<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                           Washington, D. C.   20549

                                   Form 10-Q
                                        
(Mark One)

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

For the quarterly period ended January 31, 1999


                                      OR
                                        

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from ________ to __________

Commission file number:   33-67532

                          SHEFFIELD STEEL CORPORATION
            (Exact name of registrant as specified in its charter)

              Delaware                              74-2191557
          (State or other                       (I.R.S. Employer
    jurisdiction of incorporation)             identification No.)

                          220 North Jefferson Street
                            Sand Springs, OK 74063
                   (Address of principal executive offices)
                                (918) 245-1335
             (Registrant's telephone number, including area code)



   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 _____



   At the date of this filing, there were 3,461,550 shares of the Registrant's
$.01 par value Common Stock outstanding.  The aggregate market value of voting
stock held by nonaffiliates is unknown as the Registrant's stock is not traded
on an established public trading market.

<PAGE>
 
                          SHEFFIELD STEEL CORPORATION
                                   FORM 10-Q
                                        
                                     Index

<TABLE> 
<CAPTION> 
                                                                       Page
                                                                       ----
<S>                                                                    <C>
Part I.  Financial Information
 
Item 1.  Financial Statements
         Consolidated Condensed Balance Sheets -
         April 30, 1998 and January 31,  1999                             3
                                                                         
         Consolidated Condensed Statements of Operations -               
         Three months and nine months ended                              
         January 31, 1998 and 1999                                        4
                                                                         
         Consolidated Condensed Statements of Cash Flows -               
         Nine months ended January 31, 1998 and 1999                      5
                                                                         
         Notes to Consolidated Condensed Financial Statements             6
                                                                         
Item 2.  Management's Discussion and Analysis of                         
         Financial Condition and Results of Operations                 7-13
                                                                         
                                                                         
Part II. Other Information                                               
                                                                         
Item 1.  Legal Proceedings                                               14
                                                                         
Item 4.  Submission of Matters to a Vote of Security Holders             14
                                                                         
Item 6.  Exhibits and Reports on Form 8-K                                14
                                                                         
Signature                                                                15
 
</TABLE>

                                       2
<PAGE>
 
                  SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
                                        
                     Consolidated Condensed Balance Sheets
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                               January 31,
                                                                                 April 30,        1999
Assets                                                                             1998         Unaudited
------                                                                        --------------  -------------
<S>                                                                           <C>             <C>
Current assets:
 Cash and cash equivalents                                                       $  2,590              74
 Accounts receivable, less allowance for doubtful accounts of $658                                
     and $883 at April 30, 1998 and January 31, 1999, respectively                 20,994          17,599
 Inventories                                                                       33,548          42,777
 Other current assets                                                               3,803           4,185
                                                                                 --------         -------
                                                                                                  
       Total current assets                                                        60,935          64,635
                                                                                                  
Property, plant and equipment, net                                                 68,730          68,685
Intangible assets, net                                                              8,672          10,245
Other assets                                                                        3,238           3,281
Deferred income tax asset, net                                                      2,043           2,043
                                                                                 --------         -------
                                                                                                  
     Total assets                                                                $143,618         148,889
                                                                                 ========         =======
                                                                                                  
      Liabilities and Stockholders' Deficit                                                       
                                                                                                  
Current liabilities:                                                                              
 Current portion of long-term debt                                               $  1,702           3,019
 Accounts payable                                                                  19,745          11,029
 Accrued interest payable                                                           5,151           2,155
 Accrued liabilities                                                                6,375           6,778
                                                                                 --------         -------
                                                                                                  
       Total current liabilities                                                   32,973          22,981
                                                                                                  
Long-term debt, excluding current portion                                         112,682         127,987
Accrued post-retirement benefit costs                                              10,988          12,429
Other liabilities                                                                   1,101             936
                                                                                 --------         -------
                                                                                                  
            Total liabilities                                                     157,744         164,333
                                                                                 --------         -------
                                                                                                  
Stockholders' deficit:                                                                            
 Common stock                                                                          36              35
 Additional paid-in capital                                                         2,536           2,024
 Accumulated deficit                                                              (15,698)        (16,463)
                                                                                 --------         -------
                                                                                                  
       Total stockholders' deficit                                                (13,126)        (14,404)
    Less loans to stockholders                                                      1,000           1,040
                                                                                 --------         -------
                                                                                                  
                                                                                  (14,126)        (15,444)
                                                                                 --------         -------
                                                                                                  
           Total liabilities and stockholders' deficit                           $143,618         148,889
                                                                                 ========         =======
</TABLE>

     See accompanying notes to consolidated condensed financial statements.

                                       3
<PAGE>
 
                 SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
                                        
                Consolidated Condensed Statements of Operations
                                (In thousands)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                Three Months Ended           Nine Months Ended
                                                                     January 31,                 January 31,
                                                          ----------------------------  ----------------------------
                                                              1998           1999           1998           1999
                                                          ----------     -------------  -------------  -------------
<S>                                                       <C>            <C>            <C>            <C>
Sales                                                        $42,413         34,720        136,594        118,389
Cost of sales                                                 34,046         26,684        109,428         91,600
                                                             -------         ------        -------        -------
 
       Gross profit                                            8,367          8,036         27,166         26,789
 
Selling, general and administrative expense                    3,461          3,624         10,092         11,062
Depreciation and amortization expense                          1,860          1,989          5,320          5,743
Postretirement benefit expense other than pensions               639            594          2,012          2,054
Litigation settlement                                              -              -              -         (2,200)
                                                             -------         ------        -------        -------
 
        Operating income                                       2,407          1,829          9,742         10,130
 
Other expense (income):
  Interest expense, net                                        2,955          3,731          8,723         10,869
  Other                                                           76             (4)            76             26
                                                             -------         ------        -------        -------
                                                               3,031          3,727          8,799         10,895
                                                             -------         ------        -------        -------
        Income (loss) from operations before
            extraordinary item                                  (624)        (1,898)           943           (765)
 
Extraordinary item - loss on retirement of debt               (8,023)             -         (8,023)             -
                                                             -------         ------        -------        -------
 
        Net income (loss)                                    $(8,647)        (1,898)        (7,080)          (765)
                                                             =======         ======        =======        =======
</TABLE>

     See accompanying notes to consolidated condensed financial statements.

                                       4
<PAGE>
 
                 SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
                                        
                Consolidated Condensed Statements of Cash Flows
                                (In thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                Nine Months Ended
                                                                                   January 31,
                                                                         -----------------------------------
                                                                              1998              1999
                                                                         --------------     --------------
<S>                                                                      <C>                <C>
Cash flows from operating activities:
 Net loss                                                                    $ (7,080)          (765)
 Adjustments to reconcile net income to net cash provided                                 
   by (used in) operations:                                                               
      Depreciation and amortization                                             5,481          5,987
      Loss (gain) on retirement of assets                                          81            (23)
      Accrual of postretirement benefits other than pensions,                             
          Net of cash paid                                                      1,314          1,441
      Non-cash portion of extraordinary item                                    2,995              -
      Changes in assets and liabilities, net of effects from                              
          Acquisition of business                                                  59        (17,584)
                                                                             --------        -------
                                                                                          
          Net cash provided by (used in) operations                             2,850        (10,944)
                                                                             --------        -------
                                                                                          
Cash flows from investing activities:                                                     
 Capital expenditures                                                          (4,271)        (4,805)
 Proceeds from sales of equipment                                                   -             34
 Acquisition of business, net of cash acquired                                 (2,414)        (2,635)
                                                                             --------        -------
                                                                                          
      Net cash used in investing activities                                    (6,685)        (7,406)
                                                                             --------        -------
                                                                                          
Cash flows from financing activities:                                                     
 Net increase in long-term debt                                                20,784         16,387
 Other                                                                        (15,888)          (553)
                                                                             --------        -------
                                                                                          
         Net cash (used in) provided by financing activities                   (4,896)        15,830
                                                                             --------        -------
                                                                                          
Net (decrease) increase in cash                                                 1,061         (2,516)
                                                                                          
Cash and cash equivalents at beginning of period                                   15          2,590
                                                                             --------        -------
                                                                                          
Cash and cash equivalents at end of period                                   $  1,076             74
                                                                             ========        =======
                                                                                          
Supplemental disclosure of cash flow information                                          
Cash paid during the period for interest                                     $ 11,881         13,621
                                                                             ========        =======
</TABLE>

     See accompanying notes to consolidated condensed financial statements.

                                       5
<PAGE>
 
                 SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

             Notes to Consolidated Condensed Financial Statements
                           January 31, 1998 and 1999
                                (In thousands)
                                  (Unaudited)

1)  Basis of Presentation and Summary of Accounting Policies

The consolidated financial statements of Sheffield Steel Corporation (the
Company) include the accounts of its divisions, Sheffield Steel-Sand Springs
(Sand Springs), Sheffield Steel-Kansas City (Kansas City), and Sheffield Steel-
Joliet (Joliet) and its wholly owned subsidiaries, Sheffield Steel Corporation-
Oklahoma City (Oklahoma City), Waddell's Rebar Fabricators, Inc. (Waddell) since
October 28, 1997, Wellington Industries, Inc. (Wellington) since October 6, 1998
and Sand Springs Railway Company (the Railway).  HMK Enterprises, Inc. (HMK)
owns approximately 93% of the currently issued and outstanding common stock.
All material intercompany transactions and balances have been eliminated in
consolidation.  The Company's primary business is the production of concrete
reinforcing bar, fence posts, and a range of hot rolled bar products including
rounds, flats, and squares.  The Company's products are sold throughout the
continental United States.

The condensed consolidated interim financial statements of the Company included
herein have been prepared by the Company without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission and reflect all
adjustments that are, in the opinion of management, necessary for a fair
statement of the results for the interim periods.  All adjustments made were
normal recurring accruals.  These interim financial statements should be read in
conjunction with the financial statements and notes thereto contained in the
Company's Form 10-K for the year ended April 30, 1998.  Operating results for
the quarter and nine months ended January 31, 1999 are not necessarily
indicative of the results that may be expected for the year ending April 30,
1999.

2) Inventories

The components of inventories are as follows:

<TABLE>
<CAPTION> 
                                                              January 31,
                                             April 30,           1999
                                                1998          (Unaudited)
                                             ---------        -----------
<S>                                          <C>              <C>
Raw materials and storeroom supplies          $10,673           10,769
Work in process                                11,721           13,477
Finished goods                                 11,154           18,531
                                              -------           ------
                                              
                                              $33,548           42,777
                                              =======           ======
</TABLE>

3)   Litigation Settlement
 
The Company is party to a lawsuit with several other steel manufacturers against
certain manufacturers of graphite electrodes related to price fixing within the
electrode industry. The Company uses graphite electrodes in its manufacturing
process. During the w second quarter of fiscal 1999, the Company recognized
income of approximately $2.2 million related to settlements reached to date with
certain of the defendants. The funds were subsequently received during the third
quarter of fiscal 1999.

                                       6
<PAGE>
 
                 SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

 ITEM 2.  Management's Discussion and Analysis of
          Financial Condition and Results of Operations

      The following discussion should be read in conjunction with the
 Consolidated Condensed Financial Statements of the Company and the notes
 thereto elsewhere in this Form 10-Q.

      This Quarterly Report on Form 10-Q may contain forward-looking statements
 as that term is defined in the Private Securities Litigation Reform Act of
 1995.  Such statements are based on management's current expectations and are
 subject to a number of factors and uncertainties which could cause results to
 differ materially from those described in the forward-looking statements.
 There can be no assurance that actual results or business conditions will not
 differ materially from those anticipated or suggested in such forward-looking
 statements as a result of various factors, including, but not limited to, the
 following:  the size and timing of significant orders, as well as deferral of
 orders, over which the Company has no control; the variation in the Company's
 sales cycles from customer to customer; increased competition posed by other
 mini-mill producers; changes in pricing policies by the Company and its
 competitors; the need to secure or build manufacturing capacity in order to
 meet demand for the Company's products; the Company's success in expanding its
 sales programs and its ability to gain increased market acceptance for its
 existing product lines; the ability to scale up and successfully produce its
 products; the potential for significant quarterly variations in the mix of
 sales among the Company's products; the gain or loss of significant customers;
 shortages in the availability of raw materials from the Company's suppliers;
 fluctuations in energy costs; the costs of environmental compliance and the
 impact of government regulations; the Company's relationship with its work
 force; the restrictive covenants and tests contained in the Company's debt
 instruments, which could limit the Company's operating and financial
 flexibility; Year 2000 readiness; Year 2000 impact from third parties; and
 general economic conditions.

 Results of Operations
 Three Months Ended January 31, 1999 As Compared To Three Months Ended January
 31, 1998

      Sales.  Sales for the Company for the three month period ended January 31,
 1999 were approximately $34.7 million as compared to sales of approximately
 $42.4 million for the three month period ended January 31, 1998, a decrease of
 approximately $7.7 million or 18.1%.  A decrease in shipping levels of 21.2% to
 85,974 tons from 109,119 tons was partially offset by an increase in the
 average price per ton shipped to $404 from $389.  The Company believes the
 decrease in tons shipped was due to steel consumers generally reducing their
 inventories due to unsettled market conditions caused by the Asian economic
 crisis.

      Hot Rolled Bar Products.  Shipments for the three month period ended
 January 31, 1999 were 32,035 tons compared to 44,657 tons for the three month
 period ended January 31, 1998, a decrease of 12,622 tons or 28.3%.  The
 decrease in tons shipped is due to lower sales of hot rolled bars that support
 certain industries such as oil field and agricultural equipment manufacturers.
 These industries have been negatively impacted by the Asian economic crisis,
 depressed oil prices, and by market uncertainties that may have prompted
 inventory reductions among service centers and certain original equipment
 manufacturers.  The average price per ton of hot rolled bar products for the
 three month period ended January 31, 1999 increased to $475 from $463,
 reflecting increased pricing of certain hot rolled bar products at the Sand
 Springs Facility despite decreased prices due to general market conditions
 affecting the Joliet Facility.

                                       7
<PAGE>
 
                 SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

      Rebar.  Rebar shipments for the three month period ended January 31, 1999
 were 34,565 tons compared to 46,931 tons for the three month period ended
 January 31, 1998, a decrease of 12,366 or 26.3%.  The decrease in tons shipped
 was a result of lower shipments of no-grade rebar because of low priced imports
 and lower shipments of graded rebar due to weather related delays.  The Company
 continues to rebuild its rebar business that was lost due to inventory outages
 in the first and second fiscal quarters of 1999.  The average price per ton of
 rebar for the three month period ended January 31, 1999 increased to $298 from
 $297 mainly due rebar product mix.

      Fabricated Products.  Shipments of fabricated products for the three month
 period ended January 31, 1999 were 15,981 tons compared to 12,772 tons for the
 three month period ended January 31, 1998, an increase of 3,209 tons or 25.1%.
 The increase in shipments was primarily due to the purchase of Wellington, a
 manufacturer of railroad track spikes.  The average price per ton for the three
 month period ended January 31, 1999 increased to $498 from $466.  The increase
 in average price per ton was primarily due to the acquisition of Wellington and
 improved pricing at the Kansas City Facility.

      Billets.  Shipments of billets to third parties for the three month period
 ended January 31, 1999 were 3,393 tons compared to 4,759 tons for the three
 month period ended January 31, 1998, a decrease of 1,366 tons or 28.7%.  The
 decrease was due to customers reducing inventories.  The average price per ton
 for the three month period ended January 31, 1999 decreased to $192 from $236
 as a result of reduced ferrous scrap raw material prices to which billet
 pricing is related.

      Cost of Sales.  The cost of sales for the three months ended January 31,
 1999 were approximately  $26.7 million as compared to approximately $34.0
 million for the three months ended January 31, 1998.  On an average per ton
 basis, cost of sales decreased to $310 per ton for the three months ended
 January 31, 1999 from $312 per ton for the three months ended January 31, 1998.
 The decrease in cost per ton was mainly due to lower ferrous scrap raw material
 costs partially offset by a higher proportion of sales of fabricated products.

      Gross Profit.  Gross profit for the Company for the three months ended
 January 31, 1999 was approximately $8.0 million as compared to gross profit of
 approximately $8.4 million for the three months ended January 31, 1999, a
 decrease of approximately $0.3 million or 4.0%.  Gross profit for the Company
 as a percentage of sales for the three months ended January 31, 1999 was 23.2%
 as compared to 19.7% for the three months ended January 31, 1998.  The increase
 is a result of higher average selling prices primarily for hot rolled bar and
 fabricated products and lower ferrous scrap raw material costs.

      Selling, General and Administrative Expense.  Selling, general and
 administrative expense for the Company for the three months ended January 31,
 1999 was approximately $3.6 million compared to $3.5 million for the three
 months ended January 31, 1998.  The increase of approximately $0.2 million is a
 result of additional environmental compliance expenditures, higher property
 taxes, and the addition of Wellington in October, 1998.

      Depreciation and Amortization.  Depreciation and amortization for the
 three months ended January 31, 1999 was approximately $2.0 million compared to
 $1.9 million for the three months ended January 31, 1998.  Depreciation expense
 increased at the Sand Springs Facility due to capital expenditures.

                                       8
<PAGE>
 
                 SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

      Postretirement Benefit Expense.  Postretirement benefit expense was
 relatively unchanged for the three month period ended January 31, 1999, as
 compared to the three months ended January 31, 1998.

      Operating Income.  Operating income for the Company for the three months
 ended January 31, 1999 was approximately $1.8 million as compared to
 approximately $2.4 million for the three months ended January 31, 1998, a
 decrease of approximately $0.6 million or 24.0%.  Operating income for the
 Company as a percentage of sales for the three months ended January 31, 1999
 was 5.3% as compared to 5.7% for the three months ended January 31, 1998.  The
 decrease was due to reduced shipments that caused decreased gross profit, and
 increases in selling, general and administrative expense and depreciation
 expense.

      Interest Expense.  Interest expense for the Company for the three months
 ended January 31, 1999 was approximately $3.7 million as compared to
 approximately $3.0 million for the three months ended January 31, 1998.  The
 increase was due to the increase in outstanding debt during the period.
 
 Nine Months Ended January 31, 1999 As Compared To Nine Months Ended January 31,
 1998

      Sales.  Sales for the Company for the nine month period ended January 31,
 1999 were approximately $118.4 million as compared to sales of approximately
 $136.6 million for the nine month period ended January 31, 1998, a decrease of
 approximately $18.2 million or 13.3%.  Shipping levels decreased 18.1% to
 298,087 tons from 363,775 tons.  The decrease in tons shipped was due to the
 low inventory position at the beginning of the year resulting from the rolling
 mill outage at the Sand Springs Facility in the fourth quarter of fiscal 1998.
 The outage was due to   installation of the new shear line that is expected to
 improve the efficiency of the cooling bed and increase the capacity of the
 shear line.  In addition, in the third fiscal quarter, sales decreased due to
 unsettled market conditions caused by the Asian economic crisis.  The average
 price per ton shipped for the nine month period ended January 31, 1999
 increased to $397 from $375 for the nine month period ended January 31, 1998.
 The average selling price per ton increased in all product lines except billets
 and the mix of products was weighted toward higher priced products in
 comparison to the same period in the prior year.

      Hot Rolled Bar Products.  Shipments for the nine month period ended
 January 31, 1999 were 115,642 tons compared to 138,485 tons for the nine month
 period ended January 31, 1998, a decrease of 22,843 tons or 16.5%.  Shipments
 decreased because of market conditions and in the case of the Sand Springs
 Facility, because the Company needed to produce more rebar  in order to fulfill
 specific customer's orders during the second fiscal quarter.  The average price
 per ton of hot rolled bar products for the nine month period ended January 31,
 1999 increased to $465 per ton compared to $454 per ton for the nine month
 period ended January 31, 1998.  The increase was due to improved product mix at
 the Sand Springs Facility offset by price reductions due to market conditions.

      Rebar.  Rebar shipments for the nine month period ended January 31, 1999
 were 123,606 tons compared to 159,053 tons for the nine month period ended
 January 31, 1998, a decrease of 35,447 tons or 22.3%.  This decrease was
 primarily a result of the low inventory position at the beginning of the fiscal
 year and low shipments of no-grade rebar.  The average price per ton of rebar
 for the nine month period ended January 31, 1999 increased to $302 from $296
 which attributable to  product mix.

                                       9
<PAGE>
 
                 SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

      Fabricated Products.  Shipments of fabricated products for the nine month
 period ended January 31, 1999 were 43,030 tons compared to 40,683 tons for the
 nine month period ended January 31, 1998, an increase of 2,347 tons or 5.8%.
 The average price per ton for fabricated products for the nine months ended
 January 31, 1999 increased to $504 from $459.  The increase in shipments is due
 primarily to the acquisition of Wellington.  The increase in average selling
 prices is attributable to the acquisition of Wellington as well as product mix
 and pricing at the Kansas City Facility.

      Billets.  Shipments of billets to third parties for the nine month period
 ended January 31, 1999 were 15,809 tons compared to 25,554 tons for the nine
 month period ended January 31, 1998, a decrease of 9,745 or 38.1%.  This
 decrease resulted from a curtailment of billet sales to third parties due to
 the maintenance problems and summer power outages at the Sand Springs Facility
 melt shop.  The average price per ton for billets for the nine month period
 ended January 31, 1999 decreased to $215 from $228 per ton for the nine month
 period ended January 31, 1998 as a result of reduced ferrous scrap raw material
 prices.

      Cost of Sales.  The cost of sales for the nine month period ended January
 31, 1999 were approximately $91.6 million as compared to approximately $109.4
 million for the nine month period ended January 31, 1998.  On an average per
 ton basis, cost of sales increased to $307 per ton for the nine months ended
 January 31, 1999 from $301 per ton for the nine months ended January 31, 1998.
 The increase in cost of sales per ton is due to higher conversion costs per ton
 in the melt shop due to maintenance expenditures and summer power outages
 resulting in decreased production in the first two fiscal quarters.  The higher
 conversion costs were partially offset by lower ferrous scrap raw material
 costs.

      Gross Profit.  Gross profit for the Company for the nine month period
 ended January 31, 1999 was approximately $26.8 million as compared to
 approximately $27.2 million for the nine month period ended January 31, 1998.
 Gross profit for the Company as a percentage of sales for the nine month period
 ended January 31, 1999 was 22.6% as compared to 19.9% for the nine month period
 ended January 31, 1998.  The increase is a result of both higher average
 selling prices due primarily to a more favorable product mix and lower scrap
 raw material costs partially offset by higher manufacturing costs.

      Selling, General and Administrative Expense.  Selling, general and
 administrative expense for the Company for the nine month period ended January
 31, 1999 was approximately $11.1 million as compared to approximately $10.1
 million for the nine months ended January 31, 1998.  The increase is a result
 of the acquisition of Wellington, additional environmental expenditures and an
 increase in property taxes.

      Depreciation and Amortization.  Depreciation and amortization for the nine
 months ended January 31, 1999 was approximately $5.7 million compared to $5.3
 million for the nine months ended January 31, 1998.  The increase in
 amortization is due to increased intangible assets associated with the
 acquisition of Wellington and Waddell.  Depreciation expense increased at the
 Sand Springs Facility due to capital expenditures.

      Postretirement Benefit Expense.  Postretirement benefit expense was
 relatively unchanged for the nine month period ended January 31, 1999 as
 compared to the nine month period ended January 31, 1998.

                                       10
<PAGE>
 
                 SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

      Operating Income.  Operating income for the Company for the nine month
 period ended January 31, 1999 was approximately $10.1 million as compared to
 approximately $9.7 million for nine month period ended January 31, 1998, an
 increase of approximately $0.4 million or 4.0%.  Operating income for the
 Company as a percentage of sales for the nine months ended January 31, 1999 was
 8.6% as compared to 7.1% for the nine months ended January 31, 1998.  The
 increase was primarily due to the graphite electrode litigation settlement
 offset by increased selling, general and administrative expense and
 depreciation and amortization expense.

      Interest Expense.  Interest expense for the Company for the nine months
 ended January 31, 1999 was approximately $10.9 million as compared to
 approximately $8.7 million for the nine months ended January 31, 1998.  The
 increase was due to the increase in outstanding debt during the period.
 
 Liquidity and Capital Resources

      As of January 31, 1999, the Company's long-term indebtedness, including
 current portion, was approximately $131 million. The Company had approximately
 $24 million of borrowing availability at January 31, 1999 under its revolving
 credit agreements.

      Cash flow used in operations was approximately $10.6 million for the nine
 month period ended January 31, 1999, as compared with cash flow provided by
 operations of approximately $2.9 million for the nine month period ended
 January 31, 1998.  The decrease in cash provided by operations was primarily
 due to replenishing inventories after the completion of the Shear Line Project
 and decreases in accounts payable reflecting payments on the Shear Line
 Project.  Cash used in investing activities in the nine months ended January
 31, 1999 was approximately $7.4 million, consisting of required replacement of
 plant equipment, final payments on the shear line project and the purchase of
 Wellington.  For the nine month period ended January 31, 1999, cash provided by
 financing activities consisted primarily of draws on the Revolving Credit
 Facility and on the equipment financing agreement.

      The Company's cash flow from operations and borrowings under the Revolving
 Credit Facility and the Railway Credit Facility are expected to be sufficient
 to fund budgeted capital improvements and meet near-term working capital
 requirements.

      On a long-term basis, the Company has significant future debt service
 obligations.  The Company's ability to satisfy these obligations is dependent
 on its ability to generate adequate cash flow from operations.  The Company
 expects that its cash flow from operations and available borrowings under its
 revolving credit facilities and equipment financing agreements will be
 sufficient to fund the repayment of the long term debt and other investing
 activities.  The Company's future operating results are dependent on its
 overall operating performance and are subject to general business, financial
 and other factors affecting the Company and the domestic steel industry, as
 well as prevailing economic conditions, certain of which are beyond the control
 of the Company.

 Capital Expenditures

      Capital expenditures for the nine month period ended January 31, 1999 were
 approximately $4.8 million. Primarily all of the expenditures consisted of
 normal capital projects required or justified economically, and included
 approximately $0.8 million in final payments on the shear line project.  The
 Company's cash flow from operations and borrowings under its revolving credit

                                       11
<PAGE>
 
                 SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

 facilities and equipment financing agreements are expected to be sufficient to
 meet any near-term working capital requirements the Company may have and to
 fund anticipated capital improvements.

 Year 2000 Compliance

     The Company's State of Readiness.  The company recognized the Year 2000
 (Y2K) Information Technology issues in 1986 and began to address the problem
 with the re-design of the Company's information systems.  The Company
 instituted a comprehensive Year 2000 strategy in 1997 and created a formal Y2K
 Task Force in early 1998 with executive oversight to examine Y2K issues as they
 pertain to areas outside internal information systems including the following:

 Information Systems Infrastructure.  Hardware, networks and operating systems
 that support the Company's software.

 Desktop Applications.  Private user spreadsheets and data collection that may
 have Y2K issues.

 Facilities.  Basic infrastructure items as well as backup power, fire control
 systems, security systems, scales and phones.

 Manufacturing/Distribution.  Process control equipment and software and other
 manufacturing operations that have personal computers, board level computers,
 or PLC's (Programmable Logic Controllers) interfaced to them.

 Product Compliance. Primarily testing equipment. Spectrometers, personal
 computers interfaced to testing equipment, meters and gauges used by the
 quality assurance department.

 Supply Chain.  Supply vendors, transportation and utilities, third party
 support organizations, banking and finance.

     The Task Force is responsible for taking an inventory of all systems
 software and equipment to identify potential Y2K issues and for developing
 remediation plans for problems identified. To date, the majority of the
 financial and commercial systems have been converted to full Y2K compliance.
 The payroll system and the accounts receivable systems are currently not Y2K
 compliant.  However, the payroll system is in Phase IV of a four-phase project.
 The accounts receivable system is currently in Phase I of a three-phase
 conversion.  Both projects are on schedule and expected to be completed by
 October 1, 1999.  In addition, the accounts payable system has a minor Y2K
 problem but testing has confirmed that it does not pose a service interruption
 risk.

     Outside the areas noted above, only minor problems were identified with
 electronic equipment and third party software.  The Company's rolling mill and
 shear line at the Sand Springs Facility were both installed in the last four
 years.  The rolling mill relies on a third party system that has been
 represented to the Company as Y2K compliant, with the exception of certain
 upgrades that the Company will have installed by September of 1999.  All
 remaining third party software has been examined and has been represented by
 the vendor as being Y2K compliant.  The Task Force has surveyed all vendors
 with invoices that total over $10,000 in the previous calendar year in an
 attempt to ascertain the potential risks within the supply chain, specifically
 in the areas of raw materials and utilities.  The Company has received
 responses from approximately 60% of the vendors surveyed and the Task Force has
 recommended additional follow up for vendors failing to respond to the survey.
 To date, the Company has not received any unfavorable responses from
 significant vendors.  It is anticipated that the vendor survey process will be
 completed by the spring of 1999.  Although others in the steel industry will be
 required to spend significant amounts to become Y2K compliant, the Company
 identified problem areas early and upgraded equipment and systems in the normal
 course of business. The historical and estimated future costs related to Y2K
 issues have not been and are not expected to be a material cost to the Company.

                                       12
<PAGE>
 
                 SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

     The Risks of the Company's Year 2000 Issues and Contingency Plans.  While
 the Company believes it has taken the necessary steps to identify and remediate
 its Y2K issues, the failure to do so prior to January 1, 2000 could result in
 system/equipment failures causing disruption in routine business activities
 including the production of goods.  The Company views the greatest risk of Y2K
 issues to be related to its third party suppliers and customers.  The failure
 of third parties upon whom the Company relies to timely remediate their Y2K
 issues could result in disruption in the Company's daily operations including
 the production of steel products.  As a result of the Company's reliance on
 third parties to resolve their own Y2K issues, the overall risks associated
 with the year 2000 remain difficult to accurately describe and quantify.  There
 can be no assurance that the Y2K issues will not have a material adverse impact
 on the Company and its operations.  The Company is in the process of developing
 contingency plans in areas where the risk of Y2K failures appears to be
 possible.

 Accounting Pronouncements

     In June 1997, the Financial Accounting Standards Board ("FASB") issued
 Statement of Financial Accounting Standards ("Statement") No. 130 "Reporting
 Comprehensive Income". Statement No. 130 establishes standards for reporting
 and display of comprehensive income and its components in the financial
 statements. Statement No. 130 is effective for fiscal years beginning after
 December 15, 1997. Reclassification of financial statements for earlier periods
 provided for comparative purposes is required. The Company adopted Statement
 No. 130 in the quarter ended July 31, 1998. The adoption did not impact the
 Company's consolidated results of operations.

     Also in June 1997, the FASB issued Statement No. 131, "Disclosures about
 Segments of an Enterprise and Related Information". Statement No. 131,
 establishes standards for the way that public business enterprises report
 information about operating segments in annual financial statements and
 requires that those enterprises report selected information about operating
 segments in interim financial reports issued to shareholders. It also
 establishes standards for related disclosures about products and services,
 geographic areas and major customers. Statement No. 131 is effective for
 financial statements for fiscal years beginning after December 15, 1997.
 Financial statement disclosures for prior periods are required to be restated.
 The Company plans to adopt Statement No. 131 for the year ended April 30, 1999.
 The adoption of Statement No. 131 is not expected to have a material impact on
 the Company's segment reporting.

     Currently, the Company has no significant derivative instruments and
 accordingly, the adoption of Statement No. 133, "Accounting for Derivative
 Instruments and Hedging Activities issued by the FASB on June 15, 1998, is not
 expected to have a significant effect on the Company's consolidated results of
 operations, financial position, or cash flows.
 
     In February 1998, the FASB issued Statement No. 132, "Employers'
 Disclosures about Pensions and Other Postretirement Benefits", which is
 required to be implemented for fiscal years beginning after December 15, 1997.
 Statement No. 132 revises employers' disclosures about pension and other
 postretirement benefit plans. It does not change the measurement or recognition
 of those plans.

                                       13
<PAGE>
 
                 SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
      
                          PART II.  OTHER INFORMATION

 ITEM 1.  LEGAL PROCEEDINGS

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

 ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLERS

 None.

 ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

 A.   Exhibits

 See exhibit index.

 B.   Reports on Form 8-K

 No reports on Form 8-K were filed during the third quarter ended January 31,
 1999.

                                       14
<PAGE>
 
                 SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

                                   SIGNATURES

 Pursuant to the requirements of the Securities Exchange Act of 1934, the
 Registrant has duly caused this report on Form 10-Q to be signed on its behalf
 by the undersigned thereunto duly authorized.

                                            SHEFFIELD STEEL CORPORATION


 Date:  March 12, 1999                      /s/ Robert W. Ackerman
        ------------------                  -----------------------
                                            Robert W. Ackerman, President
                                            and Chief Executive Officer



 Date:  March 12, 1999                      /s/ Stephen R. Johnson
        ------------------                  -----------------------
                                            Stephen R. Johnson, Vice President
                                            and Chief Financial Officer

                                       15