<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
                                    ---------

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

   FOR THE FISCAL YEAR ENDED MARCH 31, 1998. COMMISSION FILE NUMBER   1-12870 .
                                                                    ----------

                            COLD METAL PRODUCTS, INC.
                            -------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

         NEW YORK                                             16-1144965
(STATE OR OTHER JURISDICTION OF                            (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                             IDENTIFICATION NO.)

8526 SOUTH AVENUE, YOUNGSTOWN, OHIO                             44514
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                      (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (330) 758-1194
                                                           --------------

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

TITLE OF EACH CLASS                   NAME OF EACH EXCHANGE ON WHICH REGISTERED
-------------------                   -----------------------------------------

COMMON  SHARES                                NEW YORK STOCK EXCHANGE, INC.
PAR VALUE $.01 PER SHARE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      NONE
                                      ----
                                (TITLE OF CLASS)

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES    X     NO
     -----      -----

INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [ ]

THE AGGREGATE MARKET VALUE OF THE VOTING COMMON SHARES, $.01 PAR VALUE, HELD BY
NON AFFILIATES OF THE REGISTRANT AS COMPUTED BY REFERENCE TO THE CLOSING PRICE
ON THE NEW YORK STOCK EXCHANGE ON JUNE 12, 1998 WAS $16,991,250.

THE NUMBER OF SHARES OF REGISTRANT'S COMMON STOCK, PAR VALUE $.01 PER SHARE,
OUTSTANDING AS OF JUNE 12, 1998 WAS 7,074,250




<PAGE>   2



                            COLD METAL PRODUCTS, INC.

                  FORM 10-K - FISCAL YEAR ENDED MARCH 31, 1998
                  --------------------------------------------

                                TABLE OF CONTENTS
                                -----------------

<TABLE>
<CAPTION>
                               DESCRIPTION                                                           PAGE
                               -----------                                                           ----

<S>             <C>                                                                                     <C>
PART I          Item     1     Business                                                                  3
                         2     Properties                                                                7
                         3     Legal Proceedings                                                         8
                         4     Submission of Matters to a Vote of Security Holders                       8
                         4A    Executive Officers of the Registrant                                      8

PART II         Item     5     Market Information                                                       10
                         6     Selected Consolidated Financial Data                                     11
                         7     Management's Discussion and Analysis of
                               Financial Condition and Results of Operations                            12
                         8     Financial Statements and Supplementary Data                              15
                         9     Changes in and Disagreements with Accountants
                                         in Accounting and Financial Disclosure                         31

PART III        Item     10    Directors and Executive Officers  of the Registrant                      31
                         11    Executive Compensation                                                   31
                         12    Security Ownership of Certain Beneficial
                               Owners and Management                                                    31
                         13    Certain Relationships and Related Transactions                           31

PART IV         Item     14    Exhibits, Financial Statement Schedules
                               and Reports on Form 8-K                                                  31

                               Signatures                                                               35
</TABLE>






                                        2

<PAGE>   3



                            COLD METAL PRODUCTS, INC.
                                FORM 10-K - 1998

                                     PART I
                                     ------

ITEM 1.  BUSINESS

         (a)    General Development of Business.
                --------------------------------

                Cold Metal Products, Inc. (which, together with its wholly-owned
Canadian subsidiary, is referred to herein as the "Company") is a corporation
organized in 1980 under the laws of the State of New York. The Company is a
leading intermediate processor of flat-rolled steel engineered to meet the
critical requirements of precision parts manufacturers. As an intermediate
processor of flat-rolled steel, the Company purchases coils of rolled steel from
primary producers and processes the steel, using techniques such as
cold-rolling, annealing, normalizing, edge-conditioning and oscillate-winding,
as well as more basic services of slitting and cutting to length. The Company's
products include strip steel for speciality and conventional applications and
processed sheet steel. "Specialty" strip is highly engineered to meet customer
needs in precision parts manufacturing, and "conventional" strip is supplied to
high-volume manufacturers whose purchasing criteria emphasize quality, price and
service rather than unique specifications.

         (b)    Financial Information about Industry Segments
                ---------------------------------------------

                Production of specialty strip steel, conventional strip steel
and processed sheet steel comprises a single segment of the intermediate steel
processing industry, involving inter-related equipment, technology and raw
materials. Accordingly, the business of the Company cannot be separated into
industry segments.

         (c)    Narrative Description of Business
                ---------------------------------

                 Products and Services
                 ---------------------
                An intermediate processor of flat-rolled steel, the Company
purchases coils of rolled steel from primary producers and processes the steel,
using techniques such as cold-rolling, annealing, normalizing, edge-conditioning
and oscillate-winding, as well as the more basic services of slitting and
cutting-to-length. The Company processes and markets over 50 grades of steel,
including ultra-low carbon, low carbon, medium and high carbon, very high
carbon, alloy, high strength-low alloy and both 300 and 400 series stainless.
The following table sets forth management's estimates of the percentages of net
sales for the three years ended March 31, 1998, 1997 and 1996 attributable to
the Company's strip steel products, which include both specialty and
conventional applications, and processed sheet products, respectively:

<TABLE>
<CAPTION>
                                                          Year Ended March 31,
                                                          --------------------
                      Product                  1998              1997             1996
                      -------                  ----              ----             ----
<S>                                            <C>               <C>              <C> 
                      Strip Steel...             61%               62%              79%
                      Processed Sheet...         39                38               21
                                               ----              ----             ----
                                                100%              100%             100%
                                               ====              ====             ====
</TABLE>

                The increase in the percent of net sales of processed sheet in
fiscal 1997 is primarily attributable to the expansion of service center
business through the acquisition of Direct Steel, Inc., which became a
wholly-owned subsidiary of the Company in June 1996 and Cold Metal Processing,
which was acquired in November 1996.


                                        3

<PAGE>   4



                The Company believes that it is one of the few flat-rolled steel
processors with a significant position in both the specialty strip steel and
conventional strip steel markets, and is an industry leader in at least two key
areas of specialty strip technology: (i) continuous annealing and normalizing of
steel to produce special metallurgical properties and (ii) multi-head
oscillate-winding to produce long lengths of narrow strip steel.

         Strip Steel Products. Specialty strip products are highly engineered
and customized, processed from flat-rolled coils of steel meeting exacting
specifications in multiple rolling, annealing and finishing operations.
Specialty strip is used in the manufacture of a variety of products, including
bearings, cutting tools and chain saw blades, tape measures, high-tolerance
springs and pen clips. Conventional strip products are generally used in
high-volume manufacturing applications. Quality requirements for conventional
strip products are typically stringent, and customer purchasing decisions are
usually based on prices offered by processors which can meet those requirements.
Conventional strip products are used in the manufacture of such products as seat
belt parts, transmission parts, industrial chains, door hinges, drawer slides,
golf club shafts and other products.

         Processed Sheet. At its steel service centers, the Company produces
processed sheet consisting primarily of hot-rolled, cold-rolled and galvanized
steel. The Company's processed sheet steel is typically used in applications
that do not require precision tolerances, such as for heating ducts, wall studs
and unexposed automobile parts. The Company's steel service centers purchase
steel from primary steel producers and add value by slitting, cutting to length
and providing warehousing services.

         The principal processing techniques and the related equipment of the
Company -- rolling, annealing, slitting, oscillate-winding and finishing -- are
described below:

         -      Cold-rolling is the process of rolling steel to a specified
                thickness, temper and finish. Most strip-rolling is performed on
                reversing mills of three major types: 4-High, 6-High and cluster
                mills (or "Z-mills"). The Company utilizes all three types.

         -      Annealing is a thermal process which changes the hardness and
                certain metallurgical characteristics of steel. The most common
                means of softening strip steel for further processing or
                customer use is by annealing (heating and cooling) stacks of
                wound coils of strip steel in batch furnaces. All of the
                Company's strip mills are equipped for batch annealing.

         -      Slitting is the cutting of steel to specified widths and is
                performed at all of the Company's facilities. Coils of
                fully-processed strip or wide sheet coil are unwound, passed
                through rotary slitting knives and rewound in narrow-width coils
                as required by customer specifications.

         -      Oscillate-winding is a means of producing exceptionally long
                lengths of narrow strip steel by winding consecutive coils, much
                like thread is wound on a spool. This operation can be performed
                after slitting or, at a lower cost, on a multiple head-slitting
                and oscillate- winding line.

         -      Several auxiliary operations are performed by the Company,
                including coating and edge- conditioning. Coating is performed
                internally on an electro-galvanizing line at the Youngstown
                facility and by outside vendors for other platings or paints as
                needed to meet a given customer's needs. Edge-conditioning is
                the conditioning of edges of processed steel into square,
                full-round or partially-round shapes by rolling and skiving and
                is done at several of the Company's plants.



                                        4

<PAGE>   5



         Raw Materials.
         --------------
         The primary raw materials used in the Company's operations are
hot-rolled and cold-rolled steel coils. Currently, the Company obtains steel for
processing from a number of primary steel producers, and has developed
cooperative relationships with its principal suppliers which, the Company
believes, enable it to assure itself of the availability of steel. Pursuant to
an agreement between the Company and one of its principal suppliers, the Company
has agreed to purchase, and the supplier has agreed to supply, certain specified
volumes of various grades and specifications of steel on competitive terms. This
arrangement, which extends through the year 2001, has been, and is expected to
be, significant to the Company during periods when demand for steel is high and
primary steel suppliers are likely to allocate grades and quantities of steel.
During the fiscal year ended March 31, 1998, the Company purchased approximately
7% of its requirements for hot-rolled and cold-rolled steel under this
arrangement.

         The Company has developed supply relationships with several primary
steel producers outside of the U.S. and Canada. Over the Company's last three
fiscal years, approximately 16% of its steel requirements was purchased from
these suppliers. The Company's ability to acquire steel from sources outside the
U.S. and Canada affords it access to certain grades required for its specialty
strip production and, the Company believes, can afford substantial protection in
the event of limited steel supply in North America.

         The Company's largest component of cost of sales is raw material costs.
These costs can vary over time due to changes in steel pricing which the Company
typically passes on to customers. In periods of changing steel prices, however,
reductions in the Company's raw material costs may lag behind pressure on the
Company's prices or increases in raw material costs may precede increases in the
Company's prices, temporarily compressing the Company's profit margins.

         Patents and Trademarks
         ----------------------
         The Company has no patents material to its business. With respect to
trademarks, the Company has developed a proprietary LaserMatte(TM) finish to
enhance drawability in certain difficult forming operations, which the Company
applies utilizing laser texturing technology acquired by the Company in March of
1995. The Company also has developed and produces the UniForm(TM) series of
specialty strip products that help customers solve problems in their
manufacturing processes. These include:


        Product        Application
        -------        -----------
     UniForm(TM)100    Magnetic shielding and relay applications
     UniForm(TM)200    Extra-deep drawn parts
     UniForm(TM)300    Cup-shaped parts
     UniForm(TM)500    Applications involving severe bending or stretch forming
     UniForm(TM)700    Pre-hardened flat parts
     UniForm(TM)800    High-strength parts requiring high ductility

         Seasonality
         -----------
         The Company experiences lower levels of net sales in the months of
July, November and December due, primarily, to holiday periods and customer
plant shutdowns.

         Working Capital Requirements
         ----------------------------
         The Company generally maintains its inventory of raw materials at
levels that it believes are sufficient to satisfy the anticipated needs of its
customers based on historic buying practices and market conditions. The Company
believes that its practices are comparable to other companies in the
intermediate steel processing industry. The Company believes that cash generated
from operations and

                                        5

<PAGE>   6



from borrowing under its committed credit facility provide adequate cash for the
Company's working capital requirements.

         Customers
         ---------
         The Company sells its products primarily in the automotive,
construction, cutting tools, consumer goods and industrial markets and to
specialty steel distributors. During the fiscal year ended March 31, 1998, 44%
of the Company's net sales were to the automotive market. Net sales are
primarily to manufacturers who produce component parts for sale to automotive
manufacturers and after-market parts suppliers. The balance of the Company's net
sales are almost equally divided among the other markets served. The markets
served by the Company's steel service centers are primarily the automotive
industry in Ontario and the construction industry in Quebec.

         During the fiscal year ended March 31, 1998, the Company sold products
to approximately 1200 customers with the largest single customer accounting for
approximately 7% of the Company's net sales. The Company's ten largest customers
accounted for 31% percent of its net sales during that period. During the fiscal
year ended March 31, 1998, approximately 25% of the Company's net sales were
made pursuant to arrangements with customers which contemplate deliveries over a
period of 12 months or more.

         For the fiscal year ended March 31, 1998, approximately 51% of the
Company's net sales were to customers in the U.S. and 48% were to customers in
Canada. Less than 1% of the Company's net sales, in each of its last three
fiscal years, were derived from sales to customers outside the U.S. and Canada.
See Note 1 to Consolidated Financial Statements included herein at Item 8.

         Backlog
         -------
         At May 31, 1998, the Company's backlog was approximately $44 million
compared with approximately $48 million at May 31, 1997. Management estimates
that substantially all of the existing backlog will be shipped during the
current fiscal year.

         Competition
         -----------
         The intermediate steel processing industry is highly competitive. The
Company competes on the basis of quality, technical expertise, price and its
ability to meet the delivery demands of its customers. Its principal competitors
in the specialty strip market consist primarily of small, privately-held
concerns, many of which focus on certain grades, finishes or coatings. The
Company's competitors in the conventional strip market include Steel
Technologies, Inc., Worthington Industries and Gibraltar Steel Corporation, each
of which may have greater financial and other resources than the Company.
Imported processed steel from Japan and Europe also competes with the Company's
strip steel products.

         Compliance With Environmental Regulations
         -----------------------------------------
         The Company's steel processing facilities are subject to many federal,
state, provincial and local requirements relating to the protection of the
environment, and the Company has made, and will continue to make, expenditures
to comply with such provisions. The Company believes that its facilities are
being operated in material compliance with these laws and regulations and does
not believe that future compliance with such existing laws and regulations will
have a material adverse effect on its results of operations or financial
condition. Capital expenditures and expenses attributable to environmental
control compliance were approximately $250,000 in fiscal 1998, and are forecast
to be approximately $400,000 in fiscal 1999 and $450,000 in fiscal 2000.

         The Company has retained the services of an environmental consultant
who continuously reviews the Company's operations to insure compliance with
environmental laws and regulations. While the Company's facilities are located
on old industrial sites, and although some contamination has been discovered,
based upon studies and reports conducted by the Company's consultants, the

                                        6

<PAGE>   7



Company believes it is unlikely that any of the sites will require the Company
to incur material remediation costs.

         Employees
         ---------
         As of May 31, 1998, the Company employed a total of 834 people,
consisting of 297 salaried, 465 union, hourly and 72 non-union, hourly
employees. The Company is a party to six collective bargaining agreements at its
different facilities. The Company believes its employee relations are good.

ITEM 2.  PROPERTIES

         The following table sets forth the location, square footage and use of
each of the Company's principal production facilities.


<TABLE>
<CAPTION>
                            Square              Principal Use            Owned or  
                                                -------------            --------  
Location                    Footage                                      Leased (1)
--------                    -------                                      ----------
<S>                        <C>            <C>                              <C>
Youngstown, Ohio           430,000        Specialty Strip production       Owned

New Britain, Connecticut   290,000        Specialty Strip production       Owned

Hamilton, Ontario          314,000        Conventional Strip production    Owned
(Imperial Street)

Indianapolis, Indiana      140,000        Specialty and Conventional       Owned
                                          Strip production

Ottawa, Ohio               145,000        Speciality and Conventional      Owned
                                          Strip production

Waterbury, Connecticut     16,000         Specialty Strip processing       Leased(2)

Montreal, Quebec           45,000         Steel service center             Owned

Hamilton, Ontario          87,000         Steel service center             Owned
(Kenora Avenue)

Concord, Ontario           35,000         Steel service center             Owned
</TABLE>

(1)      Each of the facilities owned by the Company is subject to the liens of
         financial institutions providing term loans and credit facilities. 

(2)      Leased under lease expiring on November 30, 1998, concurrent with the
         Company's plans to consolidate operations at the New Britain,
         Connecticut plant.



         Changes in product mix result in significant variations in productive
capacity of the Company's strip facilities in any measurable period. The Company
estimates that its strip facilities operated at an estimated 73% of productive
capacity in fiscal 1998, and the Company's slitting equipment at its steel
service centers operated at approximately 79% of productive capacity in fiscal
1998.


                                        7

<PAGE>   8






ITEM 3.  LEGAL PROCEEDINGS

         In December 1997, a jury in the Mahoning County Common Pleas Court
issued a verdict against the Company awarding $950,000 in favor of an injured
employee. In May 1998, the court awarded pre-judgment interest related to the
verdict in the amount of $350,000. The Company, on the advice of counsel, is
vigorously pursuing all appropriate procedures to have the verdict overturned,
including post-trial motions and appeals. Additionally, the Company is pursuing
it rights to indemnity under various insurance policies.

         Although there can be no assurance that the Company will be successful
in its effort to have the verdict overturned or indemnified under insurance
policies, management believes a reasonable estimate of the final outcome is
approximately $450,000, which the Company has provided as a reserve in fiscal
1998. Although the outcome of the case, to the extent that it exceeds the
reserve, could have a material adverse effect on future results of operations of
the Company in a particular quarterly or annual period, the Company believes
that the effect would not have a material adverse effect on the Company's
consolidated financial position.

         Certain claims, suits, and complaints arising in the ordinary course of
business have been filed or are pending against the Company. In the opinion of
management, none of such claims, suits, or complaints is material, and in the
aggregate, they will not have a material adverse effect on the Company's results
of operations or financial condition.

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

         There were no submissions of matters to a vote of the shareholders in
the period in the fourth quarter of the fiscal year ended March 31, 1998.

ITEM 4A.  EXECUTIVE OFFICERS OF THE REGISTRANT

         The following table lists the names, positions held and ages of all the
executive officers of the Company:

<TABLE>
<CAPTION>
               Name                Age   Position with Company
               ----                ---   ---------------------
<S>                                 <C>  <C>
James R. Harpster........           50   President and Chief Executive Officer
R. Quintus Anderson.......          67   Chairman of the Board
Gordon A. Wilber........            56   Executive Vice President, Chief Operating Officer
Allen R. Morrow............         48   Vice President,  Chief Administrative Officer, Treasurer
John E. Sloe.................       45   Vice President, Chief  Financial Officer
Robert R. Albert............        68   Vice President - Commercial
Jack W. Watson...........           54   Vice President, General Manager, Canada
Heidi A. Nauleau.........           41   Corporate Secretary
</TABLE>

           Executive officers are elected by the Board of Directors and serve at
its discretion.

 JAMES R. HARPSTER has served as President and Chief Executive Officer of the
Company since 1984, and has served as a Director since 1982. Prior to assuming
his current position, he was Vice President of Sales for the Company since its
incorporation. He has twenty-nine years' experience in the steel industry,
having begun his career in 1969 with Jones & Laughlin Steel Corporation. During
his career with Jones & Laughlin, Mr. Harpster held various management positions
in the areas of product quality and plant operations. He graduated from Lehigh
University in 1969 with a B.S. in Metallurgy and from

                                        8

<PAGE>   9



the University of Akron in 1975 with an MBA. He is a member and past president
of the Association of Cold-Rolled Strip Steel Producers and a member of the
Department of Commerce's Industry Sector Advisory Committee on Ferrous Ores and
Metals for Trade Policy Matters.

R. QUINTUS ANDERSON has served as Chairman of the Board of Directors of the
Company since its incorporation in 1980. Mr. Anderson and Aarque Capital
Corporation, a corporation controlled by Mr. Anderson, together own
approximately 52% of the shares of Common Stock of the Company. Aarque Capital
Corporation is one of a group of privately-held corporations owned or controlled
by Mr. Anderson, known as The Aarque Companies, which are in businesses
unrelated to the business of the Company. Mr. Anderson holds a Bachelor of
Engineering degree from Princeton University and was granted a post-graduate
fellowship at the Sloane School of Industrial Management at the Massachusetts
Institute of Technology. Since his discharge as a lieutenant from the U.S. Navy
in 1957, Mr. Anderson has managed, operated and acquired businesses related
principally to the metal fabrication industry. Mr. Anderson is a trustee of
Northwestern Mutual Life Insurance Company and a director of Oneida Ltd.

GORDON A. WILBER has served as Vice President since 1984, and Executive Vice
President of the Company since 1987. Mr. Wilber was appointed Chief Operating
Officer and was elected a Director in 1994. Prior to 1987, he held the positions
of Vice President of Operations, Manager of Operations and Technical Director of
the Company. Mr. Wilber began his career as a Research Metallurgist at the
Graham Laboratories of Jones & Laughlin in 1968. Following a series of technical
positions in the basic and specialty flat-rolled divisions of Jones & Laughlin,
he became Manager of Quality Control for Jones & Laughlin's specialty strip
plants in 1977. He has a Master's Degree in Metallurgical Engineering from the
University of Illinois and a Ph.D. from Rensselaer Polytechnic Institute. He is
a member of the Board of Directors and is currently serving as President of the
Association of Cold Rolled Strip Steel Producers.

ALLEN R. MORROW serves as Vice President, Chief Administrative Officer and
Treasurer of the Company. Prior to his appointment as Chief Administrative
Officer in April 1996, he had served as Chief Financial Officer of the Company
since its incorporation in 1980. He was elected Vice President and Treasurer in
1994. Prior thereto, he held various management positions with LTV and Jones &
Laughlin and, immediately preceding his employment with the Company, was
Division Controller, Strip Plants of Jones & Laughlin. He began his career with
Coopers & Lybrand and is a Certified Public Accountant. Mr. Morrow graduated
from Geneva College in 1971 with a B.S. Bus. Ad. in Accounting and from the
University of Pittsburgh in 1978 with an MBA.

JOHN E. SLOE joined the Company on April 1, 1996 as Vice President, Chief
Financial Officer. From 1993 to 1996, he served as a turnaround management
consultant with Sloe & Associates, whereby he independently assisted
manufacturing companies improve productivity, efficiencies and profitability.
From 1990 to 1993, he served as President and Chief Executive Officer of Denman
Tire Corporation, a $45 million specialty tire manufacturer. He joined Denman
Tire as Vice President & Chief Financial Officer in 1987. Mr. Sloe began his
career in 1977 with Eaton Corporation as an accountant and rapidly progressed to
Division Controller. He is a Certified Public Accountant and graduate of
Cleveland State University with a BBA in Accounting in 1977 and in 1983 earned
an MBA degree.

ROBERT R. ALBERT has served as Vice President - Commercial of the Company since
1987 and has over 45 years experience in the steel industry. Immediately prior
to joining the Company, he served as Vice President-Sales for Sharon Steel
Corporation and has held various sales and marketing positions at both the
Empire Detroit Division of Cyclops Corporation and Bethlehem Steel Corporation.
He is a 1952 graduate of Bucknell University with a B.S. degree in Commerce and
Finance.

JACK W. WATSON has served as Vice President, General Manager, Canada since 1991.
Prior to 1991 he held positions of Manager Operations, Manager Sales/Marketing
and Quality Control at the

                                        9

<PAGE>   10



Company. Mr. Watson began his career at British Steel Corporation as a Research
Metallurgist. In 1967 he joined Dofasco Inc. holding various technical positions
before joining the Company's predecessor company, Stanley Steel, in 1980. He is
a graduate Metallurgist from Tees-Side Polytechnic, England. He is a
Professional Engineer and a member of Association of Professional Engineers of
Ontario.

HEIDI A. NAULEAU is Secretary of the Company and a Director, having been elected
to those positions in 1993. Mrs. Nauleau is Chairman of The Aarque Companies,
having been elected to that position in February 1996. Mrs. Nauleau joined The
Aarque Companies in 1981 as Assistant to the Chairman and was appointed Vice
President/Europe in 1984. From 1987 until 1992, she was manager of a subsidiary
of Aarque Steel Corporation. Prior to joining The Aarque Companies in 1981, from
1979 until 1981, Mrs. Nauleau served as a research associate for Berndtsen
International Ltd. Mrs. Nauleau is the daughter of R. Quintus Anderson. She is a
graduate of the University of Pennsylvania.

                                     PART II
                                     -------

ITEM 5.  MARKET AND DIVIDEND INFORMATION

         As of June 12, 1998, there were 7,074,250 shares of common stock
outstanding that were held by 109 shareholders of record. The Company has
declared no dividends in either of the two previous fiscal years. The Company's
ability to pay dividends in the future is limited by the terms of its credit
facilities so as not to exceed twenty-five percent of after tax income on a
cumulative basis exclusive of certain accounting adjustments, commencing as of
March 31, 1994, and by the requirement that no dividend shall result in a
default under the credit facility. Additional information regarding the
principal market for the Company's common stock and market prices for the
Company's common stock is set forth below.



<TABLE>
<CAPTION>
                                         Market Price Ranges
                                         -------------------
                                    Fiscal Year Ending March 31,
                                    ----------------------------
                                  1998                        1997
                                  ----                        ----
                           High            Low         High            Low

<S>                      <C>            <C>           <C>            <C>    
First Quarter            $  5.88        $  4.88       $  6.75        $  5.38
Second Quarter           $  6.00        $  5.50       $  6.75        $  5.50
Third Quarter            $  6.25        $  5.06       $  6.88        $  5.50
Fourth Quarter           $  5.31        $  4.50       $  6.50        $  5.13
</TABLE>






                                       10

<PAGE>   11






ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA



<TABLE>
<CAPTION>
                                                                               YEAR ENDED MARCH 31,
                                                       1998             1997            1996            1995            1994
                                                                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                               <C>              <C>             <C>             <C>             <C>           
STATEMENT OF OPERATIONS DATA:
Net sales                                         $       289,213  $       286,024 $       227,128 $       235,145 $      221,286
Cost of sales                                             264,799          262,133         205,727         208,408        196,870
                                                  -------------------------------------------------------------------------------
Gross profit                                               24,414           23,891          21,401          26,737         24,416
Selling, general, and administrative expenses              16,019           15,739          13,645          13,773         13,079
Income (loss) from equity investment                          ---               28             (98)            616            ---
Management fee to principal shareholder                       ---              ---             ---             ---          1,022
Interest expense                                            4,624            3,115           2,918           2,956          3,707
                                                  -------------------------------------------------------------------------------
Income before income taxes and cumulative
  effect of accounting changes                              3,771            5,065           4,740          10,624          6,608
Income taxes                                                1,438            1,700           1,685           3,698          2,530
                                                  -------------------------------------------------------------------------------
Income before cumulative effect of accounting
  changes                                                   2,333            3,365           3,055           6,926          4,078
Cumulative effect of accounting changes                       ---              ---             ---             ---        (10,956)
                                                  -------------------------------------------------------------------------------
Net income (loss)                                 $         2,333  $         3,365 $         3,055 $         6,926 $       (6,878)
                                                  ===============================================================================

BASIC AND DILUTED EARNINGS PER SHARE:
Income before cumulative effect of
  accounting changes                              $          0.33  $          0.47  $         0.43  $         0.96  $        0.75
Cumulative effect of accounting changes                       ---              ---             ---             ---          (2.02)
                                                  -------------------------------------------------------------------------------
Net income (loss)                                 $          0.33  $          0.47  $         0.43  $         0.96  $       (1.27)
                                                  ===============================================================================
Weighted average number of common
  shares outstanding                                    7,142,026        7,162,250       7,172,271       7,200,201      5,422,429
                                                  ===============================================================================


BALANCE SHEET DATA:
Total assets                                      $       150,381  $       153,034  $      127,785  $      131,971  $     110,939
Working capital                                            56,773           43,419          51,450          54,794         16,640
Long-term debt                                             60,859           48,330          39,000          34,250          4,250
Shareholders' equity                                       35,709           35,194          32,368          28,616         20,088
</TABLE>




                                       11

<PAGE>   12





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

         The following discussion and analysis provides information with respect
to the results of operations of the Company for fiscal 1998, 1997 and 1996 and
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto.

Results of Operations
---------------------
         The following table presents the Company's results of operations
expressed as a percentage of net sales:

<TABLE>
<CAPTION>
                                                                  YEAR ENDED MARCH 31,
                                                                  --------------------
                                                            1998           1997           1996
                                                            ----          ------         -----

<S>                                                        <C>            <C>             <C>   
Net sales                                                  100.0%         100.0%          100.0%
Cost of sales                                               91.6           91.7            90.6
                                                     --------------------------------------------
Gross profit                                                 8.4            8.3             9.4
Selling, general, and administrative expenses                5.5            5.4             6.0
Interest expense                                             1.6            1.1             1.3
                                                     --------------------------------------------
Income before income taxes                                   1.3            1.8             2.1
Income taxes                                                 0.5            0.6             0.7
                                                     --------------------------------------------
Net income                                                   0.8%           1.2%            1.4%
                                                     ============================================
</TABLE>

FISCAL 1998 COMPARED TO FISCAL 1997

         Net sales increased $3.2 million, or 1.1% to $289.2 million. Volume of
tons shipped was up 3.2% for a $9.0 million sales increase, offset by an
aggregate decrease in sales dollars per ton of $5.8 million. Increased volume
from the Ottawa expansion and stronger construction market sales were offset by
the discontinuation of a sheet services brokerage business, a mix shift to lower
revenue products and the weakened Canadian dollar.

         Gross profit for fiscal 1998 was $24.4 million, up $523,000, or 2.2%,
over fiscal 1997. As a percent of sales, margins varied only slightly at 8.4% in
fiscal 1998 versus 8.3% in fiscal 1997. Margin improvements resulted primarily
from strong construction market demand and discontinuation of the brokerage
business which weakened last year's performance. Margin improvements were offset
by weaker mix and the continued effect of ramp-up activity at Ottawa, where
increased expenses out-paced growth in volume for the year.

         Selling, general and administrative (SG&A) expenses of $16.0 million
were up $280,000 over the fiscal 1997 level of $15.8 million, but as a percent
of sales at 5.5% changed only slightly, due to the higher sales volume. The
increase reflects higher sales salaries in support of operational expansion.

         Overall operating income for fiscal 1998 was reduced by $800,000 of
one-time charges. Included was a $350,000 cost-saving initiative charge
associated with a reduction in employment levels and realignment of certain
plant operations. Additionally, a $450,000 reserve was established in connection
with an unfavorable court judgment. In fiscal 1997, the cessation of a brokerage
business reduced operating income by $880,000.

         Interest expense was $4.6 million, or 1.6% of net sales for fiscal
1998, an increase of $1.5 million over the fiscal 1997 level of $3.1 million, or
1.1% of net sales. The increase reflected a full year of financing cost expense
for the Ottawa expansion. Through the third quarter of fiscal 1997, financing
costs associated with the project were capitalized.


                                       12

<PAGE>   13



         Income taxes for fiscal 1998 were $1.4 million or an effective rate of
38%. In fiscal 1997, taxes were $1.7 million, an effective rate of 34%.
Adjustments to state taxes and a valuation allowance lowered the effective rate
in fiscal 1997.

         As a result of the factors discussed above, net income for fiscal 1998
was $2.3 million or .8% of net sales compared to $3.4 million or 1.2% of net
sales in fiscal 1997.

FISCAL 1997 COMPARED TO FISCAL 1996

         Net sales increased $58.9 million, or 25.9% to $286.0 million. The
increase is mainly attributable to the addition to the Company's consolidated
financial statements of sales of $43.5 million at Direct Steel, Inc. ("Direct
Steel"), which became a wholly owned subsidiary of the Company in June 1996 and
sales of $1.3 million attributable to the processing center acquired on November
1, 1996. Excluding the effect of these transactions, the Company's sales
increased $14.1 million, or 6.2%. Volume of tons shipped was up 12.9% accounting
for a $29.3 million sales increase, offset by an aggregate decrease in sales
dollars per ton of $15.2 million due to a decline in average selling price,
resulting from a mix shift to lower revenue products.

         Gross profit for fiscal 1997 was $23.9 million, or 8.3% of net sales,
up $2.5 million or 11.6% over fiscal 1996. As a percent of sales, it was down
from 9.4% in the prior year reflecting several factors. Start-up costs
associated with the new Ottawa facility decreased the margins by approximately
$1.6 million for fiscal 1997, approximately $700,000 of which affected the
fourth fiscal quarter. Additionally, a fourth quarter charge related to the
cessation of brokerage activities reduced gross profit by approximately $880,000
for the year. With the consolidation of Direct Steel, a greater proportion of
sales activity was weighted by a lower margin mix of business. The effect of
higher raw material costs, particularly in the fourth fiscal quarter, also
reduced margins.

         SG&A expenses of $15.7 million in fiscal 1997 were $2.1 million over
the fiscal 1996 level. As a percentage of sales, expenses decreased to 5.4% from
6.0%. Increased expenses were attributable principally to incremental activities
associated with acquisitions competed during fiscal 1997, while the lower
percentage level reflected the comparison of the expense level on the higher
sales activity level. SG&A expenses net of acquisitions increased $633,000,
reflecting higher expenses associated with normal salary increases and the
Company's general growth plan.

         Income from equity investment at Direct Steel was $28,000 for fiscal
1997. Subsequent to June 18, 1996, the operations were consolidated with the
Company's and no longer reported as income from equity investment.

         Interest expense was $3.1 million, an increase of $197,000, but 1.1 %
of net sales in fiscal 1997, down from 1.3% of net sales in fiscal 1996. Lower
interest expense through the third quarter of fiscal 1997 reflected lower
borrowing levels associated with decreased inventory levels resulting from
improved inventory management and lower rates. These favorable effects more than
offset the increased interest costs attributable to acquisition activity. The
consolidation of Direct Steel increased interest expense by $592,000 from fiscal
1996 levels. In the fourth quarter of fiscal 1997, the capitalization of
interest costs associated with the Ottawa expansion project ended and these
costs began to be reflected as interest expense, impacting the year to year
comparison by $499,000.

         Income taxes for fiscal 1997 were $1.7 million or .6% of net sales
compared to $1.7 million in fiscal 1996 or .7% of net sales. The effective tax
rates computed on income exclusive of income (loss) from equity investment were
down slightly in the current year at 33.8% versus 34.8% in the prior fiscal
year.

         As a result of the factors discussed above, net income for fiscal 1997
was $3.4 million or 1.2% of net sales compared to $3.1 million or 1.4% of net
sales in fiscal 1996.



                                       13

<PAGE>   14



LIQUIDITY AND CAPITAL RESOURCES

         The Company requires capital primarily to fund working capital needs,
capital projects, including the acquisition, expansion and improvement of
facilities, machinery and equipment and to acquire complementary steel-related
businesses consistent with the Company's growth strategy to increase its size
and profitability. The Company met its capital requirements in fiscal 1998
through cash flow from operations and from borrowings under credit facilities.

         During fiscal 1998, the Company generated cash flow from operating
activities of $1.7 million. Contributing to cash inflows in the current year
were net income, non-cash depreciation and amortization, and a decrease in
receivables. Offsetting these effects were decreases in accounts payable and
other liabilities, and an increase in inventories.

         Cash flows used for investing activities in fiscal 1998 consisted of
$3.4 million of capital spending, down from previous year spending which
included the Ottawa expansion.

         Cash flows from financing activities provided $1.9 million for fiscal
1998. The Company was in compliance with covenant requirements under its credit
facilities as of March 31, 1998.

         The Company's two bank lending arrangements provide an aggregate
maximum borrowing availability of approximately $90.2 million, of which $63.6
million was outstanding as of March 31, 1998. One of the borrowing facilities is
a term loan in the approximate amount of $20.2 million secured by the fixed
assets of the Company's facility in Ottawa, Ohio. The other is a revolving
credit facility secured by the rest of the Company's assets. The revolving
credit facility was amended on April 1, 1998 to provide maximum borrowing
availability of $70 million and to eliminate a discretionary facility with one
of the Company's Canadian operations upon completion of the amalgamation of
Direct Steel and Cold Metal Products, Limited.
 Management expects that cash generated from operating activities and its
borrowing capacity will be sufficient to meet planned capital expenditures and
other cash requirements for the next twelve months.

SEASONALITY

         The Company has in the past experienced lower levels of sales in the
months of July, November, and December, due primarily to holiday periods and
customer's temporary plant shutdowns.

INFLATION/IMPACT OF CHANGING PRICES

         The Company's largest component of cost of sales is raw material costs.
These costs can vary over time due to changes in steel pricing which the Company
typically passes on to customers. The Company does not believe that inflation
has had a significant impact on the results of its operations over the periods
presented.

ENVIRONMENTAL MATTERS

         The Company's facilities are subject to numerous federal, state,
provincial and local regulations related to environmental protection and
compliance with such regulations is a factor in the Company's operations. The
Company has made, and intends to make, expenditures necessary to comply with
such regulations. Under existing laws and regulations, the Company believes that
compliance will not have a material adverse effect on its results of operations
or financial condition.

IMPACT OF YEAR 2000

         The Year 2000 issue relates to computer programs which recognize a date
using "00" as the year 1900 rather than the year 2000. The Company does not
anticipate that expenditures to ensure that its computer systems are Year 2000
compliant will have a material impact on its financial position, results of
operations or cash flows. Although the Company does not anticipate that
third-party non-compliance, if any,

                                       14

<PAGE>   15



will have a material impact on the Company, the Company's operations could be at
risk if its suppliers and other third-parties fail to adequately address the
problem.



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
Cold Metal Products, Inc.
Youngstown, Ohio


         We have audited the accompanying consolidated balance sheets of Cold
Metal Products, Inc. and Subsidiary (the "Company") as of March 31, 1998 and
1997, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended March 31,
1998. Our audits also included the financial statement schedules listed in the
Index at Item 14(a)(2). These financial statements and financial statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on the consolidated financial statements based on our
audits.

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

         In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Cold Metal Products, Inc.
and Subsidiary as of March 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 1998 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.



/s/ Deloitte & Touche LLP
-------------------------
Cleveland, Ohio
May 8, 1998




                                       15

<PAGE>   16




                           CONSOLIDATED BALANCE SHEETS
                    COLD METAL PRODUCTS, INC. AND SUBSIDIARY


<TABLE>
<CAPTION>
                                                                                     MARCH 31,
                                                                                1998            1997
                                                                 (Dollars in thousands, except per share amounts)
<S>                                                                       <C>              <C>           
ASSETS:
Cash                                                                      $         1,140  $          898
Receivables                                                                        35,996          41,386
Inventories                                                                        53,703          50,104
Prepaid and other current assets                                                    3,134           2,090
                                                                          ---------------  --------------
      Total current assets                                                         93,973          94,478
Property, plant, and equipment - at cost                                           80,583          78,233
Less accumulated depreciation                                                    (33,203)         (29,475)
                                                                          ---------------  --------------
Property, plant and equipment - net                                                47,380          48,758
Other assets                                                                        9,028           9,798
                                                                          ---------------  --------------
     Total assets                                                         $       150,381  $      153,034
                                                                          ===============  ==============

LIABILITIES AND SHAREHOLDERS' EQUITY:
Short-term borrowings                                                     $         2,736  $       13,192
Accounts payable                                                                   26,467          29,322
Other current liabilities                                                           7,997           8,545
                                                                          ---------------  --------------
     Total current liabilities                                                     37,200          51,059
Long-term debt                                                                     60,859          48,330
Postretirement and other benefits                                                  16,613          18,451
Shareholders' equity:
Common stock, $.01 par value; 15,000,000 shares
     authorized, 7,532,250 shares issued                                               75              75
Additional paid-in capital                                                         25,350          25,330
Retained earnings                                                                  18,245          15,912
Cumulative translation adjustment                                                  (4,034)         (2,649)
                                                                          ---------------  --------------
Less treasury stock, 458,000 and 370,000 shares at cost                            (3,927)         (3,474)
                                                                          ---------------  --------------
     Total shareholders' equity                                                    35,709          35,194
                                                                          ---------------  --------------
     Total liabilities and shareholders' equity                           $       150,381  $      153,034
                                                                          ===============  ==============
</TABLE>



                 See notes to consolidated financial statements

                                       16

<PAGE>   17




                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    COLD METAL PRODUCTS, INC. AND SUBSIDIARY






<TABLE>
<CAPTION>
                                                                    YEAR ENDED MARCH 31,

                                                        1998               1997              1996

                                                     (Dollars in thousands except per share amounts)
<S>                                                  <C>               <C>               <C>        
Net sales                                            $  289,213        $  286,024        $   227,128
Cost of sales                                           264,799           262,133            205,727
                                                    -------------------------------------------------
Gross profit                                             24,414            23,891             21,401

Selling, general, and administrative expenses            16,019            15,739             13,645
Income (loss) from equity investment                        ---                28                (98)
Interest expense                                          4,624             3,115              2,918
                                                    -------------------------------------------------
Income before income taxes                                3,771             5,065              4,740
Income taxes                                              1,438             1,700              1,685
                                                    -------------------------------------------------
Net income                                           $    2,333        $    3,365        $     3,055
                                                    =================================================

Basic and diluted net income per share               $     0.33        $     0.47        $      0.43
                                                    =================================================

Weighted average number of
     shares outstanding                               7,142,026         7,162,250          7,172,271
                                                    =================================================
</TABLE>



                 See notes to consolidated financial statements


                                       17

<PAGE>   18




                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                    COLD METAL PRODUCTS, INC. AND SUBSIDIARY




<TABLE>
<CAPTION>
                                   COMMON
                                    SHARES       ADDITIONAL                     CUMULATIVE
                                    ($.01         PAID-IN          RETAINED     TRANSLATION      TREASURY
                                  PAR VALUE)      CAPITAL          EARNINGS     ADJUSTMENT         STOCK            TOTAL
                                                                      (In thousands)
<S>                                 <C>           <C>              <C>            <C>             <C>             <C>     
Balance, March 31, 1995             $  75         $ 25,437         $ 9,492        $(3,022)        $(3,366)        $ 28,616
Net income                            ---              ---           3,055            ---             ---            3,055
Shares deferred in lieu of
  pay                                 ---               20             ---            ---             ---               20
Reduction in contribution of
  principal shareholder               ---             (157)            ---            ---             ---             (157)
TREASURY STOCK                        ---              ---             ---            ---            (108)            (108)
Net adjustment for foreign
  currency translation                ---              ---             ---            942             ---              942
                                  -----------------------------------------------------------------------------------------
Balance, March 31, 1996                75           25,300          12,547         (2,080)         (3,474)          32,368
Net income                            ---              ---           3,365            ---             ---            3,365
Shares deferred in lieu of
 pay                                  ---               30             ---            ---             ---               30
Net adjustment for foreign
  currency translation                ---              ---             ---           (569)            ---             (569)
                                  -----------------------------------------------------------------------------------------
Balance, March 31, 1997                75           25,330          15,912         (2,649)         (3,474)          35,194

Net income                            ---              ---           2,333            ---             ---            2,333
Shares deferred in lieu of
 pay                                  ---               20             ---            ---             ---               20
Treasury stock                                                                                       (453)            (453)
Net adjustment for foreign
  currency translation                ---              ---             ---         (1,385)            ---           (1,385)
                                  -----------------------------------------------------------------------------------------
Balance, March 31, 1998             $  75         $ 25,350         $18,245        $(4,034)        $(3,927)        $ 35,709
                                  =========================================================================================
</TABLE>



                 See notes to consolidated financial statements

                                       18

<PAGE>   19




                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    COLD METAL PRODUCTS, INC. AND SUBSIDIARY


<TABLE>
<CAPTION>
                                                                          YEAR ENDED MARCH 31,

                                                               1998               1997             1996

                                                                             (In thousands)
<S>                                                          <C>               <C>               <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                                              $   2,333         $   3,365         $   3,055
     Adjustments to reconcile net income to net cash
        provided by operating activities
          Depreciation and amortization                          4,408             3,333             2,511
          (Income) loss from equity investment                     ---               (28)               98
          Deferred income taxes                                    301               703               468
          Deferred directors' fees                                  20                30                20
          Changes in operating assets and liabilities           (5,334)              (43)            3,211
                                                           -----------------------------------------------
          Net cash provided by operating activities              1,728             7,360             9,363

CASH FLOWS FOR INVESTING ACTIVITIES:
     Additions to property, plant, and equipment                (3,391)          (14,259)          (14,220)
     Acquisitions                                                  ---            (8,525)              ---
                                                           -----------------------------------------------
         Net cash used in investing activities                  (3,391)          (22,784)          (14,220)

CASH FLOWS FROM FINANCING ACTIVITIES
     Proceeds from term loans                                      ---            23,095               ---
     Payments of term loans                                     (1,263)             (363)              ---
     Proceeds from other debt                                  218,124           198,475           168,818
     Payments of other debt                                   (214,462)         (207,278)         (160,158)

     Defeasance of industrial revenue bond                         ---               ---            (4,250)
     Acquisition of treasury stock                                (453)              ---              (108)
     Other equity transaction                                      ---               ---              (157)
                                                           -----------------------------------------------
         Net cash provided by financing  activities              1,946            13,929             4,145

Net increase (decrease) in cash                                    283            (1,495)             (712)
Effect of exchange rates on cash                                   (41)               75                84
Cash, beginning of period                                          898             2,318             2,946
                                                           -----------------------------------------------
Cash, end of period                                          $   1,140         $     898         $   2,318
                                                           ===============================================
</TABLE>

                 See notes to consolidated financial statements

                                       19

<PAGE>   20




                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    COLD METAL PRODUCTS, INC. AND SUBSIDIARY
--------------------------------------------------------------------------------



1.  PRINCIPLES OF CONSOLIDATION, BUSINESS DESCRIPTION AND ACCOUNTING POLICIES

         Consolidation and Presentation -- The consolidated financial statements
include the accounts of the Company and its subsidiary, Cold Metal Products,
Limited, a Canadian Company. All significant intercompany transactions and
accounts have been eliminated.

         Business Description -- The Company is in the intermediate steel
processing business and processes specialty and conventional strip steel, and
premium and standard sheet steel, to meet the critical requirements of precision
parts manufacturers. Through cold rolling, annealing, normalizing,
edge-conditioning, oscillate- winding, slitting, and cutting-to-length, the
Company provides value-added products to manufacturers in the automotive,
construction, cutting tools, consumer goods, and industrial goods markets. The
Company also supplies specialty steel distributors. Its customers are located
predominately in the U.S. and Canada.

         During fiscal 1998, 1997, and 1996, approximately 44%, 41% and 37% of
the Company's sales, respectively, and 44%, and 43% of accounts receivable at
March 31, 1998 and 1997, respectively, were with companies in the automotive
industry. The balance of the Company's net sales are approximately equally
divided among the other markets served. During fiscal 1998, 1997, and 1996, the
Company's ten largest customers accounted for 31%, 31% and 35% of the Company's
net sales. No single customer accounted for 10% or more of sales in any of the
years. The Company performs ongoing credit evaluations of its customers'
financial condition and generally requires no collateral.

         Production facilities are located in Youngstown and Ottawa, Ohio;
Indianapolis, Indiana; New Britain and Waterbury, Connecticut; Hamilton and
Concord Ontario; and Pointe Claire, Quebec, Canada.

         Results of Foreign Operations -- Net sales, operating income and net
income, respectively, of the Company's Canadian subsidiary were $158.9 million,
$5.1 million and $2.0 million in fiscal 1998; $155.3 million, $5.2 million and
$2.5 million in fiscal 1997; and $97.6 million, $2.0 million and $634,000 in
fiscal 1996. Identifiable assets of the Canadian subsidiary were $67.8 million
and $71.2 million at March 31, 1998 and 1997, respectively. The remainder of the
Company's consolidated net sales, operating income, net income and assets are
related to operations in the United States.

         Both United States and Canadian operations sell to customers located
predominately in the United States and Canada. Of total net sales, approximately
51% was to customers in the United States, 48% to customers in Canada, and less
than 1% to customers in other countries.

         Inventories -- Inventories are valued at the lower of cost or market.
Cost of domestic inventories is determined under the last-in, first-out (LIFO)
method; cost of inventories of the Canadian subsidiary is determined on the
first-in, first-out (FIFO) method. Domestic inventories represent approximately
49% of total consolidated inventories at both March 31, 1998 and 1997. Under the
FIFO method of inventory pricing, domestic inventories would have been
approximately $2,017,000 and $2,622,000 higher at March 31, 1998 and 1997,
respectively.

         In fiscal 1997, inventory quantities were reduced resulting in a
liquidation of certain LIFO inventory layers carried at costs which were
different than the cost of current purchases. The effect of the LIFO liquidation
in fiscal 1997 increased income before taxes by $199,000 respectively, and net
income by $128,770.


                                       20

<PAGE>   21



         Property, Plant, and Equipment -- Property, plant, and equipment are
stated at cost. The Company provides for depreciation over the estimated useful
lives of the assets on the straight-line method for financial statement
reporting and an accelerated method for income tax reporting purposes. Estimated
useful lives range from five to thirty years.

         Interest is capitalized in connection with the construction of
qualified assets. Under this policy, interest of $722,000 and $301,000 was
capitalized in fiscal 1997 and 1996, respectively.

         Goodwill -- Goodwill is amortized using the straight-line method over a
period of forty years. The Company assesses the recoverability of this
intangible asset by determining whether the amortization of the goodwill balance
over its remaining life can be recovered through projected undiscounted cash
flows. The accumulated amount amortized at 3/31/98 and 3/31/97 was $144,000 and
$77,000, respectively.

         Revenue Recognition -- Revenue is recognized when products are shipped
to customers. Sales returns and allowances are treated as a reduction to sales
and are provided for based on historical experience and current estimates.

         Start-up Costs -- Start-up costs are expensed as incurred.

         Stock Based Compensation -- The Company accounts for its stock option
plans using the intrinsic value accounting method, measured as the difference
between the option exercise price and the market value of the stock at the
measurement date. Accordingly, no compensation expense has been recognized for
its stock-based compensation plans in the accompanying financial statements as
all option exercise prices were equal to market price on the date of grant.

         Earnings Per Share -- In 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share" which is effective for financial statements issued for periods ending
after December 15, 1997. SFAS No. 128 simplifies the standards for computing
earnings per share (EPS), replacing the presentation of primary EPS with a
presentation of basic EPS, which includes only the weighted average number of
common shares outstanding and does not include any potentially dilutive
securities in the calculation. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. For fiscal 1998, 1997 and
1996, basic and dilutive earnings per share amounts are the same as the effect
of dilutive outstanding stock options is immaterial.

         Financial Instruments -- The Company has various financial instruments
including cash, receivables, short-term and long-term debt, and miscellaneous
other assets. The Company has determined that the estimated fair value of its
financial instruments approximates carrying value.

         Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions pending completion of related events. These estimates and
assumptions affect the amounts reported at the date of the financial statements
for assets, liabilities, revenues and expenses and the disclosure of
contingencies. Actual results could differ from these estimates.

         New Accounting Standards -- The Financial Accounting Standards Board
has issued SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information", effective
for fiscal years beginning after December 15, 1997. SFAS No. 130 establishes new
standards for reporting comprehensive income and its components. The Company
does not expect that comprehensive income will differ materially from net
income, except for foreign currency translation adjustments included in
comprehensive income. SFAS No. 131 requires that a public business enterprise
report financial and descriptive information about its reportable operating
segments such as a measure of segment profit or loss, certain specific revenue
and expense items, and segment assets. The Company does not expect adoption of
the standard to have a material effect on financial position or results of
operations, as the Company operates in one business segment, intermediate steel
processing.

                                       21

<PAGE>   22



2.  OTHER BALANCE SHEET INFORMATION


<TABLE>
<CAPTION>
                                                                                MARCH 31,

                                                                       1998                   1997

                                                               --------------------------------------------
                                                                              (In thousands)
<S>                                                            <C>                    <C>                  
RECEIVABLES:
     Customers                                                 $              36,546  $              41,932
     Allowance for doubtful accounts                                            (550)                  (546)
                                                               --------------------------------------------
                                                               $              35,996  $              41,386
                                                               ============================================
INVENTORIES:
     Raw materials                                             $              28,241  $              28,209
     Work in process                                                          14,978                 15,048
     Finished goods                                                           10,484                  6,847
                                                               --------------------------------------------
                                                               $              53,703  $              50,104
                                                               ============================================
PREPAID AND OTHER CURRENT ASSETS:
     Prepaid expenses                                          $               1,470  $                 603
     Deferred income taxes                                                     1,664                  1,487
                                                               --------------------------------------------
                                                               $               3,134  $               2,090
                                                               ============================================

PROPERTY, PLANT, AND EQUIPMENT:
     Land                                                      $               2,192  $               2,227
     Buildings                                                                17,810                 17,829
     Machinery and equipment                                                  59,290                 56,481
     Construction in process                                                   1,291                  1,696
                                                               --------------------------------------------
                                                               $              80,583  $              78,233
                                                               ============================================
OTHER ASSETS:
     Deferred income taxes                                     $               3,177  $               3,629
     Goodwill                                                                  2,417                  2,566
     Other                                                                     3,434                  3,603
                                                               --------------------------------------------
                                                               $               9,028  $               9,798
                                                               ============================================
OTHER CURRENT LIABILITIES:
     Payroll and related employee benefits                     $               5,066  $               5,342
     Other                                                                     2,931                  3,203
                                                               --------------------------------------------
                                                               $               7,997  $               8,545
                                                               ============================================
</TABLE>

3.  ACQUISITIONS

         Effective June 18, 1996, Cold Metal Products, Limited acquired the
remaining outstanding shares of its 50% equity affiliate, Direct Steel, Inc.,
("Direct Steel"), for approximately $2.6 million. Direct Steel operates a steel
service center located in Concord, Ontario, Canada. The acquisition has been
accounted for as a purchase and, accordingly, assets and liabilities were
recorded at estimated fair values. The allocation of purchase price resulted in
goodwill of approximately $1.9 million, which is being amortized over 40 years.

         On November 1, 1996, Cold Metal Products, Limited acquired real
property and steel processing equipment at Hamilton, Ontario for approximately
$5.9 million including acquisition costs. The purchase was completed utilizing
the Company's existing banking facilities and short-term seller financing. The
transaction was accounted for as a purchase and assets and liabilities were
recorded at estimated fair values.




                                       22

<PAGE>   23



4.  DEBT

<TABLE>
<CAPTION>
                                                           SHORT-TERM                           LONG-TERM
                                                           MARCH 31,                            MARCH 31,
                                                    1998               1997              1998               1997
                                              -------------------------------------------------------------------------
<S>                                           <C>                <C>               <C>                <C>              
Committed facility                            $           1,358  $           1,115 $          42,000  $          27,000
Discretionary facility                                      ---             10,621               ---                ---
Term notes                                                1,378              1,456            18,859             21,330
                                              -------------------------------------------------------------------------
Total                                         $           2,736  $          13,192 $          60,859  $          48,330
                                              =========================================================================
</TABLE>


         The Company has a committed credit facility which provides availability
based on a percentage of accounts receivable, inventory, and an amortizing term
loan. On April 1, 1998, the Company amended its credit facility agreement to
provide total borrowing availability of $70 million and eliminate the
discretionary facility between Direct Steel and its lender. On the same date,
Direct Steel was amalgamated into its parent, Cold Metal Products, Limited.

         The amended facility continues to provide for borrowing at Libor rates
plus one-half percent. The agreement extends through October 2, 2000, and
contains certain financial and other covenants, including restrictions on
payment of dividends, with which the Company was in compliance at March 31,
1998. Under the committed facility, the Company has determined that $1.4 million
would be subject to repayment with funds generated from operating activities
during the business cycle. As such, these funds are reflected as short-term in
nature. The weighted average interest rate at March 31, 1998 and 1997 was 6.2%
and 7.4%, respectively. The facility is collateralized by accounts receivable,
inventory, common stock of the Canadian subsidiary, and property, plant and
equipment. As of March 31, 1998, the credit line supported letters of credit in
the amount of $448,000.

         In December 1996, the Company borrowed $21.8 million under an eight and
one-half year term loan at a fixed rate of 8.8% secured by the fixed assets of
its expanded Ottawa, Ohio facility. Proceeds of the loan were used to pay-down
debt under the Company's primary lending facility. The term loan agreement
contains certain financial and other covenants with which the Company was in
compliance at March 31, 1998. At March 31, 1998, approximately $20.2 million of
the term loan was outstanding. Aggregate maturities of the term loan for the
next five fiscal years are as follows: 1999 - $1.4 million; 2000 - $1.5 million;
2001 - $1.6 million; 2002 - $1.8 million; and 2003 - $2.0 million.





                                       23

<PAGE>   24



5.  INCOME TAXES

         Deferred income taxes reflect the net tax effects of (i) temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes, and (ii)
operating loss and tax credit carryforwards. Components of the Company's
deferred tax liabilities and assets are as follows:

<TABLE>
<CAPTION>
                                                                                 MARCH 31,

U.S.:                                                                      1998            1997
                                                                        --------------------------
                                                                              (In thousands)
<S>                                                                      <C>             <C>    
Deferred tax assets:
     Postretirement and postemployment benefit obligations               $ 5,755         $ 5,994
     Inventory basis differences                                             (75)             44
     Reserves not currently deductible                                       743             877
     Tax operating loss carrryforwards (expires 2012 and 2013)             2,162             622
     Tax credit carryforwards  (expires 2002, 2003 and unlimited)            375             256
                                                                        --------------------------
                                                                           8,960           7,793
     Valuation allowance                                                    (313)           (313)
                                                                        --------------------------
                                                                           8,647           7,480
Deferred tax liabilities-property basis differences                       (3,196)         (1,838)
                                                                        --------------------------
Total U.S.                                                                 5,451           5,642


CANADA:
Deferred tax assets:
     Postretirement and postemployment benefit obligations                   120             112
     Reserves  not currently deductible                                       25              26
     Tax operating loss carryforwards (expires 2005)                         550             ---
                                                                        --------------------------
                                                                             695             138
Deferred tax liabilities:
     Property  basis differences                                            (578)           (448)
     Pension asset                                                          (727)           (216)
                                                                        --------------------------
                                                                          (1,305)           (664)
                                                                        --------------------------
Total Canada                                                                (610)           (526)
                                                                        --------------------------
Net deferred tax asset                                                   $ 4,841         $ 5,116
                                                                        ==========================
</TABLE>


The provision for income taxes includes:

<TABLE>
<CAPTION>
                                                YEAR ENDED MARCH 31,
                                          1998         1997           1996
                                     -----------------------------------------
                                                  (In thousands)
                                     -----------------------------------------
<S>                                  <C>           <C>            <C>         
CURRENT TAXES:
   U.S. federal                      $        87   $       (182)  $        825
   Canadian federal and provincial         1,019          1,128            310
   State and local                            31             51             82
                                     -----------------------------------------
                                           1,137            997          1,217
DEFERRED TAXES:
   U.S.                                       95            620            457
   Canadian                                  206             83             11
                                     -----------------------------------------
                                             301            703            468
                                     -----------------------------------------
Total                                $     1,438   $      1,700   $      1,685
                                     =========================================
</TABLE>




                                       24

<PAGE>   25



Reconciliations of the U.S. federal statutory tax rate to the effective tax rate
are as follows:

<TABLE>
<CAPTION>
                                                             YEAR ENDED MARCH 31,
                                                  1998                 1997                 1996
                                             ---------------------------------------------------
<S>                                              <C>                  <C>                  <C>  
U. S. federal statutory tax rate                  35.0%                35.0%                35.0%
Effect of graduated rates                         (1.0)                (1.0)                (1.0)
Effect of Canadian rates                           2.6                  1.0                 (0.8)
State taxes                                        0.8                  0.7                  2.4
Reduction in valuation allowance                   0.0                 (1.5)                (1.3)
Equity (income) loss                               0.0                 (0.2)                 0.8
Other                                              0.7                 (0.4)                 0.4
                                             ---------------------------------------------------
Effective tax rate                                38.1%                33.6%                35.5%
                                             ===================================================
</TABLE>

6. RETIREMENT BENEFIT PLANS

         Substantially all of the Company's salaried and hourly employees are
covered by noncontributory retirement benefit plans. These plans generally
provide benefits based upon a formula using fiscal average earnings or at a
stated amount for each year of service. The plans' assets are principally
invested by outside asset managers in marketable debt and equity securities. The
company's funding policy is to make the annual contributions required by
applicable regulations.

Domestic pension expense includes the following components:

<TABLE>
<CAPTION>
                                                      YEAR ENDED MARCH 31,
                                             1998            1997               1996
                                        ------------------------------------------------
                                                         (In thousands)
<S>                                     <C>              <C>               <C>            
Service cost                            $          730   $          686    $         597
Interest cost                                    1,670            1,489            1,261
Actual return on assets                         (6,421)          (2,021)          (3,289)
Net amortization                                 4,784              628            2,154
Cost of special termination benefits               149              293              ---
                                        ------------------------------------------------
Domestic pension expense                $          912   $        1,075    $         723
                                        ================================================
</TABLE>

Accrued domestic pension asset/liability in the balance sheets is as follows:

<TABLE>
<CAPTION>
                                                                             MARCH 31,
                                                                         1998            1997
                                                                   ------------------------------
                                                                           (In thousands)
<S>                                                                <C>               <C>         
Vested accumulated benefit obligation                              $        19,325   $     14,344
Nonvested accumulated benefits                                               3,129          2,247
                                                                   ------------------------------
Accumulated benefit obligation                                              22,454         16,591
Effect of projected salary increases                                         3,687          2,653
                                                                   ------------------------------
Projected benefit obligation                                                26,141         19,244
Plan assets at market value                                                 27,197         20,035
                                                                   ------------------------------
Plan assets in excess of projected benefit obligation                       (1,056)          (791)
Unrecognized net obligation                                                 (1,367)        (1,508)
Unrecognized net gain                                                        1,477          2,213
Additional liability                                                           ---            100
                                                                   ------------------------------
Net domestic pension (asset) liability                             $          (946)  $         14
                                                                   ==============================
</TABLE>




                                       25

<PAGE>   26



Assumptions used in developing the domestic pension information were:

<TABLE>
<CAPTION>
                                                               YEAR ENDED MARCH 31,
                                                    1998               1997               1996
                                              -------------------------------------------------------
<S>                                                 <C>                <C>                <C> 
Discount rate for obligation                        7.00%              8.25%              8.00%
Discount rate for expense                           8.25               8.00               8.25
Long-term rate of investment return                 8.50               8.50               8.50
Salary increase rate                                5.00               5.00               5.00
</TABLE>



         Domestic employees are eligible to participate in savings plans, which
include a 401(k) feature. The Company matches employee contributions 50% to
100%, in ranges of 3% to 6% of basic earnings. Employees vest in matching
contributions after attaining three years of service. Company matching
contributions were $602,000, $556,000 and $430,000 for fiscal 1998, 1997 and
1996, respectively.

         The Canadian subsidiary has a defined contribution pension plan
covering substantially all of its salaried employees. The Company's
contributions to the defined contribution pension plan include a noncontributory
portion, which is a stated percentage of salary, and a contributory portion, in
which the Company matches the employee's contribution 100% up to 5% of their
salary. The Canadian subsidiary also has a defined benefit plan for its hourly
employees.

Canadian pension expense includes the following components:

<TABLE>
<CAPTION>
                                                         YEAR ENDED MARCH 31,
                                              1998                 1997               1996
                                       --------------------------------------------------------
                                                            (In thousands)
DEFINED BENEFIT PLAN:
<S>                                    <C>                    <C>                <C>           
     Service cost                      $              174     $          132     $          110
     Interest cost                                    302                225                182
     Actual return on assets                         (242)              (179)              (144)
     Net amortization                                 108                 74                 57
                                       --------------------------------------------------------
                                                      342                252                205
Defined contribution plan                             281                255                234
                                       --------------------------------------------------------
Canadian pension expense               $              623     $          507     $          439
                                       ========================================================
</TABLE>

Accrued Canadian pension asset/ liability in the balance sheets is as follows:

<TABLE>
<CAPTION>
                                                                                            MARCH 31,
                                                                                        1998          1997
                                                                                 -----------------------------
                                                                                           (In thousands)
<S>                                                                              <C>              <C>         
DEFINED BENEFIT PLAN:
Projected benefit obligation-fully vested                                        $        4,777   $      3,712
Plan assets at market value                                                               4,864          2,841
                                                                                 -----------------------------
Projected benefit obligation (less than) in excess of plan assets                           (87)           871
Unrecognized net obligation                                                              (2,088)        (1,499)
Additional liability (included in postretirement and other benefits)                          0          1,499
                                                                                 -----------------------------
Net Canadian pension (asset) liability                                           $       (2,175)   $       871
                                                                                 =============================
</TABLE>

         The Canadian pension information was developed using a discount rate of
7% and 8% and a long term rate of investment return of 8% and 8% for fiscal 1998
and 1997, respectively.



                                       26

<PAGE>   27



7.  POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS  OTHER THAN PENSION

Net postretirement benefit cost consisted of the following components :

<TABLE>
<CAPTION>
                                                                             YEAR ENDED MARCH 31,
                                                                      1998           1997          1996
                                                                  ------------------------------------------
                                                                                (In thousands)
<S>                                                               <C>            <C>           <C>          
Service cost                                                      $         142  $         141 $         163
Interest cost                                                               825            793           864
Net amortization                                                           (720)          (718)         (645)
                                                                  ------------------------------------------
Total                                                             $         247  $         216 $         382
                                                                  ==========================================
</TABLE>

         The Company's postretirement benefit plans are not funded. The status
of the plans' accumulated postretirement benefit obligation is as follows:

<TABLE>
<CAPTION>
                                                                MARCH 31,
                                                            1998         1997
                                                       ---------------------------
                                                              (In thousands)

<S>                                                    <C>           <C>          
Retirees                                               $       6,116 $       5,161
Fully eligible active plan participants                        2,646         2,463
Other active plan participants                                 3,046         2,453
Unrecognized net gain                                          1,090         2,650
Unrecognized prior service cost                                2,600         3,164
                                                       ---------------------------
Postretirement benefits                                       15,498        15,891
Postemployment benefits                                          100           100
                                                       ---------------------------
Total postretirement and postemployment     
benefits                                               $      15,598 $      15,991
                                                       ===========================
</TABLE>

         The assumed healthcare cost trend rate used in measuring the
accumulated postretirement benefit obligation as of March 31, 1998 was 10.0% for
pre-age 65 payments (8.0% for post-age 65 payments) decreasing linearly each
successive year until it reaches 5.5% in 2007 for pre-age 65 payments and 2003
for post-age 65 payments, after which it remains constant. A one
percentage-point increase in assumed healthcare cost trend rate for each year
would increase the accumulated postretirement benefit obligation and net
postretirement benefit cost by approximately 2% and 10%, respectively. The
assumed discount rate as of March 31, 1998 and 1997, used in determining the
accumulated postretirement benefit obligation was 7.00% and 8.25%, respectively.

8.  MANAGEMENT INCENTIVE PROGRAMS

         The Company has a discretionary deferred compensation plan for certain
key employees. The Company's policy is to expense and fund to a trust fund,
annually, amounts for services rendered, $100,000, $116,000 and $141,000 in
fiscal 1998, 1997, and 1996, respectively. The amounts vest 100% five years from
the grant date, contingent upon continued employment or attainment of a normal
retirement.

         The Company has two programs that provide for the grant of incentive
awards including stock options or restricted stock to officers, key employees,
and non-employee directors. In 1997, the Company adopted SFAS No. 123,
"Accounting for Stock-Based Compensation." As permitted by SFAS No. 123, the
Company has not changed its method of accounting for stock-based compensation.
Pro forma compensation costs for options granted in fiscal 1997 and 1996
determined under the requirements of SFAS No. 123 resulted in an immaterial
reduction of net income and earnings per share for each year.

         Effective January 27, 1994, The Company's Board of Directors approved
the officer and key employee stock option program. Under the program, stock
options granted may be either options intended to qualify for federal income tax
purposes as "incentive stock options" or options not qualifying for favorable
tax treatment, "nonqualified stock options." In fiscal 1996, the shareholders
approved an increase in the total number shares of common stock issuable under
the program to 715,350 shares. The stock options are exercisable over a period

                                       27

<PAGE>   28



determined by the Board of Directors, but no longer than ten years after the
date they are granted. Details of stock options under the program are as
follows:


<TABLE>
<CAPTION>
                                                                                        YEAR ENDED MARCH 31,
                                                                                  1998             1997            1996
                                                                           ----------------------------------------------
<S>                                                                              <C>              <C>             <C>    
Outstanding at beginning of year                                                 397,500          375,000         210,000
Granted                                                                              ---           22,500         165,000
                                                                           ----------------------------------------------
Outstanding at end of year (prices ranging from $5.75 to $10.00 per share)       397,500          397,500         375,000
                                                                           ==============================================
Exercisable at end of year                                                       192,500          160,000          50,000
Available for grant at end of year                                               317,850          317,850         340,350
</TABLE>

         The Company's Non-Employee Directors' Incentive Plan, which was adopted
on March 3, 1994 and amended by the shareholders on July 20, 1996, provides for
the issuance of shares to Directors (i) on a deferred basis, in lieu of payment
of annual retainer fees and (ii) through options granted at the beginning of a
director's terms or, on a discretionary basis, thereafter. The Plan reserves for
issuance 60,000 shares for deferral elections and 100,000 shares for the
granting of options. At the beginning of his or her term, each director is
granted an option to purchase 10,000 shares at a price equal to the market price
on the date of the grant, exercisable after three years or upon certain
specified events, such as a sale or merger of the Company. Options grantable on
a discretionary basis under the plan are exercisable no less than six months
from the date of the grant. Deferral elections under the plan allow each
eligible director to defer receipt of director fees in cash or common stock
until a specified period after his or her resignation or certain other events,
such as a sale or merger of the Company. Amounts deferred under this election
were 4,000 shares in fiscal 1998 and 5,581 shares in fiscal 1997.
Details of stock options under the plan are as follows:

<TABLE>
<CAPTION>
                                                                                           YEAR ENDED MARCH 31,
                                                                           -----------------------------------------------------
                                                                                       1998              1997              1996
                                                                           -----------------------------------------------------
<S>                                                                                   <C>               <C>               <C>   
Outstanding at beginning of year                                                      75,000            65,000            30,000
Granted                                                                                  ---            10,000            35,000
                                                                           -----------------------------------------------------
Outstanding at end of year (prices ranging from $5.75 to $10.00 per share)            75,000            75,000            65,000
                                                                           =====================================================
Exercisable at end of year                                                            50,000            30,000                --
Available for grant at end of year                                                    25,000            25,000            35,000
</TABLE>

9.  SUPPLEMENTAL CASH FLOW INFORMATION


<TABLE>
<CAPTION>
                                                                  YEAR ENDED MARCH 31,
                                                             1998                1997              1996
                                                --------------------------------------------------------
CHANGES IN OPERATING ASSETS AND LIABILITIES                          (In thousands)
<S>                                             <C>                 <C>                <C>              
(Increase) decrease in assets:
     Receivables                                $            4,705  $          (1,325) $           5,371
     Inventories                                            (4,417)             5,110             11,356
     Prepaid expenses and  other assets                       (754)              (261)              (287)
Increase (decrease) in  liabilities:


     Accounts payable                                       (2,558)            (3,244)           (11,603)
     Other liabilities                                      (2,310)              (323)            (1,626)
                                                --------------------------------------------------------
                                                $           (5,334) $             (43) $           3,211
                                                ========================================================
Interest paid                                   $            4,617  $           3,904  $           3,811
                                                ========================================================
Income taxes paid                               $              455  $             724  $           2,097
                                                ========================================================
</TABLE>

10.  COMMON STOCK

         Under a stock repurchase program authorized by the Company's Board of
Directors, the Company purchased 88,000 shares of treasury stock in fiscal 1998
for a total of $453,000. Current financing

                                       28

<PAGE>   29



agreements allow for the repurchase of stock not to exceed an aggregate amount
of $2.0 million. The aggregate amount purchased by the Company under the program
to date totals $847,000. In March 1998, the Board of Directors authorized an
additional 100,000 share stock repurchase program to be completed over an
unspecified period of time.

11.  COMMITMENTS AND CONTINGENCIES

         The Company leases certain facilities and various equipment under
noncancelable leases expiring through February 2002. The future minimum
obligations under noncancelable operating leases in effect at March 31, 1998
are: $569,000 in 1999, $482,000 in 2000, $453,000 in 2001, $310,000 in 2002 and
$0 thereafter. Total rental expense for operating leases was $1,047,000,
$914,000 and $855,000 in fiscal 1998, 1997, and 1996, respectively.

         In December 1997, a jury in the Mahoning County Common Pleas Court
issued a verdict against the Company awarding $950,000 in favor of an injured
employee. In May 1998, the court awarded prejudgment interest related to the
verdict in the amount of $350,000. The Company, on the advice of counsel, is
vigorously pursuing all appropriate procedures to have the verdict overturned,
including post-trial motions and appeals. Additionally, the Company is pursuing
it rights to indemnity under various insurance policies.

         Although there can be no assurance that the Company will be successful
in its effort to have the verdict overturned or indemnified under insurance
policies, management believes a reasonable estimate of the final outcome is
approximately $450,000, which the Company has provided as a reserve in fiscal
1998. Although the outcome of the case, to the extent that it exceeds the
reserve, could have a material adverse effect on future results of operations of
the Company in a particular quarterly or annual period, the Company believes
that the effect would not have a material adverse effect on the Company's
consolidated financial position.

         Certain other claims, suits, and complaints arising in the ordinary
course of business have been filed or are pending against the Company. In the
opinion of management, none of these other such claims, suits or complaints is
material and in the aggregate they will not have a material adverse effect on
the Company's results of operations or financial condition.

12.  QUARTERLY FINANCIAL DATA (UNAUDITED)

        The following tables set forth certain quarterly financial data.


<TABLE>
<CAPTION>
                                                                      YEAR ENDED MARCH 31, 1998
                                        --------------------------------------------------------------------------------------
                                                               (In thousands, except per share amounts)
                                          1ST QUARTER       2ND QUARTER       3RD QUARTER      4TH QUARTER       FISCAL YEAR
<S>                                     <C>                <C>               <C>              <C>                <C>        
Net sales                               $         78,232   $       73,694    $     67,059     $     70,228       $   289,213
Gross profit                                       5,993            6,397           5,738            6,286            24,414
Net income                              $            479   $          585    $        514     $        755       $     2,333
                                        ======================================================================================
Basic and diluted income per share      $           0.07   $         0.08    $       0.07     $       0.11       $      0.33
                                        ======================================================================================
</TABLE>



<TABLE>
<CAPTION>
                                                                            YEAR ENDED MARCH 31, 1997
                                        --------------------------------------------------------------------------------------
                                                               (In thousands, except per share amounts)
                                          1ST QUARTER       2ND QUARTER       3RD QUARTER      4TH QUARTER       FISCAL YEAR
<S>                                     <C>                <C>              <C>              <C>               <C>          
Net sales                               $         62,405   $       71,646   $       73,162   $       78,811    $     286,024
Gross profit                                       6,438            6,308            5,248            5,897           23,891
Net income                              $          1,405   $        1,011   $          437   $          512    $       3,365
                                        ======================================================================================
Basic and diluted  income per share     $         0.20     $         0.14   $         0.06   $         0.07    $        0.47
                                        ======================================================================================
</TABLE>




                                       29

<PAGE>   30



                                                                     SCHEDULE II



                    COLD METAL PRODUCTS, INC. AND SUBSIDIARY
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                                 (IN THOUSANDS)



<TABLE>
<CAPTION>
                                         Balance at         Charged to       Other         Deductions         Balance at
                                         ----------         ----------       -----         ----------         ----------
                                        April 1, 1995       Costs and                                       March 31, 1996
                                        -------------       ---------                                       --------------
              Description                                    Expenses
              -----------                                    --------
<S>                                   <C>                   <C>                <C>         <C>               <C>    
Allowance for doubtful accounts       $        679          $     537            --        $    (748) (1)    $    468
Inventory aging reserves (2)          $      1,604                 --            --        $    (110) (3)    $  1,494

                                         Balance at         Charged to       Other         Deductions         Balance at
                                         ----------         ----------       -----         ----------         ----------
                                        April 1, 1996       Costs and                                       March 31, 1997
                                        -------------       ---------                                       --------------
              Description                                    Expenses
              -----------                                    --------
Allowance for doubtful accounts       $        468                 --          $ 78(4)            --         $    546
Inventory aging reserves (2)          $      1,494                 --            --        $     (58) (3)    $  1,436

                                         Balance at         Charged to       Other         Deductions         Balance at
                                         ----------         ----------       -----         ----------         ----------
                                        April 1, 1997       Costs and                                       March 31, 1998
                                        -------------       ---------                                       --------------
             Description                                     Expenses
             -----------                                     --------
Allowance for doubtful accounts       $        546          $        4           --               --         $    550
Inventory aging reserves (2)          $      1,436          $      188           --               --         $  1,624
</TABLE>


(1) Deductions relate to write-off of specific accounts.
(2) To adjust specific inventory items to lower of cost or market value. Reserve
    is reflected in appropriate inventory categories. 
(3) Adjustments against the account for purposes provided.
(4) Reserves related to acquired businesses.



                                       30

<PAGE>   31



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

         None.

                                    PART III
                                    --------

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         In addition to the information reported in Part I of this Form 10-K
under the caption "Executive Officers of the Registrant," the information on
pages 2 through 3 of the Proxy Statement under the heading "Election of
Directors" and on page 9 of the Proxy Statement under the heading "Security
Ownership of Certain Beneficial Owners and Management" is incorporated herein by
reference.

ITEM 11.  EXECUTIVE COMPENSATION

         Information with respect to executive compensation set forth in the
Proxy Statement on pages 5 through 6 under the heading "Executive Compensation,"
on pages 6 through 8 under the heading "Human Resources Committee Report on
Executive Compensation," on page 8 under the heading "Performance Graph," as
well as the information on pages 3 through 4 under the heading "Compensation of
Directors," is incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Information with respect to security ownership of certain beneficial
owners and management set forth in the Proxy Statement on page 9 under the
heading "Security Ownership of Certain Beneficial Owners and Management," is
incorporated herein by reference.

ITEM 13.  CERTAIN  RELATIONSHIPS AND RELATED TRANSACTIONS

         None.

                                     PART IV

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

A.  The following documents are filed as part of this Form 10-K.

1.       Consolidated Financial Statements 
         ---------------------------------
         Included under Item 8 of this report:
         Opinion of Independent Public Accountants.
         Consolidated Balance Sheets, March 31, 1998 and 1997
         Consolidated Statement of Operations for the each of the three years in
         the period ended March 31, 1998. Consolidated Statement of
         Shareholders' Equity for each of the three years in the period ended
         March 31, 1998. Notes to Consolidated Financial Statement for each of
         the three years in the period ended March 31, 1998.

2.       Supplemental Schedules 
         ----------------------
         Included under Item 8 of this report:
         Financial Statement Schedule II - Valuation and Qualifying Accounts and
         Reserves

         All other Schedules are omitted because they are not applicable or the
         required information is shown in the financial statements or notes
         thereto.

                                       31

<PAGE>   32



3.  Exhibits

<TABLE>
<CAPTION>
Exhibit No. and Description                                                               Location
---------------------------                                                               --------

<S>           <C>                                                           <C>
(3)(i)(a)     Restated Certificate of Incorporation of Registrant           Previously filed as Exhibit 3.1 to the   
                                                                            Company's Registration Statement on Form 
                                                                            S-1, which became effective on March 21, 
                                                                            1994 at 4:00 p.m. (Commission File No.   
                                                                            33-74986)                                


(3)(i)(b)      Amendment to the Restated Certificate of                     Previously filed as Exhibit 3.3 to the  
               Incorporation of Registrant                                  Company's Registration Statement on Form
                                                                            S-1, which became effective on March 21,
                                                                            1994 at 4:00 p.m. (Commission File No.  
                                                                            33-74986)                               

(3)(ii)        Amended By-Laws of Registrant                                Previously filed as Exhibit E-1 to the
                                                                            Company's 1994 Annual Report on Form  
                                                                            10-K filed on June 29, 1994           

(4)            Specimen stock certificate for the Common Stock              Previously filed as Exhibit E-1 to the
                                                                            Company's 1995 Annual Report on Form  
                                                                            10-K filed on June 29, 1995           

(10)(a)        Third Amended and Restated  Credit Facility and              Exhibit (10)(a) hereto.
               Security Agreement between The Bank of New
               York and the Company, dated as of April 1, 1998,
               which amended and restated the  Second Amended
               and Restated Discretionary Credit facility
               previously filed  and listed as Exhibit 10(a) to the
               Company's Annual Report on Form 10K for the
               fiscal year ended March 31, 1997.

(10)(b)        Cold Metal Canadian Subsidiary Guaranty Agreement,           Previously filed as Exhibit 3.1 to the  
               dated as of July 31, 1987, between Irving Trust Company      Company's Registration Statement on Form
               (predecessor to The Bank of New York) and Registrant's       S-1, which became effective on March 21,
               Canadian Subsidiary, Cold Metal Products Company, Ltd.       1994 at 4:00 p.m. (Commission File No.  
                                                                            33-74986)                               

(10)(c)        Supply Agreement, dated February 1987, as amended            Previously filed as Exhibit 10.3 to the 
               June 20, 1989, December 31, 1992 and December 31, 1993,      Company's Registration Statement on Form
               subject to request for confidential treatment                S-1, which became effective on March 21,
                                                                            1994 at 4:00 p.m. (Commission File No.  
                                                                            33-74986)                               

(10)(d)        Tax Sharing and Indemnification Agreement, dated             Previously filed as Exhibit 10.5 to the 
               January 31, 1994, among Registrant and its                   Company's Registration Statement on Form
               affiliates                                                   S-1, which became effective on March 21,
                                                                            1994 at 4:00 p.m. (Commission File No.  
                                                                            33-74986)                               

(10)(e)        Special Incentive Compensation Plan of                       Previously filed as Exhibit 10.10 to the
               Registrant, effective December 1, 1993                       Company's Registration Statement on Form
                                                                            S- 1,which became effective on March 21,
                                                                            1994 at 4:00 p.m. (Commission File No.  
                                                                            33-74986)                               
</TABLE>



                                       32

<PAGE>   33



<TABLE>
<S>            <C>                                                          <C>
(10)(f)        Special Incentive Compensation Plan Trust                    Previously filed as Exhibit 10.11 to the
               Agreement, dated January 28, 1994                            Company's Registration Statement on Form
                                                                            S-1, which became effective on March 21,
                                                                            1994 at 4:00 p.m. (Commission File No.  
                                                                            33-74986)                               

(10)(g)        Amended and Restated 1994 Incentive Program                  Previously filed as Exhibit A to the    
                                                                            Company's 1995 Proxy Statement filed on 
                                                                            June 22, 1995.                          

(10)(h)        Share Purchase and Loan Agreement, dated                     Previously filed as Exhibit 10.13 to the
               December 30, 1993, among Cold Metal Products                 Company's Registration Statement on Form
               Company, Ltd., Lance and Mara Dunlap, 955404                 S-1, which became effective on March 21,
               Ontario, Inc. and Direct Steel, Inc.                         1994 at 4:00 p.m. (Commission File No.  
                                                                            33-74986)                               

(10)(i)        Share Purchase and Loan Amendment.  Agreement                Previously filed as Exhibit E-5 to the
               dated March 23, 1994 among Cold Metal Products               Company's 1994 Annual Report on Form  
               Company, Ltd., Lance and Mara Dunlap, 955404                 10-K filed on June 29, 1994           
               Ontario Inc. and Direct Steel, Inc.                          

(10)(j)        Shareholders Agreement, dated March                          Previously filed as Exhibit E-6 to the
               23, 1994, Cold Metal Products Company, Ltd.                  Company's 1994 Annual Report on Form  
               Lance and Mara Dunlap, 955404 Ontario Inc. and               10-K filed on June 29, 1994           
               Direct Steel, Inc.                                           

(10)(k)        Supply Agreement, dated March 23, 1994,                      Previously filed as Exhibit E-7 to the
               between Cold Metal Products Company, Ltd. and                Company's 1994 Annual Report on Form  
               Direct Steel, Inc.                                           10-K filed on June 29, 1994           

(10)(l)        Agreement between Registrant and The Stanley                 Previously filed as Exhibit 10.20 to the
               Works, dated February 17, 1994                               Company's Registration Statement on Form
                                                                            S-1, which became effective on March 21,
                                                                            1994 at 4:00 p.m. (Commission File No.  
                                                                            33-74986)                               

(10)(m)        Amended and Restated Non-Employee Directors'                 Previously filed as Exhibit B to the   
               Incentive Plan                                               Company's 1995 Proxy Statement filed on
                                                                            June 22, 1995.                         

(10)(n)        Master Equipment Lease Agreement, Equipment                  Previously filed as Exhibit E-2 to the
               Schedule No. 01 and related addenda between                  Company's 1995 Annual Report on Form  
               Cold Metal Products, Inc. and KeyCorp Leasing                10-K filed on June 29, 1995.          
               Ltd.                                                         

(10)(o)        Russell Metal, Inc. and Cold Metal Products                  Previously filed as an exhibit to the  
               Company, Ltd. Asset Purchase Agreement dated                 Company's Report on Form 10-Q for the  
               10/21/96.                                                    fiscal quarter ended December 31, 1996.
                                                                            
(10)(p)        Loan Agreement between Cold Metal Products,                  Previously filed as an exhibit to the  
               Inc. and The CIT Group/Equipment Financing,                  Company's Report on Form 10-Q for the  
               Inc.                                                         fiscal quarter ended December 31, 1996.

(21)           Subsidiary of Registrant.                                    Previously filed as Exhibit 21.1 to the 
                                                                            Company's Registration Statement on Form
                                                                            S-1, which became effective on March 21,
                                                                            1994 at 4:00 p.m. (Commission File No.  
                                                                            33-74986.)                              

(23)           Independent Auditors'  Consent.                              Exhibit 23 hereto.

(27)           Financial Data Schedule.                                     Exhibit 27 hereto.
</TABLE>



                                       33

<PAGE>   34





(b)  Reports on Form 8-K

      None filed during the year ended March 31, 1998.

(c) Exhibits Required by Item 601 of Regulation S-K

      Exhibits 3 (i)(a)-(b), (10)(b)-(f), (10)(h), (10)(l), and (21) are
incorporated herein by reference to the Company's Registration Statement on Form
S-1, which was previously filed and became effective on March 21, 1994 at 4:00
p.m. (Commission file No. 33-74986.) Exhibits (3)(ii), and (10)(i)-(k), are
incorporated herein by reference to the Company's Annual Report on Form 10-K
(Commission file No. 1-12870) for the fiscal year ended March 31, 1994. Exhibits
4, and (10)(n), are incorporated herein by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1995. Exhibits (10)(g)
and (10)(m) are incorporated herein by reference to the Company's 1995 Proxy
Statement filed on June 22, 1995. Exhibits (10)(o)-(p) are incorporated herein
by reference to the Company's Report on Form 10-Q (Commissions file No. 1-12870)
for the fiscal quarter ended December 31, 1996. The remaining exhibits are
contained herein.


                                   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.


                                      COLD METAL PRODUCTS, INC.



June 24, 1998                         By  /s/ James R. Harpster
                                          --------------------------------------
                                          James R. Harpster
                                          President and Chief Executive Officer







                                       34

<PAGE>   35


                                   SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below, as of June 24, 1998, by the following persons on
behalf of the Registrant and in the capacities indicated.


/s/ R. Quintus Anderson         Chairman of the Board of Directors
-----------------------------
R. Quintus Anderson


/s/ James R. Harpster           President, Chief Executive Officer and Director
-----------------------------   (Principal Executive Officer)
James R. Harpster            


/s/ Heidi A. Nauleau            Director
-----------------------------
Heidi A. Nauleau


/s/ Gordon A. Wilber            Director
-----------------------------
Gordon A. Wilber


/s/ Wilbur J. Berner            Director
-----------------------------
Wilbur J. Berner


                                Director
-----------------------------
Claude F. Kronk


/s/ Robert D. Neary             Director
-----------------------------
Robert  D. Neary


/s/ Edwin H. Gott, Jr.          Director
-----------------------------
Edwin H. Gott, Jr.


/s/ Peter B. Sullivan           Director
-----------------------------
Peter B. Sullivan


/s/ John E. Sloe                Vice President, Chief Financial Officer
-----------------------------   (Principal Financial and Accounting Officer)
John E. Sloe                 



                                       35