SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K/A

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 [Fee required]

For the Fiscal Year Ended December 31, 1999
                          -----------------
                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [No fee required]

For the transition period from  N/A   to N/A
                              ------     -----
Commission File Number 333-56217


                               ISG RESOURCES, INC.
                     -------------------------------------
             (Exact name of Registrant as specified in its charter)

                 Utah                           87-0327982
              --------------                  -------------
      (State or other jurisdiction of        (I.R.S. Employer
       incorporation or organization)        Identification No.)

              136 East South Temple,  Suite 1300,  Salt Lake City, Utah   84111
            --------------------------------------------------------------------
            (Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, including area code:      (801) 236-9700
                                                    -----------------------
Securities registered pursuant to Section 12(b) of the Act:

     Title of each class             Name of each exchange on which registered
     -------------------             -----------------------------------------
          None                                       None

               Securities registered pursuant to Section 12(g) of
                                    the Act:
                     10% Senior Subordinated Notes Due 2008
                     ---------------------------------------
                                (Title of Class)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X   No
                                             ---    ---
         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ _ _ ]

         The aggregate  market value of the voting stock held by  non-affiliates
of the registrant on March 29, 2000 was approximately $0.

         The number of shares of Common Stock  outstanding on March 29, 2000 was
100 shares.

         Documents Incorporated by Reference:  See Item 14(a) List of Exhibits

<PAGE>

                                     PART IV

Item 14.      Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)      1.       Financial Statements
                  See Index to Financial Statements on page F-1.

         2.       Financial Statement Schedules

                  All financial  statement  schedules have been omitted  because
                  either they are not required or the information required to be
                  set forth  therein is included in the  consolidated  financial
                  statements or notes thereto.

         3.       Exhibits

   Exhibits

     *2.1    Plan of Merger for January 1, 1999 Merger.
     *2.2    Plan of Merger for July 31, 1999 Merger.
     *3.1    Articles of Incorporation of JTM Industries, Inc.
     *3.1a   Articles of Amendment of Articles of Incorporation of JTM
             Industries, Inc.
     *3.2    By Laws of JTM Industries, Inc.
     *3.3    Articles of Incorporation of KBK Enterprises, Inc.
     *3.4    By Laws of KBK Enterprises, Inc.
     *3.5    Articles of Incorporation of Pozzolanic Resources, Inc.
     *3.6    By Laws of Pozzolanic Resources, Inc.
     *3.7    Articles of Incorporation of Power Plant Aggregates of Iowa, Inc.
     *3.8    By Laws of Power Plant Aggregates of Iowa, Inc.
     *3.9    Articles of Incorporation of Michigan Ash Sales Company,
             d.b.a. U.S. Ash Company.
     *3.10   By Laws of Michigan Ash Sales Company, d.b.a. U.S. Ash Company.
     *3.11   Articles of Incorporation of Flo Fil Co., Inc.
     *3.12   By Laws of Flo Fil Co., Inc.
     *3.13   Articles of Incorporation of U.S. Stabilization, Inc.
     *3.14   By Laws of U.S. Stabilization, Inc.
     *3.15   Articles of Incorporation of Fly Ash Products, Inc.
     *3.16   By Laws of Fly Ash Products, Inc.
     *3.17   Articles of Incorporation of ISG Resources, Inc.
     *3.18   Bylaws of ISG Resources, Inc.
     *3.19   Articles of Merger for ISG Resources, Inc. (1/1/99 Merger)
     *3.20   Articles of Merger filed in Texas. (1/1/99 Merger)
     *3.21   Articles of Merger filed in Pennsylvania. (1/1/99 Merger)
     *3.22   Articles of Merger for Pozzolanic Resources, Inc. (1/1/99 Merger)
     *3.23   Articles of Merger for St. Helens Investments, Inc. (1/1/99 Merger)
     *3.24   Articles of Merger for Pozzolanic Northwest, Inc. (1/1/99 Merger)
     *3.25   Articles of Merger for Pozzolanic Northwest Bulk Carriers, Inc.
             (1/1/99 Merger)
     *3.26   Articles of Merger filed in Iowa. (1/1/99 Merger)
     *3.27   Articles of Merger filed in Michigan. (1/1/99 Merger)
     *3.28   Articles of Merger filed in Arkansas. (1/1/99 Merger)
     *3.29   Articles of Merger for ISG Resources, Inc. (1/1/99 Merger)
     *3.30   Articles of Merger filed in Montana. (7/1/99 Merger)
     *3.31   Articles of Merger filed in Ohio. (7/1/99 Merger)
     *4.1    Indenture, dated as of April 22, 1998, by and among JTM Industries,
             Inc., the Subsidiary Guarantors and U.S. Bank National Association,
             as Trustee.
     *5.1    Opinion and consent of Morgan, Lewis & Bockius LLP as to the
             legality of the securities being registered.
     *10.1   Purchase Agreement dated as of April 17, 1998 by and among JTM
             Industries, Inc., the Subsidiary Guarantors and NationsBanc
             Montgomery Securities LLC and CIBC Oppenheimer Corp.
     *10.2   Registration Rights Agreement dated as of April 22, 1998, by and
             among JTM Industries, Inc., the Subsidiary Guarantors and
             NationsBanc Montgomery Securities LLC and CIBC Oppenheimer Corp.
     *10.3   Purchase Agreement dated as of February 27, 1998 by and among JTM
             Industries, Inc., Pozzolanic Resources, Inc. and Gerald Peabody,
             Penelope Peabody and Kokan Company Limited.
     *10.4   Stock Purchase Agreement from Power Plant Aggregates of Iowa, Inc.
     *10.5   Purchase Agreement dated as of March 1998 between JTM Industries,
             Inc. and Jack Wirt.
     *10.6   Purchase Agreement dated as of March 27, 1998, between JTM
             Industries, Inc., Donald A. Thomas, Phyllis S. Thomas and Donald W.
             Birge.
     *10.7   Secured Credit Facility dated March 4, 1998 among JTM Industries,
             Inc. and a syndicate of banks with NationsBank, N.A., as
             administrative agent, and Canadian Imperial Bank of Commerce, as
             documentation agent.
     *10.8   First Amendment dated as of May 29, 1998 to the Credit Agreement
             dated March 4, 1998 among JTM Industries, Inc. and a syndicate of
             banks with NationsBank, N.A. as administrative agent, and Canadian
             Imperial Bank of Commerce, as documentation agent.
     *10.9   Stock Purchase Agreement dated January 1999, among ISG Resources,
             Inc., James M. Isaac and Tommy C. Isaac.
     *10.10  Purchase Agreement dated October 26, 1999, between ISG Resources,
             Inc. and Mary Ellen Dentis, Trustee.
     *10.11  Purchase Agreement dated November 1999, among ISG Resources, Inc.
             and Bill E. Nichols, John W. Nichols and Debbie Dickie
     *10.12  Stock Purchase Agreement between William Leslie & ISG Resources,
             Inc.
     *10.13  Partnership Regulations for Don's Building Supply, LLP.
     *10.14  Employment Agreement between JTM Industries, Inc. (predecessor to
             ISG Resources, Inc.) and Clinton W. Pike, Sr.
   *10.14(a) Amendment to Mr. Pike's Employment Agreement.
   *10.14(b) Second Amendment to Mr. Pike's Employment Agreement.
     *10.15  Employment Agreement between ISG Resources, Inc. and R Steve
             Creamer.
     *10.16  Employment Agreement between ISG Resources, Inc. and Raul A. Deju.
     *10.17  Employment Agreement between ISG Resources, Inc. and Jean I.
             Everest, II.
     *10.18  Employment Agreement between ISG Resources, Inc. and Brett A.
             Hickman.
     *10.19  Stock Purchase Agreement dated October 1999 between ISG Resources,
             Inc. and WEBE Enterprises, Ltd.
     *10.20  Stock Purchase Agreement dated June 2, 1999 between Koch Carbon,
             Inc. and ISG Resources, Inc.
     *12.1   Statement re Computation of Ratio of Earnings to Fixed Charges.
     *21.1   Subsidiaries of ISG Resources, Inc.
     *21.2   Subsidiaries of the Registrant (As of March 30, 2000)
      *24    Powers of Attorney.
     *25.1   Statement of Eligibility of U.S. Bank National Association, as
             Trustee, on Form T-1.
    **27.1   Financial Data Schedule.
     *99.1   Form of Letter of Transmittal  respecting the exchange of the 10%
             Senior  Subordinated  Notes due 2008  which have been registered
             under the United States Securities Act of 1933 for 10% Senior
             Subordinated Notes due 2008.
     *99.2   Form of Notice of Guaranteed Delivery.

    -----------
    *    Previously Filed.
    **   Filed herewith.


(b)      Reports on Form 8-K.

         None.

<PAGE>


                                  SIGNATURES

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

                                ISG Resources, Inc.
                                (Registrant)

Date:  April 25, 2000       By:    /s/  R Steve Creamer
       --------------           ---------------------------------------------
                                R Steve Creamer, Chairman and Chief Executive
                                Officer


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.

    Signature                    Title                                 Date
    ---------                    -----                                 ----

/s/ R Steve Creamer       Chairman and Chief Executive Officer    April 25, 2000
-----------------------
R Steve Creamer


/s/ Raul A Deju           President and Chief Operating Officer   April 25, 2000
-----------------------
Raul A. Deju


/s/ J.I. Everest, II      Chief Financial Officer, Treasurer and  April 25, 2000
-----------------------   Assistant Secretary
J.I. Everest, II


/s/ Joseph M. Silvestri   Director                                April 25, 2000
-----------------------
Joseph M. Silvestri



<PAGE>
                                       F-1

                          INDEX TO FINANCIAL STATEMENTS

ISG Resources, Inc. and Subsidiaries
Audited Consolidated  Financial  Statements as of December 31, 1999 and 1998 and
     for the Years Ended  December 31, 1999 and 1998 and the Period From October
     14, 1997 to December 31, 1997:
  Report of Independent Auditors.............................    F-2
  Consolidated Balance Sheets................................    F-3
  Consolidated Statements of Operations......................    F-5
  Consolidated Statements of Shareholder's Equity............    F-6
  Consolidated Statements of Cash Flows......................    F-7
  Notes to Consolidated Financial Statements.................    F-8

JTM Industries, Inc. and Subsidiary (Predecessor to ISG Resources, Inc.)
Audited Consolidated Financial Statements for the Period From January 1, 1997 to
     October 13, 1997:
  Report of Independent Accountants..........................    F-22
  Consolidated Statement of Loss and Accumulated Deficit.....    F-23
  Consolidated Statement of Cash Flows.......................    F-24
  Notes to Consolidated Financial Statements.................    F-25


<PAGE>

                                       F-2

                         Report of Independent Auditors

The Board of Directors
ISG Resources, Inc. and Subsidiaries

We have audited the accompanying  consolidated  balance sheets of ISG Resources,
Inc.  and  Subsidiaries  as of  December  31,  1999  and  1998  and the  related
consolidated  statements of operations,  shareholder's equity and cash flows for
the years ended  December 31, 1999 and 1998 and the period from October 14, 1997
to December 31, 1997. These financial  statements are the  responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial  position of ISG Resources,
Inc.  and  Subsidiaries  at  December  31, 1999 and 1998,  and the  consolidated
results of their  operations  and their cash flows for the years ended  December
31, 1999 and 1998 and the period from  October 14, 1997 to December  31, 1997 in
conformity with accounting principles generally accepted in the United States.


Ernst & Young LLP

Salt Lake City, Utah
March 3, 2000


<PAGE>

                                       F-3
                      ISG Resources, Inc. and Subsidiaries
                           Consolidated Balance Sheets

                                                         December 31
                                                       1999          1998
  Assets
  Current assets:
     Accounts receivable:
      Trade, net of allowance for doubtful
         accounts of $329,000 in 1999 and
         $170,000 in 1998                       $  21,167,616   $ 14,975,729
      Retainage receivable                            176,000        660,609
      Other                                           502,058        296,966
     Deferred tax asset                               316,161        251,355
     Inventories                                    4,055,425        387,258
     Other current assets                             829,661        645,969
  Total current assets                             27,046,921     17,217,886

  Property, plant and equipment:
     Land and improvements                          4,371,197      1,736,384
     Buildings and improvements                     6,839,777      3,610,621
     Vehicles and other operating equipment        27,189,160     20,090,872
     Furniture, fixtures and office equipment       1,161,456        494,753
                                                   39,561,590     25,932,630
     Accumulated depreciation                      (7,893,374)    (3,562,086)
                                                   31,668,216     22,370,544
     Construction in progress                       1,915,972      5,768,564
                                                   33,584,188     28,139,108

  Other assets:
     Intangible assets, net                       153,952,547    140,835,640
     Debt issuance costs, net                       4,826,010      5,192,893
     Other assets                                   1,052,845        346,209
  Total assets                                  $ 220,462,511   $191,731,736
  ----------------------------------------------================================





<PAGE>

                                       F-4

                                                          December 31

                                                   1999                  1998
                                           -------------------------------------
Liabilities and shareholder's equity
Current liabilities:

    Accounts payable                         $ 10,409,583            $ 4,066,487
    Accrued expenses:
      Payroll                                   1,288,732              1,801,657
      Interest                                  2,190,471              2,106,054
      Other                                     1,828,537              1,534,971
    Income taxes payable                        1,705,678                422,963
    Other current liabilities                     652,119                500,000
                                           -----------------       -------------
 Total current liabilities                     18,075,120             10,432,132

 Long-term debt                               133,500,000            110,000,000
 Deferred tax liabilities                      39,158,249             41,286,434
 Payable to Industrial Services Group             643,983                  -
 Other liabilities                              1,923,355              2,488,954

 Commitments and contingencies

 Shareholder's equity:
    Common stock, no par in 1999 and
      par value of $1 per share in 1998;
      100 shares authorized, issued and
      outstanding                              25,000,050                    100
    Additional paid-in capital                      -                 24,999,950
    Retained earnings                           2,161,754              2,524,166
                                           -------------------------------------
 Total shareholder's equity                    27,161,804             27,524,216

                                           -------------------------------------
 Total liabilities and shareholder's equity $ 220,462,511           $191,731,736
                                           =====================================


See accompanying notes.


<PAGE>

                                       F-5

                      ISG Resources, Inc. and Subsidiaries
                      Consolidated Statements of Operations

                                                                   Period from
                                                                  October 14 to
                                     Year ended December 31        December 31
                                      1999           1998             1997
                                 ---------------------------------------------
Revenues:
   Product revenues              $120,319,575    $ 83,048,721     $  7,059,063
   Service revenues                35,885,697      34,243,854        5,583,981
                                 ---------------------------------------------
                                  156,205,272     117,292,575       12,643,044
Costs and expenses:
   Cost of products sold,
     excluding depreciation        83,442,725      51,878,447        4,864,226
   Cost of services sold,
     excluding depreciation        25,221,695      28,237,385        4,500,892
   Depreciation and amortization   13,091,131       9,140,938          908,619
   Selling, general and
     administrative expenses       18,962,157      14,144,765        1,255,680
   New product development          2,166,218          -                -
                                 ---------------------------------------------
                                  142,883,926     103,401,535       11,529,417
                                 ---------------------------------------------
                                   13,321,346      13,891,040        1,113,627
Interest income                        44,100         183,113           31,286
Interest expense                  (13,391,944)     (9,338,059)        (627,704)
Miscellaneous income, net             311,675          72,386                -
                                 ---------------------------------------------
Income before income tax expense      285,177       4,808,480          517,209
Income tax expense                    647,589       2,549,026          252,497
                                 ---------------------------------------------

Net income (loss)                $   (362,412)   $  2,259,454     $    264,712
                                 =============================================



See accompanying notes.


<PAGE>

                                       F-6

                      ISG Resources, Inc. and Subsidiaries
                 Consolidated Statements of Shareholder's Equity

                                            Additional                Total
                                 Common      Paid-In    Retained   Shareholder's
                                 Stock       Capital    Earnings      Equity
                             --------------------------------------------------
Balance at October 14, 1997         $100  $23,811,429  $        -   23,811,529
   Cash contribution                   -    1,188,521           -    1,188,521
   Net income                          -            -     264,712      264,712
                             --------------------------------------------------
Balance at December 31, 1997         100   24,999,950     264,712   25,264,762
   Net income                          -            -   2,259,454    2,259,454
                             --------------------------------------------------
Balance at December 31, 1998         100   24,999,950   2,524,166   27,524,216
   Change to no par value     24,999,950  (24,999,950)          -            -
   Net loss                            -            -    (362,412)    (362,412)
                             --------------------------------------------------
Balance at December 31, 1999 $25,000,050  $         -  $2,161,754  $27,161,804
                             ==================================================



See accompanying notes.


<PAGE>
<TABLE>
<CAPTION>
                                       F-7
                      ISG Resources, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows

                                                                     Period from
                                                                   October 14 to
                                             Year ended December 31  December 31
                                                   1999       1998      1997
                                             ----------------------------------
Operating activities
<S>                                           <C>           <C>            <C>
Net income (loss)                             $  (362,412)  $ 2,259,454    $264,712
Adjustments to reconcile net income (loss) to
   net cash provided by operating activities:
     Depreciation and amortization             13,091,131     9,140,938     908,619
     Amortization of debt issuance costs          702,032       463,585           -
     Deferred income taxes                     (2,229,539)   (1,697,407)   (276,245)
     Loss on sale of assets                        24,168        46,513           -
     Gain on sale of subsidiary                  (333,749)            -           -
     Changes in operating assets and
      liabilities:
         Receivables                           (2,755,382)   (1,479,648)    691,534
         Inventories                           (1,733,832)      231,658           -
         Other current and non-current assets    (879,189)      (91,603)    (22,569)
         Accounts payable                       4,485,877      (606,834) (1,035,993)
         Income taxes payable                   1,257,583      (245,447)    528,742
         Accrued expenses                        (929,504)      759,326     755,913
         Other current and non-current
           liabilities                           (132,821)     (570,491)     28,387
                                             ---------------------------------------
Net cash provided by operating activities      10,204,363     8,210,044   1,843,100

Investing activities
Purchase of businesses, net of cash acquired  (24,866,989)  (77,753,012)          -
Proceeds from sale of subsidiary                  750,000             -           -
Additions to intangible assets                   (877,349)     (691,847)          -
Purchases of property, plant and equipment     (8,790,870)   (8,574,086)    (19,491)
Proceeds from sales of property, plant
   and equipment                                  415,994       396,399           -
                                             ---------------------------------------
Net cash used in investing activities         (33,369,214)  (86,622,546)    (19,491)

Financing activities
Proceeds from long-term debt                  127,000,000   154,000,000           -
Payments on long-term debt                   (103,500,000)  (73,000,000)          -
Debt issuance costs                              (335,149)   (5,656,478)          -
Cash contributions                                      -            -    1,188,521
                                             --------------------------------------
Net cash provided by financing activities      23,164,851    75,343,522   1,188,521
                                             --------------------------------------

Net (decrease) increase in cash and
   cash equivalents                                     -    (3,068,980)  3,012,130
Cash and cash equivalents at
   beginning of period                                  -     3,068,980      56,850
                                             ---------------------------------------
Cash and cash equivalents at
   end of period                             $          -   $        -   $3,068,980
                                             =======================================

Cash paid for interest                       $ 12,605,495   $ 7,396,124   $       -
                                             =======================================
Cash paid for income taxes                   $    902,123   $ 3,989,414   $       -
                                             =======================================
See accompanying notes.
</TABLE>


<PAGE>

                                      F-8

                      ISG Resources, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                                December 31, 1999

1. Basis of Presentation

ISG  Resources,  Inc., a Utah  corporation  (the  "Company"),  is a wholly owned
subsidiary  of  Industrial  Services  Group,  Inc.  ("ISG").  ISG was  formed in
September 1997 and acquired the stock of JTM Industries, Inc. ("JTM") on October
14,  1997.  In 1998,  JTM  acquired  the  stock of  Pozzolanic  Resources,  Inc.
("Pozzolanic"), Power Plant Aggregates of Iowa, Inc. ("PPA"), Michigan Ash Sales
Company, d.b.a. U. S. Ash Company,  together with two affiliated companies, U.S.
Stabilization,  Inc. and Flo Fil Company, Inc., (collectively,  "U.S. Ash"), and
Fly  Ash  Products,   Inc.  ("Fly  Ash  Products")   (collectively,   the  "1998
Acquisitions").  Effective January 1, 1999, JTM, Pozzolanic,  PPA, U.S. Ash, Fly
Ash  Products  and their  wholly  owned  subsidiaries  merged  with and into the
Company (the "Merger").  Pneumatic Trucking,  Inc., a wholly owned subsidiary of
Michigan  Ash Sales  Company,  was not merged  into the  Company.  Consequently,
Pneumatic became a wholly owned subsidiary of the Company.

On January 7, 1999, the Company  acquired all of the  outstanding  stock of Best
Masonry and Tool Supply ("Best") for approximately  $13,300,000 in cash and paid
off outstanding debt of Best totaling approximately $2,400,000.

On May 27, 1999, the Company  acquired all of the  outstanding  stock of Mineral
Specialties, Inc. ("Specialties") for approximately $1,314,000 in cash.

On June 2, 1999, the Company acquired all of the outstanding stock of Irvine Fly
Ash, Inc. ("Irvine") for approximately $6,321,000 in cash.

On October 26, 1999, the Company acquired all of the outstanding  stock of Lewis
W. Osborne,  Inc. ("Osborne") and United Terrazzo Supply Co., Inc.  ("Terrazzo")
for approximately $1,219,000 in cash.

On December 1, 1999, the Company acquired all of the outstanding  stock of Magna
Wall, Inc. ("Magna Wall") for approximately $1,542,000 in cash.

Each of the above  acquisitions  was accounted for under the purchase  method of
accounting and,  accordingly the results of operations of each  acquisition have
been included in the consolidated financial statements since the respective date
of acquisition.

The purchase prices of the above  acquisitions were allocated based on estimated
fair values of assets and  liabilities at the respective  dates of  acquisition.
Goodwill  resulting  from  the  difference  between  the  purchase  prices  plus
acquisition  costs and the net assets of the companies  acquired in 1999 totaled
approximately  $20,073,000.  All  recorded  goodwill  is  being  amortized  on a
straight-line basis over 20 to 25 years.


<PAGE>
                                      F-9

                      ISG Resources, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

1. Basis of Presentation (continued)

The following pro forma combined financial information reflects operations as if
all of the  above  acquisitions  and  the  related  financing  transactions  had
occurred as of January 1, 1998. The pro forma combined financial  information is
presented for  illustrative  purposes only, does not purport to be indicative of
the Company's results of operations as of the date hereof and is not necessarily
indicative of what the Company's  actual  results of operations  would have been
had the  acquisitions  and the financing  transactions  been consummated on such
date.

                                     Year Ended December 31
                                    1999                1998
                             ------------------- -------------------
          Revenues           $ 164,840,000       $ 155,313,000
          Net loss           $    (409,878)      $  (1,652,000)

On November 29, 1999, the Company sold all of the outstanding stock of Pneumatic
Trucking,  Inc., a wholly owned  subsidiary  of the Company,  for  approximately
$750,000 in cash.  The Company  recognized a gain of  approximately  $334,000 on
this  sale  which  is  included  in  miscellaneous  income  in the  consolidated
statement of operations.

2.  Description of Business and Summary of Significant Accounting Policies

Description of Business

The Company  operates two principal lines of business:  coal combustion  product
(CCP) management and building materials manufacturing and distribution.  The CCP
division  purchases,  removes  and sells fly ash and other  by-products  of coal
combustion  to producers and  consumers of building  materials and  construction
related products  throughout the United States.  The building materials division
manufactures and distributes masonry  construction  materials to residential and
commercial contractors in Texas, California, Georgia and Florida.

Principles of Consolidation

These  financial  statements  reflect the  consolidated  financial  position and
results of operations of ISG Resources,  Inc. and its wholly owned subsidiaries.
All significant  intercompany  accounts and transactions have been eliminated in
consolidation.  Certain  reclassifications  have been  made to the prior  years'
amounts to conform to the current year presentation.

Revenue Recognition

Revenue from the sale of products is recognized  primarily upon passage of title
to  the  customer,   which  generally   coincides  with  physical  delivery  and
acceptance. CCP  product  revenues  generally  include  transportation  charges
associated with delivering the material.


<PAGE>

                                      F-10

                     ISG Resources, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

2.  Description  of Business  and  Summary of  Significant  Accounting  Policies
(continued)

Revenue Recognition (continued)

Service revenues include revenues earned under long-term contracts to dispose of
residual materials created by coal-fired power generation and revenues earned in
conjunction with certain construction-related  projects, which are incidental to
the primary  business.  Typical  long-term  disposal  contracts are from five to
fifteen years.  Service  revenues  under the long-term  contracts are recognized
concurrent  with the  removal of the  material  and are  typically  based on the
number  of tons of  material  removed  at an  established  price  per  ton.  The
construction-related  projects  are  generally  billed  on a time and  materials
basis;  therefore,  the  revenues  and  costs  are  recognized  when the time is
incurred and the materials are used.

Cost of CCP products sold are primarily amounts paid to the utility companies to
purchase  product  and  transportation  costs of  delivering  the product to the
customer.  Cost of  services  sold  includes  landfill  fees and  transportation
charges to deliver the product to the landfill.  Overhead  charges incurred by a
facility which generates both product and service revenues are allocated to cost
of products sold and cost of services sold based on the percentage of revenue.

Concentrations of Credit Risk

Concentrations  of credit  risk in  accounts  receivable  are limited due to the
large number of customers  comprising the Company's customer base throughout the
United States.  No single customer  provides 10 percent or more of the Company's
revenue.  The Company performs ongoing credit evaluations of its customers,  but
does  not  require   collateral  to  support   customer   accounts   receivable.
Historically, the Company has not had significant uncollectible accounts.

New Product Development

New product development costs consist of scientific research and development and
market development  expenditures.  Expenditures of $1,796,032 for the year ended
December  31, 1999 were made for research and  development  activities  covering
basic  scientific  research  and  application  of  scientific  advances  to  the
development of new and improved products and processes. Expenditures of $370,186
for the year ended December 31, 1999 were made for market development activities
related to promising new and improved  products and processes  identified during
research  and  development  activities.  The  Company  expenses  all new product
development  costs when they are incurred.  The Company  incurred no new product
development costs in the year ended December 31, 1998 or the period from October
14, 1997 to December 31, 1997.


<PAGE>
                                      F-11

                      ISG Resources, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

2.  Description  of Business  and  Summary of  Significant  Accounting  Policies
(continued)

Inventories

The Company  accounts for inventory  balances  using the lower of cost or market
method on a first-in,  first-out basis.  Inventories consist of the following at
December 31:

                                     1999                     1998
                              ---------------------   ---------------------
    Raw materials                 $     234,073           $           -
    Finished goods                    3,821,352                 387,258
                              ---------------------   ---------------------
                                  $   4,055,425           $     387,258
                              =====================   =====================

Property, Plant and Equipment

Property,  plant and equipment acquired in the acquisitions described above were
recorded at estimated  fair value at the dates of the  respective  acquisitions.
Property,  plant  and  equipment  acquired  subsequent  thereto,   renewals  and
betterments  are  recorded at cost.  Maintenance  and  repairs  are  expensed as
incurred.  Depreciation  is provided  over the  estimated  useful lives or lease
terms, if less, using the straight-line method as follows:

           Land  improvements                            1 to 20 years
           Buildings and  improvements                   3 to 40 years
           Vehicles  and other  operating  equipment     2 to 12 years
           Furniture, fixtures and office equipment       1 to 7 years

Depreciation expense was approximately  $4,996,000,  $3,281,000 and $454,000 for
the years ended  December 31, 1999 and 1998 and the period from October 14, 1997
to December 31, 1997, respectively.

Intangible Assets

Intangible  assets  consist of goodwill,  contracts,  patents and licenses,  and
assembled  workforce.   Amortization   expense  was  approximately   $8,095,000,
$5,860,000  and $455,000 for the years ended  December 31, 1999 and 1998 and the
period from October 14, 1997 to December 31, 1997, respectively. Amortization is
provided over the estimated period of benefit, using the straight-line method as
follows:

                  Goodwill                                 20 to 25 years
                  Contracts                                10 to 20 years
                  Patents and licenses                     13 to 19 years
                  Assembled workforce                             8 years

<PAGE>

                                      F-12

                      ISG Resources, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

2.  Description  of Business  and  Summary of  Significant  Accounting  Policies
(continued)

Debt Issuance Costs

Debt  issuance  costs relate to costs  incurred  with the issuance of the Senior
Subordinated  Notes  and the  Secured  Credit  Facility.  These  costs are being
amortized to interest  expense over the respective lives of the debt issues on a
straight-line basis.  Amortization expense was approximately $702,000,  $464,000
and $0 for the  years  ended  December  31,  1999 and 1998 and the  period  from
October 14, 1997 to December 31, 1997, respectively.

Income Taxes

Deferred tax assets and liabilities are provided for the future tax consequences
attributable to temporary differences between the carrying amounts of assets and
liabilities for financial statement and income tax purposes.

Fair Value of Financial Instruments

Financial  instruments  included in various  categories  within the accompanying
balance sheet consist of the following at December 31:

                                      1999                      1998
                            ----------------------------------------------------
                            Carrying        Fair        Carrying       Fair
                              Value         Value         Value        Value

                            ----------------------------------------------------
Short-term assets           $ 21,845,674 $ 21,845,674 $ 15,933,304  $ 15,933,304
Short-term liabilities        16,369,442   16,369,442   10,009,169    10,009,169
Long-term debt:
  Senior subordinated notes  100,000,000   85,000,000  100,000,000    99,000,000
  Secured credit facility     33,500,000   33,500,000   10,000,000    10,000,000
Other liabilities              1,613,393    1,255,000    2,103,856     1,531,000

The carrying value of short-term  assets and liabilities  approximate fair value
due to the  short-term  nature of the  instruments.  The  carrying  value of the
secured credit facility approximates the fair value due to the variable interest
rate features of the instrument. The fair value of the senior subordinated notes
is based on quoted market prices.  The fair value of other  liabilities is based
on  the  present  value  of  future  cash  flows  discounted  at  the  Company's
incremental borrowing rate.


<PAGE>

                                      F-13

                      ISG Resources, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

2.  Description  of Business  and  Summary of  Significant  Accounting  Policies
(continued)

Long-lived Assets

Management  evaluates the carrying value of all  long-lived  assets to determine
recoverability  when  indicators of impairment are present based generally on an
analysis of undiscounted cash flows compared to net book value. The Company also
evaluates   amortization  periods  of  assets,   including  goodwill  and  other
intangible  assets,  to determine  if events or  circumstances  warrant  revised
estimates of useful  lives.  Management  believes no material  impairment in the
value of long-lived assets exists at December 31, 1999.

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.

3.    Intangible Assets

Intangible assets consist of the following at December 31:

                                                1999              1998
                                          ------------------  -----------------
         Goodwill                         $     64,313,512    $     44,018,454
         Contracts                              98,522,146          97,960,644
         Patents and licenses                    2,787,431           2,471,584
         Assembled work force                    2,700,233           2,700,233
                                          ------------------  -----------------
                                               168,323,322         147,150,915
         Less accumulated amortization         (14,370,775)         (6,315,275)
                                          ------------------  -----------------
                                          $    153,952,547    $    140,835,640
                                          ==================  =================

4.   Long-term Debt

Secured Credit Facility

On March 4, 1998, the Company  obtained a Secured Credit Facility  provided by a
syndicate of banks.  The Secured Credit  Facility  enables the Company to obtain
revolving  secured  loans  from  time  to  time  to  finance  certain  permitted
acquisitions,  to pay fees and  expenses  incurred in  connection  with  certain
acquisitions,  to repay  existing  indebtedness,  and for  working  capital  and
general corporate purposes.


<PAGE>

                                      F-14

                      ISG Resources, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

4.   Long-term Debt (continued)

Secured Credit Facility (continued)

At the Company's  option,  the revolving  secured loans may be maintained as (a)
Eurodollar  Loans (as defined)  which will bear  interest at a rate equal to the
quotient  obtained  by  dividing  LIBOR (as  defined)  by one minus the  reserve
requirement for such  Eurodollar  Loan, plus a margin of 250 basis points or (b)
Base Rate  Loans (as  defined)  which  will have an  interest  rate equal to the
higher of (i) the Bank of  America  prime rate and (ii) the  federal  funds rate
plus 0.5%, plus a margin of 125 basis points.  The Company will also pay certain
fees with respect to any unused portion of the Secured Credit Facility.

The Secured Credit  Facility has a term of five and one-half years from the date
of initial funding, is guaranteed by ISG and existing and future subsidiaries of
the Company (the  "Guarantors"),  and is secured by a first  priority  perfected
security  interest  in all of the  capital  stock of the  Company and all of the
capital stock of each of the  Guarantors,  as well as certain present and future
assets and properties of the Company and any domestic subsidiaries.

The Secured Credit Facility  requires the Company to maintain a maximum leverage
ratio, a minimum interest coverage ratio and minimum  consolidated net worth and
certain other financial and  nonfinancial  covenants,  all as defined within the
agreement. The Company was in compliance with all such covenants at December 31,
1999.

On April 30, 1999, the Secured Credit Facility was increased to $50,000,000 from
$35,000,000. At December 31, 1999, $33,500,000 was outstanding, with $16,500,000
unused and available, under the Secured Credit Facility.

Senior Subordinated Notes

On April 22, 1998,  the Company  completed a private  placement of  $100,000,000
aggregate  principal  amount  of 10%  Senior  Subordinated  Notes  due 2008 (the
"Senior Subordinated  Notes") to finance the 1998 Acquisitions.  Interest on the
Senior Subordinated Notes is payable semi-annually on April 15 and October 15 of
each year. The Senior  Subordinated  Notes will mature on April 15, 2008 and are
guaranteed fully and  unconditionally and on a joint and several basis by all of
the Company's  existing and future  restricted  subsidiaries,  as defined in the
indenture.

The Senior  Subordinated  Notes are  redeemable  at the option of the Company at
various times throughout the term of the Senior Subordinated Notes at redemption
prices specified in the indenture.


<PAGE>

                                      F-15

                      ISG Resources, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

4.  Long-term Debt (continued)

Senior Subordinated Notes (continued)

Upon the  occurrence  of a change of  control or an asset sale as defined in the
indenture, the Company is required to make an offer to repurchase all or part of
the Senior Subordinated Notes at prices specified in the indenture.

The payment of principal,  interest,  and  liquidated  damages as defined in the
indenture,  if any, on the Senior Subordinated Notes is subordinated in right of
payment  to the prior  payment  of all  senior  indebtedness  as  defined in the
indenture,  whether  outstanding  on the  date of the  indenture  or  thereafter
incurred.  The indenture for the Company's  Senior  Subordinated  Notes contains
various limitations on the incurrence of additional  indebtedness,  the issuance
of preferred stock,  consolidations or mergers,  sales of assets, and restricted
payments,  including dividends,  for the Company and restricted  subsidiaries as
defined in the indenture.

In connection with the private placement of the Senior  Subordinated  Notes, the
Company entered into the  Registration  Rights  Agreement  pursuant to which the
Company was required to file an exchange offer  registration  statement with the
Securities  and  Exchange   Commission  which  was  declared  effective  by  the
Securities and Exchange Commission on September 4, 1998.

The aggregate  maturities of all long-term debt for the five years subsequent to
December 31, 1999 are as follows:  $0 in 2000-2002,  $33,500,000  in 2003, $0 in
2004 and $100,000,000 thereafter.

5.   Employee Benefit Plan

Prior  to  April  1,  1998,  eligible  employees  of the  Company  were  able to
participate in a 401(k) savings plan (the "JTM Plan")  sponsored by an affiliate
of the former  owner of JTM.  Under the terms of the JTM plan,  the  Company was
required to match employee contributions, as defined, up to 3% of the employees'
compensation.  Expenses related to the JTM plan were  approximately  $59,000 for
the period  from  January 1, 1998 to March 31,  1998 and  $44,000 for the period
from October 14, 1997 to December 31, 1997.

Subsequent to April 1, 1998,  eligible  employees of the Company may participate
in a 401(k)  savings  plan  (the  "ISG  Plan")  sponsored  by ISG.  The ISG Plan
requires the Company to match employee  contributions,  as defined,  up to 6% of
the employees' compensation. Expenses related to the ISG Plan were approximately
$458,000 and  $265,000 for the year ended  December 31, 1999 and the period from
April 1, 1998 to December 31, 1998, respectively.


<PAGE>

                                      F-16

                      ISG Resources, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

6.   Income Taxes

Income tax expense (benefit) consists of the following:

                                                             Period from
                                                            October 14 to
                           Year ended December 31            December 31
                          1999               1998                1997
                   ----------------------------------------------------------
Current:
     U.S. Federal   $   2,150,860      $   3,542,755       $     459,626
     State                726,268            703,678              69,116
                   ----------------------------------------------------------
                        2,877,128          4,246,433             528,742
Deferred:
     U.S. Federal      (1,847,270)        (1,416,129)           (240,135)
     State               (382,269)          (281,278)            (36,110)
                   ----------------------------------------------------------
                       (2,229,539)        (1,697,407)           (276,245)
Total:
     U.S. Federal         303,590          2,126,626             219,491
     State                343,999            422,400              33,006
                   ----------------------------------------------------------
                     $    647,589      $   2,549,026       $     252,497
                   ==========================================================

Reconciliation of income tax expense at the U.S. statutory rate to the Company's
tax expense is as follows:

                                                                    Period from
                                                                   October 14 to
                                       Year ended December 31       December 31
                                        1999             1998            1997
                                     ------------------------------------------
    35% of income before income tax  $   99,812    $   1,682,968   $   181,023

    Add:
       Non-deductible goodwill          901,551         527,208        42,702
       Other, net                      (353,774)        338,850        28,772
                                     ------------------------------------------
                                     $  647,589    $   2,549,026   $   252,497
                                     ==========================================


<PAGE>

                                      F-17

                      ISG Resources, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

6.   Income Taxes (continued)

The major  components of the deferred tax assets and  liabilities as of December
31 are as follows:

                                                 1999               1998
                                            ------------------------------------
 Deferred Tax Assets:
    Bad debt reserves                       $      128,602     $       66,572
    Accruals not currently deductible for
        tax purposes                               362,217            307,883
                                            ------------------------------------
 Total gross deferred tax assets                   490,819            374,455

 Deferred Tax Liabilities:
   Fixed asset basis differences                 2,980,762          3,040,703
   Intangible asset basis differences           36,274,790         38,363,602
   Other                                            77,355              5,229
                                            ------------------------------------
 Total gross deferred tax liabilities           39,332,907         41,409,534
                                            ------------------------------------
 Net deferred tax liabilities               $  (38,842,088)    $  (41,035,079)
                                            ====================================

7.   Commitments and Contingencies

Lease Obligations

Certain  facilities  and  equipment  are leased under  non-cancelable  operating
leases,  which  generally have renewal terms,  expiring in various years through
2006.

Future  minimum  payments  under leases with  initial  terms of one year or more
consisted of the following at December 31, 1999:

2000                                                       $     5,006,179
2001                                                             4,446,385
2002                                                             3,418,469
2003                                                             2,413,442
2004                                                             1,203,922
Thereafter                                                         595,361
                                                          -------------------
Total minimum lease payments                               $    17,083,758
                                                          ===================

Total rental  expense was  approximately  $7,595,000 for the year ended December
31, 1999, $6,113,000 for the year ended December 31, 1998 and $1,259,000 for the
period from October 14, 1997 to December 31, 1997.


<PAGE>

                                      F-18

                      ISG Resources, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

7.  Commitments and Contingencies (continued)

Sale and Purchase Commitments

The Company's  contracts with its customers and suppliers require the Company to
make minimum sales and purchases over ensuing years, approximated as follows:

                              Minimum             Minimum
                               Sales             Purchases
                        ------------------------------------
2000                    $      363,000     $     6,387,000
2001                           371,000           6,911,000
2002                           120,000           7,173,000
2003                           120,000           3,042,000
2004                           120,000           1,842,000
Thereafter                           -          10,174,000
                        ------------------------------------
                        $    1,094,000     $    35,529,000
                        ====================================

Minimum  sales  and  purchases   under   contracts  with  minimum   requirements
approximated $806,000 and $5,930,000,  respectively, for the year ended December
31, 1999 and $800,000 and $4,523,000,  respectively, for the year ended December
31, 1998 and $249,000 and  $318,000,  respectively,  for the period from October
14, 1997 to December 31, 1997.

Royalty Commitments

In connection  with a 1998  acquisition,  the Company agreed to pay a minimum of
$500,000 per year  commencing in 1999 and continuing  through 2003 for royalties
related  to the sale of certain  Class C fly ash.  The  current  portion of this
liability is recorded in other current  liabilities and the long-term portion is
recorded in other long-term liabilities in the accompanying balance sheets.

In 1999, the Company entered into a license agreement for certain technology for
which the Company agreed to pay a minimum of $200,000 in 2001, $300,000 in 2002,
$400,000 in 2003 and  $500,000  per year  thereafter  for as long as the license
agreement is effective.  The payments are for future  royalties on net sales and
sub-license  or royalty  revenue  received  related to this  license and will be
expensed in the period the related revenue is recognized.


<PAGE>

                                      F-19

                      ISG Resources, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

7. Commitments and Contingencies (continued)

Legal Proceedings

There are various legal  proceedings  against the Company  arising in the normal
course of business.  While it is not currently  possible to predict or determine
the  outcome of these  proceedings,  it is the  opinion of  management  that the
outcome  will not have a material  adverse  effect on the  Company's  results of
operations, financial position or liquidity.

Employment Agreements

The Company has employment  agreements with certain of its employees.  The terms
of these  agreements  begin to  expire  in 2000  with  annual  extensions  to be
exercised  by  mutual  consent  of  both  parties.   Without  considering  these
extensions,   these  employment   agreements   provide  for  total  annual  base
compensation of approximately  $2,256,000 in 2000,  $1,301,000 in 2001, $771,000
in 2002 and $134,000 in 2003.

Medical Insurance

Effective April 1, 1998, the Company established a self-funded medical insurance
plan for its employees with stop-loss  coverage for amounts in excess of $40,000
per  individual  and  approximately  $1,530,000 in the aggregate for the current
plan  period  ended  December  31,  1999.  The  Company  has  contracted  with a
third-party administrator to assist in the payment and administration of claims.
Insurance claims are recognized as expenses when incurred, including an estimate
of  costs  incurred  but  not  reported  at  the  balance  sheet  dates.  In the
accompanying  balance  sheets,  $112,000  and  $324,000  has been  accrued as of
December 31, 1999 and 1998, respectively, related to this liability.

8.  Reportable Segments

As discussed in note 2, the Company operates in two reportable segments: the CCP
division  and  the  building  materials  division.  The  CCP  division  consists
primarily of three operating units that manage and market CCPs in North America.
The building materials division consists of four legal entities,  Best, Osborne,
Terrazzo  and Magna Wall.  The  Company's  two  reportable  segments are managed
separately based on fundamental differences in their operations.

The Company evaluates performance based on profit or loss from operations before
depreciation,  amortization,  income taxes and interest  expense  (EBITDA).  The
Company  derives  a  majority  of its  revenues  from CCP  sales  and the  chief
operating  decision  makers  rely on  EBITDA to assess  the  performance  of the
segments and make  decisions  about  resources to be allocated to the  segments.
Accordingly,  EBITDA is  included in the  information  reported  below.  Certain
expenses are maintained at the Company's corporate


<PAGE>

                                      F-20

                      ISG Resources, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

8.  Reportable Segments (continued)

headquarters  and are not  allocated to the segments.  Such  expenses  primarily
include interest expense,  corporate overhead costs, certain non-recurring gains
and losses and intangible asset amortization.  Inter-segment sales are generally
accounted for at cost and are eliminated in consolidation.

The building  materials division includes financial data for Best from January 1
through  December 31, 1999,  Osborne and Terrazzo for the period from October 26
to  December  31, 1999 and Magna Wall for the month of  December  1999.  Amounts
included in the "Other" column include  financial  information for the Company's
corporate, R&D and other administrative business units.

The Company did not report segment  information prior to the year ended December
31, 1999, as it operated in only one significant business segment prior to 1999.
Information about reportable segments, and reconciliation of such information to
the  consolidated  totals as of and for the year ended  December 31, 1999, is as
follows:


                                       Building                    Consolidated
                             CCP       Materials      Other           Total
                       ------------ -------------- ------------- ---------------
Revenue               $134,631,711   $20,821,159   $    752,402   $156,205,272
EBITDA                  32,096,154     2,811,482     (8,139,384)    26,768,252
Total Assets            49,929,505     6,683,098    163,849,908    220,462,511
Expenditures for PP&E    7,520,689       350,610        919,571      8,790,870


The accounting  policies of the segments are the same as those  described in the
summary  of  significant  accounting  policies.  Segment  assets  reflect  those
specifically  attributable  to the  individual  segments  and  include  accounts
receivable,  inventory and property,  plant and equipment.  All other assets are
included in the "Other" column.

9.  Related Party Transactions

The Company's parent,  ISG, files a consolidated income tax return including the
Company and all of its subsidiaries. As the Company records all tax payments and
receipts,  a payable to ISG for  $643,983 has been  recorded to reflect  amounts
owed  to ISG  relating  to  ISG's  interest  deductions  included  in  the  1998
consolidated tax return filed in 1999.


<PAGE>

                                      F-21

10.  Subsequent Event

On March 2, 2000,  the Company  acquired  directly  and  indirectly  through ISG
Manufactured  Products,  Inc., a newly formed  wholly  owned  subsidiary  of the
Company,  100% of the  partnership  interests in Don's  Building  Supply  L.L.P.
("Don's") for a purchase  price of $6,000,000 in cash.  The Company  expects the
purchase  price to increase or decrease  within  sixty days of the closing  date
based on 1999 EBITDA,  as defined,  and working capital as of February 29, 2000.
Don's is  engaged  in the  retail and  wholesale  distribution  of  construction
materials to residential and commercial contractors.


<PAGE>

                                      F-22

                        Report of Independent Accountants
                        ---------------------------------

     To the Board of Directors and
     Shareholders of JTM Industries, Inc:

     In our opinion, the consolidated statements of loss and accumulated deficit
     and cash flows for the period  from  January  1, 1997 to October  13,  1997
     (appearing on pages F-23 through F-31 in this Form 10-K) present fairly, in
     all  material  respects,  the results of  operations  and cash flows of JTM
     Industries,  Inc. and its subsidiary for the period from January 1, 1997 to
     October  13,  1997,  in  conformity  with  generally  accepted   accounting
     principles.  These  financial  statements  are  the  responsibility  of the
     Company's management;  our responsibility is to express an opinion on these
     financial  statements  based on our audit.  We conducted our audit of these
     statements in accordance with generally accepted auditing standards,  which
     require that we plan and perform the audit to obtain  reasonable  assurance
     about whether the financial  statements are free of material  misstatement.
     An audit  includes  examining,  on a test basis,  evidence  supporting  the
     amounts  and  disclosures  in  the  financial  statements,   assessing  the
     accounting  principles used and  significant  estimates made by management,
     and evaluating the overall  financial  statement  presentation.  We believe
     that our audit provides a reasonable basis for the opinion expressed above.
     We  have  not  audited  the  consolidated   financial   statements  of  JTM
     Industries, Inc. for any period subsequent to October 13, 1997.

     PRICEWATERHOUSECOOPERS LLP
     February 16, 1998
     Charlotte, North Carolina


<PAGE>

                                      F-23

                              JTM INDUSTRIES, INC.
             CONSOLIDATED STATEMENT OF LOSS AND ACCUMULATED DEFICIT
                                ($000's omitted)

                                                                 Period from
                                                                 January 1 to
                                                                 October 13,
                                                                    1997
                                                            -------------------
Revenues:
Product revenues...........................................    $        25,613
Service revenues...........................................             25,682
                                                            -------------------
                                                                        51,295

Cost of product revenues, excluding depreciation...........             20,702
Cost of service revenues, excluding depreciation...........             19,999
Depreciation and amortization..............................              5,279
Selling, general and administrative expenses................             3,633
                                                            -------------------
Income from operations.....................................              1,682
Intercompany interest expense..............................              4,160
Interest expense............................................                 -
                                                            -------------------
                                                                        (2,478)
Income tax expense.........................................               (612)
                                                            -------------------
Net loss...................................................             (3,090)
Accumulated deficit - beginning of period..................             (3,966)
                                                            -------------------
Accumulated deficit - end of period.......................     $        (7,056)
                                                            ===================


   The accompanying notes are an integral part of these financial statements.


<PAGE>

                                      F-24

                              JTM INDUSTRIES, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                ($000's omitted)

                                                                  Period from
                                                                  January 1 to
                                                                  October 13,
                                                                      1997
                                                              ------------------
Net Cash Provided By (Used In):
Operating activities......................................... $           521
Investing activities.........................................            (681)
                                                              ------------------
Net cash used by operating and investing activities..........            (160)
Non-cash activities..........................................            (797)
                                                              ------------------
                                                                         (957)
Intercompany notes payable - beginning of period.............         (48,450)
                                                              ------------------
Intercompany notes payable - end of period................... $       (49,407)
                                                              ==================
Operating activities:
Net loss..................................................... $        (3,090)
Items not affecting cash:
  Loss on disposal of fixed assets...........................             305
  Depreciation and amortization..............................           5,279
  Deferred income taxes......................................             150
Cash provided by (used in) financing working capital:
  Trade and other accounts receivable........................          (1,898)
  Other current assets.......................................              87
  Accounts payable and accrued liabilities...................            (312)
                                                              ------------------
Net cash provided by operating activities.................... $           521
                                                              ==================
Investing activities:
Purchase of fixed assets..................................... $          (681)
Proceeds from sale of fixed and other assets.................               -
                                                              ------------------
Net cash used in investing activities........................ $          (681)
                                                              ==================

Supplemental cash flow information:
  Noncash transaction:
     Transfers of fixed assets from parent................... $           107
     Accounts payable related to fixed assets................               -
  Cash paid (received) for:
     Interest................................................ $         4,160
     Income taxes to (from) parent........................... $           462

   The accompanying notes are an integral part of these financial statements.

<PAGE>

                                      F-25

                              JTM INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                ($000's Omitted)

1. Basis of Presentation of Financial Statements

         These financial statements reflect the consolidated  financial position
and results of  operations  of JTM  Industries,  Inc.  and its  subsidiary,  KBK
Enterprises,  Inc. ("the  Company") which until October 13, 1997 was an indirect
wholly  owned  subsidiary  of Laidlaw  Inc. The Company is involved in materials
management  services to coal combustion  by-products (CCPs) producing  utilities
and marketing products derived from CCPs, principally in the United States.

         Interest  expense   associated  with  intercompany   financing  by  the
Company's  former parent,  Laidlaw,  Inc.  ("Laidlaw"),  has been charged to the
Company based on prime rate plus 2% on the average outstanding balance.

         The  Company is  included  in the  consolidated  tax return of Laidlaw.
Income  taxes  have  been  calculated  using  applicable  income  tax rates on a
separate return basis.

2. Summary of Significant Accounting Policies

a) Basis of Presentation

         The consolidated financial statements of the Company have been prepared
in accordance with accounting principles generally accepted in the United States
and all figures are  represented  in U.S.  dollars,  as the Company's  operating
assets are located in the United States.

         The  preparation of financial  statements in accordance  with generally
accepted  accounting  principles  requires  the  Company to make  estimates  and
assumptions  that affect reported  amounts of income and expenses and disclosure
of contingencies. Future events could alter such estimates in the near term.

b) Consolidation

         The  consolidated  financial  statements  include  the  accounts of JTM
Industries,  Inc.  and  KBK  Enterprises,  Inc.,  its  subsidiary  company.  All
significant intercompany transactions are eliminated.



<PAGE>

                                      F-26

                              JTM INDUSTRIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                ($000's Omitted)

2. Summary of Significant Accounting Policies (Continued)

c) Fixed assets

         Fixed assets are recorded at cost.  Depreciation  and  amortization  of
other property and equipment is provided  substantially on a straight-line basis
over their estimated useful lives which are as follows:

                Buildings.......................     20 to 40 years
                Vehicles and other..............      3 to 15 years

         The  company  periodically  reviews  the  carrying  values of its fixed
assets  to  determine  whether  such  values  are  recoverable.   Any  resulting
write-downs are charged against income.  Depreciation  expense amounts to $1,191
for the period from January 1, 1997 to October 13, 1997.

d) Other assets

         Goodwill is amortized on a  straight-line  basis over forty years.  The
amount of any  impairment  is charged  against  income.  During the period  from
January 1, 1997 to October 13, 1997, in connection  with the planned sale of the
Company,  Laidlaw  wrote  down the assets of the  Company  to fair  value  which
resulted in a charge against goodwill of $3,300.

e) Income taxes

         Deferred  income  taxes  are  provided  for all  significant  temporary
differences  arising  from  recognizing  certain  expenses  and certain  closure
accruals in different periods for income tax and financial reporting purposes.

f) Revenue

         Material   revenues  are  earned  by  marketing   products  created  by
coal-fired  power  generation and related  industrial  materials to consumers of
building  materials and construction  related products.  Generally,  material is
obtained from coal-fired electric utilities and is immediately  delivered to the
customer,  eliminating the need to inventory products.  Therefore,  no inventory
exists at October 13, 1997.  Material  revenues are recognized when the material
is delivered to the customer.


<PAGE>

                                      F-27

                              JTM INDUSTRIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                ($000's Omitted)

2. Summary of Significant Accounting Policies (Continued)

f) Revenue (continued)

         Service  revenues  are earned under  long-term  contracts to dispose of
residual  materials  created by coal-fired  power  generation.  Typical contract
terms are from five to fifteen years. Service revenues are recognized concurrent
with the removal of the material and are  typically  based on the number of tons
of material removed at an established price per ton.

         Costs  of  product  revenues  primarily  include  amounts  paid  to the
utilities  to  purchase  the  product  and  transportation  charges  related  to
delivering  the  product to the  customer.  Cost of service  revenues  primarily
include  landfill fees and  transportation  charges  related to  delivering  the
product to the landfill. Overhead charges incurred by a facility which generates
both product and service  revenues are allocated to cost of product revenues and
cost of  service  revenues  based on the  percentage  of each type of revenue to
total  revenues.  Cost of  product  revenues  and cost of service  revenues  are
recognized concurrent with the recognition of the related revenue.

g) Concentration of Credit Risk

         Concentrations of credit risk in accounts  receivable are limited,  due
to the  large  number  of  customers  comprising  the  Company's  customer  base
throughout the United Sates. The Company performs ongoing credit  evaluations of
its  customers,  but does not require  collateral to support  customer  accounts
receivable.  The Company establishes an allowance for doubtful accounts based on
the credit risk applicable to particular customers, historical trends, and other
relevant information.

3. Benefit Plans

         Eligible  employees of the Company may  participate in a 401(k) savings
plan  sponsored  by  Laidlaw.  The 401(k)  plan  requires  the  Company to match
employee  contributions  as defined,  up to 3% of the  employees'  compensation.
Expenses related to the 401(k) plan were  approximately $294 for the period from
January 1, 1997 to October 13, 1997.


<PAGE>

                                      F-28

                              JTM INDUSTRIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                ($000's Omitted)

4. Lease Commitments

         Rental expense  incurred under operating  leases amounted to $4,334 for
the period from January 1, 1997 to October 13, 1997.

         Rentals payable under operating leases for premises and equipment as of
October 13, 1997 are as follows:

1998...........................................................  $       4,518
1999...........................................................          3,264
2000...........................................................          1,553
2001...........................................................          1,440
2002...........................................................            753
Thereafter.....................................................          1,600
                                                                ---------------
                                                                 $      13,128
                                                                ===============

5. Legal proceedings

         The Company has various  outstanding  legal  matters  arising  from the
normal course of business.  Although the final outcome  cannot be predicted with
certainty, the Company believes the ultimate disposition of the matters will not
have a material impact on the Company's financial position.

6. Related party transactions

         Included in the financial  statements  are related  party  transactions
between  the  Company and  Laidlaw.  These  related  party  transactions  are as
follows:

                                     Period from
                                    January 1 to
                                     October 13,
                                        1997
                              ----------------------
Management fees................... $        491
Administrative fees............... $        249
Intercompany sales................ $      2,814
Allocated insurance expense....... $        515
Interest expense.................. $      4,160

<PAGE>

                                      F-29

                              JTM INDUSTRIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                ($000's Omitted)

6. Related party transactions (Continued)

         Management and  administrative  fees have been allocated to the Company
based upon the Company's share of Laidlaw's consolidated revenue. Management and
administrative  fees are charged by Laidlaw to each of its  operating  groups in
order to recover its general and administrative  costs. The services provided by
Laidlaw include treasury,  taxation and insurance. The allocated charges may not
be indicative of the expenses the Company would have incurred if Laidlaw had not
provided the services.

         On May 9,  1997,  all of the  outstanding  shares of the  Company  were
transferred from LESI to Laidlaw  Transportation,  Inc., a direct,  wholly owned
subsidiary of Laidlaw.

         In  preparation  for  the  disposal  of the  Company,  certain  closure
liabilities  amounting to $1,650 were transferred to Laidlaw, net of the related
deferred tax asset of $578.  Additionally,  a long-term receivable in the amount
of $1,008,  net of an allowance of $963, was transferred to Laidlaw.  A deferred
tax asset of $337 related to the allowance was also transferred to Laidlaw.

7. Income taxes

         The  components  of income tax expense  for the period from  January 1,
1997 to October 13, 1997 are as follows:

Current federal provision (benefit).............. $          421
Current state provision..........................             41
Deferred federal provision.......................            150
                                                  ---------------
Total income tax provision (benefit)............. $          612
                                                  ===============

<PAGE>

                                      F-30

                              JTM INDUSTRIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                ($000's Omitted)

7. Income taxes (continued)

         Deferred income taxes arise from temporary  differences between the tax
basis of assets and  liabilities  and their  reported  amounts in the  financial
statements.  Components  of deferred tax  liabilities  and assets at October 13,
1997 are as follows:

Deferred tax assets:
  Allowance for bad debts.......................... $          142
  Closure reserve..................................             97
  Other accrued liabilities........................             91
Deferred tax liabilities:
  Fixed assets.....................................            (1)
                                                    ---------------
Net deferred tax assets............................ $         329
                                                    ===============

         The difference between the federal statutory tax rate and the effective
tax rate on continuing operations for the period from January 1, 1997 to October
13, 1997 are as follows:

Federal statutory tax rate..............................          35.0%
Goodwill amortization not deductible for tax purposes...         (57.7%)
State income taxes......................................          (1.1%)
Other items - net.......................................          (0.9%)
                                                        ----------------
Effective tax rate......................................         (24.7%)
                                                        ================

8. Accrued closure costs

         The Company,  in the normal course of its  business,  expends funds for
remediation of certain property.  The Company does not expect these expenditures
to have a materially  adverse  effect on its  financial  condition or results of
operations,  since its business is based upon compliance with environmental laws
and  regulations  and its services are priced  accordingly.  The method by which
these costs are accrued involves  estimating the total site  restoration  costs,
determining  the total volume of materials the site will hold,  and accruing the
site  restoration  costs  concurrently  with the filling of the site.  The total
anticipated site restoration costs are approximately $1,900.

9. Subsequent Event

         On October 14, 1997,  Laidlaw,  Inc. sold all of the outstanding shares
of the Company for  $5,817,000 in cash, a  $29,000,000  senior bridge note and a
$17,500,000 9% Junior Subordinated Promissory Note due 2005.