SHEFFIELD STEEL CORP, S-1/A, 1997-12-01

SHEFFIELD STEEL CORP
S-1/A, 1997-12-01
STEEL WORKS, BLAST FURNACES & ROLLING MILLS (COKE OVENS)

Previous: FIRST TRUST SPECIAL SITUATIONS TRUST SERIES 53, 497J, 1997-12-01

Next: KEMPER DEFINED FUNDS SERIES 36, 485BPOS, 1997-12-01

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 1, 1997
REGISTRATION NO. 33-67532
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
SHEFFIELD STEEL CORPORATION
(Exact name of registrant as specified in its charter)
------------
DELAWARE 3312 74-2191557
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)

220 NORTH JEFFERSON
SAND SPRINGS, OKLAHOMA 74063
(918) 245-1335
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------
ROBERT W. ACKERMAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SHEFFIELD STEEL CORPORATION
220 NORTH JEFFERSON
SAND SPRINGS, OKLAHOMA 74063
(918) 245-1335
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------
Copy to:
LEWIS GEFFEN, ESQUIRE
MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO, P.C
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
(617) 542-6000

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the

Registration Statement becomes effective.

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, check the following box. [X]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
------------
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 3(E) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

EXPLANATORY NOTE

This Post-Effective Amendment relates to 375,000 shares of Common Stock,
$.01 par value per share ("Common Stock"), of Sheffield Steel Corporation (the
"Company") authorized for issuance upon exercise of warrants ("Warrants") to
purchase shares of Common Stock. A Registration Statement on Form S-1 (No. 33-
67532) relating to the Common Stock issuable upon exercise of the Warrants was
declared effective by the Commission on October 28, 1993. The purpose of this
Post-Effective Amendment is to update the information in the prospectus
contained in such Registration Statement.
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THIS PROSPECTUS AND THE INFORMATION CONTAINED HEREIN ARE SUBJECT TO CHANGE +
+COMPLETION OR AMENDMENT WITHOUT NOTICE. A REGISTRATION STATEMENT RELATING TO +
+THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. +
+THESE SECURITIES MAY NOT BE SOLD NOR MAY AN OFFER TO BUY BE ACCEPTED PRIOR TO +
+THE TIME THE REGISTRATION STATEMENT IS DECLARED EFFECTIVE. UNDER NO +
+CIRCUMSTANCES SHALL THIS PROSPECTUS CONSTITUTE AN OFFER TO SELL OR TO +
+SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER SOLICITATION OR SALE WOULD +
+BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED DECEMBER 1, 1997

PROSPECTUS

SHEFFIELD STEEL CORPORATION

375,000 SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF WARRANTS
--------

Sheffield Steel Corporation (the "Company") hereby offers 375,000 shares of
Common Stock, $.01 par value per share (the "Common Stock"), issuable upon the
exercise of outstanding warrants (the "Warrants"), each to purchase one share
of Common Stock. The Warrants were issued in connection with the Company's
public offering of 75,000 units (the "Units"), each Unit consisting of $1,000
principal amount of 12% First Mortgage Notes due 2001 and five Warrants,
pursuant to a Registration Statement on Form S-1 declared effective by the
Securities and Exchange Commission on October 28, 1993. Each Warrant entitles
the holder to purchase one share of Common Stock of the Company at a price of
$.01 per share, subject to adjustment under certain circumstances. The Warrants
will expire on November 1, 2001.

If all the Warrants were exercised, the proceeds to the Company would be
$3,750.00, less expenses. There can be no assurance that any of the Warrants
will be exercised.
--------

THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS," BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
--------

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

THE DATE OF THIS PROSPECTUS IS 1997.
<PAGE>

ADDITIONAL INFORMATION

Although the Company is not subject to the reporting and other informational
requirements of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), the Company has filed and will continue to file reports
pursuant to such requirements. Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W. Washington, D.C. 20549,
and at the Commission's regional offices at 7 World Trade Center, Suite 1300,
New York, New York 10048 and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials may also
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W. Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission. The Commission's Web site is (http://www.sec.gov). In addition,
the Company intends to furnish to its securityholders annual reports
containing consolidated financial statements audited by an independent
accounting firm and quarterly reports containing unaudited consolidated
financial information for the first three quarters of each fiscal year.

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

This Prospectus may contain forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. Such
statements are based on management's current expectations and are subject to a
number of factors and uncertainties which could cause results to differ
materially from those described in the forward-looking statements. There can
be no assurance that actual results or business conditions will not differ
materially from those anticipated or suggested in such forward-looking
statements as a result of various factors, including, but not limited to, the
following: the size and timing of significant orders, as well as deferral of
orders, over which the Company has no control; the variation in the Company's
sales cycles from customer to customer; increased competition posed by other
mini-mill producers; changes in pricing policies by the Company and its
competitors; the Company's success in expanding its sales programs and its
ability to gain increased market acceptance for its existing product lines;
the ability to scale up and successfully produce its products; the potential
for significant quarterly variations in the mix of sales among the Company's
products; the gain or loss of significant customers; shortages in the
availability of raw materials from the Company's suppliers; fluctuations in
energy costs; the costs of environmental compliance and the impact of
government regulations; the Company's relationship with its work force; the
restrictive covenants and tests contained in the Company's debt instruments,
which could limit the Company's operating and financial flexibility; and
general economic conditions.

i
<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. Except where otherwise indicated in this
Prospectus (i) all references to a fiscal year refer to the fiscal year of the
Company which ends on April 30 (for example, references to "fiscal 1997" mean
the fiscal year ended April 30, 1997) and (ii) all references to the "Company"
refer to Sheffield Steel Corporation and its subsidiaries and all references to
"Sheffield" refer to Sheffield Steel Corporation.

THE COMPANY

The Company is a leading regional mini-mill producer of hot rolled steel bar
products ("hot rolled bar"), concrete reinforcing bar ("rebar"), fabricated
products, including fabricated and epoxy-coated rebar and steel fence posts,
and various types of semi-finished steel ("billets"). The Company and its
predecessors have been in the steelmaking business for over 68 years. The
Company believes that it is among the lowest cost producers of billets in the
United States as a result of its modern melt and cast operations, high labor
productivity levels, low energy costs and competitive steel scrap costs. The
Company's low cost billets serve as the feedstock for its downstream bar mill
operations and finished products. The Company shipped approximately 470,000
tons of steel in the 12-month period ended October 31, 1997, resulting in sales
of $175.1 million and EBITDA (as defined) of $20.7 million.

The Company's primary manufacturing facility is located in Sand Springs,
Oklahoma (the "Sand Springs Facility"), where it conducts a full range of
steelmaking activities, including the melting and casting of billets and the
processing of billets into rebar, steel fence posts and a range of hot rolled
bar products. The Company currently has 600,000 tons of steelmaking capacity.
The Company has recently completed construction, installation and final
commissioning of a new $22 million rolling mill (the "New Rolling Mill") at the
Sand Springs Facility which has increased productivity and efficiency in the
manufacturing of rebar and has enabled the Company to produce certain higher
quality hot rolled bar products that it was previously unable to produce. From
the Sand Springs Facility, the Company also transfers billets to its two
rolling mills in Joliet, Illinois (the "Joliet Facility"), where it produces
high-end specialty hot rolled bar products. The Company also operates a rebar
fabrication plant in Kansas City, Missouri (the "Kansas City Plant") and a
short line railroad (the "Railway Company"). The Sand Springs Facility and the
Joliet Facility received ISO 9002 quality certification in November 1995 and
June 1996, respectively.

Hot Rolled Bar. The Company sells a variety of specialty hot rolled bar
products, including flats, squares, rounds and channels for end use
applications that include farm equipment, auto parts, conveyor assemblies, pole
line hardware, wrench handles and construction machinery. The Company sells its
hot rolled bar products to original equipment manufacturers, cold drawn bar
finishers and, to a lesser extent, steel service centers. In the hot rolled bar
market, the Company differentiates itself from its competitors through the
Joliet Facility's focus on specialty products and by targeting customers with
special requirements as to bar shape, size and chemical composition and, in
many cases, small volume needs. The Company believes that its targeted customer
focus often allows it to act as the sole supplier of particular shapes, sizes
or steel chemistries to many customers. The Company believes that these niche
markets are unattractive to larger volume producers of hot rolled bar products.
The Company's Sand Springs Facility provides it with a competitive geographical
advantage in the south-central United States hot rolled bar market and enables
the Company's customers to benefit from lower freight costs, shorter lead times
and more timely deliveries. As a result of these competitive advantages and its
strong reputation for quality and service, the Company has built a number of
strong relationships with its hot rolled bar product customers. After the
completion of the Shear Line Project (as defined), the Company expects to
increase hot rolled bar product sales from its Sand Springs Facility as part of
its business strategy to improve finished product mix. See "--Business
Strategy--Improve Finished Goods Product Mix." For fiscal 1997, sales of hot
rolled bar products accounted for approximately 44% of the Company's total
sales.

1
<PAGE>

Rebar. The Company sells rebar to leading independent fabricators for end use
applications in the commercial construction and public infrastructure markets.
The Company has worked successfully to build and maintain long-term
relationships with fabricators located in the south-central United States by
providing them with competitive pricing, assured product availability and
reliable, prompt delivery and service. The Company believes that it is the
primary and, in most cases, the sole rebar supplier to its largest rebar
customers. Although rebar demand is driven by trends in commercial and
industrial construction and infrastructure investment, the levels of public and
private sector investment in buildings, plants, facilities and infrastructure
in the south-central United States market has helped the Company maintain
relatively stable rebar sales volume during periods of overall reduced steel
industry demand. For fiscal 1997, sales of rebar accounted for approximately
32% of the Company's total sales.

Fabricated Products. The Company manufactures and sells two fabricated steel
products: fence post and fabricated rebar, including epoxy-coated rebar. Fence
post sales are concentrated in the Oklahoma, Kansas, Missouri, Texas and
Arkansas market area. The Company believes that it is the primary supplier of
fence posts in this market area, with more than half of the market share. The
Company operates a rebar fabrication facility in Kansas City, the largest
facility in the market area, where it shears and bends rebar to meet
engineering or architectural specifications for construction projects. See
"Business--Recent Developments." For fiscal 1997, sales of fabricated products
accounted for approximately 14% of the Company's total sales.

Sales of billets to third parties and Railway Company sales accounted for the
remaining 10% of the Company's total sales for fiscal 1997.

BUSINESS STRATEGY

The Company has formulated an operating strategy to strengthen its market
position and maximize profitability which has four major components: (i)
improve finished goods product mix; (ii) continue to focus on and extend strong
customer relationships; (iii) modernize melt shop operations; and (iv)
streamline and strengthen organizational structure.

Improve Finished Goods Product Mix. With the addition of the New Rolling Mill
at the Sand Springs Facility, the Company has substantially increased its hot
rolled bar production capacity. Accordingly, shipments of finished products
have increased significantly as less profitable third party billet sales have
been intentionally reduced. Billet sales, which accounted for 23.6% of tons
shipped in fiscal 1994, accounted for only 10.6% of tons shipped for the 12-
month period ended July 31, 1997. Shifting away from third party billet sales
by increasing hot rolled bar production has also increased margins and reduced
sales volatility for the Company, since hot rolled bar products are
significantly more profitable than third party billet sales and demand is more
stable. As part of its strategy to further improve product mix, the Company
intends to remove a bottleneck at the Sand Springs Facility by improving the
efficiency of the cooling bed and increasing the capacity of the shear line
(the "Shear Line Project"). The completion of the Shear Line Project, scheduled
for the end of fiscal 1998, is expected to (i) increase hot rolled bar
production capacity by more than 100,000 tons per year; (ii) enable the Company
to more fully utilize its existing 600,000 tons of steelmaking capacity; (iii)
improve the quality of all mill products, especially hot rolled bar; and (iv)
improve product mix by further reducing billet sales to third parties. The
Shear Line Project is expected to have an aggregate capital cost of
approximately $4.5 million and, upon completion and achievement of full
operating capacity, is expected to result in an annual EBITDA (as defined)
increase of approximately $9 million.

2
<PAGE>

certification at both the Sand Springs Facility and the Joliet Facility is an
indication of the Company's commitment to producing quality products. The
Company believes that its business strategy to improve its finished product mix
will strengthen its existing customer relationships and will aid it in
developing new customer relationships.

Modernize Melt Shop. The Company believes that it is among the lowest cost
producers of billets in the United States as a result of its modern melt and
cast operations, high labor productivity levels, low energy costs and
competitive steel scrap costs. With the addition of the New Rolling Mill, which
can utilize a larger billet, together with improvements in general operating
practices, yields have improved, costs have been reduced and annual billet
production capacity has increased from 525,000 tons to 600,000 tons per year.
Through incremental capital investments, the Company intends to pursue
additional modernization measures, such as the installation of a ladle arc
furnace in the melt shop, which will further enhance production capability,
increase production capacity, reduce manufacturing costs and improve the
quality of finished products.

Streamline and Strengthen Organizational Structure. The Company has improved
strategic planning, strengthened financial reporting systems and aligned
organizational structure and management incentives with the Company's business
strategies and objectives. In accordance with the collective bargaining
agreement reached in February 1997 that resulted in a 15% workforce reduction
at the Sand Springs Facility, the Company has been able to implement multi-
craft training and use greater flexibility in job assignments. Additional
initiatives to streamline operations include the elimination of a centralized
maintenance structure and close coordination of the melt shop, casting and
rolling mill operations which have resulted in significant reductions in both
billet and finished goods inventory. The Company has also put in place a new
management team to manage the Sand Springs Facility manufacturing operations.
These initiatives have resulted in improving the organizational structure of
the Company, making it flexible and more responsive to customer needs and
positioning it to implement its business strategy of improving finished product
mix.

RECENT DEVELOPMENTS

On November 26, 1997, the Company priced an aggregate of $110,000,000 of
First Mortgage Notes (the "First Mortgage Notes") in a private offering (the
"Offering") to institutional investors. The Offering will be made under Rule
144A of the Securities Act of 1933, as amended. The net proceeds of the
Offering will be applied as follows: (i) $79.5 million to redeem, at a
redemption price of 106%, the 12% First Mortgage Notes due 2001 (the "2001
Notes"); (ii) $16 million to repay amounts under the Company's credit
facilities which currently bear interest at a rate of prime plus 0.50% (or 9.0%
as of November 1, 1997); (iii) $10 million to pay dividends to the Company's
shareholders; and (iv) the remainder, if any, for general corporate purposes,
including ongoing capital expenditures.

On November 12, 1997, the Company announced that net sales and EBITDA (as
defined) for the three months ended October 31, 1997 were $46.5 million and
$5.8 million, respectively, compared to $44.7 million and $4.4 million,
respectively, for the same period in the prior year. Net sales and EBITDA (as
defined) for the six months ended October 31, 1997 were $94.2 million and $11.7
million, respectively, compared to $89.9 million and $8.6 million,
respectively, for the same period in the prior year. These increases were
primarily a result of both continued improvements in productivity and
reductions in costs at the New Rolling Mill at the Sand Springs Facility as
well as strong market demand for rebar and hot rolled bar products.

The Company's principal executive offices are located at 220 North Jefferson,
Sand Springs, Oklahoma 74063 and its telephone number is (918) 245-1335.

3
<PAGE>

THE COMMON STOCK OFFERING

Securities Offered.......... 375,000 shares of Common Stock which may be
issued upon exercise of 375,000 outstanding
Warrants.

Offering Price per Share.... $.01 per share.

Issuer...................... Sheffield Steel Corporation.

Expiration Date............. November 1, 2001.

Exercise.................... Each Warrant will entitle the holder thereof to
purchase one share of Common Stock (subject to
adjustment under certain circumstances) at a
price equal to $.01 per share. A Warrant does not
entitle the holder thereof to receive any
dividends paid on the Common Stock. See
"Description of Warrants."

USE OF PROCEEDS

If all the Warrants were exercised, the proceeds to the Company would be
$3,750.00, less expenses. The net proceeds from the exercise of the Warrants
will be used for working capital and general corporate purposes. See "Use of
Proceeds."

RISK FACTORS

Investment in the securities offered hereby involves a high degree of risk.
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating an investment in such securities.

GLOSSARY

A glossary of certain technical terms used herein follows:

"mini-mill"................. A mini-mill steel producer uses an electric arc
furnace to melt steel scrap and to cast the
molten steel into long strands of various shapes
in a continuous casting process, in contrast to
an integrated steel producer, which produces
steel from coke and iron ore through the use of
blast furnaces and basic oxygen furnaces.
Although the definition of what constitutes a
mini-mill has evolved coincident with the
competitive position of mini-mills within the
steel industry, two constant factors apply to the
mini-mill industry: the minimization of costs and
a flexible approach to available technology.

"billets"................... Billets are long, square or rectangular strands
of steel that mini-mills cast from molten steel
in a continuous casting process. Billets are an
intermediate product of a type commonly referred
to as semi-finished steel.

"hot rolled bar"............ Hot rolled bars are bars of rolled steel of
varying shapes and size that are used in the
manufacturing processes of a broad cross section
of U.S. industry. Historically, a distinction has
been made in the hot

4
<PAGE>

rolled bar market between merchant bar quality
(MBQ) products, which is comprised of a group of
commodity steel shapes that consist of rounds,
squares, flats and channels that fabricators,
steel service centers and manufacturers cut, bend
and shape into products; and special bar quality
(SBQ) products, with SBQ products calling for
closer size tolerances, special shapes and/or
special chemical compositions.
"reinforcing bar" or
"rebar"..................... Reinforcing bar is typically used in the
construction process to reinforce concrete and
other aggregate and cementing materials.

"fabricated rebar".......... Fabricated rebar is reinforcing bar that has been
sheared, bent and/or epoxy-coated to meet
engineering or architectural specifications for
use in all types of construction projects.

"fabricated products"....... Fabricated products are those products, including
fabricated rebar and steel fence posts, which the
Company fabricates from reinforcing bar or hot
rolled bars.

5
<PAGE>

SUMMARY FINANCIAL DATA

The information in the following table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", "Selected Historical Financial Data" and the Consolidated
Financial Statements of the Company and the notes thereto, included elsewhere
in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED APRIL 30, ENDED JULY 31,
------------------------------------- ----------------------
1994 1995 1996 1997 1996 1997
-------- -------- -------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER TON DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Sales................... $165,920 $175,753 $172,317 $170,865 $ 45,203 $ 47,717
Gross profit............ 24,705 31,368 29,196 30,631 7,656 9,408
Operating income........ 4,834 10,129 8,116 8,260 2,032 3,712
Interest expense........ 7,147 8,049 11,733 11,769 2,913 2,957
Net income (loss)....... (5,370) 1,825 (3,091) (3,509) (881) 755
OTHER DATA:
EBITDA (1).............. $ 13,327 $ 18,582 $ 16,430 $ 17,627 $ 4,229 $ 5,861
Capital expenditures.... 11,667 24,220 4,978 3,695 634 963
Depreciation and
amortization........... 4,941 5,930 6,567 6,775 1,696 1,711
Non-cash post-retirement
expense charges........ 3,552 2,523 1,747 1,272 501 438
Ratio of earnings to
fixed charges (2)...... -- 1.2x -- -- -- 1.2x
Finished products tons
shipped................ 396,363 367,133 383,448 413,243 105,633 116,430
Billet tons shipped..... 122,680 133,017 93,557 60,512 26,757 16,367
-------- -------- -------- -------- -------- --------
Total tons shipped...... 519,043 500,150 477,005 473,755 132,390 132,797
Average price per ton
shipped................ $ 320 $ 351 $ 361 $ 361 $ 341 $ 359
Average production cost
per ton shipped........ 272 289 300 296 284 288
Employees at end of
period................. 708 718 705 670 715 605
PRO FORMA DATA:(3)
Interest expense........ $ 3,301
Ratio of EBITDA to
interest expense....... 1.8x
<CAPTION>
AS OF JULY 31, 1997
----------------------
ACTUAL PRO FORMA(3)
-------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............ $133,401 $135,819
Long-term debt
(including current
portion)............... 94,490 114,637
Stockholders' equity.... 3,853 (14,395)
</TABLE>
- --------
(1) EBITDA is defined as operating income plus depreciation, amortization, non-
cash portion of post-retirement benefit expense, and the restructuring
charge related to the early retirement incentives in fiscal 1997. The
Company believes that EBITDA (as defined) provides additional information
for determining its ability to meet debt service requirements. EBITDA (as
defined) does not represent and should not be considered as an alternative
to net income or cash flow from operations as determined by generally
accepted accounting principles, and EBITDA (as defined) does not
necessarily indicate whether cash flow will be sufficient for cash
requirements.
(2) Ratio of earnings to fixed charges is defined as income before income taxes
and extraordinary item plus amortization of debt issuance cost and interest
expense divided by the sum of amortization of debt issuance costs plus
interest expense. Earnings were insufficient to cover fixed charges in
fiscal 1994, 1996, 1997 and the three months ended July 31, 1996 by
approximately $2,353, $3,091, $3,509 and $881 (unaudited), respectively.
(3) Pro forma data gives effect to Offering and the use of proceeds therefrom
based on an interest rate of 11.5%.

6
<PAGE>

RISK FACTORS

In addition to the other information set forth in this Prospectus,
prospective investors should consider carefully the information set forth
below before making an investment in the securities offered hereby.

LEVERAGE AND CERTAIN RESTRICTIONS

The Company currently has, and after the Offering will continue to have,
significant amounts of outstanding indebtedness in relation to its
stockholders' equity. Upon completion of the Offering and application of the
net proceeds therefrom as of July 31, 1997, the Company will have
approximately $114.6 million of indebtedness outstanding, including
approximately $0.2 million of secured indebtedness outstanding under its $40
million revolving credit facility with NationsBank of Georgia, N.A. (the
"Revolving Credit Facility"). The Company intends to use a portion of the net
proceeds of the Offering to redeem, at a redemption price of 106%, all of the
outstanding 2001 Notes and to pay down amounts outstanding under the Company's
credit facilities, although it will retain these facilities for future
borrowings. See "Description of Revolving Credit Facility", "Recent
Developments" and "Capitalization."

The indebtedness of the Company and the restrictive covenants and tests
contained in its debt instruments, including the Revolving Credit Facility and
the Indenture relating to the First Mortgage Notes, could significantly limit
the Company's operating and financial flexibility. These factors could also
significantly restrict the Company's ability to withstand competitive
pressures or adverse economic consequences, including its ability to obtain
additional financing in the future for working capital, acquisitions or
general corporate or other purposes, and may place the Company at a
competitive disadvantage with respect to less leveraged providers of similar
steel products.

The Company's ability to borrow under the Revolving Credit Facility requires
continued compliance with covenants and tests which, if breached, could result
in termination of such ability to borrow or cause a default. Consequently,
under such circumstances, the Company's access to necessary operating and
capital funds would be restricted. The Company has from time to time entered
into amendments or obtained waivers relaxing certain of the covenants and
tests in the Revolving Credit Facility, and may be required to seek additional
amendments or waivers in the future. The Revolving Credit Facility is a
floating rate obligation and, therefore, is subject to changes in prevailing
interest rates.

The First Mortgage Notes will rank pari passu in right of payment with all
future senior indebtedness of Sheffield. Borrowings under the Revolving Credit
Facility (or any successor facility) will be secured by a first priority lien
on the inventory and accounts receivable and proceeds thereof of Sheffield.
Borrowings under the revolving loan agreement (the "Railway Revolving Credit
Facility") and the term loan agreement (the "Railway Term Loan") ( the Railway
Revolving Credit Facility and the Railway Term Loan together, the "Railway
Credit Facility") are secured by a first priority lien on substantially all of
the assets of Sheffield's subsidiary, the Sand Springs Railway Company (the
"Railway Company"), and by a pledge of the stock of the Railway Company. The
First Mortgage Notes will be effectively subordinated to future borrowings by
the Railway Company under the Railway Credit Facility. The Revolving Credit
Facility provides the Company with a revolving credit commitment of $40
million, subject to levels of borrowing availability. The Railway Revolving
Credit Facility provides the Railway Company with a revolving credit
commitment of $1.5 million, subject to borrowing restrictions, and the Railway
Term Loan has an outstanding balance of $1.5 million.

CURRENT PROSPECTUS AND STATE REGISTRATION REQUIRED IN CONNECTION WITH EXERCISE
OF WARRANTS

The Company will be able to issue shares of its Common Stock upon exercise
of the Warrants only if there is a current prospectus relating to the Common
Stock issuable upon the exercise of such Warrants under an effective
registration statement filed with the Commission, and only if such Common
Stock is qualified for sale or exempt from qualification under applicable
state securities laws of the jurisdictions in which the various

7
<PAGE>

holders of such Warrants reside. Although the Company has agreed to use its
best efforts to meet such regulatory requirements, there can be no assurance
that the Company will be able to do so. Purchasers may buy Warrants in the
aftermarket or may move to jurisdictions in which the shares of Common Stock
issuable upon exercise of the Warrants are not registered or qualified for
sale. In this event, the Company would be unable to issue shares of Common
Stock to those persons upon exercise of the Warrants unless and until the
Common Stock issuable upon exercise of the Warrants are qualified for sale or
exempt from qualification in jurisdictions in which such persons reside. There
is no assurance that the Company will be able to effect any required
registration or qualification. The Warrants may be deprived of any value if a
then current prospectus covering the Common Stock issuable upon exercise of
such Warrant is not effected pursuant to an effective registration statement
or if such Common Stock is not qualified or exempt from qualification in the
jurisdictions in which the holders of such Warrants reside. See "Description
of Warrants."

RECENT LOSSES

In fiscal 1997, the Company reported net losses due primarily to (i) bad
weather in the Company's shipping region which hindered construction in that
region; (ii) a restructuring charge of $1.3 million in connection with
employee reductions; and (iii) the failure of the transformer and back-up
transformer supporting one of the two electric arc furnaces at the Sand
Springs Facility. In fiscal 1996, the Company reported a net loss due
primarily to reduced profitability of billet sales caused by weaker market
conditions and start up costs associated with the New Rolling Mill. Although
the Company did not sustain a net loss in fiscal 1995, the Company reported
losses in fiscal 1994 and 1993 due primarily to recessionary declines in steel
bar prices, and in fiscal 1993 due primarily to continuing losses from
operations at the Company's former rolling mill in Oklahoma City, Oklahoma
caused by poor yields, unreliable equipment and high costs. There can be no
assurances as to when the Company will be able to achieve sustained
profitability. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

CYCLICAL INDUSTRY AND ECONOMIC CONDITIONS

Demand for most of the Company's products is cyclical in nature and
sensitive to general economic conditions. The hot rolled bar product market is
influenced by trends primarily in the fabricated metal products, machinery and
construction and transportation equipment industries. The rebar market is
driven by trends in commercial and residential construction, industrial
investment in new plants and facilities, and government spending on
infrastructure projects and public sector buildings. The steel industry is
affected by economic conditions generally and future economic downturns may
adversely affect the Company.

COMPETITION

The Company competes with a number of domestic mini-mills in each of its
market segments. The domestic mini-mill steel industry is characterized by
vigorous competition with respect to price, quality and service. In addition,
the domestic mini-mill steel industry has from time to time experienced excess
production capacity, which reinforces competitive product pricing and results
in continued pressures on industry profit margins. The high fixed costs of
operating a steel mini-mill encourage mini-mill operators to maintain high
levels of output, regardless of levels of demand, which exacerbates the
pressures on industry profit margins. Technological advancements are also a
feature of competition in the domestic mini-mill steel industry, as mini-mills
continuously strive to produce higher quality products and to lower production
costs by increasing the efficiency and productivity of their plants and labor
force. Several domestic mini-mills which are competitors of the Company have
financial resources substantially greater than those available to the Company.

The U.S. steel industry has also historically faced competition from foreign
steel producers. Although domestic mini-mills have experienced little
competition from foreign producers in recent years due to declines in domestic
steel prices, there can be no assurance that foreign competition will not
increase in the future, which could adversely affect the Company's operating
results. See "Business--Competition."

8
<PAGE>

FLUCTUATIONS IN RAW MATERIAL AND ENERGY COSTS

The market for steel scrap, the principal raw material used in the Company's
operations, is highly competitive and its price volatility is influenced by
periodic shortages, freight costs, speculation by scrap brokers and other
market conditions largely beyond the Company's control. Within the domestic
mini-mill industry, fluctuations in scrap costs influence the selling prices
of finished goods as operators seek to maintain profit margins. Generally,
increases in steel prices lag behind increases in steel scrap prices, and
competition has sometimes restricted the ability of mini-mill producers to
raise prices to recover higher raw material costs. Although the Company
purchases outside steel scrap requirements from a number of dealers and
sources in different markets and is not dependent on any single supplier, the
Company's profitability would be adversely affected to the extent it is unable
to pass on higher raw material costs to its customers. See "Business--Raw
Materials."

The Company's manufacturing process also consumes large amounts of
electricity and natural gas. A significant increase in the Company's
electricity costs or in the price of natural gas would have an adverse impact
on the Company's cost structure, and the Company's profitability would be
adversely affected to the extent it is unable to pass such higher energy costs
on to its customers. See "Business--Energy."

ENVIRONMENTAL COMPLIANCE AND ASSOCIATED COSTS

The Company is subject to Federal, state and local laws and regulations
governing the remediation of environmental contamination associated with
releases of hazardous materials and to Federal, state and local laws and
regulations governing discharges to the air and water as well as the handling
and disposal of wastes and employee health and safety (collectively,
"Environmental Laws"). Governmental authorities have the power to enforce
compliance with these requirements, and violators may be subject to civil or
criminal penalties, injunctions or both. Third parties also may have the right
to sue for damages to enforce compliance.

The electric arc furnace melting process used at the Company's Sand Springs
Facility generates dust that contains lead, cadmium and other heavy metals.
Classified as a hazardous waste ("K061") under the Resource Conservation and
Recovery Act of 1976, as amended ("RCRA"), this dust is captured in baghouses
and subsequently transported to a High Temperature Metals Recovery processor,
Zinc Nacional, S.A., located in Monterrey, Mexico ("Zinc Nacional"). The
Company recently negotiated a three year contract with Zinc Nacional which
will expire in the year 2000. Although current law permits the export of K061,
there can be no assurance that new United States legislation prohibiting the
export of hazardous waste materials or new Mexican legislation prohibiting the
import of such materials, including K061, will not be enacted in the future.
In that event, the Company would have to find an alternative means of
treatment or disposal of the K061. The Company believes that it could properly
dispose of the K061 generated at the Sand Springs Facility by constructing an
on-site metals recovery or chemical stabilization process or by shipping the
K061 to a licensed domestic treatment facility. However, there can be no
assurance as to the availability of such alternatives or that their
construction and/or use would not result in significant cost increases.

Moreover, Environmental Laws have been enacted, and may in the future be
enacted, to create liability for past actions that were lawful at the time
taken, but that have been found to affect the environment and to create rights
of action for environmental conditions and activities. Under some of these
Environmental Laws, a company that has sent waste to a third party disposal
site could be held liable for the entire cost of remediating such site
regardless of fault or the lawfulness of the original disposal activity and
also for related damages to natural resources.

There is currently no significant remediation activity at Company owned or
operated sites. Three former K061 landfill sites at the Company's Sand Springs
Facility were closed prior to 1980 before the Company's acquisition of the
Sand Springs Facility. Additionally, a K061 concrete storage tank was closed
by the Company prior to 1990, with a final certification of this closure being
issued by the State of Oklahoma in 1990. All underground storage tanks without
containment systems, cathodic protection or leak detection were excavated

9
<PAGE>

and removed from the Sand Springs Facility with regulatory approval in 1997.
In April 1997, the Environmental Protection Agency ("EPA") Region VI conducted
a Compliance Evaluation Inspection pursuant to RCRA relating to hazardous and
solid waste management at the Sand Springs Facility and then submitted a
follow-up information request to the Company in August 1997. The Company
believes that it has provided all the information requested by EPA. It is
possible that EPA may, pursuant to its RCRA authority, seek corrective action
relating to Solid Waste Management Units identified at the Sand Springs
Facility and/or penalties for alleged violations of RCRA requirements
applicable to the Sand Springs Facility. If EPA does seek such corrective
action, it is possible that it may affect one or more of the three previously
closed K061 landfill sites at the Sand Springs Facility, and the costs
associated with such remedial activity cannot currently be predicted.
Moreover, there can be no assurance that all material environmental matters
involving remediation at either Company owned or operated sites or at sites
owned or operated by third parties which affect the Company have been
identified or that new enforcement policies or legal requirements will not
result in future material expenditures for environmental matters by the
Company.

Apart from the possibility that EPA may identify violations of RCRA
requirements as a result of the Compliance Evaluation Inspection conducted at
the Sand Springs Facility in April 1997, the Company believes that it is
currently in material compliance with all Environmental Laws. However, there
can be no assurance that material environmental liabilities will not be
incurred by the Company in the future or that future compliance with
Environmental Laws (whether those currently in effect or enacted in the
future) will not require additional expenditures by the Company or require
changes to the Company's current operations, any of which could have a
material adverse effect on the Company's results of operations and financial
condition. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business--Environmental Compliance."

UNIONIZED LABOR FORCE

The United Steelworkers of America represents approximately 69% of the
Company's employees as of July 31, 1997. Approximately 245 employees at the
Sand Springs Facility, and approximately 147 employees at the Joliet Facility,
are covered under collective bargaining agreements with the USWA that expire
on March 1, 2000 and March 1, 1999, respectively. The collective bargaining
agreement covering approximately 245 hourly-paid production and maintenance
employees at the Sand Springs Facility contains performance-based plans which
may result in higher labor costs during very profitable periods. A collective
bargaining agreement with the USWA covering approximately 23 employees at the
Kansas City Plant expires on October 31, 1999. The Railway Company also
employs approximately 19 people represented by various railway or
transportation unions. There can be no assurance that any future collective
bargaining agreements with any labor unions will contain terms comparable to
the terms contained in the existing collective bargaining agreements.

Since the last national, industry-wide strike of steelworkers in 1959, the
Company experienced a 5-day strike at the Sand Springs Facility in May 1988
and a work stoppage at the Kansas City Plant following the expiration of the
collective bargaining agreement in September 1991. There can be no assurance
that work stoppages will not occur in the future, in connection with labor
negotiations or otherwise. See "Business-- Employees."

VOTING CONTROL OF THE COMPANY

Approximately ninety-six percent of the outstanding shares of the Common
Stock, is currently owned by HMK Enterprises, Inc. ("HMK"), an affiliate of
Watermill Ventures Ltd. HMK is a privately-held holding company that is
engaged in manufacturing and distribution businesses and that has owned
substantially all of the Common Stock since 1981. The voting capital stock of
HMK is 100% owned by members of the Karol family. Consequently, certain
members of the Karol family together beneficially own substantially all of the
outstanding shares of the Common Stock, have the power to direct the affairs
of the Company and are able to determine the outcome of all matters required
to be submitted to stockholders for approval, including the election of
directors

10
<PAGE>

and amendment of the Company's Certificate of Incorporation. HMK is, and
certain of the Company's officers, directors and members of the Karol family
are, party to various transactions and agreements with the Company, including
a Management Consulting Services Agreement and an Income Tax Expense
Allocation Policy and Tax Sharing Agreement. Risk Management Solutions, Inc.,
a wholly-owned subsidiary of HMK, is a party to an Insurance Services
Agreement with the Company. See "Management--Executive Officers and
Directors", "Security Ownership of Certain Beneficial Owners and Management"
and "Certain Relationships and Related Transactions."

ABSENCE OF PUBLIC MARKET

There has been no public market for the Warrants or the Common Stock
(collectively, the "Securities"). At the time the Units were offered, the
underwriters of the Units advised the Company that they intended to make a
market in the securities offered thereby, including the Securities. However,
the underwriters were under no obligation to do so, and any market making with
respect to the Securities may be discontinued at any time without notice. The
Company does not intend to apply for the listing of the Securities on any
securities exchange. Accordingly, there can be no assurance as to the
liquidity of any markets that may develop for the Securities, the ability of
holders of either of the Securities to sell such Securities or the price such
holders would receive upon the sale of such Securities.

11
<PAGE>

USE OF PROCEEDS

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company as of July 31, 1997, and as adjusted to reflect the Offering,
including the application of a portion of the net proceeds from the Offering,
as described in "Recent Developments." This table should be read in
conjunction with the Consolidated Financial Statements of the Company and the
notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
JULY 31, 1997
-------------------------
ACTUAL AS ADJUSTED
---------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt (including current portion):
2001 Notes...................................... $ 73,353 $ --
First Mortgage Notes............................ -- 110,000
Revolving Credit Facility (1)................... 16,738 238
Railway Credit Facility (1)..................... 2,815 2,815
Equipment notes................................. 1,584 1,584
---------- -----------
Total long-term debt.......................... 94,490 114,637
Stockholders' equity:
Common stock, par value $.01 per share,
authorized 10,000,000 shares; issued 3,375,000
shares......................................... 34 34
Additional paid-in capital...................... 2,536 2,536
Retained earnings (2)........................... 1,283 (16,965)
---------- -----------
Total stockholders' equity.................... 3,853 (14,395)
Less loans to stockholders........................ (954) (954)
---------- -----------
2,899 (15,349)
---------- -----------
Total capitalization.......................... $ 97,389 $ 99,288
========== ===========
</TABLE>
- --------
(1) The Company will retain the Revolving Credit Facility and the Railway
Credit Facility for future borrowings. The Revolving Credit Facility
provides a revolving credit commitment in the amount of $40 million, with
$19.4 million available as of July 31, 1997 ($34.7 million available as of
July 31, 1997 on an as adjusted basis). The exact amount which may be
borrowed from time to time is determined by a borrowing base formula. See
"Description of Revolving Credit Facility." The Railway Revolving Credit
Facility provides a revolving credit commitment in the amount of $1.5
million, with $0.2 million available as of July 31, 1997. The Railway Term
Loan is for $2.0 million (balance of $1.5 million as of July 31, 1997) and
is reduced by $0.5 million annually on July 31.

(2) The change in retained earnings reflects the redemption premium associated
with redemption of the 2001 Notes of approximately $4.5 million, the
write-off of the unamortized discount of approximately $1.6 million and
the unamortized debt issue costs related thereto of approximately $1.6
million, estimated interest expense paid during the period between the
issuance of the First Mortgage Notes and the call date on the 2001 Notes
of approximately $0.5 million, and the payment of $10 million in dividends
to the Company's stockholders.

12
<PAGE>

SELECTED HISTORICAL FINANCIAL DATA

The following table sets forth selected historical consolidated financial
data and operating data for the Company for the periods indicated. The
Company's selected historical consolidated financial data for, and as of the
end of, each of the years in the five year period ended April 30, 1997 were
derived from the consolidated financial statements of the Company, which have
been audited by KPMG Peat Marwick LLP, independent public accountants. The
selected historical consolidated financial data for, and as of the end of, the
three months ended July 31, 1996 and 1997 were derived from unaudited
financial statements of 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. The results of operations
for the three months ended July 31, 1997 are not necessarily indicative of the
results to be expected for the entire fiscal year 1998 or any other interim
period. The information set forth in this table should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Consolidated Financial Statements of the Company and
the notes thereto, included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED APRIL 30, ENDED JULY 31,
-------------------------------------------------- ------------------
1993 1994 1995 1996 1997 1996 1997
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER TON DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Sales................... $144,026 $165,920 $175,753 $172,317 $170,865 $ 45,203 $ 47,717
Cost of sales........... 125,705 141,215 144,385 143,121 140,234 37,547 38,309
-------- -------- -------- -------- -------- -------- --------
Gross profit............ 18,321 24,705 31,368 29,196 30,631 7,656 9,408
Selling, general and
administrative expense. 10,536 10,682 12,156 11,737 11,923 3,227 3,297
Post-retirement benefit
expense other than
pensions............... -- 4,248 3,153 2,776 2,353 701 688
Restructuring charge.... 6,764(1) -- -- -- 1,320(2) -- --
Operating income (loss). (4,693) 4,834 10,129 8,116 8,260 2,032 3,712
Interest expense........ (5,707) (7,147) (8,049) (11,733) (11,769) (2,913) (2,957)
Other income (expense).. (103) (40) (58) 526 -- -- --
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes
and extraordinary item. (10,503) (2,353) 2,022 (3,091) (3,509) (881) 755
Income tax (expense)
benefit................ 2,975 949 (197) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Income (loss) from
continuing operations.. (7,528) (1,404) 1,825 (3,091) (3,509) (881) 755
Extraordinary item-loss
on retirement of long-
term debt, net of
income tax benefit of
$1,346................. -- (3,966) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)....... $ (7,528) $ (5,370) $ 1,825 $ (3,091) $ (3,509) $ (881) $ 755
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
EBITDA (3).............. $ 7,785 $ 13,327 $ 18,582 $ 16,430 $ 17,627 $ 4,229 $ 5,861
Capital expenditures.... 2,467 11,667 24,220 4,978 3,695 634 963
Depreciation and
amortization........... 5,714 4,941 5,930 6,567 6,775 1,696 1,711
Non-cash post-retirement
expense charges........ -- 3,552 2,523 1,747 1,272 501 438
Ratio of earnings to
fixed charges (4)...... -- -- 1.2x -- -- -- 1.2x
Finished products tons
shipped................ 398,783 396,363 367,133 383,448 413,243 105,633 116,430
Billet tons shipped..... 89,520 122,680 133,017 93,557 60,512 26,757 16,367
-------- -------- -------- -------- -------- -------- --------
Total tons shipped...... 488,303 519,043 500,150 477,005 473,755 132,390 132,797
Average price per ton
shipped................ $ 295 $ 320 $ 351 $ 361 $ 361 $ 341 $ 359
Average production cost
per ton shipped........ 257 272 289 300 296 284 288
Employees at end of
period................. 689 708 718 705 670 715 605
BALANCE SHEET DATA (AT
END OF PERIOD):
Total assets............ $ 94,643 $115,958 $146,459 $143,182 $136,574 $141,984 $133,401
Long-term debt
(including current
portion)............... 56,707 72,629 93,170 97,041 96,550 101,278 94,490
Stockholders' equity.... 15,098 11,683 12,596 7,662 3,098 6,781 3,853
</TABLE>
- --------
(1) In January 1993, the Company approved a restructuring plan which provided
for closure of the Oklahoma City Mill. In conjunction with this plan, the
Company recorded a nonrecurring charge aggregating $6,764. Of the total
charge, $6,330 relates to the estimated loss expected upon disposal of the
facility and plant protection, insurance and other expenses associated
with this plan. The remaining charge relates to operating losses incurred
from the date of approval through April 30, 1993.

13
<PAGE>

(2) A restructuring charge of $1.3 million was recognized in fiscal 1997 as a
result of early retirement incentives included in a collective bargaining
agreement and salaried workforce reductions in Sand Springs.

(3) EBITDA is defined as operating income (loss) plus depreciation,
amortization, non-cash portion of post-retirement benefit expense, non-
cash restructuring charges related to closure of the Oklahoma City Mill
(in fiscal 1993) and the restructuring charge related to the early
retirement incentives (in fiscal 1997). The Company believes that EBITDA
provides additional information for determining its ability to meet debt
service requirements. EBITDA does not represent and should not be
considered as an alternative to net income or cash flow from operations as
determined by generally accepted accounting principles, and EBITDA does
not necessarily indicate whether cash flow will be sufficient for cash
requirements.

(4) Ratio of earnings to fixed charges is defined as income before income
taxes and extraordinary item plus amortization of debt issuance cost and
interest expense divided by the sum of amortization of debt issuance costs
plus interest expense. Earnings were insufficient to cover fixed charges
in fiscal 1993, 1994, 1996, 1997 and the three months ended July 31, 1996
by approximately $10,503, $2,353, $3,091, $3,509 and $881 (unaudited),
respectively.

14
<PAGE>

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

The following discussion should be read in conjunction with the Consolidated
Condensed Financial Statements of the Company and the notes thereto included
elsewhere in this Prospectus.

GENERAL

The Company is a mini-mill producer of hot rolled steel bar products ("hot
rolled bar"), concrete reinforcing bar ("rebar"), fabricated products,
including fabricated and epoxy-coated rebar and steel fence posts, and various
types of semi-finished steel ("billets"). The Company and its predecessors
have been in the steelmaking business for over 68 years. The Company believes
that it is among the lowest cost producers of billets in the United States as
a result of its modern melt and cast operations, high labor productivity
levels, low energy costs and competitive steel scrap costs. The Company's low
cost billets serve as the feedstock for its downstream bar mill operations and
finished products. The Company shipped approximately 470,000 tons of steel in
the 12-month period ended October 31, 1997, resulting in sales of $175.1
million and EBITDA (as defined) of $20.7 million.

The Company's products are grouped into four categories: (i) hot rolled bar
products, which the Company produces in the form of flats, squares, rounds and
channels, typically to meet specified customer requirements; (ii) rebar, which
is principally sold to independent fabricators who shear and bend the rebar to
meet engineering or architectural specifications for construction projects;
(iii) fabricated products, consisting of fence post (sold principally to
distributors and farm cooperatives) and fabricated rebar, including epoxy-
coated rebar (typically sold to highway and construction contractors); and
(iv) billets, made by casting molten steel into square strands of various
lengths in a continuous casting process, which are either reheated, rolled and
sheared by the Company into various finished steel products described above or
sold to third parties. The Company's strategy is to improve its product mix by
utilizing billets internally to produce finished products instead of selling
billets to third parties. The Company's primary cost components are ferrous
scrap, energy and labor, the cost of warehousing and handling finished steel
products and freight costs. The following table gives summary operating data
for the Company by its principal product categories for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED APRIL 30, ENDED JULY 31,
-------------------------------------------- -----------------
1993 1994 1995 1996 1997 1996 1997
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
TONS SHIPPED:
Hot Rolled Bars......... 155,555 154,362 157,610 159,688 174,290 38,478 45,054
Rebar................... 204,290 193,475 161,198 169,316 185,745 53,556 56,551
Fabricated Products..... 38,938 48,526 48,325 54,444 53,208 13,599 14,825
-------- -------- -------- -------- -------- -------- --------
Total finished products. 398,783 396,363 367,133 383,448 413,243 105,633 116,430
Billets................. 89,520 122,680 133,017 93,557 60,512 26,757 16,367
-------- -------- -------- -------- -------- -------- --------
Total tons shipped...... 488,303 519,043 500,150 477,005 473,755 132,390 132,797
======== ======== ======== ======== ======== ======== ========
PRICE PER TON:
Hot Rolled Bars......... $ 383 $ 424 $ 462 $ 461 $ 435 $ 441 $ 439
Rebar................... 244 263 290 293 292 286 295
Fabricated Products..... 408 407 447 461 460 465 458
Billets................. 188 218 236 225 214 216 226
Average price per ton
shipped................ 295 320 351 361 361 341 359
Average production cost
per ton................ 257 272 289 300 296 284 288
</TABLE>

On March 2, 1997, the Company completed negotiation of a collective
bargaining agreement with the United Steelworkers of America which covered
approximately 315 hourly-paid production and maintenance employees at the Sand
Springs Facility. The new contract is for a term of three years, expiring
March 1, 2000.

15
<PAGE>

This collective bargaining agreement included wage increases, certain benefit
increases and changes to local work rules allowing greater flexibility. The
contract also allowed the Company to reduce and reorganize its hourly
workforce by approximately 70 hourly positions, primarily maintenance related.
Of the 70 positions, 42 employees were eliminated through retirement offers
effective June 1, 1997 and the remaining positions have been eliminated
through attrition.

RECENT DEVELOPMENTS

Net sales and EBITDA (as defined) for the three months ended October 31,
1997 were $46.5 million and $5.8 million, respectively, compared to $44.7
million and $4.4 million, respectively, for the same period in the prior year.
Net sales and EBITDA (as defined) for the six months ended October 31, 1997
were $94.2 million and $11.7 million, respectively, compared to $89.9 million
and $8.6 million, respectively, for the same period in the prior year. These
increases were primarily a result of both continued improvements in
productivity and reductions in costs at the New Rolling Mill at the Sand
Springs Facility as well as strong market demand for rebar and hot rolled bar
products.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JULY 31, 1997 AS COMPARED TO THREE MONTH ENDED JULY 31,
1996

SALES. Sales for the Company for the three month period ended July 31, 1997
were approximately $47.7 million as compared to sales of approximately $45.2
million for the three month period ended July 31, 1996, an increase of
approximately $2.5 million or 5.6%. This increase was primarily the result of
an increase in tons shipped from 132,390 to 132,797 and an increase in average
price per ton shipped from $341 to $359. The increases in tons shipped and
average selling price were due primarily to increased production and shipments
of finished goods from the Sand Spring Facility and a decrease in shipments of
billets.

Hot Rolled Bar Products. Shipments for the three month period ended July 31,
1997 were 45,054 tons compared to 38,478 tons for the three month period ended
July 31, 1996, an increase of 6,576 tons or 17.1%. This increase was primarily
a result of the continued improvements in operations of the New Rolling Mill
and implementation of the Company's business strategy to improve finished
product mix. The average price per ton for hot rolled bar products for the
three month period ended July 31, 1997 decreased to $439 from $441. While
prices improved at both the Sand Springs Facility and the Joliet Facility,
average selling prices remained essentially unchanged due to increased sales
of hot rolled bar product at the Sand Springs Facility.

Rebar. Rebar shipments for the three month period ended July 31, 1997 were
56,551 tons compared to 53,556 tons for the three month period ended July 31,
1996, an increase of 2,995 tons or 5.6%. This increase was primarily a result
of the continued improvements in operations of the New Rolling Mill and
implementation of the Company's business strategy to improve finished goods
product mix. The average price per ton for rebar products for the three month
period ended July 31, 1997 increased to $295 from $286. The increase in
average price per ton is attributable to improved market conditions.

Fabricated Products. Shipments of fabricated products for the three month
period ended July 31, 1997 were 14,825 tons compared to 13,599 tons for the
three month period ended July 31, 1996, an increase of 1,226 tons or 9.0%. The
average price per ton for fabricated products for the three month period ended
July 31, 1997 decreased to $458 from $465. The decrease in average price per
ton is attributable to competitive forces as well as product mix.

Billets. Shipments of billets to third parties for the three month period
ended July 31, 1997 were 16,367 tons compared to 26,757 tons for the three
month period ended July 31, 1996, a decrease of 10,390 tons or 38.8%. This
decrease was due to the Company's implementation of its business strategy to
utilize billets internally to produce higher value added finished products
instead of selling the billets to third parties. The average price per ton for
billets for the three month period ended July 31, 1997 increased to $226 from
$216. The increase in average price per ton is attributable to improved
product mix.

16
<PAGE>

COST OF SALES. The cost of sales for the three months ended July 31, 1997
were approximately $38.3 million as compared to approximately $37.5 million
for the three months ended July 3l, 1996. On an average per-ton basis, cost of
sales increased to $288 per ton for the three months ended July 31, 1997 from
$284 per ton for the three months ended July 31, 1996. In the three months
ended July 31, 1997, billet shipments decreased 10,390 tons and the decrease
of these lower cost products in the mix caused the average cost per ton to
increase.

GROSS PROFIT. Gross profit for the Company for the three months ended July
31, 1997 was approximately $9.4 million as compared to a gross profit of
approximately $7.7 million for the three months ended July 31, 1996, an
increase of approximately $1.8 million or 22.9%. Gross profit for the Company
as a percentage of sales for the three months ended July 31, 1997 was 19.7% as
compared to 16.9% for the three months ended July 31, 1996. The increase is a
result of higher average selling prices due primarily to a more favorable
product mix.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense for the Company for the three months ended July 31,
1997 remained approximately the same as compared to the three months ended
July 31, 1996.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization remained
approximately the same for the three months ended July 31, 1997, as compared
to the three months ended July 31, 1996.

POST-RETIREMENT BENEFIT EXPENSE. Post-retirement benefit expense remained
approximately the same for the three months ended July 31, 1997 as compared to
the three months ended July 31, 1996 as determined by an independent actuary.

OPERATING INCOME. Operating income for the Company for the three months
ended July 31, 1997 was approximately $3.7 as compared to approximately $2.0
million for the three months ended July 31, 1996, an increase of approximately
$1.7 million or 82.7%. Operating income for the Company as a percentage of
sales for the three months ended July 31, 1997 was 7.8% as compared to 4.5%
for the three months ended July 31, 1996. This increase was primarily due to
the increased gross profit as discussed above.

INTEREST EXPENSE. Interest expense for the Company for the three months
ended July 31, 1997 was approximately $3.0 million as compared to
approximately $2.9 million for the three months ended July 31, 1996. This
increase was due to a slightly higher average interest rate as compared to the
same period in the prior year.

FISCAL 1997 AS COMPARED TO FISCAL 1996

SALES. Sales for the Company for fiscal 1997 were approximately $170.9
million as compared to sales of approximately $172.3 million for fiscal 1996,
a decrease of approximately $1.5 million or 0.8%. This decrease was primarily
the result of a decrease in the tons shipped from 477,005 to 473,755, as the
average price per ton shipped remained unchanged at $361 per ton. This
decrease in sales was primarily a result of decreased shipments of billets.

Hot Rolled Bar Products. Shipments in fiscal 1997 were 174,290 tons compared
to 159,688 tons in fiscal 1996, an increase of 14,602 tons or 9.1%. Shipments
of hot rolled bars produced at the Sand Springs Facility were up approximately
66% in fiscal 1997 over the previous year due to continued improvements in
operation of the New Rolling Mill and the Company's implementation of its
business strategy to improve finished product mix. This increase was partially
offset by decreased sales of hot rolled bar products from the Joliet Facility
which were primarily due to weak market conditions encountered during the
first fiscal quarter. The average price per ton for hot rolled bar products
decreased to $435 per ton in fiscal 1997 from $461 per ton in fiscal 1996. The
decrease in average price per ton is due to the increased proportion of the
Company's hot rolled bar products being produced at the New Rolling Mill at
the Sand Springs Facility which have a lower selling price than the more
specialized products produced at the Joliet Facility.

17
<PAGE>

Rebar. Rebar shipments for fiscal 1997 were 185,745 tons as compared to
169,316 tons in fiscal 1996, an increase of 16,429 tons or 9.7%. The increase
in tons shipped was primarily due to increased production. Rebar shipments in
the previous year were limited because mill time was allocated to the
development of new hot rolled bar business in accordance with the Company's
business strategy to improve product mix. The average price per ton for rebar
decreased to $292 for fiscal 1997 from $293 per ton in fiscal 1996.

Fabricated Products. Shipments of fabricated products in fiscal 1997 were
53,208 tons, down from 54,444 tons in fiscal 1996. Shipments of fabricated
products from the Kansas City Plant decreased from the prior year, primarily
due to weak market demand in the fourth quarter. Shipments of fence posts were
consistent with the prior year. The average price per ton for fabricated
products decreased slightly to $460 per ton in fiscal 1997 from $461 per ton
in fiscal 1996.

Billets. Shipments of billets to third parties for fiscal 1997 were 60,512
tons as compared to 93,557 tons in fiscal 1996. The decrease of 33,045 tons or
35.3% was due to the Company's implementation of its business strategy to
utilize billets internally for the production of higher value added finished
products instead of selling billets to third parties. The average price per
ton for billets decreased to $214 per ton in fiscal year 1997 from $225 per
ton in fiscal 1996. The decrease in the average price per ton of billets was
partially due to weak market demand and partially due to selling a higher
proportion of commodity grade steel.

COST OF SALES. The cost of sales for fiscal year 1997 was approximately
$140.2 million as compared to approximately $143.1 million for the fiscal year
ended 1996. Cost of sales on an average per-ton basis decreased slightly from
the prior year to $296 from $300. The decrease in cost of sales per ton is due
to improved production rates and a decrease in scrap raw material costs from
the prior year. The decrease was partially offset by slightly higher
conversion costs per ton in both the melt shop and the New Rolling Mill due to
an electric furnace transformer failure and higher energy costs in comparison
to the prior year. Although the electric furnace transformer failure curtailed
melt shop operations by approximately 40% for a four month period, the Company
purchased billets from third party suppliers and met its finished product
requirements. The Company's relationships with its customers were not
disrupted and the Company's insurance policy covered its costs of purchasing
billets and repairing the transformer.

GROSS PROFIT. Gross profit for fiscal 1997 was approximately $30.6 million
as compared to approximately $29.2 million for fiscal 1996, an increase of
approximately $1.4 million or 4.9%. Gross profit as a percentage of net sales
for fiscal 1997 was 17.9% as compared to 16.9% for fiscal 1996. The increase
in gross profit in fiscal 1997 is due to the decrease in cost of sales and the
increase in sales as discussed above.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense for fiscal 1997 was approximately $11.9 million,
reflecting an increase of approximately $0.2 million from 1996 levels. This
increase is due to additional selling expenses related to the expanded sales
efforts for hot rolled bar products.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization for 1997 was
approximately $6.8 million as compared to approximately $6.6 million for 1996,
an increase of approximately $0.2 million or 3.2%. The increase in
depreciation expense was primarily the result of depreciation on capital
expenditures made in both fiscal 1996 and 1997.

POST-RETIREMENT BENEFIT EXPENSE. Post-retirement benefit expense decreased
to approximately $2.4 million for fiscal 1997 from approximately $2.8 million
in 1996. The decrease is primarily due to a decrease in the health care cost
trend rates as determined by an independent actuary.

RESTRUCTURING EXPENSE. A restructuring charge of $1.3 million, $1.0 million
of which was non-cash, was recognized in fiscal 1997 as a result of early
retirement incentives included in a collective bargaining agreement and
salaried workforce reductions in Sand Springs.

18
<PAGE>

OPERATING INCOME. Operating income was approximately $8.3 million for fiscal
1997 as compared to operating income of approximately $8.1 million for fiscal
1996, an increase of approximately $0.1 million or 1.8%. Operating income as a
percentage of sales for fiscal 1997 was 4.8% as compared to 4.7% for fiscal
1996. The slight increase is a result of higher gross profit as described
above, offset by higher administrative expenses and the restructuring charge
as explained above.

INTEREST EXPENSE. Interest expense for fiscal 1997 was approximately $11.8
million as compared to approximately $11.7 million for fiscal 1996.

FISCAL 1996 AS COMPARED TO FISCAL 1995

SALES. Sales for the Company for fiscal 1996 were approximately $172.3
million as compared to sales of approximately $175.8 million for fiscal 1995,
a decrease of approximately $3.4 million or 2.0%. This decrease was primarily
the result of a decrease in tons shipped from 500,150 tons to 477,005 tons and
was partially offset by an increase in the average price per ton shipped from
$351 to $361.

Hot Rolled Bar Products. Shipments in fiscal 1996 were 159,688 tons compared
to 157,610 tons in fiscal 1995, an increase of 2,078 tons or 1.3%. Hot rolled
bar product sales tons shipped from the Sand Springs Facility were up
approximately 74% in fiscal 1996 over the previous year due to continued
improvements in operation of the New Rolling Mill and the Company's
implementation of its business strategy to improve finished product mix.
Growth in hot rolled bar product shipments also were due to additional
production orders. Sales of hot rolled bar products from the Joliet Facility
decreased due primarily to weak market conditions encountered during the third
fiscal quarter. The average price per ton for hot rolled bar products remained
relatively constant at $461 per ton in fiscal 1996, as compared to $462 per
ton in fiscal 1995.

Rebar. Rebar shipments for fiscal 1996 were 169,316 tons as compared to
161,198 tons in fiscal 1995, an increase of 8,118 tons or 5.0%. The increase
in the tons shipped was related to additional tons being produced on the New
Rolling Mill over the previous year. Rebar shipments were limited, however,
because during start up of the New Rolling Mill mill time was allocated to the
development of new hot rolled bar product business. The average price per ton
of rebar increased to $293 for fiscal 1996 from a fiscal 1995 price per ton of
$290.

Fabricated Products. Shipments of fabricated products in fiscal 1996 were
54,444 tons, up from 48,325 tons in fiscal 1995, an increase of 6,119 tons or
12.7%. Shipments of fabricated products from the Kansas City Plant were
consistent with the prior year while shipments of fence post increased 5,786
tons. The average price per ton for fabricated products of $461 per ton in
fiscal 1996 was $14 per ton higher than the average price per ton of $447 in
fiscal 1995. This price per ton increase was due to improved market conditions
in both the fence post and the rebar fabrication businesses.

Billets. Shipments of billets to third parties for fiscal 1996 were 93,557
tons as compared to fiscal 1995 shipments of 133,017 tons. The decrease of
39,460 tons or 29.7% was primarily due to the Company's shift in emphasis to
the sale of finished products as well as decreased market demand for billets
industry-wide. Demand decreased during the summer of 1995 and did not return
to normal levels for six months. Average sales price per ton for billets
decreased from $236 per ton in fiscal year 1995 to $225 per ton in fiscal
1996. The decrease in the average price per ton of billets reflected the
weaker market encountered during the 1996 fiscal year.

COST OF SALES. The cost of sales for fiscal year 1996 was approximately
$143.1 million as compared to approximately $144.4 million for the fiscal year
ended 1995. Cost of sales on an average per-ton basis was consistent with the
prior year on a product by product comparison. The costs per ton in the
aggregate increased from $289 in fiscal year 1995 to $300 in fiscal 1996 due
to a higher percentage of finished steel product sales. In fiscal 1996 billet
shipments decreased by 39,460 tons and the decrease of these lower cost
products in the mix caused the average cost per ton to increase. Scrap prices
were fairly consistent between years.

19
<PAGE>

GROSS PROFIT. Gross profit for fiscal 1996 was approximately $29.2 million
as compared to approximately $31.4 million for fiscal 1995, a decrease of
approximately $2.2 million or 6.9%. Gross profit as a percentage of net sales
for fiscal 1996 was 16.9% as compared to 17.8% for fiscal 1995. The decrease
in gross profit in fiscal 1996 was primarily due to reduced profitability of
billets compared to fiscal 1995 caused by weaker market conditions and start
up costs associated with the New Rolling Mill. While productivity and yields
improved over fiscal 1995, costs associated with the start up of the New
Rolling Mill reduced gross profit margins.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense for fiscal 1996 was approximately $11.7 million,
reflecting a decrease of approximately $0.4 million from 1995 levels. This
decrease is the direct result of the Company's efforts to control overhead
costs throughout the Company.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization for 1996 was
approximately $6.6 million as compared to approximately $5.9 million for 1995,
an increase of approximately $0.6 million or 10.7%. The increase in
depreciation expense was primarily the result of capital expenditures related
to the New Rolling Mill.

OPERATING INCOME. Operating income was approximately $8.1 million for fiscal
1996 as compared to operating income of approximately $10.1 million for fiscal
1995, a decline of approximately $2.0 million. Operating income as a
percentage of sales for fiscal 1996 was 4.7% as compared to 5.8% for fiscal
1995. The decline was primarily due to expenses associated with the New
Rolling Mill start-up and the weaker market for billets.

INTEREST EXPENSE. Interest expense for fiscal 1996 was approximately $11.7
million as compared to approximately $8.0 million for fiscal 1995, an increase
of approximately $3.7 million or 45.8%. Interest expense in fiscal 1995
included $2.1 million interest capitalized in connection with the financing of
the New Rolling Mill construction. The remaining increase in financing costs
was primarily caused by a slightly higher lending rate in fiscal 1996 and the
build up of inventories to support the expanding hot rolled bar product
business.

LIQUIDITY AND CAPITAL RESOURCES

As of July 31, 1997, the Company's long term indebtedness was $94.5 million,
after giving effect to an unamortized discount attributable to common stock
warrants of approximately $1.6 million. After giving effect to the Offering
and the application of the net proceeds therefrom as of July 31, 1997, the
Company's outstanding indebtedness would have been approximately $114.6
million consisting of $110 million of First Mortgage Notes and $4.6 million of
other indebtedness. The Company will not be required to make any principal
payments on the First Mortgage Notes prior to maturity. See "Recent
Developments" and "Capitalization."

The Revolving Credit Facility provides a revolving credit commitment in the
amount of $40 million. Pursuant to an amendment to the Revolving Credit
Facility dated as of the Issue Date, the exact amount the Company is eligible
to borrow on a revolving basis under the Revolving Credit Facility is based on
collateral availability consisting of 85% of eligible accounts receivable and
65% of eligible inventories. After giving effect to the Offering on an as
adjusted basis as of July 31, 1997, $34.7 million would be available under the
Revolving Credit Facility. Indebtedness under the Revolving Credit Facility is
secured by a first priority lien on Sheffield's inventory and accounts
receivable. The Revolving Credit Facility matures on November 1, 2000. See
"Description of Revolving Credit Facility."

Borrowings under the Revolving Credit Facility bear interest at a floating
rate. To the extent that such interest rate increases, and to the extent that
amounts outstanding under the Revolving Credit Facility increase, there will
be corresponding increases in the Company's interest obligations. The Company
intends to use a portion of the net proceeds of the Offering to repay amounts
outstanding under the Company's credit facilities, although it will retain
these facilities for future borrowings. See "Description of Revolving Credit
Facility", "Recent Developments" and "Capitalization."

In addition to borrowings under the Revolving Credit Facility, the Company
has historically used cash flow from operations and equipment financing
agreements to fund its investing activities, including capital

20
<PAGE>

expenditures. The Company expects to incur capital expenditures of
approximately $8.5 million in fiscal 1998, including $4.5 million for the
Shear Line Project. The Company estimates annual maintenance capital
expenditures to be approximately $3 million.

Cash flow from operating activities was $4.7 million in fiscal 1997,
compared with cash flow from operating activities of $3.1 million in fiscal
1996. Cash used in investing activities in fiscal 1997 was $3.7 million,
consisting principally of replacement and environmental expenditures and other
capital improvements. In fiscal 1997, approximately $1.1 million of cash flow
from operating activities was used in financing activities, principally to
repay long-term debt and make payments to retired executives of the Company in
respect of stock appreciation rights.

Cash flow from operating activities was $3.1 million in fiscal 1996,
compared with cash flow from operating activities of $0.5 million in fiscal
1995. This increase in cash flow resulted principally from decreases in
accounts receivable and billet inventory as compared with in fiscal 1995. Cash
used in investing activities in fiscal 1996 was $4.4 million, consisting
principally of normal capital expenditures. In fiscal 1996, approximately $4.3
million of cash flow was generated from increases in long-term and revolving
credit facilities. Approximately $2.3 million was used for payments in respect
of stock appreciation rights, dividends and to repurchase common stock
warrants.

Cash flow from operating activities was $0.5 million in fiscal 1995. Cash
used in investing activities in fiscal 1995 was $24.2 million, consisting
principally of capital expenditures.

The Company's cash flow from operating activities and borrowings under the
Revolving Credit Facility are expected to be sufficient to fund the fiscal
1998 budget for capital improvements and meet any near-term working capital
requirements. On a longer term basis, the Company has significant future debt
service obligations. The Company's ability to satisfy these obligations and to
secure adequate capital resources in the future will be dependent on its
ability to generate adequate operating cash flow. The Company expects that its
cash flow from operations and borrowing availability under its revolving
credit facilities will be sufficient to fund the repayment of the First
Mortgage Notes and other investing activities. This will be dependent on its
overall operating performance and be subject to general business, financial
and other factors affecting the Company and the domestic steel industry, as
well as prevailing economic conditions, certain of which are beyond the
control of the Company. The leveraged position of the Company and the
restrictive covenants contained in the Indenture and the Revolving Credit
Facility could significantly limit the Company's ability to withstand
competitive pressures or adverse economic conditions.

The Company is subject to a broad range of federal, state and local
environmental regulations and requirements, including those governing air
emissions and discharges into water, and the handling and disposal of solid
and/or hazardous wastes. As part of its normal course of business, the Company
incurs expenses, primarily for the disposal of bag house dust, to comply with
these regulations and requirements. Expenses were approximately $2.1 million
in fiscal 1997, approximately $1.7 million in fiscal 1996, and approximately
$2.2 million in fiscal 1995. Capital expenditures incurred by the Company to
comply with these requirements were approximately $0.7 million in fiscal 1997
and approximately $0.4 million in fiscal 1996. In addition, in the event of a
release of a hazardous substance generated by the Company, the Company could
be responsible for the remediation of contamination associated with such a
release. The Company believes that it is currently in substantial compliance
with all known material and applicable environmental regulations.

The Company has not experienced any material adverse effects on operations
in recent years because of inflation, though margins can be affected by
inflationary conditions. The Company's primary cost components are ferrous
scrap, energy and labor, all of which are susceptible to domestic inflationary
pressures. Finished product prices, however, are influenced by general
economic conditions and competitive factors within the steel industry. While
the Company generally has been successful in passing on cost increases to its
customers through price adjustments, the effect of steel imports, severe
market price competition and under-utilized industry capacity has in the past,
and could in the future, limit the Company's ability to adjust pricing.

21
<PAGE>

BUSINESS

GENERAL

The Company is a leading regional mini-mill producer of hot rolled steel bar
products, concrete reinforcing bar, fabricated products, including fabricated
and epoxy-coated rebar and steel fence posts, and various types of billets.
The Company and its predecessors have been in the steelmaking business for
over 68 years. The Company believes that it is among the lowest cost producers
of billets in the United States as a result of its modern melt and cast
operations, high labor productivity levels, low energy costs and competitive
steel scrap costs. The Company's low cost billets serve as the feedstock for
its downstream bar mill operations and finished products. The Company shipped
approximately 470,000 tons of steel in the 12-month period ended October 31,
1997, resulting in sales of $175.1 million and EBITDA (as defined) of $20.7
million.

BUSINESS STRATEGY

The Company has formulated an operating strategy to strengthen its market
position and maximize profitability which has four major components: (i)
improve finished goods product mix; (ii) continue to focus on and extend
strong customer relationships; (iii) modernize melt shop operations; and (iv)
streamline and strengthen organizational structure.

Improve Finished Goods Product Mix. With the addition of the New Rolling
Mill at the Sand Springs Facility, the Company has substantially increased its
hot rolled bar production capacity. Accordingly, shipments of finished
products have increased significantly as less profitable third party billet
sales have been intentionally reduced. Billet sales, which accounted for 23.6%
of tons shipped in fiscal 1994, accounted for only 10.6% of tons shipped for
the 12-month period ended July 31, 1997. Shifting away from third party billet
sales by increasing hot rolled bar production has also increased margins and
reduced sales volatility for the Company, since hot rolled bar products are
significantly more profitable than third party billet sales and demand is more
stable. As part of its strategy to further improve product mix, the Company
intends to remove a bottleneck at the Sand Springs Facility by improving the
efficiency of the cooling bed and increasing the capacity of the shear line
(the "Shear Line Project"). The completion of the Shear Line Project,
scheduled for the end of fiscal 1998, is expected to (i) increase hot rolled
bar production capacity by more than 100,000 tons per year; (ii) enable the
Company to more fully utilize its existing 600,000 tons of steelmaking
capacity; (iii) improve the quality of all mill products, especially hot
rolled bar; and (iv) improve product mix by further reducing billet sales to
third parties. The Shear Line Project is expected to have an aggregate capital
cost of approximately $4.5 million and, upon completion and achieving full
operating capacity, is expected to result in an annual EBITDA (as defined)
increase of approximately $9 million.

Extend Strong Customer Relationships. The Company benefits from having a
number of long-standing customer relationships in each of its product markets.
The Company has built a reputation for providing consistent product quality,
reliable, prompt product delivery and service, product availability and
flexible scheduling to meet customer needs and a high level of follow up
technical assistance and service. The ISO 9002 certification at both the Sand
Springs Facility and the Joliet Facility is an indication of the Company's
commitment to producing quality products. The Company believes that its
business strategy to improve its finished product mix will strengthen its
existing customer relationships and will aid it in developing new customer
relationships.

Modernize Melt Shop. The Company believes that it is among the lowest cost
producers of billets in the United States as a result of its modern melt and
cast operations, high labor productivity levels, low energy costs and
competitive steel scrap costs. With the addition of the New Rolling Mill,
which can utilize a larger billet, together with improvements in general
operating practices, yields have improved, costs have been reduced and annual
billet production capacity has increased from 525,000 tons to 600,000 tons per
year. Through incremental capital investments, the Company intends to pursue
additional modernization measures, such as the installation

22
<PAGE>

of a ladle arc furnace in the melt shop, which will further enhance production
capability, increase production capacity, reduce manufacturing costs and
improve the quality of finished products.

Streamline and Strengthen Organizational Structure. The Company has improved
strategic planning, strengthened financial reporting systems and aligned
organizational structure and management incentives with the Company's business
strategies and objectives. In accordance with the collective bargaining
agreement reached in February 1997 that resulted in a 15% workforce reduction,
the Company has been able to implement multi-craft training and use greater
flexibility in job assignments. Additional initiatives to streamline
operations include the elimination of a centralized maintenance structure and
close coordination of the melt shop, casting and rolling mill operations which
have resulted in significant reductions in both billet and finished goods
inventory. The Company has also put in place a new management team to manage
the Sand Springs Facility manufacturing operations. These initiatives have
resulted in improving the organizational structure of the Company, making it
flexible and more responsive to customer needs and positioning it to implement
its business strategy of improving finished product mix.

PRODUCTS, CUSTOMERS AND MARKETS

Hot Rolled Bar. According to the American Iron and Steel Institute ("AISI"),
the size of the hot rolled bar product market in the United States was
approximately 7 million tons in 1996. The demand for consistent quality is
very significant in the hot rolled bar product market, where quality is
measured by the adherence to specifications related to chemical composition,
surface quality, product integrity and size tolerances. The Company sells a
variety of specialty hot rolled bar products, including flats, squares, rounds
and channels for end use applications that include farm equipment, auto parts,
conveyor assemblies, pole line hardware, wrench handles and construction
machinery. The majority of hot rolled bar products produced at the Joliet
Facility (approximately 81% in fiscal 1997) is sold directly to original
equipment manufacturers and cold drawn bar finishers, while the remainder
(approximately 19% in fiscal 1997) is sold to steel service centers. Hot
rolled bar products produced at the Sand Springs Facility are sold to both end
product manufacturers (approximately 62% in fiscal 1997) and steel service
centers (approximately 38% in fiscal 1997). For fiscal 1997, sales of hot
rolled bar products accounted for approximately 44% of the Company's total
revenues.

In the hot rolled bar market, the Company differentiates itself from its
competitors through the Joliet Facility's focus on specialty hot rolled bar
products and by targeting customers with special requirements as to bar shape,
size and chemical composition and, in many cases, small volume needs. The
Company believes that its targeted customer focus often allows it to act as
the sole supplier of particular shapes, sizes or steel chemistries to certain
customers, while in other cases it competes with a limited number of producers
of specialty hot rolled bar products. The Company believes that these niche
markets are unattractive to larger volume producers. The Company also believes
that there are significant opportunities to sell standard hot rolled bar
products to customers for whom the Joliet Facility currently satisfies
specialty hot rolled bar product requirements. The Company's Sand Springs
Facility provides it with a competitive geographical advantage in the south-
central United States hot rolled bar marked and enables the Company's
customers to benefit from lower freight costs, shorter lead times and more
timely deliveries. As a result of these competitive advantages and its strong
reputation for quality and service, the Company has developed a number of
strong relationships with the region's hot rolled bar product customers.

The Company also strives to provide its hot rolled bar product customers
with superior service. For fiscal 1997, the Company's largest specialty hot
rolled bar product customer accounted for approximately 11% of total hot
rolled bar product shipments, and the 10 largest specialty hot rolled bar
product customers accounted for approximately 41% of total hot rolled bar
product shipments. To permit a high level of service consistent with efficient
production scheduling, the Company carries a customer-designated finished
goods inventory of hot rolled bar products in excess of 10,000 tons at both
the Joliet and Sand Springs facilities. Both the Sand Springs Facility and the
Joliet Facility have implemented an internally developed bar-coded inventory
tracking system which permits quick and precise inventories to be taken at any
time. The Joliet Facility has also developed a

23
<PAGE>

customer query system which provides agents and major customers with direct
computer access to the status of their production orders, the availability of
inventory designated for them and the Joliet Facility's production schedule
for their products. See "--Business Strategy--Extend Strong Customer
Relationships."

Rebar. According to the AISI, the size of the rebar market in the United
States was approximately 6.3 million tons in 1996. Rebar is a lower value,
higher volume commodity bar product for which price is often the customer's
decisive factor. Geographic proximity to customers, which in turn determines
both freight costs and delivery response time, is also an important factor in
the rebar market, where profit margins are particularly tight and independent
fabricators typically depend on quick mill response rather than their own
inventories to meet ever-changing construction schedules. The Company sells
rebar to leading independent fabricators located in the south-central United
States who then shear and bend the rebar to meet engineering or architectural
specifications for construction projects. The Company produces rebar at the
Sand Springs Facility rolling mill, where the bars are rolled in standard
diameters from #4 bar ( 1/2 inch or 13mm) to #18 bar (2 1/4 inches or 57mm)
and sheared to standard lengths from 20 feet to 60 feet. To provide rapid
response to customer needs, the Company usually maintains a finished goods
inventory of 25,000 to 35,000 tons of rebar. Sales of rebar constituted
approximately 32% of total Company revenues in fiscal 1997.

Rebar demand is driven by trends in commercial and industrial construction
and infrastructure investment. During periods of overall reduced steel
industry demand, the Company has maintained relatively stable rebar sales
volume due to the levels of public and private sector investment in buildings,
plants, facilities and infrastructure in the south-central United States. The
Company has worked successfully to build and maintain long-term relationships
with its customers by providing them with competitive pricing, assured product
availability and reliable, prompt delivery and service. This strategy permits
the fabricators to compete successfully in the construction and infrastructure
markets, thus reinforcing the Company's relationships with such fabricators.
The Company believes that it is the primary and, in most cases, the sole
supplier to substantially all of its customers. In fiscal 1997, the Company's
10 largest rebar customer accounts represented approximately 80% of total
rebar sales. Of the 10 largest rebar customers in fiscal 1997, eight were
among the Company's 10 largest rebar customer accounts for fiscal 1996, 1995,
1994 and 1993.

24
<PAGE>

Due to the importance of pricing, freight costs and delivery response time,
sales of rebar tend to be concentrated within close geographic proximity to a
rebar manufacturer's mini-mill. The following map depicts the Company's rebar
market in the geographic area surrounding the Sand Springs Facility.

[MAP: THE COMPANY'S REBAR MARKET]

Graphic: Map of south-central United States, indicating the Company's primary
rebar market in the geographic area surrounding the Sand Springs Facility,
including Kansas and portions of Nebraska, Missouri, Arkansas and northern
Texas, as well as other bar mills and primary rebar competitors in the same
geographic area.

In the Company's primary market area of Oklahoma, Kansas and portions of
Nebraska, Missouri, Arkansas and northern Texas, the Company enjoys a freight
advantage over its competitors and believes it has a market share in excess of
50%. Approximately half of the Company's rebar shipments are made in this
primary market area. The remaining rebar shipments are made in the adjacent
regions of Nebraska, Missouri, Arkansas and Texas and in Louisiana, New Mexico
and Colorado. Since pricing, freight costs and delivery response times are
important competitive factors in the rebar market, the Company believes that
efforts to penetrate more distant markets would be uneconomical or
impractical.

Fabricated Products. The Company manufactures two fabricated steel products:
fence post and fabricated rebar, including epoxy-coated rebar, which are sold
to distributors and farm cooperatives. Fence post is produced in two weights
(1.25 pounds per foot and 1.33 pounds per foot), in orange and green colors
and various lengths from 4 feet to 8 feet. The Company manufactures
approximately 24,000 tons of fence post annually on a five

25
<PAGE>

day, one-shift basis at a post shop located adjacent to the New Rolling Mill.
The Company believes that its fence post is recognized as a quality leader in
the industry. Fabricated products sales constituted approximately 14% of total
Company revenues in fiscal 1997. The majority of the Company's fence post
sales are concentrated in the Oklahoma, Kansas, Missouri, Texas and Arkansas
market area, and the Company believes that it is the primary supplier of fence
post with more than half of the market in that area. The Company's 5 largest
customer accounts represented approximately 75% of total fence post shipments
in fiscal 1997.

Fabricated rebar is shipped from the Kansas City Plant to highway and
construction contractors in Missouri, Kansas, Nebraska and in contiguous
markets. In recent years, the Company has experienced increased demand from
contractors bidding on infrastructure projects for fabricated rebar which is
epoxy-coated prior to fabrication to protect against corrosion in the field.
This has provided the Kansas City Plant with a competitive advantage and
contributed to a growth in shipments. The Company believes that its epoxy
coating line, the only one located in the Kansas City, Missouri market,
provides a competitive advantage in securing contracts.

On October 28, 1997, the Company acquired (the "Acquisition") all of the
issued and outstanding capital stock of Waddell's Rebar Fabricators, Inc.
("Waddell"), pursuant to a Stock Purchase Agreement among the Company, Waddell
and the former stockholders of Waddell. The Acquisition purchase price
consisted of (i) $1,040,000 in cash, subject to post-closing adjustment based
upon the actual net worth of Waddell on the closing date, and (ii) secured,
subordinated promissory notes (the "Notes") in an aggregate principal amount
of $2,000,000, which Notes mature in four years and accrue interest at
NationsBank's prime rate minus one percent per annum. The Notes are secured by
the Company's pledge of the capital stock of Waddell. Waddell is a rebar
fabricator located in Independence, Missouri which specializes in smaller
volume, higher value added construction contracts. Although the Company will
maintain Waddell as a separate subsidiary for the foreseeable future, the
Company intends to integrate the management of Waddell with the management of
the Company's rebar fabrication plant in Kansas City, Missouri.

Billets. The Company sells billets to other steel mills or forgers for
conversion into finished products. Most sales are made to a single dedicated
account and a portion are sold in the "spot" market and later exported to
markets in Mexico, South America and the Caribbean. Sales volume potential and
pricing for billets, particularly in the spot market, is highly variable. The
dominant competitive factors are availability and price. To meet customer and
finished product specifications, the Company produced in excess of 100 grades
of billets during fiscal 1997. Billet sales to third parties are dependent on
the Company's own billet requirements and market conditions that vary widely.
In the past three fiscal years, billets sales to third parties have ranged
between 8% and 18% of the Company's total revenues. Billet sales constituted
approximately 8% of total Company revenues in fiscal 1997.

The Company's business strategy includes shifting away from selling billets
toward utilizing billets internally to produce higher value added finished
products. After completion of the Shear Line Project, the Company expects to
increase its production of hot rolled bar products which will increase its
need for billets and, accordingly, fewer billets will be available for sale to
third parties.

The Railway Company. The Railway Company operates approximately seven miles
of rail line between Sand Springs and Tulsa, Oklahoma, serving primarily the
operations of the Sand Springs Facility and, to a lesser extent, third
parties. The Railway Company's revenues from third parties constituted
approximately 2% of total Company revenues in fiscal 1997.

MANUFACTURING PROCESS

The Company's primary manufacturing facility is the Sand Springs Facility,
where it conducts a full range of steelmaking activities, including the
melting and casting of billets and the processing of billets into rebar, steel
fence posts and a range of hot rolled bar products. The Company has recently
completed construction, installation and final commissioning of the $22
million New Rolling Mill at the Sand Springs Facility, which has increased
productivity and efficiency in the manufacturing of rebar and has enabled the
Company to produce

26
<PAGE>

certain higher quality hot rolled bar products that it was previously unable
to produce. From the Sand Springs Facility, the Company also transfers billets
to its two rolling mills at the Joliet Facility, where it produces high end
specialty hot rolled bar products. The Company also operates a rebar
fabrication plant in Kansas City, Missouri. The Sand Springs Facility and the
Joliet Facility received ISO 9002 quality certification in November 1995 and
June 1996, respectively.

At the Sand Springs Facility, steel scrap is conveyed by rail car from the
Company's scrap yard to the facility's melt shop, where the steel scrap is
melted with electricity in two 85-ton electric arc furnaces. During the scrap
melting process, impurities are removed from the molten steel. The molten
steel is then poured into a ladle, where metal alloys are added to obtain
desired chemical compositions. The molten steel is then conveyed to a six-
strand continuous caster which casts various types of billets. The continuous
caster is capable of forming billets up to 8 inches square and 50 feet long.
These billets are then reheated, rolled and shaped into various finished steel
products at the Sand Springs or Joliet rolling mills or, to a lesser extent
sold to third parties. The Sand Springs rolling mill produces rebar, "T"
sections which are further processed into fence posts and a range of hot
rolled bar products. The rolling mills at the Joliet Facility produce an
extensive range of hot rolled bar products.

The diagram below depicts the Company's steel manufacturing process as
currently conducted.

[COMPANY'S STEEL MANUFACTURING PROCESS DIAGRAM]

Graphic: Box with "Melt and Cast Shop (Sand Springs Facility") linked by
vertical arrows with three boxes titled "Rolling Mills (Joliet Facility);"
"Rolling Mill (Sand Spring Facility);" and "Billets." Box with "Rolling Mills
(Joliet Facility)" linked by vertical arrows to box with "Hot Rolled Bar
Products." Box with "Rolling Mill (Sand Springs Facility)" linked by vertical
arrows with four boxes titled "Hot Rolled Bar Products;" "Rebar;" "Rebar
Fabrication Plant (Kansas City);" "Fence Post Shop (Sand Springs Facility).
Boxes with "Rebar Fabrication Plan (Kansas City)" and "Fence Post Shop (Sand
Springs Facility)" linked with vertical arrows to box with words "Fabricated
Product."

27
<PAGE>

SALES AND MARKETING

Hot rolled bar products produced at the Joliet Facility are sold regionally
by the Company's sales personnel and nationally through commissioned sales
representatives under exclusive agency agreements with the Company. Hot rolled
bar products produced at the Sand Springs Facility and rebar are sold through
the Company's own sales force and sales agencies which also service the Joliet
Facility. The Company markets fence post directly to farm cooperatives and to
fence post distributors. While some billets are sold through semi-finished
steel brokers on the "spot" market, most is sold through one dedicated
account. After completion of the Shear Line Project, the Company's internal
billet requirements will increase and the availability of billets for sale to
third parties will decrease accordingly. As a result of adverse weather
conditions which impact construction activities and a normal seasonal downturn
in manufacturing levels, the Company typically experiences lower sales volumes
in its third fiscal quarter.

RAW MATERIALS

The Company's primary raw material is steel scrap, which is generated
principally from industrial, automotive, demolition, railroad and other scrap
sources and is purchased by the Company in the open market through a limited
number of steel scrap brokers and dealers or by direct purchase. The cost of
steel scrap is subject to market forces, including demand by other steel
producers. The cost of steel scrap to the Company can vary significantly, and
product prices generally cannot be adjusted in the short-term to recover large
increases in steel scrap costs. Over longer periods of time, however, product
prices and steel scrap prices have tended to move in the same direction.

The long-term demand for steel scrap and its importance to the domestic
steel industry may be expected to increase as mini-mill producers continue to
expand steel scrap-based electric arc furnace capacity with additions to or
replacements of existing integrated facilities. For the foreseeable future,
however, the Company believes that supplies of steel scrap will continue to be
available in sufficient quantities. In addition, a number of technologies
exist for the processing of iron ore into forms which may be substituted for
steel scrap in electric arc furnace-based steelmaking. Such forms include
direct-reduced iron, iron carbide, hot-briquette iron and pig iron. A
sustained increase in the price of steel scrap could result in increased use
of these alternative materials. The Company has successfully employed scrap
substitutes in its manufacturing process to achieve quality characteristics
and expects to increase its usage of such substitutes in the future.

ENERGY

The Company's manufacturing process consumes large amounts of electricity.
The Company purchases its electrical needs at the Sand Springs Facility from
Public Service of Oklahoma ("PSO") under a real time pricing tariff which is
available only to PSO's largest customers. Under this tariff, the Company
purchases its base load at a contracted amount adjusted for fuel costs and
then purchases or sells power on an hour-by-hour basis at rates which
approximate PSO's incremental costs plus a small markup. Historically, the
Company has been adequately supplied with electricity and does not anticipate
any material curtailment in its operations resulting from energy shortages.

The Company believes that its utility rates are among the lowest in the
domestic mini-mill steel industry. As one of PSO's two largest customers, the
Company is able to obtain low rates from PSO. PSO is able to generate
electricity at relatively low rates, as its electric load is generated using
western coal and local natural gas as compared to the higher costs of electric
utilities that generate electric load using oil or nuclear power.

The Company also uses natural gas to reheat billets, but is not considered a
large natural gas user. Since deregulation of the natural gas industry,
natural gas requirements generally have been provided through negotiated
contract purchases of well-head gas with supplemental transportation through
local pipeline distribution networks. Although increases in the price of
natural gas might have an adverse impact on the Company's cost structure and
the Company's profitability, any such price increases would be likely to
similarly

28
<PAGE>

affect competitors using natural gas and/or electricity generated by natural
gas. The majority of the Company's natural gas needs (both to reheat billets
and as a consumer of the electricity generated by natural gas) are at the Sand
Springs Facility in Oklahoma, a state with excess natural gas supplies.
Historically, the Company has been adequately supplied with natural gas and an
adequate supply is expected to be available in the future.

COMPETITION

The Company competes with a number of domestic mini-mills in each of its
market segments. There are common competitive factors in the steel bar
business--price, proximity to market, quality and service, for example-
although their relative importance varies in the different market segments.

In the market for hot rolled bar products, the Joliet Facility occupies a
niche position at the specialty end of the product range. The Company believes
that it is the sole supplier of several particular shapes, sizes or steel
chemistries to certain customers. In other cases, the Company competes with a
limited number of other producers of specialty hot rolled bar products,
including Calumet Steel Company, Kentucky Electric Steel Co., Laclede Steel
Company and Northwestern Steel and Wire Company. From Sand Springs and to a
much lesser degree from Joliet, the Company competes with mini-mill producers
of standard hot rolled bar products, including Chaparral Steel Co., North Star
Steel Co. and Structural Metals, Inc. Competitors vary from customer to
customer depending on product specifications and requirements for order sizes
and inventory support.

Since pricing, freight costs and delivery times are the most important
competitive factors in the sale of rebar, sales tend to be concentrated within
about 350 miles of a mini-mill. In the south-central United States, the
Company believes it enjoys a competitive advantage as the closest mill serving
an area comprising Oklahoma, Kansas, western Missouri and Arkansas, and parts
of northern Texas. The majority of the Company's rebar tonnage was shipped to
this area in fiscal 1997, which the Company believes equated to in excess of
50% of the market share. In surrounding geographical areas, the Company
competes with a number of other mini-mills, principally Chaparral Steel Co.
and Structural Metals, Inc.

The Company is not in competition with foreign or integrated steel
producers. These mills have cost and freight disadvantages compared to the
Company and other domestic mini-mills which effectively preclude them from
competing in the relatively low priced hot rolled bar product and rebar
markets.

Competitive factors in fence post sales include product quality measured by
durability, price, appearance, workmanship, freight costs and delivery
response time. The Company believes that the high quality of its fence post
combined with a more aggressive sales effort has contributed to an increase in
market penetration in fiscal 1996 and fiscal 1997. Competitors include
Southern Post Co. and Chicago Heights Steel Co.

For fabricated rebar, primary competitors are independent fabrication shops
which are furnished with rebar from other mini-mills in the Midwest. In recent
years, the Company believes that increased demand for epoxy-coated product
from contractors bidding on infrastructure projects has provided the Kansas
City Plant with a competitive advantage and contributed to growth in
shipments. Other competitive factors include delivery performance, engineering
support, accurate fabrication and competitive pricing.

EMPLOYEES

As of July 31, 1997, there were approximately 600 employees of the Company.
Approximately 69% of the Company's employees are represented by one of three
bargaining units affiliated with the United Steelworkers of America. The
Company is party to a collective bargaining agreement covering approximately
245 hourly-paid production and maintenance employees at the Sand Springs
Facility. This agreement, which was negotiated as of March 2, 1997, is for a
three year period expiring on March 1, 2000. The agreement included wage
increases, certain benefit increases and changes to local work rules. The
agreement also allowed the Company to reduce and reorganize its hourly
workforce by approximately 70 positions, primarily maintenance related. Of the
70 positions, 42 were eliminated through retirement offers effective June 1,
1997 and the remaining positions have been eliminated through attrition.

29
<PAGE>

The Company is also party to a collective bargaining agreement covering
approximately 147 hourly-paid production and maintenance employees at the
Joliet Facility, which expires on March 1, 1999 and a collective bargaining
agreement covering approximately 23 employees at the Kansas City Plant which
expires on October 31, 1999. The Railway Company has approximately 19
employees who are represented by various labor unions. The Company believes
that it has maintained good relationships with its labor unions in the past,
but there can be no assurance that the terms of any future collective
bargaining agreements with any labor unions will contain terms comparable to
the terms contained in its existing collective bargaining agreements.

Since the last national, industry-wide strike of steelworkers in 1959, the
Company has experienced only a five-day strike at the Sand Springs Facility in
May 1988 and a work stoppage at the Kansas City Plant after the expiration of
its collective bargaining agreement in September 1991. The Company has not
experienced a protracted work stoppage at either the Sand Springs Facility or
the Joliet Facility, and believes that it has good relations with its
employees, but there can be no assurance that work stoppages will not occur in
the future, in connection with labor negotiations or otherwise.

ENVIRONMENTAL COMPLIANCE

The Company is subject to a broad range of Federal, state and local
environmental requirements, including those governing air emissions and
discharges into water, and the handling and disposal of wastes. The Company
has spent substantial amounts to comply with these requirements. In addition,
in the event of a release of hazardous materials generated by the Company, the
Company could potentially be responsible for the remediation of contamination
associated with such a release.

Primarily because the melting process at the Sand Springs Facility generates
emission dust that contains lead, cadmium and other heavy metals, the Company
is classified, in the same manner as other similar mini-mills in its industry,
as a generator of hazardous waste. The Resource Conservation and Recovery Act
of 1976, as amended ("RCRA"), regulates the management of emission control
sludge/dust from electric arc furnaces ("K061"), a waste stream generated in
significant quantities at the Sand Springs Facility. All of the K061 generated
at the Sand Springs Facility is shipped to Mexico, where a High Temperature
Metals Recovery processor, Zinc Nacional, S.A., recovers the zinc, lead and
cadmium and manufactures commercial and high purity zinc products. If a
release of K061 were to occur, the Company could be required to remediate such
release. Although current law permits the export of K061, there can be no
assurance that new United States legislation prohibiting the export of
hazardous waste materials or new Mexican legislation prohibiting the import of
such materials, including K061, will not be enacted. In that event, the
Company would have to find an alternative means of treatment or disposal of
the K061 in compliance with RCRA. The Company believes that it could properly
dispose of the K061 generated at the Sand Springs Facility by constructing an
on-site recovery or chemical stabilization process or by shipping the K061 to
a licensed domestic treatment facility. However, there can be no assurance as
to the availability of such alternatives or that their construction and/or use
would not result in significant cost increases.

In accordance with the Clean Air Act Amendments of 1990 ("CAAA") and
Oklahoma's State Implementation Plan, the Sand Springs Facility submitted a
Title V application for an operating permit in January 1997. Because this
application has been ruled administratively complete, the Company is
continuing to operate pending final approval, which it anticipates receiving
in calendar 1998. If approved, the CAAA operating permit would require neither
process modifications nor continuous emissions monitoring. Additional or new
air emission control regulations or requirements applicable to the Company's
operations may be promulgated under the Clean Air Act in the future. The
Company cannot at this time accurately estimate the costs, if any, of
compliance with such future Clean Air Act regulations or requirements.

As discussed above under "Risk Factors--Environmental Compliance and
Associated Costs", it is possible that EPA may identify violations of RCRA
requirements as a result of the Compliance Evaluation Inspection conducted by
EPA at the Sand Springs Facility in April 1997, and that EPA may seek
penalties and/or corrective

30
<PAGE>

action relating to the Solid Waste Management Units identified at the Sand
Springs Facility, including the three previously closed K061 landfills. While
the Company believes that any such RCRA violations that may be identified by
EPA will not result in penalties which will have a material adverse effect on
the Company's results of operations or financial condition, the costs of
corrective action (if any is required) cannot be predicted at this time and
may be material. Apart from the issues associated with the April 1997 RCRA
inspection conducted by EPA, the Company believes that it is currently in
substantial compliance with applicable environmental requirements and does not
anticipate the need to make substantial expenditures for environmental control
or remediation measures during the next three years. See "Risk Factors--
Environmental Compliance and Associated Costs."

PROPERTIES AND FACILITIES

The Company owns the properties comprising the Sand Springs Facility and the
Joliet Facility. The Sand Springs Facility is located on approximately 148
acres of land in Sand Springs, Oklahoma. The Joliet Facility is located on
approximately 30 acres of land in Joliet, Illinois. The Company leases 9 acres
of land adjacent to the Joliet Facility from the Metropolitan Water
Reclamation District of Greater Chicago under a long term lease expiring in
2053. The Company also leases the Kansas City Plant, containing approximately
77,100 square feet. In addition, the Company owns 4.5 acres of land in
Oklahoma City, Oklahoma that formerly comprised the Oklahoma City Mill.

The Sand Springs Facility comprises an aggregate of approximately 520,390
square feet of floor space and contains two 85-ton electric arc furnaces, a
six strand billet continuous caster, a rolling mill, two warehouses and a
fence post shop. The current total annual capacity of the Sand Springs
Facility is approximately 600,000 tons of billet, approximately 320,000 tons
of rebar and hot rolled bar and approximately 70,000 tons of fence post. After
completion of the Shear Line Project, the annual capacity of rebar and hot
rolled bar products is expected to increase to 450,000 tons.

The Joliet Facility comprises an aggregate of approximately 334,305 square
feet of floor space and contains a 12 inch merchant bar mill and a 10 inch
merchant bar mill. The total annual capacity of the Joliet Facility is
approximately 155,000 tons of hot rolled bar products.

The Railway Company provides freight service between Sand Springs and Tulsa
on seven miles of mainline track and 21 miles of spur line which connect
customer facilities with the main line. The Railway Company owns the mainline
track and three locomotives and operates a maintenance shop for normal repairs
and upkeep. The Railway Company also leases and operates a transload facility
and warehouse.

The Railway Company has granted a security interest in substantially all of
its assets to the Bank of Oklahoma as security for the Railway Company's
obligations under the Railway Revolving Credit Facility and the Railway Term
Loan.

The Company will grant a first priority lien on substantially all of
Sheffield's real property and equipment in favor of the Trustee for the
benefit of the holders of the First Mortgage Notes.

LEGAL PROCEEDINGS

The Company is not a party to any significant pending legal proceedings
other than litigation incidental to its business which the Company believes
will not materially affect its financial position or results of operations.
Such claims against the Company are ordinarily covered by insurance. There can
be no assurance, however, that insurance will be available in the future at
reasonable rates.

31
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company, and their ages as of
October 1, 1997 are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Robert W. Ackerman...... 59 President and Chief Executive Officer, Director
John F. Lovingfoss...... 59 Vice President--Sales and Marketing
Alton W. Davis.......... 49 Vice President--Operations
Dale S. Okonow.......... 40 Vice President and Secretary, Director
Stephen R. Johnson...... 46 Vice President, Chief Financial Officer and Assistant Secretary
Leslie L. Kelly......... 31 Controller
Steven E. Karol......... 43 Chairman of the Board, Director
Jane M. Karol........... 35 Director
Howard H. Stevenson..... 56 Director
John D. Lefler.......... 51 Director
</TABLE>

Robert W. Ackerman. Mr. Ackerman has been President and Chief Executive
Officer and a Director since 1992. From 1988 to 1992, Mr. Ackerman was the
President and Chief Executive Officer of Lincoln Pulp & Paper Co., Inc. From
1986 to 1988 Mr. Ackerman taught in the Advanced Management Program at the
Harvard University Graduate School of Business Administration. Mr. Ackerman
serves as a director of Gulf States Steel, Inc. of Alabama ("Gulf States") and
The Baupost Fund and Atlantic Investors, Inc.

John F. Lovingfoss. Mr. Lovingfoss has been Vice President--Sales and
Marketing since 1984. From 1958 to 1984, Mr. Lovingfoss held various positions
with the Company in sales, marketing and management.

Alton W. Davis. Mr. Davis has been Vice President--Operations since August
1996. From 1986 to 1996, he was Vice President and General Manager of
Ameristeel's Jacksonville, Florida location. Prior to that, he held various
management positions with both Bayou Steel and Chaparral Steel.

Dale S. Okonow. Mr. Okonow has been Vice President and Secretary since 1988
and a Director since 1990. Prior to 1988, Mr. Okonow was an associate with the
law firm of Proskauer Rose Goetz & Mendelsohn in New York City. Mr. Okonow was
Vice President and General Counsel of HMK Enterprises, Inc. ("HMK") from 1988
to 1990 and has been a Senior Vice President and Chief Financial Officer of
HMK since 1990. Mr. Okonow also serves as Vice President, Secretary and a
Director of Gulf States.

Stephen R. Johnson. Mr. Johnson has been Vice President--Chief Financial
Officer since 1995. From 1977 to 1995 Mr. Johnson held various other positions
with the Company, including the position of Vice President--Administration and
Treasurer and Vice President--MIS and Business Planning.

Leslie L. Kelly. Ms. Kelly has been Controller of the Company since 1996.
From 1993 to 1996, Ms. Kelly was the Assistant Controller of Integrity Music,
Inc. From 1988 to 1992, Ms. Kelly was employed by the accounting firm, KPMG
Peat Marwick LLP.

Steven E. Karol. Mr. Karol has been a Director of the Company since 1981 and
Chairman of the Board since 1983. Mr. Karol is also President and Chief
Executive Officer and Chairman of the Board of HMK. Mr. Karol also serves as
Chairman of the Board of Directors of Gulf States and is a Director of Stocker
and Yale. Mr. Karol is the brother of Jane M. Karol.

Jane M. Karol. Ms. Karol has been a Director since 1991. Ms. Karol is a
Director of HMK. Ms. Karol is also the sister of Steven E. Karol.

32
<PAGE>

Howard H. Stevenson. Dr. Stevenson has been a Director since 1993. Since
1982, Dr. Stevenson has been Sarofim-Rock Professor of Business Administration
at the Harvard University Graduate School of Business Administration. He is
also a Senior Associate Dean and Director of Financial and Information Systems
for Harvard Business School from 1991 to 1994. Dr. Stevenson also sits on the
boards of Harvard Business School Publishing Corporation, Camp Dresser &
McKee, Landmark Communications, Gulf States, The Baupost Group, Inc., The
Baupost Fund, Bessemer Securities Corporation, African Communications Group,
and Terry Hinge and Hardware.

John D. Lefler. Mr. Lefler has over 28 years of experience in the steel
industry and has been the President and Chief Executive Officer of Gulf States
since May 1993. Mr. Lefler has served Gulf States in various management
positions since 1986. Prior to joining Gulf States, he worked at USX for more
than 18 years in various management positions. Mr. Lefler serves as a Director
of Gulf States and First Alabama Bank.

BOARD COMMITTEES

AUDIT COMMITTEE. The Audit Committee, which met once during fiscal 1997, has
two members, Mr. Okonow and Mr. Ackerman. The Audit Committee reviews the
engagement of the Company's independent accountants, reviews annual financial
statements, considers matters relating to accounting policy and internal
controls and reviews the scope of annual audits. The findings of this
committee are reviewed by the Board of Directors.

STOCK COMPENSATION COMMITTEE. The Stock Compensation Committee has three
members, Mr. Karol, Mr. Okonow and Mr. Ackerman. The Stock Compensation
Committee did not meet during fiscal 1997. The Stock Compensation Committee
administers the Company's 1993 Employee, Director and Consultant Stock Option
Plan. See "--Stock Option Plan."

COMPENSATION COMMITTEE. The Company does not have a standing Compensation
Committee. Recommendations concerning salaries and incentive compensation
(other than stock options) for employees of the Company (other than Mr.
Ackerman) are made by Mr. Ackerman and are reviewed by the Board of Directors.
Recommendations concerning Mr. Ackerman's salary and incentive compensation
(other than stock options) are made by Mr. Karol and are reviewed by the Board
of Directors.

ELECTION AND COMPENSATION OF DIRECTORS

Ninety-six percent of the outstanding shares of the Common Stock is
currently owned by HMK, an affiliate of Watermill Ventures Ltd., which is in
turn 100% owned by members of the Karol family. Consequently, certain members
of the Karol family together beneficially own substantially all of the
outstanding shares of the Company's common stock and are able to determine the
outcome of all matters required to be submitted to stockholders for approval,
including the election of directors. See "Security Ownership of Certain
Beneficial Owners and Management."

Dr. Stevenson and Mr. Lefler each receive an annual retainer of $4,000,
payable quarterly, and a meeting fee of $1,500 for each meeting of the Board
of Directors attended. The Company reimburses ordinary and necessary out-of-
pocket expenses incurred by any Director in connection with his or her
services. In addition, Directors of the Company are eligible to receive non-
qualified stock options under the Company's 1993 Employee, Director and
Consultant Stock Option Plan (the "Stock Option Plan"). As of July 31, 1997,
no Director had been granted any stock options for services as a Director of
the Company. See "--Stock Option Plan."

33
<PAGE>

SUMMARY COMPENSATION TABLE

The following Summary Compensation Table includes, for the fiscal year ended
1997, individual compensation information for: (i) the Company's Chief
Executive Officer (the "CEO") and (ii) each of the other most highly
compensated persons who were serving as executive officers of the Company
(other than the CEO) at the end of fiscal 1997 whose salary and bonus earned
during fiscal 1997 exceeded $100,000 (collectively, the "named executive
officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
FISCAL --------------------------- ------------
NAME AND PRINCIPAL POSITION YEAR (1) SALARY BONUS OTHER #OPTIONS
- --------------------------- -------- -------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
Steven E. Karol, Chairman
of the Board............. 1997 $250,000 $70,000 $ -- --
Robert W. Ackerman,
President and
Chief Executive Officer.. 1997 275,000 10,000 -- 253,125.000
Dale S. Okonow, Vice
President and Secretary.. 1997 175,000 -- -- 56,953.125
Alton W. Davis, Vice
President--Operations.... 1997 127,000(2) 10,000 46,000(3) 25,000.000
John F. Lovingfoss, Vice
President--Sales......... 1997 150,000 10,000 -- 56,953.125
Stephen R. Johnson, Vice
President and
Chief Financial Officer.. 1997 150,000 10,000 -- 35,312.500
</TABLE>
- --------
(1) Pursuant to the Instructions to Item 402(b) of Regulation S-K, information
with respect to fiscal years prior to fiscal 1997 has not been included.
(2) Mr. Davis was hired on August 12, 1996.
(3) Represents moving and related expenses for Mr. Davis.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF PERCENT OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS GRANTED EXERCISE ANNUAL RATES OF
UNDERLYING OPTIONS TO EMPLOYEES IN OR STOCK PRICE APPRECIATION
NAME GRANTED (1) FISCAL YEAR BASE PRICE FOR OPTION TERM
- ---- ------------------ ---------------- ---------- -------------------------
5% 10%
----------- -------------
<S> <C> <C> <C> <C> <C>
Steven E. Karol......... -- --% $ -- $ -- $ --
Robert W. Ackerman...... -- -- -- -- --
Dale S. Okonow.......... -- -- -- -- --
Alton W. Davis.......... 25,000 49 20.52 835,623 1,330,590
John F. Lovingfoss...... -- -- -- -- --
Stephen R. Johnson...... 10,000 20 20.52 334,239 532,236
</TABLE>
- --------
(1) All the options were granted under the Stock Option Plan. The options
granted to the named executive officers during 1997 are incentive and non-
qualified stock options and vest on April 30, 1999.

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

During the fiscal year ended April 30, 1997, none of the named executive
officers exercised stock options. The following table provides information
regarding the number of exercisable stock options as of April 30, 1997 and the
value of "in-the-money" options, which values represent the positive spread
between the exercise price of any such option and the fiscal year-end value of
the Company's Common Stock.

34
<PAGE>

<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF THE UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR END FISCAL YEAR END
----------------------------------- ---------------------------------
NAME EXERCISABLE UNEXERCISABLE (2) EXERCISABLE (1) UNEXERCISABLE (2)
- ---- ---------------- ------------------ --------------- -----------------
<S> <C> <C> <C> <C>
Steven E. Karol......... -- -- $ -- --
Robert W. Ackerman...... 253,125.000 -- 3,133,502 --
Dale S. Okonow.......... 56,953.125 -- 705,114 --
Alton W. Davis.......... -- 25,000.000 -- --
John F. Lovingfoss...... 56,953.125 -- 705,114 --
Stephen R. Johnson...... 25,312.500 10,000.000 313,384 --
</TABLE>
- --------
(1) The value of unexercised in-the-money options at fiscal year end assumes a
fair market value for the Company's Common Stock of $19.788, as determined
by the performance-based formula prescribed in the non-qualified and
incentive agreements entered into pursuant to the Stock Option Plan.
(2) The exercise price of Messrs. Davis and Johnson's unexercisable options
was higher than the fair market value and thus none of such options were
"in-the-money" as of such date.

STOCK OPTION PLAN

On September 15, 1993, the Board of Directors adopted, and the stockholders
of the Company approved, the Company's Stock Option Plan. The Stock Option
Plan provides for the grant of incentive stock options to key employees of the
Company and non-qualified stock options to key employees, directors and
consultants of the Company. A total of 580,000 shares of Common Stock, which
would represent approximately 13.4% of the Company's Common Stock on a fully
diluted basis, have been reserved for issuance under the Stock Option Plan
upon the exercise of options. During the year ended April 30, 1997, 51,000
options were granted, leaving 456,000 options outstanding at April 30, 1997.
The options granted on December 15, 1993 to the named executive officers are
incentive stock options and non-qualified stock options and vested on April
30, 1996. The options granted during the year ended April 30, 1997 to the
named executive officer are non-qualified and vest on April 30, 1999. The
Stock Option Plan is administered by the Stock Compensation Committee of the
Board of Directors. There were no stock options exercised during fiscal 1997.

EXECUTIVE INCENTIVE PLAN

Each of the named executive officers, excluding Messrs. Karol and Okonow, is
eligible to receive bonus compensation under the Company's Executive Bonus
Plan (the "Incentive Plan"). The Incentive Plan provides that (i) in the event
that actual pre-tax profit for any fiscal year equals or exceeds budgeted pre-
tax profit for such year, participants in the Incentive Plan will be paid a
bonus ranging from 30% to 50% of such participant's base salary and (ii) in
the event that actual pre-tax profit for any fiscal year does not meet
budgeted pre-tax profit for such year, by less than 20%, the Company's Board
of Directors may, at its discretion, (A) establish a bonus pool of up to 20%
of the total base pay of all participants in the Incentive Plan and (B) award
bonus payments from such bonus pool, if any, to participants in the Incentive
Plan. Such bonus payments, if any, are to be based upon (x) the individual
performance of such participant, (y) the performance of such participant's
department and (z) such participant's contribution to the Company's overall
performance. Bonuses, if any, are required to be paid within 90 days after the
Company's fiscal year end.

PENSION PLAN

The Company maintains a retirement plan that is an Internal Revenue Code
(the "Code") qualified defined benefit pension plan (the "Pension Plan"). At
normal retirement date (age 65 or completion of 30 years of service), a
participant is paid a pension equal to the sum of: (a) the product of the
participant's years of plan service from September 1, 1981 through December
31, 1984 and 1.25% of his average monthly compensation (up to $12,500),
determined over the participant's highest five consecutive years; and (b) the
product of the participant's years of plan service after January 1, 1985 and
0.9% of his average monthly compensation (up to

35
<PAGE>

$12,500) as defined above. The normal form of pension is a lifetime annuity
with a 50% survivor pension for any surviving spouse. Optional forms of
payment are available and are actuarially equivalent to a lifetime annuity
without surviving spouse benefits. The Pension Plan also provides for early
retirement benefits on an actuarially reduced basis for participants who reach
age 55 with at least 10 years of service. Vested retirement benefits are
available for participants who are terminated with at least five years of plan
service. Although the pension is reduced to the extent of any profit sharing
retirement annuity provided by discretionary contributions under the Sheffield
Steel Corporation Thrift and Profit Sharing Plan (the "Profit Sharing Plan"),
no such discretionary contributions have been made to the Profit Sharing Plan.

Years of service for purposes of the Pension Plan with respect to the named
executive officers are as follows: Mr. Ackerman, 5 years; Mr. Lovingfoss, 37
years; and Mr. Johnson, 20 years. Mr. Davis has not yet been with the Company
for a full year. Messrs. Karol and Okonow are excluded from the Pension Plan.

The following table shows the projected annual pension benefits payable
under the current pension plan at the normal retirement age of 65:

ANNUAL NORMAL PENSION BENEFITS

FOR YEARS OF SERVICE SHOWN

<TABLE>
<CAPTION>
YEARS OF SERVICE
-------------------------------------------
ANNUAL BASE SALARY 15 20 25 30 35
- ------------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$100,000........................... $13,500 $18,000 $22,500 $27,000 $31,500
125,000........................... 16,875 22,500 28,125 33,750 39,375
150,000 and above................. 20,250 27,000 33,750 40,500 47,250
</TABLE>

THRIFT AND PROFIT SHARING PLAN

The Company's Profit Sharing Plan is a Code-qualified defined contribution
plan which permits its employees to elect "after-tax" payroll deductions
between 4% and 14% of compensation. The Profit Sharing Plan also provides for
additional discretionary contributions by the Company, which would be
allocated according to compensation ratios and, to the extent permitted by the
Code, according to compensation in excess of the FICA taxable wage base.
Discretionary Company contributions are forfeited by terminated employees with
less than five years of service. Discretionary contributions would offset
pensions under the Pension Plan described above, but no discretionary Company
contributions have been made to the Profit Sharing Plan.

401(K) RETIREMENT PLAN

The Company also sponsors a plan which permits eligible employees of the
Company to defer compensation to the extent permitted by Section 401(k) of the
Code (the "Retirement Plan"). The Retirement Plan permits, but does not
require, discretionary Company contributions. The Company made contributions
of approximately $81,000 to the Joliet Facility's 401(k) plan for the year
ended April 30, 1997.

36
<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

HMK currently owns 96% of the issued and outstanding shares of the Common
Stock. HMK is a Massachusetts-based privately-owned holding company engaged in
manufacturing and distribution businesses through two principal operating
groups.

The table below sets forth certain information regarding beneficial
ownership of the Common Stock as of October 1, 1997 by (i) each current
director of the Company, (ii) each of the named executive officers, (iii) all
current directors and officers of the Company as a group and (iv) each person
or group of persons known by the Company to beneficially own more than 5% of
the outstanding shares of Common Stock.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP (A) (B)
------------------------------------
NAME AND ADDRESS** NUMBER OF SHARES PERCENT
- ------------------ ------------------ ------------
<S> <C> <C>
Steven E. Karol.................... 1,614,397 42.71%(c)(e)
HMK Enterprises, Inc.
800 South Street
Waltham, MA 02154
Jane M. Karol...................... 1,614,397 42.71%(d)(e)
HMK Enterprises, Inc.
800 South Street
Waltham, MA 02154
Robert W. Ackerman................. 286,875(f) 7.58%
Sheffield Steel Corporation
220 N. Jefferson
Sand Springs, OK 74063
John F. Lovingfoss................. 90,703(g) 2.40%
Dale S. Okonow..................... 74,078(h) 1.96%
Stephen R. Johnson................. 25,313(i) *
Alton W. Davis..................... -- *
Howard H. Stevenson................ -- *
John D. Lefler..................... -- *
All current executive officers,
directors and nominees
of the Company as a group (9
persons).......................... 3,705,743(j) 98.03%
</TABLE>
- --------
* Represents beneficial ownership of less than 1% of the Company's
outstanding shares of Common Stock
** Addresses are given for beneficial owners of more than 5% of the
outstanding Common Stock only.
(a) The number of shares of Common Stock issued and outstanding on October 1,
1997 was 3,375,000. The calculation of percentage ownership of each listed
beneficial owner is based upon the number of shares of Common Stock issued
and outstanding at October 1, 1997, plus shares of Common Stock subject to
options or warrants held by such person at October 1, 1997 and exercisable
within 60 days thereafter. The persons and entities named in the table
have sole voting and investment power with respect to all shares shown as
beneficially owned by them, except as otherwise noted.
(b) Beneficial ownership as reported in the table above has been determined in
accordance with Rule 13d-3 under the Exchange Act.
(c) Of the 1,614,397 shares of Common Stock beneficially owned by Mr. Karol,
11,272 shares, or.33%, are owned of record by him. Mr. Karol also owns
74.7634 shares of the Class A common stock, $1.00 par value, of HMK (the
"HMK Class A Common Stock"), which shares constitute 50% of the issued and
outstanding shares of HMK Class A Common Stock. Of the 1,614,397 shares of
Common Stock beneficially owned by Mr. Karol, 1,603,125 shares, or 47.5%,
are deemed to be beneficially owned by Mr. Karol by virtue of his
ownership of such shares of HMK Class A Common Stock.

37
<PAGE>

(d) Of the 1,614,364 shares of Common Stock beneficially owned by Ms. Karol,
11,239 shares, or.33%, are owned of record by her. Ms. Karol also owns
74.7634 shares of HMK Class A Common Stock, which shares constitute 50% of
the issued and outstanding shares of HMK Class A Common Stock. Of the
1,614,364 shares of Common Stock beneficially owned by Ms. Karol,
1,603,125 shares, or 47.5%, are deemed to be beneficially owned by Ms.
Karol by virtue of her ownership of such shares of HMK Class A Common
Stock.
(e) Each of Steven E. Karol and Jane M. Karol own 74.7634 shares of HMK Class
A Common Stock, constituting 50% of the issued and outstanding shares of
HMK Class A Common Stock and 100% of the issued and outstanding shares of
HMK Class A Common Stock in the aggregate. HMK Class A Common Stock is the
only class of voting stock of HMK issued and outstanding. For purposes of
determining beneficial ownership of Common Stock as reported in the table
above, ownership of any class of non-voting stock of HMK has not been
included.
(f) Includes 253,125 shares which Mr. Ackerman may acquire upon the exercise
of options within 60 days after July 31, 1997.
(g) Includes 56,953 shares which Mr. Lovingfoss may acquire upon exercise of
options within 60 days after October 1, 1997.
(h) Includes 56,953 shares which Mr. Okonow may acquire upon exercise of
options within 60 days after October 1, 1997.
(i) Includes 25,313 shares which Mr. Johnson may acquire upon the exercise of
options within 60 days after October 1, 1997.
(j) Includes an aggregate of 392,344 shares which may be acquired upon the
exercise of options within 60 days after October 1, 1997.

38
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

CERTAIN BUSINESS RELATIONSHIPS

HMK MANAGEMENT CONSULTING SERVICES AGREEMENT

As of the Issue Date, Sheffield will enter into a Management Consulting
Services Agreement with HMK (the "Management Agreement"). The Management
Agreement is terminable by either party thereto upon 180 days' prior written
notice to the other party. Pursuant to the Management Agreement, HMK provides
management and business consulting services to Sheffield and its subsidiaries
as Sheffield may from time to time reasonably request, including, without
limitation: financial and accounting management services; marketing services;
executive personnel services; analyses and recommendations with respect to
data processing systems and services; corporate development services; contract
administration and limited legal services; representation and assistance in
the audit process and coordination of accounting functions; negotiation and
maintenance of insurance programs; and consultation and assistance in creating
and maintaining deferred compensation, pension and profit sharing plans and
other human resource related programs.

As compensation for the management and business consulting services provided
to the Company by HMK, Sheffield is obligated to pay to HMK a fee equal to of
1% of the Company's consolidated sales, payable on a monthly basis. As
additional compensation, Sheffield has agreed that all employees and directors
(and their immediate family members) of HMK and its wholly-owned insurance
services subsidiary will be covered under Sheffield's group health insurance
plan, and that Sheffield is responsible for adjusting and paying all claims by
such employees and directors (and their immediate family members) under
Sheffield's group health insurance plan, without any cost or charge-back to,
or any reimbursement from, HMK. In addition to the foregoing compensation,
Sheffield is obligated to reimburse HMK for the cost of all travel,
entertainment, telephone and other expenses incurred by HMK in performing its
services under the Management Agreement.

Management fees paid by the Company pursuant to previous agreements with HMK
during fiscal 1995, 1996 and 1997 and for the three months ended July 31, 1997
were $598,000, $573,000, $569,000 and $159,000, respectively.

RISK MANAGEMENT SOLUTIONS, INC. INSURANCE AGREEMENT.

The Company has entered into an Insurance Services Agreement (the "Insurance
Agreement") with Risk Management Solutions, Inc. ("Risk Management"), a
wholly-owned subsidiary of HMK. The Insurance Agreement is terminable by
either party thereto upon 180 days' prior written notice to the other party.
Pursuant to the Insurance Agreement, Risk Management provides insurance
services to the Company and its subsidiaries, including, without limitation:
procuring and maintaining property and casualty insurance coverage;
maintaining accounting records for all administered insurance programs;
reviewing and recommending alternative financing methods for insurance
coverages; identifying and evaluating risk exposures; reviewing claims and
expenses; budgeting for insurance expenses; and preparing and filing proof of
loss statements for insured claims. As compensation for the insurance services
provided to the Company and its subsidiaries, the Company is obligated to pay
to Risk Management a fee equal to 15% of the total annual cost of the
Company's insurance program, payable monthly. In addition to the foregoing
compensation, the Company is obligated to reimburse Risk Management for the
cost of all travel, entertainment, telephone and other expenses incurred by
Risk Management in performing its services under the Insurance Agreement.

HMK INCOME TAX EXPENSE ALLOCATION POLICY AND TAX SHARING AGREEMENT

HMK is the common parent of an "affiliated group" of corporations (as
defined in the Code), which includes Sheffield and its subsidiaries, as well
as other corporations controlled directly or indirectly by HMK. Pursuant to an
Income Tax Expense Allocation Policy and Tax Sharing Agreement effective May
1, 1991 among HMK and Sheffield and its subsidiaries (the "Tax Sharing
Agreement"), the determination/allocation of income

39
<PAGE>

tax expense (current and deferred) among members of the affiliated group or
subgroup shall, for purposes of the separate financial statements of the
affiliated group or subgroup (or any member of the affiliated group or
subgroup), be determined on a separate company basis as if the member computed
its tax expense on a separate basis and, since the affiliated group has
adopted the provisions of FASB Statement of Accounting Standards No. 109-
"Accounting for Income Taxes" (SFAS 109), (i) deferred taxes are
allocated/recognized on a separate company basis for all affiliated group
members that have temporary differences at the end of the relevant period,
(ii) income tax expense (current and deferred) is allocated/recognized on a
separate company basis for all affiliated group members irrespective of the
fact that the affiliated group has no current or deferred tax expense and
(iii) the determination/allocation of current and deferred income tax expense
on a separate company basis is determined based on the principles of SFAS 109.

Pursuant to the Tax Sharing Agreement, the affiliated group has elected to
allocate the consolidated federal income tax liability of the affiliated group
among the group's members pursuant to the consolidated return regulations of
the Code. Notwithstanding such election, Sheffield and its subsidiaries will
collectively pay to HMK, or the subsidiaries will each pay to Sheffield and
Sheffield will pay to HMK, the members' share of their separately computed
current tax expense as determined on a separate company basis, and the payment
of such current tax expense will be determined irrespective of the fact that
the affiliated group has no current tax expense, but after such income tax
expense (current and deferred) has been allocated/recognized on a separate
company basis for all affiliated group members irrespective of the fact that
the affiliated group has no current or deferred tax expense. In the event that
a temporary taxable difference originates within one member of the affiliated
group and, as a result of the available elections, the temporary taxable
difference will reverse within another member of the affiliated group, the
member with whom the temporary taxable difference originated will reimburse
the member with whom the temporary taxable difference will reverse, for the
tax consequences resulting from the reversal of such differences. Such
reimbursement will be given effect when the liability (current or deferred) is
recognized by the member with whom the reversal will occur.

INDEBTEDNESS OF MANAGEMENT AND RELATED PARTIES

As of the end of fiscal 1997, HMK owed an aggregate of $2.7 million to the
Company. Of that amount, $2.2 million was related to certain tax attributes
allocated to the Company pursuant to the Tax Sharing Agreement with HMK. Under
that agreement, the receivable will be realized by reducing the future income
taxes otherwise payable by the Company to HMK. The remaining $0.5 million
relates to the Company's advance of funds to HMK to secure a letter of credit
needed for the insurance program of the Company's Joliet facility.

In September 1992, certain of the Company's officers, directors and members
of the Karol family purchased an aggregate of 5% of the issued and outstanding
shares of the Common Stock in exchange for an aggregate of $250,000 cash and
$1,000,000 in non-recourse promissory notes secured by pledges of such stock.
The non-recourse promissory notes evidencing each such shareholders'
indebtedness bear interest at a rate of 7.61% and become due on February 1,
2007 or on such earlier date upon the occurrence of certain events as stated
in the notes. During the year ended April 30, 1997, the Company signed an
agreement to repurchase 50,625 shares of Common Stock from two former officers
of the Company. Certain payments, including those to reacquire the Common
Stock, are currently not permitted under the terms of the 2001 Notes and
revolving credit agreements. As a result of this transaction, $300,000 of the
promissory notes plus interest of $93,000 was satisfied and the Company
recorded a note payable in the amount of $662,000 to the former shareholders.
The note payable will accrue simple interest at 6.02% and will be repaid in
five annual installments beginning when, and only when, the purchase of the
shares is permitted under the Indenture and the Company's credit agreements.

Each of Robert W. Ackerman, President and Chief Executive Officer and a
Director of the Company and John F. Lovingfoss, Vice President--Sales and
Marketing of the Company, purchased 1% of the issued and outstanding shares of
Common Stock in exchange for $50,000 in cash and a non-recourse promissory
note with an original principal balance of $200,000. The aggregate amount of
indebtedness owed to the Company by each of such individuals as of April 30,
1997 is $270,596 ($200,000 principal amount and $70,596 of accrued interest).
The largest amount of indebtedness outstanding during fiscal 1997 for each of
Messrs. Ackerman and Lovingfoss was $270,596.

40
<PAGE>

Dale S. Okonow, Vice President, Secretary and a Director of the Company
purchased 0.5% of the issued and outstanding shares of Common Stock in
exchange for $25,000 in cash and a non-recourse promissory note with an
original principal balance of $100,000. The aggregate amount of indebtedness
owed to the Company by Mr. Okonow as of April 30, 1997 is $135,298 ($100,000
principal amount and $35,298 of accrued interest). The largest amount of
indebtedness outstanding during fiscal 1997 for Mr. Okonow was $135,298.

Each of Jane M. Karol, a Director of the Company and Joan L. Karol, mother
of each of Jane M. Karol and Steven E. Karol, Directors of the Company,
purchased 0.333% of the issued and outstanding shares of Common Stock in
exchange for $16,665 in cash and a non-recourse promissory note with an
original principal balance of $66,660. The aggregate amount of indebtedness
owed to the Company by each of such individuals as of April 30, 1997 is
$90,190 ($66,660 principal amount and $23,530 of accrued interest). The
largest amount of indebtedness outstanding during fiscal 1997 for each of Jane
M. Karol and Joan L. Karol was $90,190.

Steven E. Karol, Chairman of the Board of Directors of the Company,
purchased 0.334% of the issued and outstanding shares of Common Stock in
exchange for $16,670 in cash and a non-recourse promissory note with an
original principal balance of $66,680. The aggregate amount of indebtedness
owed to the Company by Mr. Karol as of April 30, 1997 is $90,215 ($66,680
principal amount and $23,535 of accrued interest). The largest amount of
indebtedness outstanding during fiscal 1997 for Mr. Karol was $90,215.

41
<PAGE>

DESCRIPTION OF REVOLVING CREDIT FACILITY

Sheffield is party to the Revolving Credit Facility with NationsBank, N.A.
("NationsBank"), pursuant to which NationsBank provides Sheffield with a
revolving credit facility (the "Revolving Credit Facility") of $40 million,
subject to levels of borrowing availability. Pursuant to an amendment
effective as of the Issue Date, borrowing availability is limited to an amount
equal to the sum of 85% of the face value of eligible accounts receivable plus
65% of the lower of fair market value or cost of eligible inventory. The total
loans outstanding at any one time against eligible inventory may not exceed
$27 million. The obligations of Sheffield under the Revolving Credit Facility
are secured by a first priority lien on Sheffield's inventory, accounts
receivable and general intangibles. Borrowings under the Revolving Credit
Facility bear interest at a fluctuating annual rate equal to between 0 and 1%
in 1/4% increments based on the Company's interest coverage plus the prime
rate as announced by NationsBank, payable monthly. The Company intends to use
a portion of the net proceeds of the Offering to pay down amounts outstanding
under the Revolving Credit Facility, but will retain the Revolving Credit
Facility for future borrowings. See "Recent Developments" and
"Capitalization."

Pursuant to an amendment that will become effective upon consummation of the
Offering, the Revolving Credit Facility requires the Company to maintain (i) a
minimum availability of $5.0 million on a formula basis and (ii) a ratio of
EDITDA to cash interest expense of 1.1 to 1.0.

The following (among other events) constitute events of default, the
occurrence and continuance of which would entitle NationsBank to terminate the
Revolving Credit Facility and to declare all amounts outstanding thereunder to
be immediately due and payable: (1) non-payment when due of any amount payable
under the Revolving Credit Facility; (2) the attachment of any involuntary
lien (other than as permitted by NationsBank), or entry of any fixed judgment,
upon Sheffield in an amount in excess of $250,000 which has not been released
within 60 days; (3) violation of any covenants, or the material untruth of any
representation or warranty made by Sheffield; (4) bankruptcy or other
insolvency proceedings are instituted against Sheffield which are not
dismissed or vacated within 60 days; (5) change of ownership, suspension of
business, disposition of certain assets, certain mergers or consolidations of
Sheffield; (6) seizure of the collateral by any third party; and (7) an event
of default of the obligations under the First Mortgage Notes. Any event of
default gives NationsBank the right to possess and sell the collateral
securing Sheffield's obligations.

42
<PAGE>

DESCRIPTION OF WARRANTS

The Warrants were issued under a Warrant Agreement (the "Warrant Agreement')
between the Company and State Street Bank and Trust Company, formerly known as
Shawmut Bank Connecticut, N.A., as Warrant Agent (the "Warrant Agent"), a copy
of which was filed as an exhibit to the Registration Statement. The following
summaries of certain provisions of the Warrant Agreement do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Warrants and the Warrant Agreement, including
the definitions therein of certain terms. Wherever particular sections or
defined terms of the Warrant Agreement are referred to, such sections or
defined terms are incorporated by reference.

Each Warrant entitles the registered holder thereof (the "holder"), subject
to and upon compliance with the provisions thereof and of the Warrant
Agreement, at such holder's option prior to 5:00 P.M., New York City time, on
November 1, 2001, to purchase from the Company one (or such other number as
may result from adjustments as provided in the Warrant Agreement) share of
Common Stock (each, a "Warrant Share") at a purchase price of $.01 per share
(the "Exercise Price"). The number of shares of Common Stock for which a
Warrant may be exercised is subject to adjustment as set forth in the Warrant
Agreement.

Warrants may be exercised by surrendering the Warrant Certificate evidencing
such Warrants with the form of election to purchase shares set forth on the
reverse side thereof duly completed and executed by the holder thereof and
paying in full the Exercise Price for each such Warrant at the office or
agency designated for such purpose, which will initially be the corporate
trust office of the Warrant Agent in New York, New York. The Exercise Price
may be paid only in cash or by certified or official bank check. In the event
the Company determines that it is unable to deliver a prospectus meeting the
requirements of the federal securities laws in connection with the issuance of
shares of Common Stock upon the exercise of Warrants, the Company may defer
issuing such shares; provided, that such deferral may not be in excess of 30
days from the date of exercise.

The Warrant Certificates evidencing the Warrants may be surrendered for
exercise or exchange, and the transfer of Warrant Certificates will be
registrable, at the office or agency of the Company maintained for such
purpose, which initially will be the corporate trust office of the Warrant
Agent in New York, New York. The Warrant Certificates will be issued only in
fully registered form in denominations of whole numbers of Warrants. No
service charge will be made for any exercise, exchange or registration of
transfer of Warrant Certificates, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.

Holders of Warrants are not entitled, by virtue of being such holders, to
receive dividends, vote, receive notice of any meetings of stockholders or
otherwise have any rights of stockholders of the Company.

The number of Warrant Shares issuable upon exercise of a Warrant (the
"Exercise Rate") is subject to adjustment from time to time upon the
occurrence of certain events, including (a) dividends or distributions on
Common Stock payable in Common Stock or other capital stock; (b) subdivisions,
combinations or certain reclassifications of Common Stock; (c) distributions
to all holders of Common Stock of rights, warrants or options to purchase
Common Stock at a price per share less than the Current Market Value of the
Common Stock; (d) certain sales of Common Stock by the Company at a price per
share less than the Current Market Value; provided, that no such adjustment
will be made with respect to any such sale effected pursuant to the exercise
of a stock option issued under the Company's 1993 Employee, Director and
Consultant Stock Option Plan if, (i) at the time of such sale, the aggregate
number of shares of Common Stock that shall have been issued pursuant to the
exercise of such options does not exceed 580,000 shares of Common Stock
(approximately 13.4% of the Company's outstanding Common Stock on a fully
diluted basis immediately after giving effect to the offering of the Units,
including, for this purpose, shares reserved for issuance under said stock
option plan) and (ii) at the time of the grant of such stock option, such
stock option was issued with an exercise price not less than the then Current
Market Value for the underlying Common Stock; and (e) distributions to
stockholders of certain types of assets, debt securities or certain rights,
warrants or options to purchase securities of the Company.

43
<PAGE>

For purposes of the preceding paragraph, the term "Current Market Value" per
share of Common Stock at any date means (i) if more than 30% of the then
outstanding shares of Common Stock shall have been distributed through
registered public offerings, the average of the "immediate market price" of
the Common Stock for fifteen consecutive trading days immediately preceding
the date in question or (ii) if 30% or less of the then outstanding shares of
Common Stock shall have been distributed through registered public offerings,
the fair market value of the Common Stock as determined by the Company's Board
of Directors in good faith and in reliance on a valuation by an Independent
Financial Advisor (as defined in the Warrant Agreement) which valuation shall
have been given not earlier than twelve months prior to the date at which the
"Current Market Value" is being determined. The "immediate market price" of
the Common Stock will be the closing sale price of the Common Stock on the
principal trading market for the Common Stock on each such trading day or, if
there is no such sale price, the average of the closing bid and asked prices
for the Common Stock on such trading day on the principal trading market for
the Common Stock or, if there is no ascertainable market price for the Common
Stock, as determined in good faith by the Company's Board of Directors.

If the Company is a party to a consolidation, merger or binding share
exchange, or certain transfers of all or substantially all of its assets
occur, the right to exercise a Warrant for Common Stock may be changed into a
right to receive securities, cash or other assets of the Company or another
person.

Fractional shares of Common Stock are not required to be issued upon
exercise of Warrants, but in lieu thereof the Company will pay a cash
adjustment.

The Warrant Agreement permits, with certain exceptions, the amendment
thereof and the modification of the rights and obligations of the Company and
the rights of the holders of Warrant Certificates under the Warrant Agreement
at any time by the Company and the Warrant Agent with the consent of the
holders of Warrant Certificates representing a majority in number of the then
outstanding Warrants.

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 10,000,000 shares of
Common Stock, par value $.01 per share.

COMMON STOCK

As of October 1, 1997, there were 3,375,000 shares of Common Stock issued
and outstanding and held of record by 9 stockholders. All of such shares are
validly issued, fully-paid and nonassessable. The holders of Common Stock are
entitled to one vote for each share held of record on all matters submitted to
a vote of the stockholders and do not have cumulative voting rights.
Accordingly, holders of a majority of the shares of Common Stock entitled to
vote in any election of directors may elect all of the directors standing for
election. Holders of Common Stock are entitled to receive ratably such
dividends as are declared by the Board of Directors out of funds legally
available therefor. The instruments governing the Company's outstanding
indebtedness require compliance with financial ratios and other related
covenants which may prohibit the Company from paying dividends. See
"Description of Certain Indebtedness". Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights. In the event of a
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in all assets remaining after payment of all
debts and liabilities. On September 15, 1993, the Company declared a 3,375-
for-l stock split, payable by dividend to holders of record of Common Stock on
September 16, 1993.

DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS

The Company's By-Laws provide that the number of directors of the Company
shall not be more than five or less than one, as fixed from time to time by
the Board of Directors. The By-Laws provide that any action required or
permitted to be taken at any annual or special meeting of stockholders may be
taken without a

44
<PAGE>

meeting, without prior notice and without a vote, if a consent in writing,
setting forth the actions so taken, is executed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Special meetings of the stockholders may
be called by the Chairman, President, Secretary or a majority of the Board of
Directors.

The Company's Certificate of Incorporation limits the liability of Directors
to the maximum extent permitted by Delaware General Corporation Law. Delaware
law provides that the directors of a corporation will not be personally liable
to such corporation or its stockholders for monetary damages for breach of
their fiduciary duties as directors, except for liability (i) for any breach
of their duty of loyalty to the corporation or its stockholders; (ii) for acts
or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law; (iii) for unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law; or (iv) for any transaction from which the director
derives an improper personal benefit. The effect of this provision is to
eliminate the rights of the Company and its stockholders (through
stockholders' derivative suits on behalf of the Company) to recover monetary
damages against a director for breach of the fiduciary duty of care as a
director (including breaches resulting from negligent or grossly negligent
behavior) except in the situations described in clauses (i) through (iv)
above. This provision does not limit or eliminate the rights of the Company or
any stockholder to seek non-monetary relief such as an injunction or
rescission in the event of a breach of a director's duty of care. The Company
believes that these provisions will assist the Company in attracting and
retaining qualified individuals to serve as directors.

The Delaware General Corporation Law provides generally that the affirmative
vote of a majority of the shares entitled to vote on any matter is required to
amend a corporation's certificate of incorporation or bylaws, unless the
corporation's certificate of incorporation or by-laws, as the case may be,
requires a greater percentage. Neither the Company's Certificate of
Incorporation nor its By-Laws impose a greater percentage stockholder vote for
any amendment to or repeal of the Certificate of Incorporation or By-Laws. The
By-Laws may also be amended or repealed by a majority vote of the whole Board
of Directors.

PLAN OF DISTRIBUTION

The shares of Common Stock issuable upon exercise of the Warrants are being
offered directly by the Company pursuant to the terms of the Warrants. No
underwriter is being utilized in connection with the offering.

In order to facilitate the exercise of the Warrants, the Company will
furnish, at its expense, such number of copies of this Prospectus to each
recordholder of the Warrants as the holder may request, together with
instructions that such copies be delivered to the beneficial owners thereof.

In connection with the offering of the Units, the Company agreed to
indemnify the underwriters of that transaction against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments
that the underwriters may be required to make in respect thereof.

The Company has no plans to list the Warrants or the Common Stock issuable
upon the exercise thereof on any securities exchange. The Company was advised
by the underwriters in connection with the offering of the Units that it
intended, at that time, to make a market in each of such securities, however,
the underwriters are not obliged to do so. Any such market-making activity may
be discontinued at any time, for any reason, without notice. If each
underwriter ceases to act as a market maker for any of such securities for any
reason, there can be no assurance that another firm or person will make a
market therein. There can be no assurance that an active market for any of
such securities will develop, or, if a market does develop, at what prices
such securities will trade.

45
<PAGE>

LEGAL MATTERS

The validity of the authorization and issuance of the Common Stock issuable
upon the exercise of the Warrants is being passed upon for the Company by
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One Financial Center,
Boston, Massachusetts 02111.

EXPERTS

The consolidated financial statements of the Company as of April 30, 1997
and 1996 and for each of the years in the three-year period ended April 30,
1997 have been included herein in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm of experts in accounting and
auditing.

46
<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report............................................. F-2
Consolidated Balance Sheets.............................................. F-3
Consolidated Statements of Operations.................................... F-4
Consolidated Statements of Stockholders' Equity.......................... F-5
Consolidated Statements of Cash Flows.................................... F-6
Notes to Consolidated Financial Statements............................... F-7-18
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders Sheffield Steel Corporation:

We have audited the accompanying consolidated balance sheets of Sheffield
Steel Corporation and subsidiaries as of April 30, 1996 and 1997, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended April 30, 1997.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Sheffield
Steel Corporation and subsidiaries at April 30, 1996 and 1997, and the results
of their operations and their cash flows for each of the years in the three-
year period ended April 30, 1997, in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP

Tulsa, Oklahoma
June 27, 1997

F-2
<PAGE>

SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
APRIL 30,
---------------- JULY 31,
1996 1997 1997
-------- ------- -----------
(UNAUDITED)
ASSETS
------
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents....................... $ 46 15 18
Accounts receivable, less allowance for doubtful
accounts of $658 at April 30, 1996 and 1997,
and $733 at July 31, 1997, respectively........ 21,607 20,856 19,740
Inventories..................................... 40,321 37,112 35,964
Prepaid expenses and other...................... 914 1,452 1,272
Deferred income tax asset....................... 2,716 2,689 2,468
-------- ------- -------
Total current assets.......................... 65,604 62,124 59,462
Property, plant and equipment, net................ 68,461 65,885 65,251
Property held for sale............................ 457 439 439
Intangible asset, less accumulated amortization
of $1,667, $2,171 and $2,285 at April 30, 1996
and 1997 and July 31, 1997, respectively......... 3,818 3,314 3,200
Other assets...................................... 347 290 306
Receivable from parent............................ 2,705 2,705 2,705
Deferred income tax asset......................... 1,790 1,817 2,038
-------- ------- -------
$143,182 136,574 133,401
======== ======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
Current portion of long-term debt............... $ 717 936 696
Accounts payable................................ 20,495 16,475 15,862
Accrued interest payable........................ 4,500 4,500 2,250
Accrued liabilities............................. 6,281 5,601 6,254
Due to affiliated company....................... 47 49 49
-------- ------- -------
Total current liabilities..................... 32,040 27,561 25,111
Long-term debt, excluding current portion, less
unamortized discount of $1,840, $1,696 and
$1,647 at April 30, 1996 and 1997 and July 31,
1997, respectively.............................. 96,324 95,614 93,794
Accrued post-retirement benefit costs............. 7,823 9,095 9,533
Other liabilities................................. 610 2,148 2,064
-------- ------- -------
Total liabilities............................. 136,797 134,418 130,502
-------- ------- -------
Stockholders' equity:
Common stock, $.01 par value, authorized
10,000,000 shares, issued and outstanding
3,375,000 shares............................... 34 34 34
Additional paid-in capital...................... 3,591 2,536 2,536
Retained earnings............................... 4,037 528 1,283
-------- ------- -------
Total stockholders' equity.................... 7,662 3,098 3,853
Less loans to stockholders...................... 1,277 942 954
-------- ------- -------
6,385 2,156 2,899
Commitments and contingencies ....................
-------- ------- -------
$143,182 136,574 133,401
======== ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE>

SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED APRIL 30, JULY 31,
------------------------------- --------------------
1995 1996 1997 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales................... $ 175,753 172,317 170,865 45,203 47,717
Cost of sales........... 144,385 l43,121 140,234 37,547 38,309
--------- --------- --------- --------- ---------
Gross profit......... 31,368 29,196 30,631 7,656 9,408
Selling, general and
administrative expense. 12,156 11,737 11,923 3,227 3,297
Depreciation and
amortization expense... 5,930 6,567 6,775 1,696 1,711
Postretirement benefit
expense other than
pensions............... 3,153 2,776 2,353 701 688
Restructuring expense... -- -- 1,320 -- --
--------- --------- --------- --------- ---------
Operating income...... 10,129 8,116 8,260 2,032 3,712
--------- --------- --------- --------- ---------
Other (expense) income:
Interest expense, net. (8,049) (11,733) (11,769) (2,913) (2,957)
Other................. (58) 526 -- -- --
--------- --------- --------- --------- ---------
(8,107) (11,207) (11,769) (2,913) (2,957)
--------- --------- --------- --------- ---------
Income (loss) from
operations before
income tax expense... 2,022 (3,091) (3,509) (881) 755
Income tax expense...... 197 -- -- -- --
--------- --------- --------- --------- ---------
Net income (loss)..... $ 1,825 (3,091) (3,509) (881) 755
========= ========= ========= ========= =========
Net income (loss) per
common and common
equivalent share....... $ .50 (.92) (1.04) (.26) .20
========= ========= ========= ========= =========
Dividends per common
share.................. $ .18 .52 -- -- --
========= ========= ========= ========= =========
Common and common
equivalent shares
outstanding............ 3,649,588 3,375,000 3,375,000 3,375,000 3,840,767
========= ========= ========= ========= =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>

SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS
YEAR ENDED APRIL 30, ENDED JULY 31,
----------------------- ----------------
1995 1996 1997 1996 1997
------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Common stock......................... $ 34 34 34 34 34
------- ------ ------ ------- -------
Additional paid-in capital:
Balance at beginning of year....... 3,997 3,685 3,591 3,591 2,536
Agreement to repurchase common
stock............................. -- -- (1,055) -- --
Repurchase of common stock war-
rants............................. (312) (94) -- -- --
------- ------ ------ ------- -------
Balance at end of year............. 3,685 3,591 2,536 3,591 2,536
------- ------ ------ ------- -------
Retained earnings:
Balance at beginning of year....... 7,652 8,877 4,037 4,037 528
Net income (loss).................. 1,825 (3,091) (3,509) (881) 755
Dividends.......................... (600) (1,749) -- -- --
------- ------ ------ ------- -------
Balance at end of year............. 8,877 4,037 528 3,156 1,283
------- ------ ------ ------- -------
Total stockholders' equity........... $12,596 7,662 3,098 6,781 3,853
======= ====== ====== ======= =======
</TABLE>

See accompanying notes to consolidated financial statements

F-5
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
THREE
MONTHS
YEAR ENDED APRIL 30, ENDED JULY 31,
------------------------ ----------------
1995 1996 1997 1996 1997
-------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVI-
TIES:
Net income (loss)................. $ 1,825 (3,091) (3,509) (881) 755
Adjustments to reconcile net in-
come (loss) to net cash provided
by operating activities:
Depreciation and amortization... 6,317 6,711 6,919 1,732 1,760
Loss (gain) on sale or retire-
ment of assets................. 58 (526) -- -- --
Accrual of postretirement bene-
fits other than pensions, net
of cash paid................... 2,523 1,747 1,272 501 438
Deferred income taxes........... 23 -- -- (47) --
Changes in assets and liabili-
ties:
Accounts receivable........... (5,515) 1,564 751 2,735 1,116
Inventories................... (9,024) (303) 3,209 (2,459) 1,148
Prepaid expenses and other.... (563) (301) (538) (85) 180
Other assets.................. (115) 177 (54) (54) (28)
Accounts payable.............. 4,806 (2,624) (4,020) (2,267) (613)
Accrued interest payable...... 100 -- -- (2,250) (2,250)
Accrued liabilities........... 74 (172) (680) (150) 653
Due to affiliated company..... 4 -- 2 2 --
Income taxes payable.......... 123 (123) -- -- --
Other liabilities............. (121) 8 1,377 52 (84)
-------- ------ ------ ------- -------
Total adjustments............. (1,310) 6,158 8,238 (2,290) 2,320
-------- ------ ------ ------- -------
Net cash provided by (used in)
operating activities......... 515 3,067 4,729 (3,171) 3,075
-------- ------ ------ ------- -------
CASH FLOWS FROM INVESTING ACTIVI-
TIES:
Capital expenditures.............. (24,220) (4,978) (3,695) (634) (963)
Proceeds from sale of fixed as-
sets............................. 30 538 18 -- --
-------- ------ ------ ------- -------
Net cash used in investing ac-
tivities .................... (24,190) (4,440) (3,677) (634) (963)
-------- ------ ------ ------- -------
CASH FLOWS FROM FINANCING ACTIVI-
TIES:
Net increase (decrease) under re-
volving lines of credit.......... 19,553 2,081 (1,995) 4,381 (1,631)
Proceeds from issuance of long-
term debt........................ 659 2,195 2,075 -- 221
Repayment of long-term debt....... (58) (549) (715) (180) (699)
Payment of debt issuance costs.... -- (75) -- -- --
Payments in respect of stock ap-
preciation rights................ (524) (416) (448) (424) --
Dividends paid.................... (600) (1,749) -- -- --
Repurchase of common stock war-
rants............................ (312) (94) -- -- --
-------- ------ ------ ------- -------
Net cash provided by (used in)
financing activities......... 18,718 1,393 (1,083) 3,777 (2,109)
-------- ------ ------ ------- -------
Net (decrease) increase in cash and
cash equivalents.................. (4,957) 20 (31) (28) 3
Cash and cash equivalents at begin-
ning of year...................... 4,983 26 46 46 15
-------- ------ ------ ------- -------
Cash and cash equivalents at end of
year.............................. $ 26 46 15 18 18
======== ====== ====== ======= =======

SUPPLEMENTAL DISCLOSURE OF CASH
- -------------------------------
FLOW INFORMATION:
----------------

Cash paid during the year for:
Interest.......................... $ 9,675 11,611 11,625 5,127 5,207
======== ====== ====== ======= =======
Income taxes...................... $ 50 174 -- -- --
======== ====== ====== ======= =======
Noncash items:
Change in unfunded accumulated
benefit obligation included in
other assets and other
liabilities...................... $ 163 558 53 -- --
======== ====== ====== ======= =======

Adjustment of property, plant
and equipment to reflect
reclassification of idle assets
to property held for sale........ $ 157 -- -- -- --
======== ====== ====== ======= =======
Adjustment of property, plant and
equipment and accounts payable
representing amounts accrued for
fixed asset purchases............ $ 2,301 -- -- -- --
======== ====== ====== ======= =======
Decrease in paid-in capital for
stock repurchase agreement....... $ -- -- 1,055 -- --
======== ====== ====== ======= =======
Increase in other liabilities for
stock repurchase agreement....... $ -- -- 662 -- --
======== ====== ====== ======= =======
Decrease in loans to stockholders
related to stock repurchase
agreement........................ $ -- -- 393 -- --
======== ====== ====== ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE>

SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE DATA)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND NATURE OF BUSINESS

The consolidated financial statements of Sheffield Steel Corporation (the
Company) include the accounts of its divisions, Sheffield Steel-Sand Springs
(Sand Springs), Sheffield Steel-Kansas City (Kansas City), and Sheffield
Steel-Joliet (Joliet) and its wholly owned subsidiaries, Sheffield Steel
Corporation-Oklahoma City (Oklahoma City), and Sand Springs Railway Company
(the Railway). HMK Enterprises, Inc. (HMK) owns 95% of the currently issued
and outstanding common stock. All material intercompany transactions and
balances have been eliminated in consolidation.

The Company's primary business is the production of concrete reinforcing bar,
fence posts, and a range of hot rolled bar products including rounds, flats
and squares. The Company operates in an economic environment wherein the
commodity nature of both its products for sale and its primary raw materials
cause sales prices and purchase costs to fluctuate, often on a short-term
basis, due to the worldwide supply and demand situation for those commodities.
The supply and demand factors for its products for sale and the supply and
demand factors for its primary raw materials correlate to a degree, but are
not necessarily the same. Therefore, margins between sales price and
production costs can fluctuate significantly on a short-term basis.

The Company sells to customers located throughout the continental United
States. The Company had one customer that accounted for approximately 10% of
sales for the year ended April 30, 1996 and no customers that accounted for
greater than 10% of sales for the years ended April 30, 1997 and 1995. The
Company had one customer that accounted for approximately 12% and 11% of sales
for the three months ended July 31, 1996 and 1997, respectively (unaudited).
The Company grants credit to customers under normal industry standards and
terms. Policies and procedures have been established which allow for proper
evaluation of each customer's creditworthiness as well as general economic
conditions. Consequently, an adverse change in those factors could effect the
Company's estimate of its bad debts.

CASH EQUIVALENTS

The Company considers all highly liquid debt instruments with a maturity of
three months or less when purchased to be cash equivalents.

INVENTORIES

Inventories are stated at the lower of cost (as determined by the first-in
first-out method) or market. The cost of work-in-process and finished goods
inventories is based on standards which approximate cost. Work-in-process and
finished goods include direct labor and allocated overhead.

INTANGIBLE ASSETS

Intangible assets consist primarily of goodwill and debt issuance costs. The
cost of goodwill is being amortized on a straight-line basis over a period of
40 years. Debt issuance costs are amortized over the term of the related
indebtedness. It is the Company's policy to recognize an impairment of the
carrying value of goodwill when management's best estimate of undiscounted
future cash flows over the remaining amortization period is less than the
carrying amount.

F-7
<PAGE>

SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are recorded at cost. Depreciation is provided
over the estimated useful lives of the individual assets using the straight-
line method. The useful lives of the property and equipment range from three
to forty years. Significant renewals and betterments are capitalized; costs of
maintenance and repairs are charged to expense as incurred. Interest costs for
the construction of certain long-term assets are capitalized and amortized
over the estimated useful lives of the related assets.

INCOME TAXES

Deferred tax assets and liabilities are recognized for the estimated future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates in effect for the year in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes
the enactment date.

The Company is a member of a group that files a consolidated income tax return
with HMK (the Group). The Group's tax-sharing agreement provides that current
and deferred income taxes be determined as if each member of the Group were a
separate taxpayer. All income taxes payable or receivable are due to or from
HMK.

POSTRETIREMENT BENEFITS

The Company provides postretirement benefits to certain retirees and their
beneficiaries, generally for the remainder of their lives. The Company
measures the cost of its obligation based on an actuarially determined present
liability, the accumulated postretirement benefit obligation (APBO). The net
periodic costs are recognized as employees render the services necessary to
earn the postretirement benefits.

ENVIRONMENTAL COMPLIANCE COSTS

In October, 1996, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 96-1, Environmental Remediation
Liabilities. SOP 96-1 was adopted by the Company on May 1, 1997 and requires,
among other things, environmental remediation liabilities to be accrued when
the criteria of Statement of Financial Accounting Standards (SFAS) No. 5,
Accounting for Contingencies, have been met. The SOP also provides guidance
with respect to the measurement of the remediation liabilities. Such
accounting is consistent with the Company's current method of accounting for
environmental remediation costs and, therefore, adoption of this new Statement
will not have a material impact on the Company's financial position, results
of operations, or liquidity.

REVENUE RECOGNITION

Revenues from sales are recognized when products are shipped to customers,
except the Railway which recognizes revenues when services are performed.

INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE

Income (loss) per share is based on the weighted average number of common
shares and dilutive common stock equivalents outstanding each year.
Outstanding stock purchase warrants (see Note 5[a]) and stock options (see

F-8
<PAGE>

SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Note 12) are common stock equivalents but were excluded from per-share
computations in the years ended April 30, 1996 and 1997, and the three months
ended July 31, 1996, since their effect on loss per common share was anti-
dilutive.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

STOCK OPTION PLAN

Prior to May 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations.
As such, compensation expense would be recorded on the date of grant only if
the current market price of the underlying stock exceeded the exercise price.
On May 1, 1996, the Company adopted SFAS No. 123, Accounting for Stock-Based
Compensation, which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro
forma earnings per share disclosures for employee stock option grants as if
the fair-value-based method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB Opinion No. 25
and provide the pro forma disclosure provisions of SFAS No. 123.

(2) FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company defines the fair value of a financial instrument as the amount at
which the instrument could be exchanged in a current transaction between
willing parties. The carrying value of cash and cash equivalents, trade
accounts receivable and trade accounts payable approximates the fair value
because of the short maturity of those instruments. The carrying amounts of
notes payable to banks and an equipment financing company (see Note 5)
approximates the fair value due to these debt instruments having variable
interest rates similar to those that are currently available to the Company.
The fair value of the 2001 Notes (see Note 5) at April 30, 1997, based on the
currently offered market price, is approximately $71.6 million versus a
carrying value of approximately $73.3 million. The fair value of the 2001
Notes at July 31, 1997, is approximately $76.5 million versus a carrying value
of approximately $73.4 million (unaudited).

(3) INVENTORIES

The components of inventories are as follows:
<TABLE>
<CAPTION>
APRIL 30, (UNAUDITED)
-------------- JULY 31,
1996 1997 1997
------- ------ -----------
<S> <C> <C> <C>
Raw materials and storeroom supplies................. $10,823 10,924 11,667
Work in process...................................... 15,640 10,978 12,450
Finished goods....................................... 13,858 15,210 11,847
------- ------ ------
$40,321 37,112 35,964
======= ====== ======
</TABLE>

F-9
<PAGE>

SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(4) PROPERTY, PLANT AND EQUIPMENT

The components of property, plant and equipment are as follows:

<TABLE>
<CAPTION>
APRIL 30, (UNAUDITED)
---------------- JULY 31,
1996 1997 1997
-------- ------- -----------
<S> <C> <C> <C>
Land and buildings................................. $ 16,448 16,483 16,719
Machinery and equipment............................ 88,096 92,607 93,798
Roadbed and improvements........................... 5,129 5,197 5,250
Construction in process............................ 3,899 2,727 2,211
-------- ------- -------
113,572 117,014 117,978
Less accumulated depreciation and amortization..... $ 45,111 51,129 52,727
-------- ------- -------
$ 68,461 65,885 65,251
======== ======= =======
</TABLE>

Depreciation and amortization of property, plant and equipment charged to
operations in 1995, 1996 and 1997 was $5,388, $6,021 and $6,271, respectively.
Depreciation and amortization of property, plant and equipment charged to
operations for the three months ended July 31, 1996 and 1997 was $1,556 and
$1,597, respectively (unaudited). Included in depreciation expense for 1995 is
approximately $500 related to the write-down of mill equipment replaced during
1995. Approximately $2,078 and $25 of interest costs were capitalized as part
of property, plant and equipment in 1995 and 1996, respectively. No interest
costs were capitalized subsequent to April 30, 1996. Interest costs incurred
in 1995, 1996 and 1997 were $10,127, $11,758 and $11,769, respectively.
Interest costs incurred in the three months ended July 31, 1996 and 1997 were
$2,913 and $2,957, respectively (unaudited).

The range of estimated useful lives for determining depreciation and
amortization of the major classes of assets are:

<TABLE>
<S> <C>
Buildings......................... 5-25 years
Machinery and equipment........... 3-25 years
Roadbed and improvements.......... 3-40 years
</TABLE>

(5) LONG-TERM DEBT

Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
APRIL 30, (UNAUDITED)
-------------- JULY 31,
1996 1997 1997
------- ------ -----------
<S> <C> <C> <C>
2001 Notes, net of unamortized discount,
effective rate 12.5% [a]............................ $73,160 73,304 73,353
Revolving credit agreement [b]....................... 18,660 18,417 16,738
Railway term loan [c]................................ -- 2,000 1,500
Railway revolving credit agreement [c]............... 3,019 1,267 1,315
Equipment notes [d].................................. 2,202 1,562 1,584
------- ------ ------
97,041 96,550 94,490
Less current portion................................. 717 936 696
------- ------ ------
$96,324 95,614 93,794
======= ====== ======
</TABLE>

F-10
<PAGE>

SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

[a] On November 4, 1993, the Company issued $75 million of 12% first
mortgage notes due 2001 (2001 Notes) with warrants to purchase 10% of
the Company's common stock. The notes were sold in units consisting of
$1,000 principal amount and five warrants. Each warrant entitles the
holder to purchase one share of the Company's common stock through
November 1, 2001, at an exercise price of $.01 per share, subject to
adjustment. The notes are secured by a first priority lien on
substantially all existing and future real property and equipment and a
second priority lien on inventory and accounts receivable. Interest is
payable semi-annually on May 1 and November 1 of each year.

[b] The revolving credit agreement with a bank provides for maximum
borrowings of $40 million based on a percentage of eligible accounts
receivable and inventory. Borrowings are secured by a first priority
lien on inventory, accounts receivable and related intangibles, and a
second priority lien on existing and future real property. Interest is
computed at prime plus a variable margin (based on the achievement of
certain interest coverage ratios) from 0 to 1% and is payable monthly.
At April 30, 1997, the interest rate was 9.5%. An annual commitment fee
of 1/4% is charged on the unused portion of the revolving credit
agreement. The agreement continues through November 1, 2000 and
thereafter on a year-to-year basis until terminated by the Company or
the lender.

[c] As of April 30, 1996, the Railway credit agreement with a bank provided
for a reducing revolving credit commitment with maximum borrowings of
$3 million. During 1997, the Railway credit agreement was restructured
and is now comprised of two notes; a $2 million term loan with $0.5
million principal payments each year with the final payment on July 31,
2000, and a $1.5 million line of credit maturing July 31, 1998.
Obligations under the notes are secured by all of the assets and
capital stock of the Railway. Interest is computed at prime plus a
variable margin (based on the achievement of certain interest coverage
ratios) from 0 to 1% and is payable quarterly. At April 30, 1997, the
interest rate was 9.5%.

[d] At April 30, 1997, the Company had $1,562 in notes payable to equipment
financing companies and vendors. The notes are payable in monthly
principal installments of $63 plus interest payable at variable rates.
The notes mature on various dates through 2002 and are secured by
equipment.

The aggregate maturities of long-term debt for the years ended April 30,
are as follows:

<TABLE>
<S> <C>
1998............................................................. $ 936
1999............................................................. 2,613
2000............................................................. 689
2001............................................................. 18,933
2002............................................................. 75,075
-------
Total maturities............................................... 98,246
Less unamortized discount.................................... (1,696)
-------
$96,550
=======
</TABLE>

Various agreements contain restrictive covenants including limitations on
additional borrowings, dividends and other distributions and the retirement of
stock. Additionally, certain agreements require maintenance of specified
levels of tangible net worth, working capital, cash flow and performance
ratios. In the event of default of the restrictive covenants or failure to
maintain the specified performance measures, the commitments related to the
credit agreements can be withdrawn by the lender.

F-11
<PAGE>

SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(6) INCOME TAXES

The Company had no income tax expense or benefit for the years ended April 30,
1996 and 1997 or the three months ended July 31, 1996 and 1997 (unaudited).
Income tax expense attributable to operations for the year ended April 30,
1995 consists of the following:

<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
<S> <C> <C> <C>
Year ended April 30, 1995:
Federal.............................................. $(174) (20) (194)
State................................................ -- (3) (3)
----- --- ----
$(174) (23) (197)
===== === ====
</TABLE>

Income taxes attributable to operations differed from the amounts computed by
applying the U.S. federal income tax rate of 34% as a result of the following:

<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS
YEAR ENDED APRIL 30, ENDED JULY 31,
------------------------ ----------------
1995 1996 1997 1996 1997
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Computed "expected" tax (expense)
benefit........................... $ (687) 1,050 1,193 300 (257)
State income taxes, net of federal
benefit........................... (81) 124 140 35 (30)
Decrease (increase) in the
valuation allowance for deferred
tax assets........................ 659 (1,231) (1,032) (335) 287
Other, net......................... (88) 57 (301) -- --
------ ------- ------- ------- -------
$ (197) -- -- -- --
====== ======= ======= ======= =======
</TABLE>

The tax effects of temporary differences that gave rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
APRIL 30, (UNAUDITED)
---------------- JULY 31,
1996 1997 1997
------- ------- -----------
<S> <C> <C> <C>
Deductible temporary differences, excluding
postretirement benefit costs:
Inventories................................... $ 1,066 1,338 1,338
Allowance for doubtful accounts............... 250 250 279
Accrued liabilities not deductible until paid. 1,583 1,677 1,657
Restructuring charge.......................... 559 560 560
Net operating loss carryforwards.............. 8,805 10,848 10,820
Alternative minimum tax credit carryforwards.. 962 962 962
Investment tax credit carryforwards........... 856 856 856
Other......................................... 103 12 20
------- ------- -------
14,184 16,503 16,492
Less valuation allowance....................... 3,409 4,441 4,154
------- ------- -------
10,775 12,062 12,338
Taxable temporary difference--plant and
equipment...................................... (9,242) (11,012) (11,455)
------- ------- -------
Net deferred tax asset, excluding
postretirement benefit costs.................. 1,533 1,050 883
Postretirement benefit costs.................... 2,973 3,456 3,623
------- ------- -------
Net deferred tax asset......................... $ 4,506 4,506 4,506
======= ======= =======
</TABLE>

F-12
<PAGE>

SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

At April 30, 1997 the Company had available net operating loss (NOL)
carryforwards for regular federal tax purposes of approximately $28,800 which
will expire as follows: $1,400, $400, $3,700, $4,200, $5,600, $7,400 and
$6,100 in the years ended 2000, 2002, 2007, 2008, 2009, 2011 and 2012,
respectively. The Company has investment tax credit carryforwards for tax
purposes of $856 which the Company has fully reserved as it is likely that
those tax credits will not be utilized prior to their expiration. The credits
expire in various periods through 2004. Company also has available $962 of
alternative minimum tax (AMT) credit carryforwards which may be used
indefinitely to reduce future federal regular income tax obligations.

A valuation allowance is required when it is more likely than not that all or
a portion of the deferred tax assets will not be realized. The ultimate
realization of the deferred tax assets is dependent upon future profitability.
Fiscal 1990 capped a three-year period in which the Company generated
approximately $19 million and $11.5 million in book and tax earnings,
respectively. During fiscal 1991 through fiscal 1994, the Company incurred
approximately $12.4 million in taxable losses as a result of steel bar prices,
significant losses from operations at Oklahoma City, and a $5.3 million loss
on the early retirement of debt. A recovery of steel bar prices which began in
fiscal 1994 and continued into 1995 resulted in the Company generating $3.6
million in taxable income. In 1995, the Company started up a new rolling mill
which passed the required performance tests and was accepted during fiscal
1997. Productivity expectations of the mill are linked to the future operating
performance of the Company. Management has introduced new mill products and
made progress toward achieving the full potential of the new mill. However,
there can be no assurance that the mill will reach the forecasted production
goals or that the Company will achieve future profitability. Accordingly, a
valuation allowance has been established to reduce the deferred tax assets to
a level which, more likely than not, will be realized.

Future annual postretirement benefit costs are expected to exceed deductible
amounts for many years and it is anticipated that all of the deferred tax
assets related thereto will be utilized as such amounts become deductible.
Accordingly, management did not establish a valuation allowance for the
deferred tax asset related to future annual postretirement benefit costs. In
order to fully realize the remaining net deferred tax asset, the Company will
need to generate future taxable income of approximately $7,100 of which
approximately $6,900 is required to fully utilize existing AMT credit
carryforwards. Based upon historical taxable income trends and projections for
future taxable income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not that the Company
will realize the benefits of the net deferred assets, net of the existing
valuation allowance.

(7) EMPLOYEE BENEFIT PLANS

Sand Springs and Joliet have defined benefit plans covering substantially all
of their employees. Benefits are generally based on years of service and the
employee's compensation during the last ten years of employment. The Company's
funding policy is to contribute annually at least the minimum amount necessary
to avoid a deficiency in the funding standard. The Company received a waiver
of the minimum funding standard in the amount of $776 for the plan year ended
December 31, 1984, which is being amortized over 15 years. Net periodic
pension expense for these plans included the following:

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-----------------------
1994 1996 1997
------- ------ ------
<S> <C> <C> <C>
Service cost........................................... $ 619 653 747
Interest cost.......................................... 1,201 1,306 1,462
Net amortization and deferral.......................... 845 2,575 420
Actual return on plan assets........................... (1,550) (3,420) (l,483)
------- ------ ------
$ 1,115 1,114 1,146
======= ====== ======
</TABLE>

F-13
<PAGE>

SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The following table sets forth the funded status of the Company's plans, as
determined by an independent actuary:

<TABLE>
<CAPTION>
APRIL 30, 1996 APRIL 30, 1997
----------------------- -----------------------
ACCUMULATED ASSETS ACCUMULATED ASSETS
BENEFITS EXCEED BENEFITS EXCEED
EXCEED ACCUMULATED EXCEED ACCUMULATED
ASSETS BENEFITS ASSETS BENEFITS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Actuarial present value of
vested benefit obligation..... $2,741 13,691 2,527 15,658
====== ====== ===== ======
Accumulated benefit obligation. 2,770 14,035 2,556 15,998
====== ====== ===== ======
Projected benefit obligation... $2,950 16,858 2,737 18,451
Plan assets at fair value...... 2,578 16,912 2,313 19,340
------ ------ ----- ------
Projected benefit obligation in
excess of plan assets......... 372 (54) 424 (889)
Unrecognized net gain.......... 114 2,732 151 2,371
Unrecognized prior service
cost.......................... (484) 101 (494) 94
Unrecognized net transition
liability..................... (35) (3,306) (11) (2,774)
Adjustment required to
recognize minimum liability... 225 -- 173 --
------ ------ ----- ------
Net pension liability (asset).. $ 192 (527) 243 (1,198)
====== ====== ===== ======
</TABLE>

Plan assets consist primarily of U.S. government obligations and marketable
equity securities. The unrecognized net transition obligations are being
amortized over periods of 14-15 years.

Major assumptions used in the accounting for the pension plans were as
follows:

<TABLE>
<CAPTION>
1996 1997
----- -----
<S> <C> <C>
Discount rate..................................................... 7.25% 7.50%
Rate of increase in compensation levels........................... 0%-5% 0%-4%
Expected long-term rate of return on assets....................... 8.0% 8.0%
</TABLE>

Certain divisions of the Company maintain defined contribution plans in which
various groups of employees participate. Total Company contributions for these
plans amounted to $57, $85, and $81 in 1995, 1996, and 1997, respectively.
Company contributions for these plans for the three months ended July 31, 1996
and 1997 were $21 and $29, respectively (unaudited).

(8) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The Company provides postretirement health and life insurance benefits to
certain retirees and their beneficiaries, generally for the remainder of their
lives. The Plan is contributory, with retiree contributions adjusted annually,
and contains other cost-sharing features such as deductibles, coinsurance, and
Medicare. The Company's policy is to fund accumulated postretirement benefits
on a "pay-as-you-go" basis. Net periodic postretirement benefit costs for
1995, 1996 and 1997 include the following components:

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
---------------------
1995 1996 1997
------- -------------
<S> <C> <C> <C>
Service cost............................................ $ 359 326 321
Interest cost........................................... 1,825 1,690 1,372
Net amortization........................................ 969 760 660
------- ------ ------
$ 3,153 2,776 2,353
======= ====== ======
</TABLE>

F-14
<PAGE>

SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The following table sets forth the APBO and the amount of the net
postretirement benefit liability as determined by an actuary and recognized in
the balance sheet at April 30, 1996 and 1997:

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Retirees................................................. $12,727 10,173
Fully eligible active plan participants.................. 4,245 4,522
Other active plan participants........................... 8,035 4,848
------- -------
Accumulated post retirement benefit obligation......... 25,007 19,543
Unrecognized transition obligation....................... (24,391) (22,956)
Unrecognized net gain.................................... 7,207 12,508
------- -------
Accrued postretirement benefit cost.................... $ 7,823 9,095
======= =======
</TABLE>

The annual discount rate used in determining the APBO was 7.25 and 7.5% at
April 30, 1996 and 1997, respectively. Also, for measurement purposes, HMO
trend rates of 8.5% and 6.3% and medical trend rates of 12.0% and 11.0% were
used for the hourly and salaried medical indemnity plans, respectively. The
medical and HMO trend rates are assumed to decline one-half percent per year
to an ultimate level of 5.5%. The health care cost trend rate assumption has a
significant effect on the amounts reported. For example, increasing the
assumed health care cost trend rates by one percentage point in each year
would increase the APBO as of April 30, 1997, by $2,800 and the aggregate
service and interest cost components of net periodic postretirement benefit
costs by $268.

(9) OPERATING LEASES

The Company is obligated under various noncancelable operating leases for
certain land and buildings. These leases generally contain inflationary rent
escalations and require the Company to pay all executory costs such as
maintenance and insurance. Rental expense for operating leases (except those
with lease terms of a month or less that were not renewed) was $260, $277 and
$313 for the years ended April 30, 1995, 1996 and 1997, respectively. Rental
expense for the three months ended July 31, 1996 and 1997 was $78 and $79,
respectively (unaudited).

Future minimum lease payments under noncancelable operating leases (with
initial lease terms in excess of one year) for the years ending April 30, are
as follows:

<TABLE>
<S> <C>
1998................................................................ $ 328
1999................................................................ 328
2000................................................................ 337
2001................................................................ 353
2002................................................................ 353
Later years......................................................... 570
------
Total............................................................. $2,269
======
</TABLE>

(10) COMMITMENTS AND CONTINGENCIES

The Company is partially self-insured for certain risks consisting primarily
of employee health insurance programs and workers' compensation. Probable
losses and claims are accrued as they become estimable. The Company maintains
letters of credit totaling approximately $2.0 million in accordance with
workers' compensation arrangements. At July 31, 1997, the Company had
approximately $3.2 million in letters of credit related to workers
compensation and supplier agreements (unaudited).

F-15
<PAGE>

SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Company is involved in claims and legal actions arising in the ordinary
course of business. In the opinion of management, the ultimate disposition of
these matters will not have a material adverse effect on the Company's
financial position, results of operations, or liquidity.

(11) RELATED PARTY TRANSACTIONS

An affiliated company provides management and business services to the
Company, including, but not limited to, financial, marketing, executive
personnel, corporate development, human resources, and limited legal services.
The Company believes that transactions with related parties are at costs that
could be obtained from third parties. Management fees charged during the years
ended April 30, 1995, 1996 and 1997, were approximately $598, $573 and $569,
respectively. Management fees charged during the three months ended July 31,
1996 and 1997, were approximately $151 and $159, respectively (unaudited). In
addition, the Company purchases general liability, workers' compensation and
other insurance through an affiliated company which provides risk management
services, including procuring and maintaining property and casualty insurance
coverage; reviewing and recommending alternative financing methods for
insurance coverage; identifying and evaluating risk exposures, and preparing
and filing proof of loss statements for insured claims. Total fees paid for
insurance services during the years ended April 30, 1995, 1996 and 1997, were
approximately $224, $115 and $115, respectively. Total fees paid for insurance
services during the three months ended July 31, 1996 and 1997 were
approximately $29 and $29, respectively (unaudited).

During fiscal year 1993, certain minority shareholders issued $1,000 of notes
receivable to the Company. The notes bear interest at an annual rate of 7.61%
and are secured by common stock of the Company. Principal and interest are due
on February 1, 2007, unless extended at the Company's option until February 1,
2012. The principal balance outstanding as of April 30, 1996 and 1997 was
$1,000 and $700, respectively. The principal balance outstanding as of July
31, 1997 was $700 (unaudited).

On September 30, 1996, the Company signed an agreement to repurchase 50,625
shares of the Company's common stock from two minority shareholders who
formerly were officers of the Company. The stock repurchase is pursuant to the
Amended and Restated Stockholder's Agreement dated September 15, 1993 and the
stock purchase price was calculated in accordance with said agreement. Certain
payments, including those to reacquire the Company's common stock, are
currently not permitted under the terms of the Company's first mortgage notes
and revolving credit agreements. As a result of this transaction, $393 of
notes receivable from the former shareholders was satisfied, the Company
recorded a note payable in the amount of $662 and decreased paid-in capital by
$1,055. The note payable will accrue simple interest at 6.02% and will be
repaid in five annual installments beginning when, and only when, the purchase
of the shares is permitted under the Company's credit agreements.

The Company has a receivable of $2,205 from HMK related to certain tax
attributes allocated to the Company. Under an agreement with HMK, the
receivable will be realized by reducing future income taxes otherwise payable
by the Company to HMK. In addition, the Company advanced $500 to HMK to secure
a letter of credit for the Joliet insurance program.

(12) STOCK OPTIONS

On September 15, 1993, the Board of Directors adopted, and the stockholders of
the Company approved, the Company's 1993 Employee, Director and Consultant
Stock Option Plan (the Stock Option Plan). The Stock Option Plan provides for
the grant of incentive options to key employees of the Company and
nonqualified stock options to key employees, directors, and consultants of the
Company. A total of 580,000 shares of the Company's common stock, which would
represent approximately 13.4% of the Company's common stock on a fully diluted

F-16
<PAGE>

SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

basis, have been reserved for issuance under the Stock Option Plan. The
options vest in three years and may be exercised within 10 years from the
grant date at a price not less than the fair market value of the stock at the
time the options are granted. Fair market value for purposes of determining
the exercise price is determined by the performance-based formula prescribed
in the Stock Option Plan. At April 30, 1997, there were 124,000 additional
shares available for grant under the Plan. There were no options granted
during the three months ended July 31, 1997 (unaudited).

The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock options in
the financial statements. Had the Company determined compensation cost based
on the fair value at the grant date for its stock options under SFAS No. 123,
the Company's net income would have been reduced to the pro forma amounts
indicated below:

<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS
YEAR ENDED ENDED
APRIL 30, 1997 JULY 31, 1997
-------------- -------------
<S> <C> <C>
Net income:
As reported...................................... $(3,509) $755
======= ====
Pro forma........................................ $(3,578) $738
======= ====
Earnings per share:
As reported...................................... $ (1.04) $.20
======= ====
Pro forma........................................ $ (1.06) $.19
======= ====
</TABLE>

The per share weighted-average fair value of stock options granted during 1997
was $4.83 on the date of grant using the minimum value method with the
following assumptions: expected dividend yield of approximately 1.0%, risk-
free interest rate of 6.38%, and an expected life of five years. Pro forma net
income reflects only options granted in 1997. Therefore, the full impact of
calculating compensation cost for stock options under SFAS No. 123 is not
reflected in the pro forma net income amounts presented above because
compensation cost is reflected over the options' vesting period of three years
and compensation cost for options granted prior to May 1, 1994 is not
considered.

The options outstanding and activity during the periods indicated is as
follows:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
------- ----------------
<S> <C> <C>
At May 1, 1994........................................ 474,609 $7.41
Granted............................................. --
Exercised........................................... -- --
Canceled............................................ -- --
-------
At April 30, 1995..................................... 474,609 7.41
Granted............................................. -- --
Exercised........................................... -- --
Canceled............................................ (69,609) --
-------
At April 30, 1996..................................... 405,000 7.41
Granted............................................. 51,000 20.52
Exercised........................................... -- --
Canceled............................................ -- --
-------
At April 30, 1997..................................... 456,000 8.87
=======
</TABLE>

F-17
<PAGE>

SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Exercise prices for options outstanding as of April 30, 1997 ranged from $7.41
to $20.52. The weighted-average remaining contractual life of those options is
6.34 years. There were 405,000 shares exercisable as of April 30, 1996 and
1997. There were no shares exercisable at April 30, 1995.

In connection with the adoption of the Stock Option Plan, the Company elected
to terminate its Stock Appreciation Rights Plan (SAR). Existing liabilities
under the SAR plan were frozen at their current level. All vested rights
become exercisable upon the participants' termination. The present value of
the SAR's, based on vesting and retirement dates, is included in accrued and
other liabilities. At April 30, 1996 and 1997, the amounts of the liability
were $873 and $368, respectively. The amount of the liability at July 31, 1997
was $368 (unaudited).

(13) RESTRUCTURING EXPENSE

During 1997, the Company recognized costs related to workforce reductions.
Approximately 42 hourly employees accepted early retirement incentives
resulting in costs of approximately $1,070 during the fourth quarter. In
addition, 14 salaried employees were involuntarily terminated in the third
quarter resulting in severance costs totaling approximately $250.

(14) SUBSEQUENT EVENT (UNAUDITED)

In October, 1997, the Company acquired the outstanding capital stock of a
reinforcing bar fabricator. The purchase price of the stock is $3,040 subject
to certain post-closing adjustments. The Company incurred approximately $2,000
in debt related to this acquisition.

F-18
<PAGE>

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

NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THOSE
TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR THE
SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF NOR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 7
Use of Proceeds........................................................... 12
Capitalization............................................................ 12
Selected Historical Financial Data........................................ 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 15
Business.................................................................. 22
Management................................................................ 32
Security Ownership of Certain Beneficial Owners and Management............ 37
Certain Relationships and Related Transactions............................ 39
Description of Revolving Credit Facility.................................. 42
Description of Warrants................................................... 43
Description of Common Stock............................................... 44
Plan of Distribution...................................................... 45
Legal Matters............................................................. 46
Experts................................................................... 46
Index to Consolidated Financial Statements................................ F-1
</TABLE>

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

---------

PROSPECTUS

---------

SHEFFIELD STEEL CORPORATION

375,000 SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF WARRANTS

, 1997

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

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses to be paid by the
Registrant. All amounts are estimates.

<TABLE>
<S> <C>
Registration Fee(1)..............................................
NASD Filing Fee(1)...............................................
Blue Sky Fees and Expenses....................................... $ 2,000
Accounting Fees and Expenses..................................... 2,000
Legal Fees and Expenses.......................................... 3,000
Fees and Expenses of Trustee..................................... N/A
Rating Agency Fees............................................... N/A
Printing and Engraving Expenses.................................. 2,000
Miscellaneous.................................................... 1,000
-------
Total.......................................................... $10,000
=======
</TABLE>
- --------
(1) Previously paid in connection with the filing of the Registrant's
Registration Statement on Form S-1 (No. 33-67532).

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the General Corporation Law of Delaware provides that a
corporation may indemnify directors and officers against liabilities and
expenses they may incur in such capacities provided certain standards are met,
including good faith and the belief that the particular action is in or not
opposed to the best interests of the corporation. Article TENTH of the
Registrant's Certificate of Incorporation provides as follows:

"TENTH: The Corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of Delaware, as the same may be amended
and supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and
the indemnification provided for herein shall not be deemed exclusive of
any other rights to which those indemnified may be entitled under any by-
law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of
such person."

The Registrant maintains insurance which insures the officers and directors
of the Registrant against certain losses and which insures the Registrant
against certain of its obligations to indemnify such officers and directors.

The Registrant and certain of the Registrant's directors and officers who
are also stockholders of the Registrant are parties to stockholder's
agreements which provide for indemnification by the Registrant of stockholders
whose shares are registered under the Securities Act of 1933, as amended (the
"Act") pursuant to the exercise of registration rights provided by such
agreements, the underwriters of such shares and controlling persons thereof,
against certain liabilities under the Act and other laws. The agreements also
contain certain provisions for indemnification by such stockholders of the
Registrant, its officers and directors, the underwriters of the offering in
which such registrable shares are included and the controlling persons of such
persons against such liabilities.

In addition, the Underwriting Agreement, the form of which was filed as
Exhibit 1 to the Registrant's Registration Statement on form S-1 No. 33-67532
filed with the Securities and Exchange Commission on

II-1
<PAGE>

August 17, 1993, contained provisions for indemnification by the Underwriters
of the Units of the Registrant and its officers, directors and controlling
stockholders against certain liabilities under the Act.

15. RECENT SALES OF UNREGISTERED SECURITIES

The Registrant has not issued or sold any unregistered securities within the
past three years.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
1 Form of Underwriting Agreement.*

3.1 Certificate of Incorporation of the Registrant, as amended.*

3.2 By-Laws of the Registrant.*

4.1 Indenture for First Mortgage Notes (including form of First Mortgage
Note registered thereunder), dated as of November 1, 1993, between
Sheffield Steel Corporation and Shawmut Bank Connecticut, N.A., as
Trustee (Incorporated by reference to Exhibit 4.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended October 31, 1993).

4.2 Receivable and Inventory Financing Agreement, dated as of January 16,
1992, between HMK Industries of Oklahoma, Inc., Sheffield Steel
Corporation, Sheffield Steel Corporation-Joliet, Sheffield Steel
Corporation-Oklahoma City and NationsBank of Georgia, N.A.*

4.3 Guaranty, dated January 16, 1992, from HMK Industries of Oklahoma,
Inc. to NationsBank of Georgia, N.A.*

4.4 Mortgage and Security Agreement, dated January 16, 1992, between
Sheffield Steel Corporation and NationsBank of Georgia, N.A.*

4.5 Mortgage and Security Agreement, dated January 16, 1992, between
Sheffield Steel Corporation-Joliet and NationsBank of Georgia, N.A.*

4.6 Stock Pledge Agreement, dated January 16, 1992, from HMK Industries of
Oklahoma, Inc. to NationsBank of Georgia, N.A.*

4.7 First Amendment to Receivable and Inventory Financing Agreement, dated
August 13, 1993 between HMK Industries of Oklahoma, Inc., Sheffield
Steel Corporation, Sheffield Steel Corporation-Joliet, Sheffield Steel
Corporation-Oklahoma City and NationsBank of Georgia, N.A.*

4.8 Warrant Agreement, dated November 1, 1993, between Sheffield Steel
Corporation and Shawmut Bank Connecticut, N.A., as Warrant Agent
(Incorporated by reference to Exhibit 4.8 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended October 31, 1993).

4.9 Intercreditor Agreement, dated November 1, 1993, between Sheffield
Steel Corporation, NationsBank of Georgia, N.A., and Shawmut Bank
Connecticut, N.A., as Trustee (Incorporated by reference to Exhibit
4.9 to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended October 31, 1993).

4.10 Security Agreement, dated November 1, 1993, between Sheffield Steel
Corporation, and Shawmut Bank Connecticut, N.A., as Collateral Agent
and Trustee (Incorporated by reference to Exhibit 4.10 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
October 31, 1993).
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
4.11 Mortgage, Assignment of Leases, Security Agreement and Fixture Filing,
dated November 1, 1993, between Sheffield Steel Corporation, and
Shawmut Bank Connecticut, N.A., as Collateral Agent, Trustee and
Mortgagee (relating to property located in Joliet, Illinois)
(Incorporated by reference to Exhibit 4.11 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended October 31, 1993).

4.12 Mortgage, Assignment of Leases, Security Agreement and Fixture Filing,
dated November 1, 1993, between Sheffield Steel Corporation, and
Shawmut Bank Connecticut, N.A., as Collateral Agent, Trustee and
Mortgagee (relating to property located in Sand Springs, Oklahoma)
(Incorporated by reference to Exhibit 4.12 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended October 31, 1993).

4.13 Second Amendment to Receivable and Inventory Financing Agreement,
dated November 1, 1993, between Sheffield Steel Corporation-Oklahoma
City, Sheffield Steel Corporation, and NationsBank of Georgia, N.A.
(Incorporated by reference to Exhibit 4.13 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended October 31, 1993).

4.14 Third Amendment to Receivable and Inventory Financing Agreement, dated
December 13, 1994 between Sheffield Steel Corporation and NationsBank
of Georgia, N.A. (Incorporated by reference to Exhibit 4.14 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
October 31, 1993).

4.15 Fourth Amendment to Receivable and Inventory Financing Agreement,
dated October 30, 1995 between Sheffield Steel Corporation and
NationsBank of Georgia, N.A. (Incorporated by reference to Exhibit
4.15 to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended October 31, 1995).

4.16 Fifth Amendment to Receivable and Inventory Financing Agreement, dated
April 19, 1996 between Sheffield Steel Corporation and NationsBank of
Georgia, N.A. (Incorporated by reference to Exhibit 4.16 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
April 30, 1996).

5 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., with
respect to the legality of the securities being registered.*

10.1 Intentionally omitted.

10.2 Income Tax Expense Allocation Policy and Tax Sharing Agreement,
effective May 1, 1991 between HMK Enterprises, Inc. and Sheffield
Steel Corporation, Sheffield Steel Corporation-Joliet, Sheffield Steel
Corporation-Oklahoma City and Sand Springs Railway Company.*

10.3 Management Services Agreement, dated October 1, 1993 between HMK
Enterprises, Inc. and Sheffield Steel Corporation.*

10.4 Insurance Services Agreement, dated October 1, 1993 between HMK
Enterprises, Inc. and Sheffield Steel Corporation.*

10.5 Design, Manufacturing and Installation Contract, dated December 10,
1993, between Sheffield Steel Corporation and Morgan-Pomini Company
(Incorporated by reference to Exhibit 10.5 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended October 31, 1993).

10.6 Form of Master Loan and Security Agreement between Sheffield Steel
Corporation and the CIT Group/Equipment Financing, Inc. dated July 14,
1994 (Incorporated by reference to Exhibit 10.6 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended April 30, 1994).

10.7 Restated Credit Agreement, dated April 23, 1991, between Sand Springs
Railway Company and Bank of Oklahoma.*

10.8 Amendment to Restated Credit Agreement, dated May 31, 1992, between
Sand Springs Railway Company and Bank of Oklahoma.*
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
10.9 Promissory Note, dated April 23, 1991, executed by Sand Springs
Railway Company in the amount of $1.9 million in favor of Bank of
Oklahoma.*

10.10 Amendment to Assignment of Transportation Agreement, dated April 23,
1991 between Sand Springs Railway Company and Bank of Oklahoma.*

10.11 Amendment to Assignment of User Contracts, dated April 23, 1991
between Sand Springs Railway Company and Bank of Oklahoma.*

10.12 Amendment to Pledge and Security Agreement, dated April 23, 1991
between Sand Springs Railway Company and Bank of Oklahoma.*

10.13 Amendment to Security Agreements, dated April 23, 1991 between Sand
Springs Railway Company and Bank of Oklahoma.*

10.14 Amendment to Real Estate Mortgage and Security Agreement, dated April
23, 1991 between Sand Springs Railway Company and Bank of Oklahoma.*

10.15 Amendment to Real Estate Mortgage and Security Agreement, dated April
23, 1991 between Sand Springs Railway Company and Bank of Oklahoma.*

10.16 Assignment of Transportation Agreement, dated December 10, 1987
between Sand Springs Railway Company and Bank of Oklahoma.*

10.17 Assignment of User Contracts, dated December 10, 1987 between Sand
Springs Railway Company and Bank of Oklahoma.*

10.18 Security Agreement, dated December 10, 1987 between Sand Springs
Railway Company and Bank of Oklahoma.*

10.19 Security Agreement, dated December 10, 1987 between Sand Springs
Railway Company and Bank of Oklahoma.*

10.20 Real Estate Mortgage and Security Agreement, dated December 10, 1987
between Sand Springs Railway Company and Bank of Oklahoma.*

10.21 Real Estate Mortgage and Security Agreement, dated December 10, 1987
between Sand Springs Railway Company and Bank of Oklahoma.*

10.22 Pledge and Security Agreement, dated December 10, 1987 between Sand
Springs Railway Company and Bank of Oklahoma.*

10.23 Guaranty Agreement, dated December 10, 1987 between HMK Industries of
Oklahoma, Inc. and Sand Springs Railway Company.*

10.24 Second Amendment to Restated Credit Agreement, dated September 24,
1993 between Sand Springs Railway Company and Bank of Oklahoma.*

10.25 Subordination Agreement dated November 10, 1995, between Sheffield
Steel Corporation and the CIT Group/Equipment Financing, Inc.
(Incorporated by reference to Exhibit 10.25 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended April 30, 1996).

10.26 First Amendment to Master Loan and Security Agreement between
Sheffield Steel Corporation and the CIT Group/Equipment Financing,
Inc. dated April 25th, 1995. (Incorporated by reference to Exhibit
10.26 to the Registrant's Annual Report on Form 10-K for the fiscal
year ended April 30, 1996).

10.27 Second Amendment to Master Loan and Security Agreement between
Sheffield Steel Corporation and the CIT Group/Equipment Financing,
Inc. dated July 2, 1996. (Incorporated by reference to Exhibit 10.27
to the Registrant's Annual Report on Form 10-K for the fiscal year
ended April 30, 1996.)
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
10.28 Sheffield Steel Corporation 1993 Employee, Director and Consultant
Stock Option Plan.*

10.29 Second Amendment to Real Estate Mortgage and Security Agreement, dated
July 31, 1996 between Sand Springs Railway Company and Bank of
Oklahoma, N.A. (Incorporated by reference to Exhibit 10.29 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended July
31, 1996.)

10.30 Third Amendment to Real Estate Mortgage and Security Agreement, dated
July 31, 1996 between Sand Springs Railway Company and Bank of
Oklahoma, N.A. (Incorporated by reference to Exhibit 10.30 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended July
31, 1996.)

10.31 Fourth Amendment to Restated Credit Agreement, dated July 31, 1996
between Sand Springs Railway Company and Bank of Oklahoma, N.A.
(Incorporated by reference to Exhibit 10.31 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended July 31, 1996.)

10.32 Promissory Note, date July 31, 1996, executed by Sand Springs Railway
Company in the amount of $1.5 million in favor of Bank of Oklahoma,
N.A. (Incorporated by reference to Exhibit 10.32 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended July 31, 1996.)

10.33 Promissory Note, date July 31, 1996, executed by Sand Springs Railway
Company in the amount of $2 million in favor of Bank of Oklahoma, N.A.
(Incorporated by reference to Exhibit 10.33 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended July 31, 1996.)

10.34 Real Time Pricing Program Agreement dated June 1, 1996 between
Sheffield Steel Corporation and Public Service Company of Oklahoma.
(Incorporated by reference to Exhibit 10.34 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended July 31, 1996.)

10.35 Agreement between the United Steelworkers of America and the Sand
Springs Division of Sheffield Steel Corporation dated March 2, 1997.
(Incorporated by reference to Exhibit 10.35 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended April 30, 1997.)

10.36 Fifth Amendment to Restated Credit Agreement, dated July 31, 1997
between Sand Springs Railway Company and Bank of Oklahoma, N.A.
(Incorporated by reference to Exhibit 10.36 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended July 31, 1997.)

12 Statement re Computation of Ratio of Earnings to Fixed Charges.
(Incorporated by reference to Exhibit 10.35 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended April 30, 1997.)

13 Statement re Computation of EBITDA. (Incorporated by reference to
Exhibit 10.35 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended April 30, 1997.)

21 Subsidiaries of the Registrant.*

23.1 Consent and Report on Schedules of KPMG Peat Marwick.

23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.(see
Exhibit 5).

24 Power of Attorney.*

25 Statement of eligibility of trustee.*
</TABLE>
- --------
* Previously filed.

(B) FINANCIAL STATEMENTS SCHEDULES

Schedule II -- Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.

II-5
<PAGE>

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;

(iii) 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 the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment 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.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as a part
of this registration statement in reliance upon Rule 430A and contained in
a 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 this
registration statement as of the time it was declared effective;

(2) For the purpose 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.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the 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 is 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 Act and will be governed by
the final adjudication of such issue.

II-6
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of
Boston, Massachusetts on December 1, 1997.

SHEFFIELD STEEL CORPORATION

*
By: ________________________________
Robert W. Ackerman
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration statement has been signed by the following persons on the
dates indicated.

SIGNATURE TITLE DATE

* President, Chief Executive Officer December 1,
- ------------------------- (principal executive officer), 1997
Robert W. Ackerman and Director

/s/ Dale S. Okonow Vice President and Secretary December 1,
- ------------------------- and Director (principal financial 1997
Dale S. Okonow officer)

* Chairman of the Board of Directors December 1,
- ------------------------- 1997
Steven E. Karol

* Director December 1,
- ------------------------- 1997
Jane M. Karol

* Director December 1,
- ------------------------- 1997
Howard H. Stevenson

/s/ John D. Lefler Director December 1,
- ------------------------- 1997
John D. Lefler

By executing his name hereto, Dale S. Okonow is signing this document on
behalf of the persons indicated above pursuant to powers of attorney duly
executed by such persons and filed with the Securities and Exchange
Commission.

/s/ Dale S. Okonow
By: ____________________
Dale S. Okonow
(Attorney-in-fact)

II-7
<PAGE>

SCHEDULE II

SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

YEARS ENDED APRIL 30, 1997, 1996 AND 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE CHARGED TO BALANCE
APRIL 30, COSTS AND DEDUCTIONS-- APRIL 30,
1996 EXPENSES WRITE-OFFS 1997
--------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
Accounts receivable--
allowance for
doubtful accounts..... $658 -- -- 658
==== === === ===
<CAPTION>
BALANCE CHARGED TO BALANCE
APRIL 30, COSTS AND DEDUCTIONS-- APRIL 30,
1995 EXPENSES WRITE-OFFS 1996
--------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
Accounts receivable--
allowance for
doubtful accounts..... $461 197 -- 658
==== === === ===
<CAPTION>
BALANCE CHARGED TO BALANCE
APRIL 30, COSTS AND DEDUCTIONS-- APRIL 30,
1994 EXPENSES WRITE-OFFS 1995
--------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
Accounts receivable--
allowance for
doubtful accounts..... $432 36 (7) 461
==== === === ===
</TABLE>

S-1
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
------- ----------- ----
<S> <C> <C>
1 Form of Underwriting Agreement.*

3.1 Certificate of Incorporation of the Registrant, as amended.*

3.2 By-Laws of the Registrant.*

4.1 Indenture for First Mortgage Notes (including form of First
Mortgage Note registered thereunder), dated as of November 1,
1993, between Sheffield Steel Corporation and Shawmut Bank
Connecticut, N.A., as Trustee (Incorporated by reference to
Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended October 31, 1993).

4.2 Receivable and Inventory Financing Agreement, dated as of
January 16, 1992, between HMK Industries of Oklahoma, Inc.,
Sheffield Steel Corporation, Sheffield Steel Corporation-
Joliet, Sheffield Steel Corporation-Oklahoma City and
NationsBank of Georgia, N.A.*

4.3 Guaranty, dated January 16, 1992, from HMK Industries of
Oklahoma, Inc. to NationsBank of Georgia, N.A.*

4.4 Mortgage and Security Agreement, dated January 16, 1992,
between Sheffield Steel Corporation and NationsBank of Georgia,
N.A.*

4.5 Mortgage and Security Agreement, dated January 16, 1992,
between Sheffield Steel Corporation-Joliet and NationsBank of
Georgia, N.A.*

4.6 Stock Pledge Agreement, dated January 16, 1992, from HMK
Industries of Oklahoma, Inc. to NationsBank of Georgia, N.A.*

4.7 First Amendment to Receivable and Inventory Financing
Agreement, dated August 13, 1993 between HMK Industries of
Oklahoma, Inc., Sheffield Steel Corporation, Sheffield Steel
Corporation-Joliet, Sheffield Steel Corporation-Oklahoma City
and NationsBank of Georgia, N.A.*

4.8 Warrant Agreement, dated November 1, 1993, between Sheffield
Steel Corporation and Shawmut Bank Connecticut, N.A., as
Warrant Agent (Incorporated by reference to Exhibit 4.8 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended October 31, 1993).

4.9 Intercreditor Agreement, dated November 1, 1993, between
Sheffield Steel Corporation, NationsBank of Georgia, N.A., and
Shawmut Bank Connecticut, N.A., as Trustee (Incorporated by
reference to Exhibit 4.9 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended October 31, 1993).

4.10 Security Agreement, dated November 1, 1993, between Sheffield
Steel Corporation, and Shawmut Bank Connecticut, N.A., as
Collateral Agent and Trustee (Incorporated by reference to
Exhibit 4.10 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended October 31, 1993).

4.11 Mortgage, Assignment of Leases, Security Agreement and Fixture
Filing, dated November 1, 1993, between Sheffield Steel
Corporation, and Shawmut Bank Connecticut, N.A., as Collateral
Agent, Trustee and Mortgagee (relating to property located in
Joliet, Illinois) (Incorporated by reference to Exhibit 4.11 to
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended October 31, 1993).
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
------- ----------- ----
<S> <C> <C>
4.12 Mortgage, Assignment of Leases, Security Agreement and Fixture
Filing, dated November 1, 1993, between Sheffield Steel
Corporation, and Shawmut Bank Connecticut, N.A., as Collateral
Agent, Trustee and Mortgagee (relating to property located in
Sand Springs, Oklahoma) (Incorporated by reference to Exhibit
4.12 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended October 31, 1993).

4.13 Second Amendment to Receivable and Inventory Financing
Agreement, dated November 1, 1993, between Sheffield Steel
Corporation-Oklahoma City, Sheffield Steel Corporation, and
NationsBank of Georgia, N.A. (Incorporated by reference to
Exhibit 4.13 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended October 31, 1993).

4.14 Third Amendment to Receivable and Inventory Financing
Agreement, dated December 13, 1994 between Sheffield Steel
Corporation and NationsBank of Georgia, N.A. (Incorporated by
reference to Exhibit 4.14 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended October 31, 1993).

4.15 Fourth Amendment to Receivable and Inventory Financing
Agreement, dated October 30, 1995 between Sheffield Steel
Corporation and NationsBank of Georgia, N.A. (Incorporated by
reference to Exhibit 4.15 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended October 31, 1995).

4.16 Fifth Amendment to Receivable and Inventory Financing
Agreement, dated April 19, 1996 between Sheffield Steel
Corporation and NationsBank of Georgia, N.A. (Incorporated by
reference to Exhibit 4.16 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended April 30, 1996).

5 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.,
with respect to the legality of the securities being
registered.*

10.1 Intentionally omitted.

10.2 Income Tax Expense Allocation Policy and Tax Sharing Agreement,
effective May 1, 1991 between HMK Enterprises, Inc. and
Sheffield Steel Corporation, Sheffield Steel Corporation-
Joliet, Sheffield Steel Corporation-Oklahoma City and Sand
Springs Railway Company.*

10.3 Management Services Agreement, dated October 1, 1993 between
HMK Enterprises, Inc. and Sheffield Steel Corporation.*

10.4 Insurance Services Agreement, dated October 1, 1993 between HMK
Enterprises, Inc. and Sheffield Steel Corporation.*

10.5 Design, Manufacturing and Installation Contract, dated December
10, 1993, between Sheffield Steel Corporation and Morgan-Pomini
Company (Incorporated by reference to Exhibit 10.5 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended October 31, 1993).

10.6 Form of Master Loan and Security Agreement between Sheffield
Steel Corporation and the CIT Group/Equipment Financing, Inc.
dated July 14, 1994 (Incorporated by reference to Exhibit 10.6
to the Registrant's Annual Report on Form 10-K for the fiscal
year ended April 30, 1994).

10.7 Restated Credit Agreement, dated April 23, 1991, between Sand
Springs Railway Company and Bank of Oklahoma.*

10.8 Amendment to Restated Credit Agreement, dated May 31, 1992,
between Sand Springs Railway Company and Bank of Oklahoma.*
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
------- ----------- ----
<S> <C> <C>
10.9 Promissory Note, dated April 23, 1991, executed by Sand Springs
Railway Company in the amount of $1.9 million in favor of Bank
of Oklahoma.*

10.10 Amendment to Assignment of Transportation Agreement, dated
April 23, 1991 between Sand Springs Railway Company and Bank of
Oklahoma.*

10.11 Amendment to Assignment of User Contracts, dated April 23, 1991
between Sand Springs Railway Company and Bank of Oklahoma.*

10.12 Amendment to Pledge and Security Agreement, dated April 23,
1991 between Sand Springs Railway Company and Bank of
Oklahoma.*

10.13 Amendment to Security Agreements, dated April 23, 1991 between
Sand Springs Railway Company and Bank of Oklahoma.*

10.14 Amendment to Real Estate Mortgage and Security Agreement, dated
April 23, 1991 between Sand Springs Railway Company and Bank of
Oklahoma.*

10.15 Amendment to Real Estate Mortgage and Security Agreement, dated
April 23, 1991 between Sand Springs Railway Company and Bank of
Oklahoma.*

10.16 Assignment of Transportation Agreement, dated December 10, 1987
between Sand Springs Railway Company and Bank of Oklahoma.*

10.17 Assignment of User Contracts, dated December 10, 1987 between
Sand Springs Railway Company and Bank of Oklahoma.*

10.18 Security Agreement, dated December 10, 1987 between Sand
Springs Railway Company and Bank of Oklahoma.*

10.19 Security Agreement, dated December 10, 1987 between Sand
Springs Railway Company and Bank of Oklahoma.*

10.20 Real Estate Mortgage and Security Agreement, dated December 10,
1987 between Sand Springs Railway Company and Bank of
Oklahoma.*

10.21 Real Estate Mortgage and Security Agreement, dated December 10,
1987 between Sand Springs Railway Company and Bank of
Oklahoma.*

10.22 Pledge and Security Agreement, dated December 10, 1987 between
Sand Springs Railway Company and Bank of Oklahoma.*

10.23 Guaranty Agreement, dated December 10, 1987 between HMK
Industries of Oklahoma, Inc. and Sand Springs Railway Company.*

10.24 Second Amendment to Restated Credit Agreement, dated September
24, 1993 between Sand Springs Railway Company and Bank of
Oklahoma.*

10.25 Subordination Agreement dated November 10, 1995, between
Sheffield Steel Corporation and the CIT Group/Equipment
Financing, Inc. (Incorporated by reference to Exhibit 10.25 to
the Registrant's Annual Report on Form 10-K for the fiscal year
ended April 30, 1996).

10.26 First Amendment to Master Loan and Security Agreement between
Sheffield Steel Corporation and the CIT Group/Equipment
Financing, Inc. dated April 25th, 1995. (Incorporated by
reference to Exhibit 10.26 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended April 30, 1996).

10.27 Second Amendment to Master Loan and Security Agreement between
Sheffield Steel Corporation and the CIT Group/Equipment
Financing, Inc. dated July 2, 1996. (Incorporated by reference
to Exhibit 10.27 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended April 30, 1996.)
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
------- ----------- ----
<S> <C> <C>
10.28 Sheffield Steel Corporation 1993 Employee, Director and
Consultant Stock Option Plan.*

10.29 Second Amendment to Real Estate Mortgage and Security
Agreement, dated July 31, 1996 between Sand Springs Railway
Company and Bank of Oklahoma, N.A. (Incorporated by reference
to Exhibit 10.29 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended July 31, 1996.)

10.30 Third Amendment to Real Estate Mortgage and Security Agreement,
dated July 31, 1996 between Sand Springs Railway Company and
Bank of Oklahoma, N.A. (Incorporated by reference to Exhibit
10.30 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended July 31, 1996.)

10.31 Fourth Amendment to Restated Credit Agreement, dated July 31,
1996 between Sand Springs Railway Company and Bank of Oklahoma,
N.A. (Incorporated by reference to Exhibit 10.31 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended July 31, 1996.)

10.32 Promissory Note, date July 31, 1996, executed by Sand Springs
Railway Company in the amount of $1.5 million in favor of Bank
of Oklahoma, N.A. (Incorporated by reference to Exhibit 10.32
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended July 31, 1996.)

10.33 Promissory Note, date July 31, 1996, executed by Sand Springs
Railway Company in the amount of $2 million in favor of Bank of
Oklahoma, N.A. (Incorporated by reference to Exhibit 10.33 to
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended July 31, 1996.)

10.34 Real Time Pricing Program Agreement dated June 1, 1996 between
Sheffield Steel Corporation and Public Service Company of
Oklahoma. (Incorporated by reference to Exhibit 10.34 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended July 31, 1996.)

10.35 Agreement between the United Steelworkers of America and the
Sand Springs Division of Sheffield Steel Corporation dated
March 2, 1997. (Incorporated by reference to Exhibit 10.35 to
the Registrant's Annual Report on Form 10-K for the fiscal year
ended April 30, 1997.)

10.36 Fifth Amendment to Restated Credit Agreement, dated July 31,
1997 between Sand Springs Railway Company and Bank of Oklahoma,
N.A. (Incorporated by reference to Exhibit 10.36 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended July 31, 1997.)

12 Statement re Computation of Ratio of Earnings to Fixed Charges.
(Incorporated by reference to Exhibit 10.35 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended April 30,
1997.)

13 Statement re Computation of EBITDA. (Incorporated by reference
to Exhibit 10.35 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended April 30, 1997.)

21 Subsidiaries of the Registrant.*

23.1 Consent and Report on Schedules of KPMG Peat Marwick.

23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C.(see Exhibit 5).

24 Power of Attorney.*

25 Statement of eligibility of trustee.*
</TABLE>
- --------
* Previously filed.

<PAGE>

EXHIBIT 23.1

ACCOUNTANTS' CONSENT AND REPORT ON SCHEDULE

The Board of Directors
Sheffield Steel Corporation:

The audits referred to in our report dated June 27, 1997, included the related
consolidated financial statement schedule as of April 30, 1996 and April 30,
1997, and for each of the years in the three year period ended April 30, 1997,
included in the registration statement. This consolidated financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion on this consolidated financial statement schedule
based on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.

We consent to the use of our reports included herein and to the reference to
our firm under the headings "Selected Historical Financial Data" and "Experts"
in the prospectus.

KPMG Peat Marwick LLP

Tulsa, Oklahoma
December 1, 1997