
and the 1993 fiscal year, respectively.

(5) EBITDA is defined as net income plus income taxes, net interest expense,
depreciation and amortization, restructuring and nonrecurring items,
cumulative effect of changes in accounting principles, and less unusual
income. The Company believes EBITDA provides additional information for
determining its ability to meet debt service requirements. EBITDA does not
represent net income or cash flow from operations as determined by
generally accepted accounting principles, and EBITDA is not necessarily an
indication of whether cash flow will be sufficient to fund cash
requirements. EBITDA does not give effect to any investment of the
approximately $374.3 million of cash remaining after application of the net
proceeds of the Note Offering and the Special Warrant Offering and the
incurrence of the Term Loans to repay indebtedness and pay related
expenses.

(6) Pro forma total interest expense reflects the issuance of the Senior
Secured Notes and the Senior Secured Discount Notes and the incurrence of
the Term Loans, as follows:

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 26, 1993 JUNE 26, 1994
----------------- ----------------
<S> <C> <C>
Issuance of Senior Secured Notes........ $15,625 $ 7,813
Issuance of Senior Secured Discount
Notes.................................. 11,165 5,400
Term Loans.............................. 4,406 2,203
Existing 6.5% to 6.75% Notes payable.... 453 227
Amortization of financing fees on Notes. 1,680 840
------- -------
$33,329 $16,483
======= =======
</TABLE>

In calculating pro forma interest expense, the Company has utilized the
interest rate of 12.5% on the Senior Secured Notes, the effective interest
rate of 13.5% on the Senior Secured Discount Notes and an interest rate of
8.8% on the Term Loan Facility (based on LIBOR as of August 3, 1994). The
Company has assumed that all interest is expensed in the period incurred.
Interest on the Notes and the Term Loans and related financing fees will be
capitalized as part of the Modernization Project when (i) the expenditures
for the asset have been made, (ii) activities that are necessary to get the
asset ready for its intended use are in progress and (iii) interest cost is
being incurred.

(7) Pro forma cash interest expense represents total interest expense,
excluding the amortization of financing fees on the Notes and the Term
Loans and the amortization of the discount of the Senior Secured Discount
Notes.
(8) Average price and average production costs per ton, which can be
significantly affected by Acme Steel's product mix in a given period,
include shipments made to external customers and intersegment shipments.
(9) As adjusted to give effect to the transactions described under "Financing
Plan."

7
<PAGE>

RISK FACTORS

In addition to the other information in this Prospectus, prospective
investors should carefully review the following risk factors before deciding to
purchase any of the Shares offered hereby.

VARIABILITY OF FINANCIAL RESULTS

The consolidated financial performance of the Company, and in particular of
its subsidiary, Acme Steel, is significantly affected by the cyclical nature of
the steel industry. For the years 1990, 1991, 1992 and 1993, Acme Steel shipped
approximately 695,000, 560,000, 610,000 and 698,000 net tons of steel,
respectively, with an average realized price per ton of approximately $422,
$423, $413 and $426. Principally as a result of the impact of these changes in
shipment volumes and, to a lesser extent, steel prices, the Company's
consolidated net sales for the years 1990, 1991, 1992 and 1993 were $446.0
million, $376.9 million, $391.6 million and $457.4 million, respectively, and
its consolidated operating income (or loss) was $8.8 million, ($1.5) million,
($2.1) million and $12.7 million, respectively. For the six months ended June
26, 1994, Acme Steel shipped approximately 382,000 net tons of steel with an
average realized price per ton of $444, compared to shipments of approximately
360,000 net tons of steel and an average realized price per ton of $411 in the
six months ended June 27, 1993. The Company reported consolidated net sales of
$256.4 million and consolidated operating income of $17.8 million for the six
months ended June 26, 1994, compared to consolidated net sales of $225.0
million and consolidated operating income of $5.4 million for the six months
ended June 27, 1993. No assurance can be given that these trends in the
Company's consolidated financial performance will continue or that other events
likely to have an adverse effect on the steel industry or the Company, such as
an economic downturn or an increase in competition, may not occur.

LEVERAGE AND ACCESS TO CAPITAL

After the Note Offering, the Company and its subsidiaries will have
significant amounts of outstanding indebtedness. The indebtedness of the
Company and its subsidiaries and the restrictive covenants contained in
existing and future debt instruments, including the Indentures relating to the
Notes and the loan documents relating to the Working Capital Facility, could
significantly limit the operating and financial flexibility of the Company.
These factors could also limit the ability of the Company and its subsidiaries
to take action in response to competitive pressures or adverse economic
conditions. The Company currently is, and upon the consummation of the Note
Offering will be, in compliance with the restrictive covenants and tests
contained in its debt instruments.

After giving effect to the issuance of the Notes and the incurrence of the
Term Loans, the Company's ratios of EBITDA to pro forma total interest expense
and EBITDA to pro forma cash interest expense would have been 0.9:1 and 1.5:1
for the fiscal year ended December 26, 1993 and 1.6:1 and 2.6:1 for the six
months ended June 26, 1994. The Company believes that internally generated
funds, currently available cash resources, the net proceeds of the Note
Offering, the Special Warrant Offering and the incurrence of the Term Loans,
and amounts to be available to the Company and its subsidiaries under the
Working Capital Facility will be sufficient to fund the anticipated capital and
other expenditures (including expenses relating to the Modernization Project)
of the Company and meet its fixed charge requirements for the foreseeable
future, including through the completion of the Modernization Project. However,
there can be no assurance that the amounts available from such sources will be
sufficient for such purposes. The Company may be required to seek additional
capital financing from a variety of potential sources, including additional
bank financing and/or debt or equity securities offerings. No assurance can be
given that such sources of funding will be available if required or, if
available, will be on terms satisfactory to the Company.

CYCLICALITY, COMPETITION, AND OTHER INDUSTRY FACTORS

The U.S. steel industry is a cyclical business characterized by excess
capacity and intense competition. In the first half of the 1980s, many steel
producers sustained large losses which led to several major

8
<PAGE>

bankruptcies and restructurings. Factors such as production overcapacity,
increased U.S. and international competition, high labor costs, inefficient
plants and reduced levels of steel demand contributed to these losses. Between
1982 and 1993, U.S. steel producers reduced their raw steel production capacity
by approximately 25%. In addition, in the late 1980s the U.S. steel industry
experienced increased demand, lower levels of steel imports and increased
efficiency through modernization of production facilities. As a result of these
and other factors, industry profits reached record levels in 1988. However, in
the latter half of 1989, steel prices and demand again began to decline, and a
number of U.S. producers reported losses in 1990, 1991 and 1992 in a sluggish
U.S. economic environment. Although many steel producers reported improved
results in 1993 compared to 1992, and the first six months of 1994 compared
with the same period in 1993, there can be no assurance that this recovery will
continue or that there will be any future improvement in U.S. steel industry
earnings.

Competition among U.S. steelmakers is intense with respect to price, service
and quality. Integrated steel producers have lost market share to mini-mills in
recent years. Mini-mills are generally smaller volume steel producers that use
ferrous scrap as their basic raw material and employ non-union workers. These
mills have recently expanded their product lines from commodity type items to
include larger-size structural products and flat-rolled products, including
those made with new, continuous thin cast technologies. To date, mini-mills are
the only U.S. producers to utilize these technologies. In addition, certain
U.S. integrated steelmakers have gone through reorganizations under Chapter 11
of the U.S. Bankruptcy Code. Following their reorganizations, these companies
generally have reduced costs and become more effective competitors. U.S. steel
producers also have invested heavily in new plants and equipment that have
enabled many companies to improve efficiency and increase productivity.

Foreign competition, from time to time and product line by product line, has
been a significant competitive factor for U.S. integrated steel producers. The
intensity of foreign competition is substantially affected by fluctuations in
the value of the United States dollar against several other currencies. The
Company believes that the attractiveness of the United States steel markets to
certain foreign producers has been diminished somewhat during recent years by a
substantial decline in the value of the United States dollar relative to these
foreign currencies. However, foreign exchange rates are subject to substantial
fluctuations, and there can be no assurance that this condition will continue
to exist. Further, many foreign steel producers are controlled or subsidized by
foreign governments whose decisions concerning production and exports may be
influenced by political and economic policy considerations as well as by
prevailing market conditions and profit opportunities. As a result, despite
relatively low U.S. steel prices and narrow profit margins, many foreign
producers have continued to ship steel products into the U.S. market. Acme
Steel has experienced little foreign competition in recent years in the markets
it serves. There can be no assurance, however, that foreign competition will
not increase in the future, which could adversely affect the Company's
operating results.

Materials such as aluminum, composites, plastics, and ceramics compete as
substitutes for steel in many of Acme Steel's markets. No assurance can be
given that an increase in use of these or other product substitutes will not
occur or, if such substitutions were to occur, that they would not have a
material adverse effect on the Company.

NEED TO MODERNIZE

Over the past decade, the price of steel, adjusted for inflation, has fallen
significantly. Although a significant portion of this decline is the result of
worldwide steelmaking overcapacity, steel pricing is also influenced by low
cost producers in the U.S. steel industry. Many of Acme Steel's competitors
have implemented steelmaking technologies not utilized by Acme Steel. As a
result, Acme Steel's costs to produce a ton of finished steel are substantially
higher than those of certain of its competitors. The Company believes that
foreign and U.S. steel producers will continue to invest heavily to replace
aging or obsolete facilities and to achieve increased production efficiencies
and improved product quality. These investments are expected to be made in
various aspects of the manufacturing process, including continuous casting and
other mill

9
<PAGE>

technologies. The Company believes that it must undertake the Modernization
Project and make the significant capital investments required if Acme Steel is
to achieve levels of cost, productivity and product quality already attained by
certain of its competitors.

MODERNIZATION AND EXPANSION PROJECT

The Company believes the equipment selected for and design of the
Modernization Project are appropriate and well conceived, but there can be no
assurance that the potential benefits of the Modernization Project, including
the anticipated increase in finished steel shipping capability, will actually
be achieved or that sufficient demand will exist for the additional finished
steel production. In particular, the estimated cost savings per ton expected to
be realized from the Modernization Project are based on numerous assumptions
including operation of Acme Steel's facilities at its full expanded capability
of approximately 970,000 tons per year capacity, which assumptions may not
prove to be accurate. In the event that output is less than that which could be
generated at full capacity, the actual cost savings per ton will likely be
lower than anticipated. In addition, continuous thin slab casting is a
relatively new technology, with the first continuous thin slab casting
facilities having been constructed in 1989. At present, there are only two
operating continuous thin slab casting facilities in North America with an
estimated combined capacity of 3.8 million tons per year. Unlike Acme Steel's
contemplated operation upon completion of the Modernization Project, the
operator of these facilities uses ferrous scrap as its basic raw material and
does not cast certain of the specialty steels and grades which Acme Steel
intends to produce. There can be no assurance that the Company can successfully
implement these aspects of the Modernization Project in the manner and for the
purposes planned.

Acme Steel has entered into an Engineering, Procurement and Construction
Contract ("EPC Contract") with Raytheon Engineers and Constructors, Inc.
("Raytheon"), a wholly owned subsidiary of Raytheon Company, pursuant to which
Raytheon will assume responsibility for the timely and effective completion of
the Modernization Project. Although the EPC contract provides for liquidated
damages, there can be no assurance that the amount of liquidated damages will
be sufficient to cover the Company's damages in the event of a significant
delay in the construction of the Modernization Project or an inability, for any
reason, to complete successfully the Modernization Project. Furthermore, if the
Modernization Project is not completed in a timely manner or for the amounts
budgeted, or there were to be substantial, unexpected production interruptions
or other start-up difficulties, the consolidated results of operations and
competitive position of the Company and its subsidiaries could be materially
adversely affected. In the event of any such difficulties, senior management
may have to devote substantial time to these matters which could adversely
affect existing operations. See "Modernization and Expansion Project."

POSSIBLE FLUCTUATIONS IN RAW MATERIAL AND ENERGY COSTS

The Company's operations at its Acme Steel subsidiary are heavily dependent
on the supply of various raw materials including iron ore pellets, coal and
energy. Acme Steel is contractually obligated to purchase, at the higher of
production cost or market price, its proportionate share of the iron ore
produced at Wabush Mines, a joint venture project in which Acme Steel has an
approximate 15.1% interest. See "Business--Raw Materials and Energy." In 1993
Acme Steel acquired approximately 56% of its iron ore pellet requirements from
this venture. Production costs at Wabush Mines currently approximate market
price; however, there can be no assurance that the mines' cost structure will
not result in above world market prices in the future. The balance of Acme
Steel's iron ore pellet needs and all of its coal and energy needs are obtained
at market prices. Supply interruptions or cost increases, to the extent that
Acme Steel could not pass on these costs to its customers, could adversely
affect the future consolidated results of operations of the Company and its
subsidiaries.

ENVIRONMENTAL COMPLIANCE AND ASSOCIATED COSTS

U.S. steel producers, including Acme Steel, are subject to stringent Federal,
state and local environmental laws and regulations concerning, among other
things, air emissions, waste water discharge,

10
<PAGE>

and solid and hazardous waste disposal. U.S. steel producers, including Acme
Steel, have spent and can be expected to spend in the future, substantial
amounts for compliance with these environmental laws and regulations. The costs
of environmental compliance may place U.S. steel producers at a competitive
disadvantage (1) to foreign steel producers, which may not be subject to
environmental requirements as stringent as those in the United States and (2)
to producers of materials that compete with steel, which may not be required to
bear equivalent costs in producing their products.

The Company, on a consolidated basis, has incurred substantial costs in
complying with Federal, state and local environmental laws and regulations. The
Company's capital expenditures related to environmental compliance were $6.6
million in 1991, $0.3 million in 1992 and $3.4 million in 1993. The Company
currently estimates that capital expenditures for environmental compliance will
be approximately $6 million and $7 million in 1994 and 1995, respectively. The
Company believes that it is currently in substantial compliance with the
various environmental regulations applicable to its businesses and, in
particular, that its coke ovens currently are in compliance with Clean Air Act
standards anticipated to be in effect through 2007. Nevertheless, there can be
no assurance that environmental requirements will not change in the future or
that the Company will not incur significant costs in the future to comply with
such requirements. The need to comply with even more stringent environmental
laws and regulations could have a material adverse effect on the Company's
financial condition and results of operations. See "Business--Environmental"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

CERTAIN INDEMNIFICATION ARRANGEMENTS

In connection with the spinoff of Acme Steel from The Interlake Corporation
("Interlake") in 1986, Interlake entered into cross-indemnification agreements
with Acme Steel relating to certain environmental, tax and other matters. To
date, Interlake has met all of its obligations under such agreements. In the
event that Interlake for any reason were unable to fulfill its obligations
under such agreements, the Company could have significant increased future
liabilities. See "Business--Legal Proceedings."

DIVIDEND POLICY

Except to the extent that redemptions of the Company's 1986 and 1988
Preferred Share Purchase Rights Plans are deemed to be dividends, since the
1986 Reorganization (defined below) the Company has not paid dividends on its
Common Stock. The Company's current intention is to reinvest its earnings to
finance the growth of its business. Accordingly, the Company does not intend to
pay dividends on its Common Stock in the foreseeable future. In addition, the
Indentures governing the Company's obligations with respect to the Notes limit
the amount of dividends that the Company may pay to its stockholders.

THE COMPANY
GENERAL

The Company is a fully integrated manufacturer and marketer of steel, steel
strapping and strapping tools, steel tubing and automotive and light truck
jacks. The Company's operations are divided into two primary segments, the
"Steel Making Segment" and the "Steel Fabricating Segment." Through these two
segments, the Company is a leader in the production of steel strapping and
automotive and light truck jacks, as well as a leader in the provision of steel
products to certain niche markets.

Based in Riverdale, Illinois, the Company is the successor to the original
Acme Steel Company (founded in 1884 as the Acme Flexible Clasp Company of
Chicago), which merged in 1964 with the Interlake Iron Company (founded in 1905
in New York as the By-Products Coke Corporation) to form Interlake Steel
Corporation. As a result of a reorganization in 1986 (the "1986
Reorganization"), a holding company was formed, The Interlake Corporation ("New
Interlake"), which became the parent company of Interlake, Inc. ("Old
Interlake"). Old Interlake then transferred its non-steel related operations
and assets to New Interlake. Old Interlake retained the iron, steel and U.S.
steel strapping assets and businesses, was renamed Acme Steel Company, and was
spun off as an independent public company in May 1986.

Acme Steel Company undertook a further reorganization in May 1992 (the "1992
Reorganization"), when the Company was formed and became the parent of Acme
Steel and Acme Steel's former operating subsidiaries, Acme Packaging, Alpha
Tube and Universal. Acme Steel and its successor, the Company, have been traded
on the Nasdaq National Market since 1986 under the symbol "ACME."

11
<PAGE>

The Company's principal executive offices are located at 13500 South Perry
Avenue, Riverdale, Illinois 60627, and the Company's telephone number is
708/849-2500. The Company's registered agent in the State of Delaware is The
Corporation Trust Company, and its registered address in Delaware is
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801.

The following chart depicts the organization of the Company and its
subsidiaries. Each of the subsidiaries will unconditionally guarantee the
Company's obligations under the Notes, and the capital stock of each subsidiary
will be pledged to secure the Company's obligations under the Notes.
----------------
ACME METALS
INCORPORATED
----------------
|
---------------------------------------------------
| 100% | 100%
---------------- ------------------
ACME STEEL ACME PACKAGING
COMPANY CORPORATION
---------------- ------------------
| 100% |
---------------- |
ALABAMA |
METALLURGICAL |
CORPORATION |
---------------- |
|
--------------------------------------------------
| 100% | 100% | 100% | 100%
------------ ------------- -------------- ----------------
UNIVERSAL ALPHA TUBE ALTA ACME STEEL
TOOL & CORPORATION SLITTING COMPANY
STAMPING CORPORATION INTERNATIONAL,
COMPANY, INC.
INC.
------------ ------------- -------------- ----------------

Alabama Metallurgical Corporation presently is not engaged in manufacturing
operations. Acme Steel Company International, Inc. is a foreign sales
corporation, formed for the purpose of processing sales to certain non-U.S.
entities. Alta Slitting Corporation ("Alta") performs slitting services for
Alpha Tube, and references in this prospectus to Alpha Tube will be deemed to
include reference to Alta.

MODERNIZATION AND EXPANSION PROJECT

OBJECTIVES

12
<PAGE>

Based on the turnkey contract price of $364.2 million, without taking into
account financing costs or changes that may be requested by Acme Steel during
construction, management estimates that the cost of the Modernization Project,
including equipment, ancillary facilities, construction, and general contractor
fees, will not exceed $372 million. As a result of the Modernization Project,
the Company expects shipping capability to increase from approximately 720,000
tons per year to approximately 925,000 tons per year within two years of start-
up and to approximately 970,000 tons per year within four years of start-up.
When the Modernization Project is completed, the Company estimates that it will
provide savings in operating costs, based upon full utilization of its expanded
shipping capability of approximately 970,000 tons per year and certain other
material assumptions, of approximately $77 per ton, resulting from elimination
of many of the production steps utilized in the existing ingot pouring and
rolling process, lower energy consumption, higher labor productivity and
increased production yields.

COMPETITIVE PRESSURES FOR MODERNIZATION

Over the past decade, the average price of all steel products, adjusted for
inflation, has fallen significantly. The forces contributing to this downward
price trend have included industry overcapacity, the growth of low cost U.S.
steel producers that make increased use of continuous casting and other
techniques for improved productivity, and lower priced imports that benefit
from foreign government subsidies. The Company believes that in recent years
steel prices have been significantly influenced by producers with the lowest
costs, and that those costs are, in large part, a function of the level of the
producers' technological advancement.

Many U.S. steel producers have sought to reduce their operating costs
significantly through the modernization and rationalization of their
facilities. One of the principal modernization initiatives has been the
development of continuous casting facilities, first for bar products, then for
thick slabs (more than 6 inches) and most recently for thin slabs (less than 4
inches). Continuous casting is a significantly less expensive method of slab
production than the ingot pouring and rolling process currently employed by
Acme Steel.

According to the American Iron and Steel Institute ("AISI") statistics, over
the past decade the U.S. steel industry has increased its continuous cast steel
production to nearly 85% of flat-rolled steel production. Twelve U.S.
facilities now use a continuous casting process to produce thick slabs. On a
combined basis these facilities have an estimated capability of 39 million tons
of flat-rolled steel per year or, based on an assumed yield of 90%,
approximately 76% of total annual flat-rolled steel shipments. In 1989, the
first continuous thin slab casting facilities were constructed. More
technologically advanced than thick slab continuous casting facilities, thin
slab casting eliminates the extra heating and rolling necessary to flatten
thick slabs. At present there are two operating continuous thin slab casting
facilities in North America with an estimated combined capability of 3.8
million tons per year or, based on an assumed yield of 90%, approximately 7% of
total annual flat-rolled steel shipments. Two additional thin slab casting
facilities are now under construction with an estimated combined capacity of 2
million tons. In addition to continuous casting, advanced steel producers are
employing other technologies, including ladle metallurgy furnaces and computer
controlled equipment, to reduce production costs, improve quality, and improve
customer responsiveness.

EXISTING STEELMAKING PROCESS

Acme Steel currently produces steel through an ingot pouring and rolling
process rather than by continuous casting. Because of the variability in ingots
and the additional conditioning and shaping processes

13
<PAGE>

needed to produce flat-rolled steel from them, the ingot process involves more
product defects, greater yield losses, higher energy consumption and lower
labor productivity than continuous casting. Further, Acme Steel's current
rolling mill facilities cannot produce a steel coil that is large enough (more
than 550 pounds per inch of width) and wide enough (more than 30 inches) to
supply all of the needs of its current customers
and many other users of flat-rolled steel. In addition, the physical
limitations of its present mill facilities do not allow Acme Steel to utilize
fully the existing raw steel capacity of its steelmaking facilities. By means
of the Modernization Project, Acme Steel expects to bring its facilities up to
world-class standards and eliminate its competitive disadvantages with respect
to more technologically advanced steel producers.

In primary steelmaking, iron ore, coke, limestone and other raw materials are
processed in blast furnaces to produce molten iron or "hot metal." In Acme
Steel's facilities, this hot metal is converted into raw or liquid steel in a
basic oxygen furnace in which impurities are removed and the chemistry or
metallurgy for end use is determined on a batch-by-batch basis. Acme Steel's
basic oxygen furnace facility employs two vessels, with a steelmaking capacity
of 100 tons per heat.

Liquid steel from the basic oxygen furnace flows into ladles, which are then
positioned via an overhead crane above a line of cast iron ingot molds. A
stream of steel flows through an opening in the bottom of the ladle to "teem"
or fill the cast iron molds. When the steel is solid enough to hold its shape,
a stripper crane lifts away the mold while a plunger holds down the steel
ingot. The "stripped" ingots are then taken to furnaces or "soaking pits" where
they are reheated or "soaked" until they reach a uniform temperature
throughout. The reheated ingots are carried to the primary rolling mill where
they are shaped into semi-finished steel slabs 4 1/2 to 6 1/2 inches thick with
the desired width and length.

The slabs are inspected, conditioned, if needed, by scarfing or mechanical
grinding to remove surface imperfections, and then stored. When scheduled for
production, the slabs are reheated to rolling temperature and finished in Acme
Steel's semi-continuous hot strip mill where they are rolled to final
thickness, tempered, and coiled into hot bands. After further processing to
customer specifications, finished products are shipped to external customers
and to the Company's Steel Fabricating Segment in the form of coils.

In the production process Acme Steel currently uses, the loss of material
between the molten steel in the basic oxygen furnace and the finished coil of
steel results in a yield of approximately 78%. In addition, the process, from
the time steel is teemed into the ingot molds until a hot rolled band is
produced, takes, on average, 10 days.

14
<PAGE>

The flow diagram below illustrates the Company's existing steelmaking process
described above. The processes shown exclude the Company's coking and primary
steelmaking operations which will remain in place after completion of the
Modernization Project.

[CHART TO COME]

STEELMAKING PROCESS UPON PROJECT COMPLETION

The Modernization Project will involve construction of a state-of-the-art
continuous thin slab caster ("Caster") and a 60" wide seven-stand hot strip
rolling mill ("Rolling Mill"). The Modernization Project will include several
other technologically advanced facilities. Two ladle metallurgy furnaces
("LMFs") will be constructed. The LMFs will use electric arc heating and an
alloy addition system to achieve a high degree of control over the final
temperature and chemistry of the liquid steel. A tunnel-type roller hearth
furnace will be constructed and used to achieve equalized temperature through
the slab's thickness and width for final rolling into coil form. The Rolling
Mill will be constructed with state-of-the-art, computer-operated features to
precisely control the thickness, profile and flatness of the product to world-
class standards. Together with the Caster, this configuration should allow Acme
Steel to produce products across all steel grades that are wider and thinner,
with superior finish quality, than those it is now able to produce. Major
ancillary facilities in the Modernization Project will include air and water
environmental control facilities, mold/segment repair equipment, a roll
grinding shop, and coil storage and shipping facilities. The Modernization
Project will eliminate the processes Acme Steel now employs for teeming,
processing, heating and rolling ingots into slabs, conditioning and reheating
slabs, and transporting and storing ingots and slabs.

15
<PAGE>

CASTER. The Caster will be supplied with high quality liquid steel from Acme
Steel's existing basic oxygen furnace. The Company believes that the liquid
steel it is able to produce in its basic oxygen furnace, because of its lower
nitrogen content and lower incidence of "tramp" elements, will result in a
superior quality finished steel compared to that produced by steel companies
using thin-slab casting technology in conjunction with ferrous scrap and
electric arc furnaces. From the basic oxygen furnaces, the liquid steel will be
transported in ladles by rubber-tired vehicles to the new casting/mill
facility, which will be approximately a half-mile away.
At the Caster, the ladles of liquid steel will be treated in the new LMFs.
After treatment, the steel will flow from the ladles through a hollow ceramic
tube ("shroud") into a refractory lined reservoir ("tundish"), and from there
downward into the Caster's mold. The mold will be constructed with copper
alloy-clad walls through which water will flow at high velocity for cooling. As
the molten steel passes vertically through the water cooled mold a thin skin
will form in a matter of seconds on the outside of a rectangular slab shell
measuring approximately 2 inches thick by 36 to 61 inches wide.

The skin on the slab or strand will become thicker as the slab emerges from
the mold and will extend inward as the slab descends through the strand guide
and air mist water spray system until the slab is solid throughout. The hot
thin slab then will be gradually bent by a series of bending rollers from a
vertical into a horizontal orientation. At the bottom of the withdrawal unit,
the continuous slab will be straightened and sheared into individual slabs of
different lengths depending on the ordered final coil weight.

As planned, the thin slab casting process will be able to run continuously,
terminating only when the last ladle in a planned sequence is fully drained.
The number of ladles cast in continuous sequence will depend upon the
production schedule being followed at any given point in time. The Company
expects that the Caster will improve Acme Steel's finished product yield,
reduce energy and labor costs, increase production capability and improve the
metallurgical and surface quality of its products.

ROLLING MILL. The Caster will be situated such that the finished slabs will
feed directly into the roller-hearth tunnel furnace. As the slabs travel
continuously through the furnace, their temperature will be equalized to the
optimum uniform exit temperature required for final rolling. From the roller-
hearth furnace the slabs will move through jets of high pressure water to
remove a thin layer of iron oxide ("scale"). Once "descaled," the slabs will
pass through an edger and then move directly to the Rolling Mill, which will be
computer-controlled and configured as seven tandem-coupled rolling stands,
power-rated at 7,000 kW each. Each stand will sequentially reduce the thickness
of the slab being rolled. At the exit of the seventh stand, the slab thickness
will have been reduced from 2 inches to the final gauge required by the
customer's order. The hot rolled strip will then pass through a system of
computer-controlled laminar water sprays to precisely and uniformly cool the
steel to the final temperature required to achieve the customer's specified
physical properties (strength and ductility). Following this final temperature
adjustment, the strip will be coiled into a hot rolled band for shipment to the
customer or to other finishing facilities.

Based on information provided by the primary equipment supplier for the
Modernization Project and the Company's own analysis, the Company believes that
when it is fully operational, the Modernization Project will accomplish the
conversion of liquid steel to coils in approximately 1 1/2 hours, rather than
the 10 days it takes at present, and will increase the material yield from
liquid steel to finished coils from 78% to over 90%. In addition, based on the
various studies and estimates available to the Company and subject to the
assumptions on which these studies and estimates are based, the Company
believes the energy requirements for the process will be reduced by
approximately 59% per ton, and, at full capacity operation, the labor cost per
ton of finished steel will be reduced by approximately 48%. Further, based on
these studies and estimates, the Company believes the finished coils will be
able to be rolled wider and thinner, with physical and mechanical properties
produced to more exacting specifications, than Acme Steel can currently
produce. For a discussion of the assumptions underlying the cost reductions
referred to above, see "Estimated Costs and Savings" below.

16
<PAGE>

The flow diagram below illustrates the Company's planned steelmaking process
after completion of the Modernization Project. The diagram excludes the
Company's coking and primary steelmaking operations, which will not be
significantly changed from the existing operations.

[CHART TO COME]
IMPACT ON EXISTING OPERATIONS

The Modernization Project will be constructed on a greenfield site which is
near Acme Steel's current steelmaking facilities but physically separate. The
Company believes steel production at Acme Steel's existing facilities will
continue during the construction of the Modernization Project without
disruption or reduction of product available for supply to customers. Raytheon
will commence construction of the Modernization Project on the closing of the
Special Warrant Offering and the Note Offering. Under the EPC contract,
Raytheon is obligated to demonstrate successful production of the first coil of
hot rolled steel no later than 27 months after such closing and to satisfy all
agreed upon performance specifications for the Modernization Project no later
than 34 months after such closing. During the Modernization Project's initial
testing and phase-in period, Acme Steel intends to use the excess capability of
its existing melting operation to produce sufficient hot metal both to maintain
existing production operations and to supply the new continuous caster. The
construction of the Modernization Project and the activities of Raytheon will
be monitored by a project management team composed primarily of existing
company officers and employees. In the event there are significant problems
with the construction of the Modernization Project, senior management may have
to devote substantial time to those problems from time to time and, as a
result, may devote substantially less time than is normal to existing
operations, which could adversely affect existing operations.

EXPANDED CAPABILITY

Acme Steel's current raw steel production capability is greater than its
ability to roll slabs into finished steel coils. In addition, Acme Steel's
existing hot strip mill cannot produce a finished coil of steel more than 30
inches wide. The Company believes, based on equipment specifications and its
own analysis, that the Modernization Project will significantly expand the
Company's shipping capability and also allow Acme Steel to produce wider sheets
and thinner gauges with physical and mechanical properties produced to more
exacting specifications than Acme Steel currently can produce. This will expand
Acme Steel's product range and allow it to sell to many markets that it
currently cannot penetrate as well as to increase sales to its existing

17
<PAGE>

customer base. Further, as detailed below, the Company believes that, after
completion of the Modernization Project, Acme Steel's productive yield from raw
steel to finished coils will increase from approximately 78% to over 90%. The
improvement in yield, together with the expanded capability of the Rolling
Mill, is expected to increase Acme Steel's shipping capability from
approximately 720,000 tons per year to approximately 925,000 tons within two
years of start-up to approximately 970,000 tons per year within four years of
start-up. This increase is an estimate based on operating rates, product mix
and other factors. No assurance can be given that Acme Steel's actual steel
production will not be less than that or that the additional amount of finished
steel, if produced, can be sold.

ESTIMATED COSTS AND SAVINGS

Steel Making Segment

The following table summarizes the costs and estimated savings in operating
expenses associated with the Modernization Project. These cost savings are
based on an increase in the Company's production capability to approximately
970,000 tons and full utilization of the expanded capability. Certain of the
cost savings are related to allocation of fixed operating costs. As a result,
the cost savings would likely be lower at lower rates of production. The
Company estimates that at a production capability of approximately 925,000
tons, the cost savings will be approximately $71 per year. There can be no
assurance as to the actual annual production volumes that will be achieved
after completion of the Modernization Project. The estimated operating savings
are based on certain additional assumptions, and are subject to associated
qualifications and limitations, as discussed below.

ESTIMATED AVERAGE COST SAVINGS
PER TON OF FINISHED COILS AT FULL UTILIZATION

<TABLE>
<CAPTION>
ESTIMATED
NEW COST
1993 COSTS STRUCTURE CHANGE
---------- --------- ------
<S> <C> <C> <C>
Productive Yield Loss............................... $ 41 $ 16 $25
Labor............................................... 118 61 57
Utilities........................................... 29 12 17
Other............................................... 172 194 (22)
---- ---- ---
$360 $283 $77
==== ==== ===
</TABLE>

The estimated operating cost savings for the Modernization Project do not
take into account increases or decreases in operating costs that are unrelated
to the Modernization Project, such as changes in wage rates and raw material
costs. In addition, the estimated operating cost savings do not take into
account any increased depreciation (estimated to be $22 million per year) or
interest costs, which will be substantially higher as a result of the
Modernization Project. Consequently, the estimated operating cost savings are
not necessarily indicative of the Company's results of operations or expected
financial performance for any period.

Productive Yield Loss. In its existing steelmaking process, Acme Steel has a
yield loss equal to approximately 22% of the liquid steel produced at the basic
oxygen furnace. The uninterrupted flow of liquid steel through the Caster and
Rolling Mill will eliminate several of the steps currently used to improve the
quality of a finished coil but which generate yield loss. In particular, the
Modernization Project is expected to eliminate the shearing of unusable "ingot
butts" at the primary mill, the grinding and "scarfing" of surface
imperfections on slabs before they are processed at the roughing mill, and the
"cutback loss" on coils due to gauge variations inherent in the existing hot
strip mill. Although the scrap generated by these processes can be reused in
Acme Steel's steelmaking process, the improved yields expected to result from
the Modernization Project will allow Acme Steel to produce more prime material
suitable for shipment rather than scrap. Based on internal engineering studies,
Acme Steel expects its yield loss after completion of the Modernization Project
to decrease from approximately 22% to less than 10%.

18
<PAGE>

Labor. The existing steelmaking process is labor intensive. Labor is required
to set-up, condition or handle steel at each step before processing.
Significant labor is required to prepare the ingot molds, pour ingots, strip
ingots, convey ingots to the soaking pits, convey the ingots to the primary
mill and convey the slabs to the existing strip mill. All of these production
steps will be eliminated through the use of a continuous thin slab casting
process. As a result, Acme Steel expects to be able to reduce its hourly work
force by approximately 250 people who are currently assigned to processes that
will be eliminated.

Utilities. The existing steelmaking process is energy intensive. The high use
of energy results from the cooling and reheating of the semi-finished steel to
prepare it for further processing. In particular, the ingots, which are allowed
to cool after pouring are subsequently charged in the soaking pit for an
average of approximately 10 hours to increase the temperature for processing
through the primary mill. Steel slabs are allowed to cool to permit
conditioning and then must be reheated for processing in the roughing and hot
strip mills. These steps consume significant amounts of electricity and natural
gas. Based on internal engineering studies, Acme Steel expects the
Modernization Project to significantly reduce its utility costs by eliminating
the need for multiple cooling and reheating cycles and several rolling
procedures.

Other. The Modernization Project will result in additional costs related to
the operations of the ladle metallurgy furnace facility, the purchase of scrap
to supplement internally generated scrap, and the purchase of additional value
added services, such as pickling, from vendors.

The Modernization Project will involve costs in addition to those incurred in
the construction and operation of the facility itself. Upon the successful
completion of the Financing Plan, the Company will record a $2.3 million non-
cash charge to account for the contractual costs associated with its planned
workforce reduction and a $7.2 million non-cash charge to reflect an impairment
in the value of the existing steel finishing facilities which will be replaced
by the Modernization Project. Further, during the Modernization Project's final
completion phase, including initial testing, the Company anticipates incurring
approximately $15 million of start-up related costs, some of which may be
capitalized as part of the Modernization Project.

Steel Fabricating Segment

The Steel Fabricating Segment is expected to derive certain benefits from the
larger, wider, higher quality, flat-rolled steel coils Acme Steel is expected
to be able to produce as a result of the implementation of the Modernization
Project. Alpha Tube is expected to realize benefits from reduced edge scrap as
well as lower production scrap rates, higher productivity levels and better
yield rates due to more consistent gauge control. Acme Packaging and Universal
are expected to benefit primarily from reduced edge scrap.

ENGINEERING, PROCUREMENT AND CONSTRUCTION CONTRACT

Acme Steel has entered into an EPC Contract, dated as of July 28, 1994, with
Raytheon pursuant to which Raytheon will provide, on a turnkey basis, design,
engineering, site preparation, procurement, construction, commissioning, start-
up, testing and training in connection with the Modernization Project. The
total price to be paid to Raytheon for the Modernization Project is $364.2
million, subject to reduction pursuant to provisions of the EPC Contract
whereby the Company will share in Raytheon's actual savings that result from
changes in the scope of Raytheon's responsibilities or production of the first
coil of hot rolled steel before the time specified. The total cost of the
Modernization Project is estimated by the Company to be approximately $372
million including certain other project costs which are the responsibility of
the Company.

Acme Steel will rely on Raytheon for on-time completion of a fully
functioning facility. Under the EPC Contract, Raytheon is obligated to
demonstrate successful production of the first coil of hot rolled steel no
later than 27 months after closing of the Special Warrant Offering and the Note
Offering and to satisfy all agreed upon performance specifications for the
Modernization Project no later than 34 months after such closing. To the extent
that there are delays in completion of the Modernization Project or the
facility is operating at a level of performance below that which Raytheon has
contractually guaranteed, Acme Steel will have the right to liquidated damages
in the form of a daily penalty fee paid by Raytheon to Acme Steel.

19
<PAGE>

This penalty fee will vary depending upon the nature of the noncompliance but
will, in any case, not be greater in the aggregate than 40% of the total EPC
Contract price prior to the production of the first coil of hot rolled steel
and 30% of the total EPC Contract price thereafter. Raytheon's obligations
under the EPC Contract are guaranteed by Raytheon Company.

The statements under this caption relating to the EPC Contract are a summary
and do not purport to be complete. Such summary is qualified in its entirety by
express reference to the EPC Contract, a copy of which is filed as an exhibit
to the Registration Statement of which this Prospectus is a part.

Raytheon has agreed to purchase $9 million of newly issued shares of Common
Stock from the Company upon terms mutually agreeable to the parties.

EQUIPMENT SUPPLIER AND SUPPLY CONTRACT

SMS Schloemann-Seimag AG and its subsidiaries, SMS Engineering, Inc. and
SMS Concast Inc. (collectively "SMS") are the primary equipment suppliers for
the Modernization Project. Raytheon has entered into a contract with SMS to
purchase equipment for the Modernization Project including, but not limited to,
the continuous thin slab caster, the tunnel roller-hearth furnace and the hot
strip rolling mill. The SMS technology for continuous thin slab casting is
currently utilized by Nucor Steel at its Crawfordsville, Indiana and Hickman,
Arkansas facilities; three additional facilities that will use this technology
are currently under construction.

Although SMS is engaged directly by Raytheon to supply the equipment, the
Company has negotiated guarantees from SMS via Raytheon, relating to key
criteria for evaluating the equipment in terms of performance and product
quality. Under these guarantees, the equipment is subject to an agreed set of
performance tests which must be met in order for SMS to fulfill this
contractual performance obligation. Additionally, SMS is required to pay
Raytheon a liquidated damage charge for any delay caused by SMS as a result of
equipment commissioning or performance.

Acme Steel expects to enter into a separate incentive agreement with SMS
providing SMS with a monetary incentive to assure that the facility can
successfully produce on a commercial basis certain grades of steel which to
date have only been produced by a continuous thin slab caster pilot plant. This
agreement is expected to provide that in the event that the equipment fails to
produce any of the required grades on a commercial basis, SMS would be liable
to Acme Steel for specified monetary damages.

INDEPENDENT REVIEW OF THE MODERNIZATION PROJECT

On April 20, 1994, Lehman Brothers Inc. retained Hatch Associates Ltd. and
Steltech Ltd. ("Hatch/Steltech"), in their capacity as experts in engineering
and technology, to provide an independent assessment of the Modernization
Project. The scope of this assessment included a review of the Company's market
analysis, the Company's assumptions in arriving at its cost savings estimates,
the existing and proposed technology to be used in connection with the
Modernization Project, the implementation of the project, its integration with
the Company's existing facilities, expected future product quality, project and
start-up costs, project management and environmental issues.

Hatch/Steltech delivered its report (the "Report") in July 1994. The Report
concludes that the Modernization Project is the correct course for the Company
and that, although the time schedule is aggressive, a 27 month implementation
schedule should be achievable. According to the Report, the Company should
attain a shipment capability of 925,000 tons per year in the second full year
after start-up which will probably increase to 969,000 tons by the fourth year
after start-up. Hatch/Steltech calculated the savings per ton (excluding
depreciation expense) from the Company's current cost of goods sold at
approximately $71 per ton at 925,000 tons shipped, increasing to approximately
$77 per ton at 969,000 tons shipped. In addition the Report indicates that
there is some risk that the Company may have difficulty in producing certain of
the

20
<PAGE>

higher grades of steel. However, for most of these grades, this risk would be
manifested in slower rates of production and higher production costs, not an
inability to produce these grades.

The foregoing is a summary of certain portions of the Report, and does not
purport to be complete. The Report includes various assumptions, estimates and
assessments, including a review of the risks of the Modernization Project, the
market for various types of steel, competitive factors, the regulatory
environment, raw material availability, technological requirements, the
Company's production plan and other factors in arriving at their conclusions
regarding the Modernization Project in its entirety and particular aspects of
it. The conclusions arrived at by Hatch/Steltech and summarized above reflect
an overall assessment of the various factors considered in the Report.

21
<PAGE>

FINANCING PLAN

The Company has adopted a plan of financing intended to provide the funds
necessary to complete the Modernization Project, to repay certain indebtedness
currently outstanding and to provide additional liquidity. The Company's plan
of financing includes the following: (i) the Note Offering, (ii) the Special
Warrant Offering, (iii) the Term Loan Facility and (iv) the securing of a
working capital facility (the "Working Capital Facility"), which initially will
be undrawn. The Special Warrant Offering occurred prior to the Note Offering,
but the net proceeds of the Special Warrant Offering have been placed in
escrow. The Note Offering is conditioned upon and, together with the
registration of the Shares offered hereby, is a condition to the release from
escrow of the net proceeds of the Special Warrant Offering. For a more complete
description of the material terms of the Notes, the Special Warrants and the
Shares offered hereby, see "Description of Capital Stock," "Description of
Notes," and "Special Warrant Offering."

The following table sets forth the Company's sources and immediate uses of
funds as if the foregoing transactions were completed on June 26, 1994:

(1) The Term Loans to be made under the Trust Loan Facility will be funded
concurrently with the closing of the Note Offering. The Term Loans will be
guaranteed by each of the Company's subsidiaries on a Senior basis and will
be secured equally and ratably by the collateral securing the Senior
Secured Notes and the Senior Secured Discount Notes. See "Description of
Other Indebtedness--Term Loan Facility."

(3) The increase in cash and cash equivalents, together with cash currently on
hand and cash flow from operations, will be used for the construction and
integration of the Modernization Project. At June 26, 1994 the Company had
cash and cash equivalents of $73.7 million. Sources and Uses of Funds above
do not give effect to the proposed purchase by Raytheon of $9 million of
newly issued shares of Common Stock. See "Modernization and Expansion
Project--Engineering, Procurement and Construction Contract."

22
<PAGE>

USE OF PROCEEDS

The net proceeds of the Note Offering, estimated at $197.2 million, together
with the net proceeds of the Special Warrant Offering, estimated at $112.3
million and the net proceeds of the Term Loan Facility estimated at $47.8
million, will be utilized for the construction of the Modernization Project,
except for approximately $50 million (plus the amount of any prepayment
penalties) which will be used to retire the Company's outstanding Senior Notes.
For information with respect to interest rates and maturity dates of the
Company's indebtedness being retired or refinanced in connection with the
Modernization Project, and certain costs associated with such repayment or
refinancing. See "Capitalization." The Company will not receive any of the
proceeds from the sale of the Shares being offered hereby.

SPECIAL WARRANT OFFERING

On March 28, 1994 the Company issued and sold 5,600,000 Special Warrants at
a price of U.S.$21.00 per Special Warrant (the "Special Warrant Offering"). The
Special Warrants were sold to purchasers on a private placement basis in Canada
and Europe pursuant to a purchase agreement (the "Purchase Agreement") dated as
of March 11, 1994 between the Company and Nesbitt Thomson Inc. (the "Dealer")
and subscription agreements (the "Subscription Agreements") between the Company
and certain substituted purchasers of Special Warrants in each case at a price
of U.S.$21.00 for each Special Warrant. The Special Warrants were issued
pursuant to exemptions from the prospectus requirements of applicable
securities law in the Qualifying Provinces (defined below) and an exemption
from Registration under the Securities Act afforded by Regulation S thereunder.
The sale of any shares of Common Stock of the Company issued upon the exercise
of Special Warrants (the "Shares") prior to the effectiveness of the
Registration Statement will be subject to restrictions. Pursuant to a
registration rights agreement dated March 28, 1994 between the Company and
certain substituted purchasers, the Company agreed to use its best efforts to
file the Registration Statement with the Commission and to maintain the
effectiveness of the Registration Statement for a continuous period ending on
the third anniversary of the closing following the fulfilment of the Escrow
Release Conditions.

The Special Warrants were created and issued under the terms of an indenture
(the "Special Warrant Indenture") between the Company and Montreal Trust
Company of Canada as trustee dated as of March 28, 1994. Concurrently with the
issue of the Special Warrants, the Company, Montreal Trust Company of Canada
(the "Escrow Agent") and the Dealer entered into an escrow agreement (the
"Escrow Agreement") dated as of March 28, 1994 pursuant to which the Escrow
Agent is holding the net proceeds of the issue of the Special Warrants,
U.S.$112,308,000, in escrow.

The Special Warrants may be exercised on or before the Expiry Time. The
Expiry Time is 5:00 p.m. (Toronto time) on the later of (i) September 14, 1994
and (ii) a date not later than October 4, 1994 as determined by the Company
with the consent of the holders of Special Warrants. Each Special Warrant
entitles the holder upon exercise to receive one share of Common Stock for no
additional consideration.

Each outstanding Special Warrant not previously exercised will be exercised
on behalf of holders on the third business day following the date that the
Registration Statement is declared effective by the SEC and certain other
conditions are met, including that a receipt for a (final) prospectus
qualifying the Common Shares for distribution in each of the Provinces of
British Columbia, Manitoba, Ontario and Quebec (the "Qualifying Provinces") has
been received, the Board of Directors of the Company has approved the
Modernization Project, and the Company has received assurance, reasonably
acceptable in form and substance to the Dealer, that not less than 85% of the
reasonably estimated funds needed for the construction of the Modernization
Project will be available to the Company upon terms acceptable to it (the
"Escrow Release Conditions"). Successful completion of the Note Offering will
satisfy the latter condition. The Escrow Release Conditions must be fulfilled
on or before the "Termination Date."

The Termination Date is August 25, 1994, unless extended. The Company may
extend the Termination Date to a date not later than September 14, 1994
provided that (i) holders of Special Warrants of record on

23
<PAGE>

August 18, 1994 (the "Record Date") holding a majority of all outstanding
Special Warrants have consented in writing to such extension prior to
August 25, 1994; (ii) the Company shall have deposited with the Escrow Agent
sufficient funds for the payment to each holder of Special Warrants of record
on the Record Date of its pro rata share of $27,500 for each day by which the
Company wishes to extend the Termination Date; and (iii) the Company shall have
provided the Escrow Agent with an irrevocable direction to make such payment in
the event that the Termination Date is extended.

If the Escrow Release Conditions are not satisfied by the Termination Date,
the Company will provide notice to all holders of Special Warrants, and a
holder of Special Warrants may elect during the period commencing at 5:00 p.m.
(Toronto time) on the Termination Date and ending at 5:00 p.m. (Toronto time)
on the twentieth day thereafter (the "Retraction Period") to either:

(a) retract the Special Warrants held by such holder for U.S.$21.00 per
Special Warrant so retracted plus interest as determined in accordance
with the Escrow Agreement; or

(b) exercise the Special Warrants and acquire Common Shares.

In the event that a Warrantholder has not made an election during the
Retraction Period, the Special Warrants held by such Warrantholder will be
immediately purchased by the Company upon the expiration of
the Retraction Period for U.S.$21.00 per Special Warrant plus accrued interest
as determined in accordance with the Escrow Agreement.

24
<PAGE>

CAPITALIZATION

The following table sets forth the consolidated capitalization of the Company
as of June 26, 1994 and as adjusted to give effect to the Note Offering, the
incurrence of the Term Loans and the Special Warrant Offering. This
presentation should be read in conjunction with the Consolidated Financial
Statements of the Company and the notes thereto, and other information included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
JUNE 26, 1994
------------------
(DOLLARS IN
THOUSANDS)
AS
ACTUAL ADJUSTED
-------- --------
<S> <C> <C>
Cash and cash equivalents.......................... $ 73,651 $374,251(6)
======== ========
Long-term debt (including current maturities)
9.35% Senior Notes, Series A due 1999............ $ 40,000 $ 0
9.35% Senior Notes, Series B due 1996............ 10,000 0
Notes payable, 6.5% to 6.75%, due 1998-2008(1)... 6,000 6,000
12 1/2% Senior Secured Notes due 2002............ 0 125,000
13 1/2% Senior Secured Discount Notes due 2004
(net of original issue discount of $37,958)..... 0 80,000
Term Loans....................................... 0 50,000
-------- --------
Total long-term debt........................... 56,000 261,000
-------- --------
Stockholders' equity
Preferred Stock, $1 par value, 2,000,000 shares
authorized, no shares issued.................... 0 0
Common stock, $1 par value, 20,000,000 shares
authorized, 5,559,161 issued and outstanding,
actual; 11,159,161 issued and outstanding as
adjusted(2)(5)(6)............................... 5,559 11,159
Retained earnings(3)............................. 61,202 53,602
Additional paid-in capital(4)(6)................. 50,743 157,443
Minimum pension liability(7)..................... (21,295) (21,295)
-------- --------
Total stockholders' equity..................... 96,209 200,909
-------- --------
Total capitalization........................... $152,209 $461,909
======== ========
</TABLE>
- --------
(1) Notes payable, 6.5% to 6.75%, due 1998-2008 reflects amounts due in
connection with an industrial revenue bond financing completed prior to the
1986 Reorganization. The proceeds from the issuance of the notes payable
were used to fund pollution control facilities at Acme Steel's Riverdale,
Illinois plant.
(2) Reflects an additional $5.6 million from the assumed exercise of the
Special Warrants for Common Stock. See "Special Warrant Offering."

(3) Reflects non-recurring charges, net of taxes, of $5.7 million in
contractual severance and asset impairments from the decision to proceed
with the Modernization Project and a $1.9 million extraordinary expense,
net of taxes, associated with the prepayment of the 9.35% Senior Notes,
Series A and B, and the write off of associated unamortized financing fees.

(4) Reflects an additional $106.7 million from the assumed exercise of the
Special Warrants for Common Stock. See "Special Warrant Offering."

(5) As of June 26, 1994, the Company had 543,000 options outstanding, of which
417,000 were exercisable.

(6) Does not give effect to the proposed purchase of $9 million of Common Stock
by Raytheon. See "The Modernization Project--Engineering, Procurement and
Construction Contract."
(7) See Retirement Benefit Plans in the notes to the consolidated financial
statements.

25
<PAGE>

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The following table sets forth selected historical consolidated financial
data and operating data for the Company for the periods indicated. The
Consolidated Statements of Operations Data and Consolidated Balance Sheet Data
for, and as of the end of, each of the five years in the period ended December
26, 1993 were derived from the consolidated financial statements of the
Company, which have been audited by Price Waterhouse LLP, independent
accountants. The selected historical consolidated financial data for, and as
of the end of, the six months ended June 27, 1993 and June 26, 1994 were
derived from unaudited financial statements for the Company which, in the
opinion of management, reflect all adjustments which are of a normal recurring
nature necessary for a fair presentation of the results of such periods.
Results for interim periods are not necessarily indicative of the results to
be expected for an entire fiscal year. The following table should be read in
conjunction with Management's Discussion and Analysis of Financial Condition
and Results of Operations and the consolidated financial statements and notes
thereto appearing elsewhere herein.

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER TON DATA)
FISCAL YEAR FIRST HALF
--------------------------------------------------- ------------------
1989 1990 1991 1992 1993 1993 1994
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Net sales................. $439,412 $446,042 $376,951 $391,562 $457,406 $225,032 $256,423
Cost of products sold..... 375,902 396,790 335,503 347,624 397,526 198,327 215,691
Depreciation expense...... 11,624 12,540 13,700 14,392 14,657 7,517 7,596
Selling and administrative
expense.................. 25,751 27,916 29,219 28,901 30,633 13,800 15,304
Restructuring/nonrecurring
charge................... -- -- -- 2,700 (1) 1,925(2) -- --
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)... 26,135 8,796 (1,471) (2,055) 12,665 5,388 17,832
Interest expense, net..... (2,116) (4,178) (4,211) (3,869) (3,813) (1,993) (1,620)
Unusual income item....... -- 4,005 1,241 1,047 1,210 -- --
Other non-operating
income................... 2,107 765 1,391 355 370 222 1,211
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes and
cumulative effect of
changes in accounting
principles............... 26,126 9,388 (3,050) (4,522) 10,432 3,617 17,423
Income tax provision
(credit)................. 9,926 3,755 (732) (1,673) 4,173 1,447 6,969
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
cumulative effect of
changes in accounting
principles............... 16,200 5,633 (2,318) (2,849) 6,259 2,170 10,454
Cumulative effect of
changes in accounting
principles, net of taxes. -- -- -- (50,323)(3) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)......... $ 16,200 $ 5,633 $ (2,318) $(53,172) $ 6,259 $ 2,170 $ 10,454
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
Consolidated:
PER SHARE DATA
Income (loss) before
extraordinary credit and
cumulative effect of
changes in accounting
principles............... $ 3.00 $ 1.05 $ (0.43) $ (0.53) $ 1.15 $ 0.40 $ 1.84
Cumulative effect of
changes in accounting
principles............... -- -- -- (9.32) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)......... $ 3.00 $ 1.05 $ (0.43) $ (9.85) $ 1.15 $ 0.40 $ 1.84
Pro forma assuming
exercise of Special
Warrants................. -- -- -- -- 0.57 -- 0.92
EBITDA(4)................. $ 40,273 $ 22,592 $ 14,144 $ 15,705 $ 30,194 $ 13,441 $ 26,937
Capital expenditures...... 14,960 28,604 10,611 7,557 11,749 4,305 5,071
Acme Steel Company:
Tons shipped-external
customers................ 506,475 436,123 286,385 320,192 413,645 205,419 238,067
Tons shipped-intersegment. 233,374 259,243 273,177 289,946 284,361 154,219 144,063
-------- -------- -------- -------- -------- -------- --------
Total tons shipped........ 739,849 695,366 559,562 610,138 698,006 359,638 382,130
Average price per ton(5).. $ 417 $ 422 $ 423 $ 413 $ 426 $ 411 $ 444
Average production cost
per ton(5)............... 339 355 354 338 349 338 338
Raw steel to finished
product yield............ 76.1% 77.2% 78.0% 78.7% 78.6% 78.5% 78.6%
CONSOLIDATED BALANCE SHEET
DATA:
Total assets.............. $285,275 $286,603 $290,736 $300,702 $333,869 $310,059 $350,628
Long-term debt (including
current portion)......... 59,500 59,500 59,500 56,000 56,000 56,000 56,000
Stockholders' equity...... 147,106 152,370 150,664 89,295 83,203 91,690 96,209
</TABLE>
- -------
(1) See Restructuring Charge in the notes to the consolidated financial
statements.
(2) See Nonrecurring Charge in the notes to the consolidated financial
statements.
(3) Cumulative effect of changes in accounting principles, net of taxes,
includes the effects of adopting FAS No. 106 "Accounting for
Postretirement Benefits Other Than Pensions" and FAS No. 109 "Accounting
for Income Taxes." See Postretirement Benefits Other Than Pensions and
Income Taxes in the notes to the consolidated financial statements.

(4) EBITDA is defined as net income plus income taxes, net interest expense,
depreciation and amortization, restructuring and nonrecurring items,
cumulative effect of charges in accounting principles, and less unusual
income. The Company believes EBITDA provides additional information for
determining its ability to meet debt service requirements. EBITDA does not
represent net income or cash flow from operations as determined by
generally accepted accounting principles, and EBITDA is not necessarily an
indication of whether cash flow will be sufficient to fund cash
requirements. EBITDA does not give effect to any investment of the
approximately $374.3 million of cash remaining after application of the
net proceeds of the Note Offering, the Term Loans and the Special Warrant
Offering to repay indebtedness and pay related expenses.
(5) Average price and average production costs per ton, which can be
significantly affected by Acme Steel's product mix in a given period,
include shipments made to external customers and intersegment shipments.

26
<PAGE>

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

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated the items in the
Consolidated Statement of Operations as a percentage of net sales.

<TABLE>
<CAPTION>
FOR THE SIX
FOR THE FISCAL YEAR ENDED MONTHS ENDED
-------------------------------------- -----------------
DECEMBER 29, DECEMBER 27, DECEMBER 26, JUNE 27, JUNE 26,
1991 1992 1993 1993 1994
------------ ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C>
Net Sales................... 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Costs and Expenses:
Cost of products sold..... 89.0 88.8 86.9 88.1 84.1
Depreciation expense...... 3.6 3.7 3.2 3.4 2.9
----- ----- ----- ----- -----
Gross profit................ 7.4 7.5 9.9 8.5 13.0
Selling and administrative
expense.................. 7.8 7.4 6.7 6.1 6.0
Restructuring/nonrecurring
charge................... 0.0 0.6 0.4 0.0 0.0
----- ----- ----- ----- -----
Operating income (loss)..... (0.4) (0.5) 2.8 2.4 7.0
Interest expense net...... (1.1) (1.0) (0.9) (0.9) (0.6)
Other non-operating income
net...................... 0.4 0.1 0.1 0.1 0.4
Unusual income item....... 0.3 0.3 0.3 0.0 0.0
Income tax provision
(credit)................... (0.2) (0.4) 0.9 0.6 2.7
----- ----- ----- ----- -----
Net income (loss) before
cumulative effect of
changes in accounting
principles................. (0.6) (0.7) 1.4 1.0 4.1
Cumulative effect of changes
in accounting principles
net of taxes............... 0.0 (12.9) 0.0 0.0 0.0
----- ----- ----- ----- -----
Net income (loss)........... (0.6)% (13.6)% 1.4% 1.0% 4.1%
===== ===== ===== ===== =====
</TABLE>

Six Months Ended June 26, 1994 as compared to Six Months Ended June 27, 1993

NET SALES. Consolidated net sales of $256.4 million for the six months ended
June 26, 1994 were $31.4 million, or 14 percent higher than net sales in the
first six months of 1993. Higher shipment volume represented a $16.0 million
increase in sales supplemented by a 7 percent increase in average selling
prices over last year's comparable period. The increased selling prices had a
$15.4 million favorable impact on sales in comparison to the first six months
of 1993.

Steel Making Segment. Net sales for the Steel Making Segment advanced to
$173.5 million in the first six months of 1994, a $22.4 million, or 15 percent,
improvement over last year's comparable period. Sales to unaffiliated customers
increased 24 percent to $111.5 million while intersegment sales of $62.0
million were 2 percent higher than in the first six months of 1993. The
increase in the Steel Making Segment's net sales was the result of a 7 percent
increase in average selling prices and a 22,000 ton increase in shipments.

Steel Fabricating Segment. Steel Fabricating Segment net sales of $144.9
million in the first six months of 1994 were $10.0 million, or 7 percent higher
than the comparable period in the prior year. A 7 percent increase in average
selling prices accounted for substantially all of the sales improvement while
increased shipments generated the remainder of the increase over last year's
first six months.

27
<PAGE>

GROSS PROFIT. The gross profit for the first six months of 1994 of $33.1
million was $13.9 million higher than the gross profit recorded during last
year's comparable period. The increase in gross profit was due to higher
average selling prices for the Company's products and increased shipment
volume. Operating costs, however, were higher in the first six months of 1994.
Higher material costs, increased expenditures and higher insurance and pension
costs ($1.3 million higher than last year's comparable period) were the primary
reasons for the increased operating costs. The gross profit, as a percentage of
net sales, was 13.0 percent in the first six months of 1994 versus 8.5 percent
in last year's comparable period.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling and administrative
expense totaled $15.3 million (6.0 percent of net sales) and $13.8 million (6.1
percent of net sales) for the six months of 1994 and 1993, respectively.

OPERATING INCOME. Operating income for the company for the six months ended
June 26, 1994 was $17.8 million as compared to operating income of $5.4 million
in the first six months of 1993.

Steel Making Segment. Operating income for the Steel Making Segment totaled
$9.2 million as compared to the $0.8 million loss recorded in the first six
months of 1993. The earnings improvement was driven primarily by a 7 percent
increase in average selling prices and increased shipments. Shipments to
external customers were 16 percent higher than last year's comparable period
while shipments to the Steel Fabricating Segment were 10,000 tons, or 7
percent, lower than in the first six months of 1993. Approximately 62 percent
of shipments and 64 percent of gross profit in 1994 was attributable to
external customers while the remainder was generated by sales to the Steel
Fabricating Segment. In 1993's first six months the Steel Making Segment
shipped 57 percent and derived 60 percent of its gross profit from external
customers. In total, the increased selling prices generated $10.5 million in
increased revenue while the increased shipments contributed $4.1 million over
last year's results. Partially offsetting the Steel Making Segment's sales-
related gains were increased material costs and higher insurance and pension
costs ($1.0 million higher than last year's comparable period) for the Steel
Making Segment's active and retired employees.

Steel Fabricating Segment. The Steel Fabricating Segment's operating income
of $9.2 million for the first six months of 1994 was $2.7 million higher than
in last year's comparable period with virtually all of the increase derived
from a 7 percent increase in average selling prices. Acme Packaging's operating
income for the first six months of 1994 was 34 percent higher than last year's
comparable period due primarily to a 4 percent increase in average selling
prices for steel strapping. Alpha Tube's results in 1994 more than doubled as a
result of a 14 percent increase in average selling prices for welded tubing,
and Universal's operating income was slightly higher in connection with a 3
percent increase in average selling prices for auto and light truck jacks. The
majority of the price increases for the Steel Fabricating Segment in the first
six months of 1994 was the result of price increases initiated in 1993.
Partially offsetting the Steel Fabricating Segment's sales related gains were
increased raw material costs in the form of higher flat-rolled prices from the
Steel Making Segment and external suppliers.

NON-OPERATING INCOME. Non-operating income in the first six months of 1994
was $1.0 million higher than last year's comparable period due primarily to a
refund of prior years' utility costs recorded in the current period.

INCOME TAX EXPENSE. The income tax expense for the first six months of 1994
totaled $7.0 million based on a 40 percent effective tax rate as compared to
the $1.4 million expense in the first six months of 1993, also based on a 40
percent effective rate.

NET INCOME. The Company recorded earnings of $10.5 million, or $1.84 per
share in the first six months of 1994 versus the $2.2 million, or 40 cents per
share, recorded in the first six months of 1993.

28
<PAGE>

Fiscal 1993 As Compared To Fiscal 1992

NET SALES. In 1993, the Company benefited from the strengthening economy in
terms of increased shipments and higher average selling prices. As a result of
an improving economy and price increases, the Company experienced the highest
quarterly net sales in its history in 1993's fourth quarter, achieving sales of
$120.5 million. For the year, consolidated net sales totaled $457.4 million, up
$65.8 million, or 17 percent, over 1992 sales. Shipments of products were
strong, representing a $57.5 million increase from last year's shipment volume
levels. Average selling prices were 2 percent higher than in 1992 with all of
the increase coming in the second half of the year. The improvement in selling
prices added $8.3 million to 1993 net sales.

Steel Making Segment. Total net sales for the Steel Making Segment advanced
to $303.8 million in 1993, a $43.7 million, or 17 percent, improvement over the
prior year. Sales to unaffiliated customers increased 29 percent to $187.8
million while intersegment sales of $116.1 million were 1 percent higher than
in 1992. The increase in total net sales was principally the result of a 13
percent jump in shipments. Steel selling prices, on average, were 3 percent
higher than the prior year. Nearly all of the price increases materialized in
the second half of the year as the Steel Making Segment began to benefit from
two $20 per ton (5 percent) increases initiated in the second and third
quarters of 1993.

Sales of sheet and strip steel, which accounted for 94 percent of the Steel
Making Segment's sales in 1993, advanced $41.8 million, or 17 percent over the
prior year. Semi-finished steel sales increased $3.3 million, or 45 percent
over the prior year, while sales of iron products fell $1.5 million, or 18
percent, as compared to a year earlier.

Steel Fabricating Segment. Steel Fabricating Segment net sales of $271.5
million were $24.6 million, or 10 percent, higher than the prior year. Higher
shipments accounted for $20 million of the improvement while a 2 percent
increase in average selling prices generated the remainder of the increase over
a year earlier.

Sales of steel strapping and strapping tools totaled $154.1 million in 1993,
an $11.7 million, or 8 percent, increase over a year earlier. Increased
shipping volume accounted for $9.4 million, or 80 percent, of the improvement
over the prior year's results. Average selling prices were 2 percent higher
than the prior year's levels with all of the increase coming in the latter part
of the year.

Steel tube sales for 1993 reached $74.3 million, up 17 percent from the prior
year. The $10.8 million improvement in sales was due mainly to increased
shipping volume. Selling prices rose 4 percent during the year with most of the
increase in the last half of 1993.

Sales of jacks and lifting tools for cars and light trucks totaled $43.1
million, 5 percent higher than the prior year. The improvement in sales was due
entirely to increased shipping volume as selling prices, on average, were
slightly below the prior year's levels.

GROSS PROFIT. Gross profit as a percent of consolidated net sales in 1993 was
9.9 percent, the highest percentage since 1989. The gross profit percentage in
1992 was 7.5 percent. Increased sales volume and higher average selling prices
were the primary determinants for the significant increase in gross profit over
last year. Operating costs, however, were higher in 1993. Labor costs increased
due to a combination of higher overtime premiums and incentive bonuses, a
negotiated bonus payment to Acme Steel's and Acme Packaging's union workers at
the Riverdale facilities for ratifying the one year labor contract that ended
August, 1993 of $0.8 million and a union signing bonus and lump sum payments
negotiated as part of the current labor contract resulting in charges of $0.3
million during the year. Unplanned expenditures to repair Acme Steel's basic
oxygen furnace and primary rolling mill also reduced gross profit in 1993.
Pension expense was $1.5 million higher than in 1992 as the Company recorded a
$0.3 million expense in 1993 versus a $1.2 million pension

29
<PAGE>

benefit in the prior year. Depreciation increased $0.5 million over the last
year due partially to a major relining of Acme Steel's blast furnace in 1990.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling and administrative
expenses in 1993 were $1.7 million higher than the prior year. However, on a
percentage of sales basis, selling and administrative expenses improved over
the prior year as expenses totaled 6.7 percent of sales in 1993 versus 7.4
percent in 1992. The Company began to benefit from lower labor costs resulting
from a program, initiated in the 1992 third quarter and substantially completed
by year end, to reduce the Company's salaried employee work-force by 10
percent. The 1993 savings from this program were sufficient to offset higher
medical costs for selling and administrative employees.

RESTRUCTURING CHARGE. During 1992, the Company recorded a $2.7 million
restructuring charge in connection with its 10 percent salaried work force
reduction which was completed during 1993. This charge covered additional
pension liability and extra vacation pay as part of an early retirement offer
and severance payments for involuntary separations. See the note to the
financial statements titled Restructuring Charge for further specific
components of the charge.

NON-RECURRING CHARGE. The Company recorded a $1.9 million non-recurring
charge in 1993 in connection with the $1.3 million write-off of Acme Steel's
No. 3 Hot Strip Mill and Billet Mill and a $0.6 million expense to close Acme
Packaging's Pittsburg-East facility in California and write off a strapping
line at its New Britain, Connecticut, facility.

OPERATING INCOME. Operating income for the Company was $12.7 million in 1993
as compared to an operating loss of $2.1 million in 1992.

Steel Making Segment. Operating income for the Steel Making Segment totaled
$0.7 million, a significant improvement over the $9.3 million loss from
operations recorded in 1992. The earnings improvement was driven by increased
shipments and higher average selling prices. Shipments to external customers in
1993 increased 87,000 tons over the prior year while shipments to the Steel
Fabricating Segment were 5,600 tons lower than in 1992. Approximately 60
percent of 1993's shipments and gross profit was attributable to external
customers while the remaining 40 percent of gross profit was generated by
shipments to the Steel Fabricating Segment. In 1992, the Steel Making Segment
shipped 55 percent of its products to external customers which generated 52
percent of its gross profit while shipments to the Steel Fabricating Segment
produced the remaining 48 percent of gross profit. The increased percentage of
shipments to external customers in 1993 is consistent with the Company's two-
pronged strategy to obtain the highest possible margin on flat-rolled steel and
obtain the highest earnings for the Company as a whole. In total, the increased
shipments generated $8.6 million in increased revenue while a 3 percent
increase in average selling prices contributed $5.9 million to the improvement
over the prior year's results. Partially offsetting the Steel Making Segment's
sales related gains were increased labor costs in connection with overtime and
union negotiated payments, unexpected repairs to its basic oxygen furnace and
primary rolling mill and a $1.3 million write-off of the No. 3 Hot Strip Mill
recorded in the fourth quarter.

Steel Fabricating Segment. Operating income for the Steel Fabricating Segment
of $11.9 million in 1993 was $4.6 million higher than the results recorded in
1992. The Steel Fabricating Segment benefited from the improving economy and
increased average selling prices in 1993.

Partially offsetting the Steel Fabricating Segment's sales and productivity
related gains were increased raw material costs in the form of higher flat-
rolled steel prices and a $0.6 million expense to close Acme Packaging's
Pittsburg-East facility in California and the write-off of a strapping line at
its New Britain, Connecticut facility. Acme Packaging, which sells steel
strapping used to secure various finished products to pallets or within
shipping containers during transportation, was helped by higher demand for its
products in connection with increased U.S. industrial output.

30
<PAGE>

Alpha Tube's results advanced due to the improvement in the housing and
recreational product markets. Alpha Tube's business also benefited from higher
margins due to increased demand for its more technologically advanced products
and gains in product quality and manufacturing productivity.

Despite downward pressure on its selling prices in 1993, Universal's business
achieved record results due to improved manufacturing productivity.

INTEREST EXPENSE AND INCOME. Interest expense was slightly lower than the
prior year. The decrease resulted from a reduced balance on the Companys long-
term debt as the result of a $3.5 million principal payment in May 1993.
Interest income was $0.1 million lower than in 1992 due mainly to reduced
returns on cash balances.

NON-OPERATING INCOME. In 1993, the Company recorded a $1.2 million pre-tax
gain as the result of a settlement of prior claims against LTV Steel Company
(LTV) by Wabush Iron, in an iron ore mine equity interest held by Acme Steel,
pursuant to the finalization of LTV's plan of reorganization. The sale of all
of the Company's interests in a coal producing property located in West
Virginia added approximately $1 million to pre-tax income in 1992.

INCOME TAX EXPENSE. The income tax expense for 1993 equaled $4.2 million
based on a 40 percent effective tax rate. Because of a loss in 1992, the
Company recognized income tax benefits of $1.7 million in 1992, based on a 37
percent effective tax rate.

NET INCOME. For 1993, the Company registered net income of $6.3 million, or
$1.15 per share. In 1992, the Company incurred a net loss of $2.8 million, or
53 cents per share, before the cumulative effect of changes in accounting
principles. The improvement in net income was due primarily to increased
shipments, and to a lesser extent, higher average selling prices for steel,
steel strapping and welded steel tube.

In 1992, the Company adopted both FAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" and FAS No. 109, "Accounting for
Income Taxes." The cumulative effect of adopting FAS No. 106 resulted in a
$42.2 million after tax charge to 1992 earnings. The cumulative effect of the
adoption of FAS No. 109 increased the 1992 net loss by $8.1 million.

Fiscal 1992 As Compared To Fiscal 1991

NET SALES. As a result of the modest economic recovery that began in 1992,
consolidated net sales of $391.6 million were $14.6 million, or 4 percent,
higher than prior year consolidated net sales. Shipments of products rebounded,
representing a $22 million increase from 1991 levels. However, selling prices
on average declined 2 percent from the prior year's prices. The weakness in
selling prices, particularly for steel and steel strapping products, had a $7.4
million negative effect on 1992 sales.

Steel Making Segment. Sales for the Steel Making Segment of $260.1 million in
1992 were up modestly (4 percent) over the year earlier due entirely to
increased shipments as average selling prices were 2 percent lower than 1991
price levels. Sales to unaffiliated customers increased 3 percent to $145.6
million while intersegment sales of $114.5 million were 4 percent higher than
in 1991.

Steel Fabricating Segment. Steel Fabricating Segment sales of $247.0 million
in 1992 were $10.9 million, or 5 percent, higher than the prior year. Steel
strapping sales of $142.3 million in 1992 were unchanged. Sales of steel tubing
amounted to $63.5 million in 1992, up 4 percent from a year earlier while auto
and truck jack sales of $41.2 million increased 20 percent over the 1991
levels.

31
<PAGE>

GROSS PROFIT. Gross profit as a percent of consolidated net sales equaled 7.5
percent in 1992, an improvement over the 7.4 percent registered in 1991. The
improvement in the 1992 gross profit over the prior year was the result of
reduced material costs and lower expenditures in connection with the Company's
aggressive cost control efforts. These cost reduction measures were more than
enough to overcome a combination of unfavorable margin impacts resulting from
lower average selling prices for most of the Company's products, a 12 percent
jump in costs associated with medical and life insurance coverage for the
Company's active and retired employees, increased property and franchise taxes
and expenses for a feasibility study of options for building a new continuous
thin slab caster/hot strip mill complex at Acme Steel's Riverdale facility. The
Company's gross profit margin benefited from a $1 million pension benefit in
1992, compared to no benefit in l991. Depreciation expense increased $0.5
million in 1992 over the prior years' expense partially due to the major
relining of the Company's blast furnace in 1990.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling and administrative
expenses in 1992 were approximately the same as in l991. As a percent of sales,
selling and administrative expenses were 7.4 and 7.8 percent in 1992 and l991,
respectively. The Company began to benefit from lower labor costs resulting
from a program, initiated in the 1992 third quarter and substantially completed
by year end, to reduce its salaried employee work-force by 10 percent. The 1992
savings from this program were sufficient to offset higher medical costs for
selling and administrative employees. Expenses associated with the
reorganization of the Company, completed in June 1992, added about $0.4 million
to selling and administrative costs in 1991.

RESTRUCTURING CHARGE. During 1992, the Company recorded a $2.7 million
restructuring charge in connection with its 10 percent salaried work force
reduction. This charge covered additional pension liability and extra vacation
pay as part of an early retirement offer as well as severance payments in
conjunction with involuntary separations.

OPERATING INCOME (LOSS). The operating loss for the Company was ($2.1)
million in 1992 as compared to a ($1.5) million loss recorded in 1991.

Steel Making Segment. The Steel Making Segment incurred a $9.4 million
operating loss in 1992 as compared to a $4.4 million loss in 1991. The $5.0
million decline in the Steel Making Segment's results was primarily due to a
combination of a two percent decline in average selling prices for sheet, strip
and semifinished steel which decreased sales by $4.8 million partially offset
($2.9 million) by a 9 percent increase in steel shipments, a $2.2 million
reduction in operating income due to a $6 million decline in iron sales as the
result of a one-time spot sale of molten iron to LTV Steel Company, Inc. in
1991 and a $2.7 million restructuring charge in connection with a 10 percent
salaried work force reduction plan. Operating costs, however, were lower than
in 1992 due to reduced material costs and lower expenditures.

Steel Fabricating Segment. Operating income for the Steel Fabricating Segment
of $7.1 million in 1992 was $4.6 million higher than the results recorded in
l991. Acme Packaging's 1992 results were $0.1 million, or 3 percent, lower than
the prior year due almost entirely to a 3 percent drop in average selling
prices. Alpha Tube's results in 1992 were $2.8 million higher than in 1991 as
the result of lower raw material costs and more efficient operations.
Universal's operating income jumped $1.9 million due to a 19 percent increase
in shipments.

INTEREST EXPENSE AND INCOME. Interest expense remained constant from 1991 to
1992. Interest income grew $0.4 million primarily because of higher cash
balances during the year.

NON-OPERATING INCOME. The sale of all of the Company's interests in a coal
producing property located in West Virginia added approximately $1 million to
pre-tax income in 1992. In 1991, pre-tax income benefited from a one-time gain
of $1.2 million in connection with the assignment to a third party of the
Company's rights in claims allowed in the LTV Steel Company, Inc. Bankruptcy.
Other non-operating income dropped

32
<PAGE>

by $1 million from a year earlier stemming principally from lower royalty
income from coal properties and a $0.4 million loss on disposal of fixed assets
recorded in 1992.

INCOME TAX EXPENSE. Because of the Company's losses in 1992 and 1991, the
Company recognized income tax benefits of $1.7 million in 1992, based on a 37
percent effective tax rate, and $0.7 million in 1991, based on a 24 percent
effective tax rate. The Company adopted FAS No. 109, "Accounting for Income
Taxes" in 1992. The impact of the adoption of this pronouncement on 1992's
results was to increase the credit for taxes by $0.9 million.

NET (LOSS). For 1992, the Company suffered a net loss of $2.8 million, or 53
cents per share, before the cumulative effect of changes in accounting
principles. In 1991, the Company incurred a net loss of $2.3 million, equal to
43 cents per share. The decline in operating earnings was due primarily to
weaker selling prices for steel and steel strapping.

Like other public companies, the Company was required to change its
accounting for retiree health care and life insurance to conform with FAS No.
106, "Employers' Accounting for Postretirement Benefits other than Pensions."
The Company chose to adopt this accounting standard effective December 30,
1991, the first day of the Company's 1992 fiscal year. The transition effect of
adopting FAS No. 106 resulted in a $67.6 million charge to 1992 earnings,
partially offset by $25.4 million in income tax effects.

The Company also elected to adopt FAS No. 109, "Accounting for Income Taxes"
in 1992. This accounting standard prescribes a new method of accounting for
deferred income taxes and requires the restatement of prior year deferred
income taxes. The cumulative effect of the adoption of this pronouncement
increased the 1992 net loss by $8.1 million.

LIQUIDITY AND CAPITAL RESOURCES.

As of June 26, 1994, the Company's long-term indebtedness (including the
current portion) was $56 million. Following the Note Offering and the
incurrence of the Term Loans, the Company's total indebtedness will be $261
million, which equates to a $205 million increase consisting of $205 million
from the Note Offering and $50 million from the Term Loans less $50 million to
repay currently outstanding Senior Notes. The Company currently has an unused
$60 million revolving credit agreement, which is expected to be terminated
concurrently with consummation of the Note Offering and replaced with a new
Working Capital Facility. The Company has obtained commitments for an $80
million Working Capital Facility with an initial term of three years from the
date of the consummation of the Note Offering. See "Description of Other
Indebtedness--Working Capital Facility." At June 26, 1994, the Company's ratio
of debt to total capitalization was .37 to 1. After giving effect to the Note
Offering, the incurrence of the Term Loans, and the Special Warrant Offering,
the Company's ratio of debt to total capitalization at that date would have
been .57 to 1.

On March 28, 1994, the Company sold the Special Warrants on a private
placement basis exclusively in Canada and Europe. On or before September 14,
1994, the Special Warrants are exercisable on a one-for-one basis for 5,600,000
shares of the Company's Common Stock. Conditions for the Company's receipt of
the proceeds of the sale of the Special Warrants include the effectiveness of
the Registration Statement and confirmation of the availability of not less
than 85% of the remaining financing needed for construction of the
Modernization Project. Successful completion of the Note Offering and the
incurrence of the Term Loans will satisfy the latter condition.

The Company's shareholders' equity totaled $96.2 million at June 26, 1994. On
a pro forma basis, following the Special Warrant Offering, the Note Offering
and the incurrence of the Term Loans, the Company's total shareholders' equity
would have been $200.9 million on June 26, 1994, which equates to a $104.7
million increase consisting of $112.3 million from the Special Warrant Offering
less restructuring costs of $5.7 million net of taxes and a penalty in
connection with prepaying currently outstanding Senior Notes of $1.9 million
net of taxes.

33
<PAGE>

The Company's cash balance at June 26, 1994 was $73.7 million. The Company
historically has financed its operating and investing activities principally
with cash from operations. Net cash provided by operations was $26.1 million in
the first half of 1994 and $16.0 million, $24.0 million and $21.7 million for
1993, 1992, and 1991, respectively.

Capital expenditures totalled $5.1 million in the first half of 1994 and
$11.7, $7.6 and $10.6 million in 1993, 1992 and 1991, respectively. Of the
$35.0 million spent on capital expenditures from 1991 through June 26, 1994,
approximately $12.0 million, or 34 percent, was attributable to compliance with
environmental regulations. The majority of the remainder of the capital project
expenditures was for replacement and rehabilitation of production facilities
throughout the Company. Based on the turnkey contract price of $364.2 million,
without taking into account financing costs or changes that may be requested by
Acme Steel during construction, management estimates that the cost of the
Modernization Project, including equipment, ancillary facilities, construction,
general contractor fees, and certain other project costs which will be paid by
the Company will not exceed $372 million. The Company expects these
expenditures will be financed exclusively from proceeds from the Note and
Special Warrant Offerings, together with cash on hand and operating cash flow.
The Company also plans to spend approximately $23.5 million in 1998 related to
the relining and upgrading of Acme Steel's A blast furnace at its Chicago
facilities, and the Company is continually evaluating opportunities for
incremental capital expenditures which meet certain financial return criteria.

BUSINESS

GENERAL

The Company, based in Riverdale, Illinois, is a fully integrated manufacturer
and marketer of steel, steel strapping and strapping tools, steel tubing and
automotive and light truck jacks. The Company's operations are divided into two
primary segments, the Steel Making Segment and the Steel Fabricating Segment.
The Steel Making Segment's sole operating subsidiary is Acme Steel, and the
Steel Fabricating Segment consists of Acme Packaging, Alpha Tube and Universal.
The table below presents the percentage make-up of the Company's net sales by
the products comprising the Company's business segments, for the past five
years.

<TABLE>
<CAPTION>
FISCAL FIRST
YEAR HALF
---------- ----------
1989 1990 1991 1992 1993 1993 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Sheet and strip steel........................ 44% 37% 32% 33% 37% 36% 38%
Semi-finished steel.......................... 5 4 1 2 2 2 4
Iron products and other...................... 1 1 4 2 2 2 2
--- --- --- --- --- --- ---
Total Steel Making Segment............... 50 42 37 37 41 40 44
Steel strapping and strapping tools.......... 34 34 38 36 33 34 30
Welded steel tube............................ 8 16 16 16 16 16 17
Auto and light truck jacks................... 8 8 9 11 10 10 9
--- --- --- --- --- --- ---
Total Steel Fabricating Segment.......... 50 58 63 63 59 60 56
</TABLE>

As the smallest integrated steel producer in the United States, with an
annual shipping capability of approximately 720,000 tons of finished steel,
Acme Steel manufactures and markets primarily flat-rolled sheet and strip
steel. Acme Steel attempts to utilize the flexibility of its small production
quantities by focusing on

34
<PAGE>

niche markets and targeting customers with small order sizes and special
metallurgical requirements such as high carbon, special alloy and high-strength
steels. The principal markets served by Acme Steel include the agricultural
equipment, automotive component, industrial equipment, industrial fastener,
pipe and tube, processor and tool manufacturing industries.

BUSINESS STRATEGY

Having implemented its downstream integration strategy, the Company is now
pursuing a business strategy consisting of the following key elements: reducing
production costs, expanding shipping capability and product range, increasing
sales of specialty products and improving product quality and customer service.

Reducing Production Costs. The Company believes that Acme Steel currently
enjoys a position as a low cost producer of liquid steel. Its finished
production costs, however, are significantly above those of certain of its
competitors. The Company believes that the Modernization Project, which will
enable Acme Steel to eliminate many of the production steps utilized in its
current ingot pouring and rolling process will significantly reduce Acme
Steel's finished steel production costs and improve operating efficiency. When
the Modernization Project is completed, the Company estimates that it will
provide savings in operating costs, based on full utilization of its expanded
shipping capability of approximately 970,000 tons per year and certain other
material assumptions, of approximately $77 per ton. The Company's Steel
Fabricating Segment subsidiaries will also be able to reduce their production
costs because the wider, larger coils supplied by Acme Steel will reduce scrap
and changeover costs and improve yields. See "Modernization and Expansion
Project--Estimated Costs and Savings."

Expanding Shipping Capability and Product Range. The new continuous casting
process is expected to increase Acme Steel's yield from raw liquid steel to
finished coils from approximately 78% to over 90%. In addition, the new Rolling
Mill is expected to eliminate the current capacity restraint imposed by Acme
Steel's existing hot strip mill, which has a rolling capability of only
approximately 720,000 tons per year. As a result, management expects the
shipping capability of Acme Steel to increase to approximately 925,000 tons per
year within two years of start-up and to approximately 970,000 tons per year
within four years of start-up. The completion of the Modernization Project will
also allow Acme Steel to produce wider sheets and thinner gauges than it is now
able to produce, thus expanding Acme Steel's product range and allowing the
Company to sell products in many markets which it currently cannot penetrate as
well as to increase sales to its existing customer base. See "Modernization and
Expansion Project--Expanded Capability."

Increasing Sales of Specialty Products. Acme Steel produces only 100 tons of
liquid steel per heat, among the smallest volumes of any integrated steel
producer. Unlike larger integrated steel producers, which generally produce
large quantities of a specific size and grade, Acme Steel, because of its small
heat size, has substantial flexibility in responding to customer orders for
specific metallurgical requirements in smaller product quantities. As a result
of this flexibility, Acme Steel currently produces over 400 grades of steel for
approximately 600 customers, with particular emphasis on specialty grades
including high carbon, alloy and high strength steels. Acme Steel also offers
narrow width strips and slitting and cut-to-length services. Acme Steel
continually seeks to expand its sales of its specialty products, and the
proportion of specialty steel sold by Acme Steel to external customers has
increased from 22.8% of total shipments in 1991 to 27.5% in 1993.

Certain of the Company's Steel Fabricating Segment subsidiaries also focus on
the sale of specialty products in niche markets. Alpha Tube, which has
developed production expertise in thin-walled tubing applications, targets
customers that are well suited to its production expertise and has developed
new products to further expand its sales in value-added segments. Universal
competes in the OEM automotive market primarily through the development of
proprietary new products, especially lighter weight automotive jacks. Both
Alpha Tube and Universal should benefit from the implementation of the
Modernization Project, as access to Acme Steel's more consistent gauge steel
will allow the development of new products that require such precise gauges.

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Improving Product Quality and Customer Service. The Company continuously
strives, through application of its Total Quality Improvement Process and Labor
Management Participation Teams (see "Business--Employee Relations"), to offer
high quality products to its customers. However, Acme Steel is currently
constrained by its ingot pouring and rolling process from achieving the
consistent quality offered by continuous casting. Through the implementation of
the Modernization Project, the Company expects to improve Acme Steel's product
quality and eliminate its competitive disadvantage with respect to customers
that demand continuously cast steel products. The proposed seven stand rolling
mill will also improve the finish quality and gauge control of Acme Steel's
products, which in turn will improve the products offered by the Company's
Steel Fabricating Segment subsidiaries. In addition, based on the Company's
internal engineering studies, the implementation of the Modernization Project
is expected to reduce the production time for transforming raw steel into steel
coils from ten days to 1 1/2 hours, thereby improving Acme Steel's ability to
fill customer orders promptly.

ACME STEEL

Product Overview. Acme Steel is a fully integrated producer of steel. The
following table sets forth the tonnage of steel shipped by Acme Steel during
the past three years in various product categories:

<TABLE>
<CAPTION>
NET TONS SHIPPED PERCENT OF TOTAL
--------------------------------------- -----------------------------
FISCAL YEAR SIX MONTHS FISCAL YEAR SIX MONTHS
----------------------- --------------- ----------------- -----------
1991 1992 1993 1993 1994 1991 1992 1993 1993 1994
------- ------- ------- ------- ------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Specialty Products:
High Carbon............ 36,315 41,042 53,021 27,748 28,317 6.5 6.7 7.6 7.7 7.4
Mid Carbon............. 51,707 55,772 84,539 42,083 50,798 9.2 9.1 12.1 11.7 13.3
Alloy.................. 14,280 16,000 21,462 10,312 10,597 2.6 2.6 3.1 2.9 2.8
HSLA................... 25,815 29,007 34,924 16,358 21,011 4.6 4.8 5.0 4.5 5.5
------- ------- ------- ------- ------- ----- ----- ----- ----- -----
128,117 141,821 193,946 96,501 110,723 22.9 23.2 27.8 26.8 29.0
------- ------- ------- ------- ------- ----- ----- ----- ----- -----
Non-Specialty Products:
Low Carbon............. 132,017 139,447 166,400 80,291 86,685 23.6 22.9 23.9 22.3 22.7
Non Prime.............. 9,690 14,327 15,029 7,764 5,992 1.7 2.3 2.2 2.2 1.6
Semi-Finished.......... 16,285 24,597 33,554 16,147 34,667 2.9 4.0 4.8 4.5 9.1
Other.................. 276 -- 4,716 4,716 -- -- -- 0.6 1.3 --
------- ------- ------- ------- ------- ----- ----- ----- ----- -----
158,268 178,371 219,699 108,918 127,344 28.2 29.2 31.5 30.3 33.4
------- ------- ------- ------- ------- ----- ----- ----- ----- -----
Intersegment Sales...... 273,177 289,946 284,361 154,219 144,063 48.9 47.6 40.7 42.9 37.6
------- ------- ------- ------- ------- ----- ----- ----- ----- -----
559,562 610,138 698,006 359,638 382,130 100.0 100.0 100.0 100.0 100.0
======= ======= ======= ======= ======= ===== ===== ===== ===== =====
</TABLE>

Specialty Products. Acme Steel specializes in manufacturing high carbon,
alloy and high strength steels and marketing these products directly to end
users. Specific metallurgical requirements are met by introducing particular
metals such as molybdenum, manganese, chrome and vanadium into the basic oxygen
furnace during the steelmaking process or additionally through other
steelmaking processes such as annealing and controlled rolling.

Non-Specialty Products. Non-specialty products include hot rolled, low carbon
steel sheet and strip products, as well as semi-finished steel, sold to
external customers. Low-carbon steel sheet and strip is a price-sensitive
product used in a broad array of industrial goods. Semi-finished steel
comprises slabs and billets which are sold to steel converters who further
process steel for resale.

Intersegment Sales. Intersegment sales to the subsidiaries comprising the
Company's Steel Fabricating Segment consist primarily of low and mid carbon
products. Approximately 80% of the intersegment sales are to Acme Packaging,
and consist of cold rolled low and mid carbon steel (which has been further
processed to enhance surface characteristics). The remainder of intersegment
sales are made to Alpha Tube and Universal.

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Customers. The Company's Steel Fabricating Segment consumes approximately 40%
to 45% of Acme Steel's steel production. The balance of Acme Steel's production
is sold to external customers, principally in the agricultural equipment,
construction, automotive components, industrial equipment, industrial fastener,
conversion, tube and tool manufacturing industries. The majority of these
customers are located within an approximately 500 mile radius of Acme Steel's
steelmaking facilities. In 1993, finished steel products sold to external
customers accounted for approximately 37% of the Company's consolidated net
sales. Acme also supplies semi-finished steel to converters for further
processing. Semi-finished steel accounted for about 2% of the Company's
consolidated net sales in 1993.

Acme Steel's customers generally are serviced by Acme Steel's own internal
sales staff. Acme's top ten external customers accounted for a combined total
of approximately 19% of Acme Steel's net sales in 1993, and no individual
customer accounted for more than 4% of such sales.

Acme Steel focuses on external customers whose demand levels and
metallurgical requirements, as well as requirements for value-added services
such as slitting, pickling, annealing and cutting-to-length, are a good match
for the small production quantities and high service levels available from Acme
Steel's facilities. Given the nature and quality of the products and services
it provides in the niche markets it serves, Acme Steel has developed strong,
long-standing relationships with its customer base.

ACME PACKAGING

Products and Markets. Acme Packaging, which was incorporated as a separate
entity in December 1991, began manufacturing steel strapping in 1905. Acme
Packaging is one of the two leading U.S. producers of steel strapping and
strapping tools. Sales by Acme Packaging constituted 33% of the Company's 1993
consolidated net sales.

Acme Packaging manufacturers three types of steel strapping: regular duty,
high tensile, and SupraMet(R). High tensile strapping is strapping that has
been heat treated to provide greater strength and elasticity for shock
absorption. SupraMet(R) is a high-strength steel strapping that is used to
unitize heavy materials such as concrete blocks, bricks, fabricated metal
products, aluminum or lead ingot, paper, glass, plastic pipe, lumber, hardboard
and particle board.

Customers. Principal markets served by Acme Packaging include the
agricultural, automotive, brick, construction, fabricated and primary metals,
forest products, paper and wholesale industries. Acme Packaging's sales are
primarily in the U.S. Its export sales have recently declined as a result of
the current weakness of many foreign economies and currently account for less
than 5% of Acme Packaging's net sales.

Acme Packaging sells steel strapping through private label distributors,
independent distributors and its own in-house sales force. No one customer
accounted for more than 10% of Acme Packaging's 1993 net sales.

ALPHA TUBE

Products and Markets. Alpha Tube, which was acquired in May 1989, is a
leading producer of high quality welded carbon steel tubing. Sales by Alpha
Tube constituted 16% of the Company's 1993 consolidated net sales.

Customers. Alpha Tube's products are used in the appliance, automotive, truck
exhaust, construction, heating and cooling equipment, household and leisure
furniture, material handling, recreational products and warehouse industries.
Alpha Tube's manufacturing customers generally are serviced by its own in-house
sales force. However, Alpha Tube also uses exclusive distributors in an effort
to increase sales in certain target markets. Alpha Tube's top ten customers
accounted for approximately 34% of its net sales in 1993, and no one customer
accounted for more than 7% of its net sales in 1993.

UNIVERSAL

Products and Markets. Universal, acquired by the Company in May 1987,
produces automotive and light truck jacks, tire wrenches and accessories.
Management estimates that Universal currently holds a 30% share

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<PAGE>

of the OEM market for automobile and light truck jacks in North America. Sales
by Universal constituted 10% of the Company's 1993 consolidated net sales.

Customers. Universal markets its products to U.S. and foreign transplant
automotive manufacturers and the automotive aftermarket. Universal's four
largest customers are General Motors, Ford, Chrysler and Honda.

The OEM market and aftermarket in the U.S. are experiencing several trends,
including a continuing demand by the automotive industry for product
development capability and leadership among their suppliers; a continuing move
toward global sourcing capability, continuing pressure by customers to reduce
per unit pricing while maintaining or increasing the quality of each unit, and
an increasing need to perform research and development for alternative
materials to be used in product manufacturing. Universal has a strong product
development, engineering, and technical service capability and has recently
instituted an effective order, manufacturing and inventory control system.
Universal intends to continue to implement productivity improvements, focus on
lightweight jack designs (which are of increasing importance as automobile
manufacturers seek to reduce the weight and thereby improve the fuel economy of
their vehicles), and pursue sales opportunities with foreign OEM's,
particularly OEM's with manufacturing facilities in the U.S. that are seeking
to increase the U.S. content of their vehicles. Universal also seeks to expand
after-market sales of tire accessory products (e.g., tire tools and wheel
chocks).

EMPLOYEE RELATIONS

As of May 1994, the Company had a work force of approximately 2,775
employees, including about 650 salaried employees and about 2,125 hourly
employees. The unionized work force totals approximately 1,970, or
approximately 71% of total employment. None of the salaried work force is
unionized and, except for fewer than 30 employees employed in Alpha Tube's
slitting operations, the hourly work force at Alpha Tube is also non-union.

The Company's relationships with its unions are good. There have been no
strikes or work stoppages at any location since the Company's purchase of Alpha
Tube, Universal and additional strapping plants. The last strike at the
Riverdale and Chicago locations was in 1959 during a major steel industry work
stoppage. The Company instituted Labor Management Participation Teams in 1982
as a vehicle for problem solving in a team environment and a Total Quality
Improvement Process in 1991 to establish standards to maximize product quality
from the existing facilities. Union members participate extensively in these
two processes.

In 1993, the Company reached a new labor agreement with the United
Steelworkers covering operations in Chicago and Riverdale, Illinois. The
agreement is for a six year term and contains a no-strike provision and a wage
reopener in 1996 which is subject to binding arbitration. The contract,
covering approximately 1,500 employees at the Riverdale, Illinois facilities of
Acme Steel and Acme Packaging, was ratified on October 1, 1993. The contract
will permit Acme Steel to fill positions in the new facility to be constructed
in connection with the Modernization Project with existing employees on the
basis of qualifications rather than strict seniority and provides incentives
for senior employees in Acme Steel's existing facilities to defer retirement
while the new facility is under construction. The contract also eliminates
retirement benefits for new employees hired after February 1, 1993 that will be
terminated as a result of the Modernization Project.

PROPERTIES

Acme Steel's principal properties consist of an iron-producing plant in
Chicago, Illinois and a steelmaking plant in Riverdale, Illinois. These
facilities include coke ovens, blast furnaces, pig casting machine, basic
oxygen furnaces, a primary mill, hot strip rolling mill for the production of
flat-rolled steel, a slab grinder, pickle lines, cold mills, annealing
furnaces, slitter lines and cut-to-length lines. Acme Packaging's principal
properties consist of steel strapping plants, which include slitting and
painting equipment, in Riverdale, Illinois; New Britain, Connecticut; Leeds,
Alabama; and Pittsburg, California. Alpha Tube's three facilities are located
in the Toledo, Ohio metropolitan area. Alpha Tube's facilities include two
manufacturing plants equipped with rolling mills for the production of welded
steel tubing, and a third plant at which steel

38
<PAGE>

slitting is performed. Universal's facilities are located in Butler, Indiana
and include a manufacturing and office building, a computer-assisted design and
manufacturing system, and automated forming and assembly lines.

All of the properties of the Company's subsidiaries are owned in fee and are
unmortgaged, other than the facilities of Alpha Tube, which are leased. As a
non-operating holding company, the Company itself does not own or lease any
properties.

RAW MATERIALS AND ENERGY

Steel Making Segment. Acme Steel's principal raw materials are iron ore and
coal, which are used in the steelmaking process. The Company believes Acme
Steel's sources of iron ore, coal and other raw materials are adequate to
provide for its foreseeable needs.

Acme Steel indirectly owns an interest of approximately 15.1% in an iron ore
mining venture, Wabush Mines ("Wabush"), in Newfoundland (Labrador) and Quebec,
Canada. The managing agent of the venture is Cliffs-Mining Company ("Cliffs"),
a subsidiary of Cleveland-Cliffs Inc. ("Cleveland-Cliffs"). Acme Steel is
contractually obligated to purchase iron ore pellets ("pellets") from Wabush at
the higher of production cost or market. Wabush's production cost currently
approximates market price; however, there can be no assurance that Wabush's
cost structure will not result in above market prices in the future. In some
cases, Acme Steel's blast furnace operations require pellets with different
properties and Acme Steel "trades" a portion of its allocated Wabush output for
alternative pellets. This type of transaction is readily accomplished because
Cliffs is the managing agent for several mining joint ventures. During 1993,
Acme Steel acquired approximately 600,000 tons of pellets, or 56% of its pellet
requirements, from Wabush. Acme Steel is obligated to purchase from Cleveland-
Cliffs 75% of its pellet requirements in excess of 680,000 tons, and Cleveland-
Cliffs has the right of first refusal to supply Acme with the remaining 25% of
its needs. The balance of Acme Steel's pellet requirements is satisfied at a
competitive delivered cost.

Currently there is a world-wide surplus of metallurgical coal. Accordingly,
Acme Steel is able to satisfy its coal requirements at competitive prices
through short-term contracts and purchases on the open market.

Acme Steel's steelmaking operations require substantial amounts of both
natural gas and electricity. Acme Steel purchases natural gas in the open
market and reuses blast furnace gas and coke oven gas. Acme Steel purchases
electricity from Commonwealth Edison Company at standard industrial rates and
is in the process of negotiating a long-term electric supply contract which, if
executed, will result in lower electric rates.

Steel Fabricating Segment. Acme Packaging and Universal purchase virtually
all of their flat-rolled steel from Acme Steel. Alpha Tube purchases from Acme
Steel a substantial portion of its steel needs that Acme Steel is able to
supply and purchases the remainder of its steel from other steel suppliers from
time to time when such purchases are deemed advantageous to the Company on a
consolidated basis. The Steel Fabricating Segment subsidiaries' purchases of
steel from Acme Steel are made at prices that approximate market prices.

COMPETITION

General. The Company's operating subsidiaries have a variety of U.S. and, in
some cases, foreign competitors, many of whom are larger, have greater capital
resources and/or have more modern technology. In general, the operating
subsidiaries compete on the basis of price, quality and service, with
particular competitive strategies adapted to the markets and customers they
serve.

Acme Steel. Acme Steel is the smallest integrated steel producer in the U.S.,
with annual shipping capability of approximately 720,000 tons. This compares
with total 1993 U.S. shipments of carbon flat-rolled steel products, as
reported by AISI, of approximately 46.4 million tons. In the specialty market
that Acme Steel targets, its primary competitors are WCI Steel, Inc. and
Bethlehem Steel at its Sparrows Point Plant, whose operations are similar to
those of Acme Steel except for their larger plant sizes and facilities, and
steel service centers, which participate in this market primarily through
larger integrated mills and overseas suppliers.

39
<PAGE>

Acme Steel operates in a cyclical and intensely competitive industry. Over
the past decade the price of steel, adjusted for inflation, has fallen
significantly. Although a significant portion of this decline is the result of
worldwide steelmaking overcapacity, steel pricing is also influenced by low
cost producers in the U.S. steel industry. Many of Acme Steel's competitors
have implemented steelmaking technologies not utilized by Acme Steel. As a
result, Acme Steel's costs to produce a ton of finished steel are substantially
higher than those of certain of its competitors. The Company believes that it
must undertake the Modernization Project and make the significant capital
investments required if Acme Steel is to achieve levels of cost, productivity
and quality already attained by certain of its competitors. See "Risk Factors--
Modernization and Expansion Project" and "Modernization and Expansion Project."

Acme Packaging. In the steel strapping market, Acme Packaging's primary
competitor is ITW Signode, a division of Illinois Tool Works, Inc., which
management believes has a market share approximating that of Acme Packaging.
The Company believes that Acme Packaging's strong market position is
attributable to (i) a broad product line, (ii) high quality, low cost strapping
produced in modern facilities, (iii) the location of its production facilities
in close proximity to a broad customer base and (iv) the benefits of a close
relationship with Acme Steel, which supplies virtually all of Acme Packaging's
steel. However, the steel strapping market is a mature market that is not
expected to grow significantly in future years. Furthermore, competition from
plastic strapping, especially the higher strength polyester products, is
expected by the Company to intensify in the traditional steel strapping markets
of lumber, paper, textiles, wood and synthetic fibers, primarily due to
improvements in product strength characteristics.

Alpha Tube. Alpha Tube operates in a highly competitive market characterized
by numerous participants with widely varying capabilities. Alpha Tube's
customers are increasingly demanding products with increased formability,
greater gauge control and lighter weight in combination with higher strength
and different steel chemistries. Customers, especially in the automotive
market, also are increasingly demanding just-in-time inventory delivery, which
has the effect of increasing inventory carrying costs at the tubing
manufacturer level. Unlike Alpha Tube, many of its competitors compete only on
price and generally offer little or no technical service.

Universal. Universal's primary competitor in the automobile and light truck
jack market is the Canadian-based Seeburn Division of Ventra Group, which has a
market share similar to that of Universal. Universal competes in a limited
market characterized by large purchasers with significant buying power.

ENVIRONMENTAL COMPLIANCE

The operations of the Company and its subsidiary companies are subject to
numerous Federal, state and local laws and regulations providing a
comprehensive program of controlling the discharge of materials into the
environment and remediation of certain waste disposal sites by responsible
parties. In addition, various Federal and state occupational safety and health
laws and regulations apply to the work place environment.

The current environmental control requirements are comprehensive and reflect
a long-term trend towards increasing stringency as environmental laws and
regulations are subject to periodic renewal and revision. The Company expects
this trend will continue and become even more pronounced in future years. The
1990 Federal Clean Air Act amendments, for example, imposed significant
additional environmental control requirements upon Acme Steel's coke plant
facilities.

In prior years, the Company has made substantial capital investments in
environmental control facilities to achieve compliance with environmental laws
and regulations, incurring expenditures of $10.3 million for environmental
projects in the period from 1991 through 1993. The Company anticipates making
further capital expenditures totaling approximately $4.1 million in 1994 for
environmental projects and approximately $7.1 million in 1995 to maintain
compliance with these laws (exclusive of any such expenditures related to the
Modernization Project). In addition, maintenance, depreciation and operating
expenses attributable to installed environmental control facilities are having,
and will continue to have, an

40
<PAGE>

adverse effect upon the Company's earnings. Although all of the Company's
subsidiary operating companies are affected by environmental laws and
regulations, such laws and regulations have had, and are expected to continue
to have, a greater impact upon the Company's steel manufacturing subsidiary
than on the Company's other operating subsidiaries.

The United States Environmental Protection Agency (the "U.S. EPA") and the
eight Great Lakes States are currently developing guidelines for discharge
standards in the Great Lakes basin pursuant to the Great Lakes Critical
Programs Act. Although these guidelines were scheduled to be issued in 1991,
due to the complexity of the process and subject matter, they have not yet been
published. When finalized, these guidelines are expected to require
substantially more stringent limitations on industrial discharges into the
water of, or entering, the Great Lakes than those currently applicable to such
discharges. After publication of the guidelines, each state is then expected to
revise its water discharge regulations to incorporate the substance of the
guidelines.

All of the process waste waters from Acme Steel are discharged to the
Metropolitan Water Reclamation District of Greater Chicago's ("MWRD") sewerage
system for treatment by the MWRD's municipal sewerage plant. Until such time as
the final guidelines are published by the U.S. EPA and specific water effluent
limitations for the MWRD's public sewerage plants are adopted by the Illinois
Environmental Protection Agency ("IEPA"), the Company will be unable to
determine whether or not Acme Steel will be subjected to further restrictions
on its process water discharges to the MWRD's sewerage system or the cost of
implementing such requirements, if any.

The Company (principally through its operating subsidiaries) is from time to
time, and expects that in the future it will be, involved in administrative
proceedings involving the issuance or renewal of environmental permits relating
to the conduct of its business. The issuance of these permits in the past has
been resolved on terms satisfactory to the Company. However, the Company has
been and expects that from time to time in the future it will continue to be
required to pursue administrative and/or judicial appeals prior to achieving a
resolution of the terms of such permits.

From time to time, the Company may be involved in administrative or judicial
proceedings with various regulatory agencies or private parties in connection
with claims that the Company's operations or its disposal of materials at waste
disposal sites have violated certain environmental laws or conditions of
existing permits. The resolution of such matters may involve the payment of
civil penalties, damages, remediation expenses and/or the expenditure of funds
to add or modify pollution control equipment.

Waste Remediation Matters.

Pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C., Section 9601 et seq. ("Superfund") and
similar state statutes, liability for remediation of property, including waste
disposal sites contaminated by hazardous materials, may be imposed on present
and former owners or operators of such property and generators or transporters
of waste materials to a waste disposal site (i.e., Potentially Responsible
Parties "PRPs"). The Company and its operating subsidiaries have been named as
PRPs with respect to several such sites. In each instance, the Company's
investigation has evidenced either (i) the Company and its operating
subsidiaries did not dispose of waste materials at the site and was not
properly named as a PRP; or (ii) the Company and such subsidiaries' proportion
of materials disposed of at such sites is of sufficiently small volume and the
material is of such a nature as to qualify them as a de minimis contributor of
waste material at such sites. The Company believes that its de minimis status
has been confirmed at American Chemical Services Site, Griffith, Indiana;
AquaTech Site, Greer, South Carolina; Thermo-Chem Site, Muskegon County,
Michigan; and Wayne Reclamation & Recycling, Inc. Site, Columbia City, Indiana.
According to the Company's records, no materials were disposed at Calumet
Containers Site, Hammond, Indiana and PSC Resources Site, Palmer,
Massachusetts. In addition to these Superfund Sites, the Company believes that
claims with respect to U.S. Scrap Site, Chicago, Illinois; 9th Avenue Dump
Site,

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<PAGE>

Gary, Indiana; and the MIDCO I and MIDCO II Site, Gary, Indiana have been
settled. The Company was asked to supply information with respect to U.S. Lead
Refinery Site, East Chicago, Indiana and has not been contacted further about
this site since January 1992.

Although no assurances can be given that new information will not be
uncovered which would cause the Company or its subsidiaries to lose their de
minimis status at these sites, or, that the Company, or its subsidiary
companies would not be named as PRPs at additional sites, the Company presently
believes its total costs for the sites named above will not be material.

Universal Tool & Stamping Company, Inc., ("Universal"), in the 1970's,
contracted with Wayne Waste and Reclamation ("WWR") to dispose of process waste
generated by Universal. Without Universal's knowledge, WWR improperly disposed
of process waste at its facility located in Columbia City, Whitley County,
Indiana which is now a Superfund site (the "Site"). Universal and many others
entered into a Consent Agreement with the U.S. EPA regarding settlement for the
cost of remediating the contamination at the Site. The Consent Agreement was
approved by the United States District Court for the Northern District of
Indiana, Fort Wayne Division, in July, 1992 in the form of a Consent Decree
which provided de minimis PRPs would extinguish their potential liability for a
definite sum and that certain other major PRPs, including Universal, would pay
a pro rata percentage of the Site clean-up expenses. Universal agreed to pay
3.59% of the total expense of remediation. While the Record of Decision
describes the work plan for remediation, no assurances can be made that the
work plan will not be reevaluated and that additional contamination or
adjustments to the work plan will not be required to fully remediate the Site
in order for it to be accepted by the U.S. EPA. For this reason remediation
expense could increase. At the present time, Universal's final expense is
estimated at less than $75,000.

Peoples Gas Light and Coke Company ("Peoples") has contacted the Company in
connection with Peoples' voluntary investigation of a site previously used by
it in the refinement of producer's gas. A continuing investigation has
preliminarily revealed the apparent existence of contamination at this
location. Although a portion of this site is currently owned by and had been
used by the Company for the storage of coke oven gas, it is the Company's
belief that the contamination is the result of Peoples' activities on this
site. There can be no assurance, however, that the investigation will not
reveal contamination of the site with additional compounds or that Peoples or
other entities will not seek recovery from the Company with respect to any
remediation activities.

In addition to the foregoing Superfund sites, the following waste remediation
matters relating to the Company's subsidiary companies are currently pending:

Universal Tool and Stamping Company, Inc.--Closure Plan. A hazardous waste
permit application under the Interim Status provision of the Resource Recovery
and Conservation Act ("RCRA") was filed on behalf of Universal with U.S. EPA
and the Indiana Department of Environmental Management ("IDEM") for several
small temporary storage areas utilized to hold hazardous waste prior to
shipment to a permanent, off-site, approved disposal area. A permit was issued
categorizing Universal as a Temporary Storage and/or Disposal facility ("TSD").

RCRA amendments, which were passed following the issuance of the permit,
eliminated the Interim Status classification and Universal attempted to
recategorize itself as a Generator of hazardous waste rather than a TSD
facility, which required the filing of a Closure Plan ("Closure Plan I") for
areas where hazardous materials had been temporarily stored. Closure Plan I was
submitted by Universal to IDEM. Closure of area 1 was separated from closure of
area 2, 3 and 3-Extended. The revised estimated cost of remediation of area 1
is approximately $25,000.

In 1988 Universal submitted a closure plan ("Closure Plan II") to IDEM
following a Notice of Violation arising out of the storage of hazardous wastes
for longer than ninety (90) days. Closure Plan II was revised in 1992 and again
in 1993.Closure Plan II also provided for remediation of Areas 2, 3 and 3-
Extended. The revised estimated cost of remediation of Closure Areas 2, 3 and
3-Extended is estimated at less than $40,000.

42
<PAGE>

While there are no assurances that the final costs will not exceed these
estimates, they are not expected to be significant.

Environmental Remediation at the Acme Packaging Facility Located at 855 North
Parkside Drive, Pittsburg, California. Litigation related to contamination
discovered prior to the acquisition of the facility located at 855 North
Parkside Drive, Pittsburg, California (the "Pittsburg Facility") was settled in
1990 by agreement among the Company and the prior owners and operators of the
Pittsburg Facility. The settlement required a prior owner to remediate
contamination detected in the groundwater, soil or subsurface soil on, under or
near the Pittsburg Facility and to investigate and remediate other
contamination on, under or near the Pittsburg Facility caused by prior owners
of that facility and to investigate and remove contamination brought to the
Pittsburg Facility during the remediation program. The prior owner is
responsible for preparation of a remedial action plan and to verify that the
appropriate local, state and Federal agencies have no objection to the remedial
action plan as completed. The remediation levels are subject to local, state
and Federal laws, rules and regulations. Acme Packaging's participation
includes observation of the former owner's actions and to contribute to the
funding of the remedial action plan costs in a non-material amount.

While the Pittsburg Facility has been closed for business reasons, the
remediation continues, principally in the form of a groundwater extraction and
treatment system which discharges the treated water to a nearby sanitary sewer
under permit. Based on the information available to date, Acme Packaging's
level of financial commitment related to this remediation has not been
significant and the balance of its commitment is not anticipated to be
significant.

Leeds, Alabama--Elevated Levels of Lead. In September, 1992, Acme Packaging
hired a consulting engineering firm for the purpose of providing soil sampling
and analysis in connection with an application for a stormwater permit for its
Leeds, Alabama, plant. Pursuant to an investigation conducted by the
consultant, elevated levels of lead were discovered on the property, including
one area of the property wherein buried drums were discovered containing lead.

In January, 1993, Acme Packaging advised the seller of this plant site that
the sampling program was initiated in conjunction with filing a Notice of
Intent for the Plan for Coverage under the Alabama Department of Environmental
Management's General Stormwater Discharge Permit. The seller was advised that
the results of the sampling program showed runoff from the west parking lot
area contained elevated concentrations of lead in the samples. Pursuant to Acme
Packaging's investigation, Acme Packaging advised the seller that all evidence
indicates these conditions were present on the property at the time the seller
owned the property and were present at the time the Leeds, Alabama, facility
was sold to Acme Packaging on March 29, 1989. Pursuant to the terms of the
purchase and sale agreements relating to this property, the seller is
responsible for remediating any lead or other contamination located on this
property. Without admitting or denying its liability, the seller has retained a
consultant to conduct a full investigation, sampling and analysis of the
property.

Acme Packaging is cooperating with the seller regarding the investigation of
the contamination of this property by lead, and/or other substances; however,
Acme Packaging intends to vigorously pursue its remedies under the purchase and
sale agreements with the seller.

Administrative and Litigation Matters.

The Company is currently involved in the following matters relating to
administrative regulations which affect, or may affect, the operations, the
permits or the issuance of permits, or litigation relating to the Company.

Acme Steel Company--NPDES Permit. In 1991, the IEPA issued Acme Steel a
permit pursuant to the National Pollution Discharge Elimination System
("NPDES") regulating non-contact water discharges to the Calumet River from
Acme Steel's coke and blast furnace plant facilities. The NPDES permit contains

43
<PAGE>

strict temperature and stormwater discharge limitations. On March 24, 1994 Acme
Steel filed an appeal (case no. 94-8) of certain conditions of the permit with
the Illinois Pollution Control Board ("IPCB"). Acme Steel is proceeding to
resolve this matter through the administrative proceedings which allow for the
filing of a Petition for an Adjusted Standard and a request for the IPCB to
grant Acme Steel an adjusted standard and relief from the temperature
limitations. Further, through modification of certain provisions in the permit
and the implementation of best management practices, Acme Steel anticipates
achieving control of Acme Steel's stormwater discharge to an extent that it
will achieve compliance with permit conditions.

In the event these matters are not resolved through the administrative
process as outlined above, Acme Steel will petition the IPCB for a variance
from the General Use Water Quality Standards. If issued, a variance will
provide temporary relief. Future compliance with permit conditions would be
achieved at an estimated capital expenditure of approximately $4.0 million and
operating expenses would be incurred at an annual rate of approximately
$600,000. A request for a hearing on the Petition for Adjusted Standard has
been filed on behalf of local citizens. In the event Acme Steel's Petition for
an Adjusted Standard is denied and a variance is denied, Acme Steel may be
subject to penalties until compliance is achieved.

While the Company believes Acme Steel has demonstrated that it is entitled to
the issuance of an Adjusted Standard, or absent an Adjusted Standard, to a
variance allowing Acme Steel sufficient time to install additional capital
equipment to achieve compliance, there are no assurances that either will be
granted. If such relief is not granted, and penalties are assessed, the Company
does not have sufficient information to estimate its liabilities for such
penalties, if any, which may be assessed.

Removal Credits and Pretreatment. The MWRD is a publicly owned treatment
works ("POTW"). The MWRD applied to the U.S. EPA for authority to revise
categorical pretreatment standards to reflect the actual treatment provided by
the MWRD for waste water discharged to the MWRD's POTW by industrial users
("Removal Credits"). These revised categorical standards, reflecting Removal
Credits are essential for Acme Steel to avoid expenditures for control of 4AAP
phenol found in discharges from its coke by-products plant and for control of
certain other pollutants. In 1987, the MWRD's application was denied by the
U.S. EPA and the denial was upheld by the United States Court of Appeals for
the Seventh Circuit. The U.S. EPA maintained that under the Clean Water Act and
decisions of U.S. District Courts, that it could not approve Removal Credits
until it promulgated "sludge criteria."

In 1993, the U.S. EPA promulgated sludge criteria which included the
possibility of granting Removal Credits for phenols in certain circumstances.
Acme Steel petitioned the MWRD for Removal Credits. Following this petition,
the MWRD again applied to the U.S. EPA for authority to grant Removal Credits.
While this application was denied, the U.S. EPA stated that if the Agency
amends its regulations with respect to 4AAP phenol either as a result of the
petition filed by the MWRD or independently, that the MWRD may then resubmit
its application.

Acme Steel filed Comments and a Request for Reconsideration and Clarification
concerning the U.S. EPA's Standards for Disposal of Sludges with the U.S. EPA
and filed a Petition for Review of the U.S. EPA's decision with the Court of
Appeals for the DC Circuit. The Comments and Request for Reconsideration is
pending. Acme Steel filed a motion to stay the petition for review. Pending a
final determination at the administrative level which is subject to appeal, the
U.S. EPA has responded to the motion to stay and does not oppose a stay of the
proceedings. While Acme Steel continues to challenge the U.S. EPA's denial of
the Removal Credits application and is pursuing administrative and legal
remedies, Acme Steel could be subject to allegations that it is in violation of
currently applicable pretreatment standards and could be required to negotiate
appropriate resolutions with the U.S. EPA and the MWRD which could result in
the payment of penalties. In the event Acme Steel is unsuccessful in its
challenge of the U.S. EPA's actions, capital expenditures required to bring its
discharges to the MWRD into compliance with the current applicable pretreatment
standards are estimated at approximately $6.0 million with annual operating and
maintenance costs estimated at approximately $0.3 million.

44
<PAGE>

Although Acme Steel is vigorously pursuing its administrative and judicial
remedies and would vigorously contest any action to assess civil penalties
against Acme Steel, the Company does not have sufficient information to
estimate its potential liability, if any, if Acme Steel's efforts to obtain
such relief, or contest such penalty assessments, are not successful.

Recent Developments. The Company recently initiated discussions with U.S. EPA
regarding the secondary (i.e., "fugitive") emission control system for the iron
desulfurization station in the basic oxygen furnace ("BOF") facility at Acme
Steel's Riverdale, Illinois, steelmaking plant. U.S. EPA has expressed concerns
regarding the adequacy of the existing iron desulfurization station controls,
and the Company has provided U.S. EPA with available information regarding the
Company's control program and schedule. The Company has included funds in its
1995 and 1996 capital budget plans for improvements in the emission collection
and cleaning system for the iron desulfurization station. Based upon
preliminary engineering estimates, the Company anticipates the cost of
improvements in the iron desulfurization station will be in the range of $6 to
$8 million and will require 15 to 18 months to install. Further discussions
with the U.S. EPA are anticipated in the near future.

1986 REORGANIZATION

Pursuant to the terms of the 1986 Reorganization, Acme Steel entered into a
Cross-Indemnification Agreement with Interlake (the "Indemnification
Agreement") dated May 29, 1986. Pursuant to the terms of the Indemnification
Agreement, for a period of ten (10) years following the date of the "Spin-Off"
(as said term is defined in the 1986 Reorganization documents), Acme Steel
undertook to defend, indemnify and hold Interlake and its affiliates harmless
from and against any and all "Claims," as that term is defined in the
Indemnification Agreement, occurring either before or after the date of the
1986 Reorganization and which arose out of or are related to the "Acme Steel
Business." The Acme Steel Business is more specifically defined in the
Indemnification Agreement as the iron and steel and domestic U.S. steel
strapping business as conducted by Acme Steel on or about May 29, 1986. The
indemnification by Acme Steel of Interlake with respect to any claims includes,
but is not limited to, all claims asserted in connection with Acme Steel's
interests or obligations with respect to: Wabush Iron Company, Ltd.; Wabush
Mines; Erie Mining Company; Olga Coal Company; assets and liabilities related
to qualified welfare and benefit plans with respect to retired, current and
future employees of Acme Steel; certain environmental matters relating to the
Acme Steel Business, whether brought by a governmental agency or a private
entity; workers' compensation matters and occupational safety, health and
administration matters; and product liability and general liability matters
related to the Acme Steel Businesses. The Agreement designated certain mineral
property interests retained by Acme Steel, including land held for the account
of Acme Steel by Syracuse Mining Company, a subsidiary of Pickands Mather and
Company; stock held in Tilden Iron Mining Company; and, lands owned in Bruce
County, Ontario, Canada, as being within the scope of the indemnification.

Similarly, and for the same period of time, Interlake undertook in the
Indemnification Agreement to defend, indemnify and hold Acme Steel and its
affiliates harmless from and against all "Claims," as that term is defined in
the Indemnification Agreement, occurring either before or after the date of the
1986 Reorganization related to the operation of all businesses and properties
currently owned, directly or indirectly, by Interlake or any subsidiary of
Interlake (other than Acme Steel and its affiliates) and relating to the
Transferred Property, as that term is defined in the Indemnification Agreement
(but excluding the Acme Steel Business), and, any business and properties
discontinued or sold by Interlake or Interlake, Inc. prior to May 29, 1986,
including any discontinued or sold businesses or property which, if continued,
would be part of the Acme Steel Business.

Environmental Indemnification. The indemnification by Interlake with respect
to any Claims incurred in connection with or arising out of or related to
Interlake Business, as the term is defined more specifically in the
Indemnification Agreement, includes but is not limited to: those claims
asserted in connection with certain stock options, rights, awards and programs;
certain deferred compensation matters; certain matters arising under qualified
welfare and benefit plans and post-retirement income plans; and, environmental

45
<PAGE>

matters relating to Interlake Businesses whether brought by governmental
agencies or private entities. These environmental matters include, without
limitation, the lawsuit captioned People of the State of Illinois v. Waste
Management of Illinois, Interlake, Inc. And First National Bank of Western
Springs, Circuit Court of Cook County, Illinois (No. 85 CH 4016); the disposal
of materials at the landfill operated by Conservation Chemical located at Gary,
Indiana, to the extent such materials originated at the plant of Gary Steel
Company; the Port Monroe Landfill site in Monroe County, Michigan, as a site of
environmental contamination as defined by the Michigan Water Resources
Commission Act; operation of facilities (which have been designated as a
superfund site) by predecessors of Interlake, Inc. at Duluth, Minnesota;
workers' compensation, occupational safety and health matters relating to the
Interlake Business; general products liability and general litigation matters
related to Interlake's Business; and, the matters arising from Lake Mining
Company, Mauthe Mining Company, Odanah Iron Company, Vermillion Mining Company
and Western Mining Company.

Pursuant to the Indemnification Agreement, Interlake has provided the defense
and paid all costs in the matter of City of Toledo v. Beazer Materials and
Services, Inc., successor-in-interest to Koppers Company, Inc., Toledo Coke
Corporation, the Interlake Corporation, successor-in-interest to Interlake,
Inc., The Interlake Companies, Inc., successor-in-interest to Interlake, Inc.,
Acme Steel Company, successor-in-interest to Interlake, Inc., United States
District Court, Northern District of Ohio, Western Division (No. 3:90 CV 7344),
which is an action for declaratory and injunctive relief by the City of Toledo
(the "City") to recover its past and future costs and damages associated with
the presence of and release of hazardous substances, hazardous wastes, solid
waste, industrial waste and other waste at or about property located on Front
Street in Toledo, Ohio. The City seeks relief pursuant to CERCLA and RCRA and
on the basis of nuisance. The City claims that the defendants owned and/or
operated facilities located on Front Street in Toledo, Ohio which generated,
transported and/or treated, stored or disposed of hazardous substances,
hazardous wastes, solid wastes and industrial wastes or other wastes which were
released at and from the facility by defendants or successors-in-interest to
the entities which owned, operated, generated, transported and/or treated,
stored or disposed of said substances.

Tax Indemnification. Pursuant to the 1986 Reorganization, Acme Steel and
Interlake entered into a tax indemnification agreement ("Tax Indemnification
Agreement"). The Tax Indemnification Agreement generally provides for Interlake
to indemnify Acme Steel for certain tax matters. Under the Tax
Indemnification Agreement, Interlake is solely responsible for any additional
income taxes Acme Steel is assessed related to adjustments relating to all tax
years prior to 1982. With respect to any additional income taxes that are
finally determined to be due with respect to the tax years beginning in 1982
through the date of the "Spin-Off" (as this term is identified in the 1986
Reorganization documents), Acme Steel is responsible for taxes relating to
"Timing Differences" in connection with Acme Steel's "Continuing Operations."
"Timing Differences" are defined generally as adjustments to income, and
deductions or credits which are required to be reported in a tax year beginning
subsequent to 1981 through the Spin-Off, but which will reverse in a subsequent
year. "Continuing Operations" is defined generally as any business and
operations conducted by Acme Steel as of the Spin-Off date. Interlake is
principally responsible for any additional income taxes Acme Steel is assessed
relating to all other adjustments prior to the Spin-Off.

While certain issues have been negotiated and settled among Acme Steel,
Interlake and the Internal Revenue Service for the tax years beginning in 1982
through the date of the Spin-Off, certain significant issues for these tax
years remain unresolved. On March 17, 1994, Acme Steel received a Statutory
Notice of Deficiency ("Notice") in the amount of $16.9 million in tax as a
result of the Internal Revenue Service's examination of the 1982 through 1984
tax years. Interlake has been principally responsible, pursuant to the Tax
Indemnification Agreement, for representing Acme Steel before the Internal
Revenue Service for the 1982 through 1984 tax years. Should the government
sustain its position as proposed for those unresolved issues and those
contained in the Notice, substantial interest would also be due (potentially in
an amount greater than the tax claimed). The taxes claimed relate principally
to adjustments for which Acme Steel is indemnified by Interlake pursuant to the
Tax Indemnification Agreement. Acme Steel has adequate reserves to cover that

46
<PAGE>

portion of the tax for which it believes it may be responsible per the Tax
Indemnification Agreement. Acme Steel is contesting the unresolved issues and
the Notice.

INTERLAKE. To date Interlake has met its obligations under the
Indemnification Agreement and Tax Indemnification Agreement with respect to all
matters covered. In the event that Interlake, for any reason, were unable to
fulfill its obligations under the Indemnification Agreement or Tax
Indemnification Agreement, Acme Steel could have substantially increased future
obligations. Interlake is subject to the informational requirements of the
Securities Exchange Act of 1934 and in accordance therewith files reports,
proxy material and other information concerning Interlake with the Commission.
Interlake's 12 1/8% senior subordinated debentures due 2002 are currently rated
CCC+ by Standard & Poor's Corporation and B3 by Moody's Investors Service, Inc.

LEGAL PROCEEDINGS

In addition to the matters referred to above, the Company and its
subsidiaries have from time to time various other litigation matters pending
which arise out of the ordinary course of their businesses. In the opinion of
management, the ultimate resolution of these matters will not have a material
adverse effect on the financial position of the Company.

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company, and their ages as of May
1, 1994 are listed below. Service with Acme Steel Company prior to the 1986
Reorganization and the 1992 Reorganization is considered service with the
Company. All positions described in the table below are with the Company. All
executive officers are elected annually by the Board of Directors of the
Company to serve for a term of one year and until their successors are elected.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Brian W. H. Marsden 62 Chairman and Chief Executive Of-
ficer
Stephen D. Bennett 45 President and Chief Operating Of-
ficer, Director
Richard J. Stefan 57 Vice President--Employee Rela-
tions
Edward P. Weber, Jr. 56 Vice President, General Counsel
and Secretary
Jerry F. Williams 54 Vice President--Finance and
Administration
James W. Hoekwater 47 Treasurer
C.J. Gauthier 72 Director
Edward G. Jordan 64 Director
Andrew R. Laidlaw 47 Director
Frank A. LePage 66 Director
Reynold C. MacDonald 75 Director
Julien L. McCall 73 Director
Carol O'Cleireacain 47 Director
William P. Sovey 60 Director
William R. Wilson 67 Director
</TABLE>

Brian W.H. Marsden. Mr. Marsden, who resides in Palos Heights, Illinois, has
been Chairman since May 1992 and Chief Executive Officer of the Company since
June 1986. From June 1986 to May 1992, Mr. Marsden was also President. He is a
member of the Executive (Chairman) and Finance Committees of the Company's
Board of Directors. Mr. Marsden was President of the Iron and Steel Division of
Interlake from

47
<PAGE>

1981 to 1986 and he joined Interlake in 1976 as Vice President Steel
Operations. Prior to joining Interlake, Mr. Marsden was with Algoma Steel
Corporation in Canada for 24 years, where his last position was Vice President
and Assistant to the President. His current term as a director expires in 1995.

Stephen D. Bennett. Mr. Bennett, who resides in Frankfort, Illinois, has been
President and Chief Operating Officer and a Director of the Company since
January 1, 1993. Prior to that date, he was Group Vice President (from January
1992 through December 1992), and Vice President--Operations (from June 1990
through December 1991). From December 1987 to May 1990, Mr. Bennett was General
Manager of Fairfield Works, USS Division of USX Corporation. Mr. Bennett is a
member of the Company's Executive and Finance Committees. His current term as a
director expires in 1997.

Richard J. Stefan. Mr. Stefan, who resides in Palos Park, Illinois, has been
Vice President--Employee Relations of the Company since June 1986. From 1959 to
1986, Mr. Stefan served in a number of employee relations positions at
Interlake.

Edward P. Weber, Jr. Mr. Weber, who resides in Munster, Indiana, has been
Vice President, General Counsel and Secretary of the Company since June 1986.
Prior to joining Acme in 1986, Mr. Weber held positions in private practice and
elsewhere in the steel industry.

Jerry F. Williams. Mr. Williams, who resides in Hinsdale, Illinois, has been
Vice President--Finance and Administration and Treasurer of the Company since
May of 1986. Mr. Williams also served as Director of Strategic Planning and
Assistant to the Chairman of Interlake from 1981 to 1986. From 1965 to 1981,
Mr. Williams served in a number of financial positions at Interlake.

James W. Hoekwater. Mr. Hoekwater, who resides in Wilton, Connecticut, has
been Treasurer of the Company since July 1, 1994. From December 1989 to October
1993 Mr. Hoekwater served as the Corporate Controller of ITT Rayonier, Inc., a
subsidiary of ITT Corporation having approximately $1 billion in yearly sales.
Mr. Hoekwater is a Certified Public Accountant and a member of the AICPA.

C.J. Gauthier. Mr. Gauthier, who resides in Oak Brook, Illinois, has been a
director of the Company since June 1986. In January 1986, he retired as
Chairman, President and Chief Executive Officer of NICOR Inc. (a public utility
holding company). Mr. Gauthier is a member of the Audit Review, Compensation,
Executive and Nominating Committees of the Company's Board of Directors. His
current term as a director expires in 1996.

Edward G. Jordan. Mr. Jordan, who resides in Carmel, California, has been a
director of the Company since July 1988. From 1982 through 1987, he served as
President and Chief Executive Officer of The American College (a private,
accredited, nontraditional college specializing in financial services and
insurance education) and in 1988 he served as a consultant to its board of
trustees. Mr. Jordan is currently a private investor. He is a director of The
ARA Group, Inc. and The Pittston Company. Mr. Jordan is a member of the Audit
Review, Finance (Chairman) and Nominating Committees of the Company's Board of
Directors. His current term as a director expires in 1995.

Andrew R. Laidlaw. Mr. Laidlaw, who resides in Hinsdale, Illinois, has been a
director of the Company since May 1987. Since 1978, he has been Chairman of the
Executive Committee and a Partner of the law firm of Seyfarth, Shaw,
Fairweather & Geraldson, Chicago, Illinois. Mr. Laidlaw is a member of the
Audit Review (Chairman), Executive and Nominating Committees of the Company's
Board of Directors. His current term as a director expires in 1997.

Frank A. LePage. Mr. LePage, who resides in Palm City, Florida, has been a
director of the Company since May 1987. In 1982, he retired as Director and
Executive Vice President of The Firestone Tire and Rubber Company. He is a
director of Parker-Hannifin Corporation. Mr. LePage is a member of the
Compensation (Chairman), Finance and Nominating Committees of the Company's
Board of Directors. His current term as director expires in 1997.

48
<PAGE>

Reynold C. MacDonald. Mr. MacDonald, who resides in Oak Brook, Illinois, has
been a Director of the Company since June 1986 and was Chairman of the Board of
the Company from June 1986 to May 1992. He is a director of The ARA Group, Inc.
and Kaiser Steel Resources. Mr. MacDonald is a member of the Audit Review,
Executive, Finance and Nominating Committees of the Company's Board of
Directors. His current term as a director expires in 1995.

Julien L. McCall. Mr. McCall, who resides in Hunting Valley, Ohio, has been a
director of the Company since June 1986. In May 1986, he retired as Chairman of
the Board and Chief Executive Officer of National City Corporation (a bank
holding company), positions he held from December 1980 to his retirement. Mr.
McCall is a member of the Compensation, Finance and Nominating Committees of
the Company's Board of Directors. His current term as a director expires in
1996.

Carol O'Cleireacain. Ms. O'Cleireacain, who resides in New York, New York,
has been a director of the Company since April 1994 as a designated union
representative. From September 1976 to February 1990 she was employed as the
Chief Economist for District Counsel 37, American Federation of State, County
and Municipal Employees. From February 1990 to August 1993, she was a
Commissioner of the New York City Department of Finance. From August 1993 to
December 1993, Ms. O'Cleireacain was employed as Director, New York City Office
of Management and Budget. From January 1994 to the present she has worked as a
consultant. Ms. O'Cleireacain is a member of the Company's Audit Review and
Nominating Committees. Her current term as a director expires in 1995.

William P. Sovey. Mr. Sovey, who resides in Rockford, Illinois, has been a
director of the Company since June 1991. He has been Vice Chairman and Chief
Executive Officer of Newell Co. (a manufacturing and marketing company for high
volume hardware and housewares, office and industrial products) since 1992.
From 1986 to 1992, he was President and Chief Operating Officer of Newell Co.
Mr. Sovey is a member of the Compensation, Finance and Nominating (Chairman)
Committees of the Company's Board of Directors. His current term as a director
expires in 1995.

William R. Wilson. Mr. Wilson, who resides in Malvern, Pennsylvania, has been
a director of the Company since July 1992. He served as Chairman and Chief
Executive Officer of Lukens, Inc. from April 1981 until his retirement in
December 1991. Prior to joining Lukens, Inc. he was employed by Inland Steel
Corporation for over 30 years. The last position held with Inland Steel
Corporation was Senior Vice President-Engineering and Corporate Planning. He is
a director of Columbia Gas System, Inc. and Provident Mutual Life Insurance
Company. Mr. Wilson is a member of the Audit Review, Compensation and
Nominating Committees of the Company's Board of Directors. His current term as
a director expires in 1996.

49
<PAGE>

SUMMARY COMPENSATION TABLE

The following table sets forth information with respect to the compensation
of the Company's Chief Executive Officer and each of the four other most highly
compensated executive officers for services in all capacities in fiscal years
1991, 1992 and 1993.

<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------- OTHER ---------------------- ALL
ANNUAL RESTRICTED SECURITIES OTHER
COMPEN- STOCK UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SATION(1) AWARD(2)(3) OPTIONS SATION(1)(4)
- --------------------------- ---- ------------------- --------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Brian W. H.
Marsden 1993 $380,000 $228,000 $ -0- $ 34,500 15,000 $44,650
Chairman and
Chief Execu-
tive 1992 360,000 -0- -0- -0- 10,000 68,264
Officer 1991 320,000 64,300 -0- 150,000 32,500 -0-
Stephen D.
Bennett 1993 $210,000 $ 94,500 $32,812(5) $ 25,875 10,000 $24,675
President and
Chief Operat-
ing 1992 160,000 -0- -0- 107,250 7,000 25,900
Officer 1991 135,000 25,000 -0- 24,000 7,400 -0-
Richard J.
Stefan 1993 $135,000 $ 60,800 $ -0- $ 17,250 4,000 $15,862
Vice Presi-
dent-- 1992 129,000 -0- -0- 7,375 4,000 20,636
Employee Rela-
tions 1991 122,000 18,400 -0- 30,000 6,500 -0-
Edward P. Web-
er, Jr. 1993 $136,000 $ 61,200 $ -0- $ 17,250 4,000 $15,980
Vice Presi-
dent, General 1992 130,000 -0- 18,972(5) 11,062 4,000 20,776
Counsel and
Secretary 1991 122,000 18,400 -0- 30,000 6,500 -0-
Jerry F. Wil-
liams 1993 $170,000 $ 76,500 $ -0- $ 20,700 5,000 $19,975
Vice Presi-
dent--Finance
and 1992 160,000 -0- 16,448(5) 14,750 5,000 25,564
Administration 1991 150,000 22,600 -0- 37,800 8,200 -0-
</TABLE>
- --------
(1) Amounts of Other Annual Compensation and All Other Compensation have not
been included for fiscal year 1991.
(2) Values of restricted stock awards are based on the closing price on the
date of grant; $17.25 for January 26, 1993, $14.75 for January 22, 1992,
$18.50 for June 12, 1992, and $12.00 for January 25, 1991.
The vesting schedule for stock awards granted on January 26, 1993 is 20% of
the shares granted on July 27, 1993, 1994, 1995, 1996 and 1997. The total
number of shares granted and the number of shares of each installment
follows: Mr. Marsden, 2,000 shares granted in installments of 400 shares
each; Mr. Bennett, 1,500 shares granted in installments of 300 shares each;
Mr. Stefan, 1,000 shares granted in installments of 200 shares each; Mr.
Weber, 1,000 shares granted in installments of 200 shares each; Mr.
Williams, 1,200 shares granted in installments of 240 shares each.
Dividends, if and when declared by the Board of Directors, are payable on
the unvested portion of this stock award.
The vesting schedule for stock awards granted on January 22, 1992 is 20% of
the shares granted on July 23 of 1992, 1993, 1994, 1995 and 1996. The total
number of shares granted and the number of shares of each installment
follows: Mr. Marsden, none; Mr. Bennett, 1,000 shares granted in
installments of 200 shares each; Mr. Stefan, 500 shares, granted in
installments of 100 shares each; Mr. Weber, 750 shares granted in
installments of 150 shares each; Mr. Williams, 1,000 shares granted in
installments of 200 shares each. Dividends are payable on the unvested
portion of the stock award.
The vesting schedule for the stock award granted to Mr. Bennett on June 12,
1992 is 1,000 shares on December 13, 1992 through 1996 for a total grant of
5,000 shares.
The vesting schedule for stock awards granted on January 25, 1991 is 20% of
the shares granted on January 25 of 1991, 1992, 1993, 1994 and 1995. The
total number of shares granted and the number of shares of each installment
follows: Mr. Marsden, 12,500 shares granted in installments of 2,500 shares
each; Mr. Bennett, 2,000 shares granted in installments of 400 shares each;
Mr. Stefan, 2,500 shares granted in installments of 500 shares each; Mr.
Weber, 2,500 shares granted in installments of 500 shares each; Mr.
Williams, 3,150 shares granted in installments of 630 shares each.
Dividends are payable on the unvested portion of the stock award.

50
<PAGE>

(3) The total number and value of the aggregate unearned restricted stock
holdings at December 26, 1993 were as follows: Mr. Marsden, 4,100 shares,
value $71,750; Mr. Bennett, 5,400 shares, value $94,500; Mr. Stefan, 1,600
shares, value $28,000; Mr. Weber, 1,750 shares, value $30,625; Mr.
Williams, 2,190 shares, value $38,325.
(4) Amounts in this column are Company contributions to the SERSP and ESOP (as
defined below), which are defined contribution plans.
(5) The dollar value of perquisites and other personal benefits for executive
officers other than Mr. Bennett was less than the established reporting
thresholds. The amount reported for Mr. Bennett includes $20,499 for
country club initiation fees and dues which are in excess of 25% of the
total perquisites and other personal benefits reported for Mr. Bennett.
Includes $13,336 and $12,876 for Messrs. Weber and Williams, respectively,
for automobile expense. These amounts are in excess of 25% of the total
perquisite and other personal benefits reported for the named executive
officers.

STOCK OPTION GRANTS IN 1993

The following table sets forth certain information relating to options to
purchase common stock granted in the fiscal year 1993 to the five individuals
named in the Summary Compensation Table.

OPTION GRANTS IN LAST FISCAL YEAR(1)

INDIVIDUAL GRANTS IN 1993
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NO. OF % OF TOTAL ANNUAL RATE OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(4)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------------
NAME GRANTED FISCAL YEAR(2) PER SHARE(3) DATE 5% 10%
---- ---------- -------------- ----------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
All Shareholders(5)..... N/A N/A N/A N/A $ 48,858,267 $ 123,816,441
B.W.H. Marsden.......... 15,000 16.9% $14.50 5/27/03 136,785 346,639
S.D. Bennett............ 10,000 11.3% 14.50 5/27/03 91,190 231,093
R.J. Stefan............. 4,000 4.5% 14.50 5/27/03 36,476 92,437
E.P. Weber.............. 4,000 4.5% 14.50 5/27/03 36,476 92,437
J.F. Williams........... 5,000 5.6% 14.50 5/27/03 45,595 115,546
Named Executive
Officers' Gains as a %
of All Shareholders'
Gains(6)............... 0.709% 0. 709%
</TABLE>
- --------
(1) Stock Appreciation Rights were not granted during 1993. All options were
granted on May 27, 1993. One-half of the options became exercisable on May
27, 1994 and one-half become exercisable on May 27, 1995 unless the vesting
schedule is accelerated so that the options become fully exercisable upon
death, retirement, disability or a change in control as defined in the
Grant of Stock Option Agreement. The options were granted for a term of 10
years, subject to earlier termination in certain events related to
termination of employment.
(2) Based on 88,500 options granted to all employees.
(3) Exercise price is the market value per share on the date of grant,
determined by calculating the average of the high and low prices of the
common stock on the Nasdaq National Market, as reported in The Wall Street
Journal for the date of grant.
(4) Total dollar gains based on the assumed annual rates of appreciation shown
here and calculated on 5,372,505 outstanding shares--the number of shares
outstanding on the date of grant. The dollar amounts in these columns are
the result of calculations at the 5% and 10% rates set by the Commission
and are not intended to forecast future appreciation of the common stock.
As an alternative to the assumed potential realizable values stated in the
5% and 10% Columns, SEC rules would permit stating the present value of
such options at the date of grant. Methods of computing present value
suggested

51
<PAGE>

by different authorities can produce significantly different results.
Moreover, since stock options granted by the Company are not transferable,
there is no objective criteria by which any computation of present value can
be verified. Consequently, the Company does not believe there is a reliable
method of computing the present value of such stock options.
(5) "All Shareholders" is shown for comparison purposes only. The potential
realizable value illustrates the gains all shareholders could realize
assuming a hypothetical ten-year option granted at $14.50 per share on May
27, 1993 if the share price of the common stock increases at the assumed
annual rates shown in the table. There can be no assurance that the common
stock will perform at the assumed annual rates shown in the table.
(6) This analysis illustrates the proportion of executive officers' gains as a
percent of all shareholders' gains under the above assumptions.

AGGREGATED OPTION EXERCISES IN 1993 AND FISCAL YEAR END OPTION VALUES

The following table sets forth certain information concerning the exercise of
options in 1993 to purchase common stock by the five individuals named in the
Summary Compensation Table and the unexercised options to purchase common stock
held by such individuals at December 26, 1993.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
NUMBER OF UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
SHARES OPTIONS AT 12/26/93 12/26/93(1)
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Brian W.H. Marsden...... -0- N/A 79,300 20,000 $205,588 $39,375
Stephen D. Bennett...... -0- N/A 15,900 13,500 26,363 26,250
Richard J. Stefan....... -0- N/A 21,550 6,000 50,544 10,500
Edward P. Weber, Jr..... -0- N/A 21,650 6,000 50,544 10,500
Jerry F. Williams....... -0- N/A 27,250 7,500 63,344 13,125
</TABLE>
- --------
(1) Calculated on the basis of the fair market value of the underlying
securities at fiscal year end, $17.125, minus the exercise price. Options
granted in 1988, 1989 and 1992 were not in-the-money at fiscal year end.

DEFINED BENEFIT PLAN

<TABLE>
<CAPTION>
AVERAGE ANNUAL EARNINGS
FOR THE 5 HIGHEST 12 MONTH PERIODS
DURING THE LAST 10 CONSECUTIVE 12-MONTH ESTIMATED ANNUAL PENSION PAYABLE
PERIODS BASED ON YEARS OF SERVICE INDICATED
--------------------------------------- -----------------------------------
15 YEARS 20 YEARS 25 YEARS 30 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
$100,000.................................. $ 14,387 $ 22,262 $ 30,137 $ 38,012
150,000.................................. 26,199 38,012 49,824 61,637
200,000.................................. 38,012 53,762 69,512 85,262
250,000.................................. 49,824 69,512 89,199 108,887
300,000.................................. 61,637 85,262 108,887 132,512
350,000.................................. 73,449 101,012 128,574 156,137
400,000.................................. 85,262 116,762 148,262 179,762
450,000.................................. 97,074 132,512 167,949 203,387
500,000.................................. 108,887 148,262 187,637 227,102
</TABLE>

The Company's Salaried Employees' Past Service Pension Plan (the "Past
Service Plan") provides for benefits based on years of credited service with
Acme Steel Company through December 31, 1981 and average annual earnings for
the 5 highest 12-month periods during the 10 consecutive 12-month periods
preceding

52
<PAGE>

retirement. The Company and Mr. Marsden are parties to a Deferred Compensation
Agreement which entitles Mr. Marsden to a supplemental pension benefit
equivalent to ten years of additional credited service under the Past Service
Plan unless (i) his employment with the Company is terminated for "Cause" (as
defined in the Deferred Compensation Agreement) or (ii) he engages in a
"competitive activity" (as defined in the Deferred Compensation Agreement) for
the period and under the circumstances provided in such agreement. Corporate
funds, rather than pension trust assets, will be used for payment of these
supplemental benefits to Mr. Marsden and any pension benefits payable in excess
of the maximum amount permitted under the Internal Revenue Code. Mr. Marsden
was deemed to have approximately 15 years of credited service as of December
31, 1981, Mr. Williams has approximately 17 years of credited service, and Mr.
Stefan has approximately 22 years of credited service. Messrs. Bennett and
Weber joined the Company after December 31, 1981 and, therefore, do not
participate in the Past Service Plan.

The preceding table is based upon retirement at age 65, a pension payable for
the life of the retiree only, and a social security offset of $8,798.40 per
year. Different benefits under the Past Service Plan may be payable for persons
whose employment terminates prior to age 65. For purposes of the table, average
annual earnings include salaries and bonuses paid or deferred during the
twelve-month period.

The Past Service Plan provides for a transition pension for salaried
employees and certain executive officers who were employed on December 31, 1981
if the benefit attributable to contributions by the Company after December 31,
1981 under the Company's Salaried Employees' Retirement Savings Plan (the
"SERSP") is less than the benefit which would be attributable under the Past
Service Plan to continuous service between January 1, 1982 and the earlier of
December 31, 1991 and termination of employment. The amount attributable to
such Company contributions is contributions to the SERSP in excess of 6 1/2
percent of the participant's earnings for each calendar quarter (which, in the
case of executive officers, are the same for purposes of the SERSP as for
purposes of the Past Service Plan) of continuous service from January 1, 1982
until the earlier of December 31, 1991 and termination of employment, together
with amounts which would have been earned had such contributions been invested
and reinvested in the Diversified Investment Fund provided for in the SERSP.
Future performance of the Diversified Investment Fund and the earnings of
participants during the 10 years preceding retirement will determine whether or
not any transition pension will be payable.

Unless a participant becomes entitled to a transition pension as described in
the preceding paragraph, years of credited service after December 31, 1981 will
have no effect on any estimated annual pension payable pursuant to the Past
Service Plan.

CHANGE IN CONTROL ARRANGEMENTS

On May 25, 1992, the Board adopted the Key Executive Severance Pay Plan (the
"Plan") from Acme Steel Company and designated the executive officers of the
Company and certain other individuals as participants. A participant may be
entitled to severance benefits under the Plan if there is a termination of his
employment without cause at any time within three years after a "Change in
Control" of the Company (as defined in the Plan). In addition, following a
Change in Control a participant may elect to terminate his employment without
loss of severance benefits in certain specified contingencies, including
termination of the participant's position as an officer or director; a good
faith determination by the participant that as a result of the Change in
Control, he is unable to carry out the authorities, powers, functions or duties
attached to his position; a significant adverse change in his position, duties
or compensation; the failure of a successor to assume the Company's obligations
under the Plan; excessive travel requirements or the substantial relocation of
his place of work; or the reorganization, dissolution, liquidation,
consolidation or merger of the Company or the sale of a significant portion of
its assets.

Under the Plan, a Change in Control is deemed to have occurred if (i) the
Company is merged or reorganized into or with, or sells all of its assets to,
another company in a transaction in which former

53
<PAGE>

shareholders of the Company own less than 75 percent of the outstanding
securities of the surviving or acquiring company after the transaction, (ii) a
filing is made with the Commission disclosing the beneficial ownership by any
person or group of 25 percent or more of the voting power of the Company, (iii)
during any period of two consecutive years individuals who were directors at
the beginning of such period cease to constitute a majority of the Board
without the approval of two-thirds of the remaining Board members, (iv) the
shareholders of the Company approve a plan or proposal for the liquidation or
dissolution of the Company, or (v) any other event, or events, which the Board
shall determine to be a Change in Control.

A participant who is terminated with rights to severance compensation under
the Plan will be entitled to receive in respect of the "Severance Period" (as
defined in the Plan), in lieu of further salary payments to the participant,
the following: (i) a sum equal to (a) three times the participant's highest
annual aggregate base salary in effect at any time within five years prior to
the date the "Notice of Termination of Employment" (as defined in the Plan) is
given, plus (b) an amount equal to the average compensation paid in the two
calendar years prior to the date said Notice is given to the participant under
the Plan, or any successor plan (provided, however, the participant may elect
to receive said sums in thirty-six (36) equal monthly payments, including
interest, after the date of said Notice); (ii) for a period of thirty-six (36)
months following the date of "Termination of Employment" (as defined in the
Plan), or until a participant's death, if earlier, life, health and accident
insurance benefits and other executive benefits the participant was receiving
immediately prior to the date of Termination of Employment; (iii) all benefits
to which the participant is entitled as a participant under the Salaried
Employees' Past Service Pension Plan, the Salaried Employees Retirement Savings
Plan or other plan or agreement relating to retirement benefits; and, (iv) all
legal fees and expenses incurred by a participant, if any, as a result of such
Termination of Employment or enforcing any right or benefit under the Plan. A
letter of credit has been obtained by the Company for the purpose of securing
the payment of such legal fees and expenses.

The net amount payable to any participant under the Plan, taking into account
payments under Other Plans, (as defined in the Plan) as appropriate, may not
exceed 2.99 times the participant's "base amount" (as defined in Section 280G
of the Internal Revenue Code), which, generally, is the average of the
participant's taxable annual income received from the Company during the five-
year period preceding the Change in Control, to avoid the special tax rules
applicable to "excess parachute payments" under Federal income tax legislation
enacted in 1984.

To protect both the Company and any participant, if the severance
compensation under the Plan, either alone or together with other payments to a
participant, would constitute "excess parachute payments", as defined in
Section 280G of the Internal Revenue Code, such severance compensation payment
would be reduced to the largest amount as would result in no portion of such
payments being disallowed as deductions to the Company under Section 280G of
the Internal Revenue Code and no portion of such payments subjecting a
participant to the excise tax imposed by Section 4999 of the Internal Revenue
Code. The determination of such reductions will be made, in good faith, by the
Company's independent accountants and will be conclusively binding upon the
Company and such participant.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During fiscal 1993 the Compensation Committee of the Board was comprised of
the following non-employee directors: C. J. Gauthier, Andrew R. Laidlaw, Julien
L. McCall, Frank A. LePage (Chairman), William R. Wilson.

Mr. Laidlaw is a partner in the law firm of Seyfarth, Shaw, Fairweather &
Geraldson which provided $101,973 in legal services to the Company in 1993. Mr.
Laidlaw resigned as a member of the Compensation

54
<PAGE>

Committee effective January 27, 1994. Mr. LePage is a director of Parker-
Hannifin Corporation to which the Company sold tubing in the amount of
$1,800,692 in 1993. Mr. Wilson is a director of Columbia Gas System, Inc. from
which the Company made purchases of $79,906 for natural gas in 1993.

DIRECTORS' COMPENSATION

Mr. MacDonald entered into an agreement with the Company effective June 1,
1992 to provide consulting services for a three-year period. Mr. MacDonald is
paid an annual fee of $50,000 in addition to any payments to which he may be
entitled as a non-employee director of the Company. Under the terms of the
contract, he is furnished with an office, secretarial and certain other
business office services which were valued by the Company at approximately
$37,000 in 1993.

Directors who are not also officers of the Company are currently paid an
annual director's fee of $18,000, a fee of $1,000 for attending a meeting of
the Board and a fee of $1,000 for attending a meeting of a committee of the
Board, whether or not more than one meeting is held on the same day. The
Chairmen of the Audit Review, Compensation, Finance and Nominating Committees
are paid an additional annual fee of $2,000. The Company provides accidental
death and dismemberment insurance for all outside directors while on the
business of the Company. All Directors are reimbursed for expenses incurred in
connection with Board and committee meetings.

In addition to the remuneration above, the Company paid fees not material in
amount for services rendered by outside directors outside the scope of normal
Board and committee meetings.

In 1992, the Company adopted the Acme Metals Incorporated Non-Employee
Directors Retirement Plan (the "Directors Retirement Plan") which provides for
benefits to directors who are not employees of the Company and who retire from
the Board after attaining 65 years of age. Four years of services as a non-
employee director is required to be eligible for a minimum retirement benefit
of 40% of the annual retainer in effect at the date of retirement. The benefit
increases 10% for each additional year of service to a maximum of 100% of the
annual retainer in effect at the date of retirement. The Directors Retirement
Plan is an unfunded non-qualified plan and all benefits will be paid out of
current earnings. No benefits are payable to the spouse or dependents of a
retired director.

55
<PAGE>

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

As of June 3, 1994, there were 5,556,661 shares of the Company's Common Stock
issued and outstanding and 6,780 registered holders of the Company's Common
Stock. Set forth below is certain information as of that date regarding those
entities known to the Company to be the beneficial owners of more than 5
percent of the Common Stock and information with respect to beneficial
ownership of the Company's Common Stock by all directors, each of the executive
officers named in "Management--Summary Compensation Table" and all directors
and executive officers as a group.

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF CLASS PERCENT OF CLASS AFTER
NAME AND ADDRESS OF COMMON STOCK PRIOR TO SPECIAL SPECIAL
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1)(2) WARRANT OFFERING(3) WARRANT OFFERING(3)(4)
------------------- ------------------------ ------------------- ----------------------
<S> <C> <C> <C>
McKenzie Financial 965,000 12.5% 7.2%
Corporation(5).................
150 Bloor Street West
Suite 805
Toronto, Ontario M5S 3B5
Canada
Goodman & Company Ltd.(6)...... 750,000 9.8 5.6
40 King Street West
55th Floor
Scotia Plaza
Toronto, Ontario M5S 4A9
Canada
Dimensional Fund Advisors, 393,514 6.6 3.3
Inc.(7)........................
1299 Ocean Avenue
Santa Monica, CA 90401
Brinson Holdings, Inc.(8)...... 365,800 6.1 3.2
209 South LaSalle Street
Chicago, Illinois 60604
DIRECTORS AND OFFICERS
Stephen D. Bennett(9).......... 37,036 * *
C.J. Gauthier.................. 173 * *
Edward G. Jordan............... 1,000 * *
Andrew R. Laidlaw.............. 1,000 * *
Frank A. LePage................ 2,500 * *
Reynold C. MacDonald(10)....... 66,301 1.1 *
Brian W.H. Marsden(11)......... 154,360 2.6 1.3
Julien L. McCall............... 1,000 * *
Carol O'Cleireacain............ 0 * *
William P. Sovey............... 1,000 * *
Richard J. Stefan(12).......... 41,756 * *
Edward P. Weber, Jr.(13)....... 34,844 * *
Jerry F. Williams(14).......... 59,970 1.0 *
William R. Wilson.............. 1,000 * *
All directors and executive
officers
as a group, 15
persons(9)(10)(11)(12)(13)(14). 401,940 6.7 3.5
</TABLE>
- --------
*Less than 1% of class
(1) As used in this section, the term beneficial ownership with respect to a
security is defined by Rule 13d-3 under the Securities Exchange Act of 1934
as consisting of sole or shared voting power (including the power to vote
or direct the vote) and/or sole or shared investment power (including the
power to dispose or direct the disposition) with respect to the security
through any contract, arrangement, understanding, relationship or
otherwise. Unless otherwise indicated, beneficial ownership consists of
sole voting and investment power.
(2) On June 3, 1994, Harris Trust & Savings Bank, Trustee for the Company's
Salaried Employees Retirement Savings Plan, the Company's Employee Stock
Ownership Plan, and the Alpha Tube Corporation Employees 401(k) Retirement
Plan, held 873,523 shares, or 15.7%, of Common Stock then outstanding.
Shares held by the Trustee on account of each of the participating
employees will be voted

56
<PAGE>

by the Trustee in accordance with written instructions from the participants
and where no instructions are received, the Trustee will vote in accordance
with the recommendations set forth by the Board in the proxy statement of
the Company. In addition, on June 3, 1994 Harris Trust and Savings Bank, as
Trustee under the Company's Pension and Retirement Plans Trust ("Trust"),
held 207,092 shares, or 3.7%, of Common Stock then outstanding. Under the
terms of the Trust, absent direction from the Company, the Trustee is
authorized to exercise voting rights as it deems proper.
(3) The shares owned by each person or entity, or by the group, and the shares
included in the total number of shares outstanding have been adjusted and
the percent owned has been computed in accordance with Rule 13d-3(d)(1)
under the Securities and Exchange Act.
(4) Upon satisfaction of all conditions to the release from escrow of the net
proceeds of the Special Warrant Offering and the deemed exercise of the
Special Warrants, an additional 5,600,000 shares of the Company's Common
Stock will be issued to the warrant holders.

(5) McKenzie Financial Corporation ("McKenzie") is deemed to have beneficial
ownership of 965,000 shares of Common Stock by reason of its sole
dispositive power over 965,000 Special Warrants. All of these Special
Warrants are held in portfolios of eight Canadian open end mutual funds to
which McKenzie serves as portfolio manager.

(6) Goodman & Company Ltd. ("Goodman") is deemed to have beneficial ownership
of 750,000 shares of Common Stock by reason of its sole dispositive power
over 750,000 Special Warrants. All of these Special Warrants are held in
portfolios of six Canadian open end mutual funds in the Dynamic group of
funds to which Goodman serves as portfolio manager.

(7) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 393,514 shares of Common
Stock as of December 31, 1993 by reason of its sole or shared voting power
and sole dispositive power over such shares. All of the shares are held in
portfolios of DFA Investment Dimensions Group, Inc., a registered open-end
investment company, or in series of The DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and the DFA Participating
Group Trust, investment vehicles for qualified employee benefit plans, all
of which Dimensional serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares.

(8) The number of shares of Common Stock beneficially owned was determined by a
review of Schedule 13G furnished to the Company which states that Brinson
Holdings, Inc. beneficially owns the shares solely through its ownership of
Brinson Partners, Inc., which owns 178,630 shares, which in turn owns
Brinson Trust Company, which owns 187,170 shares. Brinson Partners, Inc.
and Brinson Trust Company have sole voting power and sole dispositive power
with respect to the shares owned by them.

(9) Includes 24,400 shares which are not now owned but could be acquired by
exercise of stock options, 6,700 shares which are subject to conditions of
forfeiture and restrictions on sale, transfer or other disposition, and
2,140 shares held by the trustee of the Company's Employee Stock Ownership
Plan ("ESOP") which are attributable to Mr. Bennett's account.

(10) Includes 16,301 shares held in a trust to which Mr. MacDonald disclaims
beneficial ownership except to the extent of his pecuniary interest
therein.

(11) Includes 91,800 shares which are not now owned but could be acquired by
exercise of stock options, 4,100 shares which are subject to conditions of
forfeiture and restrictions on sale, transfer or other disposition, 2,500
shares owned by a family member to which Mr. Marsden disclaims beneficial
ownership, and 4,080 shares held by the trustee of the ESOP which are
attributable to Mr. Marsden's account.

(12) Includes 25,550 shares which are not now owned but could be acquired by
exercise of stock options, 1,600 shares which are subject to conditions of
forfeiture and restrictions on sale, transfer or other disposition, 1,789
shares held by the trustee of the Company's Salaried Employees Retirement
Savings Plan (SERSP) which are attributable to Mr. Stefan's account and
2,592 shares held by the trustee of the ESOP which are attributable to Mr.
Stefan's account.

(13) Includes 25,650 shares which are not now owned but could be acquired by
exercise of stock options, 2,750 shares which are subject to conditions of
forfeiture and restrictions on sale, transfer or other disposition, 100
shares held by family members, and 2,669 shares held by the trustee of the
ESOP which are attributable to Mr. Weber's account.

(14) Includes 32,250 shares which are not now owned but could be acquired by
exercise of stock options, 3,390 shares which are subject to conditions of
forfeiture and restriction on sale, transfer or other disposition, 11,287
shares held by the trustee of the SERSP which are attributable to Mr.
Williams' account, and 3,309 shares held by the trustee of the ESOP which
are attributable to Mr. Williams' account.

57
<PAGE>

SELLING STOCKHOLDERS

The table below sets forth certain information with respect to the Selling
Stockholders. All of the shares of Common Stock listed below are issuable
without payment of any additional consideration upon the exercise of the
5,600,000 Special Warrants previously issued and sold by the Company on a
private placement basis in Canada and Europe at a price of U.S. $21.00 per
Special Warrant. Registration of such shares pursuant to the Securities Act of
1933, as amended, by the Company is one of the conditions to release from
escrow of the net proceeds of the sale of the Special Warrants. See "Special
Warrant Offering." The Company will not receive any proceeds from the sale of
the Shares by the Selling Stockholders.

<TABLE>
<CAPTION>
AMOUNT OF
BENEFICIAL OWNERSHIP OF NUMBER OF SHARES OF
SHARES OF COMMON STOCK COMMON STOCK
NAME OF SELLING STOCKHOLDER AT AUGUST 5, 1994 OFFERED FOR SALE
- --------------------------- ----------------------- -------------------
<S> <C> <C>
AGF Canadian Equity Fund........... 125,000 125,000
Altamira Management Ltd. as agent
for account #175.................. 50,000 50,000
Bayrische Hypotheken und Wensel
Bank.............................. 20,000 20,000
Belmont Investments Ltd............ 10,000 10,000
Alfred Berg Re: Optimal Fund....... 30,000 30,000
Blue Circle Industries
A/C Blue Circle Pension
Investments Ltd................... 50,000 50,000
BT Landmark Balance Fund........... 50,000 50,000
BT Landmark Canadian Fund.......... 150,000 150,000
BT Landmark Resource Fund Inc...... 100,000 100,000
British Empire Securities and
General Trust PLC................. 20,000 20,000
British Life Office................ 90,000 90,000
Brant Investments Limited.......... 170,362 170,362
The Canada Trust Company
A/C (009100)6066.................. 13,100 13,100
The Canada Trust Company
A/C (058001)9055.................. 30,000 30,000
The Canada Trust Company
A/C (058001)602-9................. 20,000 20,000
The Canada Trust Company
A/C (058100)147-2................. 20,700 20,700
The Canada Trust Company
A/C (058100)248-8................. 38,400 38,400
The Canada Trust Company
A/C (058102)4848.................. 39,700 39,700
The Canada Trust Company
A/C (058104)260-7................. 5,000 5,000
The Canada Trust Company
A/C (058104)4318.................. 20,000 20,000
The Canada Trust Company
A/C (074012)191-1................. 5,300 5,300
Carr & Co.......................... 10,300 10,300
CIBC Capital Appreciation Fund..... 125,000 125,000
Compagnie d'Assurance du Quebec.... 14,500 14,500
Compagnie Financiere De Cic Et De
L'Union Europeene................. 10,000 10,000
Confederation Life Insurance
Company........................... 52,000 52,000
Contor & Co
A/C (000556)...................... 4,700 4,700
Contor & Co
A/C (000558)...................... 4,700 4,700
</TABLE>

58
<PAGE>

<TABLE>
<CAPTION>
AMOUNT OF
BENEFICIAL OWNERSHIP OF NUMBER OF SHARES OF
SHARES OF COMMON STOCK COMMON STOCK
NAME OF SELLING STOCKHOLDER AT AUGUST 5, 1994 OFFERED FOR SALE
--------------------------- ----------------------- -------------------
<S> <C> <C>
Credit Suisse S.A.................. 14,000 14,000
CT Investment Counsel Inc. ........ 100,000 100,000
Den Norske Krigsforsikring for
skib.............................. 10,000 10,000
Den Norske Bank Investor Service
V/B............................... 100,000 100,000
Bob Dorrance....................... 6,000 6,000
Dynamic American Fund.............. 20,000 20,000
Dynamic Canadian Growth Fund....... 70,000 70,000
Dynamic Fund of Canada Ltd......... 118,400 118,400
Dynamic Global Green Fund.......... 6,000 6,000
Dynamic International Fund......... 20,000 20,000
Dynamic Partners Fund.............. 515,600 515,600
Gee & Co........................... 2,200 2,200
General Accident Assurance Company. 355,000 355,000
General Accident Indemnity Company. 240,000 240,000
Gluskin Sheff & Associates, Inc. .. 195,000 195,000
Gore Co............................ 7,400 7,400
The Great-West Life Assurance
Company Stock Account No.
26-91840.......................... 16,200 16,200
The Great-West Life
Assurance Company Stock Account
No. 26-90448...................... 63,800 63,800
Groupama Gestion................... 10,000 10,000
Guardian Enterprise Fund........... 12,500 12,500
Iliad Partners I L P............... 50,000 50,000
Ince & Co. (136020-781)............ 20,000 20,000
Investors North American Growth
Fund Ltd. ........................ 200,000 200,000
Investors Special Fund Ltd. ....... 100,000 100,000
Hughes King & Company.............. 14,700 14,700
Hugh A. Jackson.................... 7,700 7,700
Lloyds Bank ID Nominees Ltd
(A/C (171685)..................... 20,000 20,000
McKenzie Financial Corporation
Account #300...................... 240,000 240,000
McKenzie Financial Corporation
Account #297...................... 200,000 200,000
McKenzie Financial Corporation
Account #293...................... 20,000 20,000
McKenzie Financial Corporation
Account #650...................... 40,000 40,000
McKenzie Financial Corporation
Account #291...................... 255,000 255,000
McKenzie Financial Corporation
Account #290...................... 100,000 100,000
McKenzie Financial Corporation
Account #601...................... 10,000 10,000
McKenzie Financial Corporation
Account #306...................... 100,000 100,000
Montowr & Co
A/C (T98710)0000.................. 2,138 2,138
Montowr & Co
A/C (T99386)0008.................. 7,800 7,800
Montreal Trust Company of Canada
A/C (979680)004................... 15,000 15,000
Montreal Trust Company of Canada
A/C (990400)493................... 60,000 60,000
Montreal Trust Company of Canada
A/C (991140)004................... 16,500 16,500
Montreal Trust Company of Canada... 20,000 20,000
</TABLE>

59
<PAGE>

<TABLE>
<CAPTION>
AMOUNT OF
BENEFICIAL OWNERSHIP OF NUMBER OF SHARES OF
SHARES OF COMMON STOCK COMMON STOCK
NAME OF SELLING STOCKHOLDER AT AUGUST 5, 1994 OFFERED FOR SALE
- --------------------------- ----------------------- -------------------
<S> <C> <C>
Natcan Investment Management Inc. . 140,000 140,000
National Bank of Canada Taxable
Safekeeping & Securities
Management........................ 10,000 10,000
National Trust Company
A/C (CE6000)...................... 4,700 4,700
National Trust Company
(TE0711)29055-000-002............. 25,000 25,000
National Trust Company
(TP1364)92-0-1.................... 700 700
National Trust Company
A/C (VE1124)6-0-0................. 4,700 4,700
National Trust Company
A/C (VE1694)7-0-9................. 4,700 4,700
National Trust Company
A/C (VE1696)7-0-0................. 26,500 26,500
Nesbitt Thomson Fehnestock
International GMBH................ 4,000 4,000
Nesbitt Thomson Inc................ 169,000 169,000
John O'Sullivan.................... 6,000 6,000
Maureen Proctor.................... 5,500 5,500
Royal Insurance Co. of Canada...... 83,000 83,000
Royal Life Insurance Co. of Canada
Balanced Fund..................... 17,500 17,500
Royal Life Insurance Co. of Canada
Equity Fund....................... 17,500 17,500
Royal Trust Corporation of Canada
In Trust For Account (255170)04... 6,100 6,100
Royal Trust Corporation of Canada
In Trust For Account (321460)01... 10,000 10,000
Royal Trust Corporation of Canada
In Trust For Account (682810)02... 120,300 120,300
Royal Trust Corporation of Canada
In Trust For Account (865290)01... 46,500 46,500
W. L. Sauder....................... 5,000 5,000
Saunders Investment Ltd. .......... 5,000 5,000
Societe Generale Re: Mr. Rivaud.... 20,000 20,000
Diane Taylor....................... 5,500 5,500
TD Trust Company
A/C (035107)4..................... 2,400 2,400
The Toronto-Dominion Bank.......... 5,300 5,300
54192-004
Trust General Du Canada............ 25,000 25,000
Trustees of the General Accident
Employees Pension Fund............ 35,000 35,000
Trustees of the Royal Insurance Co.
of Canada Retirement Plan Fund.... 17,500 17,500
United Canadian Growth Fund........ 85,400 85,400
Vector Enterprise Equity........... 12,500 12,500
Westdeutsche Laudesbank............ 20,000 20,000
</TABLE>

60
<PAGE>

PLAN OF DISTRIBUTION

The Company has been advised by the Selling Stockholders that there are no
underwriting agreements with respect to the sale of the shares, that such
shares will be sold from time to time in the open market at then prevailing
prices or in private transactions at negotiated prices, and that any brokerage
fees will be paid by the Selling Stockholders in connection therewith.

CERTAIN TRANSACTIONS

The following is a year by year listing of all transactions and any proposed
transactions which have materially affected or will materially affect the
Company and any of its subsidiaries in which the following have or had a
material interest during the fiscal years 1991, 1992 and 1993 and the current
fiscal year to date: directors and senior officers of the Company, any security
holders named in "Security Ownership of Certain Beneficial Owners and
Management," and any associate or affiliate of any of the foregoing persons or
companies. The Company believes that all transactions were in the ordinary
course of business, at competitive prices and terms and at arm's length.

SIX MONTHS 1994

Through June 26, 1994, the Company made sales to and purchases from
corporations (including subsidiaries) certain executive officers and directors
of which are also directors of the Company, as follows: Messrs. MacDonald and
Jordan are directors of The ARA Group, Inc., from which the Company made
purchases of $85,820 for food services; Mr. Laidlaw is a partner of the law
firm of Seyfarth, Shaw, Fairweather and Geraldson, to which firm the Company
paid $38,248 for professional services on behalf of the Company; and Mr. LePage
is a director of Parker-Hannifin Corporation, to which the Company made sales
of $1,358,823; and Mr. Wilson is a director of Columbia Gas System, Inc. from
which the Company made purchases of $54,740 for natural gas. There were also
purchases from one other company which did not exceed $50,000.

FISCAL YEAR 1993

In the fiscal year 1993, the Company made sales to and purchases from
corporations (including subsidiaries) certain executive officers and directors
of which are also directors of the Company, as follows: Messrs. MacDonald and
Jordan are directors of The ARA Group, Inc., from which the Company made
purchases of $167,527 for food services; Mr. Laidlaw is a partner in the law
firm of Seyfarth, Shaw, Fairweather and Geraldson, to which firm the Company
paid $101,973 for professional services on behalf of the Company; Mr. LePage is
a director of Parker-Hannifin Corporation, to which the Company made sales of
$1,800,692 for tubing; and Mr. Wilson is a director of Columbia Gas System,
Inc., from which the Company made purchases of $76,906 for natural gas. There
were also sales to one other company which did not exceed $50,000.

FISCAL YEAR 1992

In the fiscal year 1992, the Company made sales to and purchases from
corporations (including subsidiaries) certain executive officers and directors
of which are also directors of the Company, as follows: Messrs. MacDonald and
Jordan are directors of The ARA Group, Inc. from which the Company made
purchases of $182,331; Mr. Laidlaw is a partner in the law firm of Seyfarth,
Shaw, Fairweather and Geraldson, to which firm the Company paid $68,865 for
professional services on behalf of the Company; and Mr. LePage is a director of
Parker-Hannifin Corporation, to which the Company made sales of $1,047,724 for
tubing. There were also purchases from and sales to several other like
companies, the transaction amounts of which, in the aggregate, did not exceed
$50,000.

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<PAGE>

FISCAL YEAR 1991

In the fiscal year 1991, the Company made sales to and purchases from
corporations (including subsidiaries) certain executive officers and directors
of which are also directors of the Company, as follows: Mr. Gauthier is a
director of Nalco Chemical Company from which the Company made purchases of
$146,315; Messrs. MacDonald and Jordan are directors of The ARA Group, Inc.,
from which the Company made purchases of $161,173; Mr. Laidlaw is a partner in
the law firm of Seyfarth, Shaw, Fairweather & Geraldson, to which the Company
paid $108,096 for professional services performed on behalf of the Company; and
Mr. LePage is a director of Parker-Hannifin Corporation, to which a subsidiary
of Acme sold tubing in the amount of $805,611. There were also purchases from
and sales to several other like companies, the transaction amounts of which, in
the aggregate, did not exceed $50,000.

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<PAGE>

DESCRIPTION OF CAPITAL STOCK

COMMON STOCK

The Company has 20,000,000 authorized shares of Common Stock. As of June 3,
1994, the number of record holders of the Company's Common Stock was 6,780.

Holders of the Company's Common Stock have the rights provided by the
Delaware General Corporation Law and the Company's Certificate of
Incorporation. The Company's Common Stock currently has no conversion or
preemptive rights or redemption or sinking fund provisions. As shareholders of
a Delaware corporation, the holders of the Company's Common Stock have voting
rights with respect to the election of directors and the approval of
significant corporate transactions including mergers, certain asset sales and
dissolution. The holders of the Company's Common Stock are entitled to one vote
for each share held on all matters voted on by the shareholders generally,
including the election of directors. The Company's Common Stock does not have
cumulative voting rights. As a result, the holders of more than 50% of the
Company's Common Stock will be able to elect 100% of the directors to be
elected in any year if they choose to do so (subject to the voting rights, if
any, of any shares of the Company's Preferred which may at the time be
outstanding) and, in such event, the holders of the remaining shares of the
Company's Common Stock will not be able to elect any of the directors in such
year. Unless specified in a corporation's organizational documents, approval of
significant corporate transactions generally requires a majority shareholder
vote. Voting requirements which have been modified by the Company's Certificate
of Incorporation for certain transactions are discussed below. See "Certificate
of Incorporation and By-Laws."

Holders of the Company's Common Stock will be entitled to receive such
dividends as the Company's Board from time to time may declare out of funds
legally available therefor. Subject to the rights of holders of any shares of
Preferred which might at the time be outstanding, in the event of any voluntary
or involuntary liquidation, dissolution or winding up of the Company, holders
of Common Stock would be entitled to share equally in the balance of assets, if
any, remaining after payment of all debts and liabilities.

Except to the extent that redemptions of the Company's 1986 and 1988
Preferred Share Purchase Rights Plans are deemed to be dividends, since the
1986 Reorganization the Company has not paid dividends on its Common Stock. The
Company's current intention is to reinvest its earnings to finance the growth
of its business. Accordingly, the Company does not intend to pay dividends on
its Common Stock in the foreseeable future. In addition, the Indentures
governing the Company's obligations with respect to the Notes limit the amount
of dividends that the Company may pay to its stockholders.

PREFERRED STOCK

The Company has 2,000,000 authorized shares of serial preferred stock, with a
par value of $1.00 per share ("Preferred Stock"). Shares of Preferred Stock are
issuable in series by action of the Company's Board of Directors, which may fix
the designations, relative powers (including voting powers), preferences and
rights of shares to be included in any such series, and qualifications,
limitations or restrictions thereof as permitted under the Delaware General
Corporation Law. The Company, from time to time, may consider financings,
acquisitions or other proposals involving the issuance or reservation of shares
of Preferred Stock.

On July 15, 1994, the Board of Directors of the Company created a series of
Preferred Stock designated as Junior Participating Preferred Stock, Series A
("Series A Preferred Stock"). Shares of Series A Preferred Stock are issuable
upon exercise of the Rights declared pursuant to the Rights Plan. See
"Description of Capital Stock--Rights to Purchase Preferred Stock." Series A
Preferred Stock will not be redeemable. Each share of Series A Preferred Stock
will entitle the holder thereof to 100 votes on all matters submitted to a vote
of the stockholders of the Company and to a preferential cumulative quarterly
dividend payment of the greater of $25.00 per share or 100 times the dividend
declared per share of Common Stock. In the event of liquidation, the holders of
the Series A Preferred Stock will be entitled to a preferential liquidation
payment

63
<PAGE>

of the greater of $100.00 per share plus accrued and unpaid dividends or 100
times the payment made per share of Common Stock. In the event of any merger or
other business combination in which Common Stock is exchanged, each share of
Series A Preferred Stock will be entitled to receive 100 times the amount
received per share of Common Stock. These rights are protected by customary
antidilution provisions.

CERTIFICATE OF INCORPORATION AND BY-LAWS

Certain of the provisions which are included in the Certificate of
Incorporation and By-Laws affect the ability of shareholders of the Company to
change the composition of the incumbent Board of Directors and to amend or
repeal the Certificate of Incorporation or By-Laws. The following generally
describes the effect of such provisions, including potential advantages and
disadvantages to shareholders. As discussed below, potential advantages include
increased continuity and stability of management, shareholder opportunity to be
heard on major issues, fair consideration of all shareholders in certain
business combinations, and limitations on the ability of majority shareholders
to take certain actions deemed undesirable by minority shareholders. Potential
disadvantages include increased difficulty in changing management, possible
delays or discouragement of certain business combinations, and effective veto
power by minority shareholders over certain transactions favored by majority
shareholders.

Classification of the Board

The division of the Company's Board into three classes has the effect of
making it more difficult to change the composition of the Company's Board. At
least two annual shareholders' meetings will be required for shareholders to
effect a change in a majority of the Company's Board (and, therefore, a change
in control of the Company's management), except in the event of vacancies
resulting from removal for cause or other reasons (in which case the remaining
directors will fill the vacancies so created--See "Removal of Directors--
Filling Vacancies on the Board," below). While the Company anticipates no
problem with continuity or stability of the Board, the Company's Board believes
that the longer time required to elect a majority of a classified Board of
Directors will help assure the continuity and stability of the Company's
affairs and policies in the future, since a majority of the directors at any
given time will have prior experience as directors of the Company. It should
also be noted that the classification provisions will apply to every election
of directors, whether or not a change in the Company's Board might arguably be
beneficial to the Company's and its shareholders and whether or not a majority
of the Company's shareholders believes that such a change might be desirable.

Removal of Directors -- Filling Vacancies on the Board

Under Delaware law, directors serving on a classified board may be removed
only for cause unless the Certificate of Incorporation provides otherwise. As
the Company's Certificate of Incorporation contains no contrary provision, and
expressly restates the Delaware law, its directors will be subject to removal
by shareholders only for cause. The Company's Certificate of Incorporation
expressly delegates to incumbent directors the power to fill any vacancies on
the Board, however occurring, and any successor director so chosen will hold
office for the remainder of the unexpired term. Such provisions of the
Company's Certificate of Incorporation will prevent removal of incumbent
directors without cause and will prevent a third party from gaining control of
the Board by filling any vacancies created by removal with its own nominees.
These provisions will also reduce the power of shareholders generally, even
those with a majority voting interest in the Company, to remove incumbent
directors and to fill vacancies on the Board without the support of the
remaining incumbent directors.

Prohibition Against Shareholder Action by Written Consent

Under Delaware law, unless otherwise provided in the certificate of
incorporation, any action required or permitted to be taken by shareholders of
a corporation may be taken without a meeting and without a shareholder vote if
a written consent setting for the action to be taken is signed by the holders
of shares of

64
<PAGE>

outstanding stock having the requisite number of votes that would be necessary
to authorize such action at a meeting of shareholders. The Company's
Certificate of Incorporation prohibits such action. Such provision gives all
the shareholders of the Company the opportunity to participate in determining
any proposed action and prevents the holders of a majority of the voting power
of the corporation from using written consent procedure to take shareholder
action.

Fair Price Provisions

The Company's Certificate of Incorporation sets forth the required
shareholder vote with respect to certain mergers, consolidations,
reclassifications of securities, the sale of substantially all the assets of
the Company and plans of dissolution of the Company. Under current provisions
of Delaware law, unless otherwise provided in a corporation's certificate, a
merger, consolidation, reclassification, sale, or dissolution must be approved
by the vote of the holders of a majority of the outstanding shares entitled to
vote thereon. The Company's Certificate of Incorporation requires the
affirmative vote of 66 2/3% of the outstanding shares and 66 2/3% of the
outstanding Common Stock to approve the Company's sale of all of its assets to,
or consolidation or merger with a Related Company. A "Related Company" is
defined in the Company's Certificate of Incorporation as any corporation which,
together with its affiliates and associated persons, owns of record or
beneficially, directly or indirectly, more than 5% of the shares of any
outstanding class of stock of the Company entitled to vote upon such
transaction.

The Company's Certificate of Incorporation may give holders of a minority of
the Company's Common Stock veto power over a business combination which a
majority of the shareholders may believe is desirable and beneficial.
Shareholders should also be aware that the results of such provisions may be to
strengthen the position of incumbent management.

Vote Required to Amend or Repeal Certain Provisions of Certificate and By-
Laws

Under Delaware law, amendments to a certificate of incorporation require the
approval of the holders of a majority of the outstanding stock entitled to vote
thereon and a majority of the outstanding stock of each class entitled to vote
thereon as a class. Delaware permits provisions in a certificate which require
a greater vote than otherwise required by law for any corporate action. Under
the Company's Certificate of Incorporation, the provisions specified in
Articles Sixth, Seventh, Eighth and Ninth thereof may not be modified or
repealed except by the affirmative vote of the holders of not less than 80% of
the outstanding shares of the Company's Common Stock voting together and as a
separate class. Similarly, an 80% shareholder vote is required to amend the By-
Laws unless such amendment has been previously approved by 66 2/3% of the
Board. The requirement of an increased shareholder vote for such amendments to
the Certificate of Incorporation and By-Laws is designed to prevent a
shareholder that controls a majority of the voting power of the Company from
avoiding the requirements of these provisions by simply amending or repealing
them. It will also have the effect, however, of giving minority shareholders
holding in excess of 20% of the voting power of the corporation a veto power
over any changes to such provisions of the Company's Certificate of
Incorporation even if the Board or a majority of the shareholders favors such
changes.

Nominations by Directors

The Company's By-Laws set forth a procedure for shareholder nominations of
directors. Such procedure will afford the Company's Board the opportunity to
consider the qualifications of a proposed nominee and, to the extent deemed
necessary or desirable by the Board, inform shareholders about such
qualifications. Under current Delaware law and the By-Laws of the Company, any
shareholder could nominate a person for election as a director, without prior
notice to the Company's Board or other shareholders, at any meeting called for
the purpose of electing directors. Although the Company's By-Law provisions do
not give the Company's Board any power to approve or disapprove of shareholder
nominations for the election of directors, these provisions of the Company's
By-Laws may have the effect of precluding a nomination for the

65
<PAGE>

election of director if the proper procedures are not followed, and may
discourage or deter a third party from conducting a solicitation of proxies to
elect its own directors or otherwise attempting to obtain control of the
Company, even if such attempt might be beneficial to the Company and its
shareholders.

Anti-takeover Provisions

The Company's Certificate of Incorporation contains a provision (Section
Seventh) which requires a two-thirds vote of their outstanding shares voting
together and by class to approve any proposed merger or acquisition directed by
or involving a related company or affiliate of a related company as is
discussed in greater detail above. See, "Certificate of Incorporation and By-
Laws--Fair Price Provisions." An amendment of the provision requires an 80%
vote. See, "Certificate of Incorporation and By-Laws--Vote Required to Amend or
Repeal Certain Provisions of Certificate and By-Laws."

Shareholder Power to Call Special Shareholders' Meeting

In addition to permitting the Board of Directors, the Chairman of the Board
or the President to call a special meeting of shareholders, Article II, Section
3 of the Company's By-Laws permits such special meetings to also be called by
shareholders holding 50% of the outstanding shares of the Company.

RIGHTS TO PURCHASE PREFERRED STOCK

On July 15, 1994, the Board of Directors of the Company declared a dividend
of one preferred share purchase right ("Right") for each share of Common Stock.
The dividend will be paid on August 5, 1994 to stockholders of record at the
close of business on August 5, 1994 ("Record Date") and will be delivered with
each share of Common Stock issued after the Record Date and prior to the
earliest to occur of the Distribution Date (as defined below), the redemption
of the Rights and the expiration of the Rights. Except as set forth below and
subject to adjustment as provided in the Rights Agreement (as defined below),
each Right entitles the registered holder to purchase from the Company one one-
hundredth of a share of the Company's Series A Preferred Stock, at an exercise
price of $80.00 per one one-hundredth of a share ("Purchase Price"). The terms
of the Rights are set forth in a Rights Agreement dated as of July 15, 1994
("Rights Agreement"), between the Company and First Chicago Trust Company of
New York, as Rights Agent.

The Rights will be evidenced by the certificates representing the shares of
Common Stock and not by separate certificates until the close of business on
the 10th day after the earlier to occur of (i) the date on which public
disclosure is first made that a person, together with persons affiliated or
associated with it, is the beneficial owner of 15% or more of the outstanding
Common Stock (such a person being called an "Acquiring Person" and such date
being called the "Stock Acquisition Date") and (ii) commencement of or
disclosure of an intention to commence a tender or exchange offer by a person
other than the Company and certain related entities if, upon consummation of
the offer, such person, together with persons affiliated or associated with it,
could acquire beneficial ownership of 30% or more of the outstanding Common
Stock. Until the close of business on such 10th day ("Distribution Date"), the
transfer of a share of Common Stock will constitute transfer of the associated
Right. Following the Distribution Date, the Rights will be evidenced by
separate certificates.

The Rights are exercisable on and after the Distribution Date, unless
redeemed earlier, and will expire at the close of business on August 5, 2004
("Expiration Date"), unless redeemed earlier. Until a Right is exercised, the
holder has no rights as a stockholder of the Company, including, without
limitation, the right to vote or to receive dividends or distributions.

The Purchase Price, the number of outstanding Rights, and the number of
shares of Series A Preferred Stock or other securities or amount of cash or
other property issuable upon exercise of the Rights are subject to adjustment
from time to time (i) to prevent dilution, (ii) upon the occurrence of a
Triggering Event (as

66
<PAGE>

defined below), and (iii) upon the occurrence of a Business Combination (as
defined below). Adjustment to prevent dilution will occur (A) in the event of a
stock dividend or distribution on, or a subdivision, combination or
reclassification of, the Series A Preferred Stock, (B) upon the grant to
holders of the Series A Preferred Stock at less than the current market price
of the Series A Preferred Stock of certain rights, options, warrants to
subscribe for Series A Preferred Stock, or securities convertible into Series A
Preferred Stock, or (C) upon the distribution to holders of the Series A
Preferred Stock of other securities, cash (excluding regular periodic cash
dividends at an annual rate not in excess of 125% of the annualized rate of
cash dividends paid during the preceding fiscal year), evidences of
indebtedness, or assets. In addition, the number of outstanding Rights, the
number of one one-hundredths of a share of Series A Preferred Stock issuable
upon exercise of each Right, and the Purchase Price are subject to adjustment
in the event of a stock split of the Common Stock or subdivision, consolidation
or combination of the Common Stock occurring, in any such case, prior to the
Distribution Date.

With certain exceptions, no adjustment in the Purchase Price will be required
until cumulative adjustments require an adjustment of at least 1% in such
Purchase Price. Holders will have no right to receive fractional shares of
Series A Preferred Stock (other than fractions which are integral multiples of
one one-hundredths of a share of the Series A Preferred Stock) or any other
securities of the Company upon the exercise of Rights. In lieu of such
fractional shares, an adjustment in cash may be made based on the market price
of the Series A Preferred Stock or other securities on the last trading date
prior to the date of exercise, or the Company may issue scrip, warrants or
depository receipts.

A Triggering Event is deemed to occur if (i) a person becomes an Acquiring
Person, (ii) the Company is the surviving corporation in a merger with an
Acquiring Person and the Common Stock remains outstanding and unchanged, or
(iii) an Acquiring Person engages in a "self-dealing" transaction specified in
the Rights Agreement. Upon the occurrence of a Triggering Event, the Rights
will "flip-in" and each holder of a Right will be entitled, in lieu of a number
of one one-hundredths of a share of Series A Preferred Stock, to purchase that
number of shares of Common Stock that equals the result obtained by (x)
multiplying the then current Purchase Price by the number of one one-hundredth
shares of Series A Preferred Stock for which a Right was then exercisable
(without giving effect to the Triggering Event) and (y) dividing that product
by 50% of the average daily closing price for the Common Stock on its principal
consolidated reporting transaction system for the 30 consecutive trading days
immediately prior to the date of the Triggering Event.

A Business Combination is deemed to occur if, following a Stock Acquisition
Date, the Company is acquired in a merger or other business combination in
which the Common Stock does not remain outstanding or is changed or 50% or more
of its consolidated assets or earning power is sold, leased, exchanged,
mortgaged, pledged or otherwise transferred or disposed of (in one transaction
or a series of transactions). Upon the occurrence of a Business Combination,
the Rights that theretofore had not been exercised will "flip-over" and each
holder of a Right will be entitled, in lieu of a number of one one-hundredths
of a share of Series A Preferred Stock, to purchase that number of shares of
common stock of the other party to the Business Combination (or, in certain
circumstances, one of its affiliates) ("Principal Party") that equals the
result obtained by (x) multiplying the then current Purchase Price by the
number of one one-hundredth shares of Series A Preferred Stock for which a
Right was then exercisable (without giving effect to the Business combination)
and (y) dividing that product by 50% of the average daily closing price for the
common stock of the Principal Party on its principal consolidated reporting
transaction system for the 30 consecutive trading days immediately prior to the
consummation of the Business Combination or transfer.

Any Rights beneficially owned at any time on or after the earlier of the
Distribution Date and the Stock Acquisition Date by an Acquiring Person or an
affiliate or associate of an Acquiring Person will become null and void upon
the occurrence of a Triggering Event and no holder of such Rights will have any
right to exercise such Rights.

At any time prior to the earlier of (i) 20 days after the date on which the
Board of Directors of the Company becomes aware that an Acquiring Person has
become such and (ii) the Expiration Date, the

67
<PAGE>

Company, at its option, may redeem the Rights in whole, but not in part, at a
price of $.01 per Right. Immediately upon action of the Company's Board of
Directors electing to redeem the Rights, the right to exercise the Rights will
terminate and the only right of the holders of Rights thereafter will be to
receive the redemption price.

At any time prior to the time that the Company's Board of Directors becomes
aware that an Acquiring Person has become such, the Company may, without the
approval of any holder of the Rights, supplement or amend any provision of the
Rights Agreement (including to effect a change in the date on which the
Distribution Date will occur), except to effect a change in the Purchase Price,
the number of shares of Series A Preferred Stock, other securities, cash or
other property for which a Right is then exercisable or the redemption price or
to provide an earlier Expiration Date. Thereafter, the Rights Agreement may be
amended only to cure ambiguities, to correct inconsistent provisions, and in
ways that do not adversely affect the interests of the holders of the Rights.

The Rights have certain anti-takeover effects. Because of the substantial
dilution the Rights would cause to a person or group that attempts to acquire
the Company on terms not approved by the Company's Board of Directors (except
pursuant to an offer conditioned upon acquisition of a substantial number of
Rights), the Rights may discharge a tender or exchange offer for the Company's
Common Stock or reduce the amount offered in such transaction. The Rights
should not interfere with any tender or exchange offer or merger or other
business combination approved by the Board of Directors prior to 20 days after
the Board of Directors becomes aware that a person has become an Acquiring
Person, because, until such time, the Rights may be redeemed by the Company at
$.01 per Right.

The statements under this caption relating to the Rights Agreement are a
summary and do not purport to be complete. Such summary makes use of certain
terms defined in the Rights Agreement and is qualified in its entirety by
express reference to the Rights Agreement a copy of which was filed as an
exhibit to Form 8-A filed by the Company on August 8, 1994 and which is hereby
incorporated by reference.

TRANSFER AGENT AND REGISTRAR

The Transfer Agents and Registrars for the Company's Common Stock are First
Chicago Trust Company of New York, Jersey City, New Jersey and Montreal Trust
Company of Canada, Toronto, Ontario.

MARKET FOR COMMON STOCK

The Company's Common Stock is listed and traded on the Nasdaq National Market
under the symbol ACME.

The following table sets forth the high and low sales prices for the Company
Common Stock for the periods indicated:

<TABLE>
<CAPTION>
FISCAL QUARTER ENDED HIGH LOW
-------------------- ----- -----
<S> <C> <C>
June 26, 1994................................................. 26.25 21.50
March 27, 1994................................................ 27.25 17.50
December 26, 1993............................................. 18.75 13.75
September 26, 1993............................................ 20.75 14.50
June 27, 1993................................................. 18.00 14.00
March 28, 1993................................................ 17.25 12.25
December 27, 1992............................................. 13.75 11.00
September 27, 1992............................................ 18.50 12.75
June 28, 1992................................................. 19.75 14.25
March 29, 1992................................................ 18.75 13.25
</TABLE>

68
<PAGE>

DESCRIPTION OF NOTES

The Senior Secured Notes will be issued under an indenture (the "Note
Indenture") dated as of August 11, 1994 by and among the Company, the
Guarantors and Shawmut Bank Connecticut, National Association, as trustee (the
"Note Trustee"). The Senior Secured Discount Notes will be issued under an
indenture (the "Discount Note Indenture", and together with the Note Indenture,
the "Indentures") dated as of August 11, 1994, by and among the Company, the
Guarantors (as defined below) and Shawmut Bank Connecticut, National
Association, as trustee (the "Discount Note Trustee", and together with the
Note Trustee, the "Trustees"). The terms of the Notes will include those stated
in the Indentures and those made part of the Indentures by reference to the
Trust Indenture Act of 1939 (the "Trust Indenture Act"), as in effect on the
date of each of the Indentures. The Notes will be subject to all such terms.

General

The Senior Secured Notes will bear interest from the date the Senior Secured
Notes are first issued under the Note Indenture at the rate of 12.5% per annum,
payable semiannually on February 1 and August 1 of each year, commencing
February 1, 1995, to holders of record at the close of business on the January
15 or July 15 immediately preceding each such interest payment date. The Senior
Secured Notes will be due on August 1, 2002, and will be issued only in
registered form, without coupons, in denominations of $1,000 and integral
multiples thereof. The Senior Secured Notes will be senior obligations of the
Company limited to an aggregate amount of $125,000,000.

The Senior Secured Discount Notes will bear interest from August 1, 1997 at
the rate of 13.5% per annum, payable semiannually on February 1 and August 1 of
each year, commencing February 1, 1998, to holders of record at the close of
business on the January 15 or July 15 immediately preceding each such interest
payment date. The Senior Secured Discount Notes will be due on August 1, 2004,
and will be issued only in registered form, without coupons, in denominations
of $1,000 and integral multiples thereof. The Senior Secured Discount Notes
will be senior obligations of the Company limited to an aggregate amount of
$117,958,000.

All of the obligations of the Company under the Notes and the Indentures will
be secured by a pledge by the Company of all of the capital stock of its direct
Subsidiaries whether now existing or hereafter acquired and will be guaranteed
by its Subsidiaries. The Guarantee by Acme Packaging of the Notes will be
secured by a pledge by Acme Packaging of all of the capital stock of its
subsidiaries whether now existing or hereafter acquired, and the Guarantee by
Acme Steel of the Notes will be secured by a pledge by Acme Steel of all of the
capital stock of its subsidiaries whether now existing or hereinafter acquired,
and a first priority Lien on substantially all existing and future real
property, equipment, intellectual property and related intangibles of Acme
Steel, including the Modernization Project, and the proceeds thereof, but
excluding inventory, accounts receivable, certain non-material assets and
permitted liens. To the extent that Acme Steel finances the acquisition of
assets constituting a part of the Modernization Project out of the proceeds of
industrial revenue bonds or similar governmental authority obligations, such
assets shall not constitute security for its Guarantee.

The Company expects to secure a Working Capital Facility which will be
secured by inventory and accounts receivable of the Company and its
Subsidiaries. The ability of the Company and its Subsidiaries to incur
additional Indebtedness will be limited by the "Limitations on Indebtedness"
covenant of each of the Indentures, and the ability of the Company and its
Subsidiaries to incur additional secured Indebtedness will be limited by a
covenant of each of the Indentures.

69
<PAGE>

DESCRIPTION OF OTHER INDEBTEDNESS

TERM LOAN FACILITY

The Company has entered into the Term Loan Facility with Lehman Commercial
Paper Inc. ("LCP"), an affiliate of one of the Underwriters, under which LCP
will provide $50 million in funds for the completion of the Modernization
Project. See "Financing Plan." On and after the date hereof, LCP expects to
assign its loans thereunder (the "Term Loans") to one or more institutional
lenders (the "Lenders") who have provided commitments to LCP, subject to
documentation, to take an assignment of the Term Loans following which
assignments, LCP will act as administrative agent for the Lenders. The
obligations of the Company under the Term Loan Facility will be guaranteed by
each of the Subsidiaries upon terms substantially equivalent to the Gurantees.
LCP, as agent for present and future Lenders will enter into the Collateral
Agency Agreement so that the Lenders will also be secured by a first priority
security interest in the Collateral and will share, pro rata, with Holders of
the Notes in proceeds received from any foreclosure on the Collateral. The Term
Loans will bear interest at a floating rate equal to reserve adjusted LIBOR
plus 4%. The Term Loans are prepayable at any time at the option of the
Company. The Term Loans will be amortized quarterly commencing on November 1,
1998 with principal payments of $3.75 million per quarter through August 1,
2000 and $5 million per quarter from November 1, 2000 through August 1, 2001.
The Term Loans are payable at the option of the Lenders thereunder upon a
Change of Control. In the event there is an Unapplied Proceeds Offer, the
Lenders will share pro rata in the Available Proceeds Amount. The other
covenants and the events of default contained in the Term Loan Facility are
substantially the equivalent of those contained in the Notes.

WORKING CAPITAL FACILITY

The Company has accepted, subject to the negotiation and execution of the
final documentation, the principal terms and conditions of the Working Capital
Facility to replace the Company's existing revolving credit facility. It is
intended that final documentation of the Working Capital Facility will be
executed on August 11, 1994, and will contain customary conditions to closing.
Harris Trust and Savings Bank ("HTSB") and Lehman Commercial Paper Inc., an
affiliate of one of the Underwriters, will act as co-agents and HTSB will act
as administrative agent. The Working Capital Facility will provide Acme Steel,
Acme Packaging, Alpha Tube and Universal (the "Borrowers") with up to $80
million to accommodate their ongoing working capital requirements and for
general corporate purposes. Within this overall limitation, borrowing
availability to each Borrower is limited to an amount equal to the sum of 85%
of the face value of eligible accounts receivable plus 50% of the loan value of
eligible inventory; provided, however, that the total loans outstanding at any
one time to any Borrower against eligible inventory may not exceed 40% of such
amount. The obligations of the Borrowers under the Working Capital Facility
will be guaranteed by the Company and will be secured by a first priority
security interest in all present and future accounts receivable and inventory
of the Borrowers and a negative pledge applicable to all assets of the
Borrowers other than the Collateral. Borrowing under the Working Capital
Facility will bear interest at a floating rate equal to, at the Company's
option, either (a) the greater of the applicable federal funds rate plus 1/2 of
1% or the prime rate announced by HTSB ("Base Rate Loans") or (b) reserve
adjusted LIBOR plus 2% ("LIBOR Rate Loans"). Base Rate Loans will be payable
monthly in arrears and LIBOR Rate Loans will be available for fixed periods of
30, 60, 90 or 180 days, payable on the last day of the applicable period, but
in any case, at least quarterly. The Working Capital Facility will continue in
effect for three years after the date of execution thereof, subject to two one-
year extensions upon the agreement of all parties.

The Working Capital Facility will require the Company to maintain a minimum
consolidated tangible net worth. The Company will also be obligated to maintain
at all times a ratio of consolidated current assets (including all funds held
by the Collateral Agent to fund the construction of the Modernization Project)
to consolidated current liabilities of at least 1.5. The Working Capital
Facility will also require the Company to maintain a ratio of funded
Indebtedness to capital of no more than .65 at all times and a ratio of the sum
of EBITDA, project expenses and non-restricted cash to the sum of cash interest
and 30% of the average loans

70
<PAGE>

outstanding under the Working Capital Facility of not less than 1.05 calculated
cumulatively on a rolling quarterly basis. In addition, the Working Capital
Facility will limit the ability of the Company and its subsidiaries to incur
additional indebtedness, pay dividends or other distributions or make loans or
advances, merge, consolidate or sell assets or pay dividends on subsidiary
stock or make any other distributions or make loans or advances to the Company
in excess of 100% of each Subsidiary's EBITDA (as defined therein) less
maintenance capital expenditures as well as certain other covenants and
agreements typical in such facilities. The Borrowers will be required to repay
all loans outstanding under the Working Capital Facility upon a change of
control (as defined therein).

Events of default under the Working Capital Facility, which would entitle the
lenders thereunder to terminate the facility and to declare all amounts
outstanding thereunder to be immediately due and payable, will include, but not
be limited to, failure to pay any interest, principal or fees when due under
the Working Capital Facility; failure to meet any covenant or other agreement
contained in the Working Capital Facility or the untruth of any representation
or warranty made by the Company or the Borrowers therein; the attachment of
certain involuntary liens pursuant to ERISA, or the entry of certain final
judgments, upon the Company or any Borrowers; certain bankruptcy or other
insolvency proceedings, and certain defaults in other indebtedness of the
Company and the Borrowers. Any such event of default gives HTSB the right to
possess and sell the collateral securing the Borrowers' obligations.

LEGAL MATTERS

The validity of the authorization and issuance of the Common Stock will be
passed upon for the Company by Coffield Ungaretti & Harris, 3500 Three First
National Plaza, Chicago, Illinois 60602.

EXPERTS

The audited financial statements included in this Prospectus have been so
included in reliance upon the report of Price Waterhouse LLP, independent
accountants, and upon the authority of said firm as experts in auditing and
accounting. Hatch Associates Ltd. and Steltech Ltd., experts in engineering,
have consented to references to themselves and their Report in this Prospectus.

With respect to the unaudited consolidated financial information of Acme
Metals Incorporated for the six month period ended June 26, 1994 included and
incorporated by reference in this Prospectus, Price Waterhouse LLP reported
that they have applied limited procedures in accordance with professional
standards for a review of such information. However, their separate report
dated April 21, 1994, incorporated by reference herein, states that they did
not audit and they do not express an opinion on that unaudited consolidated
financial information. Price Waterhouse LLP has not carried out any significant
or additional audit tests beyond those which would have been necessary if their
report had been included. Accordingly, the degree of reliance on their report
on such information should be restricted in light of the limited nature of the
review procedures applied. Price Waterhouse LLP is not subject to the liability
provisions of section 11 of the Securities Act of 1933 for their report on the
unaudited consolidated financial information because that report is not a
"report" or a "part" of the registration statement prepared or certified by
Price Waterhouse LLP within the meaning of sections 7 and 11 of the Act.

71
<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Accountants' Report.......................................... F-2
Consolidated Statements of Operations for the Six Months Ended June 26,
1994 and June 27, 1993 (Unaudited) and for the Years Ended December 26,
1993, December 27, 1992 and December 29, 1991 (Audited)................. F-3
Consolidated Balance Sheets as of June 26, 1994 (Unaudited), December 26,
1993 and December 27, 1992 (Audited).................................... F-4
Consolidated Statements of Cash Flows for the Six Months Ended June 26,
1994 and June 27, 1993 (Unaudited) and for the Years Ended December 26,
1993, December 27, 1992 and December 29, 1991 (Audited)................. F-5
Consolidated Statements of Changes in Shareholders' Equity for the Six
Months Ended June 26, 1994 (Unaudited) and for the Years Ended December
26, 1993, December 27, 1992, December 29, 1991 and December 30, 1990
(Audited)............................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Acme Metals Incorporated

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of changes in
shareholders' equity present fairly, in all material respects, the financial
position of Acme Metals Incorporated and its subsidiaries at December 26, 1993
and December 27, 1992, and the results of their operations and their cash flows
for each of the three years in the period ended December 26, 1993, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.

As discussed in the Notes to the Consolidated Financial Statements, Acme
Metals Incorporated changed its method of accounting for postretirement
benefits other than pensions and income taxes in 1992.

PRICE WATERHOUSE LLP

March 21, 1994
Chicago, Illinois

F-2
<PAGE>

ACME METALS INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEARS ENDED
----------------------- --------------------------------------
JUNE 26, JUNE 27, DECEMBER 26, DECEMBER 27, DECEMBER 29,
1994 1993 1993 1992 1991
----------- ----------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales............... $256,423 $225,032 $457,406 $391,562 $376,951
Costs and expenses:
Cost of products sold. 215,691 198,327 397,526 347,624 335,503
Depreciation expense.. 7,596 7,517 14,657 14,392 13,700
-------- -------- -------- -------- --------
Gross profit............ 33,136 19,188 45,223 29,546 27,748
Selling and
administrative
expense.............. 15,304 13,800 30,633 28,901 29,219
Restructuring charge.. 2,700
Nonrecurring charge... 1,925
-------- -------- -------- -------- --------
Operating income (loss). 17,832 5,388 12,665 (2,055) (1,471)
Non-operating income
(expense):
Interest expense...... (2,666) (2,734) (5,384) (5,569) (5,533)
Interest income....... 1,046 741 1,571 1,700 1,322
Unusual income item... 1,210 1,047 1,241
Other--net............ 1,211 222 370 355 1,391
-------- -------- -------- -------- --------
Income (loss) before
income taxes and
cumulative effect of
changes in accounting
principles............. 17,423 3,617 10,432 (4,522) (3,050)
Income tax provision
(credit)............... 6,969 1,447 4,173 (1,673) (732)
-------- -------- -------- -------- --------
10,454 2,170 6,259 (2,849) (2,318)
Cumulative effect of
changes in accounting
principles:
Retiree health care
and life insurance
benefits, net of
taxes................ (42,246)
Income taxes.......... (8,077)
--------
(50,323)
-------- -------- -------- -------- --------
Net income (loss)....... $ 10,454 $ 2,170 $ 6,259 $(53,172) $ (2,318)
======== ======== ======== ======== ========
Per share:
Income (loss) before
cumulative effect of
changes in accounting
principles........... $ 1.84 $ 0.40 $ 1.15 $ (0.53) $ (0.43)
Cumulative effect of
changes in accounting
principles:
Retiree health care
and life insurance
benefits, net of
taxes.............. (7.82)
Income taxes........ (1.50)
-------- -------- -------- -------- --------
Net income (loss)....... $ 1.84 $ 0.40 $ 1.15 $ (9.85) $ (0.43)
======== ======== ======== ======== ========
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-3
<PAGE>

ACME METALS INCORPORATED

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

<TABLE>
<CAPTION>
JUNE 26, DECEMBER 26, DECEMBER 27,
ASSETS 1994 1993 1992
------ ----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.............. $ 73,651 $ 50,444 $ 49,224
Receivables, less allowances of $1,234
in 1994 (unaudited), $1,155 in 1993
and $1,081 in 1992.................... 62,327 58,479 47,091
Inventories............................ 41,037 47,867 39,488
Deferred income taxes.................. 12,337 12,337 11,754
Other current assets................... 944 1,267 1,303
--------- --------- ---------
Total current assets................. 190,296 170,394 148,860
--------- --------- ---------
Investments and other assets:
Investments in associated companies.... 14,701 14,701 14,105
Other assets........................... 13,493 13,389 7,197
Deferred income taxes.................. 19,846 19,846 9,851
--------- --------- ---------
Total investments and other assets... 48,040 47,936 31,153
--------- --------- ---------
Property, plant and equipment:
Property, plant and equipment, at cost. 412,945 408,556 405,684
Accumulated depreciation............... (300,653) (293,017) (284,995)
--------- --------- ---------
Total property, plant and equipment.. 112,292 115,539 120,689
--------- --------- ---------
$ 350,628 $ 333,869 $ 300,702
========= ========= =========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable....................... $ 32,503 $ 32,800 $ 25,985
Accrued expenses....................... 38,334 34,089 28,641
Income taxes payable................... 2,961 3,641 1,299
Current maturities of long-term debt... 6,667 6,667 3,500
--------- --------- ---------
Total current liabilities............ 80,465 77,197 59,425
--------- --------- ---------
Long-term liabilities:
Long-term debt......................... 49,333 49,333 56,000
Other long-term debt................... 9,983 10,543 7,951
Postretirement benefits other than
pensions.............................. 83,675 82,630 80,959
Retirement benefit plans............... 30,963 30,963 7,072
--------- --------- ---------
Total long-term liabilities.......... 173,954 173,469 151,982
--------- --------- ---------
Commitments and contingencies (see note
titled Commitments and Contingencies)
Shareholders' equity:
Preferred stock, $1 par value,
2,000,000 shares authorized, no shares
issued................................
Common stock, $1 par value, 20,000,000
shares authorized, 5,559,161,
5,406,387, and 5,357,870 shares issued
in 1994 (unaudited), 1993 and 1992,
respectively.......................... 5,559 5,406 5,358
Additional paid-in capital............. 50,743 48,344 47,679
Retained earnings...................... 61,202 50,748 44,489
Minimum pension liability adjustment... (21,295) (21,295) (8,231)
--------- --------- ---------
Total shareholders' equity........... 96,209 83,203 89,295
--------- --------- ---------
$ 350,628 $ 333,869 $ 300,702
========= ========= =========
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-4
<PAGE>

ACME METALS INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEARS ENDED
----------------------- --------------------------------------
JUNE 26, JUNE 27, DECEMBER 26, DECEMBER 27, DECEMBER 29,
1994 1993 1993 1992 1991
----------- ----------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income (loss)..... $10,454 $ 2,170 $ 6,259 $(53,172) $ (2,318)
Adjustments to
reconcile net income
(loss) to net cash
provided by (used
for) operating
activities:
Depreciation........ 7,894 7,831 15,234 14,705 14,224
Deferred income
taxes.............. (1,629) (1,848) 1,049
Cumulative effect of
changes in
accounting
principles......... 50,323
Gain on sale of
assets............. (1,047)
Nonrecurring charge. 1,925
Investment in
associated company. (596)
Change in current
assets and
liabilities:
Receivables....... (3,848) (8,608) (11,388) 1,403 741
Inventories....... 6,830 (1,950) (8,379) 1,698 7,922
Accounts payable.. (297) 6,004 6,815 4,843 (2,242)
Other current
accounts......... 3,888 2,380 7,826 3,170 (2,475)
Other, net.......... 1,188 2,198 (26) 3,943 4,820
------- ------- -------- -------- --------
Net cash provided by
(used for) operating
activities........... 26,109 10,025 16,041 24,018 21,721
------- ------- -------- -------- --------
Cash flows from
investing activities:
Capital expenditures.. (5,071) (4,305) (11,749) (7,557) (10,611)
Proceeds from sales of
assets............... 995
------- ------- -------- -------- --------
Net cash used for
investing activities. (5,071) (4,305) (11,749) (6,562) (10,611)
------- ------- -------- -------- --------
Cash flows from
financing activities:
Payment of long-term
debt................. (3,500) (3,500)
Purchase of common
stock for treasury... (79) (462)
Other................. (99) (20) 428 113 19
Proceeds from the
exercise of stock
options.............. 2,268
------- ------- -------- -------- --------
Net cash provided by
(used for) financing
activities........... 2,169 (3,520) (3,072) 34 (443)
------- ------- -------- -------- --------
Net increase
(decrease) in cash
and cash equivalents. 23,207 2,200 1,220 17,490 10,667
Cash and cash
equivalents at
beginning of year.... 50,444 49,224 49,224 31,734 21,067
------- ------- -------- -------- --------
Cash and cash
equivalents at end of
year................. $73,651 $51,424 $ 50,444 $ 49,224 $ 31,734
======= ======= ======== ======== ========
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-5
<PAGE>

ACME METALS INCORPORATED

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON
STOCK, ADDITIONAL MINIMUM
$1 PAR PAID-IN RETAINED PENSION TREASURY
VALUE CAPITAL EARNINGS LIABILITY STOCK
------ ---------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
BALANCE--DECEMBER 30, 1990.... $5,948 $46,813 $115,281 $ 0 $(15,312)
Net loss.................... (2,318)
Stock plans--issuance of
shares..................... 61 646
Tax benefit arising from
stock plan transactions.... 7
Purchase of common stock for
treasury................... (462)
------ ------- -------- -------- --------
BALANCE--DECEMBER 29, 1991.... 6,009 47,466 112,963 0 (15,774)
------ ------- -------- -------- --------
Net loss.................... (53,172)
Stock plans--issuance of
shares..................... 7 191
Tax benefit arising from
stock plan transactions.... 22
Purchase of common stock for
treasury................... (79)
Redemption of stock rights.. (107)
Retirement of treasury
stock...................... (658) (15,195) 15,853
Minimum pension liability... (8,231)
------ ------- -------- -------- --------
BALANCE--DECEMBER 27, 1992.... 5,358 47,679 44,489 (8,231) 0
------ ------- -------- -------- --------
Net income.................. 6,259
Stock plans--issuance of
shares..................... 48 635
Tax benefit arising from
stock plan transactions.... 30
Minimum pension liability... (13,064)
------ ------- -------- -------- --------
BALANCE--DECEMBER 26, 1993.... $5,406 $48,344 $ 50,748 $(21,295) $ 0
------ ------- -------- -------- --------
Net income (unaudited)...... 10,454
Stock plans--issuance of
shares (unaudited)......... 153 2,399
------ ------- -------- -------- --------
BALANCE--JUNE 26, 1994
(UNAUDITED).................. $5,559 $50,743 $ 61,202 $(21,295) $ 0
====== ======= ======== ======== ========
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-6
<PAGE>

ACME METALS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

The consolidated financial statements include the accounts of Acme Metals
Incorporated (the Company) and its majority-owned subsidiaries. Investments in
mining ventures are accounted for by the equity method. All intercompany
transactions have been eliminated.

The Company's fiscal year ends on the last Sunday in December.

Interim Financial Data

The interim financial data is unaudited; however, in the opinion of the
Company, the interim data includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results for the
interim period.

Inventories

Inventories are stated at the lower of cost or market. The primary method
used to determine inventory costs is the last-in, first-out (LIFO) method.

Property, Plant and Equipment and Depreciation

Property, plant and equipment are stated at cost. Depreciation of plant and
equipment is computed principally on a straight-line basis over the estimated
useful lives of the assets. Expenditures for maintenance, repairs and minor
renewals and betterments are charged to expense as incurred. Furnace relines
and major renewals and betterments are capitalized.

Upon disposition of property, plant and equipment, the cost and related
accumulated depreciation are removed from the accounts, and the resulting gain
or loss is recognized.

The Company from time to time reviews the carrying value of certain of its
assets and recognizes impairments when appropriate.

Retirement Benefit Plans

Pension costs include service cost, interest cost, return on plan assets and
amortization of the unrecognized initial net asset. The Company's policy is to
fund not less than the minimum funding required under ERISA.

The Company has postretirement health care and life insurance plans. The
provision for postretirement costs in 1991 includes current costs, amortization
of prior service costs over periods not exceeding twenty-five years and
interest on the accrued liability. The provisions for postretirement costs in
1993 and 1992 were determined pursuant to the provisions of Statement of
Financial Accounting Standards (FAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." Under this statement, the annual
expense represents a combination of interest and service cost provisions of the
annual accrual. The postretirement benefits are not funded.

Income Taxes

The credit for deferred income taxes in 1993 and 1992 was determined pursuant
to the provisions of FAS No. 109, "Accounting for Income Taxes." Under this
statement, the provision for deferred income taxes represents the tax effect of
temporary differences between the financial reporting basis and the tax basis
of the Company's assets and liabilities. In 1991, the provision for deferred
income taxes represents the tax effect of differences in the timing of income
and expense recognition for tax and financial reporting purposes.

F-7
<PAGE>

ACME METALS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)
Per Share Data

Amounts per common share are based on the weighted average number of common
and dilutive common equivalent shares outstanding of 5,678,661 and 5,409,761 in
the first six months of 1994 (unaudited) and 1993 (unaudited), respectively;
5,439,784 in 1993, 5,396,311 in 1992 and 5,373,564 in 1991.

Consolidated Statements of Cash Flows

For purposes of the Consolidated Statements of Cash Flows, the Company
considers all highly liquid investments purchased with a maturity of three
months or less to be cash equivalents.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current
year presentation.

RESTRUCTURING CHARGE:

During 1992, the Company substantially completed its program to reduce its
salaried work force by 10% which was completed during 1993. Voluntary
retirement offers, which included an increased pension benefit and extra
vacation pay, were extended to a number of employees for a limited period of
time. Other employees were terminated with severance pay. The pre-tax reserve
of $2.7 million established by the Company included $1.1 million related to the
increased pension benefits and acceleration of the payment of pension benefits,
a special postretirement termination charge of $1.3 million, a postretirement
plan curtailment gain of $0.4 million and $0.7 million related to increased
vacation benefits, severance pay and a reserve for contingencies related to the
program.

NONRECURRING CHARGE:

The Company recorded a $1.9 million nonrecurring charge in 1993 including
$1.3 million in connection with a decision made during the year to permanently
idle Acme Steel Company's No. 3 Hot Strip Mill and Billet Mill and a $0.6
million charge to close Acme Packaging Corporation's Pittsburg-East facility in
California and the elimination of a strapping line at its New Britain,
Connecticut facility following a determination made during the year to
consolidate production facilities and eliminate unprofitable lines.

UNUSUAL INCOME ITEM:

In 1993, the Company recorded a benefit in connection with its investment in
Wabush Iron Company (WabIron). As a result of the finalization of a plan of
reorganization for LTV Steel Company Inc., a former participant in WabIron, the
Company was awarded $1.2 million (market value) of LTV securities in a
settlement of a bankruptcy claim filed by all of the participants in the Wabush
Mines Project joint venture.

During 1992, the Company sold all of its interests in certain coal producing
property located in West Virginia. This transaction added approximately $1
million of pre-tax income to 1992 results.

In 1991, the Company recorded a benefit from an unusual item related to the
assignment of its rights in claims allowed in the LTV Steel Company, Inc.
bankruptcy to a third party. This transaction added $1.2 million of pre-tax
income to 1991 results.

F-8
<PAGE>

ACME METALS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)

INVENTORIES:

Inventories are summarized as follows:

<TABLE>
<CAPTION>
JUNE 26, DECEMBER 26, DECEMBER 27,
1994 1993 1992
----------- ------------ ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials $ 3,583 $ 6,201 $ 4,594
Semi-finished and finished products....... 29,358 32,364 26,540
Supplies.................................. 8,096 9,302 8,354
------- ------- -------
$41,037 $47,867 $39,488
======= ======= =======
</TABLE>

On December 26, 1993 and December 27, 1992, inventories valued on the LIFO
method were less than the current costs of such inventories by $57.4 million
and $55.4 million, respectively.

In 1992, inventory quantities decreased from the prior year, the effect of
which decreased cost of products sold and net loss by $0.4 million and $0.2
million, respectively.

PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment consisted of the following:

<TABLE>
<CAPTION>
JUNE 26, DECEMBER DECEMBER 27,
1994 26, 1993 1992
----------- --------- ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Land........................................ $ 3,786 $ 3,786 $ 3,786
Buildings................................... 49,126 49,578 48,530
Equipment................................... 352,717 352,306 349,494
Construction in progress.................... 7,316 2,886 3,874
--------- --------- ---------
412,945 408,556 405,684
Less accumulated depreciation............... (300,653) (293,017) (284,995)
--------- --------- ---------
$ 112,292 $ 115,539 $ 120,689
========= ========= =========
</TABLE>

The difference between depreciation expense presented in the Consolidated
Statements of Cash Flows and the Consolidated Statements of Operations
represents that portion of depreciation expense that is classified in selling
and administrative expense on the Consolidated Statements of Operations.

RETIREMENT BENEFIT PLANS:

The Company has various retirement benefit plans covering substantially all
salaried and hourly employees. Certain salaried employees with one full
calendar quarter of service are eligible to participate in the Company's
defined contribution plan and employee stock ownership plan (ESOP). Company
contributions to the defined contribution plan and employee stock ownership
plan are based upon 7.5% and 3.5% (the ESOP contribution was reduced from 6.5%
to 3.5% in the second quarter of 1993), respectively, of eligible compensation.
Amounts charged to operations under these plans were $3.4 million in 1993, $4.1
million in 1992 and $3.6 million in 1991.

Salaried employees who joined the Company prior to December 31, 1981 and
certain hourly employees participate in defined benefit retirement plans which
provide benefits based upon either years of service and final average pay or
fixed amounts for each year of service.

F-9
<PAGE>

ACME METALS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)

The net defined benefit pension credit (cost) included the following
components:

<TABLE>
<CAPTION>
1993 1992 1991
-------- -------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost................................ $ (1,852) $ (1,979) $ (1,984)
Interest cost on projected benefit
obligation................................. (14,526) (14,231) (13,923)
Actual return on plan assets................ 16,094 9,715 28,085
Net amortization and deferral............... 7,662 (12,157)
-------- -------- --------
Net pension credit (cost)................... $ (284) $ 1,167 $ 21
======== ======== ========
</TABLE>

Pension plan curtailment losses of $1.1 million are included in the 1992
restructuring charge.

Actuarial assumptions used to calculate the net defined benefit pension
credit (cost) were:

<TABLE>
<CAPTION>
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Weighted average discount rate................................ 8.5% 8.5% 9%
Increase in future compensation levels........................ 5% 5% 5%
Expected rate of return on plan assets........................ 9.75% 9.75% 9.75%
</TABLE>

The following table sets forth the funded status of the Company's defined
benefit retirement plans and amounts recognized in the balance sheet.

<TABLE>
<CAPTION>
1993 1992
---------------------- ----------------------
UNDERFUNDED OVERFUNDED UNDERFUNDED OVERFUNDED
PLANS PLANS PLANS PLANS
----------- ---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Actuarial present value
of benefit obligations:
Accumulated benefit
obligation, including
vested benefits of
$182,993 in 1993 and
$155,815 in 1992...... $189,939 $9,648 $138,372 $33,635
Effect of increase in
future compensation
levels................ 4,419 709 4,525 725
-------- ------ -------- -------
Projected benefit
obligation for service
rendered to date...... 194,358 10,357 142,897 34,360
Plan assets at fair
value, primarily U.S.
government bonds and
notes and common stock
of publicly traded
companies............... 158,975 9,860 131,300 37,258
Unrecognized net loss
from past experience
different from that
assumed and effects of
changes in assumptions.. 51,465 2,461 29,367 4,503
Prior service cost not
yet recognized in net
periodic pension cost... 5,539 1,440 192
Unrecognized net asset at
December 30, 1985 being
recognized over 15
years................... (12,879) (604) (11,773) (3,637)
Minimum pension liability
adjustment.............. (39,705) (14,509)
-------- ------ -------- -------
Prepaid (accrued) pension
cost.................... $(30,963) $1,360 $ (7,072) $ 3,956
======== ====== ======== =======
</TABLE>

F-10
<PAGE>

ACME METALS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)
In accordance with FAS No. 87, the Company has recorded an adjustment, as
shown in the table above, to recognize a minimum pension liability relating to
certain underfunded pension plans. The additional $25.2 million adjustment
arose at the end of 1993 primarily as a result of a lowering of the discount
rate to 7.5 percent from 8.5 percent. Accordingly, for pension plans with
accumulated benefits in excess of the fair value of plan assets at December 26,
1993, the accompanying consolidated balance sheets include an additional long-
term pension liability of $40.1 million, a long-term intangible asset of $5.8
million and a charge to shareholders' equity of $21.3 million, net of a
deferred tax benefit, representing the excess of the additional long-term
liability over unrecognized prior service cost.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:

The Company and its subsidiaries sponsor several unfunded defined benefit
postretirement plans that provide medical, dental, and life insurance for
retirees and eligible dependents.

In 1993 and 1992 the cost for all plans, calculated pursuant to FAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions"
amounted to $7.9 million and $7.8 million, respectively. The cost in 1991,
which was calculated under the previous accounting method, totalled $6.4
million.

The net periodic postretirement benefit cost for 1993 and 1992, net of
retiree contributions of approximately 10% of costs, included the following
components:

<TABLE>
<CAPTION>
1993 1992
------ ------
(IN
THOUSANDS)
<S> <C> <C>
Service cost--benefits attributed to service during the
period.................................................. $1,185 $1,109
Interest cost on accumulated postretirement benefit
obligation.............................................. 6,743 6,708
Net amortization and deferral............................ (64)
------ ------
Net periodic postretirement benefit cost................. $7,864 $7,817
====== ======
</TABLE>

The following table sets forth the plans' combined status at December 26,
1993 and December 27, 1992:

<TABLE>
<CAPTION>
1993 1992
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.............................................. $55,687 $57,685
Fully eligible active plan participants............... 9,675 6,751
Other active plan participants........................ 25,619 20,983
------- -------
90,981 85,419
Unrecognized net gain and prior service cost.......... (3,036) (10)
------- -------
Accrued postretirement benefit cost................... $87,945 $85,409
======= =======
</TABLE>

The accrued postretirement obligation was determined by application of the
terms of medical, dental, and life insurance plans, together with relevant
actuarial assumptions and health care cost trend rates projected at annual
rates ranging ratably from 12 percent in 1992 to 5 percent through 1999. The
effect of a 1 percent annual increase in these assumed cost trend rates would
increase the accumulated postretirement benefit obligation by approximately
$10.9 million; the annual service costs would increase by approximately $1.2
million. The obligation for postretirement benefits was remeasured as of
January 1, 1994 using a 7.5% discount rate, as compared to the 8.5% discount
rate used for the January 1, 1993 valuation.

F-11
<PAGE>

ACME METALS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)
The reduction in the discount rate contributed to a net increase in the
obligation of approximately $5 million. As the measurement of net periodic
postretirement benefit cost is based on beginning of the year assumptions, the
higher revalued obligation at the end of fiscal 1993 did not have any impact on
the expense recorded for 1993.

In accordance with the new labor agreement with the hourly workers effective
January 1, 1994, individuals retiring on or after January 1, 1993 will be
covered by a new managed care medical plan (PPO). This new plan is expected to
help control future medical costs to be paid by the Company.

POSTEMPLOYMENT BENEFITS:

In November 1992, the Financial Accounting Standards Board issued Statement
No. 112, "Employers' Accounting for Postemployment Benefits," which requires
accrual basis accounting for postemployment benefits, and must be adopted not
later than fiscal 1994. Postemployment benefits include all benefits paid after
employment but before retirement, such as layoff and disability benefits. The
Company has not yet determined the impact, if any, or the timing of this change
on the financial statements.

ACCRUED EXPENSES:

Included in the Consolidated Balance Sheets caption accrued expenses are the
following:

<TABLE>
<CAPTION>
JUNE 26, DECEMBER 26, DECEMBER 27,
1994 1993 1992
----------- ------------ ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Accrued salaries and wages....... $15,620 $16,235 $11,177
Accrued postretirement health
care and life insurance......... 5,328 5,328 4,450
Accrued taxes other than income
taxes........................... 5,354 4,970 4,736
Other current liabilities........ 12,032 7,556 8,278
------- ------- -------
$38,334 $34,089 $28,641
======= ======= =======
</TABLE>

INVESTMENTS IN ASSOCIATED COMPANIES

The Company has a 31.7 percent interest in an iron ore mining venture. In
1993, 1992 and 1991, the Company made iron ore purchases of $18.3 million,
$21.7 million, and $26.8 million, respectively, from the venture. At December
26, 1993, $4.2 million was owed to the venture for iron ore purchases; amounts
owed to the venture for such ore purchases were $3.6 million at December 27,
1992.

The Company has a 37% interest in Olga Coal Company. In 1987, Olga Coal
Company filed for protection under Chapter 11 of the U.S. Bankruptcy Act and
the coal mining operation was idled. The coal mining investment is carried at
no value in the Consolidated Balance Sheets.

INCOME TAXES:

The provision (credit) for taxes consisted of the following:

<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Taxes on income:
Current:
Federal.................................. $ 5,399 $ 62 $(1,781)
State.................................... 403 113 --
------- ------- -------
5,802 175 (1,781)
Deferred................................. (1,629) (1,848) 1,049
------- ------- -------
$ 4,173 $(1,673) $ (732)
======= ======= =======
</TABLE>

F-12
<PAGE>

ACME METALS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)
In 1992, the Company adopted FAS No. 109, "Accounting for Income Taxes," and
reported the cumulative effect of the change in the method of accounting for
income taxes as of the beginning of the 1992 fiscal year in the consolidated
statements of operations. The cumulative effect of the change in accounting for
income taxes increased the 1992 net loss by $8.1 million or $1.50 per share and
was reported separately in the consolidated statements of operations for the
year ended December 27, 1992. The change in accounting for income taxes
increased the credit for taxes in 1992 by $0.9 million.

Significant components of the Company's deferred tax liabilities and assets
at December 26, 1993 and December 27, 1992 are summarized below.

<TABLE>
<CAPTION>
LIABILITIES 1993 1992
----------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Property, plant and equipment......................... $21,319 $21,535
------- -------
Gross deferred tax liabilities........................ 21,319 21,535
------- -------
<CAPTION>
ASSETS
------
<S> <C> <C> <C>
Postretirement benefits other than pensions........... 34,381 32,222
Inventory............................................. 4,313 3,185
Reserves.............................................. 670 426
Pensions.............................................. 8,620 565
Other employee benefits............................... 2,712 2,039
Other assets.......................................... 910 736
Miscellaneous......................................... 310 236
Alternative minimum tax credits....................... 1,496 3,005
Other................................................. 90 726
------- -------
Gross deferred tax assets............................. 53,502 43,140
------- -------
Net deferred tax asset................................ $32,183 $21,605
======= =======
</TABLE>

The Company believes it is more likely than not to realize the net deferred
tax asset and accordingly no valuation allowance has been provided. This
conclusion is based on, (i) reversing deductible temporary differences
(excluding postretirement amounts) being offset by reversing taxable temporary
differences, (ii) the extremely long period that is available to realize the
future tax benefits associated with the postretirement related deductible
temporary differences and, (iii) the Company's expected future profitability.

In 1993 and 1992, the change in the deferred income tax liability primarily
represents the effect of changes in the amounts of temporary differences from
December 27, 1992 to December 26, 1993 and December 29, 1991 to December 27,
1992, respectively. For 1991, the deferred income tax liability results from
timing differences, created principally by the use of accelerated tax
depreciation, in the recognition of income and expense for tax and financial
reporting purposes.

The Company's federal tax liability is the greater of its regular tax or
alternative minimum tax. At December 26, 1993, the Company had available
alternative minimum tax credits of $1.5 million. This amount can be carried
forward indefinitely and utilized as a tax credit to reduce, to a certain
extent, regular tax liabilities of future years.

F-13
<PAGE>

ACME METALS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)

The effective income tax rates for 1993, 1992 and 1991 are reconciled to the
federal statutory tax rate in the following table:

<TABLE>
<CAPTION>
1993 1992 1991
---- ----- -----
<S> <C> <C> <C>
Statutory federal income tax rate......................... 34.0% (34.0)% (34.0)%
Change in tax rate due to:
Federal surtax.......................................... 1.9 -- --
Depreciation............................................ -- -- 5.1
Reorganization and restructuring costs.................. -- 1.7 3.9
State taxes--net of federal tax effect.................. 4.7 .8 (2.0)
Reserves no longer required............................. -- (6.4) --
Penalties............................................... .6 2.3 --
Other--net.............................................. (1.2) (1.4) 3.0
---- ----- -----
40.0% (37.0)% (24.0)%
==== ===== =====
</TABLE>

There are currently certain federal tax matters that, upon resolution, could
enable the Company to carryback its entire 1986 net operating loss.

For the first six months of 1994 (unaudited) and 1993 (unaudited), cash flows
were reduced by $7.6 million and $2.6 million for payment of income taxes. In
1993, cash flows were reduced by $4.5 million resulting from income tax
payments of $5.0 million and income tax refunds of $0.5 million in connection
with net operating loss carryback claims. In 1992, cash flows were increased by
$4.8 million resulting from $6.0 million of income tax refunds in connection
with net operating loss carryback claims and income tax payments of $1.2
million. No cash payments for income taxes were made in 1991.

LONG-TERM DEBT AND REVOLVING CREDIT AGREEMENT:

The Company's long-term debt at June 26, 1994 (unaudited), December 26, 1993
and December 27, 1992 is summarized as follows:

<TABLE>
<CAPTION>
JUNE 26, DECEMBER 26, DECEMBER 27,
1994 1993 1992
----------- ------------ ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Senior notes, 9.35%, due 1994-1999....... $50,000 $50,000 $50,000
Note payable, 6.50% to 6.75%, due 1998-
2008.................................... 6,000 6,000 9,500
------- ------- -------
56,000 56,000 59,500
Less current portion..................... 6,667 6,667 3,500
------- ------- -------
$49,333 $49,333 $56,000
======= ======= =======
</TABLE>

The maturities during the five years ending December 27, 1998 are $6.7
million in 1994 and 1995, $16.7 million in 1996, $6.7 million in 1997 and $7.2
million in 1998. Cash flows from operating activities were reduced by cash paid
for interest on debt by $5.2 million in 1993 and $5.6 million in 1992 and 1991.

The Company has a revolving credit agreement with a group of banks which
provides aggregate commitments of $60 million. At December 26, 1993 and
December 27, 1992, no amounts were outstanding under the credit agreement. The
Company pays an annual commitment fee ranging from three-eighths to one-half
percent on the unused portion of the credit line. The credit agreement includes
a covenant that restricts the payment of dividends. At December 26, 1993,
retained earnings available for the payment of dividends amounted to $10
million.

F-14
<PAGE>

ACME METALS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)

FAIR VALUE OF FINANCIAL INSTRUMENTS

Cash and Short-term Investments

The carrying amount approximates fair value because of the short maturity of
those instruments.

Long-term Debt

The fair value of the Company's long-term debt is estimated by calculating
the present value of the remaining interest and principal payments on the debt
to maturity. The present value computation uses a discount rate equal to the
prime rate at the end of the reporting period plus or minus the spread between
the prime rate and the rate negotiated on the debt at the inception of the
loan.

<TABLE>
<CAPTION>
JUNE 26, 1994 DECEMBER 26, 1993 DECEMBER 27, 1992
----------------- ----------------- -----------------
(UNAUDITED)
(IN THOUSANDS)
CARRYING FAIR CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash
equivalents............. $ 73,651 $ 73,651 $ 50,444 $ 50,444 $ 49,224 $ 49,224
Long-term debt
. Senior notes, 9.35%,
due 1994-1999.......... 50,000 54,165 50,000 56,130 50,000 57,992
. Note payable, 6.50% to
6.75%, due 1998-2008... 6,000 6,433 6,000 7,021 9,500 10,524
-------- -------- -------- -------- -------- --------
$129,651 $134,249 $106,444 $113,595 $108,724 $117,740
======== ======== ======== ======== ======== ========
</TABLE>

COMMON STOCK:

The Company has a stock incentive program which provides, among other
benefits, for the granting of stock options and stock awards to officers and
key employees. Stock options for the Company's common stock are granted at
prices not less than the market price at date of grant and no option may be
exercised more than ten years from the grant date.

Information regarding stock options is summarized below:

<TABLE>
<CAPTION>
OPTION PER SHARE
SHARES OPTION PRICE
-------- ---------------
<S> <C> <C>
OUTSTANDING AT DECEMBER 30, 1990...................... 382,475 $ 8.375-$24.25
Granted............................................. 198,500 $13.563
Exercised........................................... (2,250) $ 8.375
Canceled............................................ (18,700) $ 8.375-$24.25
--------
OUTSTANDING AT DECEMBER 29, 1991...................... 560,025 $ 8.375-$24.25
Granted............................................. 58,000 $18.75
Exercised........................................... (10,100) $ 8.375-$15.625
Canceled............................................ (30,950) $13.563-$24.25
--------
OUTSTANDING AT DECEMBER 27, 1992...................... 576,975
Granted............................................. 88,500 $14.50
Exercised........................................... (39,450) $ 8.375-$17.00
Canceled............................................ (17,675) $13.563-$24.25
--------
OUTSTANDING AT DECEMBER 26, 1993...................... 608,350
Granted (unaudited)................................. 83,500
Exercised (unaudited)............................... (144,300) $ 8.375-$24.25
Canceled (unaudited)................................ (4,550) $17.875-$24.25
--------
OUTSTANDING AT JUNE 26, 1994 (unaudited).............. 543,000
========
</TABLE>

F-15
<PAGE>

ACME METALS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)

At June 26, 1994 (unaudited), 416,750 options were exercisable; at December
26, 1993, 490,850 options were exercisable; at December 27, 1992, 447,650
options were exercisable.

Stock awards granted in 1994 (unaudited) totaled 13,000 at a value of either
$22.88 or $23.19 per share depending on the start date. Stock awards granted in
1993 totaled 15,400 shares at a value of either $16.00 or $16.75 per share
depending on the grant date. Stock awards granted in 1992 totaled 18,650 shares
at a value of either $15.00 or $18.75 per share depending on the grant date.
Stock awards granted in 1991 totaled 60,900 shares at a value of either $11.75
or $13.563 per share depending on the grant date.

COMMITMENTS AND CONTINGENCIES:

The Company's interest in an iron ore mining joint venture requires payment
of its proportionate share of all fixed operating costs, regardless of the
quantity of ore received, plus the variable operating costs of minimum ore
production for the Company's account. Normally, the Company reimburses the
joint venture for these costs through its purchase of ore at the higher of cost
or market prices. During 1993, the Company obtained approximately 56% of its
iron ore needs from the joint venture and purchases during 1993 generally
approximated market prices.

The Company is subject to various federal, state and local environmental
statutes and regulations which provide a comprehensive program for controlling
the release of materials into the environment and require responsible parties
to remediate certain waste disposal sites. In addition, various health and
safety statutes and regulations apply to the work-place environment.
Administrative, civil and criminal penalties may be applicable for failure to
comply with these laws.

These environmental laws and regulations are subject to periodic revision and
modification. The United States Congress, by example, has recently completed a
major overhaul of the federal Clean Air Act which is a major component of the
federal environmental statutes affecting the Company's operations.
Additionally, the U.S. EPA and the eight Great Lakes States are currently
developing guidelines for discharge standards in the Great Lakes basin. These
guidelines, when issued, are expected to require substantially more stringent
limitations than currently in effect for discharges into the Great Lakes basin.

From time to time, the Company is also involved in administrative proceedings
involving the issuance, or renewal, of environmental permits relating to the
conduct of its business. The final issuance of these permits to date has been
resolved on terms satisfactory to the Company; and, in the future, the Company
expects such permits will similarly be resolved on satisfactory terms. However,
if the Company is not successful in obtaining certain variances and revised
regulatory standards for water discharges from its coke and blast furnace
facilities through administrative proceedings as expected, it may be subject to
civil penalties. The Company does not currently have sufficient information to
estimate its potential liabilities, if any, should such actions occur. If the
above matters are not resolved through administrative procedures, the Company
could achieve compliance through capital expenditures approximating $10 million
in the aggregate, with annual estimated operating costs of approximately $.9
million.

Management believes it will be required to make further substantial
expenditures for pollution abatement facilities in future years because of the
continuous revision of these regulatory and statutory requirements. The Company
anticipates making capital expenditures for environmental projects of
approximately $6 million in 1994 and $7 million in 1995 to maintain compliance
with current environmental laws. While such expenditures in future years may be
substantial, management does not presently expect they will have a material
adverse effect on the Company's future ability to compete within its markets.

In those cases where the Company or its subsidiaries have been identified as
a Potentially Responsible Party ("PRP") or are otherwise made aware of a
possible exposure to incur costs associated with an environmental matter,
management determines (i) whether, in fact, the Company or its subsidiaries
have been properly named or are otherwise obligated, (ii) the extent to which
the Company or its subsidiaries may be responsible for costs associated with
the site in question, (iii) an assessment as to whether another party may be
responsible under various indemnification agreements the Company or its
subsidiaries are parties to, and

F-16
<PAGE>

ACME METALS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)
(iv) an estimate, if one can be made, of the costs associated with the clean-up
efforts or settlement costs that are the responsibility of the Company or its
subsidiaries. It is the Company's policy to make provisions for environmental
clean-up costs at the time that a reasonable estimate can be made. Certain of
the Company's operating subsidiaries have been named as PRPs at eleven
Superfund sites. Company investigations have evidenced that in all of these
cases, either the subsidiary had not disposed of waste materials and was
therefore not properly named a PRP, or that the subsidiary's proportion of
materials disposed at such sites was of sufficiently small volume to qualify
the subsidiary as a de minimis contributor. The de minimis status has been
confirmed at essentially all of the applicable sites. The Company believes,
based on all currently available information, that the total costs related to
the eleven Superfund sites will not be material to the Company's financial
position or its results of operations.

At June 26, 1994 (unaudited), the Company had recorded reserves of less than
$0.3 million for environmental clean-up matters. While it is not possible to
predict the ultimate costs of resolving environmental related issues facing the
Company or its subsidiaries, based upon information currently available, they
are currently not expected to have a material effect on the consolidated
financial condition of the Company.

In connection with the spin-off from The Interlake Corporation (Interlake) on
May 29, 1986, Acme Steel Company (a subsidiary of the Company) entered into
certain indemnification agreements with Interlake. Pursuant to the terms of the
indemnification agreements, Interlake undertook to defend, indemnify and hold
Acme Steel Company harmless from any claims, as defined, relating to Acme Steel
Company operations or predecessor operations occurring before May 29, 1986, the
inception of Acme Steel Company. The indemnification agreements cover certain
environmental matters including certain litigation and Superfund sites in
Duluth, Minnesota and Gary, Indiana for which either Interlake or Acme Steel
Company's predecessor operations have been named as defendents or PRPs, as
applicable. To date, Interlake has met its obligations under the
indemnification agreements and has provided the defense and paid all costs
related to these environmental matters. The Company does not have sufficient
information to determine the potential liability, if any, for the matters
covered by the indemnification agreements in the event Interlake fails to meet
its obligations thereunder in the future. In the event that Interlake, for any
reason, were unable to fulfill its obligations under the indemnification
agreements, the Company could have increased future obligations which could be
significant.

Also in connection with the spin-off from Interlake, Acme Steel Company
entered into a Tax Indemnification Agreement (TIA) which generally provides for
Interlake to indemnify Acme Steel Company for certain tax matters. While
certain issues have been negotiated and settled between the Company, Interlake
and the Internal Revenue Service, certain significant issues for the tax years
beginning in 1982 through 1986 remain unresolved.

On March 17, 1994, Acme Steel Company received a Statutory Notice of
Deficiency (Notice) in the amount of $16.9 million in tax as a result of the
Internal Revenue Service's examination of the 1982-1984 tax years. Should the
government sustain its position as proposed for those unresolved issues and
those contained in the Notice, substantial interest would also be due
(potentially in an amount greater than the tax claimed). The taxes claimed
relate principally to adjustments for which Acme Steel Company is indemnified
by Interlake pursuant to the TIA. The Company has adequate reserves to cover
that portion which it believes it may be responsible per the TIA. The Company
is contesting the unresolved issues and the Notice. In the event that
Interlake, for any reason, were unable to fulfill its obligations under the
TIA, the Company could have increased future obligations.

BUSINESS SEGMENTS:

Commencing in 1993, the Company has elected to present its operations in two
segments, Steel Making and Steel Fabricating. Prior year amounts have been
restated for comparison purposes.

F-17
<PAGE>

ACME METALS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)

Steel Making operations include the manufacture of sheet, strip and
semifinished steel in low-, mid-, and high-carbon alloy and special grades.
Principal markets include agricultural, automotive, industrial equipment,
industrial fasteners, welded steel tubing, processor and tool manufacturing
industries.

The Steel Fabricating business segment processes and distributes steel
strapping, strapping tools and industrial packaging (Acme Packaging
Corporation), welded steel tube (Alpha Tube Corporation) and auto and light
truck jacks (Universal Tool & Stamping Company, Inc.). The Steel Fabricating
Segment sells to a number of markets.

All sales between segments are recorded at current market prices. Income from
operations consists of total sales less operating expenses. Operating expenses
include an allocation of expenses incurred at the Corporate Office that are
considered by the Company to be operating expenses of the segments rather than
general corporate expenses. Income (loss) from operations does not include
other non-operating income or expense, interest income or expense, the
cumulative effect of changes in accounting principles, or income taxes.
Identifiable assets are those that are associated with each business segment.
Corporate assets are principally investments in cash equivalents and deferred
income taxes.

The products and services of the Steel Making and Steel Fabricating segments
are distributed through their own respective sales organizations which have
sales offices at various locations in the United States. Export sales are
insignificant for the years presented.

SEGMENT INFORMATION
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEARS ENDED
----------------------- --------------------------------------------
JUNE 26, JUNE 27, DECEMBER 26, DECEMBER 27, DECEMBER 29,
1994 1993 1993 1992 1991
----------- ----------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Sales
Steel Making
Sales to unaffiliated
customers........... $111,510 $ 90,084 $ 187,750 $ 145,627 $ 140,877
Intersegment sales... 62,034 61,108 116,094 114,517 110,184
-------- -------- --------- --------- ---------
173,544 151,192 303,844 260,144 251,061
Steel Fabricating:
Sales to unaffiliated
customers........... 144,913 134,948 269,656 245,935 236,074
Intersegment sales... 968 922 1,873 1,023 --
-------- -------- --------- --------- ---------
145,881 135,870 271,529 246,958 236,074
Eliminations......... (63,002) (62,030) (117,967) (115,540) (110,184)
-------- -------- --------- --------- ---------
Total.............. $256,423 $225,032 $ 457,406 $ 391,562 $ 376,951
======== ======== ========= ========= =========
Income (loss) from
Operations
Steel Making........... $ 9,204 $ (785) $ 736 (1) $ (9,264)(3) $ (4,403)
Steel Fabricating...... 9,238 6,530 11,926 (2) 7,350 (4) 2,561
Eliminations and
adjustments........... (610) (357) 3 (141) 371
-------- -------- --------- --------- ---------
$ 17,832 $ 5,388 $ 12,665 $ (2,055) $ (1,471)
======== ======== ========= ========= =========
Identifiable Assets:
Steel Making........... $212,712 $187,407 $ 203,366 $ 185,743 $ 171,389
Steel Fabricating...... 115,209 105,651 108,254 94,514 84,100
Corporate.............. 22,707 17,001 22,249 20,445 35,247
-------- -------- --------- --------- ---------
Total.............. $350,628 $310,059 $ 333,869 $ 300,702 $ 290,736
======== ======== ========= ========= =========
Depreciation:
Steel Making........... $ 5,899 $ 5,705 $ 11,285 $ 10,805 $ 10,010
Steel Fabricating...... 1,942 2,074 3,842 3,804 4,124
Corporate.............. 53 52 107 96 90
-------- -------- --------- --------- ---------
Total.............. $ 7,894 $ 7,831 $ 15,234 $ 14,705 $ 14,224
======== ======== ========= ========= =========
Capital Expenditures:
Steel Making........... $ 4,004 $ 3,268 $ 9,368 $ 5,661 $ 8,402
Steel Fabricating...... 1,040 946 2,283 1,823 2,027
Corporate.............. 27 91 98 73 182
-------- -------- --------- --------- ---------
Total.............. $ 5,071 $ 4,305 $ 11,749 $ 7,557 $ 10,611
======== ======== ========= ========= =========
</TABLE>

F-18
<PAGE>

ACME METALS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)
- --------
(1) Includes a $1.3 million write off of Acme Steel Company's No. 3 Hot Strip
Mill and Billet Mill.
(2) Includes a $0.6 million expense to close Acme Packaging's Pittsburg-East
facility in California and the write-off of a strapping line at its New
Britain, Connecticut facility.
(3) Includes a $2.1 million restructuring charge in connection with a 10%
salaried work force reduction plan.
(4) Includes a $0.3 million restructuring charge in connection with a 10%
salaried work force reduction plan.

SUBSEQUENT EVENT:

On March 11, 1994, Acme Metals Incorporated agreed to sell an issue of
securities on a private placement basis. Within 160 days of the closing of this
transaction (March 28, 1994), the securities will be exercisable for 5,600,000
common shares of the Company (the "Shares"). Conditions for the release of
escrowed proceeds include the approval by the Board of Directors of the Company
of the construction of a continuous thin slab caster-hot rolled mill, the
effectiveness of the registration statement for the Shares and confirmation of
the availability of debt financing sufficient for such construction.

The securities and the underlying common shares have not been registered
under the Securities Act of 1933 (the "Securities Act") and may not be offered
or sold in the United States or to a U.S. person, as defined in Regulation S
under the Securities Act, absent registration or an applicable exemption from
registration requirements.

On a pro forma basis, assuming the conditions satisfying the exchange of the
securities occurred at the beginning of the period, earnings per share for the
six month period ended June 26, 1994 would have been $.92 compared to $.20 for
the first six months of 1993 (unaudited).

F-19
<PAGE>

ACME METALS INCORPORATED

QUARTERLY RESULTS (UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1994
Net sales.............................. $123,560 $132,863
Gross profit........................... 13,519 19,617
Net income............................. 3,598 6,856
Net income per share................... $ 0.64 $ 1.20
-------- -------- -------- --------
1993
Net sales.............................. $107,863 $117,169 $111,919 $120,455
Gross profit........................... 7,518 11,670 9,206 16,829
Net income (loss)...................... 114 2,056 115 3,974
Net income (loss) per share............ $ 0.02 $ 0.38 $ 0.02 $ 0.73
-------- -------- -------- --------
1992
Net sales.............................. $ 98,522 $ 99,993 $ 94,884 $ 98,163
Gross profit........................... 7,967 5,897 6,303 9,379
Net income (loss)(/1/)................. (50,144) (1,288) (2,647) 907
Net income (loss) per share(/1/)....... $ (9.29) $ (0.24) $ (0.49) $ 0.17
Net income before accounting changes... 179 (1,288) (2,647) 907
Net income per share before accounting
changes............................... $ 0.03 $ (0.24) $ (0.49) $ 0.17
-------- -------- -------- --------
1991
Net sales.............................. $ 92,403 $ 91,732 $ 98,545 $ 94,271
Gross profit........................... 6,025 5,642 8,223 7,858
Net income (loss)...................... (1,001) (626) 229 (920)
Net income (loss) per share............ $ (0.19) $ (0.11) $ 0.04 $ (0.17)
-------- -------- -------- --------
</TABLE>

The fourth quarter of 1993 includes a $1.2 million benefit related to Acme's
investment in Wabush Mines, a $1.3 million expense to write-off the Steel
subsidiary's No. 3 Hot Strip Mill and Billet Mill, and $0.6 million of expense
associated with the closure of the Packaging subsidiary's Pittsburg-East
facility in California and the write-off of a strapping line at the Packaging
subsidiary's New Britain, Connecticut facility.

The third quarter of 1992 includes a $3.1 million restructuring charge in
connection with the Company's work force reduction plan.

The fourth quarter of 1992 includes a $1 million gain on the sale of all the
Company's interests in a coal producing property in West Virginia, and a
postretirement plan curtailment gain of $0.4 million related to the
restructuring charge was included in fourth quarter results.

The second quarter of 1991 includes an unusual item related to the assignment
of Acme's rights in claims allowed in the LTV Steel Company, Inc. bankruptcy to
a third party which added the $1.2 million to pre-tax income.
- --------
(1) Reflects the adoption of Financial Accounting Standards (FAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" and
FAS No. 109, "Accounting for Income Taxes" in the first quarter of 1992.

F-20
<PAGE>

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

No dealer, salesperson or other person has been authorized in connection with
the offering made hereby to give any information or to make any representation
not contained in this Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the
Company, any Guarantor or the Underwriter. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the securities
offered hereby to any person or by anyone in any jurisdiction where such an
offer or solicitation would be unlawful. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information contained herein is correct as of any time
subsequent to the date hereof.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain Information by Reference......................... 2
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 8
The Company............................................................... 11
Modernization and Expansion Project....................................... 12
Financing Plan............................................................ 22
Use of Proceeds........................................................... 23
Special Warrant Offering.................................................. 23
Capitalization............................................................ 25
Selected Consolidated Financial and Operating Data........................ 26
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 27
Business.................................................................. 34
Management................................................................ 47
Security Ownership of Certain Beneficial Owners and Management............ 56
Selling Stockholders...................................................... 58
Certain Transactions...................................................... 61
Description of Capital Stock.............................................. 63
Description of Notes...................................................... 69
Description of Other Indebtedness......................................... 70
Legal Matters............................................................. 71
Experts................................................................... 71
Index to Consolidated Financial Statements................................ F-1
</TABLE>

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

5,600,000 SHARES

LOGO

COMMON STOCK

-------------
PROSPECTUS

August 10, 1994
-------------

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses which will be incurred in
connection with the offering, other than underwriting discounts. The amounts
set forth below are estimated except for the SEC registration fee and the NASD
listing fee.

<TABLE>
<S> <C>
SEC registration fee......................................... $ 43,206.90
NASD listing fee............................................. 17,500.00
Printing costs............................................... 80,000.00
Accounting fees and expenses................................. 50,000.00
Legal fees and expenses (not including Blue Sky)............. 75,000.00
Miscellaneous expenses....................................... 34,293.10
-----------
Total.................................................... $300,000.00
===========
</TABLE>
- --------
* To be provided by amendment.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933. The Company's Certificate
of Incorporation and By-laws provide for indemnification of its directors,
officers and employees to the maximum extent permitted by the Delaware General
Corporation Law. In addition, the Company has Indemnification Agreements with
its officers and directors.

ITEM 16. EXHIBITS

The following exhibits are filed as part of this registration statement:

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
-------------------
<C> <S> <C>
5. Opinion regarding legality
**5.1 Opinion of Coffield Ungaretti & Harris with
respect to the legality of the securities being
issued
15. Letter regarding Unaudited Interim Financial
Information
**15.1 Letter of Price Waterhouse
23.
**23.1 Consent of Price Waterhouse
**23.2 Consent of Coffield Ungaretti & Harris (included
in Exhibit 5.1)
**23.3 Consent of Hatch Associates Ltd.
**23.4 Consent of Steltech Ltd.
24. Powers of Attorney
*24.1 Powers of Attorney of Directors of Acme Metals
Incorporated
</TABLE>
- --------

* Previously filed.

**Filed herewith.

II-1
<PAGE>

ITEM 17. UNDERTAKINGS

The Registrant hereby undertakes:

(1) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.

(2) That, for purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(4) That, for purposes of determining any liability under the Securities
Act of 1993, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof.

(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be permitted
to directors, officers and controlling persons of the Registrant pursuant
to the foregoing provisions, or otherwise, the Registrant has advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

(6) That, for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of a registration statement in reliance upon Rule 430A and contained
in the form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of the registration statement as of the time it was declared
effective.

II-2
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1 TO
THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE VILLAGE OF RIVERDALE, STATE OF ILLINOIS, ON
THE 10TH DAY OF AUGUST, 1994.

Acme Metals Incorporated
(Registrant)

/s/ Brian W. H. Marsden
By: _________________________________
Brian W. H. Marsden
Chairman of the Board of Directors
and Chief Executive Officer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Brian W. H. Marsden
- ------------------------------------
Brian W. H. Marsden Director, Chairman of the Board
of Directors and Chief
Executive Officer (Principal
Executive Officer) August 10, 1994

/s/ Jerry F. Williams
- ------------------------------------
Jerry F. Williams Vice President/Finance and August 10, 1994
Administration (Principal
Financial Officer and Principal
Accounting Officer)

/s/ Stephen D. Bennett
- ------------------------------------
Stephen D. Bennett Director, President and Chief
Operating Officer (Principal
Operating Officer) August 10, 1994

- ------------------------------------
C.J. Gauthier Director August , 1994

/s/ Edward G. Jordan*
- ------------------------------------
Edward G. Jordan Director August 10, 1994

/s/ Andrew R. Laidlaw*
- ------------------------------------
Andrew R. Laidlaw Director August 10, 1994

/s/ Frank A. LePage*
- ------------------------------------
Frank A. LePage Director August 10, 1994

/s/ Reynold C. MacDonald*
- ------------------------------------
Reynold C. MacDonald Director August 10, 1994

/s/ Julien L. McCall*
- ------------------------------------
Julien L. McCall Director August 10, 1994

/s/ Carol O'Cleireacain*
- ------------------------------------
Carol O'Cleireacain Director August 10, 1994

/s/ William P. Sovey*
- ------------------------------------
William P. Sovey Director August 10, 1994

/s/ William R. Wilson*
- ------------------------------------
William R. Wilson Director August 10, 1994
</TABLE>
/s/ Jerry F. Williams
_______________________________ August 10, 1994
(Attorney-in-Fact)

*Signed for by the Attorney-in-Fact.

II-3
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
5. Opinion regarding legality....................................
**5.1 Opinion of Coffield Ungaretti & Harris with respect to the
legality of the securities being issued.......................
15. Letter regarding Unaudited Interim Financial Information......
**15.1 Letter of Price Waterhouse....................................
23.
**23.1 Consent of Price Waterhouse...................................
**23.2 Consent of Coffield Ungaretti & Harris (included in Exhibit
5.1)..........................................................
**23.3 Consent of Hatch Associates Ltd...............................
**23.4 Consent of Steltech Ltd.......................................
24. Powers of Attorney............................................
*24.1 Powers of Attorney of Directors of Acme Metals Incorporated...
</TABLE>
- --------

* Previously filed.

**Filed herewith.
<PAGE>

GRAPHIC MATERIAL CROSS-REFERENCE PAGE

DIAGRAM ILLUSTRATING COMPANY'S EXISTING STEEL-MAKING PROCESS ON
PAGE 15.

DIAGRAM ILLUSTRATING COMPANY'S STEEL-MAKING PROCESS FOLLOWING
COMPLETION OF THE MODERNIZATION PROJECT ON PAGE 17.

<PAGE>

August 10, 1994

Acme Metals Incorporated
13500 S. Perry Avenue
Riverdale, Illinois 60627-1182

Ladies and Gentlemen:

We have acted as counsel to Acme Metals Corporation, a Delaware corporation (the
"Company") in connection with the preparation of the Registration Statement on
Form S-3 of the Company filed with the Securities and Exchange Commission (the
"Commission") on June 10, 1994, as amended on August 10, 1994 (the "Registration
Statement"), relating to the registration under the Securities Act of 1933, as
amended (the "Securities Act") of 5,600,000 shares of the Company's common
stock, par value $1.00 per share (the "Common Stock").

In connection with this we have examined:

a. the amended and restated articles of incorporation and by-laws of the
Company;

b. certain resolutions adopted by the Company's Board of Directors;

c. the Registration Statement; and

d. such other documents as we have deemed relevant for purposes of
rendering the opinions set forth herein, including certifications as to
certain matters of fact by responsible officers of the Company and by
governmental authorities.

We have assumed the authenticity of all documents submitted to us as originals
and the conformity to original documents of all documents submitted to us as
copies.

Based upon the foregoing, we are of the opinion that the Common Stock being
registered pursuant to the Registration Statement, if and when issued under the
circumstances contemplated by the Registration Statement, will be validly
issued, fully paid and nonassessable.
<PAGE>

We are members of the Bar of the State of Illinois. Our opinion is limited to
the laws of the State of Illinois, the General Corporation Law of the State of
Delaware and the Federal laws of the United States of America.

We consent to the uses of the opinion as an Exhibit to the Registration
Statement and to the reference to our firm in the Prospectus that is part of the
Registration Statement. In giving such consent, we do not hereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act.

Very truly yours,

Coffield Ungaretti & Harris

<PAGE>

200 East Randolph Drive Telephone 312 565 1500
Chicago, IL 60601
- --------------------------------------------------------------------------------

PRICE WATERHOUSE LLP [LOGO OF PRICE WATERHOUSE LLP]

Exhibit No. 15.1

August 10, 1994

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Dear Sirs:

We are aware that Acme Metals Incorporated has incorporated by reference our
report dated July 21, 1994 (issued pursuant to the provisions of Statement
on Auditing Standards No. 71) in the Prospectus constituting part of its
Registration Statement on Form S-3 to be filed on August 10, 1994. We are also
aware of our responsibilities under the Securities Act of 1933.

Yours very truly,

PRICE WATERHOUSE

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated March 21, 1994, which appears on page 33 of Acme Metals Incorporated's
1993 Annual Report on Form 10-K for the year ended December 26, 1993. We also
consent to the use in the Prospectus constituting part of this Registration
Statement on Form S-3 of our report dated March 21, 1994 relating to the
consolidated financial statements of Acme Metals Incorporated, which appears in
such Prospectus. We also consent to the references to us under the headings
"Experts," "Summary Consolidated Financial and Operating Data" and "Selected
Consolidated Financial and Operating Data" in such Prospectus. However, it
should be noted that Price Waterhouse LLP has not prepared or certified such
"Summary Consolidated Financial and Operating Data" and "Selected Consolidated
Financial and Operating Data".

PRICE WATERHOUSE LLP

August 10, 1994

Chicago, Illinois

<PAGE>

[HATCH ASSOCIATES LTD. LOGO]

July 13, 1994

Mr. Edward P. Weber, Jr.
Vice President and General Counsel
Acme Metals Incorporated
13500 S. Perry Avenue
Riverdale, Illinois 60627
U.S.A.

Dear Mr. Weber:

The undersigned hereby consents to the use of its name and references to its
report to Lehman Brothers Inc. in the prospectus constituting part of the
registration statement on form S-3 of Acme Metals Incorporated filed with the
Securities and Exchange Commission (the "Registration Statement") and to being
named therein as an expert.

The undersigned further consents to filing of this letter as an exhibit to the
Registration Statement.

Yours very truly,

HATCH ASSOCIATES LTD.

/s/ Leslie C. McLean
Leslie C. McLean
Director

<PAGE>

[LOGO OF STELTECH]

July 13, 1994

Mr. Edward P. Weber, Jr.
Vice President and General Counsel
Acme Metals Incorporated
13500 S. Perry Avenue
Riverdale, Illinois 60627
U.S.A.

Dear Mr. Weber:

The undersigned further consents to filing of this letter as an exhibit to the
Registration Statement.

Yours very truly,

STELTECH LTD.

/s/ Leslie C. McLean
Leslie C. McLean
President