SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K
(Mark One)
[ X ]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                    SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2000

                                       OR

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

                          Commission file number 1-1363

                               ENVIROSOURCE, INC.
             (Exact name of Registrant as specified in its charter)

               Delaware                            34-0617390
       (State or other jurisdiction of           (I.R.S. Employer
       incorporation or organization)            Identification No.)

               1155 Business Center Drive, Horsham, PA 19044-3454
               (Address of principal executive offices) (Zip Code)

               Registrant's telephone number, including area code:
                                 (215) 956-5500

           Securities registered pursuant to Section 12(b) of the Act:

                                              Name of each exchange on
          Title of each class                 which registered

          Common Stock, par value $.05        Pacific Exchange, Inc.
            per share

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 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 the Registrant's  knowledge,  in definitive  proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant was $200,612 as of March 1, 2001.

The number of shares  outstanding  of the  Registrant's  Common  Stock as of the
close of business on March 1, 2001 was 5,813,394.

<PAGE>

                               ENVIROSOURCE, INC.

                                     PART I

ITEM 1.  Business.

THE COMPANY

         Envirosource,  Inc. (the "Company") supplies industrial  customers with
specialized  services,  primarily  the  recycling,  handling,  stabilization  or
landfilling of environmentally  sensitive wastes or co-products.  These services
are generally provided pursuant to long-term  contracts which enable the Company
to integrate its processes with those of its customers.  The Company's principal
business  segments are (a) the IMS segment,  which  provides the steel  industry
with slag processing, metal recovery, materials handling, scrap management and a
wide range of  specialty  services,  such as surface  conditioning;  and (b) the
Technologies  segment,  which provides hazardous waste treatment,  stabilization
and  disposal  services  for   the  steel  industry  and  other  industrial  and
governmental customers.

         The  Company   conducts   its   operations   exclusively   through  its
subsidiaries.  International  Mill Service,  Inc. and its  subsidiaries  ("IMS")
constitute the IMS segment, and Envirosource Technologies, Inc. ("Technologies")
and its subsidiaries constitute the Technologies segment.

         References  herein to the Company  include its  subsidiaries as well as
its Ohio predecessor,  NEOAX, Inc., except where the context requires otherwise.
"Note"  references  herein  are to Notes to  Consolidated  Financial  Statements
appearing elsewhere in this Report.

DEVELOPMENT OF THE COMPANY

         The Company's  predecessor was originally  incorporated in Ohio in 1915
as White Motor  Corporation.  Its name was changed to Northeast Ohio Axle,  Inc.
when it emerged from reorganization proceedings in 1983 and was changed again in
1986 to NEOAX, Inc.  ("NEOAX").  In 1987, NEOAX  reincorporated in Delaware.  In
1989,  the  Company  changed its name to  EnviroSource,  Inc.,  and in 1998,  to
Envirosource, Inc.

         Envirosource's  present business units originally represented a portion
of the operations of IU International Corporation ("IU International"). Early in
1988,  the Company  acquired IU  International  with the goal of  establishing a
substantial  operating  company  centered  primarily  on  that  company's  steel
industry  business  relationships  and  prospects.  Since 1988,  the Company has
disposed  of all the  businesses  it had  owned  prior  to the IU  International
acquisition and virtually all of IU International's  operations and assets other
than the present IMS and Technologies segments,  while the Company still retains
some liabilities from businesses previously disposed.

         During 1993,  the Company  completed a  comprehensive  recapitalization
that  resulted in an affiliate of Freeman  Spogli & Co.  ("FS&Co")  purchasing a
significant amount of the Company's equity securities.  As of December 31, 2000,
FS&Co held  approximately  47% of the outstanding  shares of Common Stock of the

                                       1

<PAGE>

                               ENVIROSOURCE, INC.

Company.  Also during 1993,  the Company sold $220 million  principal  amount of
9-3/4% Senior Notes Due 2003 (the "1993  Notes").  A significant  portion of the
proceeds  from the sale of the  1993  Notes  was  used to  retire  $150  million
principal amount of the Company's 14% Extendible Reset Senior Subordinated Notes
Due 1998.  In 1997,  the Company  issued $50 million of 9-3/4%  Senior Notes Due
2003,  Series B (the "1997 Notes"),  having  substantially the same terms as the
Company's  1993 Notes,  resulting  in a total of $270  million of 9-3/4%  Senior
Notes Due 2003 issued.

         In 1996, the Company moved its headquarters from Stamford, Connecticut,
consolidating  the  activities  of its  corporate  headquarters,  as well as the
headquarters for its IMS and Technologies segments, in Horsham, Pennsylvania.

         On February 1, 2001, the Company sold its Envirosafe Services of Idaho,
Inc. ("ESII")  subsidiary,  which had been a part of the Company's  Technologies
segment.


BUSINESS SEGMENTS

         IMS

         The Company  has served the steel  industry  for 65 years.  The Company
believes it increases its customers'  productivity  by providing  cost-effective
and  reliable  on-site  reclamation  of steel  and iron and a  variety  of other
specialized  services that are essential to the efficient  functioning  of steel
mills.

         North   America's   steel  mills   operate  in  a  highly   competitive
environment.  Services  that  help to  reduce  their  total  process  costs  are
therefore of  significant  value.  IMS  generally  provides  recycling and metal
recovery  operations  under long-term  contracts with a customer base of over 50
steel mill sites in North America,  including  integrated mills,  mini-mills and
specialty   mills.   Using  specially   designed   equipment,   IMS  provides  a
comprehensive  recycling  solution by  processing  slag (a  co-product  of steel
production),  recovering  valuable  metallics and selling the residual aggregate
for road base and other  uses.  The  effective  removal of slag on a  continuous
basis is critical to a steel mill.

         The Company has  pursued a strategy  of building on its  experience  by
offering a broad range of services to enhance mill productivity.  These services
include  specialized  materials  handling  and steel slab  surface  conditioning
(scarfing).  Substantially  all of IMS's services are provided  on-site at steel
mills,  by IMS  employees  using  equipment  owned by or  leased  to IMS.  IMS's
services are integrated with the operations of its customers.

                                       2

<PAGE>

                               ENVIROSOURCE, INC.

         IMS's  largest  site  is at USX  Corporation's  Gary  Works,  in  Gary,
Indiana,  the largest steel mill in North America.  During the three years ended
December 31, 2000, USX Corporation  contributed  approximately 18 to 22% percent
of the Company's consolidated  revenues,  including revenues of the Technologies
segment.

         Competition. Competition in IMS's markets is based primarily on quality
         -----------
of service,  reliability,  technology and price.  In its core steel  reclamation
business,  the Company  believes that IMS services  customers  which account for
approximately 27% of total domestic steel production.  The Company believes that
IMS has one large  competitor and a number of smaller  competitors.  The Company
believes  that  IMS's  significant  market  share is  based on its  reliability,
reputation and breadth of experience.

         TECHNOLOGIES

         Technologies  has been in the business of the treatment and disposal of
industrial  and hazardous  wastes since 1976. On February 1, 2001,  Technologies
sold ESII,  which  operates  a  hazardous  waste  landfill  in Idaho.  The below
discussion details Technologies' business after such sale.

         Through   its   Envirosafe    Services   of   Ohio,   Inc.   subsidiary
("Envirosafe"),  Technologies  owns and  operates  one of the 6 hazardous  waste
landfills  in the  Eastern  half  of the  United  States.  Envirosafe  primarily
services steel industry  customers in the Eastern half of the United States, but
also services companies in other industries, as well as government agencies.

         Envirosafe's  facility is located in Ohio and holds operating  permits,
issued  by  state  and  federal   environmental   agencies  under  the  Resource
Conservation  and Recovery Act, as amended  ("RCRA"),  that require  renewal and
modification  from time to time.  The  Company  expects  that it will obtain the
renewals  and  modifications  to its  permits  that it  requires  to continue to
provide waste management services.

         Envirosafe is a licensee of a proprietary  technology  (Super Detox(R))
for  stabilizing  electric arc furnace  ("EAF") dust - a listed  hazardous waste
(KO61)  under  RCRA  that is  generated  by steel  mills.  Envirosafe  currently
provides Super  Detox(R)  stabilization  for EAF dust at its Ohio  facility.  In
recent  years,  Technologies  entered into a number of new contracts to receive,
process and dispose of EAF dust at its  Envirosafe  facility  and  continues  to
market this treatment and disposal service to other U.S. mini-mills.

         Competition.  The  Company's  hazardous  waste  treatment  and disposal
         -----------
business is  characterized  by intense  competition.  The Company  believes that
Envirosafe  treats and disposes of  approximately  20% of the total domestic EAF
dust  production.  Envirosafe  has  two  primary  competitors  in  this  market:
Horsehead Resource Development Company, Inc., a thermal metal recovery processor
that has a larger market share, and another thermal recovery  processor that has
a smaller market share. In addition, there are a number of smaller competitors.

                                       3

<PAGE>

                               ENVIROSOURCE, INC.

         There are a limited  number of  competitors  in the off-site  hazardous
waste landfill  business.  There are 6 active,  permitted  commercial  hazardous
waste  landfills  in the  Eastern  half  of the  U.S.  There  are  also  several
competitors  engaged in the  treatment  or  stabilization  of  hazardous  waste.
Competition in this industry is based on service, site and process integrity and
the all-in cost of disposal, which includes treatment,  transportation costs and
taxes.  The market for  hazardous  waste  services  generally is  geographically
broad,  but is  narrowed  depending  on  factors  such as the  types  of waste a
facility is  permitted to accept,  the types of services  offered by a facility,
the cost of  operation  of a facility  and the  proximity of the facility to the
customer. Envirosafe primarily serves the Eastern half of the U.S.

SEGMENT DATA

         See  Note  10  to  the  Consolidated   Financial  Statements  appearing
elsewhere  in this Report for  information  concerning  revenues  and  operating
income by segment for the years ended  December 31, 2000,  1999 and 1998 and the
percentage  of  total  revenues  contributed  by each  class of  service  of the
Company's continuing operations for each such year.

COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS

         The Company,  its  competitors and customers are subject to an array of
federal,  state and local environmental laws and regulations.  Such requirements
not only can  affect  the  demand  for the  Company's  services,  but could also
require  the  Company to incur  significant  costs for such  matters as facility
upgrading,   remediation  or  other  corrective  action,  facility  closure  and
post-closure  maintenance and monitoring.  It is possible that future changes in
environmental  compliance  requirements  could  have a  material  effect  on the
Company's future results of operations or financial  condition,  but the Company
is unable to predict any such future regulatory  changes or impact.  The Company
believes that the Consolidated  Financial Statements appearing elsewhere in this
Report appropriately  reflect all presently known compliance costs in accordance
with accounting  principles  generally accepted in the United States.  Stringent
interpretation of environmental laws and regulations  governing  hazardous waste
treatment and disposal  facilities by state and federal regulators also subjects
the Company to  violations  and fines from time to time,  none of which has been
material to the Company.

EMPLOYEES

         At March 1, 2001, the Company employed  approximately  1,435 persons. A
majority  of the  hourly  employees  are  covered  by  site-specific  collective
bargaining agreements with various unions,  including the International Union of
Operating Engineers,  the United Steelworkers and the International  Brotherhood
of Teamsters. Several of these contracts will be renegotiated in 2001. All other
contracts will be renegotiated in 2002 or thereafter.

                                       4

<PAGE>

                               ENVIROSOURCE, INC.

ITEM 2.  Properties.

HEADQUARTERS

         The Company,  IMS and  Technologies  maintain their  headquarters  at a
single location in Horsham, Pennsylvania in leased premises.

IMS

         IMS has operations providing metal recovery and other services at steel
mills throughout the continental United States and in Canada.  Equipment located
at the  sites  operated  by IMS  and  its  subsidiaries  includes  prefabricated
storage,  shop and office  structures,  pot  carriers,  slab  haulers,  loaders,
railcars,   cranes,  trucks,  metal  recovery  plants  and  crushers  and  other
specialized mobile and stationary equipment, most of which is owned by or leased
to IMS. In addition, IMS leases office space near Pittsburgh, Pennsylvania.

         Management  believes that the physical facilities for the Company's IMS
segment are adequate for its operations and provide sufficient  capacity to meet
its   anticipated   requirements.   The  metal  recovery  and  slag   processing
installations  are generally  located at specific  customer  facilities  and are
adequate to handle current levels of customer  operations and anticipated future
needs for current customers.

TECHNOLOGIES

         Envirosafe owns substantially all of the land,  buildings and equipment
used in its treatment and disposal operation in Oregon, Ohio.  Envirosafe's Ohio
facility  currently  has  approximately  1.1 million  cubic yards of  permitted,
unused waste disposal capacity. Management believes that the physical facilities
for Technologies are adequate for its operations and provide sufficient capacity
to meet its anticipated requirements.

ITEM 3.  Legal Proceedings.

         The information  pertaining to the litigation described under Note 7 to
the  Consolidated  Financial  Statements  appearing  elsewhere in this Report is
incorporated herein by reference.

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

         Not applicable.



                                   *    *    *

                                       5

<PAGE>

                               ENVIROSOURCE, INC.

EXECUTIVE OFFICERS OF THE COMPANY

         The Company's executive officers are as follows:

Name                       Age          Position

Robert N. Gurnitz           62          Chairman of the Board; Director

John T. DiLacqua            48          President and Chief Executive
                                        Officer; Director

John C. Heenan              50          Senior Vice President, Treasurer and
                                        Chief Financial Officer

John P. Carroll             46          Vice President, Human Resources

Richard J. Fitz             52          Controller

Leon Z. Heller              51          Vice President, General Counsel and
                                        Secretary

         The  specified  age of each  Executive  Officer of the Company is as of
March 31, 2001.

         Officers are elected  annually  and hold office until their  successors
are elected and qualified.

         Robert N. Gurnitz became a director of the Company in November 1997 and
Chairman of the Board of the Company in December  1998.  Mr.  Gurnitz  served as
President and Chief Executive  Officer of  Northwestern  Steel and Wire Co. from
1991 to 1993 and as its Chairman and Chief Executive  Officer from 1993 to 1997.
Prior to that he served in various senior  management  capacities  with Rockwell
International   Corporation,    Bethlehem   Steel   Corporation   and   Webcraft
Technologies.

         John T.  DiLacqua  became  President,  Chief  Executive  Officer  and a
director of the Company in January 1999. From October 1997 to December 1998, Mr.
DiLacqua served as President of the U.S.  Ferrous  Operations of Philip Services
Corporation, which included, among others, the former Luria Brothers Division of
Connell  Limited  Partnership.  Prior to that, he served as the President of the
Luria Brothers Division of Connell Limited  Partnership from May 1994 to October
1997,  and, from  December 1990 to May 1994, he served as its Vice  President of
Finance and Administration.

                                       6
<PAGE>

                               ENVIROSOURCE, INC.

         John C.  Heenan has been  Senior  Vice  President  and Chief  Financial
Officer of the Company  since August 1999,  and  Treasurer  since  January 2001.
Prior  to  that,   Mr.   Heenan  had  been  Senior  Vice   President,   Finance,
Administration  and Planning of the Company since  February  1999.  From October
1997 to December 1998, Mr. Heenan served as Chief Financial  Officer of the U.S.
Ferrous Operations of Philip Services Corporation, which included, among others,
the former Luria  Brothers  Division of Connell  Limited  Partnership.  Prior to
that,  he served  as the Vice  President  -  Controller  of the  Luria  Brothers
Division of Connell Limited  Partnership  from April 1997 to October 1997. Prior
to that,  he served as Chief  Financial  Officer of Standard  Chlorine  Chemical
Company from 1993 to 1997.

         John P.  Carroll was elected  Vice  President - Human  Resources of the
Company in June 1999. Mr. Carroll has been the Vice President - Human  Resources
of the Company's  International  Mill Service,  Inc.  subsidiary since September
1995.  Prior to that, Mr. Carroll had been  International  Mill Service,  Inc.'s
Director  -  Human   Resources   since   September   1994.  Mr.  Carroll  joined
International Mill Service, Inc. in 1980.

         Richard J. Fitz was  elected  Controller  of the  Company in June 1999.
Prior to that,  Mr.  Fitz had been the  Company's  Director of  Corporate  Audit
Services since March 1988.

         Leon Z. Heller was elected  Vice  President  of the Company in February
1998 and has  served  as the  Company's  General  Counsel  and  Secretary  since
September  1996. Mr. Heller also has been the Vice President and General Counsel
of International Mill Service, Inc., a subsidiary of the Company, since February
1991.

                                       7

<PAGE>

                               ENVIROSOURCE, INC.

                                     PART II

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

         The Company's  Common Stock trades on the OTC Bulletin  Board under the
symbol "ENSO". Prior to July 26, 2000, the Company's stock traded on The Pacific
Exchange  under  the  symbol  "ES" as well.  Prior to  September  2,  1999,  the
Company's  stock also traded on The Nasdaq Stock Market under the symbol "ENSO."
The  following  table  sets  forth the high and low sales  prices for the Common
Stock for each of the  calendar  quarters  of 2000 and 1999,  based upon  prices
supplied by The Nasdaq Stock Market and Commodity Systems, Inc.

                        2000               1999
                   High      Low      High      Low
                   ----      ---      ----      ---
First Quarter      $1.13     $.41     $5.25     $1.38
Second Quarter       .94      .44      2.72       .94
Third Quarter        .47      .15      3.38       .25
Fourth Quarter       .31      .07       .80       .38

         The Company has not paid a cash  dividend on its Common Stock since the
confirmation of its plan of  reorganization  in November 1983 and has no present
plan to pay cash dividends. The Company is currently prohibited from paying cash
dividends on its Common Stock by its bank credit agreement and by the indentures
under which the 1993 Notes and the 1997 Notes were issued.

         On March 1, 2001 the Company had approximately  2,900 holders of record
of its Common Stock.

                                       8

<PAGE>

                               Envirosource, Inc.


Item 6.      Selected Financial Data

The  information  presented  below  should  be  read  in  conjunction  with  the
accompanying Consolidated Financial Statements and Notes thereto.


<TABLE>
<CAPTION>
                                               2000              1999              1998              1997              1996
                                            -----------       -----------       -----------       -----------       -----------
                                                                (In thousands, except for per share amounts)

<S>                                         <C>               <C>               <C>               <C>               <C>
FOR THE YEAR ENDED DECEMBER 31:
Revenues                                    $  199,579        $  211,975        $  232,376        $  227,678        $  212,789
Costs and expenses               (1)           179,911           201,828           217,383           206,687           193,914
                                            -----------       -----------       -----------       -----------       -----------
Operating income before impairment loss         19,668            10,147            14,993            20,991            18,875
Loss on impairment of long-lived assets              -            75,192                 -                 -                 -
                                            -----------       -----------       -----------       -----------       -----------
Operating income (loss)                         19,668           (65,045)           14,993            20,991            18,875
Interest expense, net of income                 26,196            29,754            29,248            28,085            26,831
                                            -----------       -----------       -----------       -----------       -----------
Loss from continuing operations
  before income taxes                           (6,528)          (94,799)          (14,255)           (7,094)           (7,956)
Income tax expense (benefit)                       945               952            16,384             1,368            (3,266)
                                            -----------       -----------       -----------       -----------       -----------
Loss from continuing operations                 (7,473)          (95,751)          (30,639)           (8,462)           (4,690)
Income from discontinued operations                  -                 -                 -             9,600               399
Cumulative effect of accounting change               -                 -                 -              (639)                -
                                            -----------       -----------       -----------       -----------       -----------
Net income (loss)                           $   (7,473)       $  (95,751)       $  (30,639)       $      499        $   (4,291)
                                            ===========       ===========       ===========       ===========       ===========

Income (loss) applicable to common shares   $   (7,473)       $  (95,751)       $  (30,639)       $      499        $   (4,442)
                                            ===========       ===========       ===========       ===========       ===========
Per share:
  Loss from continuing operations           $    (1.29)       $   (16.47)       $    (5.27)       $    (1.46)       $    (0.84)
  Income from discontinued operations                -                 -                 -              1.66              0.07
  Cumulative effect of accounting change             -                 -                 -             (0.11)                -
                                            -----------       -----------       -----------       -----------       -----------
  Net income (loss)                         $    (1.29)       $   (16.47)       $    (5.27)       $     0.09        $    (0.77)
                                            ===========       ===========       ===========       ===========       ===========
Average common shares outstanding                5,813             5,813             5,813             5,787             5,775

OTHER DATA:
EBITDA of continuing operations  (2)        $   51,917        $   48,149        $   53,906        $   58,183        $   51,875
Cash flow provided by operating activities  $   21,449        $   24,948        $   27,883        $   30,523        $   28,163
Cash flow provided (used) before financing
  activities                                $    4,763        $   16,359        $  (12,980)       $   41,032        $   (4,158)

AT DECEMBER 31:
Total assets                                $  263,471        $  278,257        $  387,456        $  413,302        $  459,909
Working capital (deficiency)                $   (1,753)       $    9,946        $     (444)       $     (779)       $   (8,762)
Long-term debt                              $  289,621        $  284,651        $  298,023        $  281,614        $  268,424
Total debt                                  $  290,822        $  284,952        $  303,572        $  295,400        $  332,928
Stockholders' equity (deficit)              $  (93,165)       $  (85,563)       $    9,843        $   40,211        $   39,057
-----------------------------------------
(1)  Includes  unusual  charges of $5.8  million in 1999,  $7.9 million in 1998,
     $1.3 million in 1997 and $5.5 million in 1996.

(2)  EBITDA  represents  earnings from  continuing  operations  before  interest
     expense,  income  taxes,  depreciation  and  amortization  expenses (net of
     amortization of deferred financing costs), and asset impairment charges. It
     should not be considered as an alternative  measure to operating  income as
     an  indicator  of the  Company's  results of  operations,  nor should it be
     viewed as an  alternative  to cash flow as an  indicator  of the  Company's
     overall liquidity,  as presented in the accompanying  financial statements.
     Furthermore,  EBITDA  measures shown for the Company in this report may not
     be comparable to similarly titled measures given by other companies.

</TABLE>

                                        9

<PAGE>
                               ENVIROSOURCE, INC.

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

LIQUIDITY AND CAPITAL RESOURCES

Liquidity
---------

         The Company's  liquidity  requirements arise primarily from the funding
of capital expenditures, working capital needs, and debt service obligations. At
December  31, 2000,  the Company had  negative  working  capital  totaling  $1.8
million,  compared with working capital of $10 million at December 31, 1999. The
1999  working  capital  total  included  $15.2  million of a trust fund that had
previously   provided   financial   assurance  for  the  estimated  closure  and
post-closure  costs at the Company's  Idaho waste  landfill site. The trust fund
was  subsequently  recovered  by the Company in the first  quarter of 2000.  The
Company  paid $2.5  million in the second  quarter of 2000 as  collateral  for a
surety bond which replaced the trust fund.  Included in the 2000 cash flows from
operations were  approximately $5 million of non-recurring  cash inflows,  which
included $3.3 million  recovered  from the IRS from the settlement of an old tax
case.

         The Company's  capital  expenditures  for 2000 were $35.7  million,  an
increase  of $18.4  million  from 1999.  The  increase  was  primarily  due to a
significant  new IMS contract to provide  services at a "greenfield"  steel mill
unit of an established  customer.  The Company expects  capital  expenditures in
2001 will  decrease  from 2000  levels,  even  though  there will be  additional
expenditures  at this site.  Capital  additions  are not  expected to exceed $25
million in 2001.  At December 31, 2000 the Company had  commitments  for capital
equipment additions totaling approximately $15.8 million,  primarily to be spent
in 2001.

         The  Company is  subject to  asbestos-related  personal  injury  claims
against two  Pennsylvania-based  subsidiaries  which are no longer in operation.
Some of the costs to date for claims and legal  expenses  have been borne by the
Company's  insurers.  In 2000 the Company paid claims and expenses totaling $6.4
million,  and received recoveries from insurance carriers totaling $3.4 million.
The payments were funded in part by a cash settlement from an insurance  company
of $8.7 million received in 1999;  claims and expenses payments for 1999 totaled
$2.7  million.  Management  cannot with any  reasonable  certainty  estimate the
ultimate amount of claims probable of assertion,  nor can it accurately  predict
the level of success in securing recoveries from the Company's insurers. The two
subsidiaries are  participants in the Center for Claims  Resolution  ("CCR"),  a
group of companies who have had  asbestos-related  claims asserted against them.
The CCR acts as a central administrative entity to attempt cost-effective claims
handling,  reduce litigation  costs,  and, until 2001, effect  broad-based claim
settlements.  Early  in  2001,  with  some  CCR  participants  either  declaring
bankruptcy from excessive costs of asbestos claims, or electing to leave the CCR
and provide  their own  defenses,  the CCR became an  administrative  and claims
handling  entity  which also  provides  certain  litigation  advice,  and ceased
broad-based  settlements.  The two  subsidiaries  of the Company have elected to
continue participating in the CCR.

                                       10

<PAGE>

                               ENVIROSOURCE, INC.

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

         The  Company's  2000  financing   activities   included  capital  lease
financing  totaling  $8.7  million,  which  funded  a  portion  of  its  capital
expenditures.  The Company made net repayments against its $40 million revolving
credit facility  totaling $2.4 million in 2000,  compared with net repayments of
$16 million in 1999. At December 31, 2000, the Company had  outstanding  standby
letters of credit and minimum  availability  requirements,  which  totaled $15.9
million. In addition,  there was $3.6 million borrowed against the revolver. The
revolving  credit  facility  matures  March 31, 2003,  and is secured by various
assets  of the  Company's  IMS  subsidiary,  primarily  equipment  and  accounts
receivable.  The facility also  contains  covenants  which,  among other things,
require the Company to meet various performance ratios. At December 31, 2000 the
Company was in compliance with all such covenants of the agreement.


Capital Resources
-----------------

         The  Company's  primary  sources  of  funds  are  its  cash  flow  from
operations, and its borrowing capacity against its revolving credit facility, as
well as the ability to obtain  lease  financing  for  equipment.  The  Company's
outlook on the North American  steel industry for 2001, and its inherent  effect
on the  Company's  businesses,  indicates  a  significant  challenge  to  obtain
sufficient  capital  resources  to meet all of its  objectives  for the upcoming
year.  Current  projections  indicate  operating  cash flow for 2001 will likely
decrease  from the $21.4  million  realized  in 2000.  Several of the  Company's
customers  declared  bankruptcy in late 2000 and early 2001;  additional filings
are certainly  possible as the North American steel industry continues to suffer
from excess capacity,  weak steel prices,  high energy costs, and high levels of
foreign  imported  steel.  The  Company's  IMS  business   requires   continuing
investment in heavy capital  equipment to service its  customers.  The Company's
$270 million of outstanding Senior Notes require semiannual interest payments of
$13.1 million in June and December.

         The current strain on the Company's capital resources could require the
Company to seek  easing of  restrictions  on its  revolving  credit  facility or
reductions in capital  investment,  with subsequently higher operating costs for
equipment  maintenance and repairs.  Management plans to continue maximizing the
use of its operating cash flow to meet its investment and financing  objectives.
Management also plans to pursue various  alternatives  to effectively  deal with
the Senior Notes,  which mature in June 2003.  Management  has been advised that
the Senior Notes traded at about 22% of face value near year-end  2000;  see the
risk factors in the "Forward-Looking  Information" section following the results
of operations discussion.

                                       11

<PAGE>

                               ENVIROSOURCE, INC.

RESULTS OF OPERATIONS
2000 COMPARED WITH 1999
-----------------------

                                  Year Ended                     2000
                                 December 31,             Increase (decrease)
                           -------------------------   -------------------------
                               2000         1999         Amount          %
                           -----------   -----------   -----------   -----------
                                          (Dollars in thousands)
REVENUES
  IMS                      $  162,752    $  180,697    $  (17,945)     (9.9)%
  Technologies                 36,827        31,278         5,549      17.7%
                           -----------   -----------   -----------
                           $  199,579    $  211,975    $  (12,396)     (5.8)%
                           ===========   ===========   ===========

GROSS PROFIT (LOSS)
  IMS                       $  31,886    $   40,611    $   (8,725)
  Technologies                 10,062        (2,058)       12,120
                           -----------   -----------   -----------
                           $   41,948    $   38,553    $    3,395       8.8%
                           ===========   ===========   ===========

OPERATING INCOME (LOSS)
  IMS                      $   15,899    $   25,254    $   (9,355)
  Technologies                  4,697        (7,538)       12,235
  Corporate headquarters         (928)       (1,726)          798
                           -----------   -----------   -----------
                               19,668        15,990         3,678      23.0%
  Technologies impairment
    loss                           --       (75,192)       75,192

  Other unusual charges            --        (5,843)        5,843
                           -----------   -----------   -----------
CONSOLIDATED OPERATING
  INCOME (LOSS)            $   19,668    $  (65,045)   $   84,713
                           ===========   ===========   ===========

         Consolidated  revenue  for  2000  decreased  $12.4  million,  or  5.8%,
compared with 1999.  Revenues of the IMS segment  decreased  primarily  from the
expiration and non-renewal of contracts with two large steel industry  customers
near the end of 1999. The effects of the lost contracts were partly mitigated by
increased steel production by the Company's  ongoing  customers during the first
half  of  2000,  and  by  increased  revenues  from  the  Technologies  segment.
Technologies  revenues  for 2000  increased  compared  with 1999,  due to higher
volumes of processed waste, including more tons of EAF dust processed from steel
mill  customers.  The current  outlook  for the North  American  steel  industry
indicates that the significant decreases in production levels experienced during
late 2000 will not  reverse in the  near-term.  Three IMS steel  mill  customers
declared  bankruptcy  near year-end  2000; one has since ceased  production.  In
addition,  in February  2001 the Company's  Technologies  segment sold its Idaho
waste  landfill  and a contract  with a steel mill in  Sterling,  Illinois  that
together contributed $14 million to 2000 revenues.  Therefore, 2001 revenues may
be significantly less than 2000 levels.

         Consolidated  gross profit for 2000 increased 8.8% from the same period
a year ago.  Technologies  gross  profit  increased  due in part to the  revenue
increase,  and partly due to lower depreciation and amortization  expenses after
an  asset  impairment   charge  recorded  at  the  end  of  1999.   Technologies
depreciation and amortization  expenses for 2000 were $7.2 million less than the
prior year.  The  Technologies  profit  increase  more than  offset  lower gross
profits at IMS, which  resulted from the expired  contracts and from higher fuel
costs;  fuel costs  during 2000  increased  $1.7 million or almost 40% from 1999
levels.

         Selling,  general and administrative expenses for 2000 were essentially
unchanged  from 1999.  Although the  Company's bad debt expense was $2.7 million
higher  than in 1999,  the expense  was offset by a $1.5  million  non-recurring
recovery  from a former  subsidiary,  and another $1.2 million of  non-recurring
insurance-related recoveries.

                                       12

<PAGE>

                               ENVIROSOURCE, INC.

RESULTS OF OPERATIONS (CONTINUED)

         In 1999,  the  Company  recorded a $75.2  million  non-cash  charge for
impaired assets related to the Company's waste landfill sites in Ohio and Idaho,
and  other  unusual  charges  of  $5.8  million,   including  $2.8  million  for
write-downs of excess capital  equipment,  and $3.0 million  related to a profit
improvement  program.  Operating  income  for 2000  totaled  $19.7  million,  an
increase of $84.7 million from the loss in the prior year. There were no unusual
charges recorded in 2000 and no asset impairment writedown.  Excluding the asset
impairment  write-down in 1999,  the operating  income  improved by $9.5 million
during 2000. The improvement was primarily due to increases in revenues  coupled
with decreases in depreciation  and  amortization  expenses in the  Technologies
segment,  and also cost  improvements  in both segments to partially  offset the
lower revenues in the IMS segment.

         Interest expense for 2000 decreased 5.5% from 1999, due partly to lower
borrowings  on the  Company's  revolving  credit  facility,  and in  part to the
capitalization  of almost $1 million in interest  costs related to the Company's
investment in a new "greenfield" facility of an existing customer.

         The Company  recorded a net loss for 2000  totaling  $7.5  million,  or
$1.29 per share. The net loss in 1999 totaled $95.8 million,  which included the
$75.2 million asset impairment charge.

YEAR 2000 ISSUES
----------------

         The Company did not experience any business  disruptions in 2000 due to
Year  2000  computer   program  issues,   nor  does  it  anticipate  any  future
disruptions.  Costs to bring all  financial  and  operational  software  to Year
2000-compliant  status were not significant,  as most software packages had been
previously updated in the ordinary course of business.

                                       13

<PAGE>

                               ENVIROSOURCE, INC.

RESULTS OF OPERATIONS
1999 COMPARED WITH 1998
-----------------------



                                  Year Ended                     1999
                                 December 31,             Increase (decrease)
                           -------------------------   -------------------------
                              1999          1998         Amount          %
                           -----------   -----------   -----------   -----------
                                           (Dollars in thousands)
REVENUES
  IMS                      $  180,697    $  191,438    $  (10,741)      (5.6)%
  Technologies                 31,278        40,938        (9,660)     (23.6)%
                           -----------   -----------   -----------
                           $  211,975    $  232,376    $  (20,401)      (8.8)%
                           ===========   ===========   ===========

GROSS PROFIT (LOSS)
  IMS                      $   40,611    $   42,190    $   (1,579)      (3.7)%
  Technologies                 (2,058)        3,766        (5,824)    (154.6)%
                           -----------   -----------   -----------
                           $   38,553    $   45,956    $   (7,403)     (16.1)%
                           ===========   ===========   ===========

OPERATING INCOME (LOSS)

  IMS                      $   25,254    $   26,465    $   (1,211)
  Technologies                 (7,538)         (796)       (6,742)
  Corporate headquarters       (1,726)       (2,742)        1,016
                           -----------   -----------   -----------
                               15,990        22,927        (6,937)     (30.3)%
  Technologies impairment
    loss                      (75,192)           --       (75,192)

  Other unusual charges:
    IMS                        (2,924)       (2,851)          (73)
    Technologies                 (530)         (790)          260
    Corporate headquarters     (2,389)       (4,293)        1,904
                           -----------   -----------   -----------
                               (5,843)       (7,934)        2,091
                           -----------   -----------   -----------
CONSOLIDATED OPERATING
  INCOME (LOSS)            $  (65,045)   $   14,993    $  (80,038)
                           ===========   ===========   ===========

         Consolidated  revenue  for  1999  decreased  $20.4  million,  or  8.8%,
compared with 1998.  Both  operating  segments  reported lower revenues in 1999.
Revenues  of the  IMS  segment  decreased  primarily  from  the  loss of a steel
industry customer in late 1998 that had contributed almost five percent of total
IMS 1998  revenue.  Reduced  steel  production in North America by the Company's
ongoing  customers  during early 1999 also  contributed to the decrease,  though
this effect was partly  mitigated in the latter half of the year. As a result of
heightened  competition,  contracts with two large IMS steel mill customers were
not renewed and expired near year-end 1999, which negatively  affected  revenues
in 2000. Technologies segment revenues for 1999 decreased significantly,  due to
price  reductions  resulting from overall  competition  in the waste  processing
markets, and a change in the mix of material processed.

         Consolidated  gross profit during 1999 decreased from the same period a
year ago. The gross profit decline of $7.4 million  resulted  primarily from the
revenue decrease noted above. The IMS segment  benefited from cost reductions as
a result of the Company's  profit  improvement  program  originated in 1998. The
Technologies  segment  experienced  a gross  loss in  1999,  resulting  from the
revenue  decline,  and from the margin effects of the unfavorable  change in the
mix of material processed.

         Selling,  general and administrative  expenses for 1999 were reduced by
4.4% from 1998.

                                       14

<PAGE>

                               ENVIROSOURCE, INC.

RESULTS OF OPERATIONS (CONTINUED)

         The Company  announced in early 1999 that it was  evaluating  strategic
alternatives  for its  Technologies  business,  including its potential sale. In
December 1999, the Company announced it had not received satisfactory offers for
Technologies, and would retain this business. Concurrent with that announcement,
the Company completed a thorough review of the Technologies operations. Due to a
very  competitive  market,  the  average  price per ton for waste  processed  at
Technologies'  landfill  sites had  decreased  significantly  in late 1998,  and
remained well below  expectations  throughout  1999.  Management  did not expect
significant  future price  improvements,  though further  deterioration  was not
anticipated  either.  Based on the above,  management  determined  that  certain
assets  of  the  Technologies   business  were  no  longer  fully   recoverable.
Accordingly,  in the fourth  quarter  of 1999 the  Company  recorded  an unusual
non-cash  charge  totaling  $75.2  million for  impaired  assets  related to the
Company's  waste landfill  sites in Ohio and Idaho.  As a result of this charge,
the Company  expected  to realize  non-cash  cost  savings of  approximately  $8
million in 2000 from reduced depreciation and amortization expenses.

         In addition,  the Company recorded other unusual charges during 1999 of
$5.8 million. Included in these charges were $2.8 million recorded in the fourth
quarter of 1999  related to the  write-down  to net  realizable  value of excess
capital equipment that resulted  primarily from the Company's loss of contracts.
Also  included were $3.0 million of unusual  charges  recorded in the 1999 first
quarter related to a profit improvement  program initiated by the Company during
1998,  of which $2.3 million were for employee  severance  costs and the balance
for  consulting  expenses.  During 1998 the  Company  recorded  $7.9  million of
unusual charges,  which included $7.3 million related to the profit  improvement
program,  and  consisted  of $3 million of excess  equipment  write-downs,  $2.2
million of consulting fees, and $2.1 million of severance costs.

         Although the Company had significantly  reduced outstanding  borrowings
on its  revolving  credit  facility  by the  end of  1999,  average  outstanding
borrowings  during the year were not  significantly  different  from 1998.  As a
result, interest expense for 1999 was essentially unchanged from the prior year.

         In the 1998 fourth quarter the Company recorded a charge totaling $15.3
million to write-off all of its  previously  recorded  deferred tax assets.  The
reversal was made when the Company reported negative quarterly operating income,
preventing a  determination  that it was more likely than not the Company  would
earn sufficient  taxable income during the next several years to realize its net
deferred tax assets.

         The Company  recorded a net loss for 1999 totaling  $95.8  million,  or
$16.47 per  share.  The net loss in 1998  totaled  $30.6  million,  or $5.27 per
share.

                                       15

<PAGE>

                               ENVIROSOURCE, INC.

FORWARD-LOOKING INFORMATION ("SAFE HARBOR STATEMENT")

         Certain   matters   discussed  in  this  report  are   "forward-looking
statements" as defined in the Private  Securities  Litigation Reform Act (PSLRA)
of 1995. Although the Company believes that its  forward-looking  statements are
based on  expectations  and  assumptions  that are  reasonable,  forward-looking
statements  are  inherently  subject  to risk and  uncertainties,  some of which
cannot be predicted.  Various  uncertainties exist with respect to the Company's
operations and business environment, and their outcomes are dependent on various
important risk factors.  The Company cautions users of this report that numerous
important  risk factors  discussed  below,  among others,  may have caused prior
actual results,  and could cause future results, to differ materially from those
expressed  in any  forward-looking  statements  made by,  or on behalf  of,  the
Company.  Among the factors or uncertainties  that could cause actual results to
differ from forward-looking statements are:

o    Dependence on steel mill  production;  economic  conditions - The Company's
     revenues are impacted by the level of steel  production  at its  customers'
     sites in North  America.  In addition  to  commercial  factors  such as the
     demand for steel, steel prices, and foreign imports,  other factors such as
     weather,  energy prices, labor issues or mill outages for refurbishment can
     or could affect production levels of the Company's customers.

o    Dependence on key customers;  competition - The Company derives significant
     revenue from a single customer. The loss of any key customer as a result of
     termination or non-renewal of its contracts  could have a material  adverse
     effect on the  Company's  revenue and  operating  income.  Both the IMS and
     Technologies  operating  segments  face  significant  competition  in their
     respective  industries.  Heightened competition during 1999 resulted in the
     loss of two large steel mill contracts for IMS. The Company's  Technologies
     business  experienced  significant  price  reductions for waste  processing
     during the 1990s due to  competitive  pressures.  There can be no assurance
     that the Company  will not  continue to  experience  negative  effects from
     increased  competition,  with possible  future effects of reduced  revenue,
     gross margins, and operating income.

o    Financial  condition of the  Company's  steel mill  customers - Five of the
     Company's  customers  that  contributed  $15.6  million  to  2000  revenues
     declared  bankruptcy  at or  near  year-end  2000.  More  bankruptcies  are
     possible as  competition  intensifies  and more of the Company's  customers
     report  operating  losses.  The  Company's  provision  for bad debt in 2000
     increased  $2.7 million  from the prior year.  More  customer  bankruptcies
     could impact the Company's revenues and profits through reduced production,
     cash flow from operations through reduced  collections of receivables,  and
     impact the Company's  operating expenses by requiring larger provisions for
     bad debt.

o    Environmental  regulation  -The  Company is subject to a complex,  evolving
     array of federal, state and local environmental laws and regulations. It is
     possible  that future  imposition of  additional  environmental  compliance
     requirements  could  have a material  effect on the  Company,  however  the
     Company cannot predict any such future requirements.

                                       16


<PAGE>

                               ENVIROSOURCE, INC.

Forward-Looking Information (continued)

o    Financial  leverage  and debt  service - The  Company  has $270  million of
     publicly held debt due in June 2003, which was trading at about 22% of face
     value at year-end  2000.  The Company  also  currently  has a negative  net
     worth,  resulting  from  losses.  However,  the  Company  has,  through its
     positive operating cash flow, continued to service its outstanding debt and
     other  obligations,  and  is  currently  in  compliance  with  all  of  its
     requirements under its bank credit facility.  The ability of the Company to
     meet its debt  obligations  in the future will be  dependent  on its future
     performance,  which is subject to, among other things,  the various factors
     discussed above, and also the Company's  ability to implement a solution to
     effectively deal with its Senior Notes.  There can be no assurance that any
     additional financing or refinancing, nor any debt re-capitalization will be
     possible.

                                       17

<PAGE>
                               ENVIROSOURCE, INC.

ITEM 7A.  Quantitative and Qualitative Disclosure About Market Risk.

         Since the Company performs services principally on a contractual basis,
and operates  mostly within the United  States,  its primary  market risk is the
exposure to  interest  rate  fluctuations  on its debt  instruments.  All of the
Company's long-term debt at December 31, 2000 bears fixed interest rates, except
for the $3.6 million in  borrowings  outstanding  on the  Company's  bank credit
facility,  which expires March 31, 2003.  Interest rates on revolver  borrowings
are floating,  and are indexed to the US prime rate and/or  LIBOR.  The weighted
average interest rate on these borrowings at December 31, 2000 was 10.75%. A one
percentage point increase or decrease in the US prime rate (9.5% at December 31,
2000) would increase or decrease the annual  interest  expense  related to these
borrowings by approximately  $36,000 (see Note 6 in Item 8, Financial Statements
and Supplementary Data included herein).

                                       18

<PAGE>
                               ENVIROSOURCE, INC.

Item 8.  Financial Statements and Supplementary Data.

         Index to Financial Statements (Item 14(a) 1)

         Reports of Independent Certified Public Accountants

         Consolidated Balance Sheet at December 31, 2000 and 1999

         Consolidated  Statement of Operations  for the Years Ended December 31,
         2000, 1999 and 1998

         Consolidated  Statement  of  Stockholders'  Equity for the Years  Ended
         December 31, 2000, 1999 and 1998

         Consolidated  Statement of Cash Flows for the Years Ended  December 31,
         2000, 1999 and 1998

         Notes to Consolidated Financial Statements

         FINANCIAL STATEMENT SCHEDULES (ITEM 14(A) 2)

         Financial statement schedules have been omitted because either they are
           not  applicable,  or the  required  information  is  included  in the
           financial statements or the notes thereto.

                                       19

<PAGE>

               Report of Independent Certified Public Accountants
               --------------------------------------------------

Board of Directors and Stockholders
Envirosource, Inc.

         We  have  audited  the  accompanying  consolidated  balance  sheets  of
Envirosource,  Inc. and  subsidiaries  as of December 31, 2000 and 1999, and the
related  consolidated  statements of operations,  stockholders' equity (deficit)
and cash flows for the two year period ended December 31, 2000.  These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

         In our opinion,  the  financial  statements  referred to above  present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Envirosource,  Inc. and  subsidiaries  as of December 31, 2000 and 1999, and the
consolidated  results of their operations and their  consolidated cash flows for
the two year period  ended  December  31,  2000 in  conformity  with  accounting
principles generally accepted in the United States.


/s/ Grant Thornton LLP

Philadelphia, Pennsylvania
February 13, 2001

                                       20

<PAGE>
                         REPORT OF INDEPENDENT AUDITORS



Stockholders and Board of Directors
Envirosource, Inc.


We  have  audited  the  accompanying   consolidated  statements  of  operations,
stockholders'  equity,  and cash flows of Envirosource,  Inc. for the year ended
December 31, 1998.  These  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the consolidated  results of operations and
cash flows of  Envirosource,  Inc.  for the year ended  December  31,  1998,  in
conformity with accounting principles generally accepted in the United States.




                                                   /s/ Ernst & Young LLP

Philadelphia, Pennsylvania
March 19, 1999

                                       21

<PAGE>

<TABLE>
<CAPTION>
                               ENVIROSOURCE, INC.
                           CONSOLIDATED BALANCE SHEET
                             (Dollars in thousands)


                                                          December 31,
                                                  -----------------------------
                                                     2000              1999
                                                  -----------       -----------
<S>                                               <C>               <C>
ASSETS
Current assets:
  Cash and cash equivalents                       $    4,042        $    2,125
  Accounts receivable, less allowance
    for doubtful accounts                             25,786            32,829
  Trust fund                                               -            15,173
  Other current assets                                 5,467             3,645
                                                  -----------       -----------
    Total current assets                              35,295            53,772

Property, plant and equipment, net                   113,240           103,192

Goodwill, less accumulated amortization              103,281           109,586

Other assets                                          11,655            11,707
                                                  -----------       -----------
                                                  $  263,471        $  278,257
                                                  ===========       ===========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
  Accounts payable                                $   12,124        $   14,933
  Salaries, wages and related benefits                 9,402             8,345
  Insurance obligations (excluding
    IU International)                                  2,224             2,587
  IU International acquisition obligations
    (including insurance)                              5,791             5,623
  Other current liabilities                            6,306            12,037
  Current portion of debt                              1,201               301
                                                  -----------       -----------
    Total current liabilities                         37,048            43,826

Long-term debt                                       289,621           284,651

Other long-term liabilities                           29,967            35,343

Stockholders' deficit:
  Common stock, par value $.05 per share,
    20,000,000 shares authorized,
    5,813,394 shares issued and outstanding              291               291
  Capital in excess of par value                     175,969           175,969
  Accumulated deficit                               (267,995)         (260,522)
  Accumulated other comprehensive losses              (1,430)           (1,211)
  Stock purchase loan receivable from officer              -               (90)
                                                  -----------       -----------
    Total stockholders' deficit                      (93,165)          (85,563)
                                                  -----------       -----------
                                                  $  263,471        $  278,257
                                                  ===========       ===========

</TABLE>

                            See accompanying notes.

                                       22

<PAGE>
<TABLE>
<CAPTION>
                               ENVIROSOURCE, INC.
                      CONSOLIDATED STATEMENT OF OPERATIONS
         (Dollars and shares in thousands, except for per share amounts)

                                                              Years Ended December 31,
                                                   -----------------------------------------------
                                                      2000              1999              1998
                                                   -----------       -----------       -----------
<S>                                                <C>               <C>               <C>
Revenues                                           $  199,579        $  211,975        $  232,376
Expenses:
  Cost of revenues                                    133,869           142,763           155,063
  Selling, general and administrative                  16,440            16,004            16,735
  Depreciation and amortization
    (less interest amortization)                       29,602            37,218            37,651
  Loss on impairment of long-lived assets                   -            75,192                 -
  Other unusual charges                                     -             5,843             7,934
                                                   -----------       -----------       -----------
    Total expenses                                    179,911           277,020           217,383
                                                   -----------       -----------       -----------

Operating income (loss)                                19,668           (65,045)           14,993

Interest income                                         2,647               784             1,262
Interest expense                                      (28,843)          (30,538)          (30,510)
                                                   -----------       -----------       -----------

Loss before income taxes                               (6,528)          (94,799)          (14,255)

Income tax expense:
  Current                                                (945)             (952)           (1,047)
  Deferred                                                  -                 -           (15,337)
                                                   -----------       -----------       -----------
   Total income tax expense                              (945)             (952)          (16,384)
                                                   -----------       -----------       -----------

Net loss                                           $   (7,473)       $  (95,751)       $  (30,639)
                                                   ===========       ===========       ===========

Basic and diluted loss per share                   $    (1.29)       $   (16.47)       $    (5.27)
                                                   ===========       ===========       ===========

Weighted average shares                                 5,813             5,813             5,813
                                                   ===========       ===========       ===========

</TABLE>

                            See accompanying notes.

                                       23
<PAGE>


<TABLE>
<CAPTION>
                               ENVIROSOURCE, INC.
            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                             (Dollars in thousands)

                                                                                     Accumulated
                                                     Capital in                         Other             Stock
                                     Common          Excess of        Accumulated    Comprehensive      Purchase
                                     Stock           Par Value          Deficit      Income (Loss)        Loans              Total
                                  -----------       -----------       -----------    -----------       -----------       -----------
<S>                               <C>               <C>               <C>            <C>               <C>               <C>
Balance at January 1, 1998        $      291        $  175,939        $ (134,132)    $   (1,224)       $     (663)       $   40,211
Comprehensive loss:
  Net loss                                                               (30,639)                                           (30,639)
  Translation adjustment                                                                   (332)                               (332)
                                                                                                                         -----------
    Total comprehensive loss                                                                                                (30,971)
                                                                                                                         -----------

Loan repayment                                                                                                573               573
Other                                                       30                                                                   30
                                  -----------       -----------       -----------    -----------       -----------       -----------
BALANCE AT DECEMBER 31, 1998             291           175,969          (164,771)        (1,556)              (90)            9,843
Comprehensive loss:
  Net loss                                                               (95,751)                                           (95,751)
  Translation adjustment                                                                    345                                 345
                                                                                                                         -----------
    Total comprehensive loss                                                                                                (95,406)
                                                                                                                         -----------

                                  -----------       -----------       -----------    -----------       -----------       -----------
BALANCE AT DECEMBER 31, 1999             291           175,969          (260,522)        (1,211)              (90)          (85,563)
Comprehensive loss:
  Net loss                                                                (7,473)                                            (7,473)
  Translation adjustment                                                                   (219)                               (219)
                                                                                                                         -----------
    Total comprehensive loss                                                                                                 (7,692)
                                                                                                                         -----------
Loan repayment                                                                                                 90                90
                                  -----------       -----------       -----------    -----------       -----------       -----------
BALANCE AT DECEMBER 31, 2000      $      291        $  175,969        $ (267,995)    $   (1,430)       $        -        $  (93,165)
                                  ===========       ===========       ===========    ===========       ===========       ===========
</TABLE>

                            See accompanying notes.

                                       24
<PAGE>
<TABLE>
<CAPTION>
                               ENVIROSOURCE, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                             (Dollars in thousands)

                                                                               Years Ended December 31,
                                                                     -----------------------------------------------
                                                                        2000              1999              1998
                                                                     -----------       -----------       -----------
<S>                                                                  <C>               <C>               <C>
OPERATING ACTIVITIES:
  Loss from continuing operations                                    $   (7,473)       $  (95,751)       $  (30,639)
  Adjustments to reconcile loss from continuing
    operations to cash provided by operating activities:
    Non-cash impairment loss on long-lived assets                             -            75,192                 -
    Other unusual charges (payments), net                                (2,026)            2,479             4,896
    Deferred income taxes                                                     -                 -            15,337
    Depreciation                                                         24,126            26,832            27,330
    Amortization                                                          7,263            12,437            12,075
    Non-cash provision for doubtful accounts                              2,726                36               728
    Changes in working capital                                           (2,541)            3,413            (2,759)
    Other, net                                                             (626)              310               915
                                                                     -----------       -----------       -----------
Cash provided by operating activities                                    21,449            24,948            27,883
                                                                     -----------       -----------       -----------

INVESTING ACTIVITIES:
  Additions to property, plant and equipment, gross                     (35,748)          (17,336)          (35,588)
  Less amounts financed by capital lease obligations                      8,684                 -                 -
                                                                     -----------       -----------       -----------
    Net additions to property, plant and equipment                      (27,064)          (17,336)          (35,588)
  Proceeds from dispositions of assets                                    1,718             3,099             1,475
  Landfill permit additions and closure expenditures                     (1,596)             (419)           (2,751)
  Closure trust fund recovery (payments), net                            12,563               171            (1,072)
  Cash flows related to IU subsidiaries' asbestos claims, net            (3,013)            6,016                11
  Cash flows related to IU International acquisition, net                   692               113            (2,411)
  Other                                                                      14              (233)             (527)
                                                                     -----------       -----------       -----------
Cash used for investing activities                                      (16,686)           (8,589)          (40,863)
                                                                     -----------       -----------       -----------

Cash provided (used) before financing activities                          4,763            16,359           (12,980)
                                                                     -----------       -----------       -----------

FINANCING ACTIVITIES:
  Revolving credit facility:
    Borrowings                                                           70,662            78,719            68,000
    Repayments                                                          (73,060)          (94,734)          (54,000)
                                                                     -----------       -----------       -----------
                                                                         (2,398)          (16,015)           14,000
                                                                     -----------       -----------       -----------

  Other debt repayment                                                     (448)           (2,521)           (5,828)
  Debt issuance costs                                                         -              (832)                -
                                                                     -----------       -----------       -----------
Cash provided by (used for) financing activities                         (2,846)          (19,368)            8,172
                                                                     -----------       -----------       -----------

CASH AND CASH EQUIVALENTS:
  Increase (decrease) during the year                                     1,917            (3,009)           (4,808)
  Beginning of year                                                       2,125             5,134             9,942
                                                                     -----------       -----------       -----------
  End of year                                                        $    4,042        $    2,125        $    5,134
                                                                     ===========       ===========       ===========

</TABLE>

                            See accompanying notes.

                                       25

<PAGE>

                               ENVIROSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.   ACCOUNTING POLICIES

Principles of consolidation:  The consolidated  financial statements include the
---------------------------
accounts  of  the  Company  and  its  subsidiaries.  Intercompany  accounts  and
transactions have been eliminated.  Certain amounts reported in prior years have
been reclassified for comparative purposes.

Use of estimates:  Preparing financial  statements in accordance with accounting
----------------
principles  generally accepted in the United States requires  management to make
estimates  and  assumptions  that affect the amounts  reported in the  financial
statements  and  accompanying  notes.  Actual  results  could  differ from those
estimates.

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

Long-lived assets: Property, plant and equipment is stated at cost. Depreciation
-----------------
is computed by the straight-line method based on the following lives:  buildings
and improvements - 10 to 30 years and machinery and equipment - 3 to 25 years.

Landfill  development and permit costs are depreciated or amortized based on the
ratio of cubic  yards of  disposal  capacity  utilized  to total  cubic yards of
disposal capacity (see Note 3).

Landfill closure costs and post-closure obligations at the Company's landfill in
Idaho were secured by a trust fund invested in U.S.  government  and  government
agency  securities.  These  investments,  totaling $15.2 million at December 31,
1999 were carried at amortized cost which  approximated  market value.  Interest
income and realized  gains and losses were  recognized in earnings.  The Company
obtained permission from the necessary regulatory agencies to replace this trust
fund with a surety bond  obtained  from an insurance  company.  The entire $15.2
million  balance of the trust fund was  recovered in the first  quarter of 2000.
Accordingly,  the trust fund was  classified as  short-term on the  accompanying
balance sheet at December 31, 1999.  The surety bond  agreement  required a $2.5
million collateral payment,  which was made in June 2000 (see Note 2). The trust
fund  balances  that secure the landfill  closure  obligations  at the Company's
landfill in Ohio were  written  off in an  impairment  charge  incurred in 1999,
however the Company retains legal  ownership of these assets,  which are to fund
the closure and monitoring obligations (see Note 3).

The  excess  of  purchase  price  over  fair  value of net  assets  of  acquired
businesses   (goodwill)  is  recorded  as  an  asset  and  amortized  using  the
straight-line method over periods of 15 to 40 years (see Note 3).

The Company accounts for potential impairment of long-lived assets in accordance
with the  Financial  Accounting  Standards  Board's  (FASB)  Statement  No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." As required by that Statement, the carrying value of long-lived
assets will be reviewed when facts and circumstances  suggest that they may have
become  impaired.  If this review  indicates  that such assets will not be fully
recoverable,  as determined based on anticipated cash flows over their estimated
remaining  useful  lives,  the carrying  value of such assets will be reduced to
their fair value,  based on the discounted present value of the anticipated cash
flows (see Note 3).

Costs of computer software developed or obtained for internal use expended after
December  31,  1998  are  generally   expensed  as  incurred,   however  certain
development  stage costs may be capitalized,  based on guidance  provided by the
Accounting Institute of Certified Public Accountants'  Statement of Position No.
98-1.

                                       26

<PAGE>

                               ENVIROSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  ACCOUNTING POLICIES (CONTINUED)

Closure costs: The estimated costs of future closure and post-closure monitoring
-------------
and  maintenance  of landfills  are accrued based on the ratio of cubic yards of
disposal capacity utilized to total cubic yards of disposal capacity.

Revenues:  The Company's revenues are recognized as services are provided.
--------

Earnings per share:  Basic earnings per share are calculated by dividing  income
------------------
(loss)  applicable  to common  shares by the weighted  average  number of shares
outstanding during the period.  Basic and diluted earnings per share amounts are
the same in each year  because  there is no  dilution  when there is a loss from
continuing operations.

In June 1998 the company  completed a 1-for-7  reverse  stock split.  Numbers of
shares and per share amounts have been restated for all periods  presented prior
to that date.

Stock-based  compensation plans: The Company follows Accounting Principles Board
-------------------------------
Opinion No. 25,  Accounting  for Stock Issued to Employees,  in  accounting  for
stock-based  compensation  plans and discloses the fair value of options granted
and pro forma  effects  of  compensation  expense on  earnings  as  required  by
Statement of  Financial  Accounting  Standards  (SFAS) No. 123,  Accounting  for
Stock-Based Compensation.

NOTE 2.  SUBSEQUENT EVENT

On February 1, 2001,  the Company sold all of the common stock of its Envirosafe
Services  of Idaho,  Inc.  ("ESII")  subsidiary.  In addition to the Idaho waste
landfill  operations,  the  Company's  contract  with a steel mill in  Sterling,
Illinois  was  included  in the  sale.  Cash  proceeds  from the  sale  were not
significant,  however the  transaction  eliminated the need for  Envirosource to
provide related financial assurances of at least $12.5 million, which would have
been due on February 5, 2001. The Company recorded a $2.3 million pretax gain on
the sale  during  the  first  quarter  of 2001.  ESII,  including  the  Sterling
operations,  contributed  approximately $14 million of revenues to the Company's
Technologies segment in 2000.

As part of the  transaction,  the  purchaser  provided  a  guaranty  for  ESII's
outstanding  debt,  which consisted of $8.5 million of industrial  revenue bonds
due November 1, 2002, and it provided  financial  assurance for the  obligations
for closure and long-term  monitoring of the Idaho landfill site. The holders of
the industrial revenue bonds and the appropriate  regulatory  authorities agreed
to accept the purchaser's guaranty and financial assurance to replace those that
had previously  been provided by  Envirosource.  Until  February 2000,  ESII had
provided the financial  assurances with trust funds of $15 million; at that time
a surety bond was substituted and the cash, netting $12.6 million,  was returned
to the Company.

NOTE 3.  UNUSUAL ITEMS

In 1999 the Company recorded an impairment loss of $75.2 million,  or $12.94 per
share, to reduce the long-lived  assets related to certain of its landfill sites
to their  estimated  fair  value.  The  write-down  included  $28.4  million  of
property, plant and equipment,  $20.5 million of landfill permits, $15.8 million
of  non-recoverable  trust funds and other  deferred  charges,  $8.6  million of
goodwill, and $1.9 million related to other long-lived assets.

                                       27

<PAGE>


                               ENVIROSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3.  UNUSUAL ITEMS (CONTINUED)

The Company  recorded other unusual  charges during 1999 of $5.8 million,  which
included a non-cash charge of $2.8 million to write-down excess equipment to net
realizable  value,  and $3 million for  severance  and  consulting  related to a
profit improvement program.  Unusual charges in 1998 totaled $7.9 million, which
included a $3 million  non-cash  equipment  write  down,  and $4.3  million  for
severance and consulting related to the profit improvement program.

NOTE 4. INCOME TAXES

The Company has net operating loss  carryforwards  totaling  $113.1 million that
expire at various dates through 2020;  these are  represented  as a deferred tax
asset of $39.6 million in the table below. In the fourth quarter of 1998, all of
the Company's  net deferred tax assets were  written-off  with a charge  against
operations,  when the Company reported negative quarterly operating income, thus
preventing  a  determination  that it was more  likely than not that the Company
will earn sufficient taxable income during the next several years to realize its
net deferred tax assets.

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows (in thousands):


                                                      2000              1999
                                                   -----------       -----------
Deferred tax assets:
     Net operating loss carryforwards              $   39,571        $   38,509
     Asset impairment                                  23,317            23,317
     Accruals                                          17,636            17,218
                                                   -----------       -----------
         Total deferred tax assets                     80,524            79,044
     Valuation allowance                              (69,188)          (65,533)
                                                   -----------       -----------
         Net deferred tax assets                       11,336            13,511

Deferred tax liabilities:
     Tax over book:
        Depreciation                                   (4,121)           (5,002)
        Post-closure deductions                        (3,323)           (5,125)
        Landfill permit amortization                   (3,892)           (3,384)
                                                   -----------       -----------
         Total deferred tax liabilities               (11,336)          (13,511)
                                                   -----------       -----------
         Net deferred taxes                        $       --        $       --
                                                   ===========       ===========

Subject to the Company's  ability to generate  sufficient future taxable income,
upon  recognition  of  additional  net  deferred tax assets,  the $69.2  million
valuation  allowance  would be credited as follows:  $2.2  million to capital in
excess of par value, $8.8 million to goodwill and $58.2 million to reduce income
tax expense.

                                       28

<PAGE>


                               ENVIROSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4. INCOME TAXES (CONTINUED)

In 2000, the valuation allowance was increased by a net $3.7 million,  primarily
due to the  operating  loss for the year.  In 1999 the  valuation  allowance was
increased by a net $28.7 million, primarily due to the asset impairment charge.

The components of income tax (expense) attributable to continuing operations are
as follows (in thousands):

                                    2000              1999              1998
                                 -----------       -----------       -----------
Current:
     State                       $     (736)       $     (749)       $     (897)
     Canadian                          (209)             (203)             (150)
                                 -----------       -----------       -----------
                                       (945)             (952)           (1,047)

Deferred:
     Federal                             --                --           (15,337)
                                 -----------       -----------       -----------
                                 $     (945)       $     (952)       $  (16,384)
                                 ===========       ===========       ===========

Canadian income before income taxes was not significant in 2000, 1999 and 1998.

Income tax (expense)  benefit  varies from amounts  computed by applying the 35%
federal statutory rate for the following reasons (in thousands):

                                    2000              1999              1998
                                 -----------       -----------       -----------
Benefit of pre-tax loss at
     statutory rate              $    2,285        $   33,180        $    4,989
Goodwill amortization                (1,441)           (1,633)           (1,692)
Effect of increasing deferred
     tax valuation allowance         (1,311)          (32,012)          (19,098)
Effect of state and Canadian
     income taxes                      (478)             (487)             (583)
                                 -----------       -----------       -----------
                                 $     (945)       $     (952)       $  (16,384)
                                 ===========       ===========       ===========

                                       29

<PAGE>


                               ENVIROSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5.  OTHER BALANCE SHEET INFORMATION

Long-lived assets (in thousands):

                                                      2000              1999
                                                   -----------       -----------
Property, plant and equipment, at cost:
  Land, landfill development and improvements      $   18,747        $   17,080
  Buildings and improvements                           29,269            25,338
  Machinery and equipment                             230,175           212,060
                                                   -----------       -----------
                                                      278,191           254,478
Less accumulated depreciation                        (164,951)         (151,286)
                                                   -----------       -----------
                                                   $  113,240        $  103,192
                                                   ===========       ===========

Goodwill, at cost                                  $  161,403        $  163,481
Less accumulated amortization                         (58,122)          (53,895)
                                                   -----------       -----------
                                                   $  103,281        $  109,586
                                                   ===========       ===========

Other long-term liabilities (in thousands):
  Closure and post-closure liabilities*            $   10,818        $   10,715
  IU International acquisition obligations             12,504            17,073
  Other                                                 6,645             7,555
                                                   -----------       -----------
                                                   $   29,967        $   35,343
                                                   ===========       ===========

* Includes  $10.0  million in 2000 and $9.6  million in 1999 for the Idaho waste
landfill /Sterling, Illinois sites sold in February 2001 (see Notes 1 and 2).

Allowance for doubtful accounts (in thousands):
                                    2000              1999              1998
                                 -----------       -----------       -----------
Balance at the beginning of year $      896        $    1,045        $      701
Additions charged to expense          2,726                36               728
Amounts written off                    (278)             (185)             (384)
                                 -----------       -----------       -----------
Balance at end of year           $    3,344        $      896        $    1,045
                                 ===========       ===========       ===========

                                       30

<PAGE>


                               ENVIROSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6.  LONG-TERM DEBT

Long-term debt at December 31 is summarized as follows (in thousands):

                                                      2000              1999
                                                   -----------       -----------
9 3/4% Senior Notes due 2003                       $  270,000        $  270,000
Revolving credit facility                               3,587             5,985
Industrial revenue bond                                 8,500             8,500
Capital equipment leases and other                      8,735               467
                                                   -----------       -----------
                                                      290,822           284,952
Less current maturities                                (1,201)             (301)
                                                   -----------       -----------
Long-term debt                                     $  289,621        $  284,651
                                                   ===========       ===========

The estimated fair value of the financial instruments representing the long-term
debt above was $79.0  million and $189.6  million at December  31, 2000 and 1999
respectively. The fair value of the Senior Notes is based upon management's best
knowledge of recent trading prices.

At December  31,  2000,  required  principal  payments by year for the next five
years are as follows: $1.2 million in 2001, $9.8 million in 2002, $274.9 million
in 2003,  $1.4 million in 2004,  $1.5 million in 2005, and $2 million due beyond
2005.  Included in the $9.8  million due in 2002 is an $8.5  million  industrial
revenue  bond  which was  assumed  by the  purchaser  when the  Company's  Idaho
landfill site was sold in February, 2001. Capital leases originating during 2000
expire  between  2003 and 2007,  and have a weighted  average  interest  rate of
10.7%. Required payments for non-cancelable  capital leases (including interest)
for the next five years are:  $2.0  million  in 2001 and 2002,  $1.9  million in
2003, $1.8 million in 2004 and 2005, and $2.2 million thereafter.

The Senior Notes  indenture  (10.2%  effective  rate including  amortization  of
issuance costs) contains restrictions customarily found in such agreements, such
as limits on indebtedness and payments with respect to capital stock.

In November 1999 the Company, through its IMS subsidiary,  replaced its previous
$43.8 million bank credit  facility with a new $40 million credit  facility (the
"Agreement") with Bank of America,  N.A. As required by the Emerging Issues Task
Force  issue  98-14,  the  unamortized  issuance  costs from the  previous  bank
facility  totaling  $1.1  million were  combined  with  issuance  costs from the
Agreement and are amortized  through the Agreement's  maturity date of March 31,
2003. The Agreement is secured by certain assets of IMS,  principally  equipment
and accounts  receivable.  Interest on  borrowings is based on either the bank's
prime rate or the London Interbank Offering Rate (LIBOR), plus a negotiated bank
margin.  The interest  rate on  outstanding  borrowings at December 31, 2000 was
10.75%.  The Company  also pays a  commitment  fee on the unused  portion of the
facility.  The Agreement  contains  certain  restrictions on the Company and its
subsidiaries,  including,  among  other  things,  a  requirement  to  maintain a
specified  minimum  level of available  credit ($8  million),  and a prohibition
against  payment of cash dividends.  The Agreement also contains  covenants that
require the Company to meet certain  financial ratios and tests. At December 31,
2000, the Company was in compliance with all such  covenants.  In December 2000,
the  Agreement  was  amended to  increase  the  amount of  capital  expenditures
permitted by IMS for the 2000 year only. After deducting outstanding borrowings,
$7.9  million of  commitments  for  standby  letters of credit,  and the minimum
availability requirement,  approximately $18.4 million of the total facility was
unused and available.  For  comparative  purposes,  the Company  reclassified $6
million of revolver borrowings  outstanding at December 31, 1999 from short-term
to long-term debt.

                                       31

<PAGE>

                               ENVIROSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7.  IU INTERNATIONAL ACQUISITION OBLIGATIONS

The Company has certain  obligations  resulting from the 1988  acquisition of IU
International  Corporation ("IU") that are unrelated to current  operations.  At
December  31, 2000,  these  liabilities  totaled  $18.3  million,  of which $5.8
million  were  classified  as  short-term  and the balance as  long-term  on the
accompanying balance sheet. At December 31, 1999, such liabilities totaled $22.6
million,  of which $5.6 million were  classified  as  short-term.  These amounts
represent obligations for product liability claims, insurance, employee benefits
and other matters.

The product  liability  obligations  primarily pertain to personal injury claims
for certain  asbestos-related  products distributed by two Pennsylvania-based IU
subsidiaries  during the 1960s and 1970s that are no longer operating  entities.
The two  subsidiaries  are  participants  in the Center  for  Claims  Resolution
("CCR"),  a group of companies  who have had  asbestos-related  claims  asserted
against  them.  The CCR  acts as a  central  administrative  entity  to  attempt
cost-effective claims handling, reduce litigation costs, and, until 2001, effect
broad-based claim settlements.  Early in 2001, with some CCR participants either
declaring  bankruptcy  from excessive costs of asbestos  claims,  or electing to
leave the CCR and provide their own defenses, the CCR changed its procedures and
no longer participates in broad-based  settlements.  The two subsidiaries of the
Company  elected  to  continue  participating  in the CCR,  using it solely  for
defense advice, administrative and claims handling services.

Management believes: a) that most of the Company's product liability and related
litigation defense costs will ultimately be recovered through insurance coverage
in place during the periods covered by such claims, and b) the ultimate exposure
to the Company will result  primarily  from  certain  insurance  companies  that
provided the Company  with  insurance  coverage for such claims,  and have since
become  insolvent.  Management  is actively  pursuing  recovery  claims from the
insolvent  estates and potential  reinsurance such insolvent  companies may have
had  with  other  insurers.  Management  cannot  with any  reasonable  certainty
estimate  the  ultimate  amount  of claims  probable  of  assertion,  nor can it
accurately  predict the level of success in securing  recoveries  from insolvent
insurers.  However,  management  has  recorded  a  liability  which it  believes
reflects  all  currently  available  information  including  known  claims,  and
probable  insurance  coverage.  Management will continue to evaluate whether the
Company's  ultimate  liability  for product  liability  claims can be reasonably
estimated.  If such an estimate is feasible,  charges against future  operations
may be  necessary,  however  the  timing  or amount  of any such  charge  cannot
presently be determined.

At  December  31,  2000 and 1999,  the  Company  had  recorded  asbestos-related
liabilities  in the amount of $6.3 million and $9.3  million.  During 2000,  the
Company  paid claims and claim  expenses  totaling  $6.4  million,  and received
recoveries  from  insurance  carriers  totaling $3.4 million.  During 1999,  the
Company received a cash settlement of $8.7 million from an insurance  company in
settlement  of its  obligations  to  insure  the  Company  under  two  insurance
policies.  Any claims up to a total of $8.7  million  covered  by such  policies
became the responsibility of the Company. Claim payments by the Company for 1999
totaled $2.7 million.

NOTE 8.  STOCKHOLDERS' EQUITY (DEFICIT)

At December 31, 2000, a total of 874,157  shares of the  Company's  common stock
have been reserved for stock options (see Note 9). Under the terms of the Senior
Notes  indenture  and bank credit  facility,  the Company may not declare or pay
dividends or make cash distributions to the common stockholders.

                                       32

<PAGE>

                               ENVIROSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8.  STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

An affiliate of Freeman  Spogli & Co. owns  approximately  47% of the  Company's
common stock.

The Company is authorized to issue 5.6 million  shares of preferred  stock,  par
value $.25 per share,  with such terms and  conditions  as shall be specified by
the Company's Board of Directors.

At December 31, 1999,  the Company had a loan to an employee  totaling  $90,000,
which  originated  to  purchase  common  stock of the  Company in 1989.  Accrued
interest receivable on the loan as of that date was approximately  $51,000.  The
loan was settled during 2000.

NOTE 9.  STOCK OPTIONS

The Company has in the past provided  incentive stock options and  non-qualified
stock options to key employees to purchase shares of the Company's common stock.
The terms and conditions  for option grants are  determined by the  Compensation
and Stock  Option  Committee  of the Board of  Directors.  In 1999,  the Company
adopted the 1999 Stock Option Plan,  which  provided for up to 500,000 shares of
the Company's  common stock  subject to grants.  The term of such grants may not
exceed ten years from the grant date. Incentive stock options may not be granted
at exercise  prices less than the fair market  value of the stock at the time of
grant. Options generally vest over three or five year periods.

Option activity is summarized below:
<TABLE>
<CAPTION>
                                                                       Weighted
                                       Number of Shares                -Average
                                  -----------------------------
                                                       Under            Exercise                 Range
                                                                                     -----------------------------
                                   Available          Option              Price         From               To
                                  -----------       -----------        -----------   -----------       -----------
<S>                               <C>               <C>                <C>           <C>               <C>
Balance at January 1, 1998           198,678           228,121              28.27         10.63             57.75

  Granted                            (82,747)           82,747              14.34         13.60             21.00
  Canceled                            45,229           (45,229)             31.27         10.06             57.75
                                  -----------       -----------
BALANCE AT DECEMBER 31, 1998         161,160           265,639              23.42         10.06             49.00
                                  -----------       -----------

  Authorized                         500,000            ------
  Granted                           (167,856)          167,856               4.09          2.06              5.13
  Canceled                            82,786          (131,426)             27.05         14.00             49.00
                                  -----------       -----------
BALANCE AT DECEMBER 31, 1999         576,090           302,069              11.10          2.06             45.50
                                  -----------       -----------

  Granted                             (2,142)            2,142                .77           .77               .77
  Canceled                            15,000           (19,002)             23.38         14.00             45.50
                                  -----------       -----------
BALANCE AT DECEMBER 31, 2000         588,948           285,209              10.26           .77             30.63
                                  ===========       ===========

</TABLE>

                                       33

<PAGE>

                               ENVIROSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 9.  STOCK OPTIONS (CONTINUED)

Summarized  information about stock options  outstanding at December 31, 2000 is
as follows:

<TABLE>
<CAPTION>
                                      Weighted-
                                       Average        Weighted-                      Weighted-
    Range of          Number of       Remaining        Average        Number of       Average
    Exercise           Options       Contractual      Exercise         Options        Exercise
     Prices          Outstanding        Life           Price         Exercisable       Price
----------------     -----------     -----------     -----------     -----------     -----------
<S>                  <C>             <C>             <C>             <C>             <C>
$.77 to $.77              2,142       9.0 years            $.77              --      $       --
$2.06 to $5.13          167,856       8.2                  4.18          57,855            4.21
$10.06 to $21.00         76,235       6.0                 15.16          62,533           15.44
$21.01 to $30.63         38,976       3.7                 27.34          38,690           27.34
                    ------------                                     -----------
$.77 to $30.63          285,209       7.0 years           10.26         159,078           14.25
                    ============                                     ===========

</TABLE>

The Company  also  maintains a stock option plan for outside  directors  who are
neither  employees of the Company nor affiliated with Freeman Spogli & Co. Under
the plan, each outside director is granted options to purchase 714 shares of the
Company's  common stock at the prior year-end market price. The plan also allows
these directors to elect to receive below-market options in lieu of their annual
directors'  fees. In 1998 two directors  elected to receive such options in lieu
of their $15,000  annual  directors'  fees.  All options  granted under the plan
become exercisable within one year of the grant date.

Using the  Black-Scholes  option pricing model, the estimated per share weighted
average fair values of stock  options  granted were $0.53 in 2000,  $1.18 during
1999 and $9.95 during 1998.  Assumptions  made in  determining  the estimates of
fair value include:  risk-free  interest rates of 6.6% in 2000 and 1999 and 4.7%
in 1998; a volatility factor of .58 for all three years; and a  weighted-average
expected life of 8 years for all three years.

The following table summarizes the pro forma effects assuming  compensation cost
for such  awards  had  been  recorded  based  upon  estimated  fair  values  (in
thousands, except for per share amounts):

                                    2000              1999              1998
                                 -----------       -----------       -----------
Pro forma net loss               $   (7,588)       $  (95,845)       $  (30,913)

Pro forma net loss per share     $    (1.31)       $   (16.49)       $    (5.32)

                                       34

<PAGE>


                               ENVIROSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10.  OPERATING SEGMENTS

The  Company's  reportable  operating  segments,  which are organized by type of
service,  are: IMS, which provides recycling and other specialized  services for
the steel industry,  and Technologies,  which operates  hazardous waste disposal
landfills and provides waste management and stabilization services for the steel
industry,  as well as companies in other industries and  governmental  agencies.
Information by reportable segment for the three years ended December 31, 2000 is
as follows (in thousands):

                                    2000              1999              1998
                                 -----------       -----------       -----------
REVENUES
  IMS                            $  162,752        $  180,697        $  191,438
  Technologies                       36,827            31,278            40,938
                                 -----------       -----------       -----------
                                 $  199,579        $  211,975        $  232,376
                                 ===========       ===========       ===========

UNUSUAL CHARGES
  IMS                                    --      $     (2,924)       $   (2,851)
  Technologies                           --           (75,722)             (790)
  Corporate headquarters                 --            (2,389)           (4,293)
                                 -----------       -----------       -----------
                                         --      $    (81,035)       $   (7,934)
                                 ===========       ===========       ===========

TOTAL OPERATING INCOME (LOSS)
  IMS                            $   15,899            22,330        $   23,614
  Technologies                        4,697           (83,260)           (1,586)
  Corporate headquarters               (928)           (4,115)           (7,035)
                                 -----------       -----------       -----------
                                 $   19,668       $   (65,045)       $   14,993
                                 ===========       ===========       ===========

IDENTIFIABLE ASSETS
  IMS                            $  226,748        $  226,763        $  246,768
  Technologies                       30,173            45,395           131,440
  Corporate headquarters              6,550             6,099             9,248
                                 -----------       -----------       -----------
                                 $  263,471        $  278,257        $  387,456
                                 ===========       ===========       ===========

DEPRECIATION AND AMORTIZATION
  IMS                            $   25,707         $  26,613        $   27,079
  Technologies                        4,410            11,498            11,275
  Corporate headquarters              1,272             1,158             1,051
                                 -----------       -----------       -----------
                                 $   31,389         $  39,269        $   39,405
                                 ===========       ===========       ===========

CAPITAL EXPENDITURES
  IMS (1)                            34,716         $  15,876        $   27,874
  Technologies                        1,032             1,460             7,714
                                 -----------       -----------       -----------
                                 $   35,748         $  17,336        $   35,588
                                 ===========       ===========       ===========

(1) Includes in 2000 $8.7 million of expenditures financed through capital lease
    obligations.

Corporate  headquarters  expenses and assets  support both  segments but are not
directly  associated with either.  Corporate assets consist  principally of cash
and cash equivalents, and unamortized debt issuance costs.

                                       35

<PAGE>


                               ENVIROSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10.  OPERATING SEGMENTS (CONTINUED)

Revenues  from  the  Company's  largest  steel  industry  customer  ranged  from
approximately  $41 to $44 million annually during the three years ended December
31, 2000. Almost all of this revenue was recorded by the Company's IMS business.
Accounts  receivable due from that customer totaled $4.3 million at December 31,
2000. The Company  conducts  business  primarily in the United  States,  its IMS
business  has  some  Canadian  customers,  however  foreign  operations  are not
material. Technologies' waste landfill sites are located in the United States.

The following  table sets forth the  percentage of total revenue  contributed by
each class of services during the three years ended December 31, 2000:

                                    2000              1999              1998
                                 -----------       -----------       -----------
Industrial recycling                  65.8%             70.6%             69.6%

Specialized services                  15.7%             14.6%             12.8%

Waste stabilization and disposal      18.5%             14.8%             17.6%
                                 -----------       -----------       -----------
                                     100.0%            100.0%            100.0%
                                 -----------       -----------       -----------

NOTE 11.  RETIREMENT PLANS

The Company has several  non-contributory defined benefit pension plans covering
certain salaried and hourly  employees.  The plans provide pension benefits that
are based on varying levels of service and compensation. Assets of the plans are
principally  common stocks,  fixed income securities and cash  equivalents.  The
Company's  contributions  are  based on  funding  standards  established  by the
Employee Retirement Income Security Act of 1974.

                                       36

<PAGE>


                               ENVIROSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11.  RETIREMENT PLANS (CONTINUED)

                                                      2000              1999
                                                   -----------       -----------
Change in benefit obligations:

  Benefit obligations at beginning of year         $   19,716        $   21,443
  Service cost                                            402               475
  Interest cost                                         1,481             1,504
  Net actuarial (gains) losses                            (51)             (792)
  Benefits paid                                        (2,654)           (2,950)
  Other                                                   (23)               36
                                                   -----------       -----------
  Benefit obligations at end of year               $   18,871        $   19,716
                                                   ===========       ===========

Change in plan assets:
  Fair value of plan assets at beginning of year   $   21,463        $   20,294
  Actual return on assets                               5,168             4,284
  Employer contributions                                  165               145
  Benefits paid                                        (2,654)           (2,950)
  Plan expenses                                          (325)             (338)
  Other                                                   (20)               28
                                                   -----------       -----------
  Fair value of plan assets at end of year         $   23,797        $   21,463
                                                   ===========       ===========

Funded status                                      $    4,926        $    1,747
Unrecognized net actuarial (gains) losses              (6,466)           (2,998)
Unamortized prior service cost decrease                (2,458)           (2,798)
Other                                                      (5)               (7)
                                                   -----------       -----------
Accrued pension cost                               $   (4,003)       $   (4,056)
                                                   ===========       ===========

Net periodic  pension cost for defined  benefit plans includes the following (in
thousands):

                                    2000              1999              1998
                                 -----------       -----------       -----------
Service cost                     $      402        $      475        $      564
Interest cost                         1,481             1,524             1,550
Expected return on plan assets       (1,429)           (1,427)           (1,463)
Net amortization and deferral          (341)             (257)             (195)
                                 -----------       -----------       -----------
Net periodic pension costs       $      113        $      315        $      456
                                 ===========       ===========       ===========

The actuarial  present value of projected  benefit  obligations  was  determined
using  discount  rates of 8.00% in 2000 and 7.75% in 1999.  The expected  annual
long-term rate of return on plan assets used in determining net periodic pension
cost was 8.5% in both years.  Benefit  obligations of plans with  obligations in
excess of plan assets at December 31, 2000 totaled $1.1 million; assets for such
plans were $1.0 million,  and the total prepaid  expenses of such plans were not
significant.

The Company also sponsors  several  defined  contribution  retirement  plans for
which  contributions  and costs are based on percentages of defined  earnings of
participating employees. Costs for these plans amounted to $0.9 million in 2000,
and $1.2 million in 1999 and 1998.

37

<PAGE>

                               ENVIROSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11.  RETIREMENT PLANS (CONTINUED)

In  addition,  for the  benefit  of certain  unionized  employees,  the  Company
participates in defined benefit multi-employer pension plans, for which reliable
information  concerning the Company's  share of related  estimated plan benefits
and assets is not available,  and defined  contribution  multi-employer  pension
plans. Costs for multi-employer  pension plans amounted to $1.9 million in 2000,
$2.4 million in 1999 and $2.2 million in 1998.

The Company also  participates  in several defined  contribution  multi-employer
plans that provide health care and other welfare  benefits to certain  unionized
employees during their working lives and after retirement. Costs for these plans
amounted to $2.1 million in 2000, $2.2 million in 1999 and $2.1 million in 1998.

The Company also has several defined benefit  postretirement  plans that provide
varying amounts of medical and death benefits,  primarily to retired  employees.
The actuarially  computed cost for these plans was $.5 million in 2000 and 1999,
and  $.3  million  in  1998.  The  plans  are  not  funded,   the  Company  pays
postretirement  benefits as required for  individual  participants.  The accrued
postretirement benefit obligation at December 31, 2000 and 1999 was $4.6 million
and $4.4 million,  of which $3.9 million  represents  obligations in connnection
with the IU  International  acquisition.  The discount rate used to  actuarially
compute this liability was 8.00% for 2000 and 7.75% for 1999.

Future cost  increases in health care  benefits are assumed to be 10.0% in 2000,
decreasing  by  approximately  1% per year to 5% by 2005 and  remaining  at that
level  thereafter.  Increasing  these rates by 1% each year would  increase  the
accumulated  postretirement  benefit  obligation  as of December 31, 2000 by $.2
million  and  would  not have had a  significant  impact  on the  postretirement
benefit cost for 2000.

NOTE 12.  SUPPLEMENTAL CASH FLOW INFORMATION

Amortization in the consolidated  statement of cash flows includes  amortization
of goodwill,  landfill  permits and deferred charges related to landfill closure
together with non-cash interest costs.

Changes in working capital include the following (in thousands):

                                    2000              1999              1998
                                 -----------       -----------       -----------

Accounts receivable              $    4,317        $     (560)       $      (64)
Other current assets                 (2,020)             (581)              446

Accounts payable and other
  current liabilities                (4,838)            4,554            (3,141)
                                 -----------       -----------       -----------

Cash provided (used)             $   (2,541)       $    3,413        $   (2,759)
                                 ===========       ===========       ===========


                                       38

<PAGE>


                               ENVIROSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12.  SUPPLEMENTAL CASH FLOW INFORMATION (CONTINUED)

During the first  quarter of 2000,  the Company  recovered  $15.2 million from a
trust fund that previously  provided financial  assurance that the Company could
meet its  closure  and  post-closure  obligations  related  to the  Idaho  waste
landfill. In the second quarter of 2000, the Company made a $2.5 million payment
of collateral  for a surety bond that had replaced the Idaho trust fund.  During
1999 and 1998,  the Company made payments of $0.8 million and $1.2 million,  and
recovered $1 million and $0.1 million related to all of its trust funds.

Net cash  flows  related to the IU  International  acquisition  are  principally
payments of and recoveries from pre-acquisition obligations or events.

Cash flows for asbestos-related claims during 2000 included insurance recoveries
of $3.4 million and payments of $6.4  million.  In 1999,  the Company  recovered
$8.7 million from an insurance  company  related to such  obligations,  and made
$2.7 million of payments.  Cash flows during 1998 for such  obligations were not
significant.

During  2000,  the  Company  incurred  $29.8  million  of  interest  costs,  and
capitalized  $1 million of interest.  The Company paid interest of $28.0 million
in 2000,  $28.5 million in 1999 and $28.8  million in 1998.  Payments for income
taxes were $.5 million in 2000, $.9 million in 1999 and $1.4 million in 1998.

NOTE 13.  COMMITMENTS AND CONTINGENCIES

Future minimum lease payments for non-cancelable operating leases as of December
31, 2000 amount to $13.8 million in 2001, $11.2 million in 2002, $6.4 million in
2003,  $3.3  million in 2004,  $1.1  million  in 2005,  and  decreasing  amounts
thereafter.  Operating  leases are primarily for machinery and  equipment.  Rent
expense was $11.0  million in 2000,  $11.7  million in 1999 and $11.6 million in
1998. At December 31, 2000, the Company had  commitments  for capital  equipment
additions totaling $15.8 million.

The Company holds  operating  permits issued by various  environmental  agencies
that require renewal and modification  from time to time. The Company expects to
obtain any required  renewals and  modifications  to its existing  permits.  The
Company, its competitors and customers are subject to a complex,  evolving array
of environmental laws and regulations.  Changes in such regulations may not only
affect the demand for  treatment and disposal  services,  but could also require
the  Company to incur  significant  costs for  remediation  or other  corrective
action,  facility  closure or post-closure  monitoring.  It is possible that the
future imposition of additional environmental compliance requirements could have
a material effect on the Company's results of operations or financial condition,
but the Company is unable to predict any such future  requirements.  The Company
believes that the consolidated  financial statements  appropriately  reflect all
presently  known  compliance   costs  in  accordance  with  generally   accepted
accounting principles.

The  Company  is a party to  litigation  and  proceedings  arising in the normal
course  of its  present  or  former  businesses.  The  Company  has  recorded  a
contingent  liability for certain product liability claims related to its former
businesses (see IU Acquisition Obligations at Note 7 in this Report).

                                       39

<PAGE>

                               ENVIROSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13.  COMMITMENTS AND CONTINGENCIES (CONTINUED)

The Company's  outlook on the North  American  steel  industry for 2001, and its
inherent effect on the Company's  businesses,  indicates a significant challenge
to obtain  sufficient  capital  resources to meet all of its  objectives for the
upcoming year.  Current  projections  indicate operating cash flow for 2001 will
likely  decrease  from  the  $21.4  million  realized  in 2000.  Several  of the
Company's customers declared bankruptcy in late 2000 and early 2001;  additional
filings are certainly possible as the North American steel industry continues to
suffer from excess  capacity,  weak steel prices,  high energy  costs,  and high
levels of foreign imported steel. The Company's IMS business requires continuing
investment in heavy capital  equipment to service its  customers.  The Company's
$270 million of  outstanding  Senior  Notes,  which were trading at about 22% of
face value at  year-end  2000,  require  semiannual  interest  payments of $13.1
million in June and December.

The Company  also  currently  has a negative net worth,  resulting  from losses.
However, the Company has, through its positive operating cash flow, continued to
service  its  outstanding  debt  and  other  obligations,  and is  currently  in
compliance  with all of its  requirements  under its bank credit  facility.  The
ability  of the  Company  to meet its debt  obligations  in the  future  will be
dependent  on  its  future  performance,  including  the  Company's  ability  to
implement a solution to effectively deal with its Senior Notes. Management plans
to pursue various  alternatives to effectively deal with the Senior Notes, which
mature in June 2003. There can be no assurance that any additional  financing or
refinancing, nor any debt re-capitalization will be possible.

The current strain on the Company's  capital resources could require the Company
to seek easing of restrictions on its revolving credit facility or reductions in
capital  investment,  with  subsequently  higher  operating  costs for equipment
maintenance and repairs.  Management plans to continue maximizing the use of its
operating cash flow to meet its investment and financing objectives.

                                       40
<PAGE>

                               ENVIROSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(In thousands, except per share amounts)

                             Fourth         Third        Second         First
                            Quarter        Quarter       Quarter       Quarter
                           -----------   -----------   -----------   -----------
2000
Revenues                   $   45,418    $   51,248    $   52,430    $   50,483
Gross profit                   10,323        12,395        10,910         8,320
Operating income                4,069         7,160         5,113         3,326
Net loss                   $     (908)   $      (76)   $   (2,420)   $   (4,069)
                           ===========   ===========   ===========   ===========
Basic and diluted net
  loss per share           $     (.16)   $     (.01)   $     (.42)   $     (.70)
                           ===========   ===========   ===========   ===========


                             Fourth         Third        Second         First
                            Quarter(1)     Quarter       Quarter       Quarter
                           -----------   -----------   -----------   -----------
1999
Revenues                   $   54,271    $   55,584    $   53,837    $   48,283
Gross profit                    9,124        10,948        10,434         8,047
Operating income (loss)
  before impairment charge        718         5,867         4,733        (1,171)
Operating income (loss)       (74,474)        5,867         4,733        (1,171)
Net loss                   $  (81,966)   $   (1,633)   $   (3,088)   $   (9,064)
                           ===========   ===========   ===========   ===========

Basic and diluted net
  loss per share           $   (14.10)   $     (.28)   $     (.53)   $    (1.56)
                           ===========   ===========   ===========   ===========

(1) Included in the 1999 fourth  quarter is a loss on impaired  assets  totaling
    $75.2 million related to the waste  landfills of the Company's  Technologies
    business.

                                       41

<PAGE>
                               ENVIROSOURCE, INC.

Item 9.   Changes  in and  Disagreements  with  Accountants  on  Accounting  and
          Financial Disclosure.


          The Company filed a Current  Report on Form 8-K,  Item 4,  regarding a
          change in the Company's independent  accountants,  dated September 24,
          1999.


                                       42

<PAGE>

                               ENVIROSOURCE, INC.

                                    PART III

Item 10.  Directors and Executive Officers of the Company.

         Reference is made to the  information  set forth under the headings (i)
"Election  of  Class  C  Directors"  and  "Section  16(a)  Beneficial  Ownership
Reporting  Compliance" in the Company's  Proxy Statement to be filed pursuant to
Regulation  14A under the  Securities Act of 1934 within 120 days after December
31, 2000 and (ii)  "Executive  Officers of the Company" in Part I of this Annual
Report on Form 10-K, which information is incorporated herein by reference.


Item 11.  Executive Compensation.

         Reference  is made to the  information  set  forth  under  the  heading
"Executive  Compensation"  in the Company's Proxy Statement to be filed pursuant
to  Regulation  14A under  the  Securities  Act of 1934  within  120 days  after
December 31, 2000, which information is incorporated herein by reference.


Item 12.  Security Ownership of Certain Beneficial Owners and Management.

         Reference  is made to the  information  set  forth  under  the  heading
"Security  Ownership  of  Certain  Beneficial  Owners  and  Management"  in  the
Company's  Proxy  Statement  to be filed  pursuant to  Regulation  14A under the
Securities  Act  of  1934  within  120  days  after  December  31,  2000,  which
information is incorporated herein by reference.


Item 13.  Certain Relationships and Related Transactions.

         Reference  is made to the  information  set  forth  under  the  heading
"Certain  Transactions" in the Company's Proxy Statement to be filed pursuant to
Regulation  14A under the  Securities Act of 1934 within 120 days after December
31, 2000, which information is incorporated herein by reference.

                                       43

<PAGE>

                               ENVIROSOURCE, INC.

                                     PART IV

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

          (a) Financial  Statements,  Financial Statement Schedules and Exhibits
              filed. (1) and (2)

                  Financial  statements and schedules are shown in the index and
                  other information contained in Item 8 of this report.

          (3)              Exhibits.
                           --------

3.1       Amended  and  Restated  Certificate  of  Incorporation  of the Company
          (incorporated  herein by reference to Appendix A (pages A-1 to A-3) to
          the Company's  Proxy Statement filed April 29, 1996, in respect of its
          1996 Annual Meeting of Stockholders (File No. 1-1363)).

3.2       Amendment  of  Amended  and  Restated   Certificate  of  Incorporation
          (incorporated  herein by  reference to Page 2 to the  Company's  Proxy
          Statement  filed April 30, 1997, in respect of its 1997 Annual Meeting
          of Stockholders (File No. 1-1363)).

3.3       Amendment  of  Amended  and  Restated   Certificate  of  Incorporation
          (incorporated  herein by reference to Pages 13 and 14 of the Company's
          Proxy  Statement  filed April 30, 1998,  in respect of its 1998 Annual
          Meeting of Stockholders (File No. 1-1363)).

3.4       By-Laws of the Company  (incorporated herein by reference to Exhibit C
          (pages C-1 to C-9) to the Company's  Proxy  Statement  filed April 24,
          1987, in respect of its 1987 Annual Meeting of Stockholders  (File No.
          1-1363)).

3.5       Amendment  to the  By-Laws  of the  Company  (incorporated  herein  by
          reference to Exhibit 3.4 to the  Company's  Annual Report on Form 10-K
          for the fiscal year ended December 31, 1987 (File No. 1-1363)).

3.6       By-Laws  Amendment Adopted March 26, 1997 by Unanimous Written Consent
          of the Board of Directors,  Effective June 19, 1997  (incorporated  by
          reference  to Exhibit 3.5 to the  Company's  Quarterly  Report on Form
          10-Q for the fiscal quarter ended June 30, 1997 (File No. 1- 1363)).

                                       44

<PAGE>

                               ENVIROSOURCE, INC.

4.1       Indenture,  dated as of July 1, 1993,  between  the Company and United
          States  Trust  Company  of  New  York,  as  Trustee,  relating  to the
          Company's  9-3/4%  Senior Notes due 2003,  including  the form of such
          Notes attached as Exhibit A thereto  (incorporated herein by reference
          to Exhibit 4.10 to the Company's Quarterly Report on Form 10-Q for the
          fiscal quarter ended June 30, 1993 (File No. 1-1363)).

4.2       First  Supplemental  Indenture,  dated as of November 2, 1995, between
          the Company and United  States Trust  Company of New York, as Trustee,
          relating to the Company's  9-3/4% Senior Notes due 2003  (incorporated
          herein by reference to Exhibit 4.15 to the Company's  Quarterly Report
          on Form 10-Q for the fiscal quarter ended September 30, 1995 (File No.
          1-1363)).

4.3       Second Supplemental Indenture, dated as of September 24, 1997, between
          the Company and United  States Trust  Company of New York, as Trustee,
          relating to the Company's  9-3/4% Senior Notes due 2003  (incorporated
          herein by reference to Exhibit 4.5 to the Company's  Quarterly  Report
          on Form 10-Q for the fiscal quarter ended September 30, 1997 (File No.
          1-1363)).

4.4       Indenture,  dated as of September  30,  1997,  between the Company and
          United States Trust  Company of New York, as Trustee,  relating to the
          Company's  9-3/4% Senior Notes due 2003,  Series B, including the form
          of such Notes  attached as Exhibit A thereto  (incorporated  herein by
          reference  to Exhibit 4.6 to the  Company's  Quarterly  Report on Form
          10-Q for the  fiscal  quarter  ended  September  30,  1997  (File  No.
          1-1363)).

4.5       Registration  Rights Agreement,  dated as of September 30, 1997, among
          the Company and Morgan Stanley Dean Witter,  Jeffries & Company,  Inc.
          and  NationsBanc  Capital  Markets,   Inc.   (incorporated  herein  by
          reference  to Exhibit 4.7 to the  Company's  Quarterly  Report on Form
          10-Q for the  fiscal  quarter  ended  September  30,  1997  (File  No.
          1-1363)).

4.6       Registration  Rights  Agreement,  dated as of May 13, 1993,  among the
          Company,  FS Equity  Partners II, L.P., The IBM Retirement  Plan Trust
          Fund and Enso  Partners,  L.P.  (incorporated  herein by  reference to
          Exhibit  4.29  to  Amendment  No.  1  to  the  Company's  Registration
          Statement on Form S-1, filed June 14, 1993 (File No. 33-62050)).

4.7       Loan  Agreement,  dated as of June 1,  1994,  between  the  Industrial
          Development   Corporation  of  Owyhee  County,  Idaho  and  Envirosafe
          Services of Idaho,  Inc.  relating to  $8,500,000  Industrial  Revenue
          Bonds,  Series  1994.  (The  Company  agrees to furnish a copy of such
          agreement to the Commission upon request).

                                       45

<PAGE>

                               ENVIROSOURCE, INC.

4.8       Loan and  Security  Agreement,  dated as of  November  16,  1999,  the
          lenders   parties   thereto,   Bank  of  America,   N.A.,   as  Agent,
          International Mill Service, Inc. and IMS Alabama,  Inc.  (incorporated
          herein by reference to Exhibit 4.8 to the  Company's  Annual Report on
          Form 10-K for the  fiscal  year  ended  December  31,  1999  (File No.
          1-1363)).

4.9*      Amendment  Number  1 to  Loan  and  Security  Agreement,  dated  as of
          December 12, 2000, the lenders parties thereto, Bank of America, N.A.,
          as Agent, International Mill Service, Inc. and IMS Alabama, Inc.

10.1      Restated  Incentive  Stock  Option  Plan of the  Company,  as  amended
          (incorporated  herein  by  reference  to  Exhibit  A to the  Company's
          Registration  Statement on Form S-8,  filed January 17, 1989 (File No.
          33-26633)).

10.2      Stock Option Agreement,  dated March 18, 1992, between the Company and
          Raymond P. Caldiero (incorporated herein by reference to Exhibit 10.20
          to the Company's  Annual Report on Form 10-K for the fiscal year ended
          December 31, 1992 (File No. 1-1363)).

10.3      Stock Option Agreement,  dated March 18, 1992, between the Company and
          Jeffrey G. Miller  (incorporated  herein by reference to Exhibit 10.21
          to the Company's  Annual Report on Form 10-K for the fiscal year ended
          December 31, 1992 (File No. 1-1363)).

10.4      Amendment,  dated August 5, 1993, to the Stock Option Agreement, dated
          March  18,   1992,   between   the   Company  and  Jeffrey  G.  Miller
          (incorporated  herein by reference to Exhibit 10.22 to  Post-Effective
          Amendment No. 1 to the Company's  Registration  Statement on Form S-1,
          filed September 16, 1993 (File No. 33-46930)).

10.5      Stock Option Agreement,  dated August 5, 1993, between the Company and
          Wallace B. Askins  (incorporated  herein by reference to Exhibit 10.23
          to  Post-Effective  Amendment  No.  1 to  the  Company's  Registration
          Statement on Form S-1, filed September 16, 1993 (File No. 33-46930)).

10.6      Envirosource,  Inc.  1993 Stock  Option Plan  (incorporated  herein by
          reference  to  Exhibit  10.21  to  Amendment  No.  1 to the  Company's
          Registration  Statement  on Form S-1,  filed  June 14,  1993 (File No.
          33-62050)).

                                       46

<PAGE>

                               ENVIROSOURCE, INC.

10.7      Envirosource,  Inc.  Stock Option Plan for  Non-Affiliated  Directors,
          dated as of  January  1, 1995  (incorporated  herein by  reference  to
          Exhibit  10.14 to the  Company's  Annual  Report  on Form 10-K for the
          fiscal year ended December 31, 1994 (File No. 1-1363)).

10.8      Supplemental  Executive  Retirement  Plan  of the  Company,  effective
          January 1, 1995 (incorporated  herein by reference to Exhibit 10.19 to
          the  Company's  Annual  Report on Form 10-K for the fiscal  year ended
          December 31, 1994 (File No. 1-1363)).

10.9      Envirosource,  Inc.  1999 Stock  Option Plan  (incorporated  herein by
          reference to Appendix A to the Company's  Proxy  Statement filed April
          30, 1999, in respect of its 1999 Annual Meeting of Stockholders  (File
          No. 1-1363)).

10.10     Employment  Agreement,  dated as of  January  20,  1999,  between  the
          Company and John T.  DiLacqua  (incorporated  herein by  reference  to
          Exhibit 10.19 to the Company's  Quarterly  Report on Form 10-Q for the
          fiscal quarter ended March 31, 1999 (File No. 1-1363)).

10.11     Letter Agreement,  dated March 23, 1999, between the Company and James
          C. Hull  (incorporated  herein by  reference  to Exhibit  10.22 to the
          Company's  Quarterly  Report on Form 10-Q for the fiscal quarter ended
          March 31, 1999 (File No. 1-1363)).

10.12     Letter Agreement,  dated July 30, 1999,  between the Company and James
          C. Hull  (incorporated  herein  by reference  to Exhibit  10.13 to the
          Company's  Annual  Report  on Form  10-K  for the  fiscal  year  ended
          December 31, 1999 (File No. 1-1363)).

10.13     Employment Agreement, dated as of January 3, 2000, between the Company
          and John P. Carroll (incorporated herein by reference to Exhibit 10.14
          to the Company's  Annual Report on Form 10-K for the fiscal year ended
          December 31, 1999 (File No. 1-1363)).

10.14     Employment Agreement, dated as of January 3, 2000, between the Company
          and John C. Heenan  (incorporated herein by reference to Exhibit 10.15
          to the Company's  Annual Report on Form 10-K for the fiscal year ended
          December 31, 1999 (File No. 1-1363)).

10.15     Employment Agreement, dated as of January 3, 2000, between the Company
          and Leon Z. Heller  (incorporated herein by reference to Exhibit 10.16
          to the Company's  Annual Report on Form 10-K for the fiscal year ended
          December 31, 1999 (File No. 1-1363)).

                                       47

<PAGE>

                               ENVIROSOURCE, INC.

10.16     Promissory Note of John P. Carroll,  dated August 1, 1995, as amended,
          payable to International Mill Service,  Inc.  (incorporated  herein by
          reference to Exhibit 10.17 to the Company's  Quarterly  Report on Form
          10-Q for the fiscal quarter ended March 31, 2000 (File No. 1-1363)).

21.1*     Subsidiaries of the Company

23.1*     Consent of Grant Thornton LLP

23.2*     Consent of Ernst & Young LLP


          (b)      Reports on Form 8-K.
                   -------------------
          No reports on Form 8-K were filed during  the  quarter  ended December
31, 2000.

* Filed herewith.

                                       48

<PAGE>

                               ENVIROSOURCE, INC.


                                   SIGNATURES


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

Dated:  March 23, 2001
                                              ENVIROSOURCE, INC.



                                              By: /s/ JOHN T. DILACQUA
                                                  --------------------
                                                   John T. DiLacqua
                                                   President and Chief
                                                   Executive Officer


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Company and in the capacities indicated on March 23, 2001.

Signature                                    Title
---------                                    -----

/s/ JOHN T. DILACQUA                        President,  Chief  Executive Officer
--------------------
John T. DiLacqua                            and  Director  (Principal  Executive
                                            Officer)


/s/ JOHN C. HEENAN                          Senior Vice President, Treasurer and
------------------
John C. Heenan                              Chief Financial Officer (Principal
                                            Financial and Accounting
                                            Officer)


/s/ ROBERT N. GURNITZ                       Chairman of the Board of Directors
---------------------
Robert N. Gurnitz

<PAGE>

                               ENVIROSOURCE, INC.

/s/ WALLACE B. ASKINS                       Director
---------------------
Wallace B. Askins


/s/ RAYMOND P. CALDIERO                     Director
-----------------------
Raymond P. Caldiero


/s/ JEFFERY G. MILLER                       Director
---------------------
Jeffrey G. Miller


/s/ JON D. RALPH                            Director
----------------
Jon D. Ralph


/s/ JOHN M. ROTH                            Director
----------------
John M. Roth


/s/ J. FREDERICK SIMMONS                    Director
------------------------
J. Frederick Simmons


/s/ RONALD P. SPOGLI                        Director
--------------------
Ronald P. Spogli


<PAGE>

                               ENVIROSOURCE, INC.

                                  EXHIBIT INDEX


Number                     Description                                  Page
------                     -----------                                  ----
4.9       Amendment No. 1 to Loan and Security  Agreement,             EXHIBIT 1
          dated as of December 12,  2000,  the  lenders
          parties  thereto,  Bank of America, N.A., as Agent,
          International Mill Service, Inc. and IMS Alabama, Inc.

21.1      Subsidiaries of the Company                                  EXHIBIT 2

23.1      Consent of Grant Thornton LLP                                EXHIBIT 3

23.2      Consent of Ernst & Young LLP                                 EXHIBIT 4