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


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

For the Fiscal Year Ended December 31, 1998
                                       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____________


                               ISG RESOURCES, INC.
             (Exact name of Registrant as specified in its charter)
          Texas                                                   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, 1999 was approximately $0.

         The number of shares of Common Stock, without par value, outstanding on
March 29, 1999 was 100 shares.

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


                                                       PART I

Item 1.       Business

General Development of Business

ISG Resources,  Inc.'s  predecessor was organized under the laws of the State of
Texas on February 6, 1981. Industrial Services Group, Inc. ("ISG") was formed in
September 1997 by Citicorp Venture Capital,  Ltd. ("CVC") and certain members of
ISG Resources,  Inc.'s  management  team to acquire the stock of JTM Industries,
Inc. ("JTM") and its wholly owned subsidiary, KBK Enterprises, Inc. ("KBK") (the
"JTM Acquisition") from Laidlaw  Transportation,  Inc. ("Laidlaw").  Pursuant to
the JTM Acquisition,  JTM became a wholly owned subsidiary of ISG. Subsequently,
JTM changed its name to ISG Resources, Inc. (the "Company").

Through  strategic  acquisitions over the past fiscal year, the Company acquired
several key competitors  serving diverse  geographic  regions and companies with
products and/or services that  complemented the Company's then current products.
On March 4, 1998, the Company acquired the stock of Pozzolanic  Resources,  Inc.
("Pozzolanic") for $40.0 million, at which time Pozzolanic became a wholly owned
subsidiary of the Company.  Pozzolanic  is a provider of marketing  services for
coal  combustion  products  ("CCPs") in the Pacific  Northwest  and in the Rocky
Mountain area. On March 20, 1998, the Company  acquired the stock of Power Plant
Aggregates of Iowa,  Inc.  ("PPA") for $6.4 million (net of $2.1 million of cash
acquired, for a total consideration of $8.5 million), at which time PPA became a
wholly owned  subsidiary  of the  Company.  PPA and its  subsidiary  provide the
personnel  and  equipment to service a large  contract  recently  awarded to the
Company in Iowa. On April 22, 1998,  the Company  acquired the stock of Michigan
Ash Sales Company,  d.b.a. U.S. Ash Company ("U.S.  Ash"),  U.S.  Stabilization,
Inc.,  and Flo Fil Co.,  Inc.  (collectively  the "U.S.  Ash Group") for a total
consideration  of $24.6 million,  at which time the U.S. Ash Group became wholly
owned  subsidiaries  of the  Company.  The U.S.  Ash Group is a provider  of CCP
management  services in Michigan,  Ohio and Indiana,  areas where the  Company's
services were limited.  On April 22, 1998, the Company acquired the stock of Fly
Ash  Products,  Inc.  ("Fly Ash  Products")  for a total  consideration  of $9.5
million,  at which time Fly Ash Products became a wholly owned subsidiary of the
Company. Fly Ash Products is a provider of CCP management services in Arkansas.

On May 1, 1998, the Company,  through Pneumatic Trucking, Inc. ("Pneumatic"),  a
wholly owned  subsidiary  of U.S.  Ash,  purchased the rolling stock of a former
related party of U.S. Ash for approximately $885,000.

On August 6, 1998, the Company  acquired the exclusive  license to make, use and
sell  products  utilizing the  Dynastone(TM)  technology.  Dynastone(TM)  is the
technology  used for the  production  of a unique  acid and  chemical  resistant
cement  utilizing high volumes of CCPs. The license  creates the opportunity for
the Company to enter the  cementitious  manufactured  concrete  products  arena,
utilizing  its  extensive  reserve  of  CCP  resources.   Based  upon  available
information,  the Company believes it is now the largest manager and marketer of
CCPs in North  America.  CCPs are the residual  materials  created by coal-fired
power  generation.  The Company enters into long-term CCP management  contracts,
primarily with coal-fired  electric  generating  utilities.  These utilities are
required to manage,  or contract to manage,  CCPs in  accordance  with state and
federal  environmental  regulations.  In addition,  the Company provides similar
materials management services for other industrial clients.
<PAGE>

Important Developments since Fiscal Year End

Effective January 1, 1999, the Company, Pozzolanic, PPA, the U.S. Ash Group, Fly
Ash  Products and KBK merged with and into ISG  Resources,  Inc., a newly formed
Utah  corporation.  Prior to the merger,  ISG Resources (Utah) had no assets and
was a wholly owned  subsidiary  of  Industrial  Services  Group,  Inc.  ("ISG").
Pneumatic,  a wholly owned  subsidiary  of U.S. Ash, was not merged into the new
Utah  corporation.  Consequently,  Pneumatic is now a wholly owned subsidiary of
the Utah  corporation.  All  references  to the  "Company"  herein  refer to ISG
Resources, Inc.
(Utah) and all of its predecessors.

As a result of the  foregoing  merger,  all 1999 reports  filed  pursuant to the
Securities  Exchange Act of 1934, as amended,  will be filed with ISG Resources,
Inc., the Utah corporation, as the registrant.

On or about  January 7, 1999,  the Company  acquired the issued and  outstanding
capital stock of Best Masonry & Tool Supply, Inc. ("Best"). Best is now a wholly
owned subsidiary of the Company.


Principal Products and their Markets

The Company  uses CCPs and other  industrial  materials  to make  products  that
primarily  replace  manufactured or mined  materials,  such as portland  cement,
lime,  agricultural  gypsum, fired lightweight  aggregate,  granite aggregate or
limestone.  The  Company's  focus  on  CCPs  and  related  industrial  materials
development  has also  created a variety  of  applications,  such as  fillers in
asphalt shingles and related  products,  that extend beyond the traditional uses
of CCPs and related  industrial  materials.  For  purposes of this  report,  the
Company's  products are broken down into  traditional  products and  value-added
products.  Traditional  products  are those  products  that the  Company and its
competitors within the industry historically produce with the CCPs.  Value-added
products are newer products that have been developed to utilize CCPs and related
materials  which in the past were deemed  waste  products  and  usually  sent to
landfills.

The primary  CCPs  managed by the Company are fly ash and bottom ash. Fly ash is
the fine  residue and bottom ash is the heavier  particles  that result from the
combustion of coal.  Utilities firing boilers with coal first pulverize the coal
and then blow the  pulverized  coal into a burning  chamber where it immediately
ignites to heat the boiler tubes.  The heavier bottom ash falls to the bottom of
the burning  chamber while the lighter fly ash remains  suspended in the exhaust
gases. Before leaving the exhaust stack, the fly ash particles are removed by an
electrostatic  precipitator,  bag  house  or other  method.  The  bottom  ash is
hydraulically  conveyed to a collection area, while the fly ash is pneumatically
conveyed to a storage silo.
<PAGE>

Fly ash is a pozzolan  that,  in the  presence of water,  will  combine  with an
activator  (lime,  portland  cement  or kiln  dust)  to  produce  a  cement-like
material.   It  is  this  characteristic  that  allows  fly  ash  to  act  as  a
cost-competitive  substitute  for other  more  expensive  cementitious  building
materials.  Concrete manufacturers can typically use fly ash as a substitute for
15% to 40% of their cement requirements, depending on the quality of the fly ash
and the proposed end-use  application for the concrete.  In addition to its cost
benefit,  fly ash provides greater structural strength and durability in certain
construction applications, such as road construction.  Bottom ash is utilized as
an aggregate in concrete block construction and road base construction.

According  to  the  American  Coal  Ash   Association   (the  "ACAA"),   of  the
approximately  100 million tons of CCPs that were generated in the United States
during 1996, fly ash accounted for  approximately  59%, bottom ash accounted for
approximately 16% and flue gas  desulphurization  waste ("scrubber  sludge") and
boiler slag accounted for approximately 25%.

Traditional Products and Applications

The Company's  traditional  products are CCPs and related  industrial  materials
which  generally  require  minimal  processing  or  additives  to fulfill  their
applications.  The Company  typically  provides  these products to its customers
directly  from its clients'  sites.  The Company has been  successful in selling
significant  portions of the CCPs and other  industrial  materials it manages to
traditional  markets  (e.g.,  the use of fly ash as pozzolan in portland  cement
concrete and the use of bottom ash as a lightweight aggregate).

The following is a brief description of the Company's traditional products:

Fly ash is used as (i) a  pozzolan  to  partially  replace  portland  cement  in
ready-mix concrete and concrete products (e.g., concrete pipe); (ii) an additive
to portland cement to produce I-P cement and blended cements;  (iii) an additive
in downhole  cementing of oil wells; and (iv) a primary  constituent in flowable
grout used to fill voids under concrete slabs and underground tank voids.

Bottom ash is used as (i) raw feed stock for the  manufacture of portland cement
clinker;  (ii) a lightweight  aggregate for concrete and concrete block; (iii) a
filler in the  manufacture  of clay brick;  and (iv) an  aggregate  in asphaltic
concrete. It can also be mixed with salt as an additive for ice and snow control
or used as backfill for pipe bedding and dry bed material.

Fluidized bed ash is used (i) for stabilization in mud drying; (ii) as a reagent
to solidify liquid wastes in petrochemical and related areas; and (iii) for soil
stabilization to create more solid foundations for vertical construction.

Scrubber  sludge is used as cement  stabilized  road  base  material  and can be
processed to be used in wallboard manufacture.

Boiler slag is used for a variety of  applications,  including  roofing shingles
and cement.
<PAGE>

Cement  and  lime  kiln  dust  and  related  industrial  minerals  are  used  as
cementitious  binders for  chemical  fixation/solidification  of  hazardous  and
non-hazardous wastes, soil stabilization and chemical processes.

Value-Added Products and Applications

To diversify  its product  offerings  and ensure that it  productively  uses the
CCPs, the Company also develops and markets value-added  products made from CCPs
and related  industrial  materials,  and it  continues  to expand the breadth of
markets for these  products.  Through its research and  development  program and
certain  licenses,  the  Company has  broadened  the end use market for CCPs and
related industrial  materials by introducing several  proprietary  products made
from previously  non-marketable materials. The Company sells and distributes its
products to cement plants,  ready-mix concrete plants, road contractors,  carpet
manufacturers,  roofing shingle  producers,  soil stabilization  firms,  utility
companies and other waste management firms.  Several of its proprietary products
have  been   utilized  by  government   agencies  such  as  the   Department  of
Transportation, the Federal Aviation Administration, the Army Corps of Engineers
and the U.S. Bureau of Mines.

The following is a list of the Company's value added products and applications:

Powerlite(R)  is a pyrite free bottom ash which,  when processed by the Company,
produces a high quality aggregate for the concrete block industry.  Powerlite(R)
has exhibited superior flow characteristics,  often making it more economical to
use than other  aggregates.  The Company has provided  customers in the Atlanta,
Georgia area with more than two million tons of Powerlite7 in the past 15 years.

SAM(TM)  (Stabilized  Aggregate  Material)  is  manufactured  by the  Company by
combining several  industrial  materials  received from clients and transforming
them into a well-graded  replacement for natural aggregate.  SAM(TM) can be used
in many other applications, such as road base, sub-base, parking areas, drainage
media and rip-rap.

Pozzalime(TM)/Envira-Cement(R) are the Company's lime-based pozzolanic materials
that  contain  significant  moisture-reduction  properties.   Pozzalime(TM)  and
Envira-Cement(R)  have been  successfully  utilized in  road-base  construction,
road-sub-base  construction,  chemical fixation,  soil  stabilization,  moisture
reduction, mud drying, pH adjustments, acid neutralization, sewage treatment and
mine reclamation.

Gypcem(R) is the Company's processed gypsum,  registered and exclusively sold by
the Company, that has characteristics  allowing it to be used in the manufacture
of portland cement.  With  considerable  handling  capabilities,  the product is
often more economical to use than conventional  mined gypsum.  Under a long-term
contract with Dupont,  the Company designed,  constructed and currently operates
an on-site processing facility for the 100,000 tons of synthetic gypsum produced
each year.
<PAGE>

Peanut Maker(R) is a gypsum landplaster  developed by the Company for use in the
agricultural  market as a soil  enhancer.  During  1997,  under a contract  with
Dupont, the Company managed 47,000 tons of Dupont's industrial  material,  which
was  historically  disposed  of. The Company  has  transformed  this  previously
unmarketable  material  into  Peanut  Maker(R),  a  beneficial-use,  value-added
product.  Peanut  Maker(R)  has been used on over 60,000  acres of peanut  crops
annually for the past 10 years. It continues to be in demand because of its high
calcium content.  The  disassociation  rate afforded by Peanut Maker(R) makes it
more effective and economical than traditional calcium supplements.  It has been
a  recommended  source of calcium by the Virginia and North  Carolina  Extension
Services since its invention.

ALSIL(R)/Orbaloid(R)  are  industrial  fillers  developed  by the  Company  from
processed  client-generated  materials  for use in filler  applications  such as
roofing shingles,  carpet and mat backing, and ceramic products. The Company has
two U.S.  patents  and one  Canadian  patent for the use of  ALSIL(R) in roofing
shingles.  The Company has  secured  multiple  contracts  with  various  shingle
manufacturers,  with one  agreement  extending  for the  life of the  customer's
manufacturing plant.

Flexbase(TM)  is a mixture  of fly ash and  scrubber  sludge  which the  Company
processes to form a road-base material.

Stabil-Fill(TM) is a lime-stabilized  fly ash that the Company has developed and
sold  for use as a fill  material  in  lieu of  natural  borrow  materials.  The
resulting  mixture  is  lightweight  and  compacts  with  standard  construction
equipment.  Applications include commercial or industrial property  development,
roadway embankment and subgrade for parking lots, airport runways,  golf courses
or driving ranges, and athletic fields.

Redi-Fill(TM)/Flo  Fil(R) are the  Company's  processed  fly ash and bottom ash,
sold for use as a structural fill and ready-mixed flowable fill.

In  addition to these value added  products,  the Company  uses its  traditional
products for non-traditional  applications.  Non-traditional applications of fly
ash include:  (i) use as mineral  filler to replace fine aggregate in bituminous
coatings  for roads  (asphalt  surface);  (ii) use as a primary  constituent  in
flowable  fill to backfill  around  in-ground  pipes and  structures;  (iii) for
stabilization of soils with high plasticity or low load bearing abilities;  (iv)
to  produce a filler  grade  material  for a variety of  products;  and (v) as a
binder with calcium sulfate to replace limestone road base materials.
<PAGE>

Status of any Publicly Announced New Product or Service

On August 6, 1998, the Company  acquired the exclusive  license to make, use and
sell  products  utilizing the  Dynastone(TM)  technology.  Dynastone(TM)  is the
technology  used for the  production  of a unique  acid and  chemical  resistant
cement   utilizing  high  volumes  of  CCPs.  Since  the  Company  acquired  the
Dynastone(TM) license, the Company entered into a contractual agreement with CSR
Hydro Conduit  ("CSR"),  one of the largest  concrete pipe  manufacturers in the
United  States.  Under the  agreement,  the  Company  will  provide CSR with the
proprietary Dynastone(TM) technology to manufacture acid resistant concrete pipe
using  CCPs in  addition  to  traditional  cements.  The  Company  has  recently
established a laboratory in San Antonio, Texas dedicated to commercialization of
the Dynastone(TM) technology.

Competitive Business Conditions

According  to data  compiled  by the Energy  Information  Administration  of the
United States Department of Energy (the "EIA"), of the 1,996 electric generating
units  operating  in the  United  States  in 1996,  1,128  were  coal-fired  and
represented  approximately 55% of the total electricity  generated,  an increase
from  approximately  50% in 1995.  Coal is the  largest  indigenous  fossil fuel
resource in the United  States,  with current  U.S.  annual coal  production  in
excess  of one  billion  tons.  Approximately  80% of the coal  produced  is for
electric  power  generation,  and its use has grown by almost  25% over the last
decade. The combustion of coal provides  cost-effective  electricity generation,
but results in a high percentage of residual material,  which serves as the "raw
material"  for the CCP  industry.  The industry  manages  these CCPs and related
materials by developing  end-use markets for certain CCPs and providing  storage
and disposal services for the remainder of such materials.

In order to sustain its position as a leader in the CCP management industry, the
Company  relies  on  and  continues  to  implement  the  following   competitive
strengths:

Leading  Market  Position.  The  Company  believes  it is a party  to  more  CCP
management  contracts and manages more CCP tonnage than any of its  competitors.
The Company has aggressively  penetrated its service areas and has won contracts
based  on  its  "one-stop"  approach  to  CCP  and  other  industrial  materials
management services.  This approach combines the Company's marketing,  materials
handling and  technological  capabilities to lower the client's cost of managing
CCPs and other  industrial  materials in accordance  with  applicable  state and
federal regulations.

Geographic  Diversification.  The Company believes it is the only company in the
CCP management  industry with a national scope. This national scope provides the
Company with several significant  competitive benefits,  including mitigation of
the effects of cyclical regional  economies and weather  patterns.  In addition,
the Company's  national scope and storage  capabilities will create  incremental
revenue  through  the  ability to shift  products  among  regions to meet market
demand while minimizing transportation costs.

Value-Added Products and Services. The Company's focused new product development
efforts  have  broadened  the  end-use  market  for  CCPs and  other  recyclable
industrial  materials.  The Company has successfully  introduced new patented or
trademarked  products  made from  previously  non-marketable  materials  through
proprietary  processes.  These  product  development  efforts  have  reduced the
materials  management  cost to the Company's  clients and improved the Company's
revenue mix and margins.
<PAGE>

Strong Client  Relationships.  At December 31, 1998, the Company had contractual
relationships  with  eleven  of the  largest  fifteen  coal  powered  electrical
utilities in the United States, based on total electricity revenues. The Company
has  maintained  long-term  contracts  with certain  utilities  since 1968,  and
experienced  a  renewal  or  extension  rate of  greater  than 90% since the JTM
Acquisition. The Company's clients rely on its marketing, materials handling and
technological  capabilities to extend the useful life of their landfill sites by
creatively managing and marketing a broader range of CCPs than competitors.

Source and Availability of Raw Materials

The  Company's  primary  raw  material  is  CCPs.  As  long as the  majority  of
electricity  generated  in  this  country  comes  from  the  use  of  coal-fired
generation,  the  Company  believes  it will  have  an  adequate  supply  of raw
materials.

Dependence on Limited Customers

The Company works with a large number of customers  and has long-term  contracts
with most such  customers.  The  Company's  core  business is based on long-term
materials  management  contracts with power producers and industrial clients. As
of December 31, 1998, the Company had 87 materials management  contracts,  17 of
which generated more than $1.0 million of annual revenues each. Typical contract
terms are from five to fifteen  years.  The  Company  is focused on serving  its
current  client  base  and  plans to  aggressively  target  additional  contract
opportunities to increase both tonnage under management and revenues.

Intellectual Property

The  Company  owns and has  obtained  licenses to various  domestic  and foreign
patents  and  trademarks  related to its  products  and  processes.  While these
patents  and  trademarks  in  the  aggregate  are  important  to  the  Company's
competitive  position, no single patent or trademark is material to the Company.
The Company's license agreements  generally have a duration which coincides with
the patents covered thereby.

Government Approval

None.

Effect of Existing or Probable Government Regulation

None.
<PAGE>

Research and Development

In an effort to maximize the  percentage  of products  marketed to end users and
minimize the amount of materials landfilled,  the Company's focused research and
development  efforts have created or caused the Company to acquire the rights to
value-added  products  such  as  ALSIL(R),  Powerlite(R),  Flexbase(TM),  Peanut
Maker(R) and Dynastone(TM).  The Company markets CCP tonnage under management to
the building materials and construction  related products industry to be used in
engineering  applications,  such as ready-mix concrete,  lightweight  aggregate,
stabilized road bases,  flowable and structural fill, and roofing shingles.  The
Company's major customers for its marketed products include LaFarge Corporation,
Consolidated Sugar Refineries,  Elk Corporation of Texas and GS Roofing Products
Company, Inc. The Company's research and development program and other dedicated
efforts have  resulted in twelve  patented  products or  processes  and two U.S.
patents and five  foreign  patents  pending.  Costs  incurred  for  research and
development  were not  material to the results of  operations  of the Company in
1998, 1997, or 1996.

Cost of Compliance with Environmental Laws

None.

Employees

The Company has a total of 630 employees, of which 570 are full-time employees.


Item 2.       Properties

The Company  operates  its  corporate  headquarters  in Salt Lake City,  Utah in
offices  leased under a three year lease expiring in July 2001. The total amount
of leased space in the  corporate  headquarters  is 9,396  square  feet.  Due to
Company's national scope of operations, it has a number of other properties used
in its operations.  The following table sets forth certain information regarding
the Company's other principal facilities as of December 31, 1998:

 Location               Function              Ownership              Lease
                                                                Termination Date

Kennesaw, GA          Offices                    Leased        January 31, 2004
Delle, UT             Storage Silos              Leased        November 1, 2001
Fargo, ND             Fly Ash Storage            Leased        Month to Month
Good Spring, PA       Silo Facility              Leased        August 15, 1999
Valley View, PA       Rail Siding                Leased        December 31, 2015
Chester, VA           Office/Rail Spur           Leased        November 30, 1999
Taylorsville, GA      Rail Sidetrack             Leased        30 days notice
Taylorsville, GA      Lab Facility               Owned
Doraville, GA         Terminal Facility          Leased        August 11, 2005
Leland, NC            Transfer Facility          Owned
Franklin, VA          Structural Fill            Owned
Clinton, TN           Structural Fill            Owned
Mercer Island, WA     Offices                    Leased        June 30, 1999
Centralia, WA         Storage Facility           Owned
Ogden, UT             Storage Facility           Owned
Oregon City, OR       Offices                    Leased        Month to Month
Fresno, CA            Terminal Facility          Leased        March 31, 2002
Allentown, PA         Offices                    Leased        February 28, 2001
Pomona, CA            Rail Terminal              Owned
Stafford, TX          Offices                    Leased        April 30, 2003

Management believes its facilities are in good condition and that the facilities
are  adequate  for its  operating  needs  for  the  foreseeable  future  without
significant modifications or capital investment.
<PAGE>


Item 3.       Legal Proceedings

The Company is a  defendant  in various  lawsuits  which are  incidental  to the
Company's  business.  Management,  after  consultation  with its legal  counsel,
believes that any potential liability as a result of these matters will not have
a  material  effect  upon the  Company's  results  of  operations  or  financial
position.


Item 4.       Submission of Matters to a Vote of Security Holders

None.



                                     PART II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters

The Company's common stock is not publicly traded and is wholly owned by ISG.


Item 6.       Selected Financial Data

The following table sets forth summary consolidated financial information of the
Company for each of the five years in the period ended  December 31, 1998.  Such
information was derived from the audited  consolidated  financial statements and
notes thereto. The selected  consolidated  financial information for the periods
prior to  October  14,  1997 set forth  below is not  comparable  to  subsequent
periods due to the step-up in basis  resulting from the JTM  Acquisition and the
completion of the Acquisitions.

The selected consolidated financial information set forth below has been derived
from the audited consolidated  financial statements of the Company and should be
read in  conjunction  with  "Management's  Discussion  and Analysis of Financial
Condition and Results of Operations" and the consolidated  financial  statements
and notes thereto included elsewhere herein.

<PAGE>
<TABLE>
<CAPTION>




                                               2 1/2 Months 9 1/2 Months
                                          Year Ended     Ended       Ended
                                            December  December 31,October 13,       Year Ended December 31,
                                              31,
                                              1998                1997        1997       1996            1995         1994
                                                                   (Dollars in thousands)
Statement of Income Data:
<S>                                              <C>          <C>         <C>        <C>           <C>            <C>    
Revenue .......................................  $ 117,293    $ 12,643    $ 51,295   $  62,841     $     64,986   $60,784
Cost of products and services sold, excl. depr      80,116       9,365      40,701      52,268           51,489   52,356
Depreciation and amortization .................      9,141         908       5,279       2,285           2,265    1,538
Selling, general and administrative expenses ..     14,145       1,256       3,633       5,667           9,692        -(1)
Income from Operations ........................     13,891       1,114       1,682      2,621            1,540       6,890
Interest Expense ..............................      9,338         628       4,160      4,853            4,081          17
Net income (loss) before income taxes .........      4,808         517      (2,478)    (2,232)           6,873
Net income (loss) .............................      2,259         265      (3,090)    (1,870)           6,873(1)

Balance Sheet Data:
Working capital (deficiency) ..................      6,786     (21,648)    (43,594)   (45,804)         (42,268)      6,249
Total assets ..................................    191,732      73,270      58,396     62,950           61,779      18,291
Total debt ....................................    110,000        --          --         --               --         2,976
Shareholder's equity ..........................     27,524      25,265       3,623      6,713            8,033      17,831

Other Data:
Cash flows from operating activities ..........      8,164       1,843         521        603           (1,115)        -(1)
Cash flows from investing activities ..........    (86,576)        (19)       (681)    (3,869)                         -(1)
Cash flows from financing activities ..........     75,344       1,189         957      2,844           (4,113)        -(1)
EBITDA (2) ....................................     23,287       2,054       6,961      4,906            3,805       8,428
EBITDA margin .................................       19.9%       16.2%      13.6%             7.8%        5.9%     13.9%
Captial expenditures ..........................      8,131          19         681      4,357            4,589         905
Ratio of earnings to fixed charges (3) ........      1.42x       1.49x      0.56x            0.68x       0.58x     5.21x
Deficit of earnings to fixed charges ..........       --          --        (2,478)    (2,232)          (2,541)       --
</TABLE>

(1)  During the year ended  December 31, 1994,  the Company was a subsidiary  of
     Union Pacific and was not allocated any SG&A or income tax expense.
(2)  EBITDA  represents   earnings  before  interest   expense,   income  taxes,
     depreciation  and  amortization.  EBITDA  should  not be  considered  as an
     alternative  to net income or any other GAAP measure of  performance  as an
     indicator  of the  Company's  performance  or to  cash  flows  provided  by
     operating,  investing or financing activities as an indicator of cash flows
     or a measure of  liquidity.  Management  believes  that  EBITDA is a useful
     adjunct to net income and other  measurements  under GAAP in evaluating the
     Company's  ability  to  service  its  debt  and  is a  conventionally  used
     financial indicator. However, due to possible inconsistencies in the method
     of calculating  EBITDA, the EBITDA measures presented may not be comparable
     to other similarly titled measures of other companies.
(3)  The ratio of earnings to fixed charges is computed by dividing  earnings by
     fixed  charges.  For this purpose,  earnings  include  pre-tax  income from
     continuing  operations plus fixed charges.  Fixed charges include interest,
     whether  expensed or  capitalized,  amortization  of debt  expense and that
     portion of rental expense which is representative of the interest factor in
     these rentals.

<PAGE>


Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

The following  discussion and analysis  should be read in  conjunction  with the
consolidated  financial statements and notes thereto of ISG Resources,  Inc. and
its predecessor,  JTM Industries, Inc. and other financial information appearing
elsewhere herein.

General

The Company is a manager  and  marketer  of CCPs in North  America.  The Company
generates  revenues  from  marketing  products to its  customers  and  providing
materials management,  engineering and construction services to its clients. The
Company was founded in 1997 upon the  acquisition  of JTM by ISG.  Subsequently,
the Company acquired Pozzolanic, PPA, the US Ash Group and Fly Ash Products (the
"1998 Acquisitions"). The Company's strategic objectives include the maintenance
and expansion of long-term  contractual  relationships,  the increase in product
sales  and  applications  through   cross-marketing  and  further  technological
advances  and the pursuit of  strategic  acquisitions.  The  Company  expects to
achieve cost savings and  incremental  profitability  through the integration of
administration,  purchasing,  insurance,  marketing and other  operations of its
strategic acquisitions.

Seasonality

The Company's  business is subject to seasonal  fluctuation.  The Company's need
for working capital  accelerates  moderately  during the middle of the year, and
accordingly,  total debt levels  tend to peak in the second and third  quarters,
declining  in the fourth  quarter of the year.  The amount of revenue  generated
during  the  middle of the year  generally  depends  upon a number  of  factors,
including  the  level of road and other  construction  using  concrete,  weather
conditions affecting the level of construction, general economic conditions, and
other factors beyond the Company's control.

Results of Operations

Fiscal year 1998 was the first complete year of operations subsequent to the JTM
Acquisition  and, thus, is not comparable to any prior  accounting  period.  For
purposes of discussing the results of  operations,  fiscal year 1998 is compared
to the period from the JTM Acquisition  date to December 31, 1997 and the period
from January 1, 1997 to the JTM Acquisition  date, which reflects the results of
the  predecessor  company.  Due to the 1998  Acquisitions  and the change in the
capital  structure,  the financial  condition and results of operations  are not
directly comparable to that of the predecessor company.
<PAGE>

Fiscal Year 1998  Compared  to 2 1/2 Months  Ended  December  31, 1997 and 9 1/2
Months Ended October 13, 1997

 Revenues.  Revenues  were $117.3  million,  $12.6  million and $51.3 million in
fiscal year 1998,  the 2 1/2 months ended December 31, 1997 and the 9 1/2 months
ended October 13, 1997,  respectively,  resulting in average monthly revenues of
$9.8  million,  $5.0 million and $5.4 million for the  respective  periods.  The
increase in the average  monthly  revenues in 1998 is due  primarily to the 1998
Acquisitions.

Cost of Products Sold, Excluding Depreciation.  Cost of products sold, excluding
depreciation,  was $51.9 million,  $4.9 million and $20.7 million in fiscal year
1998,  the 2 1/2 months  ended  December  31,  1997 and the 9 1/2  months  ended
October 13, 1997,  respectively,  resulting in cost of products sold,  excluding
depreciation,  as a percentage of product revenues of 62.5%, 68.9% and 80.8% for
the respective  periods.  The improvement in margins is due to two factors:  (1)
change in product mix from lower margin product sold to the former parent in the
pre-acquisition period as opposed to higher margin product sold to third parties
in the post-acquisition period, and (2) price increases.

Cost of Services Sold, Excluding Depreciation.  Cost of services sold, excluding
depreciation  was $28.2  million,  $4.5 million and $20.0 million in fiscal year
1998,  the 2 1/2 months  ended  December  31,  1997 and the 9 1/2  months  ended
October 13,  1997,  respectively,  resulting in a  relatively  constant  cost of
services sold,  excluding  depreciation,  as a percentage of service revenues of
82.4%, 80.6% and 77.9% for the respective periods.

Depreciation and  Amortization.  Depreciation and amortization was $9.1 million,
$0.9  million  and $5.3  million  in fiscal  year 1998,  the 2 1/2 months  ended
December  31, 1997 and the 9 1/2 months ended  October 13,  1997,  respectively,
resulting in average monthly depreciation and amortization of $0.8 million, $0.4
million and $0.6 million,  for the  respective  periods.  The 9 1/2 months ended
October 13, 1997  includes a $3.3 million  goodwill  write-off by the  Company's
former parent in connection with the JTM Acquisition.  Excluding this write-off,
average monthly  depreciation  and  amortization for this period would have been
$0.2 million.  The increase in average monthly depreciation and amortization for
the 2 1/2 months ended December 31, 1997 over the 9 1/2 months ended October 13,
1997,  before the goodwill  write-off  discussed  above, is due primarily to the
amortization of goodwill, contracts, patents and assembled workforce, which were
recorded  at fair value  upon the JTM  Acquisition,  as well as the  accelerated
amortization  rate of goodwill by the Company after its  acquisition by ISG. The
increase in average monthly  depreciation  and amortization for fiscal year 1998
over  the 2 1/2  months  ended  December  31,  1997  is  due  primarily  to  the
amortization of goodwill, contracts and assembled workforce, which were recorded
at fair value upon the 1998 Acquisitions.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative  expenses  ("SG&A")  were $14.1  million,  $1.3  million and $3.6
million in fiscal year 1998,  the 2 1/2 months ended December 31, 1997 and the 9
1/2 months  ended  October 13,  1997,  respectively.  For the 9 1/2 months ended
October 13, 1997, management fees were allocated to the Company by Laidlaw based
upon the  Company's  share of  Laidlaw's  consolidated  revenue.  The  allocated
charges may not be indicative of the expenses the Company would have incurred if
Laidlaw had not provided the services.  The increase in SG&A in fiscal year 1998
is due primarily to three factors:  (1) costs associated with the reorganization
of the Company (i.e.,  consulting,  travel,  employee relocation) after the 1998
Acquisitions;  (2) increased sales and marketing efforts; and (3) an increase in
management incentive compensation.
<PAGE>

Interest  Expense.  Interest  expense was $9.3  million,  $0.6  million and $4.2
million in fiscal year 1998,  the 2 1/2 months ended December 31, 1997 and the 9
1/2 months ended October 13, 1997,  respectively,  resulting in average  monthly
interest  expense  of $0.8  million,  $0.2  million  and  $0.4  million  for the
respective periods.  The decrease in the average monthly interest expense in the
2 1/2 months  ended  December  31, 1997 as  compared  to the 9 1/2 months  ended
October 13, 1997 is due  primarily  to a decrease in the  Company's  outstanding
indebtedness resulting from the elimination of the intercompany  indebtedness to
Laidlaw upon the JTM  Acquisition.  The increase in the average monthly interest
expense  in  fiscal  year  1998  is due  primarily  to the  issuance  of  Senior
Subordinated Notes in April 1998.

Income Tax Expense. Income tax expense was $2,549,000,  $252,000 and $612,000 in
fiscal year 1998,  the 2 1/2 months ended December 31, 1997 and the 9 1/2 months
ended October 13, 1997, respectively, resulting in effective tax rates of 53.0%,
48.8% and  (24.7%).  The negative  effective  tax rate in the 9 1/2 months ended
October 13, 1997 is due  primarily  to the large  goodwill  write-off  discussed
above which was not deductible  for tax purposes.  The increase in the effective
tax rate from the 2 1/2 months  ended  December  31, 1997 to fiscal year 1998 is
due  primarily  to the  increase  in  non-deductible  amortization  of  goodwill
recorded upon the 1998 Acquisitions.

Net  Income  (Loss).  As a result of the  factors  discussed  above,  net income
increased  to $2.3  million  and $0.3  million in fiscal year 1998 and the 2 1/2
months ended December 31, 1997, respectively,  as compared to a net loss of $3.0
million in the 9 1/2 months ended October 13, 1997.


2 1/2 Months Ended  December  31, 1997 and 9 1/2 Months  Ended  October 13, 1997
Compared to Fiscal Year 1996

Revenues.  Revenues were $12.6 million, $51.3 million and $62.8 million in the 2
1/2 months ended  December 31, 1997, the 9 1/2 months ended October 13, 1997 and
fiscal year 1996,  respectively,  resulting in average monthly  revenues of $5.0
million, $5.4 million and $5.2 million for the respective periods. The change in
the average monthly  revenues  between the three periods is due primarily to the
seasonality  of the industry.  Revenues  peak in the second and third  quarters,
declining in the fourth and first quarters.
<PAGE>

Cost of Products Sold, Excluding Depreciation.  Cost of products sold, excluding
depreciation,  was $4.9 million,  $20.7 million,  and $22.4 million in the 2 1/2
months  ended  December 31,  1997,  the 9 1/2 months ended  October 13, 1997 and
fiscal year 1996,  respectively,  resulting in cost of products sold,  excluding
depreciation, as a percentage of product revenues of 68.9%, 80.8%, and 87.8% for
the respective  periods.  The improvement in margins is due to two factors:  (1)
change in product mix from lower margin product sold to the former parent in the
pre-acquisition  periods  as  opposed  to higher  margin  product  sold to third
parties in the  post-acquisition  period, and (2) a $1.0 million settlement of a
lawsuit charged to cost of sales in 1996.

Cost of Services Sold, Excluding Depreciation.  Cost of services sold, excluding
depreciation  was $4.5  million,  $20.0  million and $29.9  million in the 2 1/2
months  ended  December 31,  1997,  the 9 1/2 months ended  October 13, 1997 and
fiscal year 1996,  respectively,  resulting  in a  relatively  constant  cost of
services sold,  excluding  depreciation,  as a percentage of service revenues of
80.6%, 77.9%, and 80.0% for the respective periods.

Depreciation and  Amortization.  Depreciation and amortization was $0.9 million,
$5.3 million,  and $2.3 million in the 2 1/2 months ended December 31, 1997, the
9 1/2  months  ended  October  13,  1997 and  fiscal  year  1996,  respectively,
resulting in average monthly depreciation and amortization of $0.4 million, $0.6
million  and  $0.2  million  for  the  respective   periods.   The  increase  in
depreciation  and  amortization  in the 9 1/2 months ended October 13, 1997 over
the fiscal year 1996 is due  primarily to a $3.3 million  goodwill  write-off by
the Company's  former parent in connection with the JTM  Acquisition.  Excluding
this write-off,  average monthly  depreciation  and amortization for this period
would have been consistent  with fiscal year 1996 at $0.2 million.  The increase
in average  monthly  depreciation  and  amortization  for the 2 1/2 months ended
December  31,  1997 over the 9 1/2 months  ended  October 13,  1997,  before the
goodwill  write-off  discussed  above,  is due primarily to the  amortization of
goodwill,  contracts,  patents and assembled  workforce,  which were recorded at
fair value upon the JTM  Acquisition,  as well as the  accelerated  amortization
rate of goodwill by the Company after its acquisition by ISG.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative  expenses  ("SG&A")  were $1.3  million,  $3.6  million  and $5.7
million in the 2 1/2 months  ended  December  31,  1997,  the 9 1/2 months ended
October 13, 1997 and fiscal year 1996,  respectively.  The decrease  from fiscal
year 1996 to the 9 1/2 months  ended  October  13,  1997  reflects a decrease in
management  fees charged by the Company's  former  parent,  from $2.7 million in
fiscal year 1996 to $0.7  million in the 9 1/2 months  ended  October 13,  1997.
Management  fees  were  allocated  to the  Company  by  Laidlaw  based  upon the
Company's share of Laidlaw's consolidated revenue. The allocated charges may not
be indicative of the expenses the Company would have incurred if Laidlaw had not
provided the services.

Interest  Expense.  Interest  expense was $0.6  million,  $4.2  million and $4.8
million in the 2 1/2 months  ended  December  31,  1997,  the 9 1/2 months ended
October  13,  1997 and fiscal  year  1996,  respectively,  resulting  in average
monthly interest expense of $0.2 million,  $0.4 million and $0.4 million for the
respective  periods.  The decrease in interest expense in the 2 1/2 months ended
December  31, 1997 as compared  to the 9 1/2 months  ended  October 13, 1997 and
fiscal year 1996 is due  primarily  to a decrease in the  Company's  outstanding
indebtedness resulting from the elimination of the inter-company indebtedness to
Laidlaw upon acquisition by ISG.
<PAGE>

Income Tax Benefit  (Expense).  Income tax expense was  $252,000 and $612,000 in
the 2 1/2 months ended  December 31, 1997 and the 9 1/2 months ended October 13,
1997  compared  to an income  tax  benefit  of  $362,000  in fiscal  year  1996,
resulting in effective  tax rates of 48.8%,  (24.7%) and 16.2%.  The increase in
income  taxes from fiscal year 1996 to the 9 1/2 months  ended  October 13, 1997
reflects  increases in the Company's  taxable  income,  primarily from obtaining
higher margins and SG&A reductions. The negative effective tax rate in the 9 1/2
months ended October 13, 1997 is due primarily to the large  goodwill  write-off
discussed above which was not deductible for tax purposes.

Net  Income  (Loss).  As a result of the  factors  discussed  above,  net income
increased  to $0.3  million  in the 2 1/2  months  ended  December  31,  1997 as
compared  to net  losses of $3.0  million  and $1.8  million in the 9 1/2 months
ended October 13, 1997 and fiscal year 1996, respectively.

Liquidity and Capital Resources

The Company financed the JTM Acquisition and the 1998  Acquisitions  through the
issuance  of  $100.0  million  of 10%  Senior  Subordinated  Notes  due 2008 and
borrowings on its Secured Credit  Facility.  Operating and capital  expenditures
have been financed  primarily  through cash flows from operations and borrowings
under the Secured Credit Facility.

At December  31,  1998,  the Company had no cash or cash  equivalents  and $25.0
million  available under the Secured Credit Facility.  In addition,  the Company
had working capital of approximately $6.8 million,  an increase of $28.4 million
from December 31, 1997 resulting  primarily from the replacement of a short-term
note with long-term debt.

The Company  intends to make capital  expenditures  over the next several  years
principally to construct storage, loading and processing facilities for CCPs and
to  replace  existing  capital  equipment.  During  fiscal  year  1998,  capital
expenditures  amounted to  approximately  $8.1 million,  including  $0.9 million
expended to purchase the rolling stock of Pneumatic.  Capital  expenditures made
in the ordinary  course of business will be funded by cash flow from  operations
and borrowings under the Secured Credit Facility.

The 1999 acquisition of Best Masonry and Tool Supply discussed  elsewhere herein
was financed through borrowings under the Secured Credit Facility.

The  Company  anticipates  that its  principal  use of cash will be for  working
capital requirements, debt service requirements and capital expenditures.  Based
upon current and anticipated levels of operations, the Company believes that its
cash flow from  operations,  together with amounts  available  under the Secured
Credit  Facility,  will be adequate  to meet its  anticipated  requirements  for
working capital, capital expenditures and interest payments for the next several
years. There can be no assurance,  however,  that cash flow from operations will
be sufficient  to service the Company's  debt and the Company may be required to
refinance  all or a  portion  of  its  existing  debt  or to  obtain  additional
financing.  These increased  borrowings may result in higher interest  payments.
There can be no assurance  that any such  refinancing  would be possible or that
any additional  financing could be obtained.  The inability to obtain additional
financing could have a material adverse effect on the Company.
<PAGE>

The Year 2000 Issue

In general,  the Year 2000 issue  relates to computers  and other  systems being
unable to  distinguish  between  the years  1900 and 2000  because  they use two
digits,  rather than four, to define the applicable  year.  Systems that fail to
properly recognize such information will likely generate erroneous data or cause
a system to fail possibly resulting in a disruption of operations. The Company's
products do not incorporate such date coding so the Company's efforts to address
the Year  2000  issue  fall in the  following  three  areas:  (i) the  Company's
information  technology ("IT") systems; (ii) the Company's non-IT systems (i.e.,
machinery,  equipment and devices which utilize  technology  which is "built in"
such as embedded microcontrollers); and (iii) third-party customers.

The Company is  currently  working to resolve the  potential  impact of the Year
2000  issue  on  the  processing  of   date-sensitive   data  by  the  Company's
computerized  information  systems.  Specifically,  the  Company  has  commenced
installation of new accounting and financial  software and anticipates that this
process will be complete by the end of April 1999. The Company is also acquiring
and installing Year 2000 compliant  software  upgrades in all scales used in its
operations.  The  Company  is  analyzing  all  other IT and  non-IT  systems  to
determine  if any other  modifications  or upgrades  are  necessary.  The amount
charged to  expense  during the year ended  December  31,  1998,  as well as the
amounts  anticipated to be charged to expense  related to the Year 2000 computer
modifications,  have  not  been  and  are not  expected  to be  material  to the
Company's financial position, results of operations or cash flows.

The Company is also  evaluating and taking steps to resolve Year 2000 compliance
issues that may be created by customers,  suppliers  and financial  institutions
with whom the Company does business. Because many of the Company's suppliers are
heavily  regulated  utilities with  mandated,  the Company does not expect these
suppliers to  experience  problems.  The Company is examining  customers and may
send out confirmation  letters of Year 2000 compliance if the Company determines
such action is necessary. The Company cannot guarantee that the systems of other
entities will be converted on a timely basis.

The  foregoing  statements  are based  upon  management's  current  assumptions.
However,  there can be no guarantee  that these  assumptions  have addressed all
relevant uncertainties.

Forward-Looking Information

Statements  included in this  Management's  Discussion and Analysis of Financial
Condition  and  Results  of  Operations  and  other  items of this Form 10-K may
contain  forward-looking  statements.  Such forward-looking  statements are made
pursuant to the safe harbor  provisions  of the  Private  Securities  Litigation
Reform Act of 1995. Such statements may relate but not be limited to projections
of revenues,  income or loss, capital expenditures,  plans for growth and future
operations,  financing needs, as well as assumptions  relating to the foregoing.
Forward-looking  statements are inherently  subject to risks and  uncertainties,
some of which cannot be predicted or quantified. When used in this "Management's
Discussion and Analysis of Financial  Condition and Results of Operations",  and
elsewhere  in this Form 10-K the words  "estimates",  "expects",  "anticipates",
"forecasts",  "plans",  "intends"  and  variations  of such  words  and  similar
expressions  are intended to identify  forward-looking  statements  that involve
risks  and  uncertainties.   Future  events  and  actual  results  could  differ
materially  from  those  set  forth  in,   contemplated  by  or  underlying  the
forward-looking statements.
<PAGE>


Item 7a.      Qualitative and Quantitative Disclosures about Market Risk

In 1997,  the SEC issued new rules (Item 305 of Regulation  S-K) which  requires
disclosure  of  material  risks as defined by Item 305,  related to market  risk
sensitive financial  instruments.  As defined,  the Company currently has market
risk sensitive  instruments related to interest rates. As disclosed in Note 4 of
the audited  consolidated  financial  statements,  the  Company has  outstanding
long-term debt of $110,000,000  at December 31, 1998. The Company  currently has
an average  maturity of nine years for long-term debt,  $100,000,000 of which is
at a fixed rate of 10% and  $10,000,000 of which is at a rate averaging 8.5% for
the year ended December 31, 1998.

The Company does not have  significant  exposure to changing  interest  rates on
long-term debt because interest rates for the majority of the debt is fixed. The
Company has not undertaken any additional  actions to cover interest rate market
risk  and is not a party to any  other  interest  rate  market  risk  management
activities.

A hypothetical  10% change in market interest rates over the next year would not
impact the Company's earnings or cash flows as the interest rate on the majority
of the long-term debt is fixed. A 10% change in market interest rates would have
a  material   effect  (likely   increasing  or  decreasing  the  fair  value  by
approximately  50%) on the fair value of the Company's publicly traded long-term
debt due to the volume outstanding at December 31, 1998.

The Company does not purchase or hold any derivative  financial  instruments for
trading purposes.



<PAGE>


Item 8.       Financial Statements and Supplementary Data

The  audited  financial  statements  for the year ending  December  31, 1998 are

<PAGE>
                                                     F-2

                          INDEX TO FINANCIAL STATEMENTS



ISG Resources, Inc. and Subsidiaries
Audited  Consolidated  Financial Statements as of December 31, 1998 and 1997 and
for the Year Ended  December  31, 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 Income ........................................   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  as of October 13, 1997 and for the
Period From January 1, 1997 to October 13, 1997 and the Year Ended  December 31,
1996:
Report of Independent Accountants ...................................       F-17
Consolidated Balance Sheet ..........................................       F-18
Consolidated Statements of Loss and Accumulated Deficit .............       F-19
Consolidated Statements of Cash Flows ...............................       F-20
Notes to Consolidated Financial Statements ..........................       F-21

Pozzolanic Resources, Inc. and Subsidiaries
Audited  Consolidated  Financial  Statements as of December 31, 1997 and for the
Years Ended December 31, 1997 and 1996:
Report of Independent Auditors ......................................       F-26
Consolidated Balance Sheet ..........................................       F-27
Consolidated Statements of Income and Retained Earnings .............       F-29
Consolidated Statements of Cash Flows ...............................       F-30
Notes to Consolidated Financial Statements ..........................       F-31

Michigan Ash Sales Company (d.b.a. U.S. Ash Company) and Affiliated Companies
Audited Combined Financial Statements as of April 21, 1998 and December 31, 1997
and for the Period  From  January 1, 1998 to April 21,  1998 and the Years Ended
December 31, 1997 and 1996:
Report of Independent Auditors ........................................     F-34
Combined Balance Sheets ...............................................     F-35
Combined Statements of Income and Retained Earnings ...................     F-37
Combined Statements of Cash Flows .....................................     F-38
Notes to Combined Financial Statements ................................     F-39

                                      F-1

<PAGE>


                         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, 1998 and December 31, 1997,  and the
related consolidated  statements of income,  shareholder's equity and cash flows
for the year ended  December  31, 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  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 financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial  position of ISG Resources,
Inc.  and  Subsidiaries  at  December  31, 1998 and 1997,  and the  consolidated
results of their operations and their cash flows for the year ended December 31,
1998 and the period from  October 14,  1997 to December  31, 1997 in  conformity
with generally accepted accounting principles.

                                                     Ernst & Young LLP

Salt Lake City, Utah
March 15, 1999


                                      F-2
<PAGE>

                      ISG Resources, Inc. and Subsidiaries
                           Consolidated Balance Sheets


                                                                December 31
                                                          1998            1997
  Assets
Current assets:
 Cash and cash equivalents .......................  $        --     $  3,068,980
 Accounts receivable:
  Trade, net of allowance for doubtful accounts of
     $170,000 in 1998 and $206,000 in 1997 .......     14,975,729      9,167,788
  Retainage receivable ...........................        660,609        517,695
  Other ..........................................        296,966        318,271
 Deferred tax asset ..............................        251,355        324,608
 Other current assets ............................      1,033,227        216,225
Total current assets .............................     17,217,886     13,613,567

Property, plant and equipment:
 Land and improvements ...........................      1,736,384      1,624,335
 Buildings and improvements ......................      3,610,621      3,145,031
 Vehicles and other operating equipment ..........     20,090,872      9,817,148
 Furniture, fixtures and office equipment ........        494,753      1,115,721
                                                       25,932,630     15,702,235
 Accumulated depreciation ........................     (3,562,086)     (453,516)
                                                       22,370,544     15,248,719
 Construction in progress ........................      5,768,564           --
                                                       28,139,108     15,248,719

Other assets:
 Intangible assets, net ..........................    140,835,640     44,385,492
 Debt issuance costs, net ........................      5,192,893           --
 Other assets ....................................        346,209         22,335

Total assets .....................................  $ 191,731,736   $ 73,270,113
                                                    =============   ============



                                      F-3
<PAGE>
                                                                 December 31
                                                           1998          1997
                                                         -----------------------
Liabilities and shareholder's equity
 Current liabilities:
   Accounts payable .................................  $  4,066,487  $ 1,806,678
   Accrued expenses:
     Payroll ........................................     1,801,657    1,693,953
     Interest .......................................     2,106,054      627,704
     Other ..........................................     1,534,971    1,604,879
   Income taxes payable .............................       422,963      528,742
   Note payable .....................................          --     29,000,000
   Other current liabilities ........................       500,000         --
                                                        -----------  -----------
Total current liabilities ...........................    10,432,132   35,261,956

Long-term debt ......................................   110,000,000         --
Other long-term liabilities .........................     2,488,954      306,098
Deferred tax liability ..............................    41,286,434   12,437,297

Commitments and contingencies

Shareholder's equity:
   Common stock, par value $1 per share; 100 shares
     authorized,  issued and outstanding ............           100          100
   Additional paid-in capital .......................    24,999,950   24,999,950
   Retained earnings ................................     2,524,166      264,712
                                                                     -----------
                                                                     -----------
Total shareholder's equity ..........................    27,524,216   25,264,762



Total liabilities and shareholder's equity ..........  $191,731,736  $73,270,113
                                                       ============  ===========
See accompanying notes.

                                      F-4
<PAGE>
                      ISG Resources, Inc. and Subsidiaries
                        Consolidated Statements of Income


                                                                    Period from
                                                  Year ended       October 14 to
                                             December 31, 1998 December 31, 1997
                                                  ------------------------------
Revenues:
   Product revenues .............................  $  83,048,721   $  7,059,063
   Service revenues .............................     34,243,854      5,583,981
                                                                   ------------
                                                                   ------------
                                                     117,292,575     12,643,044
Costs and expenses:
   Cost of products sold, excluding depreciation      51,878,447      4,864,226
   Cost of services sold, excluding depreciation      28,237,385      4,500,892
   Depreciation and amortization ................      9,140,938        908,619
   Selling, general and administrative expenses .     14,144,765      1,255,680
                                                                   ------------
                                                     103,401,535     11,529,417
                                                                   ------------
                                                      13,891,040      1,113,627
Interest income .................................        183,113         31,286
Interest expense ................................     (9,338,059)      (627,704)
Miscellaneous income ............................         72,386           --
                                                                   ------------
Income before income tax expense ................      4,808,480        517,209
Income tax expense ..............................      2,549,026        252,497
                                                                   ============

Net income ......................................  $   2,259,454   $    264,712
                                                   =============   ============

See accompanying notes.

                                      F-5
<PAGE>
<TABLE>
<CAPTION>
                                                ISG Resources, Inc. and Subsidiaries
                                           Consolidated Statements of Shareholder's Equity



                                                             Common           Additional         Retained               Total
                                                             Stock         Paid-In Capital       Earnings       Shareholder's Equity
                                                        ----------------------------------------------------------------------------

<S>                                                            <C>            <C>                   <C>                  <C>        
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
                                                               ====           ===========           ==========           ===========


See accompanying notes.
</TABLE>

                                                                F-6
<PAGE>
                      ISG Resources, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows



                                                                     Period from
                                                       Year ended  October 14 to
                                                       December 31   December 31
                                                           1998           1997
                                          --------------------------------------
Operating activities
Net income .........................................  $   2,259,454   $  264,712
Adjustments to reconcile net income
 to net cash provided by operating
   activities:
     Depreciation and amortization .................      9,140,938      908,619
     Amortization of debt issuance costs ...........        463,585          --
     Deferred income taxes .........................     (1,697,407)   (276,245)
     Changes in operating assets and liabilities:
         Receivables ...............................     (1,479,648)     691,534
         Other current and non-current assets ......        140,055     (22,569)
         Accounts payable ..........................       (606,834) (1,035,993)
         Income taxes payable ......................       (245,447)     528,742
         Accrued expenses ..........................        759,326      755,913
         Other current and non-current liabilities .       (570,491)      28,387
                                                         ----------  -----------
Net cash provided by operating activities ..........      8,163,531    1,843,100

Investing activities
Purchase of businesses, net of
 cash acquired of $5,829,695 .......................    (77,753,012)         --
Additions to intangible assets .....................       (691,847)         --
Purchases of property, plant and equipment .........     (8,131,174)    (19,491)
                                                         ----------  -----------
Net cash used in investing activities ..............    (86,576,033)    (19,491)

Financing activities
Proceeds from long-term debt .......................    154,000,000          --
Payments on long-term debt .........................    (73,000,000)         --
Debt issuance costs ................................     (5,656,478)         --
Cash contributions .................................           --      1,188,521
                                                        -----------  -----------
Net cash provided by financing activities ..........     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 .............................  $   7,396,124   $      --
Cash paid for income taxes .........................  $   3,989,414   $      --

See accompanying notes.




                                      F-7
<PAGE>
                      ISG Resources, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                                December 31, 1998

1. Basis of Presentation

ISG Resources, Inc. (formerly, JTM Industries, Inc.) (the "Company") is a wholly
owned  subsidiary  of  Industrial  Services  Group  ("ISG").  ISG was  formed in
September 1997 to acquire the stock of the Company from Laidlaw  Transportation,
Inc. ("Laidlaw") (the "Acquisition").  Pursuant to the Acquisition,  the Company
became  a  wholly  owned  subsidiary  of ISG.  Laidlaw  received  from  ISG,  as
consideration for the Acquisition, a $29,000,000 senior bridge note (the "Senior
Bridge Note"),  a $17,500,000 9% Junior  Subordinated  Promissory  Note due 2005
(the "Junior  Subordinated Note") and $5,817,000 in cash. The Senior Bridge Note
was pushed down to the Company as the  proceeds of a future debt  offering  were
used to retire this note.  The Junior  Subordinated  Note was not pushed down to
the Company as such proceeds were not used to retire this note,  the Company has
not and does not plan to assume the Junior  Subordinated  Note,  and the Company
does not guarantee or pledge its assets as collateral for this note.

The Acquisition  was accounted for under the purchase  method of accounting.  At
the date of the  Acquisition,  asset and liability values were recorded at their
fair values with respect to the purchase price, with the difference  between the
purchase price and fair value of the net assets  recorded as goodwill.  In 1998,
the value  allocated to goodwill  was  increased  by  approximately  $879,000 to
reflect  certain  changes  to the fair  values  of the  assets  and  liabilities
estimated at the acquisition date.

On March 4, 1998, the Company  completed the  acquisition of all the outstanding
shares of Pozzolanic  Resources,  Inc.  ("Pozzolanic").  The consideration  paid
consisted  of  approximately  $40,000,000  in  cash.  The  acquisition  has been
accounted  for as a purchase  and,  accordingly,  the results of  operations  of
Pozzolanic have been included in the  consolidated  financial  statements  since
March 4, 1998.

On March 20, 1998, the Company  completed the acquisition of all the outstanding
shares of Power Plant Aggregates of Iowa, Inc. ("PPA").  The consideration  paid
consisted  of  approximately  $8,541,000  in  cash.  The  acquisition  has  been
accounted for as a purchase and,  accordingly,  the results of operations of PPA
have been  included in the  consolidated  financial  statements  since March 20,
1998.

On April 22, 1998, the Company acquired all of the outstanding stock of Michigan
Ash Sales  Company,  d.b.a.  U.S.  Ash  Company,  together  with two  affiliated
companies, U.S. Stabilization,  Inc. and Flo Fil Co., Inc. (collectively,  "U.S.
Ash"). The  consideration  paid consisted of approximately  $24,600,000 in cash.
The  acquisition  has been  accounted  for as a purchase and,  accordingly,  the
results  of  operations  of U.S.  Ash have  been  included  in the  consolidated
financial statements since April 22, 1998.

On April 22, 1998, the Company acquired all of the outstanding  stock of Fly Ash
Products,  Inc.  ("Fly Ash  Products").  The  consideration  paid  consisted  of
approximately  $9,500,000 in cash. The  acquisition  has been accounted for as a
purchase  and,  accordingly,  the results of operations of Fly Ash Products have
been included in the consolidated financial statements since April 22, 1998.

The purchase prices of the above  acquisitions were allocated based on estimated
fair values of assets and  liabilities at the respective  dates of  acquisition.
Amounts allocated to contracts and assembled workforce approximated  $70,705,000
and $1,600,000, respectively. Goodwill resulting from the difference between the
purchase  prices  plus  acquisition  costs and the net  assets of the  companies
acquired in 1998 totaled  approximately  $28,500,000.  All recorded  goodwill is
being amortized on a straight-line basis over 25 years.


                                      F-8
<PAGE>

                      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 above acquisitions as well as the debt transactions  discussed in Note 4 had
occurred as of January 1, 1997.  The pro forma  combined  financial  information
contained herein 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 debt  transactions  been
consummated on such date. The pro forma combined financial information set forth
below  is based on  historical  financial  statements  of ISG  Resources,  Inc.,
Pozzolanic, PPA, U.S. Ash and Fly Ash Products.

                                           Year Ended December 31
                                          1998                1997
                                 ------------------- -------------------
            Revenues              $     125,061,000   $    110,337,000
            Net income                     (566,000)        (2,651,000)

2. Description of Business and Summary of Significant Accounting Policies

Description of Business

The Company  purchases,  removes and sells fly ash and other by-products of coal
combustion throughout the United States.

Principles of Consolidation

These  financial  statements  reflect the  consolidated  position and results of
operations  of  ISG  Resources,  Inc.  and  its  wholly  owned  subsidiary,  KBK
Enterprises, Inc. ("KBK") as of and for the year ended December 31, 1998 and the
period from October 14 to December 31, 1997 and the accounts of Pozzolanic, PPA,
U.S.  Ash and Fly Ash  Products as of December 31, 1998 and for the periods from
their  respective dates of acquisition to December 31, 1998  (collectively,  the
"Company").  All significant  intercompany  accounts and transactions  have been
eliminated in consolidation.

Revenue Recognition

Product  revenues are earned by marketing  products  created by coal-fired power
generation  and related  industrial  materials  to  producers  and  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.  Product  revenues are
recognized when the material is delivered to the customer.

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.

                                      F-9
<PAGE>
                      ISG Resources, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

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

Cost of products  sold are  primarily  amounts paid to the utilities to purchase
product and transportation costs of delivering the product to the customer. Cost
of services sold include 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. 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.

Cash Equivalents

Cash  equivalents are highly liquid  investments with maturities of three months
or less when purchased.

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 15 years 
             Buildings and  improvements               3 to 40 years
             Vehicles and other operating equipment    2 to 12 years 
             Furniture, fixtures and office equipment  1 to 5 years

Depreciation  expense was  approximately  $3,281,000  and  $454,000 for the year
ended  December  31, 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  $5,860,000  and
$455,000  for the year ended  December  31, 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              25 years
                      Contracts             20 years
                      Patents and licenses  13 to 19 years
                      Assembled workforce   8 years

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 over the respective lives of the debt issues on a straight-line basis.
Accumulated amortization at December 31, 1998 was $463,585.


                                      F-10
<PAGE>
                      ISG Resources, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

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

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

The  Company's  financial  instruments,  as defined by  Statement  of  Financial
Accounting  Standards No. (SFAS) 107,  "Disclosure About Fair Value of Financial
Instruments," consist of cash equivalents, accounts receivable, accounts payable
and accrued expenses, long-term debt and notes payable. At December 31, 1998 and
December 31, 1997, the carrying value of cash equivalents,  accounts receivable,
accounts payable, accrued expenses and notes payable approximates fair value due
to the short term  nature of the  instruments.  Long-term  debt  outstanding  at
December 31, 1998 also  approximates  fair value due to the lack of  significant
fluctuations in interest rates since the debt was issued.

Long-lived Assets

As required by Statement of Financial  Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of,"  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.  Management  believes no
material  impairment  in the value of  long-lived  assets exists at December 31,
1998.

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, 1998 and 1997:

                                                   December 31
                                               1998          1997
                                         -------------   ------------
          Goodwill                       $  44,018,454              $
                                                           14,640,584
          Contracts                         97,960,644     26,700,000
          Patents and licenses               2,471,584      2,400,000
          Assembled work force               2,700,233      1,100,000
                                         -------------   ------------
                                           147,150,915     44,840,584
          Less accumulated amortization     (6,315,275)      (455,092)
                                         =============   ============
                                         $ 140,835,640   $ 44,385,492
                                         =============   ============


                                      F-11
<PAGE>
                      ISG Resources, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

4. Debt

Note Payable

The Senior  Bridge Note had an original  maturity of March 30,  1998,  which was
extended to April 30, 1998.  The Senior  Bridge Note bore  interest at 1.5% plus
the prime rate (as determined by The Chase  Manhattan  Bank,  N.A) through March
30,  1998 and 2% plus the prime  rate  thereafter.  The Senior  Bridge  Note was
repaid  with a  portion  of the  proceeds  from the  Senior  Subordinated  Notes
discussed below.

Secured Credit Facility

On March 4, 1998, the Company  obtained a $42,000,000  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 repay existing indebtedness, to pay fees and expenses
incurred in connection  with certain  acquisitions  and for working  capital and
general corporate purposes.

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 Nations Bank N.A.  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,
1998.

Upon  completion  of the  private  placement  of the Senior  Subordinated  Notes
discussed  below,  the  Secured  Credit  Facility  was  permanently  reduced  to
$35,000,000.

At December 31, 1998,  $10,000,000 was outstanding,  with $25,000,000 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").  The proceeds were used to pay the Senior Bridge
Note,  a portion of the Secured  Credit  Facility,  consideration  and  expenses
related to the U.S. Ash and Fly Ash Products acquisitions, and transaction fees.
Interest on the Senior  Subordinated Notes is payable  semi-annually on April 15
and  October  15  of  each  year,   commencing  October  15,  1998.  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.

                                      F-12
<PAGE>
                      ISG Resources, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

4. Debt (continued)

Senior Subordinated Notes (continued)

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.

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,  1998 are as follows:  $0 in  1999-2002,  $10,000,000  in 2003 and
$100,000,000 thereafter.

5. Accrued Closure Costs

The  Company,  in  the  normal  course  of  business,  expends  funds  for  site
restoration  of certain  property  utilized  for  disposal  services.  The total
anticipated site restoration costs currently are approximately  $357,000.  As of
December 31, 1998 and 1997, $210,000 and $306,000,  respectively, of anticipated
site restoration costs have been accrued.




                                      F-13
<PAGE>
                      ISG Resources, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

6. Income Taxes

Income  tax  expense  (benefit)  consists  of the  following  for the year ended
December 31, 1998 and the period from October 14, 1997 to December 31, 1997:

                                        1998           1997
                                    ------------------------
                  Current:
                       U.S. Federal  $ 3,542,755   $ 459,626
                       State             703,678      69,116
                                      ----------   ---------
                                       4,246,433     528,742
                  Deferred:
                       U.S. Federal   (1,416,129)   (240,135)
                       State            (281,278)    (36,110)
                                       ---------   ---------
                                      (1,697,407)   (276,245)
                  Total:
                       U.S. Federal    2,126,626     219,491
                       State             422,400      33,006
                                       ---------  ----------
                                     $ 2,549,026   $ 252,497
                                      ==========   =========

Reconciliation of income tax expense at the U.S. statutory rate to the Company's
tax expense for the year ended December 31, 1998 and the period from October 14,
1997 to December 31, 1997 is as follows:

                                                       1998        1997

      35% of income before income tax                $1,682,968  $181,023

      Add:
         Goodwill amortization                          527,208    42,702
         Other permanent differences                     64,289     7,318
         State income taxes, net of federal benefit     274,561    21,454
                                                     $2,549,026  $252,497
                                                     ----------  --------

The major  components of the deferred tax assets and  liabilities as of December
31, 1998 and 1997 are as follows:

                                                      1998           1997
                                                  -----------------------------
  Deferred Tax Assets:
        Bad debt reserves                      $     66,572   $     78,658
        Accruals not currently deductible for
            tax purposes                            307,883        387,053
                                               ------------    ------------
     Total gross deferred tax assets                374,455        465,711

     Deferred Tax Liabilities:
       Fixed asset basis differences              3,040,703      1,130,285
       Intangible asset basis differences        38,363,602     11,424,094
       Other                                          5,229         24,021
                                              -------------   ------------
                                                 41,409,534     12,578,400
                                              =============   ============
       Net deferred tax liabilities            $(41,035,079)  $(12,112,689)
                                              =============    ============


                                      F-14
<PAGE>
                      ISG Resources, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

7. Employee Benefit Plan

Prior  to  April  1,  1998,  eligible  employees  of the  Company  were  able to
participate in a 401(k) savings plan (the "Laidlaw  Plan")  sponsored by Laidlaw
Environmental  Services, Inc. ("LESI"), an affiliate of Laidlaw. Under the terms
of the Laidlaw plan, the Company was required to match  employee  contributions,
as defined,  up to 3% of the employees'  compensation.  Expenses  related to the
Laidlaw 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
$265,000 for the period from April 1, 1998 to December 31, 1998.

8. 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, 1998:

               1999                                      $     4,201,000
               2000                                            2,614,000
               2001                                            2,210,000
               2002                                            1,680,000
               2003                                            1,205,000
               Thereafter                                      1,549,000
                                                         -------------------
               Total minimum lease payments              $    13,459,000
                                                         ===================

Total rental  expense was  approximately  $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.

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, as follows:

                                      Minimum       Minimum
                                       Sales       Purchases
                             ------------------------------------

                          1999   $    806,000   $  5,933,000
                          2000        363,600      6,390,000
                          2001        371,000      6,914,000
                          2002        120,000      7,176,000
                          2003        120,000      3,045,000
                    Thereafter             --     11,709,000
                                 ------------    -----------
                                 $              $ 41,167,000
                                 ============   ============



                                      F-15
<PAGE>
                      ISG Resources, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

8. Commitments and Contingencies (continued)

Sale and Purchase Commitments (continued)

Minimum  sales  and  purchases   under   contracts  with  minimum   requirements
approximated $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 Commitment

The Company has agreed to pay a minimum of $500,000 per year  commencing in 1999
and continuing  through 2003 for future 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 sheet.

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
employment  agreements  provide  for  the  total  annual  base  compensation  of
approximately $2,067,000 and expire from 2000 to 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  $1,300,000 in the aggregate.  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 date.

9. Subsequent Events

Effective  January 1, 1999,  the Company,  Pozzolanic,  PPA,  U.S.  Ash, Fly Ash
Products and KBK merged with and into ISG  Resources,  Inc., a newly formed Utah
corporation.  Prior to the merger, ISG Resources,  Inc. (Utah) had no assets and
was a wholly owned subsidiary of ISG. Pneumatic  Trucking,  Inc., a wholly owned
subsidiary  of  Michigan  Ash Sales  Company,  was not merged  into the new Utah
corporation.  Consequently,  Pneumatic is now a wholly owned  subsidiary  of ISG
Resources, Inc. (Utah).

On January 7, 1999, the Company  acquired all of the  outstanding  stock of Best
Masonry and Tool Supply  ("Best")  for  approximately  $13,300,000  and paid off
outstanding debt of Best totaling approximately  $2,400,000.  Best is engaged in
the retail and  wholesale  distribution  of masonry  construction  materials  to
residential  and commercial  contractors  from its Texas and Georgia  locations.
Best  also  produces  its own  brand  named  formulas  of  manufactured  masonry
products.


                                      F-16
<PAGE>



                        Report of Independent Accountants



     February 16, 1998

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

     In our opinion, the accompanying consolidated balance sheet and the related
     consolidated  statements of loss and accumulated  deficit and of cash flows
     present fairly,  in all material  respects,  the financial  position of JTM
     Industries,  Inc. and its subsidiaries at October 13, 1997, and the results
     of their  operations  and their cash flows for the period ended October 13,
     1997 and the year ended  December 31, 1996,  in conformity  with  generally
     accepted  accounting   principles.   These  financial  statements  are  the
     responsibility  of  the  Company's  management;  our  responsibility  is to
     express an opinion on these financial  statements  based on our audits.  We
     conducted  our audits of these  statements  in  accordance  with  generally
     accepted  auditing  standards,  which  require that we plan and perform the
     audit to obtain reasonable assurance about whether the financial statements
     are free of material misstatement.  An audit includes examining,  on a test
     basis,  evidence  supporting  the amounts and  disclosures in the financial
     statements,  assessing  the  accounting  principles  used  and  significant
     estimates  made  by  management,   and  evaluating  the  overall  financial
     statement  presentation.  We believe  that our audits  provide a reasonable
     basis for the opinion expressed above.

     As discussed in Note 10, Laidlaw,  Inc. sold the outstanding  shares of JTM
     Industries, Inc. on October 14, 1997.

     PRICEWATERHOUSECOOPERS LLP



                                      F-17
<PAGE>
                              JTM INDUSTRIES, INC.
                           CONSOLIDATED BALANCE SHEET

                                October 13, 1997

                                ($000's omitted)




                                          ASSETS
Current assets
Trade and other accounts receivable
(net of allowance for doubtful accounts of $406) ..................    $  9,726
Retainage receivable ..............................................         770
Deferred income taxes .............................................         329
Other current assets ..............................................         354
                                                                       --------


         Total current assets .....................................      11,179
Fixed assets
Land and improvements .............................................       1,798
Buildings .........................................................       3,533
Vehicles and other equipment ......................................      11,038
Construction in progress ..........................................         886
                                                                       --------


                                                                         17,255
Less: Accumulated depreciation ....................................      (4,090)
                                                                       --------


                                                                         13,165

Goodwill (net of accumulated amortization of $6,095) ..............      34,052
                                                                       --------


         Total assets .............................................    $ 58,396
                                                                       ========




                           LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable ..................................................    $  2,808
Accrued liabilities ...............................................       2,558
Intercompany notes payable ........................................      49,407
                                                                       --------


         Total current liabilities ................................      54,773
                                                                       --------


Commitments and contingencies
Stockholder's equity
Common stock - authorized, issued and outstanding 100 shares ......           1
Paid in capital ...................................................      10,678
Accumulated deficit ...............................................      (7,056)
                                                                       --------


         Total stockholder's equity ...............................       3,623
                                                                       --------


         Total liabilities and stockholder's equity ...............    $ 58,396
                                                                       ========

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


                                      F-18
<PAGE>
                              JTM INDUSTRIES, INC.
             CONSOLIDATED STATEMENTS OF LOSS AND ACCUMULATED DEFICIT
                                ($000's omitted)



                                                    Year to Date     Year Ended
                                                   October 13,      December 31,
                                                        1997             1996
                                                  -------------   --------------

Revenues:
Product revenues .....................................    $ 25,613     $ 25,513
Service revenues .....................................      25,682       37,328
                                                          --------     --------



                                                            51,295       62,841

Cost of product revenues, excluding depreciation .....      20,702       22,397
Cost of service revenues, excluding depreciation .....      19,999       29,871
Depreciation and amortization ........................       5,279        2,285
Selling, general and administrative expenses .........       3,633        5,667
                                                          --------     --------


Income from operations ...............................       1,682        2,621
Intercompany interest expense ........................       4,160        4,845
Interest expense .....................................        --              8
                                                          --------     --------


                                                            (2,478)      (2,232)
Income tax benefit (expense) .........................        (612)         362
                                                          --------     --------


Net loss .............................................      (3,090)      (1,870)
Accumulated deficit - beginning of year ..............      (3,966)      (2,096)
                                                          --------     --------


Accumulated deficit - end of year ....................    $ (7,056)    $ (3,966)
                                                          ========     ========

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


                                      F-19
<PAGE>
                              JTM INDUSTRIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                ($000's omitted)



                                                        Year to Date  Year Ended
                                                        October 13, December 31,
                                                             1997        1996
                                                        ------------  ----------

Net Cash Provided By (Used In):
Operating activities ...................................   $    521    $    603
Investing activities ...................................       (681)     (3,869)
                                                           --------    --------


Net cash used by operating and investing activities ....       (160)     (3,266)
Non-cash activities ....................................       (797)        422
                                                           --------    --------


                                                               (957)     (2,844)
Intercompany notes payable - beginning of year .........    (48,450)    (45,606)
                                                           --------    --------


Intercompany notes payable - end of year ...............   $(49,407)   $(48,450)
                                                           ========    ========




Operating activities:
Net loss ...............................................   $ (3,090)   $ (1,870)
Items not affecting cash:
  Loss on disposal of fixed assets .....................        305        --
  Depreciation and amortization ........................      5,279       2,285
  Deferred income taxes ................................        150         266
Cash provided by (used in) financing working capital:
  Trade and other accounts receivable ..................     (1,898)        685
  Other current assets .................................         87          94
  Accounts payable and accrued liabilities .............       (312)       (857)
                                                           --------    --------


Net cash provided by operating activities ..............   $    521    $    603
                                                           ========    ========




Investing activities:
Purchase of fixed assets ...............................   $   (681)   $ (4,357)
Proceeds from sale of fixed and other assets ...........       --           488
                                                           --------    --------


Net cash used in investing activities ..................   $   (681)   $ (3,869)
                                                           ========    ========




Supplemental cash flow information:
  Noncash transaction:
     Transfers of fixed assets from parent .............   $    107    $    128
     Accounts payable related to fixed assets ..........       --      $    504
  Cash paid (received) for:
     Interest ..........................................   $  4,160    $  4,845
     Income taxes to (from) parent .....................   $    462    $   (629)


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

                                      F-20
<PAGE>
                              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.

         The surplus funds of the Company are regularly  transferred to Laidlaw,
and any financing requirements are provided by Laidlaw.  Accordingly, no cash or
bank indebtedness balances are reported in these financial statements.

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 assets,  liabilities,  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.

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 and
$1,281 for the period  ended  October 13, 1997 and the year ended  December  31,
1996, respectively.

                                      F-21
<PAGE>
                              JTM INDUSTRIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                ($000's Omitted)

2. Summary of Significant Accounting Policies (Continued)

d) Other assets

         Goodwill is amortized on a  straight-line  basis over forty years.  The
amount of any impairment is charged against income.  In 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.

         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 and $266 for the
period  ended   October  13,  1997  and  the  year  ended   December  31,  1996,
respectively.


                                      F-22
<PAGE>
                              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 and
$6,136 for the period  ended  October 13, 1997 and the year ended  December  31,
1996, respectively.

         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.

         In January  1997,  a third  party  filed suit  against  the Company for
breach of contract.  The Company settled this claim for $1,000 in February 1997.
The Company  accrued the loss as of December  31, 1996 as a component of cost of
sales.

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:

                                                        Year to Date  Year Ended
                                                        October 13, December 31,
                                                           1997           1996
                                                   ------------     ------------

Management fees ................................          $  491          $2,320
Administrative fees ............................          $  249          $  423
Intercompany sales .............................          $2,814          $4,953
Allocated insurance expense ....................          $  515          $  772
Interest expense ...............................          $4,160          $4,845


         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.


                                      F-23
<PAGE>
                              JTM INDUSTRIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                ($000's Omitted)

6. Related party transactions (Continued)

         In 1996,  Laidlaw  contributed  additional  capital  of $550  through a
reduction in the intercompany note payable in a non-cash transaction.  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  and for the year  ended  December  31,  1996 are as
follows:
                                                        Year to Date  Year Ended
                                                        October 13, December 31,
                                                            1997          1996
                                                     ---------------------------

Current federal provision (benefit) ................         $421         $(676)
Current state provision ............................           41            48
Deferred federal provision .........................          150           266
                                                             ----         -----


Total income tax provision (benefit) ...............         $612         $(362)
                                                             ====         =====

         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 and for the year ended December 31, 1996 are as follows:
                                                        Year to Date  Year Ended
                                                        October 13, December 31,
                                                             1997          1996
                                                      -------------------------

Federal statutory tax rate ...............................       35.0%     35.0%
Goodwill amortization not deductible for tax purposes ....      (57.7%)  (15.7%)
State income taxes .......................................       (1.1%)   (1.4%)
Other items - net ........................................       (0.9%)   (1.7%)
                                                               ----       ----


Effective tax rate .......................................      (24.7%)    16.2%
                                                               ====       ====

                                      F-24
<PAGE>
                              JTM INDUSTRIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                ($000's Omitted)

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.

                                      F-25
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Pozzolanic Resources, Inc. and Subsidiaries

         We  have  audited  the  accompanying   consolidated  balance  sheet  of
Pozzolanic  Resources,  Inc. and  Subsidiaries  as of December 31, 1997, and the
related  consolidated  statements of income and retained earnings and cash flows
for each of the two years in the period ended 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 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  financial  statements  referred to above  present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Pozzolanic  Resources,  Inc. and  Subsidiaries  at December  31,  1997,  and the
consolidated  results of their  operations  and their cash flows for each of the
two years in the period ended  December 31, 1997, in conformity  with  generally
accepted accounting principles.

                                                     Ernst & Young LLP

Seattle, Washington
February 10, 1998, except for
  Note 8, as to which
  the date is March 4, 1998

                                      F-26
<PAGE>
                   POZZOLANIC RESOURCES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET

                                December 31, 1997

Assets
Current assets:
  Cash ..........................................................   $    40,399
  Short-term investments at cost ................................     2,850,330
  Accounts receivable, less allowance
 for doubtful accounts of $47,000 ...............................     1,925,269
  Deferred freight ..............................................       402,958
  Other receivables .............................................       140,065
  Amounts due from related parties ..............................         3,760
  Prepaid expenses ..............................................        61,023
  Current deferred income taxes .................................        41,250
                                                                    -----------


Total current assets ............................................     5,465,054
Property, plant, and equipment:
  Land ..........................................................       107,777
  Buildings .....................................................        66,362
  Plant equipment ...............................................     5,724,253
  Automotive equipment ..........................................       630,700
  Office furniture and equipment ................................       357,848
  Leasehold improvements ........................................       247,406
                                                                    -----------


                                                                      7,134,346
  Accumulated depreciation and amortization .....................    (5,412,615)
                                                                    -----------


                                                                      1,721,731
Other assets:
  Fly ash contracts, less accumulated amortization of $789,568 ..       143,358
  Deposits and other ............................................        12,069
  Notes receivable ..............................................         9,604
  Deferred income taxes .........................................        58,406
                                                                    -----------


                                                                        223,437
                                                                    -----------


Total assets ....................................................   $ 7,410,222
                                                                    ===========

See accompanying notes.


                                      F-27
<PAGE>
                   POZZOLANIC RESOURCES, INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEET (Continued)

                                December 31, 1997

Liabilities and shareholders' equity
 Current liabilities:
  Trade accounts payable .......................................      $  536,228
  Accrued expenses .............................................         298,025
  Advances from suppliers ......................................         410,509
  Income taxes payable .........................................           4,771
                                                                      ----------


Total current liabilities ......................................       1,249,533

Deferred gains .................................................         700,000

Shareholders' equity:
  Common stock, Class A, voting, $1 par value:
   Authorized shares - 1,000
    Issued and outstanding shares - 200 ........................             200
  Preferred stock, Class C, nonvoting, $1 par value:
   Authorized shares - 15,000
    Issued and outstanding shares - 2,900 ......................           2,900
  Preferred stock, Class D, nonvoting, $1 par value:
   Authorized shares - 15,000
    Issued and outstanding shares - 5,800 ......................           5,800
  Retained earnings ............................................       5,451,789
                                                                      ----------


Total shareholders' equity .....................................       5,460,689
                                                                      ----------


Total liabilities and shareholders' equity .....................      $7,410,222
                                                                      ==========

See accompanying notes.

                                      F-28
<PAGE>
                   POZZOLANIC RESOURCES, INC. AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

                                                      Year Ended December 31
                                                       1997              1996
                                             -----------------------------------

Sales ..........................................   $ 21,263,494    $ 17,993,543
Cost of goods sold .............................     13,607,238      11,684,111
                                                     ----------      ----------


Gross profit ...................................      7,656,256       6,309,432
Selling, administrative, and general expenses ..      2,897,974       2,451,703
                                                      ---------       ---------


Operating income ...............................      4,758,282       3,857,729
Interest income ................................         37,637          86,578
Other income ...................................         63,542         356,183
                                                         ------         -------


Income before income taxes .....................      4,859,461       4,300,490
Provision for federal and state income taxes:
  Current ......................................      1,830,499       1,544,462
  Deferred .....................................        (52,241)         (1,333)
                                                        -------          ------ 


                                                      1,778,258       1,543,129
                                                      ---------       ---------


Net income .....................................      3,081,203       2,757,361
Retained earnings at beginning of year .........      6,507,086       3,749,725
Less dividends paid ............................      4,136,500            --
                                                     ----------   ------------


Retained earnings at end of year ...............   $  5,451,789    $  6,507,086
                                                   ============    ============

See accompanying notes.

                                      F-29
<PAGE>

                   POZZOLANIC RESOURCES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                          Year Ended December 31
                                                         1997             1996
                                                      --------------------------

Operating activities
Collection of trade receivables ................   $ 20,925,826    $ 18,063,627
Payments to suppliers and employees ............    (15,638,348)    (13,719,586)
Income taxes paid ..............................     (1,400,259)     (1,576,602)
Interest received ..............................         34,429          87,324
Dividends received .............................         17,885          17,115
Interest paid ..................................         (8,185)           --
Other, net .....................................        (73,322)        266,561
                                                                   ------------


Net cash provided by operating activities ......      3,858,026       3,138,439

Investing activities
Purchases of property, plant, and equipment ....       (401,144)       (980,942)
Proceeds from sale of equipment ................          1,509           4,450
                                                                   ------------


Net cash used in investing activities ..........       (399,635)       (976,492)

Financing activities
Dividends paid .................................     (4,136,500)           --
Line of credit advance .........................        755,000            --
Line of credit reduction .......................       (755,000)           --
                                                                   ------------


Net cash used in financing activities ..........     (4,136,500)           --
                                                                   ------------

Increase (decrease) in cash
 and short-term investments ....................       (678,109)      2,161,947
Cash and short-term investments
 at beginning of year ..........................      3,568,838       1,406,891
                                                                   ------------


Cash and short-term
 investments at end of year ....................   $  2,890,729    $  3,568,838
                                                                   ============

Reconciliation of net income to net
 cash provided by operating activities:
  Net income ...................................   $  3,081,203    $  2,757,361
  Adjustments to reconcile net income to
      net cash provided by
      operating activities:
     Depreciation and amortization .............        701,572         647,059
     Loss on disposal of fixed assets ..........           --            (3,424)
     Other assets ..............................           (298)             (3)
     Note receivable ...........................         (9,604)           --
     Deferred income taxes .....................         52,240          (1,333)
     Net operating working capital items .......         32,913        (261,221)
                                                                   ------------


Net cash provided by operating activities ......   $  3,858,026    $  3,138,439
                                                                   ============

See accompanying notes.


                                      F-30
<PAGE>
                   POZZOLANIC RESOURCES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 1997

1. Organization

         Pozzolanic Resources,  Inc. ("Resources" or the "Company") is a holding
company for Pozzolanic Northwest, Inc. ("Northwest") and St. Helens Investments,
Inc.  ("St.  Helens"),  d.b.a.  Pozzolanic  International,  whose purpose is the
distribution  of fly  ash,  which is used in the  production  of  concrete.  The
companies  have been  selling fly ash in the western  United  States and British
Columbia since 1976. Resources also owns all the outstanding stock of Pozzolanic
Northwest Bulk Carriers,  Inc. ("Bulk  Carriers").  Bulk Carriers  operates as a
common carrier, primarily in the Pacific Northwest.

2. Accounting Policies

         Financial Statement Presentation

         In addition to the accounts of Resources,  the  consolidated  financial
statements  include the accounts of Northwest  and its wholly owned  subsidiary,
Pozzolanic N.W. FSC, Inc. (a Foreign Sales Corporation - "FSC"); St. Helens; and
Bulk Carriers. Significant intercompany transactions and accounts are eliminated
in consolidation.

         Revenue Recognition

         Revenue is recognized upon delivery of products to the customer.

         Deferred Freight

         Freight costs incurred moving fly ash to Resources'  storage facilities
are deferred  until the fly ash is sold.  Such deferred  freight is allocated to
fly ash sales on an average cost per ton basis.

         Property, Plant, and Equipment

         Property,  plant,  and equipment  are stated on the basis of cost.  The
provision  for  depreciation  is  determined by  straight-line  and  accelerated
methods over the estimated useful lives of the assets.

         Statements of Cash Flows

         For   purposes   of  the   statement   of   cash   flows,   short-term,
interest-bearing  investments  with  maturities  on the date of purchase of less
than three months are considered cash  equivalents.  The fair values of cash and
short-term investments approximate their carrying values.

         Income Taxes

         The Company applies the liability method of accounting for income taxes
as  prescribed  by SFAS No.  109,  "Accounting  for  Income  Taxes."  Under  the
liability  method,  deferred tax assets and  liabilities  are recognized for the
expected future tax consequences of existing  differences  between the financial
reporting and tax reporting  bases of assets and  liabilities  using enacted tax
laws and rates.

         Deferred  income  taxes  relate   principally  to  differences  in  the
treatment between tax and book of depreciation and freight costs.


                                      F-31
<PAGE>
                   POZZOLANIC RESOURCES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Accounting Policies (Continued)

         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 amounts  reported in the financial  statements  and
accompanying notes.  Actual results could differ from those estimates.  The only
significant  estimate made by management is the  determination  of the allowance
for doubtful accounts.

3. Related Parties

         On October 1, 1980, Northwest  transferred two of its fly ash contracts
to St. Helens. In return, St. Helens issued to Northwest  nonvoting common stock
with a par value of $700,000.  The related fly ash contracts have an unamortized
carrying value at December 31, 1997 of approximately  $143,000.  Since Northwest
had no cost basis in the contracts and is not assured of realization of the gain
on this transaction, no gain on the transfer has been recognized.

         The above fly ash  contracts  are being  amortized  on a  straight-line
basis over the lives of the contracts.

4. Commitments and Contingencies

         The Company has entered into operating leases for office space, storage
facilities,  and rail  cars  through  2002.  Aggregate  minimum  lease  payments
required over the lives of the leases are as follows:

1998 ...............................................                  $  720,000
1999 ...............................................                     660,000
2000 ...............................................                     290,000
2001 ...............................................                     180,000
2002 ...............................................                      60,000
                                                                      ----------


                                                                      $1,910,000
                                                                      ==========


         Rental expense under operating  leases was  approximately  $560,000 and
$210,00 in 1997 and 1996, respectively.

         The Company's  contracts with its suppliers require the Company to make
minimum purchases of fly ash over ensuing years as follows:

1998 ...................................................              $  730,000
1999 ...................................................                 730,000
2000 ...................................................                 730,000
2001 ...................................................                 730,000
2002 ...................................................                 730,000
2003 and thereafter ....................................                  15,000
                                                                      ----------


                                                                      $3,665,000
                                                                      ==========


         Fly ash  purchases  under  supplier  contracts  with  minimum  purchase
requirements   amounted  to  $1,010,000   and   $1,915,000  in  1997  and  1996,
respectively.

                                      F-32
<PAGE>
                   POZZOLANIC RESOURCES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Commitments and Contingencies (Continued)

         The supplier  contracts  provide for adjustment of the minimum purchase
prices based on changes in the specific price of Portland cement.

5. Credit Agreement

         Resources entered into a credit agreement with a bank that expires June
30, 1998. The agreement provides for borrowings of up to $2,500,000.  Borrowings
under the  agreement  are secured by accounts  receivable  and  inventories  and
require  monthly  payments of interest at the lending  bank's prime rate.  There
were no borrowings outstanding under this agreement at December 31, 1997.

6. Capital Stock

         Holders  of Class A voting  common  stock are not  entitled  to receive
dividends.  The  holders  of  Class C  nonvoting  preferred  stock  and  Class D
nonvoting  preferred  stock shall be entitled to dividends only when declared by
the Board of Directors with the unanimous approval of voting stockholders.

7. Impact of the Year 2000 (Unaudited)

         The Company has completed an  assessment  of its computer  programs and
will have to modify or replace  portions of its  software  so that its  computer
systems  will  function  properly  with  respect  to dates in the year  2000 and
thereafter.  The total Year 2000 project cost is not expected to be significant.
The project is estimated to be completed no later than December 31, 1998,  which
is prior  to any  anticipated  impact  on its  operating  systems.  The  Company
believes that with modifications to existing software,  the Year 2000 Issue will
not pose significant operational problems for its computer systems.

8. Subsequent Event

         On March 4, 1998, all of the Company's  outstanding stock was purchased
by an unrelated third party.

                                      F-33
<PAGE>



                         Report of Independent Auditors

The Board of Directors and Shareholders  Michigan Ash Sales Company (d.b.a. U.S.
Ash Company), U.S. Stabilization, Inc. and Flo Fil Company, Inc.

We have audited the  accompanying  combined balance sheets of Michigan Ash Sales
Company  (d.b.a.  U.S.  Ash  Company),  U.S.  Stabilization,  Inc.,  and Flo Fil
Company,  Inc. (the "Companies") as of April 21, 1998 and December 31, 1997, and
the related combined  statements of income and retained  earnings and cash flows
for the period from January 1 to April 21, 1998 and for each of the two years in
the  period  ended  December  31,  1997.  These  financial  statements  are  the
responsibility of the Companies' management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the combined  financial  position of Michigan Ash Sales
Company  (d.b.a.  U.S.  Ash  Company),  U.S.  Stabilization,  Inc.,  and Flo Fil
Company,  Inc. at April 21, 1998 and December 31, 1997, and the combined results
of their  operations and their cash flows for the period from January 1 to April
21, 1998 and for each of the two years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.


                                                     Ernst & Young LLP

Salt Lake City, Utah
December 18, 1998


                                      F-34
<PAGE>
              Michigan Ash Sales Company (d.b.a. U.S. Ash Company)
                            and Affiliated Companies

                             Combined Balance Sheets


                                                        April 21     December 31
                                                           1998          1997
                                                   --------------- -------------
Assets
Current assets:
     Cash and cash equivalents .....................  $   408,363   $ 3,136,041
     Accounts receivable (net of allowance for
       doubtful accounts of $15,114 in 1998 and
       $34,458 in 1997) ............................    2,005,693     1,713,409
     Other receivables .............................       51,101        51,901
     Inventories ...................................       29,316        21,875
     Deferred income tax ...........................        5,928        42,116
                                                      -----------   -----------
Total current assets ...............................    2,500,401     4,965,342

Property, plant, and equipment
     Buildings .....................................      579,788       578,788
     Plant equipment ...............................      207,334       207,334
     Vehicles ......................................      158,474       138,124
                                                      -----------   -----------
                                                          945,596       924,246
     Accumulated depreciation ......................     (594,515)     (567,369)
                                                      -----------   -----------
                                                          351,081       356,877



                                                      ===========   ===========
Total assets .......................................  $ 2,851,482   $ 5,322,219
                                                      ===========   ===========






                                      F-35
<PAGE>
              Michigan Ash Sales Company (d.b.a. U.S. Ash Company)
                            and Affiliated Companies

                       Combined Balance Sheets (continued)


                                                          April 21   December 31
                                                            1998         1997
                                                    --------------- ------------
Liabilities and shareholder's equity
 Current liabilities:
     Trade accounts payable ..........................   $  932,417   $  347,177
     Accrued expenses ................................       32,935      592,309
     Payables to affiliates ..........................      386,401    1,942,590
     Current income tax payable ......................      155,251      217,005
                                                         ----------   ----------
Total current liabilities ............................    1,507,004    3,099,081

Deferred income tax ..................................       60,805       55,512

Commitments and contingencies

Shareholder's equity:
     Common stock
         Michigan Ash Sales Company, $1 par value;
             50,000 shares authorized;
             1,000 shares issued and outstanding .....        1,000        1,000
         U.S. Stabilization, Inc., $1 par value;
             50,000 shares authorized;
             1,000 shares issued and outstanding .....        1,000        1,000
         Flo Fil Company, Inc., $1 par value;
             50,000 shares authorized;
             1,000 shares issued and outstanding .....        1,000        1,000
     Retained earnings ...............................    1,280,673    2,164,626
                                                                      ----------
                                                                      ----------
Total shareholder's equity ...........................    1,283,673    2,167,626

                                                         ==========   ==========
Total liabilities and shareholder's equity ...........   $2,851,482   $5,322,219
                                                         ==========   ==========


See accompanying notes.

                                      F-36
<PAGE>

              Michigan Ash Sales Company (d.b.a. U.S. Ash Company)
                            and Affiliated Companies

               Combined Statements of Income and Retained Earnings


                                      Period from
                                      January 1 to                  Year ended
                                       April 21                     December 31
                                        1998             1997           1996
                                 ------------------ -------------- -------------

Revenues:
     Materials and services sold ...  $  3,323,405   $ 11,216,477   $ 7,535,232
     Commissions ...................       219,827        495,691
                                                     ------------   -----------
                                                                    -----------
Total revenues .....................     3,323,405     11,436,304     8,030,923

Costs and expenses:
     Cost of materials and
       services sold ...............     2,745,932     10,006,618     6,298,862
     Selling, general and
       administrative ..............     1,147,377      1,469,009     1,039,363
                                      ------------   ------------   -----------
                                         3,893,309     11,475,627     7,338,225
                                                     ------------   -----------
                                                                    -----------
                                          (569,904)       (39,323)      692,698
Interest income ....................        19,902         92,403        45,403
Other income .......................        17,452         77,330         4,068
                                      ------------   ------------   -----------
Income (loss) before income taxes ..      (532,550)       130,410       742,169

Income taxes
    Current ........................       (40,078)        44,570       299,712
    Deferred .......................        41,481          4,833       (34,268)
                                      ------------   ------------   -----------
                                             1,403         49,403       265,444
                                      ------------   ------------   -----------
Net income (loss) ..................      (533,953)        81,007       476,725

Shareholder distribution ...........      (350,000)      (108,367)
Retained earnings at
   beginning of year ...............     2,164,626      2,083,619     1,715,261
                                                                    -----------
                                      ============   ============   ===========
Retained earnings at
   end of year .....................  $  1,280,673   $  2,164,626   $ 2,083,619
                                      ============   ============   ===========


   See accompanying notes.

                                      F-37
<PAGE>
              Michigan Ash Sales Company (d.b.a. U.S. Ash Company)
                            and Affiliated Companies

                        Combined Statements of Cash Flows


                                             Period from
                                             January 1 to             Year ended
                                               April 21              December 31
                                                1998           1997        1996
                                             -----------------------------------
Operating activities
Net income (loss) .......................  $  (533,953)  $    81,007   $ 476,725
Adjustments to reconcile net income
   to net cash provided by operating
   activities:
     Depreciation .......................       27,146        63,073      46,025
     Deferred income taxes ..............       41,481         4,833    (34,268)
     Changes in operating assets and
       liabilities:
         Accounts receivable ............     (291,484)     (597,925)  (173,391)
         Inventories ....................       (7,441)        2,765     (2,778)
         Trade accounts payable and
           payables to affiliates .......     (970,949)      701,312   (184,845)
         Income taxes payable ...........      (61,754)      (35,621)    243,060
         Accrued expenses ...............     (559,374)      267,956      37,018
                                                                      ----------
Net cash (used in) provided by
   operating activities .................   (2,356,328)      487,400     407,546

Investing activities
Purchases of property, plant
   and equipment ........................      (21,350)     (116,818)
Proceeds from disposal of property, plant
    and equipment .......................       29,457
                                               -----------  ----------- -------

Net cash used in investing activities ...      (21,350)      (87,361)

Financing activities
Shareholder distribution ................     (350,000)      (75,000)
                                             -----------    ----------- --------
Net increase (decrease) in cash and
    cash equivalents ....................   (2,727,678)      400,039     332,546
Cash and cash equivalents at
   beginning of period ..................    3,136,041     2,736,002   2,403,456
                                                                      ----------
                                                                      ==========
Cash and cash equivalents at
   end of period ........................  $   408,363   $ 3,136,041 $ 2,736,002
                                                                     ===========

Cash paid during the period
   for income taxes .....................  $    21,677   $    80,191  $   56,652

See accompanying notes.


                                      F-38
<PAGE>
              Michigan Ash Sales Company (d.b.a. U.S. Ash Company)
                            and Affiliated Companies

                     Notes to Combined Financial Statements

                                 April 21, 1998


1.  Description of the Business and Significant Accounting Policies

The accompanying  combined financial statements include the accounts of Michigan
Ash Sales  Company,  U.S.  Stabilization,  Inc. and Flo Fil Company,  Inc.  (the
Companies).  All three companies are  wholly-owned by an individual  shareholder
and have common management.  Significant  intercompany accounts and transactions
have been  eliminated  in  combination.  The  operations  of the  Companies  are
summarized below:

         Michigan  Ash Sales  Company  (d.b.a.  U.S.  Ash  Company) - A Michigan
         corporation   involved   primarily  in  the   business  of   marketing,
         transporting  and  disposing  of fly  ash  and  other  coal  byproducts
         generated by  utilities,  primarily in the states of Michigan,  Indiana
         and Ohio.  Customers of the company consist of concrete  manufacturers,
         cement manufacturers,  construction  contractors,  and other affiliated
         companies.

         U.S.  Stabilization,  Inc. - A Michigan  corporation in the business of
         mixing fly ash with  steel  company  waste  byproducts  to comply  with
         landfill disposal regulations for a steel company in Indiana.

         Flo Fil Company,  Inc. - A Michigan  corporation  involved primarily in
         the  business of mixing and selling a low-cost  fly ash based  concrete
         product for use in applications with lower-grade product requirements.

On March 25, 1998, an agreement was signed to sell all the outstanding  stock of
the Companies to an unrelated third party effective April 21, 1998.

Revenue Recognition

Revenues are recognized when materials or services are provided to customers.

Cash and Cash Equivalents

Cash  equivalents are highly liquid  investments with maturities of three-months
or less when purchased.


                                      F-39
<PAGE>
              Michigan Ash Sales Company (d.b.a. U.S. Ash Company)
                            and Affiliated Companies

               Notes to Combined Financial Statements (continued)


1.  Significant Accounting Policies (continued)

Property, Plant and Equipment

Property,  plant,  and  equipment  are  recorded  at cost.  Major  renewals  and
improvements  are capitalized,  while  maintenance and repairs are expensed when
incurred.  Depreciation  is  computed  using the  straight-line  method over the
estimated  useful lives of 5 to 10 years for  vehicles,  machinery and equipment
and 40 years for buildings and improvements.

As required by Statement of Financial  Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of,"  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.  Management  believes no
material impairment in the value of long-lived assets exists at April 21, 1998.

Income Taxes

The  Companies  account for income taxes,  using the  provisions of Statement of
Financial  Accounting  Standards (SFAS) No. 109,  "Accounting for Income Taxes."
Deferred income taxes result  primarily from temporary  differences  between the
financial  statement  bases and the tax bases of assets  and  liabilities  using
enacted tax rates.

Fair Value of Financial Instruments

Statement of Financial  Accounting  Standards  No. 107,  "Disclosure  About Fair
Value of Financial  Instruments"  (SFAS 107) requires the disclosure of the fair
value of financial  instruments,  both assets and liabilities recognized and not
recognized on the balance  sheet,  for which it is  practicable to estimate fair
value.  SFAS 107 defines fair value of a financial  instrument  as the amount at
which the instrument could be exchanged in a current transaction between willing
parties.  At April 21, 1998 and December 31, 1997, the carrying value of all the
Companies'  financial  instruments  (accounts  receivable,  accounts payable and
accrued expenses) approximates fair value.

Inventories

Inventories consist of spare parts for equipment and are stated at cost.

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
reported  amounts of revenues and expenses during the reporting  period.  Actual
results could differ from those estimates.





                                      F-40
<PAGE>
              Michigan Ash Sales Company (d.b.a. U.S. Ash Company)
                            and Affiliated Companies

               Notes to Combined Financial Statements (continued)


2.  Income Taxes

Reconciliation  of  income  tax  expense  at  the  U.S.  statutory  rate  to the
Companies' tax expense follows:

                                                     Period from January
                                                        1 to April 21
                                                     Year ended December 31
                                                     1998       1997      1996

34% of income before income tax ................  $(181,067)  $ 44,339  $252,337

Add (deduct):
   Permanent differences .......................    175,970      2,954     2,391
   Earnings of combined affiliate not subject
       to taxation because of S Corporation
       status ..................................                           (629)
   State income taxes, net of federal benefit
                                                      6,500      2,110    11,345
                                                  $   1,403   $ 49,403  $265,444
                                                                        --------

The major  components of the deferred tax assets and liabilities as of April 21,
1998 and December 31, 1997 are as follows:

                                                               1998       1997
                                                            --------------------
   Deferred Tax Assets:
   Bad debt reserves .....................................  $  5,928   $ 12,251
   Accruals not currently deductible for tax purposes ....    17,750
  Net operating loss carryforwards .......................    12,115
                                                             -------   --------
                                                               5,928     42,116

Deferred Tax Liabilities:
  Fixed asset basis differences ..........................    60,805     55,512
                                                            ========    ========
Net deferred tax liabilities .............................  $(54,877)  $(13,396)
                                                            ========    ========



                                      F-41
<PAGE>
<TABLE>
<CAPTION>

              Michigan Ash Sales Company (d.b.a. U.S. Ash Company)
                            and Affiliated Companies

               Notes to Combined Financial Statements (continued)

3.  Related Party Transactions

The  following  table   summarizes   revenues  and  expenses   reported  in  the
accompanying  combined statements of income that were either received or accrued
from, or paid or accrued to, the sole shareholder,  individuals  affiliated with
the  sole  shareholder,  or  companies  owned  by or  affiliated  with  the sole
shareholder:

                                                                     Period from
                                                                    January 1 to                Year ended
                                                 Nature of            April 21                  December 31
                  Related Party               Transaction             1998              1997             1996
         ------------------------------- ----------------------- ---------------- ------------------ --------------

<S>     <C>                         <C>                       <C>             <C>                   <C>
         Commission revenues:
         Wirt Transportation, Inc.   Commissions on loads
                                     hauled by Wirt
                                     Transportation, Inc.     $     -           $    219,827        $  495,691


               Cost of materials and services sold:

      Wirt Transportation, Inc.    Trucking fees                                     2,489,134       1,868,055
                                                                   372,839
      Wirt Payroll Services and    Fees for leased
        JAD Payroll Services       employees
                                                                  1,353,651          1,485,181       1,080,769
      JD Ash Equipment Co.         Equipment  rental  and
                                     maintenance
                                     contract fees                 157,742           1,045,545         430,415
      Sand and Stone Co.           Purchases of materials                              253,116         148,199
      Wirt Trucking Co.            Equipment rental                                     79,479          79,479

                 Selling, general and administrative:

      Sand and Stone Co.           Building rental                19,501              93,000          93,000
      Bay Dock Company, Inc.       Building rental                                    67,200
</TABLE>

Due to the related  nature of these parties,  the amounts  received and paid may
not have been the same if similar  activities had been undertaken with unrelated
parties. All leasing arrangements with related parties are cancelable.

Prior to January 2, 1997,  U.S.  Stabilization,  Inc.  was  wholly-owned  by the
president of Michigan Ash Sales  Company and U.S.  Stabilization,  Inc. In April
1996, the president received two distributions from U.S.  Stabilization totaling
$75,000. The remaining  undistributed  retained earnings of U.S.  Stabilization,
Inc. as of December  31, 1996 totaled  $33,367 and was accrued as an  additional
distribution  to the  president  on that date.  The accrued  distribution,  plus
accrued  interest,  is included in payables to  affiliates  in the  accompanying
combined balance sheet as of April 21, 1998 and December 31, 1997. On January 2,
1997,   the  president   transferred   all  the   outstanding   shares  of  U.S.
Stabilization,  Inc. to the sole  shareholder  of Michigan Ash Sales Company and
Flo Fil Company, Inc.

                                      F-42
<PAGE>
              Michigan Ash Sales Company (d.b.a. U.S. Ash Company)
                            and Affiliated Companies

               Notes to Combined Financial Statements (continued)


4.  Commitments and Contingencies

Michigan Ash Sales Company has a commitment to purchase equipment related to
a contract  with a supplier.  Under this  commitment,  the company will purchase
approximately  $250,000  of  equipment  and the utility  will  provide a certain
amount of ash at no cost.  The  equipment  is  necessary  to fulfill the utility
contract.

5.  Concentrations of Credit Risk

The  Companies   maintain   their  cash  balances  at  two  separate   financial
institutions  located in Michigan.  Accounts at each  institution are insured by
the Federal Deposit Insurance  Corporation up to $100,000. At April 21, 1998 and
December 31, 1997, the Companies'  uninsured cash balances  totaled $307,000 and
$2,287,000 respectively.

Generally,  the Companies do not require collateral or other security to support
customer  trade  accounts  receivable.  The  Companies'  five largest  customers
accounted  for  approximately  25% of the  revenues  in  1998,  1997  and  1996.
Customers of the  Companies  are primarily  concentrated  in the public  utility
industry.  Customers are also concentrated in the states of Michigan,  Illinois,
Indiana,  and  Ohio.  Historically,  the  Companies  have  not  had  significant
uncollectable accounts.

6.  Impact Of The Year 2000 (Unaudited)

The Companies  have not completed an  assessment of their  computer  programs to
determine  if such  programs  will have to be  modified  or replaced so that the
computer  systems will function  properly with respect to dates in the year 2000
and thereafter. However, because of the limited use of computers and software in
the day to day operations of the Companies business, management does not believe
that the Year 2000 Issue will pose significant operational problems.





<PAGE>

attached hereto at pages F-1 through F-43.


Item  9.  Changes  In and  Disagreements  With  Accountants  on  Accounting  and
Financial Disclosure

None.


                                    PART III

Item 10.      Directors and Executive Officers of the Registrant

The Company's  directors and executive  officers,  and their respective ages and
positions  with the Company,  are set forth below in tabular form.  Biographical
information on each person is set forth following the tabular information. There
are no family relationships  between any of the Company's directors or executive
officers.  The  Company's  board of  directors  is  currently  comprised of five
members,  each of whom is elected for a term of one year.  At December 31, 1998,
the board had one  unoccupied  position.  Executive  officers  are chosen by and
serve at the discretion of the board of directors.


          Name                    Age        Position with Company

R Steve Creamer ..............    47 Chairman of the Board and Chief Executive
                                     Officer
Raul A. Deju .................    52 President and Chief Operating Officer,
                                     Assistant Secretary  and Director
J.I. Everest, II .............    42 Chief Financial Officer, Treasurer,
                                     and Assistant Secretary
Clinton W. Pike ..............    46 Executive Vice President
Danny L. Gray ................    43 Senior Vice President, Eastern Operations
Brett A. Hickman .............    36 Senior Vice President, General Counsel
                                     and Secretary
Grover C. Dobbins, Jr ........    50 Senior Vice President, Administration
                                     and Assistant Secretary
Joseph M. Silvestri ..........    37 Director
Richard M. Cashin, Jr ........    45 Director

R Steve Creamer.  Mr.  Creamer is the Chairman of the Board and Chief  Executive
Officer of the Company and ISG.  Immediately  prior to his  employment  with the
Company,  Mr.  Creamer  was CEO  (from  1992 to 1997)  and the  founder  of ECDC
Environmental L.C., the largest rail-served industrial waste management facility
in North  America.  Prior to that, Mr. Creamer served as CEO of Creamer & Noble,
an engineering firm based in St. George,  Utah. He earned a B.S. degree in Civil
and Environmental Engineering from Utah State University in 1973. Mr. Creamer is
a P.E.
<PAGE>

Raul A. Deju.  Dr.  Deju is the  President  and Chief  Operating  Officer of the
Company and ISG.  Dr. Deju served as a Director of Rockwell  Hanford  Operations
through 1981, Senior Vice President of International Technologies,  Inc. through
1987 and Regional  President of several  subsidiaries of WMX Technologies,  Inc.
through 1995. Dr. Deju served as Chairman and CEO of DGL  International  through
1997,  and retains an ownership  position in DGL. Dr. Deju has been on the Board
of Directors of various national and international  WMX  subsidiaries,  Advanced
Sciences, Inc. and Isadra, Inc. Dr. Deju is a member of both the Company and ISG
Boards of Directors. Dr. Deju is an advisor to a committee of the U.S. Secretary
of Commerce and has served on the U.S. Environmental  Protection Agency Advisory
Committee.  Dr. Deju received a B.S.  degree in Mathematics  and Physics in 1966
and a Ph.D. degree in Engineering  Geology in 1969 from the New Mexico Institute
of Mining and Technology.

J.I.  Everest,  II. Mr. Everest is the Chief  Financial  Officer,  Treasurer and
Assistant  Secretary of the Company and ISG. He is responsible for all financial
functions of the Company.  Immediately prior to his employment with the Company,
he served as Vice President of Finance for ECDC  Environmental,  Inc. (from 1993
to  1997).   From  1988  to  1993,   Mr.   Everest  was  Director  of  Financial
Analysis/Treasury  of USPCI,  Inc. Mr. Everest earned an M.B.A.  degree (Finance
Concentration)  in 1994  from the  University  of Texas at  Austin  and a B.B.A.
degree from Southern Methodist University in 1979. Mr. Everest is a C.P.A.

Clinton W. Pike. Mr. Pike is the Executive Vice President of the Company.  Since
he began his service in 1990,  Mr. Pike has served as Vice President of Business
Development for the Company,  establishing the Business and Product  Development
Program, and spearheading nontraditional business advancement and growth through
acquisitions  and the development of new markets.  Prior to his service with the
Company,  he was  Coordinator,  Fuel and Ash Quality with Georgia Power Company,
where he directed a total CCP management program. Mr. Pike earned a B.S.
degree in Biology (Chemistry minor) from Georgia Southwestern College in 1974.

Danny L. Gray.  Mr. Gray is a Senior Vice  President of the  Company.  From July
1994 until 1997,  he served  principally  as  President  of KBK and also as Vice
President  of the Company.  Prior to joining the  Company,  Mr. Gray was a Civil
Engineer  with  American  Electric  Power in 1978  and was  promoted  to  Senior
Environmental  Engineer,  Environmental  Department of that company in 1980. Mr.
Gray  earned a B.S.  degree in Civil  Engineering  from  Virginia  Tech in 1977,
graduating with honors.

Brett A. Hickman. Mr. Hickman is the Senior Vice President,  General Counsel and
Secretary of the Company.  From December 1993 until  February  1998, Mr. Hickman
was General Counsel,  Western Division of Laidlaw Environmental  Services,  Inc.
Prior to that,  Mr.  Hickman was an attorney  with Davis & Lavender in Columbia,
South Carolina.  Mr. Hickman earned a B.A. degree in Political  Science from The
Citadel in 1983 and a J.D. degree from the University of South Carolina in 1986.

 Grover C. Dobbins, Jr. Mr. Dobbins is the Senior Vice President, Administration
of the Company. He joined the Company in 1989 as Manager of Project Development.
He began work as Vice President,  Corporate Services in January, 1991. From 1992
to 1995, Mr. Dobbins served as Director of Marketing. Effective January 1, 1996,
he was appointed Vice President,  Administration.  Prior to his service with the
Company,  he was a Principal Engineer at Carolina Power and Light Company for 15
years.  Mr.  Dobbins earned a Master of Civil  Engineering  degree in 1972 and a
B.S. degree in Civil Engineering in 1971 from North Carolina State University.
<PAGE>

Joseph M. Silvestri.  Mr. Silvestri has been a director of the Company since its
acquisition  by ISG. Mr.  Silvestri  has been employed by CVC since 1990 and has
served as a Vice  President  there since 1995.  Mr.  Silvestri  is a director of
International Media Group, Polyfibron Technologies,  Frozen Specialties, Glenoit
Mills, Euramax and Triumph Group.

Richard M.  Cashin,  Jr. Mr.  Cashin was  appointed a director of the Company in
March  1998.  Mr.  Cashin  has been  employed  by CVC since  1980,  and has been
President since 1994. Mr. Cashin is a director of Levitz Furniture Incorporated,
Lifestyle Furnishings International, Euramax and Titan Wheel International.


Compliance with Section 16(a) of the Securities Exchange Act of 1934.

Section  16(a)  of the  Securities  Exchange  Act of  1934,  and the  rules  and
regulations promulgated thereunder, require the Company's executive officers and
directors,  and  persons  who  beneficially  own  more  than  ten  percent  of a
registered  class  of the  Company's  equity  securities,  to  file  reports  of
ownership and changes in ownership with the  Securities and Exchange  Commission
and the National  Association of Securities Dealers Automated  Quotations System
and to furnish the Company with copies thereof.  None of the Company's executive
officers  and  directors  and ten percent  owners own any shares in the Company.
Accordingly, no such reports have been, or need to be, filed.


Item 11.      Executive Compensation

The following  table shows the  compensation  paid by the Company to its current
Chairman and Chief Executive  Officer,  and the Company's other most highly paid
executive officers.



<PAGE>
<TABLE>
<CAPTION>


                                            Summary Compensation Table

                                                Annual Compensation

       Name and Principal Position(1)                        Fiscal Year      Salary (2)      Bonus        Other Annual
       ------------------------------                        -----------      ----------      -----                    
                                                                                                              Compensation (3)

<S>                    <C>                                             <C>        <C>          <C>                   <C>   
       R Steve Creamer (4)                                             1998       $193,747     $130,000              $5,150
       Chairman, Chief Executive Officer
                                                                       1997         24,231            0                   0

       Clinton W. Pike                                                 1998        160,461      191,700             106,886
       Executive Vice President
                                                                       1997        149,255      119,492               4,374

       Raul A. Deju (4)                                                1998        182,869      121,338              5,150
       President and Chief Operating Officer
                                                                       1997         23,710            0                  0

       William H. Gehrmann                                             1998        129,065      162,407              5,882
       Vice President
                                                                       1997        102,000       30,862              5,000

       J.I. Everest, II (4)                                            1998        145,934      108,337              8,092
       Treasurer and Chief Financial Officer
                                                                       1997         28,647            0                  0
</TABLE>

-----------

(1)      Positions indicated were as of December 31, 1998.

(2)      Includes  amounts,  if any,  deferred by the named  individual  for the
         period in question  pursuant to Section 401(k) of the Internal  Revenue
         Code under the Company's 401(k) Savings Plan (the "401(k) Plan").

(3)      Amounts shown under Other Annual  Compensation  include amounts paid by
         the Company as matching  and/or  profit  sharing  contributions  to the
         401(k) Plan, but do not include perquisites and other personal benefits
         provided to each of the named executives,  the aggregate value of which
         did  not  exceed  the  lesser  of  $50,000  or 10% of  any  such  named
         executive's annual salary and bonus.

(4)      Mr.  Creamer,  Mr. Deju and Mr.  Everest  have been  employed  with the
         Company  since October 14, 1997,  and the 1997 salary  reflects the two
         and a half months they worked for the Company in 1997.


<PAGE>
<TABLE>
<CAPTION>

Item 12.      Security Ownership of Certain Beneficial Owners and Management

The Company is wholly owned by ISG. The following table sets forth the number of
shares of ISG's common stock  beneficially  owned as of January 29, 1999, (i) by
each person who is known by the Company to own beneficially  more than 5% of the
Company's  common stock,  (ii) by each director and director  nominee,  (iii) by
each of the  Company's  named  executive  officers,  and (iv) by all  directors,
director nominees and executive  officers,  as a group, as reported by each such
person.


                                                                                Beneficial Ownership of    Beneficial Ownership of
                                                                                      Common Stock             Preferred Stock
Name and Address of Beneficial Owner                                             Number of                  Number of
                                                                                   Shares       Percent       Shares       Percent

<S>                            <C>                                                    <C>            <C>          <C>           <C> 
Citicorp Venture Capital, Ltd. (1)..........................................          187,425        37.9         26,813        38.3
R Steve Creamer (2)(3)......................................................          150,266        30.4         25,351        36.2
J.I. Everest, II (3)........................................................           49,467        10.0          6,925         9.9
CCT Partners IV, LP (4).....................................................           33,075         6.7          4,732         6.8
Richard M. Cashin, Jr.......................................................            7,840         1.6          1,122         1.6
Raul A. Deju ...............................................................           45,317         9.2          2,023         2.9
Joseph M. Silvestri.........................................................              980         0.2            140         0.2
Brett A. Hickman............................................................           4,950          1.0           700          1.0
Clinton W. Pike (5).........................................................             -
Danny L. Gray (5)...........................................................             -
All directors and executive officers as a group
(8 persons) (2)(3)(5).......................................................          258,820        52.4         36,261        51.8

</TABLE>

-----------

(1)      The address of Citicorp Venture Capital, Ltd. is: 399 Park Avenue, 14th
         Floor, New York, NY 10043.

(2)      Includes  112,700  shares  owned by Mr.  Creamer's  adult son and three
         minor children.

(3)      Messrs.  Creamer  and  Everest  beneficially  own shares in ISG through
         RACT, Inc., a Utah corporation ("RACT"),  which directly owns shares in
         ISG.  The  business  address of RACT is: 136 East South  Temple,  Suite
         1300, Salt Lake City, Utah 84111.

(4)      The  address  of CCT  Partners  IV, LP is the same as that of  Citicorp
         Venture Capital, Ltd.

(5)      Messrs.  Pike and Gray,  pursuant to their employment  contracts,  have
         each  been  granted  an  economic   interest  in  one  percent  of  all
         outstanding  shares  of the  Company's  stock  as of the  date of their
         respective   employment   agreements.    See   "Management   Employment
         Agreements."

<PAGE>

Item 13.      Certain Relationships and Related Transactions

None.


                                     PART IV

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

(a)  Exhibits.

   Exhibits

          *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.
          *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.
          *10.1Purchase  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.
<PAGE>

          *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.
          *10.8First 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.
        **12.1 Statement re Computation of Ratio of Earnings to Fixed Charges.
         *21.1 Subsidiaries of JTM Industries, Inc.
           *24 Powers of Attorney
          *25.1Statement 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:  March 31, 1999                By:/s/R. Steve Creamer
                                   R Steve Creamer, Chairman and Chief Executive

         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                March 31, 1999
---------------------------          Chief Executive Officer
    R Steve Creamer

/s/Raul A. Deju                       President,                  March 31, 1999
---------------------------           Chief Operating Officer
    Raul A. Deju                      Assistant Secretary and Director

 /s/J.I. Everest, II                  Chief Financial Officer,    March 31, 1999
---------------------------           Treasurer and
    J.I. Everest, II                  Assistant Secretary

/s/Joseph M. Silvestri                 Director                   March 31, 1999
---------------------------
    Joseph M. Silvestri

                                      Director                    March 31, 1999
    Richard M. Cashin