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

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                    For the fiscal year ended January 2, 1999

                        Commission file number 333-04254

                              BAR TECHNOLOGIES INC.
             (Exact name of registrant as specified in its charter)

         Delaware                                                  13-3753384
         --------                                                  ----------
(State or other jurisdiction of                                 (IRS Employer
incorporation or organization)                               Identification No.)

                  3770 Embassy Parkway, Akron, Ohio 44333-8367
                  --------------------------------------------
                    (Address of Principal Executive Offices)

       (330) 670-3000 (Registrant's telephone number including area code)
       --------------

         5700 Lombardo Center Drive, Suite 100, Seven Hills, Ohio 44131
         --------------------------------------------------------------
  (Former name, former address and fiscal year, if changed since last report )


        Securities registered pursuant to Section 12(b) of the Act: None

        Securities registered pursuant to Section 12(g) of the Act: None


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-X is not contained herein, and will not be contained, to the
best of the 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. X
                            ---

The number of shares outstanding of each of the issuer's classes of common stock
as of January 2, 1999 was as follows:

Class A Common Stock, $0.001 par value                        204,458 shares

Class B Common Stock, $0.001 par value                        536,829 shares

Class C Common Stock, $0.001 par value                        536,865 shares


                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None
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                                     PART I

ITEM 1. BUSINESS

GENERAL

Bar Technologies Inc. a Delaware corporation ("Bar Tech" or, the "Company"),
produces and markets special bar quality ("SBQ") steel bar products. SBQ steel
bar products are high quality hot rolled and cold finished carbon and alloy
steel bars used primarily in critical applications in the automotive and
industrial equipment industries.

The Company was formed when it acquired certain steelmaking and bar rolling
assets (the "BRW Assets") from the former Bar, Rod & Wire Division (the
"Bethlehem BRW Division") of Bethlehem Steel Corporation ("Bethlehem") in
September 1994. The Bethlehem BRW Division was a leading manufacturer of high
quality engineered bar, rod and wire products prior to its shutdown in December
1992. In conjunction with the acquisition, the Company developed and implemented
a major modernization and expansion plan. In February 1996, the Company
restarted the mill facility located in Lackawanna, New York and began producing
and shipping hot rolled bar products. The Company commenced its commercial
steelmaking operations at its Johnstown, Pennsylvania facility in August 1996 in
conjunction with the commissioning of its continuous caster.

In April 1996, the Company acquired Bliss & Laughlin Industries Inc. ("BLI"),
one of the largest processors of cold finished steel bar products in North
America, to complement its existing scope of product offerings and enhance its
distribution network.

The Company's principal owners, Blackstone Capital Partners II Merchant Banking
Fund L. P. and its affiliates ("Blackstone") and certain affiliates of the
successor to Veritas Capital, Inc. ("Veritas"), serving as general partners for
limited partnerships, acquired Republic Engineered Steels, Inc. ("Republic") in
September 1998. Blackstone and Veritas intend to combine the Company and
Republic (the "Combination") during 1999, subject to refinancing a significant
portion of the combined companies' debt.

BUSINESS

The production of SBQ steel bar products is a segment of the overall steel
market. The bar products segment is further divided into three categories which
are delineated by the quality and the end use of the bar product: (i.)
reinforcing bar, (ii.) merchant quality bar and, (iii.) hot-rolled engineered
bar. Hot-rolled engineered bar is the highest quality segment of the bar product
market. The Company produces various grades and sizes of finished hot rolled
engineered bar products. The Company intends to operate in the higher quality
end of the hot rolled engineered bar market. SBQ steel bar products sell for
higher prices per net ton than merchant or commodity grade steel bar products as
they generally contain more alloys than merchant and commodity grade products
and are sold to customers who require precise metallurgical content and
compliance with rigorous quality specifications. The semi-finished billets
produced in the Company's Johnstown, Pennsylvania facility are produced to
specified chemical composition and quality.

The Company's hot-rolled engineered bar products include rounds, squares,
hexagons and flats in both cut lengths and coils. The Company produces hot
rolled engineered bar products up to 3 1/4" in diameter which are generally used
by its customers in critical applications where product strength, integrity and
durability are imperative considerations. These applications include: cam
shafts, axles, roller bearings, automotive suspension parts, large fasteners,
hydraulic hose fittings, transmission gears, and forged hand tools.

The Company also produces cold finished bars which are high quality processed
steel bars used in machined and shafting products that require superior
straightness, tolerance, finish and mechanical properties. Cold finished bars
are processed from hot rolled bars, by a process that cleans, draws and
straightens the raw material and cuts it to specific lengths. The Company
believes that it offers one of the widest ranges of sizes and shapes in the cold
finished bar industry. Products include round bars from 1/4" to 6" in diameter,
square bars from 3/8" to 6" square, flat bars from 1/4" to 3" thick and from
1/2" to 14-5/8" 

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wide, and hexagonal bars from 1/4" to 3-1/4" thick. End users of cold finished
bars incorporate them in a wide range of products including electrical and
non-electrical machinery and equipment and a wide variety of vehicular equipment
including automobiles, trucks, sport-utility vehicles, off-road vehicles and
agricultural equipment.

The Company also thermally treats both hot rolled and cold finished bars. The
Company's thermally treated steel products include stress relieved, carbon
restored, normalized or annealed products, all of which offer high strength
combined with machinability.

The Company operates in two reportable segments: hot-rolled and cold-finished.
The Company manages the reportable segments as separate strategic business
units. Differences between the segments include: manufacturing techniques and
equipment, competition, and end-users.

SALES AND MARKETING

The Company's strategy is to expand its role as a critical supplier to
automotive and industrial equipment original equipment manufacturers ("OEMs")
and its first tier suppliers. These customers are increasingly consolidating
their supplier base and are seeking long-term partnerships with large suppliers
who have the capability to offer a broad range of products. The Company's
proposed Combination with Republic is an important step in achieving this
objective. Republic is a long-term industry participant with a strong reputation
for quality products which serves an established customer base with a broad
range of high-end SBQ bar products.

As the Company transitioned from initial operational and organizational start-up
activities to a focused commercial effort, it began receiving qualifications
from certain Tier I and II suppliers to the U.S. automotive market. This
requirement generally takes between three and twelve months for a supplier to
achieve. As a result of these qualifications, the Company shifted its product
mix from lower to higher margin and product grades.

Penetration of these targeted market segments is dependent upon various factors,
including the ability to produce product to precise chemistry and manufacturing
tolerances. Additionally, producers must meet pre-qualification requirements,
including QS-9000 certification, to become approved suppliers for certain
potential customers such as automotive OEMs and their suppliers. These
requirements vary in scope and generally take between one and three years for a
supplier to achieve. Frequently, the qualification process requires the Company
to supply one or more trial heats of engineered bar products for customer
evaluation.

Certain customers in the higher quality bar segments require their suppliers to
be certified to third party quality systems such as QS-9000 and ISO 9000 before
commencing new supplier trials. The Company obtained QS-9000 certification for
its Lackawanna hot rolled steelmaking operations in August 1998 and is in the
process of obtaining such certification for its Johnstown melt shop with
completion scheduled for the third quarter 1999. The Company's Hamilton, Ontario
and Harvey, Illinois cold finishing plants also received QS-9000 certification
in 1998. Certification of the Company's facility in Cartersville, Georgia has
begun with expected completion in the first quarter 2000.

Subsequent to the acquisition of Republic, the Company and Republic share common
management and have begun to perform certain sales, marketing and administrative
functions on a combined basis. This includes marketing both companies' steel
products jointly under the combined brand name "Republic Technologies
International" using a single sales force. However, throughout fiscal 1998, each
customer purchase order for steel products continued to be placed directly with
the Company or Republic, as appropriate, to make the sale. The costs of joint
functions have been borne ratably by the Company and Republic based upon
relative sales volumes achieved. 

As of January 4, 1999, Republic Technologies International Marketing, LLC
("Marketing JV") was formed. The Company and Republic expect to finalize an
agreement in the second quarter 1999 under which this jointly owned Marketing JV
will market, advertise, promote and sell both companies' steel products to each
company's existing and potential customers. The Company and Republic will be
reimbursed for expenses they incur on behalf of the Marketing JV, including
compensation costs of employees of the Company and Republic who perform sales
and marketing functions for the Marketing JV. Except for certain prior
commitments to customers that will continue to be placed with the Company or

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Republic as applicable, it is intended that customer purchase orders will be
placed with the Marketing JV. Pursuant to allocation procedures to be approved
by the boards of directors of both companies, the production of steel products
to fulfill these orders will be allocated between the Company and Republic. To
compensate the Marketing JV for marketing services performed, it is intended
that the Company and Republic will pay commissions at specified percentages of
sales.

The Company has direct sales representation in the major manufacturing centers
of the Midwest, Great Lakes and Southeast regions of the United States,
including among others, the Chicago, Detroit and Cleveland markets, and Canada.
The Company believes the majority of hot rolled and cold finished bar product
consumption in North America to be in these markets. Previously, the Company
utilized independent sales agents to cover the remaining areas of the United
States and Canada in which it markets its cold finished bar. In addition to the
combined sales and marketing functions with Republic, the Company also uses
independent sales agents in certain areas in the South and on the West Coast.
The Company also has customer service and sales personnel to staff the inside
sales organization. The Company is not dependent on a single or a small number
of customers. The loss of any one customer would not have a material adverse
effect on its business.

SEASONALITY

The Company's business is subject to some degree of seasonality. The primary end
markets for the Company's products are the automotive and industrial equipment
industries. Consequently, the SBQ industry, including the Company, typically
experiences higher shipment volumes and revenues in the second and third
quarters due to seasonality of the automotive and industrial equipment
industries.

RAW MATERIAL

The Company's primary raw material for the manufacture of hot rolled products is
ferrous scrap metal, which is generated principally from industrial, automotive,
demolition and railroad sources. The high quality of the Company's products
requires the use of premium grades of scrap metal, the supply of which is more
limited. Prices for scrap metal vary based on numerous factors including
quality, periodic shortages, freight costs, speculation by scrap brokers and
other conditions beyond the control of the Company. However, the Company
generally has not had difficulty purchasing adequate scrap metal of the required
quality. The Company believes that adequate supplies of scrap metal will
continue to be available in sufficient quantities for the foreseeable future.
The Company currently purchases scrap from Republic who is pooling the purchase
requirements of both the Company and Republic to purchase scrap in the open
market through a number of scrap brokers and dealers.

The Company currently purchases semi-finished billets from other steelmakers for
use in production at its Lackawanna facility. However, the Company plans to
phase out these purchases and purchase grades it does not produce from Republic.

Additionally, the Company purchases various materials such as nickel, chrome,
molybdenum, vanadium, manganese, silicon, aluminum, titanium, sulfur, lead, lime
and fluorspar for use as alloying agents and cleansing materials.
Prices of these materials could fluctuate significantly.

For fiscal 1998, approximately 45% of BLI's products were produced from hot
rolled bar from numerous outside sources in sizes either outside of the
Company's current capability, or which the Company chooses not to produce.
These products include flats, small diameter rods and large rounds. The Company
expects that these products will continue to be readily available. The
remaining product supply is furnished directly from the Company's Lackawanna    
facility and other affiliate sources. The proportion of purchases from
non-affiliated suppliers is expected to be reduced to 15% by the end of 1999,
as the Company and Republic integrate their manufacturing processes. 

ENERGY SOURCES

The Company's primary use of electricity is its electric furnace operations in
Johnstown, Pennsylvania. The principal use of natural gas is for billet
reheating operations at the Lackawanna, New York rolling mill.

The Company has negotiated a five-year contract, expiring in May 2002 for
electrical power with a utility company for its operations in Johnstown,
Pennsylvania. The Company has also negotiated an agreement for natural gas
expiring in April 2001 at its Lackawanna, New York rolling mill. Both 

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agreements allow the Company to purchase energy at rates considered competitive
in the current marketplace.

All of the Company's energy sources are transmitted via common carrier
utilities, and therefore could be subject to disruption or curtailment.
Therefore, the Company's results of operations would be adversely affected to
the extent lost profits from such an event could not be recovered under the
Company's insurance policies. The Company has not experienced any material
curtailment or loss of electricity or natural gas since it began its operations.

COMPETITION

The Company competes mainly on the basis of product quality, price, customer
service, breadth of product offering and delivery capability. The Company
believes its cost structure provides it with the means to compete effectively on
pricing. The Company has corporate departments specifically dedicated to quality
and customer service, which allows it to adequately support its customers'
technological and other service needs. The Company believes that it has one of
the widest selections of product grades and sizes in the industry. The domestic
steel industry is highly competitive and additionally, foreign competition can
be significant in certain market areas in which certifications are not required.
Recent entrants into the SBQ steel market compete directly with the Company in a
major portion of its products. Maintaining high standards of product quality
while keeping production costs competitive is essential to the Company's ability
to compete in its markets. The Company believes that its proposed Combination
with Republic will provide for additional opportunities to improve its market
competitiveness.

The Company's primary competition for its hot rolled bar products are both large
domestic steelmakers and specialized mini-mills. Many of the large steelmakers
have greater financial resources and utilize modern technologies similar to some
of the equipment and processes currently in place at the Company.

The Company believes it is one of the four largest cold finishing marketers in
the United States. However, numerous competitors exist in the domestic cold
finishing market. There are over 20 cold finishers in the domestic market at
present. Although direct foreign competition in the cold finishing industry is
not a significant market factor, the ability of domestic competitors to obtain
low-cost imported hot rolled bar could have an adverse affect on the Company's
operations.

The Company maintains a Canadian production facility in Hamilton, Ontario. As a
result, the Company is subject to business risks inherent in Canada, including
political uncertainty, import and export limitations, exchange controls and
currency fluctuations. The Company believes risks related to its foreign
operation are mitigated due to the political and economic stability of the
country in which its facility is located.

Foreign competition is a significant factor in the North American engineered bar
industry. Imports are substantially affected by fluctuations in the value of
various world currencies. If the U. S. dollar were to strengthen significantly
against foreign currencies, the price and sales volume of the Company's products
could be adversely affected. There can be no assurance that economic changes
will not result in increased foreign competition in the Company's North American
markets.

BACKLOG

The Company had backlog of approximately 63,000 hot-rolled and 40,000
cold-finished tons at January 2, 1999. Management does not believe that the
amount of backlog is a reliable indication of future sales. Orders for both
engineered hot rolled and cold finished bar products generally are filled within
five to 12 weeks of the order depending on the product, customer specification
and other product requirements. Customer orders generally are cancellable
without penalty prior to finish size rolling and depend on the changing
production schedule of customers.

PATENTS, TRADEMARKS AND TRADE NAMES

The Company has the patents, trademarks and trade names necessary for the
operation of its business as now conducted. The loss of any or all of these
patents, trademarks and trade names would not have a material adverse effect on
the Company's business. However, in recognition of these trademarks in the

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marketplace, the Company considers these intellectual property rights important
to its business and intends to actively defend and enforce them as necessary.

EMPLOYEES

In 1998, the Company and an affiliate of Republic entered into a settlement
agreement with the United Steelworkers of America ("USWA") under which a new
master labor agreement was established for all U.S. employees of the Company and
Republic represented by the USWA. The new collective bargaining agreement
relating to certain Company employees at the Lackawanna, Johnstown and Harvey
facilities became effective in February 1999 and expires in October 2003. Wage
and benefit provisions under this collective bargaining agreement are specified
until expiration of the agreement and will be subject to negotiations at that
time.

As part of the agreement, the Company committed to establish a $1.6 million fund
to be distributed to eligible USWA employees in May 1999 in full and complete
satisfaction of the Company's obligation under its predecessor collective
bargaining agreement to establish an employee stock ownership plan ("ESOP").
Additionally, the collective bargaining agreement granted the USWA the power to
appoint one director.

The agreement also provides that covered employees will be able to purchase
shares of the combined company following the Combination of the Company and
Republic. A maximum of $15 million of shares will be offered in the aggregate at
the same price per share attributable to the common stock of the combined
company acquired directly and indirectly by Blackstone in the Combination. Such
offering is to occur no later than six months after the closing of the
Combination. Holders of these shares will be granted piggyback registration
rights entitling them to registration of their shares in an underwritten initial
public offering of the combined company, subject to customary provisions.

Production and maintenance employees at BLI's Hamilton, Ontario facility are
covered by a separate collective bargaining agreement with the USWA, which
expires in October 2003. Production and maintenance employees at BLI's Medina,
Ohio facility are covered by a collective bargaining agreement with the
International Association of Machinists and Aerospace Workers (the "IAM") that
expires in October 2000. Production employees at BLI's Batavia, Illinois and
Cartersville, Georgia facilities are not represented by a union.

As of January 2, 1999, the Company had approximately 850 employees. At January
1, 1999, certain salaried employees of the Company were terminated by the
Company and became employees of Republic. Under the terms of an employee leasing
and overhead allocation agreement, the Company and Republic share the costs of
common expenses including, but not limited to sales and marketing services,
administrative services, plant overhead and costs for certain common facilities.
Salary and benefit costs are allocated according to each company's approximate
share of combined trade volumes. Certain salaried employees located at the
Company's facilities in Lackawanna, New York and Johnstown, Pennsylvania were
also included in this arrangement. However, the Company leased back the services
of these employees, the salary and benefit costs of which are borne entirely by
the Company.

ENVIRONMENTAL MATTERS

The domestic steel industry is subject to a broad range of Federal, state and
local environmental laws and regulations including those governing discharges
into the air and water, handling and disposal of solid and hazardous wastes, the
remediation of soil and ground water contaminated by petroleum products or
hazardous substances or wastes, and the health and safety of employees. The
Company has taken, and continues to take, into account the requirements of such
environmental laws and regulations in the conduct of its facilities and believes
that it is currently in substantial compliance with such material laws and
regulations. As is the case with most steel producers, the Company could incur
significant costs related to environmental compliance. To the extent the Company
might incur any substantial costs, these costs most 

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likely would be incurred over a number of years; however, no assurance can be
given that future regulatory actions regarding soil or ground water at the
Company's facilities, as well as continued compliance with environmental
requirements, will not require the Company to incur significant costs that may
have a material adverse effect on the Company's financial condition, results of
operations or cash flows.

Through the Company's contractual agreements with Bethlehem, the Company has
sought to reduce the impact of costs arising from or related to actual or
potential environmental conditions at the Company's facilities caused or created
by Bethlehem or its predecessors in title and attributable to the period in
which the Bethlehem BRW Division or its predecessors operated such facilities.
Pursuant to such arrangements, Bethlehem has agreed to indemnify the Company for
such costs by limiting the Company's potential exposure to any such damages
incurred (i) through December 1996, to 50% of the first $2.0 million in damages,
or $1.0 million, and (ii) thereafter, to 50% of the first $10.0 million of
damages, or $5.0 million in the aggregate. Although several investigations of
past or present environmental conditions at the Company's facilities have been
conducted by or on behalf of Bethlehem and certain regulatory agencies, the
reports and results of which have been made available to the Company, an
in-depth, environmental review of the Company's facilities to determine the
potential scope, if any, of required remediation at such facilities has not been
conducted by or on the behalf of the Company. There can be no assurance that
Bethlehem will meet its obligations under the indemnification arrangements or
that there will not be future contamination for which the Company might be fully
liable and that may require the Company to incur significant costs that could
have a material adverse effect on the Company's financial condition, results of
operations or cash flows.

Bethlehem is conducting remediation activities on a small portion of the
Lackawanna facility historically used for mill scale storage, which was
identified by the U. S. Environmental Protection Agency (the "EPA") pursuant to
an Administrative Order on Consent issued August 1990 as requiring certain
corrective action. Bethlehem currently awaits approval of the Remediation Work
Plan for the former mill scale storage area submitted to the EPA in September
1994. Bethlehem is ultimately liable for compliance with the Administrative
Order on Consent and the Company believes that Bethlehem is likely to fulfill
these obligations, although there can be no assurance such will occur.

In August 1995, BLI received a request for information from the EPA pursuant to
section 104(e) of CERCLA with respect to a federal investigation and potential
remediation of two hazardous waste treatment sites in Kansas City, Kansas and
Kansas City, Missouri. In 1985, BLI shipped ten capacitors from its Harvey,
Illinois facility to these sites for disposal. The capacitors held approximately
88 gallons of oil that may have contained polychlorinated biphenyls. At this
time, BLI has not received any further correspondence from the EPA and has not
been named as a potentially responsible party under CERCLA at either site;
however, there can be no assurance at this time that further action by the EPA
will not occur. The Company has not estimated the amount of liability it may
incur in connection with this disposal. The Company understands that the EPA has
identified approximately 1,300 customers of the treatment sites, which operated
over a period of several years. While no assurances can be given, the Company
does not believe that BLI's liability relating to these sites will have a
material adverse effect on the Company's financial condition, results of
operations or cash flows.

Various Federal, state and local laws, regulations and ordinances govern the
removal, encapsulation or disturbance of asbestos containing materials ("ACMs").
Such laws and regulations may impose liability for the release of ACMs and may
provide for third parties to seek recovery from owners or operators of
facilities at which ACMs were or are located for personal injury associated with
exposure to ACMs. The Company is aware of the presence of ACMs at its
facilities, but it believes that such materials are in acceptable condition at
this time. The Company believes that any future costs related to remediation of
ACMs at these sites will not be material, either on an individual basis or in
the aggregate, although there can be no assurance with respect thereto.

The Company has the necessary environmental permits for the construction and
operation of its business.

Canadian Drawn Steel Company, Inc. ("CDSC"), BLI's Canadian subsidiary, is also
subject to Canadian federal, provincial, regional and municipal environmental
laws and regulations. BLI believes that it is 



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currently in substantial compliance with all applicable material environmental
laws and regulations and does not anticipate any substantial additional capital
expenditures for environmental control facilities in the near future. However,
there can be no assurance that the Company will not be required to incur
significant costs that could have a material adverse effect on the Company's
financial condition, results of operations or cash flows.

Some of the steel processing operations presently conducted by Bliss & Laughlin
Steel Company ("BLSC") commenced over 100 years ago by predecessors of BLSC and
included properties which over the years were sold by BLSC's predecessors. Given
the nature and geographic diversity of its current and its predecessors' former
operations, it is possible that claims would be asserted against BLI in the
future based upon the current property ownership of BLI and by historical
operations by its predecessors. However, BLI has received an indemnification
from the former owner and operator of such properties for certain environmental
claims or liabilities relating to activities at BLI's Harvey and Batavia,
Illinois and Medina, Ohio properties prior to October 23, 1984, when BLSC
succeeded to ownership of such properties, and for certain environmental claims
or liabilities relating to properties that were sold by BLSC's predecessors.
There can be no assurance that such former owner and operator will meet its
obligation under the indemnification agreements or that there will not be future
contamination for which the Company might be fully liable and that may require
the Company to incur significant costs that could have a material adverse effect
on the Company's financial condition, results of operations or cash flows.

While the Company believes that the foregoing environmental matters will not,
individually or in the aggregate have a material adverse impact on the Company's
financial condition, results of operations or cash flows, there can be no
assurance to that effect.

ITEM 2. PROPERTIES

The Company operates manufacturing locations in seven locations and leases its
corporate offices. The locations and square footage information are as follows:

Executive Offices - The Company's corporate offices, which are leased, were
recently relocated to Akron, Ohio. The new corporate offices, which are shared
with Republic, are approximately 33,000 square feet.

Johnstown, Pennsylvania - Aggregate floor area of approximately 1.9 million
square feet of manufacturing, office and storage space.

Lackawanna, New York - Aggregate floor area of approximately 1.1 million square
feet of manufacturing, office and storage space.

Harvey, Illinois - Aggregate floor area of approximately 331,000 square feet of
manufacturing, office and storage space.

Batavia, Illinois - Aggregate floor area of approximately 61,000 square feet of
manufacturing, office and storage space.

Cartersville, Georgia - Aggregate floor area of approximately 92,000 square feet
of manufacturing, office and storage space.

Hamilton, Ontario, Canada - Aggregate floor area of approximately 135,000 square
feet of manufacturing, office and storage space.

Medina, Ohio - Aggregate floor area of approximately 126,000 square feet of
manufacturing, office and storage space.

All property relating to the Company's manufacturing facilities is owned by the
Company. In addition, the Company maintains operating leases for various of its
sales offices. The Company's corporate offices were relocated from Seven Hills,
Ohio to Akron, Ohio in March 1999. As part of the Company's initiatives 



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related to its proposed combination with Republic, the new corporate offices
located in Akron, Ohio are headquarters to both the Company and Republic in an
attempt to reduce overhead and increase efficiency. The Company is actively
pursuing a tenant to sub-lease its Seven Hills, Ohio former offices which are
presently unoccupied. The Company believes that all of its production facilities
operate efficiently and have adequate capacity to achieve its strategic
expansion objectives.

ITEM 3. LEGAL PROCEEDINGS

Bethlehem is conducting remediation activities on a small portion of the
Lackawanna facility historically used for mill scale storage, which was
identified by the U. S. Environmental Protection Agency (the "EPA") pursuant to
an Administrative Order on Consent issued August 1990 as requiring certain
corrective action. Bethlehem currently awaits approval of the Remediation Work
Plan for the former mill scale storage area submitted to the EPA in September
1994. Bethlehem is ultimately liable for compliance with the Administrative
Order on Consent and the Company believes that Bethlehem is likely to fulfill
these obligations, although there can be no assurance such will occur.

In August 1995, BLI received a request for information from the EPA pursuant to
section 104(e) of CERCLA with respect to a federal investigation and potential
remediation of two hazardous waste treatment sites in Kansas City, Kansas and
Kansas City, Missouri. In 1985, BLI shipped ten capacitors from its Harvey,
Illinois facility to these sites for disposal. The capacitors held approximately
88 gallons of oil that may have contained polychlorinated biphenyls. At this
time, BLI has not received any further correspondence from the EPA and has not
been named as a potentially responsible party under CERCLA at either site;
however, there can be no assurance at this time that further action by the EPA
will not occur. The Company has not estimated the amount of liability it may
incur in connection with this disposal. The Company understands that the EPA has
identified approximately 1,300 customers of the treatment sites, which operated
over a period of several years. While no assurances can be given, the Company
does not believe that BLI's liability relating to these sites will have a
material adverse effect on the Company's financial condition, results of
operations or cash flows.

Except as described hereunder, the Company is not involved in any other
proceedings which, either individually or in the aggregate, may have a material
adverse effect on the financial condition, results of operations or cash flows
of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.


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                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The Company has three classes of common equity: Class A Common Stock, Class B
Common Stock, and Class C Common Stock (collectively, the "Common Stock"). There
is currently no established trading market for the Company's Common Stock.

ITEM 6. SELECTED FINANCIAL DATA (UNAUDITED)(1) (2)

<TABLE>
<CAPTION>
                                                           (In thousands of dollars, except per share data)
                                                                           Three Months
                                            Year Ended      Year Ended        Ended
                                            January 2,      January 3,      December 28,      Years Ended September 30,
                                               1999            1998            1996            1996             1995
                                            -------------------------------------------------------------------------
<S>                                         <C>             <C>             <C>             <C>             <C>
Net sales                                   $ 271,851       $ 242,896       $  40,251       $  77,163
Operating loss                                (17,679)        (22,727)         (8,702)        (31,460)      $ (10,658)        
Net loss before extraordinary item            (41,978)        (44,823)        (13,525)        (41,419)        (12,832)        
Extraordinary item                               --              --              --            (2,214)          --            
Net loss                                      (41,978)        (44,823)        (13,525)        (43,633)        (12,832)        
Net loss applicable to common shares          (42,363)        (45,208)        (13,618)        (44,018)        (13,217)        
Net loss per common share: basic and
  diluted
    Net loss before extraordinary item      $  (33.14)      $  (50.88)      $  (18.37)      $  (93.08)      $  (67.29)
    Extraordinary item                           --              --              --             (4.93)          --             
                                            ---------       ---------       ---------       ---------       ---------
    Net loss                                $  (33.14)      $  (50.88)      $  (18.37)      $  (98.01)      $  (67.29)      
                                            =========       =========       =========       =========       =========
Total assets                                $ 222,501       $ 205,678       $ 206,287       $ 200,979       $  46,001
Long-term debt                                128,962         130,741         132,093         132,426          44,952         
Redeemable preferred stock                      5,500           5,500           5,500           5,500           5,500
Cash dividends declared per
     preferred share                              350              350             88             350             350
</TABLE>


(1)      The Company changed its fiscal year from its previous calendar quarter
         basis ended September 30 to a 4/4/5 week fiscal quarter basis ending
         the Saturday closest to December 31. As a result, the Company's fiscal
         year 1997 began on December 29, 1996 and ended on January 3, 1998.
         Fiscal 1997 includes 53 weeks while 1998, 1996 and 1995 each include 52
         weeks.

         The three month transition period ended December 28, 1996 bridges the
         gap between the Company's old and new fiscal year-ends.

(2)      The Company had no income statement activity prior to the acquisition
         of the BRW Assets on September 26, 1994, and such activity was
         insignificant for the period from September 26 through September 30,
         1994. As of September 30, 1994, the Company had total assets of $46.8
         million, long-term debt of $34.8 million, and redeemable preferred
         stock of $5.5 million. No dividends were declared during the period.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
OF OPERATIONS


OVERVIEW

The Company acquired certain steelmaking and hot bar rolling assets from the
former Bar, Rod and Wire Division of Bethlehem Steel Corporation ("Bethlehem")
in September 1994. The Company commenced operations at its Lackawanna, New York
hot bar rolling mill in February 1996 and commissioned its continuous caster and
commenced the melt shop located at its Johnstown, Pennsylvania facility in
August 1996.



                                       10
<PAGE>   11


In April 1996, the Company completed a recapitalization (the "Recapitalization")
which included i.) the issuance of $91.6 million in aggregate principal amount
of 13-1/2% Senior Notes due 2001 for proceeds of approximately $90.0 million;
ii.) the purchase by Blackstone of 536,829 shares of Class B Common Stock of the
Company in consideration of $30.0 million; iii.) the establishment of a $90.0
million senior revolving credit agreement (the "Revolving Credit Agreement")
with a group of banks led by Chase Manhattan Bank, as agent; and, iv.) the
completion of the merger with BLI, a major independent cold finished processor
of steel bars. The Company acquired BLI for an aggregate equity purchase price
of approximately $38.0 million, plus the assumption of $3.6 million of debt and
the refinancing of $16.8 million of debt. The acquisition and the subsequent
repayment of the $16.8 million in debt was financed with the proceeds from the
Company's Recapitalization.

In September 1997, the Company's principal owners, Blackstone and Veritas
purchased 536,865 shares of Class C non-voting Common Stock for $30.0 million.
The proceeds were utilized for various capital projects at the Company's
facilities. These projects are anticipated to be completed by the second half of
1999. Additionally, the Company and its commercial banks negotiated an amendment
to its existing $90.0 million Revolving Credit Agreement (the "Amended
Agreement"). The Amended Agreement provided for the addition of a new revolving
credit sub-facility (the "Sub-Facility") and amended certain portions of the
Revolving Credit Agreement. The Sub-Facility component of the Amended Agreement
provides the Company with up to $15.0 million of additional borrowing capacity
based on a higher receivables and inventory advance rate than in the Revolving
Credit Agreement.

In September 1998, Blackstone and Veritas and their respective affiliates,
serving as general partners for limited partnerships, acquired Republic.
Blackstone and Veritas intend to combine BarTech and Republic during 1999,
subject to refinancing a significant portion of the combined companies' debt.

Subsequent to the acquisition of Republic, the Company and Republic share common
management and have begun to perform certain sales, marketing and administrative
functions on a combined basis. This includes marketing both companies' steel
products jointly under the combined brand name "Republic Technologies
International" using a single sales force. However, throughout fiscal 1998, each
customer purchase order for steel products continued to be placed directly with
the Company or Republic, as appropriate, to make the sale. The costs of joint
functions have been borne ratably by the Company and Republic based upon
relative sales volumes achieved. The Company also participates in an inventory
purchasing arrangement with Republic. Under the terms of this arrangement,
Republic purchases inventory products on behalf of both companies and bills the
Company for its respective purchases, plus an administrative fee.

Pending the proposed combination as of January 4, 1999, Republic Technologies
International Marketing, LLC ("Marketing JV") was formed. The Company and
Republic expect to finalize an agreement in the second quarter 1999 under which
this jointly owned Marketing JV will market, advertise, promote and sell both
companies' steel products to each company's existing and potential customers.
The Company and Republic will be reimbursed for expenses they incur on behalf of
the Marketing JV, including compensation costs of employees of the Company and
Republic who perform sales and marketing functions for the Marketing JV. Except
for certain prior commitments to customers that will continue to be placed with
the Company or Republic as applicable, it is intended that customer purchase
orders will be placed with the Marketing JV. Pursuant to allocation procedures
to be approved by the boards of directors of both companies, the production of
steel products to fulfill these orders will be allocated between the Company and
Republic. To compensate the Marketing JV for marketing services performed, it is
intended that the Company and Republic will pay commissions at specified
percentages of sales.

The Company's strategy is to expand its role as a critical supplier to
automotive original equipment manufacturers and their first tier suppliers. To
successfully penetrate these markets, producers must meet pre-qualification
requirements for certain potential customers. Certain customers in the higher
quality bar segments require their suppliers to be certified to third party
quality systems such as QS-9000 and ISO 9000 before commencing new supplier
trials. The Company obtained QS-9000 certification for its Lackawanna hot rolled
steelmaking operations in August 1998 and is in the process of obtaining such
certification for its Johnstown hot rolled facility with completion scheduled
for third quarter 1999. The Company's Hamilton, Ontario and Harvey, Illinois
cold finishing plants also received QS-9000 certification in 1998. Certification
of the Company's facility in Cartersville, Georgia has begun with expected
completion in the first quarter 2000. As a result of these qualifications, the
Company has accelerated the shift of its product mix from lower to higher
margins and product grades.

                                       11
<PAGE>   12

RESULTS OF OPERATIONS

FISCAL YEAR 1998 ENDED JANUARY 2, 1999 COMPARED WITH FISCAL YEAR 1997 ENDED
JANUARY 3, 1998

Net sales for the fiscal year ended January 2, 1999 totaled $271.9 million on
shipments of approximately 527,000 net tons compared with net sales of $242.9
million for the fiscal year ended January 3, 1998 on shipments of approximately
450,000 tons. Fiscal 1998 net sales for hot-rolled products were $114.1 million
while net sales for cold-finished products were $157.8 million for the same
period compared with fiscal 1997 hot-rolled net sales of $83.8 million and
cold-finished net sales of $159.1 million. The $29.0 million increase in net
sales is largely the result of a 17.1% increase in shipping volumes, primarily
of hot-rolled products, coupled with a slight increase in selling prices per ton
on hot-rolled products. The increase in fiscal 1998 net sales was adversely
affected as selling prices per ton on cold-finished products decreased as a
reaction to downward market pressures on pricing from the Company's competition.

Cost of sales totaled $262.5 million, or 96.5% of net sales, for the fiscal year
ended January 2, 1999 compared with cost of sales of $239.4 million, or 98.5% of
net sales, for the similar period ended January 3, 1998. Cost of sales in fiscal
1998 consisted of $120.2 million on hot-rolled products and $142.3 million on
cold-finished products compared with $97.3 million on hot-rolled products and
$142.1 million on cold-finished products in fiscal 1997. The decrease in cost of
sales as a percentage of net sales was due to operating cost efficiencies
associated with the higher production and shipping levels in fiscal 1998
partially offset by production outages experienced at the Company's Lackawanna
facility during its third quarter fiscal 1998 due to the installation of a new
rolling mill electrical control system. The improvement in operating costs was
primarily generated by a decrease in manufacturing costs on a cost per ton basis
for the Company's hot-rolled products while costs on a per ton basis for
cold-finished products remained relatively unchanged.

Cost of sales for the fiscal year 1997 reflect operating cost inefficiencies
related to production outages during the fourth quarter of that period as the
Company experienced a major mechanical breakdown at its Lackawanna hot bar
rolling mill operation. A failure on its No. 1 rolling stand resulted in a
twelve-day production outage. Additionally in fiscal 1997, the Company
experienced operating cost inefficiencies relating to the integration of
inexperienced personnel into its Lackawanna rolling mill crews. The Company
added a third and fourth production shift at the Lackawanna facility, which
began in April and August 1997, respectively. As a result, cost of sales as a
percentage of net sales for fiscal 1997 was 116.1% for hot-rolled products and
89.3% for cold-finished products.

Depreciation and amortization for the fiscal year ended January 2, 1999 was $6.0
million compared with $4.5 million for the fiscal year ended January 3, 1998.
The increase was primarily attributable to additional depreciation as a result
of the installation of a new rolling mill electrical control system at the
Company's Lackawanna facility and upgrades to its computer system in an effort
to improve its processes related to financial and operational information.

Selling, general and administrative expense was $21.1 million during the fiscal
year ended January 2, 1999 compared with $21.7 million for the fiscal year ended
January 3, 1998. The decrease in selling, general and administrative expense was
primarily due to the combination of sales and marketing efforts of the Company
and Republic in an effort to reduce overhead and improve customer service. In
the fall of 1998, the companies commenced marketing their respective steel
products jointly under the combined brand name "Republic Technologies
International" using a single sales force. However, throughout fiscal 1998 each
customer purchase order for steel products continued to be placed directly with
the Company or Republic, as appropriate to make the sale. The costs of such
joint marketing efforts have been borne ratably by the Company and Republic
based upon their approximate sales volumes achieved through such joint
marketing.

The improvement in selling, general and administrative expense was offset by
$1.3 million of non-recurring expenses in fiscal 1998 as the Company incurred
costs for employee severance compensation and the relocation of its corporate
offices previously located in Seven Hills, Ohio as the Company began 



                                       12
<PAGE>   13

initiatives to reduce overhead and increase efficiency in anticipation of its
proposed combination with Republic.

Interest expense, net increased to $27.0 million for the year ended January 2,
1999 compared with $23.3 million for the similar period for the year ended
January 3, 1998. The $3.7 million increase reflects higher average debt levels
borrowed under the Company's Revolving Credit Agreement.

Other income was $2.7 million for the year ended January 2, 1999 and $1.4
million for the year ended January 3, 1998. Income for the year ended January 2,
1999 primarily represented proceeds of $2.3 million for a settlement of an
antitrust lawsuit against certain graphite electrode producers. Other income for
the year ended January 3, 1998 is primarily comprised of a gain on the sale of
certain real property at the Company's facility in Johnstown, Pennsylvania.

The provision for income taxes for fiscal 1998 and fiscal 1997 consisted of
currently payable income taxes, primarily foreign income taxes owed by CDSC. As
a result, the Company reported a net loss of $42.0 million in fiscal 1998
compared with a net loss of $44.8 million in fiscal 1997.

TRANSITION PERIOD - THREE MONTHS ENDED DECEMBER 28, 1996

As a result of the change of its fiscal year, the Company's fiscal 1997 began
December 29, 1996 and ended January 3, 1998. Fiscal 1996 began October 1, 1995
and ended September 30, 1996. The following discussion for the Company's results
of operations covers the three month transition period ended December 28, 1996,
which bridges the gap between the Company's old and new fiscal year ends.

The company recorded net sales of $40.3 million for the three months ended
December 28, 1996, which included hot-rolled net sales of $4.9 million and net
sales of cold-finished products of $35.4 million.

Despite the inclusion of BLI operations for the three months ended December 28,
1996, the Company continued to incur losses from operations as a result of its
continued start-up activities. The Company reported a loss from operations of
$8.7 million for the three months ended December 28, 1996, as the Company
continued to experience lower gross profits reflecting its re-entry into the
lower margin segment of the market. Inefficiencies resulting from initial low
volume production levels, the commercial start-up of the Johnstown melt shop and
the newly commissioned continuous caster contributed to the Company's operating
loss for this three-month period.

Interest expense, net was $5.1 million for the three-month period ended December
28, 1996, as a result of the higher average debt levels following the Company's
Recapitalization in April 1996.

The provision for income taxes consisted primarily of a provision for foreign
taxes related to a subsidiary of BLI.

FISCAL YEAR 1997 ENDED JANUARY 3, 1998 COMPARED WITH FISCAL YEAR 1996 ENDED
SEPTEMBER 30, 1996

The results of BLI have been included since the date of its acquisition, April
2, 1996. The overall comparability of fiscal 1997 was influenced by the
Company's continuing progression in moving from the start-up status of
operations towards levels of sales and production necessary to generate
operating income and the future benefit to be attained from operating BarTech
and BLI on a vertically integrated basis.

Net sales for the fiscal year ended January 3, 1998 totaled $242.9 million
compared with net sales of $77.2 million for the fiscal year ended September 30,
1996. Fiscal 1997 net sales consisted of $83.8 million for hot-rolled and $159.1
million for cold-finished. In fiscal 1996, net sales of cold-finished products
of $73.1 million were included since the BLI acquisition date of April 1996
through September 30, 1996. The $165.7 million increase in net sales is
primarily the result of the Company's continuing progression in moving from the
start-up status of operations toward levels of sales and production necessary to
generate 



                                       13
<PAGE>   14

operating income. The benefits obtained from operating Bar Tech and BLI on a
vertically integrated basis were evidenced as net sales for cold-finished
products increased $86.0 million from $73.1 million in fiscal 1996, which
included BLI for the last six months of the fiscal year, to $159.1 million in
fiscal 1997. Fiscal 1997 net sales of hot-rolled products benefited from
initiatives begun in the fourth quarter of fiscal 1996, which included among
others, the establishment of a full-time sales force, successful trials for
pre-qualification requirements and continuing sales to numerous new customers.
The $79.7 million increase in hot-rolled product net sales in fiscal 1997 was
supported by increased production at the Johnstown caster and by the addition of
a third and fourth production shift at the Lackawanna facility, which began in
April and August 1997, respectively.

In October 1997, the Company experienced a major mechanical breakdown at its
Lackawanna hot bar rolling mill operation. A failure on its No. 1 rolling stand
gearbox resulted in catastrophic damage to the drive gear. The Company returned
to partial operations after nine days, and full production resumed after twelve
days. The Company lost an estimated 15,000 to 20,000 production tons during the
outage. Because of the low finished hot-bar inventory levels at the time of the
failure, shipment performance was adversely affected during and after the
outage.

As a result, the Company's delivery performance deteriorated and certain
customers did not place orders in November and December 1997. These customers
generally were in the higher margin segment of the Company's product line.
Accordingly, the Company's unit sales price also declined during the fourth
quarter 1997. Following the outage, the Company's delivery performance improved
such that all of the customers which did not place orders in the latter part of
the fourth quarter of fiscal 1997, placed orders and accepted shipments in the
first quarter of fiscal 1998.

Cost of sales for the year ended January 3, 1998 were $239.4 million, or 98.5%
of net sales, compared with $92.0 million, or 119.2% of net sales for the year
ended September 30, 1996. Fiscal 1996 cost of sales for hot-rolled products of
$25.2 million on net sales of $4.0 million reflect the preparation for the
start-up of production at the Company's Johnstown facility which commenced
operations in August 1996. Cost of sales for fiscal 1997 reflect inefficiencies
relating to the integration of inexperienced personnel into its Lackawanna
rolling mill crews. This was evidenced as cost of sales as a percentage of net
sales for fiscal 1997 was 116.1% for hot-rolled products and 89.3% for
cold-finished products.

Depreciation and amortization for the year ended January 3, 1998 were $4.5
million compared with $2.0 million for the year ended September 30, 1996. The
increase of $2.5 million was primarily attributable to the Company's
modernization and expansion projects during its initial start-up period. Also
contributing to the increase was additional amortization of goodwill as a result
of the BLI acquisition on April 2, 1996.

Selling, general and administrative expense was $21.7 million during the fiscal
year ended January 3, 1998 compared with $14.6 million for the fiscal year ended
September 30, 1996. The increase in selling, general and administrative expense
was primarily due to higher wage and salary costs as the Company continued to
recruit qualified professionals in fiscal 1997. Contributing to the increase, to
a lesser extent, was a one-time charge for consulting fees incurred by the
Company in connection with re-negotiations of its electric power contract for
the primary mill at its Franklin operations and severance costs incurred in
relation to the Company's relocation of its corporate offices from Johnstown,
Pennsylvania to Seven Hills, Ohio (a suburb of Cleveland, Ohio).

Interest expense, net increased $12.5 million to $23.3 million for the year
ended January 3, 1998 from $10.8 million for the year ended September 30, 1996.
This increase was the result of borrowings on the $90.0 million revolving credit
agreement which the Company established as part of its Recapitalization in April
1996.

The provision for income taxes was $0.2 million for both years ended January 3,
1998 and September 30, 1996. The provision for income taxes consists primarily
of a provision for foreign taxes relating to CDSC.



                                       14
<PAGE>   15

Despite the inclusion of the BLI operations since its acquisition in April 1996,
the Company continued to incur losses from operations as a result of its
continued investment in start-up activities. As a result, the Company reported a
net loss of $44.8 million for the year ended January 3, 1998 compared with a
loss of $43.6 million after an extraordinary loss on the early extinguishment of
debt of $2.2 million for the year ended September 30, 1996.

LIQUIDITY AND CAPITAL RESOURCES

Prior to the acquisition of Republic by Blackstone and Veritas, the Company's
liquidity and capital resources were managed on a stand-alone basis. The
resources available to the Company on a stand-alone basis are described below.
Subsequently, the Company's relationship with Republic has provided additional
capital resources and sources of liquidity through the combined management of
the two companies, as more fully described below.

The Company's primary capital resources have consisted of long-term debt and
borrowings under a Revolving Credit Agreement. The long-term debt financing
arrangements consist principally of Senior Notes and economic development
financing. As described in Note 7 to the Consolidated Financial Statements, the
Company has obtained approval for deferral of principal and interest payments on
certain economic development financing. As further described in Note 7 to the
Consolidated Financial Statements, in March 1999, the Company obtained waivers
of default provisions under the terms of certain loans in exchange for payment
of certain amounts the lenders considered delinquent. The Company also agreed,
subject to consummation of the Combination, to refinance certain economic
development loans and modify the terms of other economic development loans.

As described in Note 6 to the Consolidated Financial Statements, the Company has
a Revolving Credit Agreement that provides for an aggregate principal amount of
up to $90.0 million, including letters of credit, through April 2, 2000. Also as
described in Note 6, a Sub-Facility component of the Revolving Credit Agreement
provides the Company with up to $15.0 million of additional borrowing capacity
through September 1, 1999 based on a higher receivable and inventory advance
rate. Amounts available under the Revolving Credit Agreement and Sub-Facility
vary based upon the Company's borrowing base, as defined under the agreements.
As of January 2, 1999, no amounts were available for additional borrowings under
the Revolving Credit Agreement and Sub-Facility.

There are no restrictions on the ability of BLI to transfer funds to the
Company.

                                       15
<PAGE>   16


Blackstone and Veritas, principal owners of both the Company and Republic, plan
to combine the two companies during 1999. Pending the completion of the
Combination, the Company and Republic are combining their sales efforts and
commencing marketing their respective steel products jointly under the combined
brand name "Republic Technologies International". As of January 4, 1999,
Republic Technologies International Marketing, LLC ("Marketing JV") was formed.
The Company and Republic expect to finalize an agreement in the second quarter
1999 under which this jointly owned Marketing JV will market, advertise, promote
and sell both companies' steel products to each company's existing and potential
customers. The Company and Republic will be reimbursed for expenses they incur
on behalf of the Marketing JV, including compensation costs of employees of the
Company and Republic who perform sales and marketing functions for the Marketing
JV. Except for certain prior commitments to customers that will continue to be
placed with the Company and Republic as applicable, it is intended that customer
purchase orders will be placed with the Marketing JV. Pursuant to allocation
procedures to be approved by the boards of directors of both companies, the
production of steel products to fulfill these orders will be allocated between
the Company and Republic. To compensate the Marketing JV for marketing services
performed, it is intended that the Company and Republic will pay commissions at
specified percentages of sales.

The Company participates in an inventory purchasing arrangement with Republic.
Under the terms of this arrangement, Republic purchases inventory products on
behalf of the combined company and bills the Company for their respective share
plus an administrative fee. A similar arrangement is in place with regards to
insurance. Republic purchases insurance coverage for the combined companies for
which the costs are borne ratably by the Company and Republic based on their
respective share. In December 1998, Republic completed its negotiations for a
two-year insurance contract for the combined company which included third-party
financing for certain payments.

Since its formation, the Company has incurred substantial losses as a result of
the ongoing start-up activities of its facilities and its general and
administrative expenses. Any substantial delay in achieving or a failure to
bring the facilities up to commercial volumes and productivity levels, or to
sell its products in its target markets could have a material adverse effect on
the Company's financial condition and results of operations. Also, in the event
of a substantial delay in integrating the operations of the Company and Republic
including implementation of the Combination, or the occurrence of any
substantial unanticipated costs related thereto, could have a material adverse
effect on the Company's financial condition and results of operations. In the
event of the above, the Company may need to borrow additional funds under its
Revolving Credit Agreement or, to the extent that the funds were not available
thereunder, to obtain additional financing to meet its cash flow requirements.
The Company is highly leveraged. Restrictive covenants included in the indenture
and other debt obligations may have the effect of limiting the Company's ability
to incur additional indebtedness, sell assets, or acquire other entities and may
otherwise limit the operational and financial flexibility of the Company.

The Company and Republic presently perform certain functions on a combined basis
and intend to further integrate operations in 1999 through the Marketing JV. As
a consequence, management believes that capital resources and liquidity of the
Company and Republic can and will be managed on a combined basis prior to
consummation of the Combination. Management has prepared fiscal 1999 financial
and operational plans on a combined basis for the Company and Republic. Based on
these plans, even if the Combination is not consummated during 1999, management
believes that the aggregate of cash flows from combined operations, available
funds under existing credit agreements and funds expected to be available to
refinance certain acquisition-related debt of Republic, will be sufficient in
1999 to enable both the Company and Republic to meet their debt service
requirements when due and to fund their capital expenditures, working capital
and general corporate requirements, although there can be no assurances with
respect thereto.

Cash used by operating activities decreased to $7.2 million for the year ended
January 2, 1999, a decrease of $43.7 million, from $50.9 million used by
operating activities for the year ended January 3, 1998. The decrease was
primarily attributable to the growth in accounts payable and other current
liabilities resulting from higher inventory levels, and a decrease in accounts
receivable.

                                       16

<PAGE>   17

Capital expenditures during the year ended January 2, 1999 were $16.3 million
compared with $5.8 million for the year ended January 3, 1998. Capital
expenditures for fiscal 1998 were primarily due to the installation of a new
rolling mill electrical process control system and upgrades to its computer
system in an effort to improve its processes related to financial and
operational information.

Dividends paid to holders of the Company's preferred stock were approximately
$385 thousand in both fiscal 1998 and 1997.

As of January 2, 1999, the Company had capital commitments of $3.4 million
outstanding for fiscal 1999. The Company has a technical exchange agreement that
requires payments of $6.0 million over four years, including $1.8 million for
fiscal 1999.  (See Note 14 to the Consolidated Financial Statements).

As of January 2, 1999, the Company had net operating loss carryforwards of
approximately $148 million available to offset future federal and state taxable
income during the carryforward periods which expire through 2019. These
carryforwards include amounts available from certain prior year operating loss
carryforwards which were limited as a result of the Recapitalization.
Utilization of these prior year loss carryforwards is limited to approximately
$1.1 million annually through 2010.

In March 1999 the Company announced plans to close BLI's cold-finishing plants
in Medina, Ohio and Batavia, Illinois by July 1999. The planned closures
resulted from the overall strategic plan of the Company and Republic to utilize
both companies' plants in key market areas to best service the combined customer
base. The closure of these plants is not expected to have a material effect on
the Company's future results of operations or cash flows. The Company believes
there will be no material impairments of the carrying values of the related
assets. These plant closures will affect less than ninety employees and the
related severance costs are not material to the Company's consolidated financial
statements.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and For Hedging Activities," ("SFAS 133"). This statement establishes accounting
and reporting standards requiring that every derivative instrument be recorded
on the balance sheet as either an asset or liability measured at fair value.
SFAS 133 requires that changes in the fair value of derivatives be recognized
currently in earnings unless specific hedge accounting criteria are met. SFAS
133 is effective for fiscal years beginning after June 15, 1999, and cannot be
applied retroactively. The Company has not completed its evaluation of SFAS 133
and accordingly, is unable to determine what impact, if any, SFAS 133 will have
on its financial statements.

ENVIRONMENTAL MATTERS

The domestic steel industry is subject to a broad range of federal, state and
local environmental laws and regulations including those governing discharges
into the air and water, handling and disposal of solid and hazardous wastes, the
remediation of soil and ground water contaminated by petroleum products or
hazardous substances or wastes, and the health and safety of employees. The
Company has taken, and continues to take, into account the requirements of such
environmental laws and regulations in the operation of its facilities and
believes that it is currently in substantial compliance with such material laws
and regulations. As is the case with most steel producers, the Company could
incur significant costs related to environmental compliance. To the extent the
Company might incur any substantial costs, these costs most likely would be
incurred over a number of years; however, no assurance can be given that future
regulatory actions regarding soil or ground water at the Company's facilities,
as well as continued compliance with environmental requirements, will not
require the Company to incur significant costs that may have a material adverse
effect on the Company's financial condition, results of operations or cash
flows.



                                       17
<PAGE>   18

The Company has sought to reduce the impact of costs arising from or related to
actual or potential environmental conditions at the Company's facilities caused
or created by Bethlehem or its predecessors in title and attributable to the
period in which the Bethlehem BRW Division or its predecessors operated such
facilities through the Company's contractual agreements with Bethlehem. Pursuant
to such arrangements, Bethlehem has agreed to indemnify the Company for such
costs by limiting the Company's potential exposure to any such damages incurred
(i) through December 1996, to 50% of the first $2.0 million in damages, or $1.0
million, and (ii) thereafter, to 50% of the first $10.0 million of damages, or
$5.0 million in the aggregate. Although several investigations of past or
present environmental conditions at the Company's facilities have been conducted
by or on behalf of Bethlehem and certain regulatory agencies, the reports and
results of which have been made available to the Company, an in-depth,
environmental review of the Company's facilities to determine the potential
scope, if any, of required remediation at such facilities has not been conducted
by or on the behalf of the Company. There can be no assurance that Bethlehem
will meet its obligations under the indemnification arrangements or that there
will not be future contamination for which the Company might be fully liable and
that may require the Company to incur significant costs that could have a
material adverse effect on the Company's financial condition and results of
operations.

Bethlehem is conducting remedial activities on a small portion of the Lackawanna
facility historically used for mill scale storage, which was identified by the
U. S. Environmental Protection Agency (the "EPA") pursuant to an Administrative
Order on Consent issued August 1990 as requiring certain corrective action.
Bethlehem currently awaits approval of the Remedial Work Plan for the former
mill scale storage area submitted to the EPA in September 1994. Bethlehem is
ultimately liable for compliance with the Administrative Order on Consent and
the Company believes that Bethlehem is likely to fulfill these obligations,
although there can be no assurance such will occur.

In August 1995, BLI received a request for information from the EPA pursuant to
section 104(e) of CERCLA with respect to a federal investigation and potential
remediation of two hazardous waste treatment sites in Kansas City, Kansas and
Kansas City, Missouri. In 1985, BLI shipped ten capacitors from its Harvey,
Illinois facility to these sites for disposal. The capacitors held approximately
88 gallons of oil that may have contained polychlorinated biphenyls. At this
time, BLI has not received any further correspondence from the EPA and has not
been named as a potentially responsible party under CERCLA at either site;
however, there can be no assurance at this time that further action by the EPA
will not occur. The Company has not estimated the amount of liability it may
incur in connection with this disposal. The Company understands that the EPA has
identified approximately 1,300 customers of the treatment sites, which operated
over a period of several years. While no assurances can be given, the Company
does not believe that BLI's liability relating to these sites will have a
material adverse effect on the Company's financial condition, results of
operations and cash flows.

Various Federal, state and local laws, regulations and ordinances govern the
removal, encapsulation or disturbance of asbestos containing materials ("ACMs").
Such laws and regulations may impose liability for the release of ACMs and may
provide for third parties to seek recovery from owners or operators of
facilities at which ACMs were or are located for personal injury associated with
exposure to ACMs. The Company is aware of the presence of ACMs at its
facilities, but it believes that such materials are in acceptable condition at
this time. The Company believes that any future costs related to remediation of
ACMs at these sites will not be material, either on an individual basis or in
the aggregate, although there can be no assurance with respect thereto.

The Company has the necessary environmental permits for the construction and
operation of its business.

Canadian Drawn Steel Company, Inc. ("CDSC"), BLI's Canadian subsidiary, is also
subject to Canadian federal, provincial, regional and municipal environmental
laws and regulations. BLI believes that it is currently in substantial
compliance with all applicable material environmental laws and regulations and
does not anticipate any substantial additional capital expenditures for
environmental control facilities in the near future. However, there can be no
assurance that the Company will not be required to incur significant 



                                       18
<PAGE>   19

costs that could have a material adverse effect on the Company's financial
condition and results of operations.

Some of the steel processing operations presently conducted by Bliss & Laughlin
Steel Company ("BLSC") commenced over 100 years ago by predecessors of BLSC and
included properties which over the years were sold by BLSC's predecessors. Given
the nature and geographic diversity of its current and its predecessors' former
operations, it is possible that claims would be asserted against BLI in the
future based upon the current property ownership of BLI and by historical
operations by its predecessors. However, BLI has received an indemnification
from the former owner and operator of such properties for certain environmental
claims or liabilities relating to activities at BLI's Harvey and Batavia,
Illinois and Medina, Ohio properties prior to October 23, 1984, when BLSC
succeeded to ownership of such properties, and for certain environmental claims
or liabilities relating to properties that were sold by BLSC's predecessors.
There can be no assurance that such former owner and operator will meet its
obligation under the indemnification agreements or that there will not be future
contamination for which the Company might be fully liable and that may require
the Company to incur significant costs that could have a material adverse effect
on the Company's financial condition and results of operations.

While the Company believes that the foregoing environmental matters will not,
individually or in the aggregate have a material adverse impact on the Company's
financial condition or results of operations, or on the Company's competitive
position with respect to other steelmakers that are subject to the same
environmental requirements, there can be no assurance to that effect.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

YEAR 2000

The Year 2000 issue ("Year 2000") is the result of computer programs being
written using two digits rather than four digits to define the applicable year.
Computer equipment, software and other devices with embedded technology that are
time-sensitive may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in system failures or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to receive orders or manufacture product, ship inventory, process transactions,
send invoices, deposit cash, or engage in other normal business activities. The
inability of business processes to function properly in year 2000 could have
adverse effects on companies and entities throughout the world.

The Company has developed plans to address issues related to the impact of Year
2000 in four major areas: infrastructure, business applications, plant
applications and suppliers.

The infrastructure portion of the program addresses wide and local area
networks, servers, personal computing, telecommunications systems and software,
fax and facility security systems. Each location's equipment has been
inventoried and assessed for Year 2000 problems. Some facilities have completed
the remediation process through replacement or upgrade, and have been tested. As
of January 2, 1999, this portion of the program is approximately 75% complete.
The remaining facilities are scheduled to be completed by September 1999.

The business application portion of the program addresses applications and
system software that run on the larger mainframe and mid-range computers. These
systems are being upgraded and/or replaced with new applications to provide Year
2000 readiness. As of January 2, 1999, approximately 50% of this program area
has been completed, with four facilities converted or upgraded and the remaining
facilities scheduled to be completed by September 1999.

The Company's plant systems include hardware, software and associated embedded
computer technologies that are used to operate the Company's manufacturing
facilities. These systems have been inventoried and adequately assessed. Five
plant sites have completed remediation and testing. The final plant site is
scheduled for remediation and testing in July 1999.



                                       19
<PAGE>   20

The Company is currently assessing the impact of the Year 2000 issue as it
relates to its suppliers and customers to identify the extent to which the
Company may be vulnerable in the event those parties fail to properly resolve
their own Year 2000 issues. Readiness questionnaires were sent to the Company's
supplier base. Less than 25% of the suppliers surveyed responded.

As part of the Year 2000 readiness plan, the Company is continuing to assess the
risks associated with the potential system failures of its suppliers, banks,
utilities and internal systems. The Company is developing contingency plans for
these failures, which may include, but are not limited to the use of alternative
suppliers and developing alternative manual systems.

The cost of the Year 2000 project is estimated at $1.6 to $2.0 million and is
being funded through operating cash flows. The Company has to date incurred $0.3
million of costs and expects to incur the remaining amounts through year 2000.
The cost of replacement hardware and software will be capitalized as appropriate
according to the Company's capital policies and amortized over the applicable
useful lives.

The Company presently believes that it has effective plans in place to
anticipate and resolve the potential Year 2000 issues. In the event, however,
that the Company does not properly and fully anticipate and resolve all Year
2000 issues, there can be no assurance that Year 2000 issues will not materially
impact and adversely effect the Company's results of operations or its
relationships with third parties.

The estimated costs and dates by which the Company believes it will have
completed its objectives are based on management's best estimates, which rely on
numerous assumptions regarding future events, including the availability of
certain key resources, third-party remediation plans, and other factors. These
estimates, however, may prove to be inaccurate, and actual results could differ
materially from those anticipated. Factors that could result in material
differences include, without limitation, the availability and cost of personnel
with the appropriate training and experience, the ability to accurately
identify, assess, remediate and test all relevant computer codes and embedded
technology, and similar uncertainties. In addition, Year 2000 issues may lead to
possible third-party claims, the impact of which cannot be estimated at this
time. No assurances can be given that the aggregate cost of defending and
resolving such claims, if any, would not have a material adverse effect on the
Company.

The Company currently believes that the most reasonably likely worst case
scenario for its operations with respect to the Year 2000 issue would be the
inability to sustain its current level of shipments, inability to bill or
invoice and a decrease in operational efficiency as a result of an increase in
manual processing efforts. This could result in potential lost sales and
profits. The Company is continuing to develop its contingency plans to address
these potential disruptions to its business.

FORWARD LOOKING STATEMENTS

Statements included in this filing with the Securities and Exchange Commission
(including those portions of Management's Discussion and Analysis that refer to
the future) may contain forward-looking statements that are not historical facts
but refer to management's intentions, beliefs, or expectations for the future.
It is important to note that the Company's actual results could differ
materially from those projected in such forward-looking statements. Certain
factors that could cause actual results to differ from those in such
forward-looking statements include, but are not limited to, the following:

         Any substantial delay in the proposed combination of the Company and
         Republic, or in the event of a combination that the combined company is
         unable to achieve the objectives of rationalizing and modernizing
         production facilities;

         Any substantial unanticipated delays or difficulties in implementing
         the agreement with respect to the marketing JV or managing the capital
         resources and liquidity of the Company and Republic on a combined
         basis;

         Any substantial delay in the implementation of the Company's plans or
         substantial unanticipated costs associated with its plans for a
         successful transition into an integrated steelmaking and bar rolling
         operation;

         The ability of the Company to sell its products in its targeted markets
         at gross margins necessary to produce and maintain positive operating
         income. The Company's success is dependent on its ability to increase
         sales. The Company is in the process of enhancing its sales and
         customer service programs;

         The Company is subject to a variety of competitive factors such as
         pricing, the financial strength of its competitors and the Company's
         ability to establish a favorable position in the steelmaking and bar
         rolling industry. The Company's competitive position could also be
         adversely affected by any consolidation of its competition in the
         steelmaking industry; and

                                       20
<PAGE>   21

         The ability of the Company and its major suppliers to remedy its 
         Year 2000 issues timely and in a cost-effective manner.

The Company has, in a previous filing with the Securities and Exchange
Commission, made projections with respect to the future performance of the
Company. Actual results have differed substantially from these initial
projections for various reasons, including the replacement of the Company's
original management team. As a result, the projections included in such previous
filing cannot be relied upon as an indicator of future Company performance. The
Company does not intend to update these projections and cautions that historical
information should not be used in evaluating future performance of the Company.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risks due to changes in interest rates with
respect to its long-term debt. The table below presents principal cash flows and
weighted average interest rates of the Company's long-term debt at January 2,
1999 by expected maturity dates as well as the respective fair value amounts.

The Company has a cold-finishing plant in Canada and is, therefore, subject to
foreign currency exchange risk exposure. Historically, the exchange rate
volatility and related exposure to the Company has been minimal. At the present
time, the Company does not hedge foreign currency risk.

The fair value of the Company's Senior Notes was determined using quoted market
prices. Remaining long-term debt consists of the Company's economic development
financing, a subordinated note and an Industrial Revenue Bond (see Note 7 to the
Consolidated Financial Statements). The fair value of the Company's economic
development financing approximates carrying value as the development authorities
continue to offer such financing on substantially the same terms as provided to
the Company.

<TABLE>
<CAPTION>
                                                               (in millions)
                                                                               There-
                         1999      2000        2001        2002      2003       after       Total      Fair Value
                     ----------------------------------------------------------------------------------------------
<S>                  <C>       <C>         <C>          <C>       <C>        <C>         <C>           <C>
Fixed:
  Senior Notes                               $91.6                                         $91.6         $97.8
  Interest rate                               13.5%

  All other            $ 2.2     $ 5.0       $ 4.8        $ 5.2     $ 3.1      $14.5       $34.8         $34.3
  Average
     interest rates      6.0%      5.8%        5.6%         5.4%      4.2%       2.9%

Variable               $ 1.6     $ 1.2       $ 1.8        $ 1.8     $ 0.5      $ 3.6       $10.5         $10.5
  Average
     interest rates       (1)       (1)         (1)          (1)       (1)        (1)         (1)           (1)
</TABLE>

(1) - At variable rates based on Prime, LIBOR, or other money market rates.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The response to this item is submitted in a separate section of this report
following the signature page.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
        FINANCIAL DISCLOSURE

Changes in Accountants

A report on Form 8-K was filed on December 28, 1998 by the Company announcing
the appointment of the accounting firm of Deloitte & Touche LLP as independent
accountants to audit its fiscal 1998 financial statements and the dismissal of
Arthur Andersen LLP, its previous independent public accountants, which has been
approved by the board of directors.

Disagreements with Accountants on Accounting and Financial Disclosure

None.



                                       21
<PAGE>   22

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

EXECUTIVE OFFICERS AND DIRECTORS

         The Company's executive officers and directors as of January 2, 1999
are as follows (each of the Company's executive officers hold the same position
with Republic):

<TABLE>
<CAPTION>
         NAME                       AGE                                POSITION                         
-----------------------------       ---              ----------------------------------------------------
<S>                                 <C>              <C>
Thomas N. Tyrrell                    53              Chief Executive Officer and Director

Joseph F. Lapinsky                   48              President and Chief Operating Officer

Robert L. Meyer                      49              Executive Vice President and General Manager, Hot-
                                                     Rolled Bar Division

John G. Asimou                       53              Executive Vice President and General Manager,
                                                     Cold-Finished Bar Division

Brenda K. Brown                      38              Vice President of Finance and Controller

John B. George                       52              Vice President of Finance and Treasurer, Secretary

David A. Stockman                    52              Class B Director

Richard C. Lappin (c)                54              Class B Director

Robert B. McKeon (a)(b)              43              Chairman and Director

Thomas J. Campbell (a) (b)           39              Director

Daniel R. DeVos (b)                  56              Director

Anthony Rainaldi                     73              Director

Buddy W. Davis (b)                   68              Director
</TABLE>


(a)      Member of Compensation Committee.
(b)      Member of Audit, Budget, and Finance Committees.
(c)      Appointed January 19, 1999



                                       22
<PAGE>   23
Thomas N. Tyrrell has served as Chief Executive Officer of the Company since
September 1996, and has served as a director of the Company since December 1996.
Mr. Tyrrell also served as President of the Company from September 1996 to
September 1998. From 1993 to 1996, Mr. Tyrrell served as Vice Chairman and
Executive Vice President-Commercial of Birmingham Steel Corporation, a producer
of steel bar, rod and wire. Mr. Tyrrell was the President and Chief Executive
Officer of American Steel & Wire Corporation from 1986 to 1993, a producer of
steel bar, rod and wire, when it was acquired by Birmingham Steel Corporation.
From 1978 to 1986, Mr. Tyrrell was Vice President - Commercial of Raritan River
Steel Company, a producer of steel rod. From 1967 to 1978, Mr. Tyrrell was
employed by Bethlehem Steel Corporation, a fully integrated steel producer, in
various sales and product development capacities. Mr. Tyrrell is also a director
of Republic Engineered Steels, Inc. 

Joseph F. Lapinsky became President and Chief Operating Officer in October 1998.
Mr. Lapinsky served as a Corporate Vice President and President of Republic
Engineered Steels, Inc. Hot-Rolled Bar Division from January 1997 to September
1998. Prior to that time, Mr. Lapinsky served as General Manager of Republic
Engineered Steels, Inc. hot-rolled bar operations from September 1995 to January
1997. Prior to that time, he was Executive Vice President of Autumn Industries,
Inc. from September 1991 to September 1995 and Executive Vice President of CSC
Industries, Inc. from December 1987 to September 1991. Mr. Lapinsky has been
active in the steel industry since 1973. Mr. Lapinsky is also a director of
Republic Engineered Steels, Inc.

Robert L. Meyer has served as Executive Vice President and General Manager,
Hot-Rolled Bar Division since October 1998. Mr. Meyer served as Executive Vice
President and Chief Operating Officer of the Company from October 1996 until
September 1998. From 1994 to 1996, Mr. Meyer was President and Chief Operating
Officer of Chase Brass & Copper, Inc., a producer of copper alloy rod. From 1993
to 1995, Mr. Meyer was Vice President and General Manager of the Precious Metals
Products Division of Handy & Harman, Inc., a manufacturer of metal products
including automotive parts and wire and tubing products. From 1986 to 1988, Mr.
Meyer was employed by American Steel & Wire Corporation as General Manager of
its rod mill and, from 1988 to 1993, as Vice President of Operations. Prior to
1986, Mr. Meyer was employed by the United States Steel Corporation in various
supervisory SBQ bar manufacturing capacities.

John G. Asimou became Executive Vice President and General Manager, Cold
Finished Bar Division in October 1998. Mr. Asimou served as Executive Vice
President of Technology & Development of the Company from August 1996 until
September 1998. From 1993 to 1996, Mr. Asimou was Vice President - Quality &
Technology for Birmingham Steel Corporation. From 1986 to 1993, Mr. Asimou
served as General Manager - Quality and Technology of American Steel & Wire
Corporation. From 1984 to 1986, Mr. Asimou was Metallurgical Service Engineer
for Bethlehem Steel Corporation. From 1968 to 1984, Mr. Asimou served in various
SBQ bar and rod assignments for United States Steel Corporation, a fully 
integrated steel producer.

Brenda K. Brown became Vice President of Finance and Controller in October 1998.
From September 1997 to October 1998, Ms. Brown was Director of Finance for the
Seat Belt Systems Division of TRW Inc. From 1992 to 1997, Ms. Brown was
Director of Finance and Information Services for TRW's Nelson Stud Welding
Division. From 1984 to 1992, Ms. Brown held various finance positions for TRW.

John B. George became Vice President of Finance and Treasurer in October 1998.
He was also appointed Secretary in December 1998. Prior to joining the Company,
Mr. George previously served as Treasurer of Republic Engineered Steels, Inc.
since April 1991. From November 1989 to April 1991, he was Assistant Treasurer
for Republic Engineered Steels, Inc. Mr. George has been active in the steel
industry since 1969.

David A. Stockman was elected as a Class B Director of the Company upon
consummation of the Recapitalization. Mr. Stockman is a Senior Managing Director
of the Blackstone Group L. P., with which he has been associated since 1988. Mr.
Stockman is also a director of UCAR International Inc. and Co-Chairman of the
board of directors of Collins & Aikman Corporation, and Chairman of the board of
directors of Republic Engineered Steels, Inc.

Richard C. Lappin was elected as a Class B Director of the Company in January
1999. Mr. Lappin recently joined the Blackstone Group L. P. as a Senior Managing
Director. Prior to joining Blackstone, Mr. Lappin served as President of Farley
Industries, President of Fruit of the Loom and President and CEO of Doehler-



                                       23
<PAGE>   24


Jarvis and Southern Fastening Systems. Over the course of his career, he has
also held senior executive positions with Champion Spark Plug Company and RTE
Corporation. Mr. Lappin is also a director of Republic Engineered Steels, Inc.

Robert B. McKeon has served as Chairman and director of the Company since
September 1993. Mr. McKeon has served as President of Veritas Capital, Inc., a
New York- based merchant banking and private equity investment firm, since its
formation in 1992. From 1990 to 1992, Mr. McKeon was Chairman and from 1988 to
1990, was President of Wasserstein Perella Management Partners, Inc., a New York
merchant banking fund. Mr. McKeon was formerly Chairman of Maybelline Inc. from
1990 to 1992 and Co-Chairman and Co-Chief Executive Officer of Collins and
Aikman Inc. from 1989 to 1992. Mr. McKeon also serves as Chairman of the
Connecticut Health and Educational Facilities Authority, Chairman of HITCO
Technologies Inc., and Chairman of H. Kock & Sons Inc, and is a director of
Republic Engineered Steels, Inc.

Thomas J. Campbell has served as a director of the Company since September 1993.
Mr. Campbell has served as a partner and is a director of Veritas Capital Inc.,
a New York merchant banking and private equity firm, since its formation in
1992. From 1988 to 1992, Mr. Campbell was Vice President of Wasserstein Perella
Management Partners, Inc., a New York merchant banking fund. Mr. Campbell also
served as a director of Collins & Aikman Inc. from 1988 to 1992 and as a
director of Maybelline Inc. from 1990 to 1992. Mr. Campbell is also a director
of HITCO Technologies Inc. and Republic Engineered Steels, Inc.

Daniel R. DeVos has served as a director of the Company since December 1994. Mr.
DeVos has served as the President and Chief Executive Officer of Concurrent
Technologies Corporation since 1992. Mr. DeVos was President and Chief Executive
Officer of Metalworking Technology, Inc. and National Defense Environmental
Corporation from 1990 until such corporations were merged into Concurrent
Technologies Corporation in 1992. Mr. DeVos serves as the director
representative of the Commonwealth of Pennsylvania. Mr. DeVos is also director
of the United States National Bank, Johnstown, Pennsylvania.

Anthony Rainaldi has served as a director of the Company since April 1995. From
1983 to 1994, Mr. Rainaldi was a District Director and Member of the
International Executive Board of the USWA. Mr. Rainaldi serves as a director
representative of the USWA. Mr. Rainaldi is also director of Sharpsville Quality
Products.

Buddy W. Davis has served as a director of the Company since December 1994. Mr.
Davis was a District Director of the USWA, from 1974 to April 1993, when he
retired. Mr. Davis serves as a director representative of the USWA. He is also a
director of Acme Metals, Inc.

ITEM 11.  EXECUTIVE COMPENSATION

Summary Compensation Table

As of January 1, 1999, the Company terminated the employment of certain salaried
employees who were subsequently re-employed by Republic. Under the terms of an
employee leasing and overhead allocation agreement with Republic, salary and
benefit costs are borne ratably according to each company's approximate share of
shipping volumes. Among these salaried employees previously employed by the
Company were Messrs. Tyrrell, Meyer and Asimou who presently hold the positions
of Chief Executive Officer, Executive Vice President and General Manager,
Hot-Rolled Bar Division and Executive Vice President and General Manager, Cold
Finished Bar Division, respectively, for both the Company and Republic.

Mr. Lapinsky is employed by Republic and presently holds the position of
President and Chief Operating Officer for both the Company and Republic.



                                       24
<PAGE>   25


The following table sets forth for the fiscal years ended January 2, 1999 and
January 3, 1998, the three month period ended December 28, 1996 and the fiscal
year ended September 30, 1996, the compensation paid by the Company and its
affiliate to its Chief Executive Officer and each of its four most highly
compensated executive officers:

<TABLE>
<CAPTION>
                                                                                                            All Other
Name & Principal Position                  Year            Salary ($)               Bonus ($)           Compensation ($)
---------------------------------------   ------          -------------           ----------------     ---------------------
<S>                                        <C>            <C>                     <C>                  <C>
Thomas N. Tyrrell                          1998           $  367,000              $  175,000           $      4,620 (a)
  Chief Executive Officer                  1997           $  350,000                     n/a           $      2,100 (a)
                                           1996*          $   87,500                     n/a           $        658 (a)
                                           1996           $   35,950              $  300,000 (b)       $        483 (a)

Joseph F. Lapinsky                         1998           $  229,160 (d)          $  363,075 (b)                n/a
  President & Chief Operating              1997                  n/a                     n/a                    n/a
    Officer                                1996*                 n/a                     n/a                    n/a
                                           1996                  n/a                     n/a                    n/a

Robert L. Meyer                            1998           $  205,000              $  112,500           $      2,706 (a)
Executive Vice President & General         1997           $  195,000                     n/a           $      1,170 (a)
  Manager, Hot-Rolled Bar Division         1996*          $   35,500              $  150,000 (b)       $        232 (a)
                                           1996                  n/a                     n/a                    n/a

John G. Asimou                             1998           $  191,250              $   87,500           $      2,525 (a)
Executive Vice President & General         1997           $  180,000                     n/a           $      1,080 (a)
   Manager, Cold-Finished Bar              1996*          $   44,792                     n/a           $        338 (a)
   Division                                1996           $   18,585              $  135,000 (b)       $        124 (a)

Frederick L. Deichert                      1998           $  113,710              $   68,750           $     46,039 (a) (c)
Vice President of Finance and              1997           $  145,000                     n/a           $        870 (a)
  Chief Financial Officer                  1996*          $    6,042              $   12,000 (b)                n/a
                                           1996                  n/a                     n/a                    n/a
</TABLE>

*        The amounts set forth herewith represent compensation paid by the
         Company for the three month period ended December 28, 1996. This
         presentation is the result of the Company's change in its fiscal year
         from its previous calendar quarter basis ended September 30 to a 4/4/5
         week fiscal quarter basis ending the Saturday closest to December 31.
         As a result, the Company's fiscal year 1996 ended on September 30, and
         its fiscal 1997 began on December 29, 1996 and ended on January 3,
         1998.

(a)      The amounts set forth in this column for Messrs. Tyrrell , Meyer,
         Asimou and Deichert reflect amounts of annual premiums paid by the
         Company under group term life insurance for such officers. The life
         insurance carries a maximum value of two times base salary for each
         officer and has no cash surrender value.

(b)      In fiscal 1998, Mr. Lapinsky received a retention bonus of $83,075, and
         signing bonuses totalling $280,000 upon assuming his new positions with
         the Company and Republic. Messrs. Meyer and Deichert received signing
         bonuses of $150,000 and $12,000, respectively during the three month


                                       25
<PAGE>   26

         period ended December 28, 1996. Messrs. Tyrrell and Asimou received
         signing bonuses of $300,000 and $135,000, respectively, in fiscal 1996.

(c)      Mr. Deichert was terminated from the Company in November 1998. The
         amounts set forth in this column for fiscal 1998, consisted of life
         insurance premiums (see note (a) above) and severance compensation of
         $44,125, which included a lump sum payment of $26,000. Under a
         severance agreement between the Company and Mr. Deichert, he is
         entitled to $145,000 in severance compensation over the one year period
         following his termination, plus the lump sum severance payment and
         accrued 1998 bonus.

(d)      Mr. Lapinsky joined the Company in October 1998 as President and Chief
         Operating Officer. He also holds this position with Republic Engineered
         Steels, Inc., an affiliate of the Company. Amounts presented for Mr.
         Lapinsky are his combined earnings from both companies for the full
         fiscal year.

Messrs. Tyrrell, Lapinsky, Meyer, and Asimou entered into employment agreements
with the Company and Republic (the "Employment Agreements") effective October 1,
1998, each of which contains substantially similar terms and conditions except
with respect to salary provisions. The Employment Agreements will continue until
September 30, 2001, and will renew annually thereafter each October 1 for one
year renewal terms unless terminated by Messrs. Tyrrell, Lapinsky, Meyer and
Asimou, as applicable, or the Company or Republic at least 90 days prior to the
expiration date . The annual base salaries of Messrs. Tyrrell, Lapinsky, Meyer
and Asimou currently in effect under these Employment Agreements are $400,000,
$275,000, $235,000 and $225,000, respectively, and each Employment Agreement
provides for an annual increase based on performance. Messrs. Tyrrell, Lapinsky,
Meyer and Asimou are also entitled to receive an annual bonus, which will be no
less than $150,000, $100,000, $75,000 and $75,000, respectively, for fiscal
years 1999 and 2000.

As a result of signing the Employment Agreements, Messrs. Tyrrell, Meyer, and
Asimou, and other members of management, forfeited their rights to prior vested
and unvested options to purchase common stock of the Company. Mr. Deichert and
Mr. Ben L. Bishop Jr., who terminated from the Company during 1998, have
forfeited their rights to prior vested or unvested options to purchase common
stock of the Company under the terms of their respective separation agreements.

Subject to consummation of the proposed combination of the Company and Republic,
the continuing executives listed in the Summary Compensation Table above are
eligible to receive in the future options to acquire an aggregate, 6.0% of the
common stock of the survivor entity of the Combination, subject to dilution. The
exercise price per share will equal the price per share paid by Blackstone.


Directors' Compensation and Consulting Arrangements

Each non-employee director of the Company is entitled to receive, as annual
compensation for serving on the board of directors of the Company, $25,000, plus
reimbursement of reasonable out-of-pocket expenses.


                                       26
<PAGE>   27

Item 12.  Security Ownership of Certain Beneficial Owners and Management

The table below sets forth certain information concerning the beneficial
ownership of the Company's common stock by (i) all persons known by the Company
to own beneficially more than 5% of the Company's Common Stock, (ii) each
director, (iii) each of the named officers, and (iv) all directors and named
executive officers as a group:

<TABLE>
<CAPTION>
Beneficial Owner                                               Shares                    Ownership %
------------------                                             ------                    -----------
<S>                                                            <C>                       <C>
Blackstone Management Associates II L.L.C. (a) (b) (c)         930,530                         72.8%
BRW Partners Inc. (a) (d) (e)                                  196,410                         15.4%
Veritas Capital, LLC (f)                                        68,897                          5.4%
BRW Partners LLC (g)                                            56,371                          4.4%
KDJ, LLC (h)                                                    17,896                          1.4%
Thomas N. Tyrrell                                                    0                            *
Joseph F. Lapinsky                                                   0                            *
Robert L. Meyer                                                      0                            *
John C. Asimou                                                       0                            *
Frederick L. Deichert                                                0                            *
David A. Stockman (c)                                                0                            *
Richard C. Lappin (c)                                                0                            *
Robert B. McKeon (e)                                           339,574                         26.6%
Thomas J. Campbell (e)                                         339,574                         26.6%
Daniel R. DeVos                                                      0                            *
Anthony Rainaldi                                                     0                            *
Buddy W. Davis                                                       0                            *
All directors and named executive officers as a group          339,574                        26.6%
</TABLE>

*        Represents less than 1% of the Company's outstanding common stock.

(a)      Blackstone's investment was made indirectly through BRW Steel Holdings
         L.P., a Delaware limited partnership initially organized by persons
         associated with Veritas in connection with the acquisition of the BRW
         Assets from Bethlehem ("BRWSH"), and BRW Steel Offshore Holdings L.P.,
         a Delaware limited partnership newly organized by Blackstone and
         persons associated with Veritas in connection with the recapitalization
         ("Offshore BRWSH"; together with BRWSH, the "Partnerships"), whereby
         the Partnerships became the direct holders of all newly issued shares
         of Class B Common Stock and all shares of Class A Common Stock
         previously held solely by BRWSH. After Blackstone's investment, both
         Blackstone and BRW Partners, Inc. ("BRWPI"), a corporation controlled
         by principals of Veritas, hold partnership interests in each
         Partnership. The limited partnership agreement of BRWSH was amended to
         provide, and the limited partnership agreement of Offshore BRWSH
         provides, for certain sharing arrangements between Blackstone, on the
         one hand, and BRWPI and the current limited partners of BRWSH, on the
         other hand, with respect to proceeds from the sale of the Common Stock
         held by such Partnerships. Such limited partnership agreements also
         provide that, subject to the Stockholders' Agreement, Blackstone will
         exercise all voting and dispositive power with respect to the Class B
         Common Stock held by the Partnerships and BRWPI will exercise all
         voting and dispositive power with respect to the Class A Common Stock
         held by the Partnerships.

(b)      Blackstone Management Associates II L.L.C., as the general partner of
         each of Blackstone Capital Partners II Merchant Banking Fund L.P.,
         Blackstone Offshore Capital Partners II L.P. and Blackstone Family
         Investment Partnership II L.P., exercises voting and dispositive power
         with respect to 536,829 shares. Of such shares, approximately 385,177
         shares, 113,697 shares and 37,955 shares, respectively, are held by
         Blackstone Capital Partners II Merchant Banking Fund L.P., Blackstone
         Offshore Capital Partners II L.P. and Blackstone Family Investment
         Partnership II L.P. Blackstone Management Associates II L.L.C. holds
         393,701 shares of non-voting Class C Common Stock.



                                       27
<PAGE>   28

(c)      Messrs. Stockman and Lappin are affiliated with Blackstone in the
         capacities described under "Executive Officers and Directors". Their
         address is c/o The Blackstone Group L.P., 345 Park Avenue, New York
         10154. Such individuals disclaim beneficial ownership of any shares of
         Common Stock beneficially owned by Blackstone.

(d)      BRWPI is one of the two general partners of the Partnerships and
         exercises voting and dispositive power with respect to the 196,410
         shares of Class A Common Stock. BRWPI holds 143,164 shares of
         non-voting Class C Common Stock.

(e)      BRWPI is owned by Robert B. McKeon and Thomas J. Campbell, both of whom
         are principals of Veritas and are directors of the Company. Pursuant to
         the organizational documents of BRWPI, all material actions to be taken
         by BRWPI as a general partner of BRWSH require the approval of Mr.
         McKeon and Mr.Campbell. BRWPI's address is c/o Veritas Capital Inc., 10
         East 50th Street, New York, New York 10022. Messrs. McKeon and Campbell
         each are considered to have beneficial ownership of all of the shares
         included in the table above beneficially owned by BRWPI due to their
         control of BRWPI. 

(f)      Veritas Capital LLC is owned by Robert B. McKeon.

(g)      BRW Partners LLC is owned by Messrs. Robert B. McKeon and Thomas J.
         Campbell. BRW Partners LLC is the general partner of BRW Steel Holdings
         II L.P. BRW Partners LLC's address is c/o Veritas Capital Management
         LLC, 660 Madison Avenue, 14th Floor, New York, New York 10021.

(h)      KDJ LLC is owned by Thomas J. Campbell.


Messrs. Tyrrell, Lapinsky, Meyer, Asimou, and George and Ms. Brown, executives
of the Company (the "Executives"), entered into employment agreements with the
Company and Republic (the "Employment Agreements") effective October 1, 1998,
each of which contains substantially similar terms and conditions other than
compensation. Subject to consummation of the proposed combination of the Company
and Republic, the Executives and other members of management are eligible to
receive in the future options to acquire an aggregate 9.0% of the common stock
of the survivor entity of the Combination, subject to dilution. The exercise
price per share will equal the price per share paid by Blackstone.

As a result of signing the Employment Agreements, Messrs. Tyrrell, Meyer, and   
Asimou, and other members of management, forfeited their rights to prior vested
and unvested options to purchase common stock of the Company. Messrs. Deichert
and Bishop, who terminated from the Company during 1998, have forfeited their
rights to prior vested or unvested options to purchase common stock of the
Company under the terms of their respective separation agreements.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Messrs. Davis and Rainaldi are members of the board of directors of the Company
pursuant to the Company's predecessor collective bargaining agreement and serve
as representatives of the USWA and the Company employees covered by the
collective bargaining agreement.

In connection with the Recapitalization, an affiliate of Blackstone received an
origination fee and expense reimbursement totaling $2.0 million and an affiliate
of Veritas received a financial advisory fee and expense reimbursement totaling
$2.0 million in fiscal 1996.

In connection with the Recapitalization, the Company entered into a management
agreement with the Johnstown Advisors Corp ("Advisors") and Blackstone
Management Partners L.P. ("Blackstone Advisors"), an affiliate of Blackstone.
Johnstown Advisors Corp. is owned by the principals of BRWPI, the general
partner of BRW Steel Holdings, LP, which owns approximately 26.6% of the common
stock of the Company, on a fully diluted basis. Blackstone owns approximately
72.8% of the common stock of the Company, on a fully diluted basis. Pursuant to
this agreement, Advisors and Blackstone Advisors are to provide certain
management and financial monitoring services to the Company for which they will
share 


                                       28
<PAGE>   29
equally an annual advisory fee of $0.9 million plus reimbursement of certain
out-of-pocket expenses. Under this agreement, the Company expensed $0.9
million in fiscal 1998 and $1.5 million in fiscal 1997.

Blackstone and Veritas, principal owners of both the Company and Republic, plan
to combine the two companies during 1999.

At January 1, 1999, certain salaried employees of the Company were terminated by
the Company and became employees of Republic. Under the terms of an employee
leasing and overhead allocation agreement, the Company and Republic share the
costs of common expenses including, but not limited to sales and marketing
services, administrative services, plant overhead and costs for certain common
facilities. Salary and benefit costs are allocated according to each company's
approximate share of combined trade volumes. Among the salaried employees
included in this overhead allocation are Messrs. Tyrrell, Meyer and Asimou who
hold the positions of Chief Executive Officer, Executive Vice President and
General Manager, Hot Rolled Bar Division and Executive Vice President and
General Manager, Cold Finished Bar Division, respectively, for both the Company
and Republic. Certain salaried employees located at the Company's facilities in
Lackawanna, New York and Johnstown, Pennsylvania were also included in this
arrangement. However, the Company leased back the services of these employees,
of which the salary and benefit costs are borne entirely by the Company.

As of January 4, 1999, Republic Technologies International Marketing, LLC
("Marketing JV") was formed. The Company and Republic expect to finalize an
agreement in the second quarter 1999 under which this jointly owned Marketing JV
will market, advertise, promote and sell both companies' steel products to each
company's existing and potential customers. The Company and Republic will be
reimbursed for expenses they incur on behalf of the Marketing JV, including
compensation costs of employees of the Company and Republic who perform sales
and marketing functions for the Marketing JV. Except for certain prior
commitments to customers that will continue to be placed with the Company or
Republic as applicable, it is intended that customer purchase orders will be
placed with the Marketing JV. Pursuant to allocation procedures to be approved
by the boards of directors of both companies, the production of steel products
to fulfill these orders will be allocated between the Company and Republic. To
compensate the Marketing JV for marketing services performed, it is intended
that the Company and Republic will pay commissions at specified percentages of
sales.

The Company participates in an inventory purchasing arrangement with Republic.
Under the terms of this arrangement, Republic purchases inventory products on
behalf of the combined company and bills the Company for its respective
purchases plus an administrative fee. During the period from September 8, 1998
to January 2, 1999, the Company purchased billet and bar products as well as
scrap material at market prices from Republic, totaling approximately $16.1
million. A similar arrangement is in place with regard to insurance. Republic
purchased insurance coverage for the combined company for which the costs are
borne ratably by the Company and Republic based on their respective share of
coverage. In December 1998, Republic completed negotiations for a two-year
insurance contract for the combined company for which the terms of payment
include a third-party financing arrangement.

As a result of the above, the Company had a current receivable due from Republic
of approximately $1.9 million, a current payable due to Republic of $15.5
million and a non-current payable due to Republic of $0.5 million at January 2,
1999. At January 2, 1999 and January 3, 1998, current amounts payable to
Blackstone were $0.9 million and $1.5 million, respectively.

                                       29
<PAGE>   30

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
------------------------------------------------------------------------

(a)  (1) The following consolidated financial statements of the Company are
         included in a separate section of this report following the signature
         page:

                  Consolidated Statements of Operations - Years Ended January 2,
                  1999 and January 3, 1998, Three Months Ended December 28,
                  1996, and Year Ended September 30, 1996

                  Consolidated Balance Sheets - January 2, 1999 and January 3, 
                  1998

                  Consolidated Statements of Stockholders' Equity (Deficit) -
                  Years Ended January 2, 1999 and January 3, 1998, Three Months
                  Ended December 28, 1996, and Year Ended September 30, 1996

                  Consolidated Statements of Cash Flows - Years Ended January 2,
                  1999 and January 3, 1998, Three Months Ended December 28,
                  1996, and Year Ended September 30, 1996

                  Notes to Consolidated Financial Statements - January 2, 1999

                  Reports of Independent Auditors

(a)   (2)  Financial Statement Schedules

                  The following consolidated financial statement schedule of the
                  Company is included in a separate section of this report
                  following the signature page:

                           Schedule II - Valuation and Qualifying Accounts

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

(a)   (3)  Exhibits

           Exhibit No.                        Description
           -----------                        -----------

           3.1                      Amended and Restated Certificate of
                                    Incorporation of Bar Technologies Inc.
                                    (filed as Exhibit 3.1 of Bar Technologies
                                    Inc. Form 10-K for the year ended January 3,
                                    1998, SEC File No. 333-04254 and
                                    incorporated by reference and made a part
                                    hereof.)

           3.2*                     Amended and Restated By-laws of Bar 
                                    Technologies Inc.

           4.1*                     Indenture, dated as of April 1, 1996, among
                                    BarTech, BLI Acquisition Corporation, Bliss
                                    & Laughlin Industries Inc., Bliss & Laughlin
                                    Steel Company, Canadian Drawn Steel Company 
                                    Inc. and the United States Trust Company of
                                    New York.

           4.2*                     Form of Note.

           4.3*                     Common Stock Registration Rights Agreement,
                                    dated as of April 1, 1996, among BarTech, 
                                    BRW Steel Holdings, L.P., BRW Steel Offshore
                                    Holdings, L.P., Blackstone Capital Partners
                                    II Merchant Banking Fund L.P. and Chase 
                                    Securities Inc.



                                       30
<PAGE>   31

         4.4*                 Warrant Agreement, dated as of April 1, 1996, 
                              between BarTech and United States Trust Company of
                              New York.

         10.1*                Credit Agreement, dated as of April 2, 1996, 
                              between BarTech, Bliss & Laughlin Steel Company
                              and Chase Manhattan Bank, formerly known as
                              Chemical Bank.

         10.2*                Master Pledge Agreement, dated April 2, 1996, 
                              among BRW Steel Holdings, L.P., BRW Steel Offshore
                              Holdings, L.P., BarTech, Bliss and Laughlin
                              Industries Inc., Bliss & Laughlin Steel Company
                              and United States Trust Company of New York.

         10.8                 Employment agreement dated December 2, 1996, 
                              between the Company and Mr. Frederick L. Deichert
                              (filed as Exhibit 10.8 of Bar Technologies Inc. 
                              Form 10-K for the year ended September 30, 1996, 
                              SEC File No. 333-04254 and incorporated by 
                              reference and made a part hereof.)

         10.14*               Master Agreement dated July 18, 1994, by and among
                              the Commonwealth of Pennsylvania, acting by and
                              through the Department of Commerce, the
                              Pennsylvania Industrial Development Authority, the
                              Commonwealth of Pennsylvania, acting by and
                              through the Department of Community Affairs, the
                              Johnstown Industrial Development Corporation, the
                              County of Cambria, the City of Johnstown, BarTech
                              and BRW Steel Corporation-Johnstown.

         10.15*               Amendment No. 1 to the Master Agreement dated 
                              September 21, 1994, by and among the Commonwealth
                              of Pennsylvania, acting by and through the
                              Department of Commerce, the Pennsylvania
                              Industrial Development Authority, the Commonwealth
                              of Pennsylvania, acting by and through the
                              Department of Community Affairs, the Johnstown 
                              Industrial Development Corporation, the County of 
                              Cambria, the City of Johnstown and BarTech.

         10.16*               Sunny Day Fund Loan Agreement dated September 21,
                              1994, by and between BarTech and the Commonwealth
                              of Pennsylvania acting by and through its
                              Department of Commerce.

         10.17*               Pennsylvania Industrial Development Authority 
                              Consent, Subordination and Assumption Agreement,
                              dated August 4, 1994, effective as of September
                              21, 1994, by BarTech and Johnstown Industrial
                              Development Corporation in favor of the
                              Pennsylvania Industrial Development Authority.

         10.18*               Economic Development Partnership Loan Agreement 
                              dated September 21, 1994, between the City of
                              Johnstown and BarTech.

         10.19*               Economic Development Set-Aside Loan Agreement 
                              dated as of July 6, 1995, between the City of
                              Johnstown and BarTech.

         10.20*               Economic Development Set-Aside Loan Agreement 
                              dated July 6, 1995, between the City of Johnstown
                              and BarTech.

         10.21*               Section 108 Loan Agreement dated July 20, 1994, by
                              and between the City of Johnstown, the County of
                              Cambria and the Company.



                                       31
<PAGE>   32

         10.22*               Amendment No. 1 to Section 108 Loan 
                              Agreement, dated August 1994, by and among the
                              City of Johnstown, the County of Cambria and the
                              Company.

         10.23*               Loan and Use Agreement dated September 21, 1994, 
                              by and between the Company and Marine Midland
                              Bank.

         10.24*               Loan Agreement dated August 12, 1994, by and 
                              between the Company and Buffalo and Erie County
                              Regional Development Corporation.

         10.25*               Community Development Block Grant Loan Agreement
                              dated November 3, 1995, between Cambria County and
                              the Company.

         10.26*               BID Loan Agreement dated March 12, 1996, between 
                              Johnstown Industrial Development Corporation and
                              the Company.

         10.27*               Contribution Agreement dated December 1993, by and
                              between the Company and Bethlehem Steel
                              Corporation.

         10.28*               Amendment No. 1 to Contribution Agreement dated 
                              January 1994, by and between the Company and
                              Bethlehem Steel Corporation.

         10.29*               Amendment No. 2 to the Contribution Agreement 
                              dated January 7, 1994, by and between the Company
                              and Bethlehem Steel Corporation.

         10.30*               Amendment No. 3 to Contribution Agreement dated 
                              June 7, 1994, by and between the Company and
                              Bethlehem Steel Corporation.

         10.31*               Amendment No. 4 to Contribution Agreement dated 
                              June 29, 1994, by and between the Company and
                              Bethlehem Steel Corporation.

         10.32*               Amendment No. 5 to Contribution Agreement dated 
                              September 21, 1994, by and between the Company and
                              Bethlehem Steel Corporation.

         10.33*               Subordinated Loan Agreement dated September 21, 
                              1994, by and between the Company and Bethlehem
                              Steel Corporation.

         10.34                Loan Agreement dated December 1, 1988 between
                              Development Authority of Cartersville and Bliss &
                              Laughlin Steel Company (filed as Exhibit 10 (e) to
                              Form 10-K of Bliss & Laughlin Industries Inc. for
                              the year ended September 30, 1989 and incorporated
                              by reference and made a part hereof).

         10.35*               Collective Bargaining Agreement dated February 15,
                              1994 by and between the Company, the United Steel
                              Workers of America and the AFL-CIO.

         10.36*               Amendment No. 1 to the Collective Bargaining 
                              Agreement dated September 21, 1994, by and between
                              the Company, the United Steel Workers of America
                              and the AFL-CIO.

         10.37*               Letter Agreement dated March 28, 1996, by and 
                              between the Company, BRW Steel Holdings, L.P. and
                              the United Steel Workers of America.



                                       32
<PAGE>   33

         10.38*               Amended and Restated Intercreditor and
                              Subordination Agreement dated April 2, 1996, by
                              and between the Company and United States Trust
                              Company of New York, Bethlehem Steel Corporation,
                              the Pennsylvania Lenders (as defined therein), the
                              Lackawanna Lenders (as defined therein), Chase
                              Manhattan Bank (formerly known as Chemical Bank)
                              Rokop Corporation, those parties who in the future
                              become Government Lenders (as defined therein),
                              those parties who in the future become Notes
                              Refinancing lenders (as defined therein), and each
                              of the Pledgors (as defined therein) from time to
                              time, made party thereto.

         10.40                Amended Credit Agreement dated September 11, 1997,
                              by and between the Company and Chase Manhattan
                              Bank (filed as Exhibit 10.4 of Bar Technologies
                              Inc. Form 10-K for the year ended January 3, 1998,
                              SEC File No. 333-04254 and incorporated by
                              reference and made a part hereof.)

         10.41                Subscription Agreement for Bar Technologies Inc. 
                              dated September 11, 1997 (filed as Exhibit 10.41
                              of Bar Technologies Inc. Form 10-K for the year
                              ended January 3, 1998, SEC File No. 333-04254 and
                              incorporated by reference and made a part hereof.)

         10.42                Amended and Restated Stockholders' Agreement for 
                              Bar Technologies Inc. dated September 11,
                              1997(filed as Exhibit 10.42 of Bar Technologies
                              Inc. Form 10-K for the year ended January 3, 1998,
                              SEC File No. 333-04254 and incorporated by
                              reference and made a part hereof.) . 

                
         10.43                Deferral letter from The Pennsylvania Department
                              of Community and Economic Development dated
                              November 21, 1997(filed as Exhibit 10.43 of Bar
                              Technologies Inc. Form 10-K for the year ended
                              January 3, 1998, SEC File No. 333-04254 and
                              incorporated by reference and made a part hereof.)

         10.44                Agreement between the Company and Pennsylvania
                              Electric Company, dated July 9, 1997(filed as
                              Exhibit 10.44 of Bar Technologies Inc. Form 10-K
                              for the year ended January 3, 1998, SEC File No.
                              333-04254 and incorporated by reference and made
                              a part hereof.)

         10.45                Employment Agreement dated October 1, 1998, 
                              between the Company and Mr. Thomas N. Tyrrell,
                              Chief Executive Officer, filed herewith.

         10.46                Employment Agreement dated October 1, 1998, 
                              between the Company and Mr. Joseph Lapinsky,
                              President and Chief Operating Officer, filed
                              herewith.

         10.47                Employment Agreement dated October 1, 1998, 
                              between the Company and Mr. Robert L. Meyer,
                              Executive Vice President and General Manager,
                              Hot-Rolled Bar Division, filed herewith.

         10.48                Employment Agreement dated October 1, 1998, 
                              between the Company and Mr. John Asimou, Executive
                              Vice President and General Manager, Cold-Finished
                              Bar Division, filed herewith.

         10.49                Employee Leasing and Overhead Agreement between 
                              the Company and Republic Engineered Steels, Inc. 
                              dated March 8, 1999, filed herewith.

                                       33
<PAGE>   34

         10.50                Collective Bargaining Agreement dated August 1, 
                              1998 by and between the Company, RES Acquisition
                              Corporation and the United Steel Workers of
                              America, filed herewith.

         10.51                Employment Separation and General Release dated
                              November 20, 1998, between the Company and
                              Frederick L. Deichert, filed herewith.

         16                   Letter Regarding Change in Certifying Accountants
                              (filed as Exhibit 16 to the Bar Technologies Inc.
                              Form 8-K dated December 28, 1998, and incorporated
                              by reference and made a part hereof).

         21                   Subsidiaries of the Registrant.

         27                   Financial Data Schedule.

          *         Filed as an exhibit to the Registration Statement on Form
                    S-4 of Bar Technologies Inc., SEC Registration No. 333-4254
                    and incorporated by reference and made a part hereof.

(b)   Reports on Form 8-K

              On December 28, 1998, the Company filed a Form 8-K to announce the
              appointment of Deloitte & Touche LLP as independent accountants to
              audit its fiscal 1998 financial statements and the dismissal of
              Arthur Andersen LLP, its previous independent public accountants,
              which has been approved by the board of directors.

              On December 31, 1998, the Company filed a Form 8-K to announcing a
              change in its fiscal year effective with its reporting of fiscal
              1999, from a 4/4/5 week fiscal quarter basis ending the Saturday
              closest to December 31 to a calendar quarter basis with the fiscal
              year ending on December 31.



                                       34
<PAGE>   35

                                   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.

                                                    Bar Technologies Inc.
                                                    ---------------------
                                                          (Registrant)

Date: March 31, 1999                       By: /s/ Thomas N. Tyrrell
                                              ----------------------------
                                               Thomas N. Tyrrell
                                               Chief Executive Officer

                                           By: /s/ Brenda K. Brown
                                              -----------------------------
                                              Brenda K. Brown
                                              Vice President of Finance and
                                                    Controller


                                POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints Robert
B. McKeon, Thomas N. Tyrrell and David Stockman, each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements to this report and to
file the same with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission.

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 indicated on March 31, 1999.

<TABLE>
<S>                                             <C>
/s/ Thomas N. Tyrrell                              /s/ Buddy W. Davis            
---------------------                              ------------------            
    Thomas N. Tyrrell, Chief Executive                 Buddy W. Davis, Director  
        Officer and Director                                                     
                                                                                 
                                                                                 
/s/ David A. Stockman                              /s/ Daniel R. DeVos           
---------------------                              -------------------           
    David A. Stockman, Class B Director                Daniel R. DeVos, Director 
                                                                                 
                                                                                 
/s/ Robert B. McKeon                               /s/ Anthony Rainaldi          
--------------------                               --------------------          
    Robert B. McKeon, Chairman and Director            Anthony Rainaldi, Director
                                                                                 
                                                                                 
/s/ Thomas J. Campbell                             /s/ Brenda K. Brown              
----------------------                             -------------------              
    Thomas J. Campbell, Director                       Brenda K. Brown,             
                                                       Vice President of Finance and
                                                       Controller                   
/s/ Richard C. Lappin          
---------------------          
    Richard C. Lappin, Class B 
    Director                   

</TABLE>



                                       35
<PAGE>   36


INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of
Bar Technologies Inc.


We have audited the accompanying consolidated balance sheet of Bar Technologies
Inc. and subsidiaries as of January 2, 1999, and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for the
year then ended. Our audit also included the financial statement schedule for
the year ended January 2, 1999 listed in the Index at Item 14(a)(2). These
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, such fiscal 1998 consolidated financial statements present
fairly, in all material respects, the financial position of Bar Technologies
Inc. and subsidiaries as of January 2, 1999, and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles. Also, in our opinion, such fiscal 1998 financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.


DELOITTE & TOUCHE LLP

Cleveland, Ohio
March 31, 1999



                                       36
<PAGE>   37


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Bar Technologies Inc.:

We have audited the accompanying consolidated balance sheet of Bar Technologies
Inc. (a Delaware corporation) and subsidiaries as of January 3, 1998 and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for the year ended January 3, 1998, the three month period ended
December 28, 1996 and the year ended September 30, 1996. These consolidated
financial statements and schedule referred to below are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule 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 financial position of Bar Technologies Inc. and
subsidiaries as of January 3, 1998 and the results of their operations and their
cash flows for the year ended January 3, 1998, the three months ended December
28, 1996 and the year ended September 30, 1996, in conformity with generally
accepted accounting principles.

Our audits of Bar Technologies Inc. and subsidiaries were made for the purpose
of forming an opinion on the basic financial statements taken as a whole.
Schedule II is presented for the purpose of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.



                                                      ARTHUR ANDERSEN LLP

Pittsburgh, Pennsylvania
March 24, 1998



                                       37
<PAGE>   38

                     BAR TECHNOLOGIES INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED JANUARY 2, 1999 AND
  JANUARY 3, 1998, THE THREE MONTHS ENDED DECEMBER 28, 1996 AND THE YEAR ENDED
                               SEPTEMBER 30, 1996
                (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                        Three Months
                                         Year Ended      Year Ended         Ended       Year Ended
                                         January 2,      January 3,      December 28,   September 30,
                                            1999            1998             1996           1996
                                      ---------------  --------------  ---------------  ------------
<S>                                      <C>             <C>             <C>             <C>      
Net sales                                $ 271,851       $ 242,896       $  40,251       $  77,163

Cost of sales                              262,462         239,370          43,427          91,995

Depreciation and amortization                5,961           4,523           1,221           2,036

Selling, general and
     administrative expense                 21,107          21,730           4,305          14,592
                                         ---------       ---------       ---------       ---------
Loss from operations                       (17,679)        (22,727)         (8,702)        (31,460)

Interest expense, net                       26,959          23,306           5,148          10,833

Other income                                 2,663           1,415             328           1,079
                                         ---------       ---------       ---------       ---------
Loss before provision for
     income taxes                          (41,975)        (44,618)        (13,522)        (41,214)

Provision for income taxes                       3             205               3             205
                                         ---------       ---------       ---------       ---------
Loss before extraordinary item             (41,978)        (44,823)        (13,525)        (41,419)

Extraordinary loss on early
     extinguishment of debt                   --              --              --             2,214
                                         ---------       ---------       ---------       ---------
Net loss                                   (41,978)        (44,823)        (13,525)        (43,633)
Preferred stock dividends                      385             385              93             385
                                         ---------       ---------       ---------       ---------
Net loss applicable to
     common shares                       $ (42,363)      $ (45,208)      $ (13,618)      $ (44,018)
                                         =========       =========       =========       =========

Per share data - basic and diluted:
  Loss before extraordinary item         $  (33.14)      $  (50.88)      $  (18.37)      $  (93.08)
  Extraordinary loss on early
    extinguishment of debt                    --              --              --             (4.93)
                                         ---------       ---------       ---------       ---------
     Net loss                            $  (33.14)      $  (50.88)      $  (18.37)      $  (98.01)
                                         =========       =========       =========       =========
</TABLE>

The accompanying notes are an integral part of these statements.


                                       38
<PAGE>   39

                     BAR TECHNOLOGIES INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                    AS OF JANUARY 2, 1999 AND JANUARY 3, 1998
                            (IN THOUSANDS OF DOLLARS)


<TABLE>
<CAPTION>
                                                            January 2, 1999  January 3, 1998
                                                            ---------------  ---------------
<S>                                                            <C>             <C>      
ASSETS

Current assets:
    Cash and cash equivalents                                  $   2,188       $   3,391
    Accounts receivable, less allowances of $1,104 and
          $817, respectively                                      26,152          34,287
    Accounts receivable due from affiliates                        1,935            --   
    Inventories                                                   74,168          58,277
    Other current assets                                           2,676           1,977
                                                               ---------       ---------

       Total current assets                                      107,119          97,932

Property, plant and equipment:
    Land and improvements                                          2,580           2,628
    Buildings and improvements                                    19,944          20,189
    Machinery and equipment                                       72,162          60,058
    Construction-in-progress                                       8,396           4,134
                                                               ---------       ---------

       Total property, plant and equipment                       103,082          87,009

    Accumulated depreciation                                     (12,983)         (7,432)
                                                               ---------       ---------

       Net property, plant and equipment                          90,099          79,577

    Goodwill, net of accumulated amortization of $891 and
          $567, respectively                                      11,969          12,293

    Restricted debt service fund                                   1,551           1,551

    Other assets                                                  11,763          14,325
                                                               ---------       ---------

       Total assets                                            $ 222,501       $ 205,678
                                                               =========       =========
</TABLE>

The accompanying notes are an integral part of these statements.


                                       39
<PAGE>   40

                     BAR TECHNOLOGIES INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                    AS OF JANUARY 2, 1999 AND JANUARY 3, 1998
                (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                              January 2, 1999  January 3, 1998
                                                                              ---------------  ---------------
<S>                                                                               <C>             <C>      
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
  Current liabilities:
     Accounts payable                                                             $  44,791       $  33,339
     Amounts due to affiliates                                                       16,401           1,531
     Accrued interest                                                                 4,885           3,605
     Other accrued liabilities                                                       19,687          12,647
     Current maturities of long-term debt                                             3,805           3,033
     Revolving credit facility                                                       79,000          53,650
                                                                                  ---------       ---------
       Total current liabilities                                                    168,569         107,805

     Long-term debt                                                                 128,962         130,741
     Deferred income taxes                                                            5,001           5,047
     Amounts due to affiliates, long-term                                               531            --
     Other long-term liabilities                                                      5,377           4,964
                                                                                  ---------       ---------
       Total liabilities                                                            308,440         248,557

  Redeemable stock:
     Series A preferred stock $0.001 par value
          Authorized 5,000 shares
          Issued and outstanding, 1,100 shares                                        5,500           5,500

Commitments and contingencies (Note 14)

  Stockholders' equity (deficit):
     Series B preferred stock $0.001 par value
          Authorized, issued and outstanding, 1 share                                  --              --
     Class A common stock, $0.001 par value
          Authorized, 1,000,000 shares
          Issued and outstanding, 204,458 shares                                       --              --
     Class B common stock, $0.001 par value
          Authorized, 600,000 shares
          Issued and outstanding, 536,829 shares                                          1               1
     Class C common stock, non-voting, $0.001 par value, 
          Authorized, 600,000 shares 
          Issued and outstanding, 536,865 shares                                          1               1
     Additional paid-in capital                                                      63,055          63,055
     Warrants outstanding                                                             5,119           5,119
     Accumulated deficit                                                           (158,424)       (116,061)
     Accumulated other comprehensive loss                                            (1,191)           (494)
                                                                                  ---------       ---------
  Total stockholders' equity (deficit)                                              (91,439)        (48,379)
                                                                                  ---------       ---------

Total liabilities and stockholders' equity  (deficit)                             $ 222,501       $ 205,678
                                                                                  =========       =========
</TABLE>

The accompanying notes are an integral part of these statements.

                                       40
<PAGE>   41


                     Bar Technologies Inc. and Subsidiaries
            Consolidated Statements of Stockholders' Equity (Deficit)
    For the Years Ended January 2, 1999 and January 3, 1998, the Three Months
          Ended December 28, 1996 and the Year Ended September 30, 1996
                            (In thousands of dollars)
<TABLE>
<CAPTION>

                                                                                                                                    
                                                                                Additional                                          
                                       Class A      Class B        Class C       Paid-in          Warrants        Accumulated       
                                    Common Stock  Common Stock   Common Stock    Capital         Outstanding        Deficit         
                                    ------------  ------------   ------------    -------         -----------        -------         
<S>                               <C>             <C>           <C>           <C>             <C>             <C>  
Balance, September 30, 1995          $     -                                     $  3,704                         $ (13,217)        
  Net loss                                                                                                        $ (43,633)        
  Preferred stock dividend                                                                                        $    (385)        
  Other comprehensive
    income - foreign currency
     translation adjustments                                                                                                        
  Issuance of common stock                        $      1                       $ 30,002                                           
  Issuance of warrants                                                                           $   5,119                          
  Amortization of deferred
    compensation                                                                                                                    
                                     -------      --------       -----------     --------        ---------        ---------         

Balance, September 30, 1996          $     -      $      1                       $ 33,706        $   5,119        $ (57,235)        
  Net loss                                                                                                        $ (13,525)        
  Preferred stock dividend                                                                                        $     (93)        
  Other comprehensive
    income - foreign currency
     translation adjustments                                                                                                        
                                     -------      --------       -----------     --------        ---------        ---------         

Balance, December 28, 1996           $     -      $      1                       $ 33,706        $   5,119        $ (70,853)        
  Net loss                                                                                                        $ (44,823)        
  Preferred stock dividend                                                                                        $    (385)        
  Other comprehensive
    income - foreign currency
     translation adjustments
                                                                                                                                    
  Issuance of common stock                                        $     1        $ 29,349 
                                     -------      --------       -----------     --------        ---------        ---------         

Balance, January 3, 1998             $     -      $      1        $     1        $ 63,055        $   5,119        $(116,061)        
  Net loss                                                                                                        $ (41,978)        
  Preferred stock dividend                                                                                        $    (385)        
  Other comprehensive
    income - foreign currency
     translation adjustments                                                                                                        
                                     -------      --------       -----------     --------        ---------        ---------         
Balance, January 2, 1999             $     -      $      1        $     1        $ 63,055        $   5,119        $(158,424)        
                                     =======      ========       ===========     ========        =========        =========         
</TABLE>

The accompanying notes are an integral part of these statements.


<TABLE>
<CAPTION>

                                                    Accumulated
                                                       Other                                   Total
                                   Deferred        Comprehensive       Comprehensive       Stockholders'
                                 Compensation      Income (Loss)       Income (Loss)      Equity (Deficit)
                                 ------------      -------------       -------------      ----------------
<S>                            <C>               <C>                 <C>                <C>          
Balance, September 30, 1995      $    (112)                                                $     (9,625)
  Net loss                                                             $   (43,633)        $    (43,633)
  Preferred stock dividend                                                                 $       (385)
  Other comprehensive
    income - foreign currency
     translation adjustments                       $       (49)              $ (49)        $        (49)
  Issuance of common stock       $      58                                                 $     30,061
  Issuance of warrants                                                                     $      5,119
  Amortization of deferred
    compensation                 $      54                                                 $         54    
                                 ---------         -----------         -----------         ------------ 

Balance, September 30, 1996      $       -         $       (49)        $   (43,682)        $    (18,458)  
                                                                       ===========
  Net loss                                                             $   (13,525)        $    (13,525)
  Preferred stock dividend                                                                 $        (93)
  Other comprehensive
    income - foreign currency
     translation adjustments                       $       (82)        $       (82)        $        (82)
                                 ---------         -----------         -----------         ------------ 

Balance, December 28, 1996       $       -         $      (131)        $   (13,607)        $    (32,158)        
                                                                       ===========
  Net loss                                                             $   (44,823)        $    (44,823)
  Preferred stock dividend                                                                 $       (385)
  Other comprehensive
    income - foreign currency
     translation adjustments                       $      (363)        $      (363)        $       (363)
  Issuance of common stock                                                                 $     29,350
                                 ---------         -----------         -----------         ------------ 

Balance, January 3, 1998         $       -         $      (494)        $   (45,186)        $    (48,379)
                                                                       ===========
  Net loss                                                             $   (41,978)        $    (41,978)
  Preferred stock dividend                                                                 $       (385)
  Other comprehensive
    income - foreign currency
     translation adjustments                       $      (697)        $      (697)        $       (697)
                                 ---------         -----------         -----------         ------------ 
Balance, January 2, 1999         $       -         $    (1,191)        $   (42,675)        $    (91,439)
                                 ==========        ===========         ===========         ============ 

</TABLE>


                                       41
<PAGE>   42


                     BAR TECHNOLOGIES INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JANUARY 2, 1999 AND
            JANUARY 3, 1998, THE THREE MONTHS ENDED DECEMBER 28, 1996
                      AND THE YEAR ENDED SEPTEMBER 30, 1996
                            (IN THOUSANDS OF DOLLARS)


<TABLE>
<CAPTION>
                                                                                                Three Months
                                                           Year Ended         Year Ended           Ended            Year Ended
                                                           January 2,         January 3,        December 28,       September 30,
                                                              1999               1998               1996                1996
                                                         --------------     --------------     --------------     ---------------
<S>                                                       <C>                <C>                <C>                <C>          
Cash flows from operating activities
     Net loss                                             $    (41,978)      $    (44,823)      $    (13,525)      $    (43,633)
     Adjustments to reconcile net cash
          used by operating activities:
       Depreciation and amortization                             5,961              4,523              1,221              2,036
       Extraordinary loss on early
          extinguishment of debt                                   --                 --                 --               2,214
       Accretion of original issue discount                      1,393              1,243                285                633
       Amortization of deferred financing cost                   2,819              2,131                511              1,396
       (Increase) decrease in accounts receivable                7,657            (16,148)               755                900
       Increase in inventory                                   (16,179)              (462)           (12,157)           (12,016)
       (Increase) decrease in other current assets                (720)             1,159                (67)            (1,306)
       Increase in accounts payable                             11,642              6,504              4,023              5,473
       Increase in due to/from affiliates                       13,466                --                 --                 --
       Increase (decrease)  in other
          current liabilities                                    8,494             (4,051)             2,220             12,150
       Other                                                       232               (930)              (242)              (129)
                                                          ------------       ------------       ------------       ------------
Net cash used by operating activities                           (7,213)           (50,854)           (16,976)           (32,282)
                                                          ------------       ------------       ------------       ------------

Cash flows from investing activities
       Net capital expenditures                                (16,325)            (5,813)              (186)           (21,300)
       Acquisition of BLI, net of cash                            --                 --                 --              (41,028)
                                                          ------------       ------------       ------------       ------------
Net cash used by investing activities                          (16,325)            (5,813)              (186)           (62,328)
                                                          ------------       ------------       ------------       ------------
Cash flows from financing activities
          Net receipts under revolving credit agreement         25,350             13,850             17,300             22,500
          Issuance of debt                                        --                  324               --              104,363
          Repayments of debt                                    (2,401)            (2,588)            (4,727)           (32,154)
          Proceeds from issuance of common stock                  --               29,350               --               30,003
          Proceeds from issuance of warrants                      --                 --                 --                5,119
          Preferred stock dividends                               (385)              (385)               (93)              (385)
          Deferred debt financing costs                           --                 --                 --              (12,398)
          Deposits into bond interest escrow                      --               12,836              6,149            (18,516)
                                                          ------------       ------------       ------------       ------------
Net cash provided by investing activities                       22,564             53,387             18,629             98,532
                                                          ------------       ------------       ------------       ------------
Effect of exchange rate changes on cash
                                                                  (229)              (363)                44                (49)
Net increase (decrease) in cash and cash
equivalents                                                     (1,203)            (3,643)             1,511              3,873
Cash and cash equivalents-beginning of  year                     3,391              7,034              5,523              1,650
                                                          ------------       ------------       ------------       ------------
Cash and cash equivalents-end of year                     $      2,188       $      3,391       $      7,034       $      5,523
                                                          ============       ============       ============       ============
Supplemental cash flow information:
     Interest paid                                        $     20,584       $     18,957       $      5,360       $      2,976
     Income taxes paid                                    $        196       $       --         $       --         $        622
</TABLE>

The accompanying notes are an integral part of these statements.



                                       42
<PAGE>   43

BAR TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 2, 1999 AND JANUARY 3, 1998, THE THREE MONTHS ENDED
DECEMBER 28, 1996 AND THE YEAR ENDED SEPTEMBER 30, 1996

(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE INFORMATION)


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED
         INFORMATION

NATURE OF OPERATIONS AND CUSTOMER CONCENTRATION

Bar Technologies Inc. and subsidiaries ("BarTech" or the "Company") is a
producer of high quality hot rolled engineered and cold finished steel bar
products. The Company was formed on September 26, 1994, when it acquired certain
steelmaking and bar rolling assets of the former Bar, Rod and Wire Division of
Bethlehem Steel Corporation ("Bethlehem"). In February 1996, the Company
restarted its Lackawanna, New York bar mill and began the production of hot
rolled engineered bar products. In conjunction with the acquisition, the Company
developed and implemented a major modernization and expansion plan and
subsequently began commercial steelmaking operations at its Johnstown,
Pennsylvania facility in August 1996.

On April 2, 1996, the Company consummated an amended merger agreement with Bliss
& Laughlin Industries, Inc. ("BLI"), a major independent cold finished processor
of steel bars. The Company financed the acquisition with part of the proceeds of
its recapitalization. (See Note 5 - Recapitalization)

The Company's principal owners, Blackstone Capital Partners II Merchant Banking
Fund L. P. and its affiliates ("Blackstone") and certain affiliates of the
successor to Veritas Capital, Inc. ("Veritas") serving as general partners for
limited partnerships, acquired Republic Engineered Steels, Inc. ("Republic") in
September 1998. Blackstone and Veritas intend to combine the Company and
Republic (the "Combination") during 1999, subject to refinancing a significant
portion of the combined companies' debt.

Subsequent to the acquisition of Republic, the Company and Republic share common
management and have begun to perform certain sales, marketing and administrative
functions on a combined basis. This includes marketing both companies' steel
products jointly under the combined brand name "Republic Technologies
International" using a single sales force. However, throughout fiscal 1998, each
customer purchase order for steel products continued to be placed directly with
the Company or Republic, as appropriate, to make the sale. The costs of joint
functions have been borne ratably by the Company and Republic based upon
relative sales volumes achieved. The Company also participates in an inventory
purchasing arrangement with Republic. Under the terms of this arrangement,
Republic purchases inventory products on behalf of both companies and bills the
Company for its respective purchases, plus an administrative fee.

As of January 4, 1999, Republic Technologies International Marketing, LLC
("Marketing JV") was formed. The Company and Republic expect to finalize an
agreement in the second quarter 1999 under which this jointly owned Marketing JV
will market, advertise, promote and sell both companies' steel products to each
company's existing and potential customers. The Company and Republic will be
reimbursed for expenses they incur on behalf of the Marketing JV, including
compensation costs of employees of the Company and Republic who perform sales
and marketing functions for the Marketing JV. Except for certain prior
commitments to customers that will continue to be placed with the Company or
Republic as applicable, it is intended that customer purchase orders will be
placed with the Marketing JV. Pursuant to allocation procedures to be approved
by the boards of directors of both companies, the production of steel products
to fulfill these orders will be allocated between the Company and Republic. To
compensate the Marketing JV for marketing services performed, it is intended
that the Company and Republic will pay commissions at specified percentages of
sales.



                                       43
<PAGE>   44


Since its formation, the Company has incurred substantial losses as a result of
the ongoing start-up of its facilities and its general administrative expenses.
Any substantial delay in achieving or a failure to bring the facilities up to
commercial volumes and productivity levels, or to sell its products in its
target markets could have a material adverse effect on the Company's financial
condition and results of operations. Also, in the event of a substantial delay
in integrating the operations of the Company and Republic, including
implementation of the Combination or the occurrence of any substantial
unanticipated cost related thereto, could have material adverse effect on the
Company's financial condition and results of operations. In the event of the
above, the Company may need to borrow funds under its Credit Agreement or, to
the extent funds are not available thereunder, to obtain additional financing to
meet its cash flow requirements. The Company is highly leveraged. Restrictive
covenants included in the indenture and other debt obligations may have the
effect of limiting the Company's ability to incur additional indebtedness, sell
assets, or acquire other entities and may otherwise limit the operational and
financial flexibility of the Company.

The Company and Republic presently perform certain functions on a combined basis
and intend to further integrate operations in 1999 through the Marketing JV. As
a consequence, management believes that capital resources and liquidity of the
Company and Republic can and will be managed on a combined basis prior to
consummation of the Combination. Management has prepared fiscal 1999 financial
and operational plans on a combined basis for the Company and Republic. Based on
these plans, even if the Combination is not consummated during 1999, management
believes that the aggregate of cash flows from combined operations, available
funds under existing credit agreements and funds expected to be available to
refinance certain acquisition-related debt of Republic, will be sufficient in
1999 to enable both the Company and Republic to meet their debt service
requirements when due and to fund their capital expenditures, working capital
and general corporate requirements, although there can be no assurances with
respect thereto.

The Company has two operating segments: hot-rolled and cold-finished special
quality steel bar products. The Company operates in both the United States and
Canada. Major market areas include the Midwest and Great Lakes Regions of the
United States, with customers that include the automotive, machinery, and tool
industries, as well as, independent forgers and steel service centers. The
Company's ability to generate future revenue may be dependent on economic
conditions in these geographic areas including conditions that affect those
industries.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Bar Technologies
Inc. and its wholly owned subsidiary, Bliss & Laughlin Industries Inc. ("BLI")
from April 2, 1996, the effective date of the acquisition. All significant
intercompany accounts and transactions have been eliminated.

FISCAL YEAR CHANGE

Effective with its reporting for fiscal 1999, the Company is changing its fiscal
year from a 4/4/5 week fiscal quarter basis ending the Saturday closest to
December 31 to a calendar quarter basis with the fiscal year ending on December
31. Accordingly, under the new fiscal year calendar, the Company's quarters will
each be comprised of three calendar months ending March 31, June 30, September
30 and December 31. Previously, each of the Company's quarters were comprised of
thirteen weeks. Due to the relative proximity of the new fiscal year end date
with the Company's former year end date, no transition period will be required.

Effective February 1997, the Company changed its fiscal year from its previous
calendar quarter basis ended September 30 to a 4/4/5 week fiscal quarter basis
ending the Saturday closest to December 31. As a result, the Company's fiscal
year 1997 began on December 29, 1996 and ended on January 3, 1998. Fiscal 1997
included 53 weeks while fiscal 1998 and 1996 each included 52 weeks. The
three-month transition period ended December 28, 1996 bridges the gap between
the Company's old and new fiscal year ends.


                                       44
<PAGE>   45

CASH AND CASH EQUIVALENTS

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

RESTRICTED DEBT SERVICE FUND

The restricted debt service fund consists of a noncurrent escrow amount required
by the Marine Midland Term Loan (see Note 7).

INVENTORIES

Inventories are valued at the lower of cost or market (net realizable value).
Cost is determined using the first-in, first-out (FIFO) method.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost and include improvements that
significantly extend the useful lives of existing plant and equipment. The
Company provides for depreciation of property, plant and equipment on the
straight-line method based upon the estimated useful lives of the assets.
Depreciation expense was $5,631 for fiscal 1998, $4,198 for fiscal 1997, $1,140
for the three months ended December 28, 1996 and $1,874 for fiscal 1996. The
range of estimated useful lives of the Company's assets are as follows:

                  Buildings and improvements     40 years
                  Machinery and equipment    7 - 20 years

Repairs and maintenance costs are expensed as incurred. Capital expenditures
which cannot be used immediately are included in construction-in-process. As
these projects are completed, they are transferred to depreciable assets. Net
gains or losses related to asset dispositions are recognized in earnings in the
period in which the disposition occurs.

The Company reviews long-lived assets and certain identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the amount or fair
value, as defined, of the assets. Assets to be disposed of are reported at the
lower of the carrying amount or fair value less costs to sell.

GOODWILL

Goodwill represents the amount paid for BLI in excess of the fair value of the
identifiable net assets acquired. It is being amortized on a straight-line basis
over 40 years.

NET LOSS PER SHARE

Basic earnings per share are computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share reflect the potential dilution that could
occur if common stock equivalents (i.e., warrants and stock options) were
exercised and then shared in the earnings of the Company. For the years ended
January 2, 1999 and January 3, 1998, the three months ended December 28, 1996,
and the year ended September 30, 1996, the reported basic and diluted earnings
per share were the same; however, securities totaling 91,609, 137,416, 132,606,
and 114,512, respectively for the above periods, were excluded from the diluted
earnings per share calculations due to their antidilutive effect.



                                       45
<PAGE>   46

The weighted average number of common shares used in the calculation of net loss
per common share were 1,278,152 and 888,581 for the years ended January 2, 1999
and January 3, 1998, respectively, 741,287 for the three month period ended
December 28, 1996 and 449,114 for the year ended September 30, 1996.

INCOME TAXES

Deferred income taxes are provided for all temporary differences between the
book and tax basis of assets and liabilities.

FOREIGN CURRENCY TRANSLATION

Asset and liability accounts of the Company's foreign subsidiary, Canadian Drawn
Steel Company, Inc. ("CDSC"), are translated into U. S. dollars in accordance
with Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation". Balance sheet accounts are translated using current exchange rates
in effect at the balance sheet date and revenue and expense accounts are
translated using a weighted average exchange rate during the period. Translation
adjustments are reflected as other comprehensive income (loss) in shareholders'
equity and had no tax effects for any of the periods presented.

Transaction gains and losses are included in the consolidated statements of
operations as incurred. These amounts were not significant in all periods
presented.

REVENUE RECOGNITION

The Company records revenues at the time product is shipped to its customers.
Sales are made with no right of return.

ACCOUNTING ESTIMATES

The presentation of the consolidated financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses and disclosure of contingent assets and liabilities. The
estimates and assumptions used in the accompanying consolidated financial
statements are based upon management's evaluation of the relevant facts and
circumstances as of the date of the financial statements. Actual results may
differ from the estimates and assumptions used in preparing the accompanying
consolidated financial statements.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and For Hedging Activities," ("SFAS 133"). This statement establishes accounting
and reporting standards requiring that every derivative instrument be recorded
on the balance sheet as either an asset or liability measured at fair value.
SFAS 133 requires that changes in the fair value of derivatives be recognized
currently in earnings unless specific hedge accounting criteria are met. SFAS
133 is effective for fiscal years beginning after June 15, 1999, and cannot be
applied retroactively. The Company has not completed its evaluation of SFAS 133
and accordingly, is unable to determine what impact, if any, SFAS 133 will have
on its financial statements.

RECLASSIFICATIONS

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


                                       46
<PAGE>   47


NOTE 2 - INVENTORIES

           Inventories consisted of the following:  (in thousands)

<TABLE>
<CAPTION>
                     January 2,       January 3,
                        1999            1998
                     ----------      ----------
<S>                  <C>             <C>       
Raw materials        $   13,965      $   14,569
Work-in-process          21,812          22,341
Finished goods           38,391          21,367
                     ----------      ----------
Total                $   74,168      $   58,277
                     ==========      ==========
</TABLE>

NOTE 3 - OTHER ASSETS

<TABLE>
<CAPTION>
           Other assets consisted of the following: (in thousands)

                                                       January 2,   January 3,
                                                          1999         1998
                                                        -------      -------
<S>                                                     <C>          <C>
Deferred financing costs, net of accumulated
   amortization of $7,170 and $4,351, respectively      $ 6,557      $ 9,188
Deferred income taxes                                     1,214        1,214
Other                                                     3,992        3,923
                                                        -------      -------
Total                                                   $11,763      $14,325
                                                        =======      =======
</TABLE>

NOTE 4 - ACQUISITION

On April 2, 1996, the Company consummated an amended merger agreement with BLI,
a major independent cold finished processor of steel bars. The Company acquired
BLI for $9.50 per common share in cash for an aggregate equity purchase price of
approximately $38.0 million, plus the assumption of $3.6 million of debt and the
refinancing of $16.8 million of debt. The Company financed the acquisition with
part of the proceeds of its recapitalization. (See Note 5 - Recapitalization).

The acquisition was accounted for as a purchase, and accordingly, the results of
operations of BLI have been included in the consolidated financial statements
since April 2, 1996. The purchase price, including acquisition expenses, was
allocated to assets acquired and liabilities assumed based on fair market values
at the date of acquisition. The excess of the purchase price over the fair
market value of the net assets acquired was recognized as goodwill and is being
amortized over 40 years. The fair value of assets acquired and liabilities
assumed are summarized as follows: (in thousands)

<TABLE>
<CAPTION>
<S>                                <C>     
Current assets                     $ 53,743
Property, plant and equipment        21,468
Other assets                          5,165
Goodwill                             12,860
Current liabilities                 (38,142)
Long-term liabilities               (13,064)
                                   --------

Total                              $ 42,030
                                   ========
</TABLE>


                                       47
<PAGE>   48


NOTE 5 - RECAPITALIZATION AND EQUITY CONTRIBUTIONS

On April 2, 1996, the Company completed a recapitalization ("Recapitalization)
which included the following: 

-         The issuance of $91.6 million in aggregate principal amount of 13-1/2%
          Senior Secured Notes due 2001 for proceeds of $90.0 million.
-         The issuance of 536,829 shares of Class B Common Stock in
          consideration of $30.0 million in cash provided by Blackstone ("the
          Blackstone Investment").
-         The establishment of a new senior revolving credit agreement ("the
          Revolving Credit Agreement") among the Company and a syndicate of 
          banks with Chase Manhattan Bank (formerly Chemical Bank), as agent, 
          which provides the Company with a revolving credit facility in an 
          aggregate principal amount of up to $90.0 million, of which a portion
          will be available in the form of letters of credit.
-         The consummation of an amended merger agreement with BLI, a major
          independent cold finished processor of steel bars. The Company
          acquired BLI for $9.50 per common share in cash for an aggregate
          equity purchase price of approximately $38.0 million, plus the
          assumption of $3.6 million of debt and the refinancing of $16.8
          million of debt. The Company financed the acquisition with part of the
          proceeds of the Recapitalization.
-         The repayment of the following indebtedness: (i) approximately $16.8
          million aggregate principal amount of outstanding loans under BLI
          Revolving Credit Facilities; (ii) approximately $5.8 million aggregate
          principal amount of outstanding loans under the Existing Bar Tech
          Credit Facilities; and (iii) approximately $6,100 aggregate principal
          amount of outstanding loans under the Master Agreement with the
          Commonwealth of Pennsylvania and various of its agencies (the "Master
          Agreement").

On September 11, 1997, the Company's principal owners, Blackstone and Veritas
purchased 536,865 shares of Class C non-voting common stock for $30.0 million.
The proceeds were used to fund the Company's capital program aimed at enhancing
the productive capacity of its steelmaking facilities. Approximately $14.0
million was for improvements to the Company's Johnstown, Pennsylvania mill
facility to produce enhanced machinability (including leaded) and bearing steel
grades. An additional $14.0 million was for several projects at the Company's
Lackawanna, New York 13" bar mill. The remaining amounts were for various
projects at the Company's cold-finishing subsidiary, BLI. These projects are
expected to be completed during the second half of fiscal 1999.

NOTE 6 - REVOLVING CREDIT AGREEMENT

In April 1996, the Company entered into a $90.0 million Revolving Credit
Agreement with a group of banks with Chase Manhattan Bank as agent. The
revolving facility provided the Company with an aggregate principal amount of up
to $90.0 million, of which $5.4 million is in the form of letters of credit. The
Credit Agreement matures April 2, 2000 and is initially secured by (i) all of
the inventory, accounts receivable, related intangibles and documents and the
proceeds of the foregoing; (ii) all of the Common Stock of the Company
outstanding as of April 2, 1996, subject to dilution and release under certain
circumstances, and; (iii) all of the Capital Stock of each direct or indirect
subsidiary of the Company. The pledges of Capital Stock referred to in (ii) and
(iii) will be made on a first priority basis and will be equal and ratable with
the liens on such capital stock in favor of holders of Senior Notes. Borrowings
under the Credit Agreement bear interest at a rate per annum equal to, at the
Company's option, either a prime rate plus 2.0% or an adjusted LIBOR rate plus
3.0%, subject to upward adjustment in certain circumstances.

The Credit Agreement contains a number of covenants that, among other things,
restrict the ability of the Company to dispose of assets, incur additional
indebtedness, prepay other indebtedness or amend other debt instruments, pay
dividends, create liens on assets, enter into sale and leaseback transactions,
make investments, loans or advances, make acquisitions, engage in mergers or
consolidations, change the business conducted by the Company, make capital
expenditures above certain levels or engage in certain transactions with
affiliates and otherwise restrict corporate activities. In addition, under the
Credit Agreement, the Company is required to maintain a minimum Consolidated
Interest Coverage Ratio. The Credit Agreement also contains provisions that
prohibit any modifications of the Indenture Agreement dated April 2, 1996 to the
Senior Notes in any manner adverse to the Lenders and that limit the Company's


                                       48
<PAGE>   49

ability to refinance the Senior Notes without the consent of such Lenders. In
the third quarter of 1997, the Company and its commercial banks negotiated an
amendment to its existing $90.0 million Revolving Credit Agreement (the "Amended
Agreement"). The Amended Agreement provides for the addition of a new revolving
Sub-Facility ("Sub-Facility") and amends certain portions of its original
Revolving Credit Agreement. The Sub-Facility component of the Amended Agreement
provides the Company with up to $15.0 million of additional borrowing capacity
based on a higher receivable and inventory advance rate than in the Revolving
Credit Agreement. The Sub-Facility component of the Amended Agreement expires on
September 1, 1999. The maturity date of the Amended Agreement remains April 2,
2000. 

Borrowings under the Amended Agreement bear interest at a rate per annum
equal to, at the Company's option, either a prime rate plus 2.0% or adjusted
LIBOR plus 3.0%, subject to upward adjustment in certain circumstances.
Sub-Facility borrowings bear interest at a rate per annum equal to, at the
Company's option, either a prime rate plus 3.5% or LIBOR plus 4.5%. Borrowings
outstanding under the Amended Agreement including the Sub-Facility were $79.0
million at January 2, 1999 and $53.7 million at January 3, 1998, respectively.
There were no amounts available under the Amended Agreement and Sub-Facility at
January 2, 1999 based on the applicable borrowing base under its Amended
Agreement. Weighted-average interest rates on borrowings under the Amended
Agreement and the Sub-Facility at January 2, 1999 were 8.79% and 11.50%,
respectively. At January 3, 1998, weighted-average interest rates were 8.98% and
11.00%, respectively.

The Amended Agreement contains a number of covenants similar to those in the
Revolving Credit Agreement. Additionally, under the Amended Agreement, the
Company is required to maintain a minimum Consolidated Interest Coverage Ratio
beginning with annualized results for the quarter ended September 30, 1998. The
Amended Agreement also contains provisions that prohibit any modifications of
the Indenture Agreement dated April 2, 1996 to the Senior Notes in any manner
adverse to the Lenders and that limit the Company's ability to refinance the
Senior Notes without the consent of such Lenders.




                                       49
<PAGE>   50

NOTE 7 - FINANCING ARRANGEMENTS

The Company had the following long-term debt obligations outstanding:

<TABLE>
<CAPTION>
                                                                        January 2,     January 3,
                                                                           1999          1998
                                                                         --------      --------
<S>                                                                      <C>           <C>
13-1/2% Senior Secured Notes, due April 1, 2001                          $ 91,609      $ 91,609
Marine Midland Term Loan, interest rate at Prime or LIBOR plus
   1.0%, due March 1, 2003                                                  6,929         7,578
RDC Loan, interest rate at 7.75%, due July 1, 2004                            411           482
Economic Development Partnership ("EDP I"), interest at 3.0%,
   due October 1, 2009                                                      5,707         5,707
Sunny Day Fund I ("SDF I"),  interest rate at 3.0%, due
   October 1, 2009                                                          6,491         6,607
Community Development Block Grant Program ("CDBG"),
   interest rate at 3.0%, due July 1, 2010                                    690           690
Economic Development Partnership ("EDP II"), interest rate at
   3.0%, due July 1, 2010                                                   1,300         1,300
Housing and Urban Development 108 ("HUD") Bonds, interest
   rates between 6.6% and 8.2%, due on various dates from August 1,
   1999 to September 26, 2003                                               5,750         7,000
Pennsylvania Industrial Development Authority Note ("PIDA I"),
   interest rate at 2.0%, due October 1, 2009                               1,646         1,646
Pennsylvania Industrial Development Authority Note ("PIDA II"),
   interest rate at 3.0%, due March 1, 2011                                 1,797         1,797
Bethlehem Subordinated Note, interest rate at 7.0%, due
   September 26, 2002                                                       5,500         5,500
Business Infrastructure Development ("BID"), Program, interest
   rate at 3.0%, due April 1, 2011                                          2,500         2,500
Economic Development Partnership ("EDP III"), interest rate at
   3.0%, due December 1, 2007                                               3,000         3,000
Industrial Revenue Bond ("IRB"), interest rate is variable,
   calculated weekly, representing minimum rate required to sell
   bonds in a secondary market, due December 1, 2018                        3,600         3,600
U.S. Bank Mortgage Note, interest at 9.35%, due April 1, 2002                  --           315
                                                                         --------      --------
                                                                          136,930       139,331
Less:  Original issue discount                                              4,163         5,557
                                                                         --------      --------
Total                                                                     132,767       133,774
Less:  Current maturities                                                   3,805         3,033
                                                                         --------      --------
Long - term debt                                                         $128,962      $130,741
                                                                         ========      ========
</TABLE>

The Company incurred an extraordinary charge of $2.2 million during the third
quarter of fiscal 1996, to reflect the recognition of premium and previously
deferred charges resulting from the repayment of debt as part of the
Recapitalization.

SENIOR SECURED NOTES

In April 1996, the Company completed a Recapitalization which included the
issuance of $91.6 million in aggregate principal amount Senior Secured Notes
("Senior Notes"). Interest on the Senior Notes is at 13-1/2% per annum and is
payable semi-annually on each April 1 and October 1, to the holders of record of
Senior Notes at the close of business on March 15 and September 15 immediately
preceding such interest payment date.


                                       50
<PAGE>   51


The Senior Notes are callable after three years at the following redemption
prices:

<TABLE>
<CAPTION>
                           Year                               Percentage
                           ----                               ----------
<S>                                                           <C>
                           1999                                106.750%
                           2000                                103.375%
</TABLE>

The Senior Notes are fully and unconditionally guaranteed (the "Guarantee") on a
senior basis, jointly and severally, by the Company's wholly-owned subsidiary,
BLI and its wholly-owned subsidiary, CDSC. The subsidiary guarantors comprise
all of the direct and indirect subsidiaries of the Company.

The following is the condensed information of the subsidiary guarantors on a
combined basis. The separate financial statements and other disclosures
concerning the subsidiary guarantors are not presented because management does
not believe they would be material to investors. The following information is as
of and for the years ended January 2, 1999 and January 3, 1998, the three months
ended December 28, 1996 and the period ended September 30, 1996: (in thousands)

<TABLE>
<CAPTION>
                                                            Three Months
                            Year Ended      Year Ended         Ended          Period Ended
                            January 2,      January 3,      December 28,    September 30,
                               1999            1998             1996             1996
                            ----------      ----------      ----------       ----------
<S>                         <C>             <C>             <C>              <C>       
Current assets              $   48,465      $   56,948      $   48,814       $   52,082
Noncurrent assets               37,745          37,868          39,229           39,871
Current liabilities             33,152          43,180          37,811           41,117
Noncurrent liabilities          13,979          13,611          13,244           13,209
Net sales                      157,764         159,120          35,369           73,120
Gross profit                    15,562          17,026           3,419            5,118
Operating income                 3,519           3,307             105            3,165
Net income (loss)                1,751           1,035            (497)          (4,414)
</TABLE>

The Senior Notes and the Guarantee are collateralized by liens on (i) interests
in certain real properties owned or leased by the Company and the Guarantors on
the issue date, (ii) interest in machinery and equipment owned on, or acquired
after, the issue date by the Company and the Guarantors located at such real
properties, (iii) all of the Common Stock of the Company outstanding on the
issue date (which was pledged on a non-recourse basis and will be subject to
dilution for issuances of Common Stock subsequent to the Offering and release
upon the occurrence of certain events), (iv) all of the outstanding capital
stock of the Company's existing subsidiaries, (v) certain contract and
intellectual property rights of the Company and the Guarantor, (vi) the Interest
Escrow Account, and (vii) proceeds of the foregoing.

The Indenture contains certain restrictive covenants including (i) limitations
on additional indebtedness, (ii) limitations on issuances and sales of preferred
stock of certain subsidiaries, (iii) limitations on restricted payments, (iv)
limitations on liens, (v) limitations on sale-leaseback transactions, (vi)
limitations on payment restrictions affecting the subsidiaries, (vii)
limitations on the disposition of proceeds from asset sales, (viii) limitations
on transactions with interested persons and (ix) limitations on designations of
Unrestricted Subsidiaries (as defined). In addition, the indenture limits the
ability of the Company and the guarantors to consolidate, merge or sell all or
substantially all of their assets. These covenants are subject to important
exceptions and qualifications.

If the Company has Excess Cash Flow for any fiscal year, it will be required,
subject to certain exceptions and limitations (including its ability to retain
the first $10.0 million of Excess Cash Flow), to use 75% of such Excess Cash
Flow to make an offer to purchase Senior Notes at a price equal to 100% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of the purchase.

Issued in connection with the Senior Notes are warrants which entitle the
holders thereof to acquire an aggregate of 91,609 shares of Class A Common
Stock, representing approximately 10% of the Company's



                                       51
<PAGE>   52

outstanding common stock on a fully diluted basis immediately after giving
effect to the consummation of the Recapitalization and certain other agreed to
issuances of common stock.

The warrants can be exercised at a price of $0.01 per share of common stock on
or after July 1, 1996 and after the occurrences of certain other events. The
warrants expire on April 1, 2001. The recording of these warrants created an
original issue discount on the Senior Notes.

ECONOMIC DEVELOPMENT FINANCING

In connection with the acquisition of the assets of Bethlehem BRW Division and
its original modernization and expansion plan, the Company entered into loan
agreements with lenders in Pennsylvania and New York to procure financing for
the transaction.

Pennsylvania

The Company entered into the Master Agreement with the Commonwealth of
Pennsylvania and various of its agencies (collectively, the "Commonwealth") on
July 18, 1994. Pursuant to the Master Agreement, the Company entered into loan
agreements with the Commonwealth, through its Department of Commerce and
Department of Community Affairs. The total amount committed to the Company by
the Commonwealth pursuant to the Master Agreement was $33.0 million. The loans
have been made through the Sunny Day Fund ("SDF"), the Johnstown Industrial
Development Corporation ("IDC"), the Pennsylvania Industrial Development
Authority ("PIDA"), the Business Infrastructure Development Program ("BID"), the
Economic Development Partnership ("EDP"), the Community Development Block Grant
Program ("CDBG") and the Enterprise Zone Competitive Program ("ECP"). (The loans
governed by the Master Agreement are collectively referred to herein as the
"Commonwealth Loans").

The Company has obtained approval from the Pennsylvania Industrial Development
Authority regarding the deferral of principal on its PIDA and BID loans, and
principal and interest deferral on its EDP loans. The Company must resume
principal payments related to PIDA and BID loans and principal and interest
payments related to EDP loans beginning January 2000. All deferred loans are
required to be amortized over their original maturity schedule with no deferral
of final maturity.

As of January 2, 1999 and January 3, 1998, $23.1 million and $23.2 million,
respectively, in aggregate principal amount of Commonwealth Loans were
outstanding.

New York

JDA Guaranteed Marine Midland Term Loan - The Company is party to a Loan and Use
Agreement, dated September 21, 1994, with Marine Midland Bank ("Marine Midland")
(the "Marine Midland Loan"), whereby Marine Midland loaned $10.0 million to the
Company for use in connection with the acquisition of Lackawanna, New York real
estate from Bethlehem. The Marine Midland Loan is guaranteed by the New York Job
Development Authority ("JDA"). Interest on the Marine Midland Loan is the Prime
rate, or the LIBOR rate, as determined by the Company.

RDC Loan - The Company is party to a Loan Agreement with the Buffalo and Erie
County Regional Development Corporation ("RDC") providing for a loan in the
amount of $0.5 million to be used by the Company for working capital needs (the
"RDC Loan"). The RDC Loan has an interest rate of 7.75% per annum until July 1,
1999, and has an adjustable rate thereafter. The RDC Loan is secured by a
Security Agreement which grants RDC a security interest in equipment, fixtures,
inventory, accounts receivable, chattel paper and general intangibles.

BETHLEHEM SUBORDINATED LOAN AGREEMENT

The Company entered into $5.5 million Subordinated Loan Agreement, dated
September 21, 1994, with Bethlehem (the "Bethlehem Loan"). The terms of the
agreement provide for three equal installments on the first day of October in
each of the years 2000, 2001 and 2002 at a rate of 7.0% per annum and is due on


                                       52
<PAGE>   53

October 1, 2002. The Bethlehem Loan is secured by a subordinated security
interest in certain real and personal property of the Company and any and all
proceeds therefrom. The outstanding principal amount under the Bethlehem Loan
has been reduced by an original issue discount.

OTHER

In March 1999, the Company obtained waivers of default provisions under the
terms of the Marine Midland Loan and certain Commonwealth Loans in exchange for
payment of certain amounts the lenders considered delinquent. The Company also
agreed, subject to consummation of the Combination, to refinance the SDF, PIDA I
and PIDA II loans and to modify the terms of certain other Commonwealth Loans.

Maturities of the Company's long-term debt obligations were as follows: (in 
thousands)

<TABLE>
<S>                                                  <C>
                  1999                               $       3,805
                  2000                                       6,239
                  2001                                      98,219
                  2002                                       7,079
                  2003                                       3,514
            Thereafter                                      18,074
                                                     ----------------
                 Total                               $     136,930
                                                     ================
</TABLE>

NOTE 8 - SEGMENTS AND RELATED INFORMATION

The Company operates in two reportable segments: hot-rolled and cold-finished.
The Company manages the reportable segments as separate strategic business
units. Differences between the segments include: manufacturing techniques and
equipment, competition, and end-users. The Company's hot-rolled engineered bar
products include rounds, squares and hexagons in both cut lengths and coils. The
Company produces hot rolled engineered bar products up to 3 1/4" in diameter
which are generally used by its customers in critical applications where product
strength, integrity and durability are imperative considerations such as cam
shafts, axles, roller bearings, automotive suspension parts, large fasteners,
hydraulic hose fittings, transmission gears, and forged hand tools.

The Company also produces cold finished bars which are used in machined and
shafting products that require superior straightness, tolerance, finish and
mechanical properties. Cold finished bars are processed from hot rolled bars, by
a process that cleans, draws and straightens the raw material and cuts it to
specific lengths. Products include round bars from 9/16" to 3-1/2" in diameter
and hexagonal bars from 1" to 1-13/16" thick. End users of cold finished bars
incorporate them in a wide range of products including electrical and
non-electrical machinery and equipment and a wide variety of vehicular equipment
including automobiles, trucks, sport-utility vehicles, off-road vehicles and
agricultural equipment.

Both segments operate in similar markets within the United States and Canada.
Major market areas include the Midwest, Southeast and Great Lakes Regions of the
United States, with customers that include automotive, machinery and tool
industries as well as independent forgers and steel service centers.

The accounting policies of both segments are the same as those described in the
Company's Summary of Significant Accounting Policies. The Company measures
segment performance based on earnings before interest, taxes, depreciation and
amortization ("EBITDA").


                                       53
<PAGE>   54

Hot-rolled accounts for intersegment sales at current market prices as if the
transaction had taken place with a third party.

<TABLE>
<CAPTION>
                                                                 For the Year Ended January 2, 1999
                                                                           (in thousands)
                                     ------------------------------------------------------------------------------------------
                                                                                                  Inter
                                                           Cold-               Total             Segment
                                       Hot-Rolled        Finished             Segments         Eliminations       Consolidated
                                     -------------     -------------      --------------     ----------------    --------------
<S>                                  <C>                <C>                <C>                <C>                <C>         
Net sales                            $    164,016       $    157,764       $    321,780       $    (49,929)      $    271,851
Depreciation and amortization               3,780              2,181              5,961               --                5,961
Segment profit (EBITDA)                   (14,759)             5,704             (9,055)              --               (9,055)
Segment assets                            153,661             86,210            239,871            (17,370)           222,501
Capital expenditures                       14,228              2,097             16,325               --               16,325
</TABLE>

<TABLE>
<CAPTION>
                                                                 For the Year Ended January 3, 1998
                                                                           (in thousands)
                                     ------------------------------------------------------------------------------------------
                                                                                                  Inter
                                                           Cold-               Total             Segment
                                       Hot-Rolled        Finished             Segments         Eliminations       Consolidated
                                     -------------     -------------      --------------     ----------------    --------------
<S>                                  <C>                <C>                <C>                <C>                <C>         
Net sales                            $    140,494       $    159,120       $    299,614       $    (56,718)      $    242,896
Depreciation and amortization               2,518              2,005              4,523               --                4,523
Segment profit (EBITDA)                   (22,102)             5,313            (16,789)              --              (16,789)
Segment assets                            138,509             94,816            233,325            (27,647)           205,678
Capital expenditures                        4,590              1,223              5,813               --                5,813
</TABLE>

<TABLE>
<CAPTION>
                                                           For the Three Months Ended December 28, 1996
                                                                           (in thousands)
                                     ------------------------------------------------------------------------------------------
                                                                                                  Inter
                                                           Cold-               Total             Segment
                                       Hot-Rolled        Finished             Segments         Eliminations       Consolidated
                                     -------------     -------------      --------------     ----------------    --------------
<S>                                  <C>                <C>                <C>                <C>                <C>         
Net sales                            $     12,304       $     35,369       $     47,673       $     (7,422)      $     40,251
Depreciation and amortization                 599                622              1,221               --                1,221
Segment profit (EBITDA)                    (7,880)               727             (7,153)              --               (7,153)
Segment assets                            139,303             88,043            227,346            (21,059)           206,287
Capital expenditures                           50                136                186               --                  186
</TABLE>

<TABLE>
<CAPTION>
                                                             For the Year Ended September 30, 1996
                                                                           (in thousands)
                                     ------------------------------------------------------------------------------------------
                                                                                                  Inter
                                                           Cold-               Total             Segment
                                       Hot-Rolled        Finished             Segments         Eliminations       Consolidated
                                     -------------     -------------      --------------     ----------------    --------------
<S>                                  <C>                <C>                <C>                <C>                <C>         
Net sales                            $     12,531       $     73,120       $     85,651       $     (8,488)      $     77,163
Depreciation and amortization                 838              1,198              2,036               --                2,036
Segment profit (EBITDA)                   (26,378)            (1,967)           (28,345)              --              (28,345)
Segment assets                            126,368             91,953            218,321            (17,342)           200,979
Capital expenditures                       20,400                900             21,300               --               21,300
</TABLE>


The reconciliation of segment profit (EBITDA) to net loss before extraordinary
item is as follows: (in thousands)


<TABLE>
<CAPTION>
                                               Year Ended             Year Ended          Three Months            Year Ended
                                               January 2,             January 3,        Ended December 28,       September 30,
                                                  1999                  1998                   1996                   1996
                                            ----------------       ---------------      ------------------      ---------------
<S>                                            <C>                    <C>                 <C>                    <C>
Segment profit (EBITDA)                        $  (9,055)             $ (16,789)           $   (7,153)           $    (28,345)
Provision for income taxes                             3                    205                     3                     205
Interest expense, net                             26,959                 23,306                 5,148                  10,833
Depreciation and amortization                      5,961                  4,523                 1,221                   2,036
                                            ----------------       ---------------      ------------------      ---------------
Net Loss before extraordinary           
   item                                        $ (41,978)             $ (44,823)           $  (13,525)           $    (41,419)
                                            ================       ===============      ==================      ===============

</TABLE>

The Company operates in both the United States and Canada. Its net sales from
external customers in Canada were approximately $22.0 million, $34.0 million,
$8.0 million, and $31.0 million for the years ended January 2, 1999 and January
3, 1998, the three months ended December 28, 1996, and the year ended September
30, 1996, respectively. Its principal long-lived assets, consisting of property,
plant, and equipment, were $4.1 million and $4.5 million and January 2, 1999 and
January 3, 1998, respectively.

                                       54
<PAGE>   55


NOTE 9 - PENSIONS AND OTHER POSTRETIREMENT BENEFIT PLANS

At January 2, 1999, the Company adopted SFAS 132, "Employers' Disclosure about
Pensions and Other Postretirement Benefits" ("SFAS 132"). This statement revises
the disclosures for pension and other postretirement benefit plans but does not
change the way obligations or expense are measured or recognized in the
financial statements. Disclosures for prior periods have been conformed to the
requirements of SFAS 132.

BLI maintains defined benefit pension plans covering substantially all hourly
employees of its Harvey, Illinois, and Medina, Ohio plants. Employees at the
Batavia, Illinois and Cartersville, Georgia, plants are not covered. Benefits
are based on years of service and employee's age at termination. The Company's
Canadian subsidiary, CDSC, maintains pension plans covering substantially all
employees. Benefits for the CDSC salaried employees' plan are based on an
average salary for the five most recent years prior to retirement. Benefits for
the CDSC bargaining unit employees' plan are based on years of service. The
Company's policy is to fund pension cost in accordance with the requirements of
the Employee Retirement Income Security Act of 1974 in the United States and
local regulations in Canada.

BLI and CDSC also sponsor postretirement plans for health care and life
insurance that cover most full-time employees. The plans pay stated percentages
of most necessary medical expenses incurred by retirees, after subtracting
payments by Medicare or other providers and after a stated deductible has been
met. Participants become eligible for benefits if they retire from BLI or CDSC
after reaching age 55 with 10 or more years of service.

In addition, the Company and its subsidiaries maintain various defined
contribution plans, including salary savings plans, profit sharing plans and a
supplemental incentive compensation plan. Expense related to these plans was
approximately $317, $171, $44 and $56 in fiscal 1998, fiscal 1997, the three
months ended December 28, 1996 and fiscal 1996, respectively.

At January 2, 1999 and January 3, 1998, the plan assets for all plans were
invested in various trust funds administered by a trustee.

The components of the net periodic pension costs are summarized as follows: (in 
thousands)

<TABLE>
<CAPTION>
                                                                             Three Months
                                                   Year Ended    Year Ended      Ended     Period Ended
                                                   January 2,    January 3,   December 28, September 30,
                                                       1999        1998          1996          1996
                                                  ------------  -----------   -----------   -----------
<S>                                                 <C>           <C>           <C>           <C>    
Service cost                                        $   394       $   393       $   183       $   186
Interest cost on projected benefit obligations        1,283         1,254           645           614
Expected return on plan assets                       (1,718)       (1,633)         (780)         (896)
Amortization of prior service cost                       40            35          --            --
Recognized net actuarial loss (gain)                     21            22             9           188
                                                    -------       -------       -------       -------
Net periodic pension cost                           $    20       $    71       $    57       $    92
                                                    =======       =======       =======       =======
</TABLE>

Net periodic postretirement benefit cost included the following components: (in
thousands)

<TABLE>
<CAPTION>
                                                                     Three Months        
                                       Year Ended      Year Ended       Ended        Period Ended
                                       January 2,      January 3,    December 28,    September 30,
                                          1999            1998           1996            1996
                                       ----------      ----------    ------------    -------------
<S>                                    <C>             <C>           <C>             <C>     
Service cost of benefit earned          $    202        $    161        $     41        $     66
Interest on accumulated postretirement
  benefit obligations                        431             415             105             184
Recognized net actuarial loss                 42              10            --              --
                                        --------        --------        --------        --------
Net periodic postretirement cost        $    675        $    586        $    146        $    250
                                        ========        ========        ========        ========
</TABLE>

                                       55
<PAGE>   56

The change in benefit obligation, change in plan assets, funded status and
amounts recognized in the consolidated balance sheets related to the Company's
pension plans and other postretirement benefits are as follows: (in thousands)

<TABLE>
<CAPTION>
                                                             PENSION PLANS                          OTHER BENEFITS
                                                  ------------------------------------     -----------------------------
                                                       JANUARY 2,         JANUARY 3,         JANUARY 2,        JANUARY 3,
                                                          1999               1998              1999              1998
                                                  ------------------------------------     -----------------------------
<S>                                                     <C>               <C>               <C>               <C>     
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year                 $ 19,142          $ 17,115          $  6,579          $  5,426
Service cost                                                 394               393               202               161
Interest cost                                              1,283             1,254               431               415
Amendments                                                  --                  68              --                --
Foreign currency exchange rate change                       (654)             (371)             (456)             --
Actuarial (gain) loss                                        (90)            --                  (33)             --
Change in discount rate                                      418             1,718                75               913
Benefits paid                                             (1,300)           (1,035)             (320)             (336)
                                                  ------------------------------------     -----------------------------
Benefit obligation at end of year                       $ 19,193          $ 19,142          $  6,478          $  6,579

CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year          $ 20,946          $ 19,735              --                --
Actual return on plan assets                               2,384             2,364              --                --
Employer contribution                                        508               332          $    320         $     336
Foreign currency exchange rate change                       (712)             (450)             --                --
Benefits paid                                             (1,300)           (1,035)             (320)             (336)
                                                  ------------------------------------     -----------------------------
Fair value of plan assets at end of year                $ 21,826          $ 20,946          $   --            $   --

Funded status - overfunded (underfunded)                $  2,633          $  1,804          $ (6,478)         $ (6,579)
Unrecognized net actuarial loss                               19               484             1,346             1,445
Unrecognized prior service cost                              502               574              --                --
                                                  ------------------------------------     -----------------------------
Prepaid (accrued) benefit cost                          $  3,154          $  2,862          $ (5,132)         $ (5,134)
                                                  ====================================     =============================
WEIGHTED AVERAGE ASSUMPTIONS:
Discount rate                                               6.83%             7.00%             6.81%             6.93%
Expected return on plan assets                              8.50%             8.50%
Rate of compensation increase                               4.59%             4.59%
</TABLE>

The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for the pension plan with accumulated benefit obligations in
excess of plan assets were $1,321, $1,289, and $1,231, respectively, as of
January 2, 1999, and $1,172, $1,144, and $1,083, respectively, as of January 3,
1998.

For measurement purposes, a weighted average annual rate of increase in the per
capita cost of covered health care claims of 7.56% was assumed for fiscal 1999;
the rate assumed to decrease by approximately 0.5% per year to 5.40% for fiscal
2003, and remain at that level thereafter. To illustrate the health care cost
trend on amounts reported, changing the assumed health care cost trend rates by
one percentage point in each year would have the following effects as of and for
the fiscal year ended January 2, 1999: (in thousands)

<TABLE>
<CAPTION>
                                                                             One Percentage Point
                                                                       Increase               Decrease
                                                                   ------------------    --------------------
<S>                                                                <C>                   <C>           
            Effect on total service and interest cost components   $         123         $          112
            Effect on postretirement benefit obligation            $       1,204         $        1,115
</TABLE>


                                       56
<PAGE>   57

NOTE 10 - INCOME TAXES

The components of deferred income taxes at January 2, 1999 and January 3, 1998
were as follows:

<TABLE>
<CAPTION>
                                               (in thousands)
Asset (liability)                    January 2, 1999    January 3, 1998
-----------------
<S>                                     <C>              <C>       
Net operating loss carryforwards        $   59,310       $   41,876
Inventory                                    2,560            1,733
Post retirement benefits                     2,019            2,002
Property basis differences                  (8,319)          (6,336)
Other - net                                    894              209
Valuation allowance                        (59,670)         (42,736)
                                        ----------       ----------
Net deferred income taxes               $   (3,206)      $   (3,252)
                                        ==========       ==========
</TABLE>

Net deferred income tax assets (liabilities) as of January 2, 1999 and January
3, 1998 recorded in the balance sheet were as follows:

<TABLE>
<CAPTION>
                                           (in thousands)
                                 January 2, 1999    January 3, 1998
                                 ---------------    ---------------
<S>                                <C>                <C>       
Prepaid expense                    $      581         $      581
Other assets                            1,214              1,214
Other long-term liabilities            (5,001)            (5,047)
                                   ----------         ----------
Net deferred income taxes          $   (3,206)        $   (3,252)
                                   ==========         ==========
</TABLE>

As of January 2, 1999, the Company had net operating loss carryforwards of
approximately $148 million available to offset future federal and state taxable
income during the carryforward periods which expire through 2019. These
carryforwards include amounts available from certain prior year operating loss
carryforwards which were limited as a result of the Recapitalization.
Utilization of these prior year loss carryforwards is limited to approximately
$1.1 million annually through 2010.

The realization of these tax benefits will depend upon the Company's ability to
generate future taxable income. Based upon its history of net operating losses,
the Company has recorded a valuation allowance to offset net deferred tax assets
that are not expected to be realized.

The provision for income taxes for fiscal 1998, fiscal 1997, the three months
ended December 28, 1996 and fiscal 1996 consisted of currently payable income
taxes, primarily foreign income taxes owed by CDSC. The difference between the
U.S. statutory income tax rate of 35% and the Company's effective rate results
principally from the recorded valuation allowances used to offset the deferred
tax benefits of tax loss carryforwards incurred by its U.S. operations during
each of these periods.

NOTE 11 - COMMON AND PREFERRED STOCK

The Company's authorized capital stock consists of 1,000,000 shares of Class A
Common Stock, 600,000 shares of Special Class B Common Stock, 600,000 shares of
Special Class C Common Stock and 5,000 shares of Series A Preferred Stock and
one share of Series B Preferred Stock, each with a par value of $0.001 per
share. The Special Class B Common Stock allows the holders to designate
directors who will hold 50 % of the voting power of the Board of Directors. The
Special Class B Common Stock will also have certain rights in the event of a
liquidation, dissolution or winding up of the Company. The Company's Class C
common stock is non-voting.

In connection with the Recapitalization, 66,600 shares of existing common stock
of the Company were converted into 196,410 shares of Class A Common Stock. As a
result, the number of shares outstanding prior to the Recapitalization and
earnings per share amounts were adjusted to reflect this reclassification of
shares.



                                       57
<PAGE>   58

On September 26, 1994, the Company issued 1,100 shares of Series A Cumulative
Preferred Stock with a $0.001 par value to Bethlehem in connection with the
formation of the Company. The shares were issued at $5,000 per share or $5.5
million in total.

In each year, the Series A Preferred Stock is entitled to receive, whether or
not declared by the Board of Directors, cash dividends equal to $350 per share,
which dividends are cumulative. In the event that the Company is liquidated, the
holders of Series A Preferred Stock are entitled to a liquidation preference,
prior to any payment on the Common Stock, of $5,000 per share plus any unpaid
dividends. The Company is required to redeem all shares of Series A Preferred
Stock on the sixth anniversary of the date of original issuance of such shares
(September 26, 2000) for a total of $5,000 per share plus all accrued or
declared but unpaid dividends, and the Company may, at its option, redeem shares
of Series A Preferred Stock at an earlier date at the mandatory redemption
price, plus accrued but unpaid dividends. Holders of Series A Preferred Stock do
not generally vote on stockholders' matters. However, the consent or vote of
66-2/3% in voting power of the Series A Preferred Stock are only transferable by
a holder of Series A Preferred Stock to an affiliate of such holder or upon the
prior written consent of the Company. Upon redemption or repurchase by the
Company, shares of Series A Preferred Stock will not be reissued and will be
canceled.

One share of Series B Preferred Stock was issued to the union representing the
Company's Johnstown, PA and Lackawanna, NY facilities. The Series B Preferred
Stock is not entitled to receive dividends and is non-redeemable. In the event
that the Company is liquidated, the holder of Series B Preferred Stock is to be
entitled to a liquidation preference, after payment to the holders of the Series
A Preferred Stock and prior to any payment on the Common Stock, of $100 per
share. The Series B Preferred Stock does not generally vote on stockholders'
matters; however, the holder of Series B Preferred Stock has the right to
nominate and elect two directors to the Board of Directors, and to remove such
directors as provided in the Company's Bylaws.

As part of the Recapitalization in April 1996, the Company issued 536,829 shares
of Class B common stock in consideration of $30.0 million in cash provided by
Blackstone. In September 1997, the Company issued 536,865 shares of Class C
common stock to Blackstone and Veritas for capital contributions of $30.0
million.

NOTE 12 - STOCK PLANS

As part of the Company's previous collective bargaining agreement with the
United Steelworkers of America ("USWA"), the Company committed to grant
employees represented by the USWA a minimum of 20% equity interest in its common
stock through one or more stock ownership plans ("ESOP"), subject to dilution
for events occurring subsequent to February 1994. Following the Recapitalization
and Equity Investment, the commitment had been reduced to 3.7% of the Company's
common stock as of January 3, 1998, on a fully diluted basis. Under the previous
collective bargaining agreement, the allocation methodology and timing had not
been determined by the parties and the ESOP had not been established.

In 1998, the Company and an affiliate of Republic entered into a settlement
agreement with the USWA under which new master labor agreements were established
for all USWA employees of the Company and Republic. The new collective
bargaining agreements expire in 2003. As part of the new agreements, the Company
committed to establish a $1.6 million fund to be distributed to eligible USWA
employees in May 1999 in full and complete satisfaction of the Company's
obligation to establish an ESOP.

The agreement also provides that covered employees will be able to purchase
shares of the combined company following the Combination of the Company and
Republic. A maximum of $15 million of shares will be offered in the aggregate at
the same price per share attributable to the common stock of the combined
company acquired directly and indirectly by Blackstone in the Combination. Such
offering is to occur no later than six months after the closing of the
Combination. Holders of these shares will be granted piggyback registration
rights entitling them to registration of their shares in an underwritten initial
public offering of the combined company, subject to customary provisions.



                                       58
<PAGE>   59

Under Equity Award Agreements with certain executive employees in fiscal 1996
and prior periods the Company committed to award common stock grants. The value
of these awards on the date of commitment was recorded as deferred compensation
and was amortized over the terms of the employment agreements. Common stock
grants to these employees in fiscal 1996 represent 8,048 shares of Class A
common stock.

Severance agreements were negotiated with certain former Company executives
during fiscal 1998 and 1996. Included in Selling, General and Administrative
Expense for the years ended January 2, 1999 and September 30, 1996 relating to
these agreements were $0.3 million and $2.9 million, respectively.

Pursuant to the terms of certain executives' prior employment agreements, the
Company granted 4,810, 18,094, and 22,903 non-qualified stock options during the
year ended January 3, 1998, the three months ended December 28, 1996 and the
year ended September 30, 1996, respectively, at a price of $55.89 per share,
which approximated fair market value at the date of grant. No options were
granted during fiscal 1998. Expiration dates for the options were ten years from
the grant date and the options became exercisable according to certain criteria
regarding the Company's performance and length of service of the executive.

In the fourth quarter of fiscal year 1998, the executives of the Company (the
"Executives") entered into employment agreements with the Company and Republic
(the "Employment Agreements"). Each of the Employment Agreements contains
substantially similar terms and conditions other than compensation. Subject to
consummation of the proposed combination of the Company and Republic, the
Executives and two other members of management are eligible to receive in the
future options to acquire an aggregate 9.0% of the common stock of the survivor
entity of the Combination, subject to dilution. The exercise price per share
will equal the price per share paid by Blackstone.

As a result of signing the Employment Agreements, the Executives and other
members of management forfeited their rights, if any, to prior vested and
unvested options to purchase common stock of the Company. Two former executives
who terminated from the Company during 1998, have forfeited their rights to
prior vested or unvested options to purchase common stock of the Company under
the terms of their respective separation agreements.

Activity related to stock options is summarized below. The exercise price for
all shares was $55.89 per share.

<TABLE>
<CAPTION>
                                                                                        Three Months
                                                                                           Ended
                                                                                        December 28,
(in thousands)                                   Fiscal 1998        Fiscal 1997            1996             Fiscal 1996
                                               --------------     --------------     ---------------      ---------------
<S>                                                  <C>                 <C>                 <C>                     
Options outstanding at beginning period              45,807              40,997              22,903                --
Granted                                                --                 4,810              18,094              22,903
Forfeited                                           (45,807)               --                  --                  --
                                               ------------        ------------        ------------        ------------
Outstanding at end of period                           --                45,807              40,997              22,903
                                               ============        ============        ============        ============
Exercisable at end of period                           --                 3,892                --                  --
                                               ============        ============        ============        ============
Weighted average fair value of option
  of option granted                                   N/A          $      20.21        $      19.85        $      20.52
                                               ============        ============        ============        ============
</TABLE>



                                       59
<PAGE>   60

The Company accounts for its equity award agreements and stock option grants
under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees," under which the compensation costs, if applicable, have been
determined. Had the compensation costs been determined consistent with SFAS No.
123, "Accounting for Stock Based Compensation," net income (loss) and earnings
per share would have been as follows: (in thousands except for per share
amounts)

<TABLE>
<CAPTION>
                                                                               Three Months
                                                                                  Ended
                                                                               December 28,
                                     Fiscal 1998          Fiscal 1997             1996             Fiscal 1996
                                   -------------        -------------        -------------        --------------
<S>                                <C>                  <C>                  <C>                  <C>          
Net (loss):
     As reported                   $    (41,978)        $    (44,823)        $    (13,525)        $    (43,633)
     Pro Forma                          (41,791)             (44,976)             (13,559)             (43,633)

Diluted earnings per share:
     As reported                   $     (33.14)        $     (50.88)        $     (18.37)        $     (98.01)
     Pro Forma                           (32.70)              (50.62)              (18.29)              (98.01)
</TABLE>

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions for the grants in fiscal 1997, the three months period ended
December 28, 1996 and fiscal 1996: (in thousands)


<TABLE>
<CAPTION>
                                                                                        Three Months
                                                                                           Ended
                                                                                        December 28,
                                                                     Fiscal 1997            1996             Fiscal 1996
                                                                   ----------------    ---------------      ---------------
<S>                                                                <C>                 <C>                  <C>
Average risk free interest rate                                          6.44%               6.27%                6.56%
Expected dividend yield                                                     0%                  0%                   0%
Expected life of options                                               7 years             7 years              7 years
Expected volatility rate                                                    0%                  0%                   0%
</TABLE>

NOTE 13 - RELATED PARTY TRANSACTIONS

In connection with the Recapitalization, an affiliate of Blackstone received an
origination fee and expense reimbursement totaling $2.0 million and an affiliate
of Veritas received a financial advisory fee and expense reimbursement totaling
$2.0 million in fiscal 1996.

In connection with the Recapitalization, the Company entered into a management
agreement with the Johnstown Advisors Corp. ("Advisors") and Blackstone
Management Partners L.P. ("Blackstone Advisors"), an affiliate of Blackstone.
Johnstown Advisors Corp. is owned by the principals of BRW Partners Inc., the
general partner of BRW Steel Holdings, LP, which owns approximately 26.6% of the
common stock of the Company, on a fully diluted basis. Blackstone owns
approximately 72.8% of the common stock of the Company, on a fully diluted
basis. Pursuant to this agreement, Advisors and Blackstone Advisors are to
provide certain management and financial monitoring services to the Company for
which they will share equally an annual advisory fee of $0.9 million plus
reimbursement of certain out-of-pocket expenses. Under this agreement, the
Company expensed $0.9 million in fiscal 1998 and $1.5 million in fiscal 1997.

Subsequent to the acquisition of Republic, the Company and Republic share common
management and have begun to perform certain sales, marketing and administrative
functions on a combined basis. This 



                                       60
<PAGE>   61

includes marketing both companies' steel products jointly under the combined
brand name "Republic Technologies International" using a single sales force.
However, throughout fiscal 1998 each customer purchase order for steel products
continued to be issued directly to the Company or Republic, as appropriate, to
make the sale. The costs of joint functions are borne ratably by the Company and
Republic based upon relative sales volume achieved.

The Company participates in an inventory purchasing arrangement with Republic.
Under the terms of this arrangement, Republic purchases inventory products on
behalf of both companies and bills the Company for its respective purchases plus
an administrative fee. During the period from September 8, 1998 to January 2,
1999, the Company purchased billet and bar products as well as scrap material at
market prices from Republic, totaling approximately $16.1 million. A similar
arrangement is in place with regard to insurance. Republic purchased insurance
coverage for the combined company for which the costs are borne ratably by the
Company and Republic based on their respective share of coverage. In December
1998, Republic completed negotiations for a two-year insurance contract for the
combined company for which the terms of payment include a third-party financing
arrangement.

At January 1, 1999, certain salaried employees of the Company became employees
of Republic. Under the terms of an employee leasing and overhead allocation
agreement, the Company and Republic share the costs of common expenses
including, but not limited to sales and marketing services, administrative
services, plant overhead and costs for certain common facilities. Costs are
allocated according to each company's approximate share of combined trade
volumes. Among the salaried employees included in this overhead allocation were
Messrs. Tyrrell, Meyer and Asimou who hold the positions of Chief Executive
Officer, Executive Vice President and General Manager, Hot Rolled Bar Division
and Executive Vice President and General Manager, Cold Finished Bar Division,
respectively, for both the Company and Republic. Certain salaried employees
located at the Company's facilities in Lackawanna, New York and Johnstown,
Pennsylvania were also included in this arrangement. However, the Company leased
back the services of these employees, the salary and benefit costs of which are
borne entirely by the Company.

As of January 4, 1999, Republic Technologies International Marketing, LLC
("Marketing JV") was formed. The Company and Republic expect to finalize an
agreement in the second quarter 1999 under which this jointly owned Marketing JV
will market, advertise, promote and sell both companies' steel products to each
company's existing and potential customers. The Company and Republic will be
reimbursed for expenses they incur on behalf of the Marketing JV, including
compensation costs of employees of the Company and Republic who perform sales
and marketing functions for the Marketing JV. Except for certain prior
commitments to customers that will continue to be placed with the Company or
Republic as defined in the agreement, it is intended that customer purchase
orders will be placed with the Marketing JV. Pursuant to allocation procedures
to be approved by the boards of directors of both companies, the production of
steel products to fulfill these orders will be allocated between the Company and
Republic. To compensate the Marketing JV for marketing services performed, it is
intended that the Company and Republic will pay commissions at specified
percentages of sales.

As a result of the above, the Company had a current receivable due from Republic
of approximately $1.9 million, a current payable due to Republic of $15.5
million and a non-current payable due to Republic of $0.5 million at January 2,
1999. At January 2, 1999 and January 3, 1998, current amounts payable to
Blackstone were $0.9 million and $1.5 million, respectively.

NOTE 14 - COMMITMENTS AND CONTINGENCIES

The Company, in the ordinary course of business, is the subject of or party to
various pending or threatened legal and environmental actions. The Company
provides for the costs related to these matters when a loss is probable and the
amount is reasonably estimable. Based on information presently known to the
Company, management believes that any ultimate liability resulting from these
actions will not have a material adverse affect on its consolidated financial
position, results of operations or cash flows.

The Company uses certain lease arrangements to supplement its financing
activities. Rental expense under operating leases was $0.9 million for the year
ended 



                                       61
<PAGE>   62

January 2, 1999, $0.8 million for the year ended January 3, 1998, $0.06 million
for the three month period ended December 28, 1996, and $0.2 million for the
year ended September 30, 1996. At January 2, 1999, total minimum lease payments
under noncancellable operating leases are $0.7 million in 1999, $0.6 million in
2000, $0.3 million in 2001, $0.2 million in 2002 and 2003 and $0.9 million
thereafter.

On January 25, 1999, the Company entered into a technical exchange agreement
with Sanyo Special Steel Company, Ltd. ("Sanyo") for a total of $6.0 million
plus expenses. The four year agreement provides for technical assistance to the
Company in order to improve its operations and facilities at its Lackawanna, New
York facility. The Company's future obligation is divided into 9 installments
over the following years: $1.8 million in 1999, $1.2 million in 2000, $1.2
million in 2001, $1.2 million in 2002 and $0.6 million in 2003.

Republic also has a technical exchange agreement with Sanyo. The Company
subsequently entered into an agreement with Republic to share with each other
the information obtained from Sanyo for use at their respective steelmaking
facilities.

NOTE 15 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS AND SIGNIFICANT
          GROUP CONCENTRATION OF CREDIT RISK

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:

CASH AND CASH EQUIVALENTS

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

REDEEMABLE PREFERRED STOCK

          It is not practicable to estimate the fair value of this preferred
          stock, which is not publicly traded.

LONG-TERM DEBT

          The fair value of the company's long-term debt obligations are
          estimated based upon quoted market prices for the same or similar
          issues or on the current rates offered to the company for debt of the
          same remaining maturities. The fair value of the company's senior
          secured notes is determined using quoted market prices. The fair value
          of the company's economic development financing approximates carrying
          values as the development authorities continue to provide such
          financing on substantially the same terms as provided to the company.

The estimated fair value of the Company's financial instruments are as follows:
(in thousands)

<TABLE>
<CAPTION>
                                            January 2, 1999                      January 3, 1998
                                 ----------------------------------    -----------------------------------
                                    Carrying              Fair             Carrying              Fair
                                     Amount               Value             Amount               Value
                                 --------------      --------------    ----------------     --------------
<S>                               <C>                 <C>                 <C>                 <C>         
Cash and cash equivalents         $      2,188        $      2,188        $      3,391        $      3,391
Long-term debt                         132,767             142,601             133,774             133,575
Redeemable preferred stock               5,500                  --               5,500                  --
</TABLE>

                                       62
<PAGE>   63


                              BAR TECHNOLOGIES INC.
                                   SCHEDULE II
                        VALUATION AND QUALIFYING ACCOUNTS

    FOR THE YEARS ENDED JANUARY 2, 1999 AND JANUARY 3, 1998, THE THREE MONTHS
  ENDED DECEMBER 28, 1996 AND THE YEAR ENDED SEPTEMBER 30, 1996 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                  Additions
                                                  -------------------------------------------
                                                                                Charged to     Deductions
                                     Balance at    Charged to                     Other           from        Balance
                                      Beginning     Costs and                   Accounts -      Reserves     at End of
            Description                of Year      Expenses      Recoveries     Describe          (b)          Year
-----------------------------------------------------------------------------------------------------------------------
<S>                                  <C>          <C>            <C>          <C>             <C>           <C>
ALLOWANCE FOR DOUBTFUL
 ACCOUNTS:
                1998                   $   817              448       (11)          55  (c)(d)     (205)    $   1,104
                1997                       567            1,160      (885)          (3) (c)         (22)          817
               *1996                       549               18                                                   567
                1996                                        117                    432  (a)                       549
                                                                                                                  

VALUATION ALLOWANCE
  FOR DEFERRED TAX ASSETS:
                1998                   $42,736           16,934                                              $ 59,670
                1997                    24,791           17,945                                                42,736
               *1996                    19,142            5,649                                                24,791
                1996                    11,697            7,445                                                19,142
</TABLE>


*         The Company changed its fiscal year from its previous calendar quarter
          basis ended September 30, to a 4/4/5 week fiscal quarter basis ending
          the last Saturday of the fifth week. As a result, the Company's fiscal
          year 1997 began on December 29, 1996 and ended on January 3, 1998.
          Fiscal 1997 includes 53 weeks while fiscal 1998 and 1996 each include
          52 weeks. This period represents the three month transition period
          that bridges the Company's old and new year ends.

(a)       Represents the allowance recognized in connection with the acquisition
          of Bliss & Laughlin Industries, Inc.

(b)       Represents uncollected accounts charged-off against the allowance.

(c)       Foreign currency translation.

(d)       Addition to allowance due to reclassification of $60.

                                       63