<PAGE>   1


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

              [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
                For the transition period from _______ to _______

                       Commission file number 333-90709-04

                REPUBLIC TECHNOLOGIES INTERNATIONAL HOLDINGS, LLC
                -------------------------------------------------
             (Exact name of registrant as specified in its charter)

         Delaware                                           34-1902647
         --------                                           ----------
(State or other jurisdiction of                           (IRS Employer
incorporation or organization)                          Identification No.)

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

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


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

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


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes  X  No
                                       ---    ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-X is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  X
                             ---

The number of shares outstanding of each of the registrant's classes of common
stock as of May 11, 2001 was as follows: AS OF MAY 11, 2001, THERE WERE 740
CLASS A UNITS OF MEMBERS' INTEREST, 1,000 CLASS B UNITS OF MEMBERS' INTEREST AND
30,000 CLASS C UNITS OF MEMBERS' INTEREST OUTSTANDING.




                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None
                                      ----


<PAGE>   2


                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM                                                                                                                  PAGE
----                                                                                                                  ----
<S>          <C>                                                                                                       <C>
1.           Business                                                                                                    3
2.           Properties                                                                                                 17
3.           Legal Proceedings                                                                                          17
4.           Submission of Matters to a Vote of Security Holders                                                        18
5.           Market for the Registrant's Common Equity and Related Stockholder Matters                                  18
6.           Selected Financial Data                                                                                    18
7.           Management's Discussion and Analysis of Financial Condition and Results of Operations                      19
7A.          Quantitative and Qualitative Disclosures about Market Risk                                                 27
8.           Financial Statements and Supplementary Data                                                                28
9.           Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                       28
10.          Directors and Executive Officers of the Registrant                                                         28
11.          Executive Compensation                                                                                     30
12.          Security Ownership of Certain Beneficial Owners and Management                                             31
13.          Certain Relationships and Related Party Transactions                                                       34
14.          Exhibits, Financial Statement Schedules and Reports on Form 8-K                                            39

                      Independent Auditors' Report                                                                      47

                      Consolidated/Combined Statements of Operations for the
                      Year Ended December 31, 2000, the Periods from August 13,
                      1999 to December 31, 1999 and January 1, 1999 to August
                      12, 1999, and the Year Ended December 31, 1998                                                    48

                      Consolidated Balance Sheets as of December 31, 2000 and 1999                                      49

                      Consolidated/Combined Statements of Members' Interest/Stockholders' Deficit for the Year
                      Ended December 31, 1998, the Periods from January 1, 1999 to August 12, 1999 and August
                      13, 1999 to December 31, 1999, and the Year Ended December 31, 2000                               51

                      Consolidated/Combined Statements of Cash Flows for the Year Ended December 31, 2000,
                      the Periods from August 13, 1999 to December 31, 1999 and January 1, 1999 to August 12,
                      1999, and the Year Ended December 31, 1998                                                        52

                      Notes to Consolidated/Combined Financial Statements for the Year Ended December                   53
                      31, 2000, the Periods from August 13, 1999 to December 31, 1999 and January 1,
                      1999 to August 12, 1999, and the Year Ended December 31, 1998

                      Schedule II- Valuation and Qualifying Accounts                                                    81
</TABLE>




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<PAGE>   3



                                     PART I
ITEM 1. BUSINESS

GENERAL

As used herein, "SBQ steel products" includes high quality engineered steel rod
products as well as special bar quality steel products.

Republic Technologies International Holdings, LLC, a Delaware limited liability
company, and its subsidiaries ("Republic Technologies", or the "Company"),
produce and market special bar quality ("SBQ") steel products. SBQ steel
products are high quality hot-rolled and cold-finished carbon and alloy steel
bars and rods used primarily in critical applications in the automotive and
industrial equipment industries. The Company supplies a diverse customer base
that includes leading automobile and industrial equipment manufacturers and
their first tier suppliers.

The Company was formed in a combination completed on August 13, 1999 (the
"Combination"). The Combination was completed through a series of mergers, asset
transfers and related steps as set forth in a Master Restructuring Agreement
among Bar Technologies Inc. ("BarTech"), Republic Engineered Steels, Inc.
("Republic"), USS/Kobe Steel Company and various of their affiliates. Following
the Combination, Republic Technologies, a newly formed legal entity, indirectly
owns and operates all of the assets of BarTech, Republic and USS/Kobe Steel
Company's SBQ steel products business ("USS/Kobe").

BarTech was formed in September 1994 with the assistance of affiliates of The
Veritas Capital Fund L.P. ("Veritas") to acquire and restart specific melt shop
and hot-rolling assets of the former Bar, Rod and Wire Division of Bethlehem
Steel Corporation. In April 1996, Blackstone Capital Partners II Merchant
Banking Fund L.P. ("Blackstone") acquired control of BarTech concurrently with
BarTech's acquisition of Bliss and Laughlin Industries, Inc. ("BLI"), one of the
largest processors of cold-finished SBQ steel in North America. Republic was a
leading U.S. manufacturer of SBQ steel products, which was formed in 1989 to own
and operate the former assets of the Bar Division of LTV Steel Company, Inc. In
September 1998, Blackstone and other investors acquired control of Republic
through RES Holding Corporation with the intention of combining it with BarTech.
USS/Kobe was the SBQ steel production facilities and related operations division
of USS/Kobe Steel Company, a 50/50 joint venture formed in July 1989 between
subsidiaries of USX Corporation ("USX"), and Kobe Steel, Ltd. ("Kobe"). The
aforementioned companies joined to become Republic Technologies after the
Combination on August 13, 1999.

On April 2, 2001 ("Petition Date"), Republic Technologies International, LLC and
its immediate parent, Republic Technologies International Holdings, LLC, and its
subsidiaries, Bliss & Laughlin LLC, and RTI Capital Corp. (collectively,
"Debtors"), filed voluntary petitions for reorganization under Chapter 11
("Chapter 11") of the Federal Bankruptcy Code ("Bankruptcy Code") in the United
States Bankruptcy Court in the Northern District of Ohio, Eastern Division
("Court"). The Company is managing its business subsequent to the Petition Date
as debtor-in-possession subject to Court approval. The Debtors attributed the
need to reorganize to extremely difficult market conditions that have made it
impossible for them to meet their financial obligations. The industry-wide
market conditions, the Company's high level of indebtedness following the
Combination and an overall softening of the U. S. economy had substantially
diminished the Company's liquidity, adversely impacted operations and undermined
its ability to implement strategic business initiatives in the short term.

Under Chapter 11 proceedings, actions by creditors to collect claims in
existence at the filing date ("prepetition") are stayed ("deferred"), absent
specific Court authorization to pay such claims, while the Company continues to
manage the business as debtor-in-possession. The Company received approval from
the Court to pay or otherwise honor certain of its prepetition obligations,
including employee wages and certain employee benefits. The amount of the claims
to be filed by the creditors could be significantly different than the amount of
the liabilities recorded by the Company. The Company has many executory
contracts and other agreements that could be rejected during the Chapter 11
proceedings.


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<PAGE>   4

Under Chapter 11, the rights of and ultimate payments by the Company to
prepetition creditors and to equity investors may be substantially altered. This
could result in claims being liquidated in the Chapter 11 proceedings at less
(and possibly substantially less) than 100% of their face value and the equity
of the Company's equity investors being diluted or cancelled. The Company's
prepetition creditors and its equity investors will each have votes in the plan
of reorganization. The Company has not yet proposed a plan of reorganization.
Due to material uncertainties, it is not possible to determine the additional
amount of claims that may arise or ultimately be filed, or to predict the length
of time the Company will operate under the protection of Chapter 11, the outcome
of the Chapter 11 proceedings in general, whether the Company will continue to
operate under its current organizational structure, or the effect of the
proceedings on the business of the Company or its subsidiaries or on the
interests of the various creditors and security holders.

As a result of the Chapter 11 filings, Events of Default, as defined in the
related debt agreements, have occurred with respect to all of the Company's
secured and undersecured debt. Subsequent to the Petition Date, the secured debt
will be classified as a current liability and the undersecured debt will be
classified as liabilities subject to compromise.

BUSINESS

The production of SBQ steel products is a segment of the overall steel market.
The SBQ bar products segment is further divided into three categories which are
delineated by the quality and the end use of the bar product: (1) reinforcing
bar, (2) merchant quality bar, and (3) hot-rolled engineered bar. Hot-rolled
engineered bar is the highest quality segment of the bar product market. The
Company produces various grades and sizes of finished hot-rolled engineered bar
and rod products and intends to operate in the higher quality end of the
hot-rolled engineered bar and rod market. SBQ steel products sell for higher
prices per net ton than merchant or commodity grade steel products as they
generally contain more alloys than merchant and commodity grade products and are
sold to customers who require precise metallurgical content and compliance with
rigorous quality specifications.

The following table sets forth the Company's net tons shipped from our principle
product lines, on an actual basis for the year ended December 31, 2000 and on a
proforma basis for the year ended December 31, 1999 (in 000s):

                                                    Year ended December 31,
                                             ---------------------------------
                                                1999                2000
                                             --------------- -----------------
        Net tons shipped:
             SBQ hot-rolled products         1,674    65%        1,501     59%
             SBQ cold-finished products        439    17           373     15
             Seamless rounds                   362    14           596     24
             Semi-finished steel products      103     4            56      2
                                             ------ -------- ---------- ------
                Total net tons shipped       2,578   100%        2,526    100%
                                             ====== ======== ========== ======

The Company reports its operations in three segments: hot-rolled products,
cold-finished products, and specialty steel products. Seamless tube rounds and
semi-finished steel products are included in the hot-rolled segment.

THE STEEL MANUFACTURING PROCESS

The manufacturing process for the Company's hot-rolled and cold-finished SBQ
steel products involves a number of steps that are outlined below.

Melting. The Company's production of steel begins at its electric furnace melt
shop in Canton, Ohio and its blast furnaces in Lorain, Ohio. The Canton melt
shop operates electric arc furnaces, which consume ferrous scrap as the primary
raw material. Premium grade steel scrap is transported from a scrap yard to the
facility's melt shop, where it is melted in two 220-ton electric arc furnaces at
the Canton, Ohio facility. After the scrap reaches a molten state, it is poured
from the furnace into ladles and further processed in a


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<PAGE>   5

ladle refining furnace, where alloys, carbon and other materials are added to
create the desired chemical, metallurgical and physical properties. During the
scrap melting and refining process, impurities are removed from the molten
steel. In addition, as part of the refining process, the molten steel is further
processed in a vacuum degasser, which removes oxygen, hydrogen and nitrogen to
produce a clean, high-quality steel.

At the Company's Canton, Ohio facility, the molten steel is introduced to its
continuous rolling process in which molten steel is poured into a four-strand
continuous bloom caster, solidified in molds and cut into blooms and billets in
a single continuous process. These semi-finished blooms and billets, having been
produced to a specified chemical composition, size and quality, are then cooled
and sent to the Company's rolling mills for further processing into finished
products or sold as semi-finished products.

Unlike the Company's electric furnace melt shop that relies on steel scrap, its
Lorain, Ohio facility produces iron in a blast furnace, and later converts the
iron to steel in a basic oxygen furnace by adding scrap. The primary raw
materials used in the Company's blast furnace are (1) taconite pellets, which
are a concentrated form of iron ore, (2) coke, which is a product produced by
baking specific types of coal at high temperature, and (3) limestone or other
cleansing materials, which are necessary to remove impurities in the material.
In addition, scrap material is often used in place of iron ore and pulverized
coal is often used in place of coke. The Company purchases the taconite pellets
and coke from USX Corporation pursuant to long-term supply agreements and the
other materials are either produced at the facility or purchased from third
parties. See Item 13 -- Certain Relationships and Related Party
Transactions-Agreements with USX Corporation and Kobe Steel, Ltd. and their
Affiliates.

The Company operates two blast furnaces at its Lorain facility. Within the
refractory brick-lined blast furnace chamber, the iron material consisting of
taconite or other ores, the carbon material consisting of coke and pulverized
coal and the cleansing or "flux" material are heated to temperatures in excess
of 2,500 degrees Fahrenheit. The high temperature causes a chemical reaction
between the iron and carbon creating pig iron or hot metal. The flux material
combines with impurities to create a by-product called slag.

Special rail vehicles then transfer the pig iron in liquid form to the Lorain
melt shop, which operates two 220-ton basic oxygen furnaces. Sulfur is removed
from the hot metal and the hot metal is mixed with high quality scrap. This
mixture is injected with oxygen that causes another chemical reaction that
converts the pig iron or hot metal into molten steel, which is then poured into
ladles. The ladles are transported to a ladle metallurgy facility where alloying
agents and other refining materials may be added and blended into the steel. In
addition, for some applications, the molten steel may be processed in a vacuum
degasser to reduce oxygen, hydrogen and nitrogen.

The molten steel is then poured into a five-strand continuous bloom caster
through which the steel flows and cools. The cooled material solidifies and then
is cut into blooms. The caster produces large diameter round blooms that are
feedstock for hot-rolled large diameter seamless tube products or rectangular
blooms that are transported to a mill that converts the blooms into billets to
be used as feedstock for hot-rolled bar and rod, or into smaller diameter
semi-finished rounds to be used as feedstock for hot-rolled smaller diameter
seamless tube products.

Hot-Rolled Products. The Company's hot-rolled products are manufactured from
steel or iron melted in its steel production facilities, which is cast into
blooms or direct cast into billets. Blooms and billets are processed into
hot-rolled products by changing the internal physical properties, size, and
shape of the steel. As a direct cast billet or bloom cast billet is reduced in
size, the strength and integrity of the resulting bar or rod product is
increased. The completed hot-rolled products are coiled or are placed on a
cooling bed and then cut into required lengths. Then the items are stacked into
coils or bundles and placed in warehouses from which they are shipped directly
to the customer or to one of the Company's cold-finishing mills for further
processing.

Since blooms have a larger cross-sectional area than billets, a greater
reduction to size occurs. Accordingly, a hot-rolled product rolled from a bloom
cast billet is generally stronger than a direct cast


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billet hot-rolled product of the same size and metallurgical content. Typically
customers concerned about product quality and strength as related to reduction
of area require bloom-based hot-rolled bar products.

Direct cast billet products are generally used for smaller SBQ product sizes and
for less demanding end-use applications. The Company's Canton, Ohio Caster and
Continuous Rolling Facility ("CR") and Lorain, Ohio melt shop facilities cast
bloom-based products in a 10" by 13" or 12.5" by 14" size and have approximately
2.4 million tons of aggregate annual bloom capacity.

The following table displays the major end-market applications of the Company's
hot-rolled products by size and shape:

<TABLE>
<CAPTION>
                             MAJOR END-MARKET APPLICATIONS BY PRODUCT SIZES AND SHAPES

                         ------------------------------------------------------------------------------------
                                    Rounds                       Squares                   Hexagons
-------------------------------------------------------------------------------------------------------------
<S>                      <C>                            <C>                        <C>
      7/32"-3/4"
                         Auto fasteners                 Not Applicable             Hose couplings
                         Tire cord                                                 Converters
                         Specialty springs
-------------------------------------------------------------------------------------------------------------
       3/4"-3 1/4"
                         Bearings                       Not Applicable             Hose couplings
                         Spindles                                                  Converters
                         Steering columns
                         Gears
                         Constant velocity joints
                         Hubs
                         Axles
-------------------------------------------------------------------------------------------------------------
         3 1/4"+
                         Crankshafts                    Off-highway equipment      Not Applicable
                         Axles                          Agricultural equipment
                         Hydraulic cylinders            Converters
                         Machine parts
                         Converters
-------------------------------------------------------------------------------------------------------------
</TABLE>

Cold-Finished Products. The Company produces its cold-finished SBQ steel
products by improving the physical properties of hot-rolled products through
value-added processes at its cold-finishing plants. Cold-finishing processes
produce products with more precise size and straightness tolerances as well as a
surface finish that provide customers with a more efficient means of producing a
number of end products by often eliminating the first processing step in the
customer's process. The four basic cold-finishing processes are the following:


Process                       Description
-------                       -----------
Cold Drawing                  Hot-rolled products that have been descaled by
                              blasting the surface with hardened steel shot or
                              pickling with acid are (1) drawn or pulled through
                              a tungsten carbide die, which compresses the
                              surface, elongates the product and makes it smooth
                              and shiny and (2) straightened.

Turning and Polishing         Removing the surface of hot-rolled products with a
                              revolving cutting tool, which is the turning
                              process, then rotating the turned product through
                              rollers that polish the surface and straighten the
                              product.

Turning, Grinding and         The same processes as turning and polishing
Polishing                     products, with the addition of a grinding process
                              that yields very fine tolerances.

Drawing, Turning, Grinding    The same processes as turning, grinding
and polishing                 products, with the and Polishing addition of a
                              drawing process to add physical strength.


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<PAGE>   7

After the cold-finished products are cut to length, they are stacked in bundles
and transported to warehouses from which they are shipped to customers.

The following table displays the major end market applications of the Company's
cold-finished products by shape without references to product size, which is
less important for determining the end use of cold-finished steel products:

                     MAJOR END MARKET APPLICATIONS BY SHAPES

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                 ROUNDS                         HEXAGONS             SQUARES                 FLATS
----------------------------------------------------------------------------------------------------------
<S>                                       <C>                     <C>               <C>
Constant velocity joints                  Hose fittings           Agricultural      Machine tool fixtures
Hydraulic hose couplings                  Spark plug shells          equipment      Office furniture
Steering rack gears                       Nuts                                      Exercise equipment
Fractional horsepower motor shafts                                                  Agricultural equipment
Engine valves and fuel injector parts
Hydraulic cylinders for off-highway
     and agricultural equipment
Shafts and gears for appliance
     industry
----------------------------------------------------------------------------------------------------------
</TABLE>

Seamless Tube Rounds. In connection with a supply agreement with USX and the
Lorain Tubular Company ("Lorain Tubular"), Republic Technologies produces
semi-finished rounds at its Lorain, Ohio facility for purchase by Lorain Tubular
and by USX's Fairfield, Alabama facility under specified circumstances.
Depending on the desired end-use application for Lorain Tubular, these products
are either cast to sizes of 10.5", 12.25" or 13.5" or cast to size and then
rolled at the Company's primary rolling mill to sizes of 6" or 10.5". For the
Fairfield facility, the Company produces semi-finished product in rounds at
11.6". Seamless tubes are used in oil and gas drilling and exploration
applications. For a description of the rounds supply agreement see Item 13 -
"Certain Relationships and Related Party Transactions".

Semi-Finished Steel Products. In addition to Republic Technologies' hot-rolled
and cold-finished products and seamless tube rounds, the Company sells
semi-finished products produced by its melt shop casters which have not been
processed further at its rolling mill facilities. These products are typically
sold to rolling mills operated by competitors that do not have melt shop
facilities or to steel service centers or distributors, for further processing
before they reach the ultimate end user. These products are sold in sizes
ranging from 5"-14".

SEASONALITY

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

RAW MATERIALS

Scrap Metal. The major raw material for the Company's electric arc furnace melt
shops is ferrous scrap metal, which is generated principally from industrial,
automotive, demolition and railroad sources. The long-term demand for scrap
metal and the importance of scrap metal to the domestic steel industry is
expected to increase as steelmakers continue to expand scrap metal-based
electric furnace capacity, with additions to, or replacements of, existing
integrated steel manufacturing facilities that use iron ore, coke and limestone
as their principal raw materials. The high quality of Republic Technologies'
products requires the use of premium grades of scrap metal, the supply of which
is more limited. Prices for scrap metal vary based on numerous factors including
quality, availability, freight costs, speculation by scrap brokers and other
conditions beyond the Company's control. However, the Company generally has not
had difficulty purchasing adequate scrap metal of the required quality. The
Company believes that adequate supplies of scrap metal will continue to be
available in sufficient quantities for the foreseeable future. In


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<PAGE>   8

the future, the Company expects to purchase scrap in the open market through a
number of brokers and dealers or by direct purchase.

The Company seeks to reduce its exposure to fluctuations in the price of scrap
metal by charging where possible scrap metal surcharges based on the increase in
the price of scrap metal above specified levels. For other customers,
adjustments are made in selling prices if the price of scrap exceeds or drops
below specified levels. These surcharges and price adjustments are determined on
a monthly or quarterly basis.

Coke and Iron Ore Pellets. Iron ore pellets and coke are the principal raw
materials used in the Company's blast furnaces. Republic Technologies has
entered into long term sourcing agreements with USX who will supply the iron ore
pellets and coke that are the raw material inputs for the blast furnace/ basic
oxygen process route at its Lorain, Ohio facility. The Company expects that
these agreements will provide the Company, during the term of the contracts,
with a consistent supply of quality materials to Republic Technologies at prices
that will be favorable as compared to market prices due to the "most favorable
nations" pricing terms in the agreement, which guarantees the Company a price
matching the lowest price offered by USX. For additional information on the iron
ore pellets and coke supply agreement, see Item 13 - "Certain Relationships and
Related Party Transactions".

Coal. The Lorain, Ohio blast furnace injects pulverized coal into the blast
furnace to offset its use of higher priced metallurgical coke and reduce the
material cost for hot-metal production. This coal is pulverized and delivered to
the Lorain facility under a long-term tolling agreement with Ohio Edison Power
Company (a wholly-owned subsidiary of FirstEnergy). The price over the life of
the agreement is fixed. For additional information see Item 13 - "Certain
Relationships and Related Party Transactions".

Alloys and Fluxes. Additionally, the Company purchases various materials such as
nickel, chrome, molybdenum, vanadium, manganese, silicon, aluminum, titanium,
sulphur, lead, lime and fluorspar for use as alloying agents and fluxing, or
cleansing, materials. Historically, prices of many of these materials have
fluctuated dramatically.

Semi-Finished Billets and Hot-Rolled Bars. Historically, the Company has
purchased semi-finished billets from other steelmakers for use in production at
its hot-rolling mills. The Company purchases from several suppliers and expects
that grades of semi-finished billets that it chooses not to produce will be
available for purchase.

In addition, the Company has previously purchased a portion of its hot-rolled
bar requirements for its cold-finishing operations from third-party suppliers.
During the years ended December 31, 2000 and 1999, approximately 76% and 70%,
respectively, of it's cold-finished bar and rod production used internally
produced hot-rolled products.

ENERGY SOURCES

The Company's manufacturing facilities consume large amounts of electricity and
natural gas. Republic Technologies has not had difficulty in obtaining adequate
sources of electricity and natural gas in the past and does not foresee any
significant difficulties in the future.

The Company's primary use of electricity is at its electric arc furnace melt
shop in Canton, Ohio and at its blast furnace melt shop facility in Lorain,
Ohio, which uses less electric power than the electric arc furnaces. Republic
Technologies currently has a long-term electricity contract in place for both of
these facilities that continues until December 31, 2001. The rest of its
facilities purchase their electricity from local utilities under various
contracts and terms. The Company believes that its electricity costs are
competitive with other steel manufacturers.

In connection with the Combination, Republic Technologies entered into an
agreement with FirstEnergy Services Corp. ("FirstEnergy") under which it
appointed FirstEnergy as its exclusive representative for the procurement of
energy supply and services. As a result of this arrangement, the Company expects
that it is


                                       8
<PAGE>   9


likely that FirstEnergy will eventually fill much of its energy purchasing
requirements. For additional information on this arrangement, see Item 13 -
"Certain Relationships and Related Party Transactions".

The principal use of natural gas in the Company's operations is for the billet
reheating operations at its Lorain, Ohio; Lackawanna, New York and Massillon,
Ohio hot-rolling mills and at the blast furnace and primary mill at its Lorain,
Ohio melt shop facility. The Company has negotiated distribution contracts,
storage contracts, primary firm transportation contracts and secondary firm
transportation contracts where necessary for cost effective, reliable natural
gas deliveries. The Company has also negotiated gas purchase contracts with
dependable supplies that are NYMEX based. Each facility's delivery arrangement
is negotiated separately for the specific needs of that facility.

CUSTOMERS

The Company primarily markets its products to consumers of higher quality,
critical application SBQ steel products. Customers in these targeted market
segments require higher quality SBQ steel products for use in hot and cold
metal-forming operations such as cold forge/extrusion, warm forge, hot forge and
hot/cold heading processes, rather than traditional machining processes.
Penetration of these targeted market segments is dependent upon various factors,
including the ability to achieve precise chemistry and manufacturing tolerances.
Additionally, producers must meet pre-qualification requirements to become
approved suppliers for potential customers.

For customers in the automobile manufacturing industry and their suppliers, the
most important form of certification is the Quality System Requirement standard,
or "QS-9000" certification, which is a quality system standard established by
the Chrysler, Ford and General Motors Quality Requirement Task Force, which sets
forth a standard set of quality requirements for components and materials
suppliers to the automotive industry. Certification requirements vary in scope
and generally take between three and twelve months for a supplier to achieve.
Frequently, the qualification process requires a producer to supply one or more
trial heats of SBQ steel products for customer evaluation, although some
customers have longer pre-qualification requirements. Because of the high costs
incurred by suppliers and customers and significant time that may be required to
obtain qualifications, the qualification processes can create strong bonds and
commitments between suppliers and customers.

Most of the Company's facilities have satisfied all major pre-qualification
requirements, including QS-9000. All of its facilities have received QS-9000
certifications.

The Company's five largest customers accounted for 29.1% and 25.2% of its total
net sales in 2000 and 1999, respectively. Lorain Tubular Company LLC (14.6%) was
the only customer that accounted for 10% or more of the Company's total sales in
2000, and no customer accounted for greater than 10% in 1999.

DISTRIBUTION

The Company markets its SBQ steel products through a staff of professional sales
representatives and sales technicians located in the major manufacturing centers
of the Midwest, Great Lakes, and Southeast regions of the United States and
Canada, as well as utilizing independent sales agents to cover some areas in
states in the South and on the West Coast of the United States.

The Company's facilities are strategically located to serve the majority of
consumers of SBQ steel products in the United States and Canada. The Company
ships products between its mills and finished products to its customers by rail
and truck. Customer needs and location dictates the type of transportation
utilized by the Company for deliveries. The proximity of the Company's rolling
mills and cold-finishing plants to its customers allows it to provide
competitive rail and truck freight rates and flexible deliveries in order to
satisfy just-in-time and other customer manufacturing requirements. The Company
believes that the ability to meet the product delivery requirements of its
customers in a timely and flexible fashion is a key to attracting and retaining
customers as more and more SBQ steel product consumers reduce their in-plant raw
material inventory. The Company optimizes freight costs by using its
significantly greater scale of


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<PAGE>   10

operations to maintain favorable transportation arrangements, continuing to
combine orders in shipments whenever possible and utilizing "backhauling" of
scrap and other raw materials.

COMPETITION

The domestic steel industry is highly competitive. The Company competes with
other SBQ steel producers including the following:

         -   integrated mills, which make steel by processing iron ore and
             other raw materials in a blast furnace;

         -   mini-mills, which make steel by melting scrap metals in an
             electric arc furnace; and

         -   merchant bar quality producers.

The Company's primary competition for its hot-rolled bar products is both large
domestic steelmakers and specialized mini-mills. Many of the large steelmakers
have greater financial resources and utilize modern technologies similar to some
of the equipment and processes currently in place at the Company. Numerous
competitors exist in the domestic cold-finishing market. There are over 20
cold-finishers in the domestic market at present. In addition, foreign
competition can be significant in segments of the SBQ steel market, particularly
where certifications are not required, and during periods when the U.S. dollar
is strong as compared with foreign currencies. This competition is exerting
significant downward pressure on the price level of some of the Company's
products.

The principal areas of competition in the Company's markets are product quality
and range, delivery reliability, service and price. SBQ steel products are
characterized by special chemistry and precise processing requirements.
Maintaining high standards of product quality while keeping production costs
competitive is essential to the Company's ability to compete in its markets.
Management believes that Republic Technologies has the widest selection of
product grades and sizes in the industry. The ability of a manufacturer to
respond quickly to customer orders currently is, and is expected to remain,
important as customers continue to reduce their in-plant raw material inventory.

BACKLOG

The Company calculates backlog as those orders received but not yet shipped. Its
backlog as of December 31, 2000 was $361 million, and its combined backlog as of
December 31, 1999 was $297 million. Orders are generally filled within 3 to 14
weeks of the order depending on the product, customer needs and other production
requirements. Customer orders are generally cancelable without penalty prior to
finish size rolling, and depend on customers' changing production schedules.
Accordingly, the Company does not believe that the amount of backlog orders is a
reliable indication of future sales.

PATENTS, TRADEMARKS AND TRADE NAMES

The Company has the patents, trademarks and trade names necessary for the
operation of its business as now conducted. The loss of any or all of these
patents, trademarks and trade names would not have a material adverse effect on
the Company's business. However, in recognition of these trademarks in the
marketplace, the Company considers these intellectual property rights important
to its business and intends to actively defend and enforce them as necessary.

EMPLOYEES

In connection with the acquisition of Republic by RES Holding Corporation in
September 1998, the Company entered into a new Master Collective Bargaining
Agreement covering all former Republic and BarTech facilities with employees
represented by the United Steelworkers of America ("USWA") and replaced the
existing collective bargaining agreements with the USWA, other than selected
plant-specific agreements. In connection with the Combination, the scope of the
same Master Collective Bargaining Agreement was extended to cover the former
USS/Kobe Lorain, Ohio facility. This labor agreement expires on October 31,
2003.


                                       10
<PAGE>   11

The vast majority of Republic Technologies' production workers are covered by
the collective bargaining agreement with the USWA. A union does not represent
production employees at the Company's Cartersville, Georgia facility. Republic
Technologies had 3,889 employees at December 31, 2000, including 864 salaried
employees.

The labor agreement provides for formalized workplace flexibility and
consolidation of job classifications at the Company's facilities. Under the
labor agreement, the USWA has agreed to eliminate many practices, which in the
past restricted workplace flexibility and led to inefficiencies. Republic
Technologies and the USWA have also agreed to reduce the number of job
classifications at all covered facilities to five from over thirty-four. This
reduction will enable Republic Technologies to assign a greater number of
responsibilities to individual employees.

Republic Technologies and the USWA have agreed under the labor agreement that
the USWA will be granted "partnership" rights in the management of the Company.
These "partnership" rights afford access to the Company's decision-making
processes through the formation of leadership and advisory committees containing
members of management and USWA representatives. Additionally, the USWA has the
right to appoint one director to the Board of Directors of Republic Technologies
International, Inc. ("Republic Technologies, Inc."), the Company's ultimate
parent company, as agreed to by the USWA and Republic Technologies.

The labor agreement provides for voluntary early retirement buyouts and a
voluntary severance plan applicable to all former Republic facilities with
employees represented by the USWA and the former USS/Kobe facilities, for the
purpose of permanently reducing the net number of hourly employees represented
by the USWA at these facilities by over 1,700 from the date of the new labor
agreement. In the event that the required headcount reductions are not achieved
through the early retirement buyout program and a voluntary severance plan, the
Company may layoff up to 300 employees. For additional information regarding the
expected cash costs associated with the early retirement buyout program and the
voluntary severance plan, see "Management's Discussion and Analysis of Financial
Condition and Results of Operation - Liquidity and Capital Resources".

Wage and benefit provisions under this collective bargaining agreement are
specified until expiration of the agreement and will be subject to negotiations
at that time.

The labor agreement also provides for improvements in the existing defined
benefit pension plans covering employees at former Republic facilities, former
USS/Kobe facilities and the former BLI Harvey, Illinois facility, and the
creation of defined benefit plan obligations covering employees at former
BarTech facilities. The existing defined benefit pension plans may be
consolidated into one defined benefit pension plan in the future, which will
contain terms found in traditional steel industry defined benefit pension plans.
For additional information regarding the anticipated pension costs associated
with the labor agreement, see "Management's Discussion and Analysis of Financial
Condition and Results of Operation - Liquidity and Capital Resources".

Pursuant to the labor agreement, the employees covered by the agreement are
expected to be offered the opportunity to purchase up to $15.0 million worth of
common stock of Republic Technologies, Inc. at a price per share equal to the
effective price per share paid by the investors for new shares they acquired in
connection with the Combination transactions. Pursuant to an agreement with the
USWA, this offering is to be accomplished on the earliest of (1) January 1,
2001, (2) immediately preceding Republic Technologies proceeding with an initial
public offering or (3) a change of control. However, no activity related to this
agreement has occurred between January 1, 2001 and the filing date of this
report. The new labor agreements contemplate that any shares sold will be
subject to customary restrictions on transfer and will have the benefit of
customary "piggyback" registration rights.

Finally, the labor agreement also provides for management neutrality, employment
security for covered employees and various capital expenditures with respect to
the Company's new and existing facilities. The


                                       11
<PAGE>   12

labor agreement also contemplates one-time payments to various USS/Kobe covered
employees expected to total approximately $3 million relating to signing bonuses
and employee equity interest obligations.

ENVIRONMENTAL MATTERS

The domestic steel industry is subject to a broad range of environmental laws
and regulations, including those governing the following:

-    discharges into the air and water;

-    the handling and disposal of solid and hazardous wastes;

-    the remediation of soil and groundwater contamination by petroleum
     products or hazardous substances and wastes; and

-    the health and safety of its employees.

The Company continuously monitors its compliance with these environmental laws
and regulations and believes that it currently is in substantial compliance with
them. The Company anticipates that its expenditures for environmental control
measures during the next twenty-four months will be approximately $6.4 million.

As is the case with most steel producers, the Company could incur significant
costs related to environmental issues in the future, in particular those arising
from remediation costs for historical waste disposal practices at its
facilities. The Company currently believes that these costs are likely to be in
the range of $15.4 million to $25.1 million over the lives of the Company's
facilities although some third-party estimates are substantially higher. The
Company's reserve to cover probable environmental liabilities, including the
matters discussed below, was approximately $19.6 million as of December 31,
2000. In addition to the accrual amounts specifically discussed below, the $19.6
million also includes accruals of approximately $1.0 million relating to the
Company's voluntary program relating to the replacement of PCB-containing
transformers at its facilities and $2.8 million relating to certain remaining
environmental matters which are not believed to be material and which are not
discussed below. The Company believes that it has no significant environmental
compliance and remediation costs with respect to the former BarTech's operations
and, accordingly, only three non-material reserve items have been established.
As of December 31, 2000 the Company had a reserve of $1.5 relating to the U.S.
Environmental Protection Agency (the "U.S. EPA") "multimedia" audit that is
discussed below. Except as noted below, the Company is not otherwise aware of
any significant environmental compliance and remediation costs with respect to
the former USS/Kobe's operations for which the establishment of a reserve would
be appropriate. To the extent the Company incurs any such remediation costs,
these costs will most likely be incurred over a number of years; however, future
regulatory action regarding historical disposal practices at its facilities, as
well as continued compliance with environmental requirements, may require the
Company to incur significant costs that may have a material adverse effect on
its future financial performance.

The U.S. EPA has identified a number of solid waste management units, or
"SWMUs," at the Eighth Street facility in Canton, Ohio. On June 16, 1999, the
Company entered into an Administrative Consent Order with the U.S. EPA to
investigate these SWMUs and propose appropriate remedial measures. The "Berger
Triangle," a seven acre parcel of land the Company owns in Canton that is listed
on the U.S. EPA's Comprehensive Environmental Response, Compensation and
Liability Information System list of contaminated or potentially contaminated
sites, is also included within the scope of the Administrative Consent Order.
The Company anticipates that through the year 2004, it will spend approximately
$1.3 million to investigate the SWMUs and the Berger Triangle. The Company has
accrued approximately $4.3 million regarding these matters. However, the Company
is currently unable to predict precisely the amount or timing of the costs it
may be required to incur to remediate these sites, but the cost could be greater
than the amount currently accrued.

The electric arc furnace dust waste pile located at the Canton facility has been
exempted from the scope of the Administrative Consent Order discussed above.
However, on April 26, 1999, the Company entered into a Consent Decree with the
Ohio Environmental Protection Agency (the "Ohio EPA") providing for the closure
in-place of that waste pile. The Company submitted a draft closure plan to the
Ohio EPA on July 2,


                                       12
<PAGE>   13

1999 that was approved on October 22, 1999. The Company originally anticipated
initiating closure construction in the spring of the year 2000, but has
concluded negotiations with the Ohio EPA to defer this until 2001. The Company
anticipates that the construction, which would involve the placement of a 54-
inch thick liner on top of the existing pile, would involve expenditures of
approximately $1 million. The Company estimates that the cost of 30 years of
post-closure monitoring and maintenance of the closed waste pile would be an
additional $1.1 million. Republic Technologies had accrued approximately $2.1
million regarding the closure and post-closure care of the waste pile as of
December 31, 2000. In January of 2001, the Company placed the $2.1 million
related to these costs on reserve with an insurance company.

Notices of historical waste disposal activities at one of the two Massillon,
Ohio facilities and the two Canton facilities were filed by LTV Steel and its
predecessors with the U.S. EPA, under Section 103(c) of the federal
Comprehensive Environmental Response, Compensation and Liability Act. In 1985,
the Ohio EPA recommended the Massillon plant as a medium priority for further
state investigation. The Ohio EPA also recommended the Harrison Avenue facility
in Canton as a medium priority for further state investigation and a low
priority for further federal investigation. No further investigation of
historical waste disposal activities has been performed at these facilities
since 1986 by any environmental authority. The Company could be required, in the
future, to incur significant costs to investigate such historical waste disposal
activities and remediate any contamination found to exist at these facilities.
Republic Technologies has accrued approximately $5.4 million regarding the
Massillon facility. However, the Company is currently unable to predict
precisely the amount or timing of such costs.

Through contractual agreements with Bethlehem Steel Corporation ("Bethlehem"),
the Company has sought to reduce the impact of costs arising from or related to
actual or potential environmental conditions at BarTech's facilities caused or
created by Bethlehem or BarTech's predecessors in title and attributable to the
period in which the Bethlehem Bar Rod and Wire Division or BarTech's
predecessors operated such facilities. Pursuant to such arrangements, Bethlehem
agreed to indemnify BarTech for such costs by limiting BarTech's potential
exposure to any such damages incurred (1) through December 1996, to 50% of the
first $2 million in damages, or $1 million, and (2) thereafter, to 50% of the
first $10 million of damages in the aggregate, or $5 million in total exposure.
Although several investigations of past or present environmental conditions at
the former BarTech's facilities have been conducted by or on behalf of Bethlehem
and regulatory agencies, the reports and results of which have been made
available to the Company, an in-depth, environmental review of the former
BarTech facilities to determine the potential scope, if any, of required
remediation at such facilities has not been conducted by or on the behalf of
BarTech or the Company. There can be no assurance that Bethlehem will meet its
obligations under the indemnification arrangements or that there will not be
future contamination for which the Company might be fully liable and that may
require it to incur significant costs that could have a material adverse effect
on its business, results of operations or financial condition.

Bethlehem is conducting remedial activities on a small portion of the
Lackawanna, New York facility historically used for mill scale storage, which
was identified as requiring corrective action by the U.S. EPA pursuant to an
Administrative Order on Consent issued to Bethlehem in 1990. Bethlehem is
currently awaiting approval of the Remedial Work Plan for the former mill scale
storage area submitted to the U.S. EPA in September 1994. Bethlehem is
ultimately liable for compliance with the Administrative Order on Consent and,
while no assurances can be given, the Company believes that Bethlehem is likely
to fulfill these obligations.

Some of the steel processing operations presently conducted by Bliss & Laughlin,
LLC ("Bliss & Laughlin") commenced over 100 years ago by predecessors of Bliss &
Laughlin and included properties which over the years were sold by Bliss &
Laughlin's predecessors. Given the nature and geographic diversity of its
current and its predecessors' former operations, it is possible that claims
would be asserted against Bliss & Laughlin in the future based upon the current
property ownership of Bliss & Laughlin and by operations of BarTech's
predecessors. Bliss & Laughlin has received an indemnification from the former
owner and operator of such properties for various environmental claims or
liabilities relating to activities at Bliss & Laughlin's Harvey and Batavia,
Illinois and Medina, Ohio properties prior to October 23, 1984, when Bliss &
Laughlin succeeded to ownership of such properties, and for various
environmental claims or liabilities relating to properties that were sold by
Bliss & Laughlin's predecessors. There can be no


                                       13
<PAGE>   14

assurance that such former owner and operator will meet its obligation under the
indemnification agreements or that there will not be future contamination for
which the Company might be fully liable and that may require it to incur
significant costs that could have a material adverse effect on its business,
results of operations or financial condition.

Canadian Drawn Steel Company, Inc. ("CDSC"), is also subject to Canadian
federal, provincial, regional and municipal environmental laws and regulations.
The Company believes that it is currently in substantial compliance with
applicable environmental laws and regulations and does not anticipate any
material capital expenditures for environmental control facilities in the
future. However, there can be no assurance that the Company will not be required
to incur significant costs that could have a material adverse effect on its
business, results of operations or financial condition.

The Lorain, Ohio facility has been in continuous operation by the Company,
USS/Kobe, USX and its predecessors for over 100 years. Although the Company is
not aware of any material environmental issues at this facility other than those
described herein, it believes the long operational history of this facility
poses a significantly greater probability of some form of environmental
contamination than at its newer facilities. Costs or liabilities associated with
any contamination at this facility could be significant.

In connection with the formation of USS/Kobe Steel Company in 1989 by USX and
Kobe, USS/Kobe Steel Company obtained a limited indemnity from USX concerning
identified matters arising out of the past operation of the melt, bar and
tubular facilities at Lorain, Ohio by USX and its predecessors. The Company is
the beneficiary of a portion of this indemnity. The 1989 agreement relating to
the formation of USS/Kobe Steel Company divided environmental responsibility
into several different categories. The first category includes specific areas
and projects for which USX retained complete responsibility. USX retained all
responsibility relating to a hazardous waste landfill referred to as the D-2
Landfill, and for all disposals of waste materials prior to June 30, 1989 at
locations other than the Lorain property. The second category includes matters
that were split between USS/Kobe Steel Company and USX.

Two cost sharing baskets and one cost sharing percentage were agreed to by USX
and USS/Kobe Steel Company as well. One of the cost sharing baskets provides
that USS/Kobe Steel Company will be responsible for the first $10 million of
costs and USX will be responsible for costs above that amount incurred relating
to the areas formerly occupied by a coke plant and related facilities, a
sintering plant, and a galvanizing plant. USX and USS/Kobe Steel Company
subsequently agreed that USS/Kobe Steel Company could treat $3 million of its
expenses in demolishing the coke batteries as expenditures against this $10
million basket. The second cost sharing basket provides that USS/Kobe Steel
Company will be responsible for the first $9 million of costs related to 13
identified SWMUs that are generally classified as disposal sites. The percentage
cost sharing agreement provides that in the event of any groundwater
remediation, USS/Kobe Steel Company will pay 65% of the cost and USX will pay
35% of the cost. In each case, USX's obligation to indemnify is limited to
cleanup actions specifically required by government agencies.

Except for these specific indemnities and for specific projects that USX agreed
to complete, USS/Kobe Steel Company assumed responsibility for all environmental
conditions at the Lorain facility, including additional SWMUs at the facility
that were not included within the scope of the environmental cost sharing
provisions of the 1989 agreement contributing the Lorain facilities to USS/Kobe
Steel Company. Although environmental regulators have not required action
regarding the SWMUs at the Lorain facility, the Company could incur significant
investigation and remediation costs in the future. However, the Company is
currently unable to predict precisely the amount or timing of the costs it may
be required to incur to investigate and remediate the SWMUs or other potential
areas of contamination.

Pursuant to the master restructuring agreement, which sets forth indemnification
and cost sharing arrangements regarding environmental liability at the Lorain,
Ohio facilities, the new tubular steel company owned by USX will be responsible
for environmental liabilities relating to its operations and to the portions of
the real property at the Lorain site that it owns. As a general matter, the
Company is responsible for environmental liabilities relating to its operations
and to the portions of the real property at the Lorain site that it owns. There
can be no assurance that USX will meet its obligations under the indemnification
and


                                       14
<PAGE>   15

cost sharing arrangements in the master restructuring agreement or that there
will not be future identification of contamination at the facilities in Lorain,
Ohio for which the Company might be fully liable and that may require it to
incur significant costs that could have a material adverse effect on its
business, results of operations and financial condition.

The Company and the U.S. EPA are parties to an April 1992 consent decree and an
April 1999 amendment to this consent decree concerning the blast furnaces at the
Lorain facility. Pursuant to the original consent decree, USS/Kobe Steel Company
paid a $500 thousand penalty. The amended consent decree settled additional past
violations by payment of a $440 thousand penalty, required the installation of
new continuous emission monitors, included a revised emission limit for carbon
monoxide and established interim emissions limits that will apply until a permit
modification establishing final emission limits is complete pursuant to the
amended consent decree.

USS/Kobe Steel Company was the subject of a "multimedia" audit by the U.S. EPA
beginning in 1997, which included an air, water and hazardous waste compliance
review. The final report and citations have not been issued, but a number of
citations and notices of violation have been issued as a result of the audit.
USS/Kobe Steel Company has already addressed many of the issues pointed out by
U.S. EPA. USS/Kobe Steel Company and the U.S. EPA have entered into a tolling
agreement concerning issuance of the final audit. On July 20, 1999, USS/Kobe
Steel Company had an initial meeting with the U.S. EPA regarding the multimedia
audit. At that time, the U.S. EPA proposed penalties related to alleged
violations of environmental laws addressing water, air and hazardous waste
issues and indicated that it would pursue the negotiation of a consent decree
with USS/Kobe Steel Company relating to the findings of the multimedia audit.
The Company has subsequently met with the U.S. EPA regarding these matters on
several occasions. It is possible that such a consent decree, if finalized, will
require penalties, further testing and mandatory and voluntary environmental
projects. At this time, the Company is unable to predict the final outcome of
the audit and the ongoing investigation, but it could result in litigation or
material penalties or other costs. Accordingly, and in light of the current
negotiations with the U.S. EPA, the Company has increased the reserve from $361
thousand at the time of the Combination to $1.5 million. Although the multimedia
audit is not generally the subject of an environmental indemnity, the Company
believes that penalties resulting from the multimedia audit, to the extent
relating to the steel tube facilities at the Lorain facility, would be under the
master restructuring agreement the responsibility of the new tubular steel
company owned by USX. To the extent that any penalties relate to discharges of
wastewater from the D-2 Landfill, the Company believes those penalties would be
indemnified against by USX.

In August 1998, the U.S. EPA issued a notice of violation concerning emissions
from the Lorain, Ohio blast furnace casthouse and gas flare stack that allegedly
exceeded opacity limits. The U.S. EPA has stated that it will pursue these
matters as part of the multimedia enforcement action discussed above.

In July and November of 1998, the U.S. EPA issued Findings of Violation and
Order for Compliance alleging that USS/Kobe Steel Company violated its National
Pollutant Discharge Elimination System permit by exceeding permit limits and
allowing unauthorized discharges. The Company believes that there have been a
small number of permit limit exceedences since January 1996 and that these
events are isolated incidents. The U.S. EPA has indicated an intention to pursue
these matters as part of the multimedia enforcement action discussed above.

In September 1998, the Ohio EPA issued a notice of violation regarding an oil
discharge from a storm sewer. USS/Kobe Steel Company remediated this discharge
and in April 1999 submitted to the agency a study that was required by the
notice of violation. No response has been received from the Ohio EPA concerning
this matter.

In December 1992, the Ohio EPA issued a notice of potential violation alleging
that the storage of blast furnace flue dust constitutes unlawful disposal.
USS/Kobe Steel Company contests this characterization and in 1995 submitted to
Ohio EPA a revised waste management plan addressing this and other issues.
USS/Kobe Steel Company has not received a response from the agency. Based on
previous engineering estimates to conduct a self-directed closure of the area,
the Company has established a $2.5 million reserve.


                                       15
<PAGE>   16

The Bar and Pipe Mill Recycle System (the "BPMRS"), a component of the
wastewater treatment system at the Lorain, Ohio facility, is used by both the
Company's operations and the operations of the tubular steel company of USX.
Although the Company will be responsible for historical environmental
liabilities at the BPMRS, on an on-going basis the new tubular steel company and
the Company will share the cost of the continued operation of the BPMRS on a
basis proportionate to the amount of its respective discharges to that lagoon.
The Company is under no current obligation to upgrade or replace the BPMRS, and
it does not anticipate that it will do so within the next three years. However,
the Company does anticipate that a project to upgrade or replace the BPMRS will
occur after this period and the expense could be material to its business,
results of operation or financial condition. The new tubular steel company has
agreed that if it elects to continue to use the upgraded or replaced BPMRS, it
will bear a portion of the capital expense proportionate to the amount of its
discharge to the shared facility.

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

CONSOLIDATION PLAN

The Combination combined three businesses with a broad base of both
complementary and overlapping operations. The intention of the Company's
consolidation plan was to create a more efficient, higher quality network of
production facilities operated by a smaller and more flexible workforce. This
plan, as originally conceived, contemplated a capital investment of
approximately $322 million to expand capacity, maximize operating efficiency and
increase value-added product processing. The Company's consolidation plan is
currently under review and full implementation of the plan may be delayed or the
plan may be revised, particularly in light of the Company's petition for
reorganization under Chapter 11 of the Federal Bankruptcy Code, recent market
developments, and cash flow constraints.

The principal components of the Company's consolidation plan currently include
the following:

Plant Rationalization. The Company has shutdown several higher cost, less
efficient facilities. Specialty Steel operations at the Baltimore facility were
shutdown in December 2000, and Cold finishing operations at the Willimantic
facility were shutdown in March 2001. The consolidation plan contemplates that
the production of these facilities will be reallocated to the remaining
lower-cost facilities and a new production facility to be constructed. These
actions are designed to significantly reduce the Company's fixed operating
costs, principally through (1) the reduction of production employees represented
by the USWA and (2) the reduction of non-union salaried plant personnel.

Enhance Productivity at Remaining Facilities. Through the use of targeted
capital investment, improved product flows and facility specialization, the
Company believes that it can realize substantial variable cost savings at its
remaining facilities. Much of this variable cost improvement is expected to come
from closing outmoded shops with poor tolerances and high yield losses and
shifting to higher quality modernized operations with minimal yield losses. The
elimination of obsolete steel making equipment may also result in lower expenses
on some production.

There are a large number of factors that may affect the Company's ability to
complete this consolidation plan and achieve operating synergies and cost
savings. Many of these factors are beyond the Company's control. These factors
include, but are not limited to, the outcome of the Chapter 11 proceedings,
general economic conditions, increased operating costs and unanticipated capital
expenditures, problems in obtaining funding for capital expenditures, customer
certification issues, the responses of our competitors or customers and legal
and regulatory developments.




                                       16
<PAGE>   17



ITEM 2. PROPERTIES

The Company owns 17 manufacturing locations and leases its corporate offices.
The following table shows the locations, square footage and production capacity
as of December 31, 2000:

<TABLE>
<CAPTION>
                                                                  APPROXIMATE SIZE IN          PRODUCTION CAPACITY (A)
                       LOCATION                                 THOUSANDS OF SQUARE FEET         (TONS IN THOUSANDS)
                       --------                                 ------------------------         -------------------
<S>                                                                   <C>                          <C>
         Melt Shops/Caster Facilities:
            Canton, Ohio                                                 481                          925
            Lorain, Ohio                                                 688                        1,300
            Johnstown, Pennsylvania (B)                                1,917                          770
         Hot-Rolling and Processing Mills:
            Lorain, Ohio (two mills)                                   1,247                        1,115
            Lackawanna, New York                                       1,099                          600
            Massillon, Ohio (Oberlin Road)                               667                          480
            Canton, Ohio (C)                                             743                          380
            Chicago, Illinois (D)                                      2,019                           --
         Cold-Finishing Facilities:
            Harvey, Illinois                                             331                          120
            Massillon, Ohio (Rose Avenue)                                553                          120
            Gary, Indiana (Dunes Highway)                                266                           90
            Cartersville, Georgia                                         92                           60
            Gary, Indiana (Seventh Avenue)                               200                           60
            Hamilton, Ontario, Canada                                    135                           60
            Beaver Falls, Pennsylvania                                   176                           55
            Willimantic, Connecticut (E)                                  89                           25
         Corporate Offices                                                33                           --
</TABLE>

(A) -    Stated tons represent the production capacity of the individual
         facility only and do not represent the Company's production capacity
         as a whole added together.
(B) -    Melt production at the Johnstown facility was shutdown in August
         2000. Certain processing operations continued through April of 2001.
(C) -    The hot rolling facility (12" bar mill) was shutdown in October 2000.
(D) -    The hot-rolling operations at the Chicago mill were shutdown in
         November 1999. Certain processing operations are continuing in part of
         this facility.
(E) -    Cold finishing operations at the Willimantic location were shutdown in
         March 2001.

The Company owns all property relating to its manufacturing facilities. In
addition, the Company maintains operating leases for various sales offices. The
Company's corporate offices were relocated to Fairlawn, Ohio in March 1999.

ITEM 3. LEGAL PROCEEDINGS

Bankruptcy Filings. On April 2, 2001, Republic Technologies International, LLC
and its immediate parent, Republic Technologies International Holdings, LLC, and
its subsidiaries, Bliss & Laughlin, LLC and RTI Capital Corp., filed voluntary
petitions for reorganization under Chapter 11 of the Federal Bankruptcy Code in
the United States Bankruptcy Court in the Northern District of Ohio, Eastern
Division.

The Chapter 11 cases have been assigned to Judge Marilyn Shea-Stonum and
designated as case Numbers 01-51117 (Republic Technologies International, LLC),
01-51118 (Republic Technologies International Holdings, LLC), 01-51119 (Bliss &
Laughlin, LLC), and 01-51120 (RTI Capital Corp.). The Chapter 11 cases will be
jointly administered for procedural purposes only, under case Number 01-51117.
Each of these entities will continue to operate its business and manage its
property as a debtor in possession


                                       17
<PAGE>   18

pursuant to sections 1107 and 1108 of the Bankruptcy Code. As a result of the
Chapter 11 filings, litigation relating to prepetition claims against the
Debtors is stayed; however, certain prepetition claims by the government or
governmental agencies seeking equitable or other non-monetary relief against the
Debtors are not subject to the automatic stay.

Other. The Company is involved in various legal proceedings, including
environmental proceedings with governmental authorities, personal injury and
product liability litigation and claims by present and former employees under
federal and counterpart state anti-discrimination and other laws relating to
employment and pursuant to collective bargaining agreements. Except those
environmental proceedings described above under "Item 1.-Business-Environmental
Matters," the Company does not believe that any proceedings, either individually
or in the aggregate, will have a material adverse effect on its business,
results of operations or financial condition.

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

None.

                                     PART II

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

None

ITEM 6. SELECTED FINANCIAL DATA (1)

<TABLE>
<CAPTION>
                                          (in thousands of dollars)
                                         The Company - Consolidated                     The Predecessor - Combined
                                     ----------------------------- -----------------------------------------------------------------


                                      Year Ended    Period from     Period from
                                     December 31,   August 13,      January 1,   Year Ended    Year Ended    Three      Year Ended
                                         2000         1999 to         1999 to   December 31,  December 31,   Months     September
                                                   December 31,     August 12,      1998           1997       Ended       30, 1996
                                                       1999            1999                                December 28,
                                                                                                             1996
                                     -----------------------------------------------------------------------------------------------

<S>                                    <C>              <C>          <C>         <C>          <C>           <C>           <C>
Net sales                              $1,265,401       $527,580     $ 525,326   $  484,864    $ 250,131     $ 41,450      $79,462

Operating loss                           (152,440)      (137,273)      (70,648)     (70,333)     (21,312)      (8,702)     (31,460)

Net loss from continuing Operations      (270,403)      (183,024)     (114,913)    (113,558)     (44,823)     (13,525)     (41,419)

Net loss before extraordinary Item       (287,234)      (189,402)     (114,913)    (113,558)     (44,823)     (13,525)     (41,419)

Extraordinary item                             --        (23,874)           --           --           --           --       (2,214)

Net loss                                 (287,234)      (213,276)     (114,913)    (113,558)     (44,823)     (13,525)     (43,633)

Total assets(2)                         1,197,084      1,415,257     1,047,760      888,065      205,678      206,287      200,979

Long-term debt(2)                         502,254        481,062       589,228      422,483      130,741      132,093      132,426

Redeemable members'
     interest/preferred stock(2)            3,800          5,500         5,500        5,500        5,500        5,500        5,500
</TABLE>


(1)      In 1999, the Company changed its fiscal year to a calendar year ending
         on December 31 from a 4/4/5 week fiscal quarter basis ending the
         Saturday closest to December 31. For comparative purposes fiscal years
         1998 and 1997 are being presented as ending on December 31, 1998 and
         1997, respectively. The three month period ending December 28, 1996
         bridges the gap between the Predecessor's old and new fiscal year-ends.

(2)      Balance sheet balances at August 12, 1999 are unaudited.


                                       18
<PAGE>   19



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

On April 2, 2001, Republic Technologies International, LLC and its immediate
parent, Republic Technologies International Holdings, LLC, and its subsidiaries,
Bliss & Laughlin, LLC and RTI Capital Corp., filed voluntary petitions for
reorganization under Chapter 11 of the Federal Bankruptcy Code in the United
States Bankruptcy Court in the Northern District of Ohio, Eastern Division.
Subsequent to the Petition Date, the Company is operating as a
debtor-in-possession.

GENERAL
The Company is the largest producer of SBQ steel products in the United States
with a market share of approximately 23%, based on 2000 calendar year shipments.
SBQ steel products are high quality hot-rolled and cold-finished carbon and
alloy steel bar and rod used primarily in critical applications in automotive
and industrial equipment. SBQ steel products are sold to customers who require
precise metallurgical content and quality characteristics. SBQ steel products
generally contain more alloys and sell for substantially higher prices than
merchant and commodity steel bar and rod products. The Company produces the
widest range of SBQ steel products in the United States and supplies a diverse
customer base that includes leading automobile and industrial equipment
manufacturers and their first tier suppliers.

RESULTS OF OPERATIONS
The consolidated/combined results of operations include BarTech for all periods
presented, Republic since its acquisition date of September 8, 1998 and USS/Kobe
since its acquisition date of August 13, 1999. Accordingly, prior period results
are not comparable with the current periods

YEAR ENDED DECEMBER 31, 2000 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1999
Net sales for the year ended December 31, 2000 totaled $1,265.4 million on
shipments of approximately 2,525,194 net tons compared with net sales of
$1,052.9 million for the year ended December 31, 1999 on shipments of
approximately 1,878,000 net tons. Net sales for the year ended December 31, 2000
were comprised of $984.8 million for hot-rolled and $280.6 million for
cold-finished, compared with hot-rolled net sales of $727.8 million and
cold-finished net sales of $325.1 million for the year ended December 31, 1999.
After giving consideration to the timing of the Combination and the coincident
acquisition of USS/Kobe on August 13, 1999, on a comparable basis, weak demand
in the automotive and service center markets during the third and fourth
quarters of 2000 was responsible for the lower hot roll and cold finish bar
shipping levels. The less value-added semi-finished sales increased in 2000.
This change in product mix resulted in lower average sales revenues per ton of
shipments versus the prior year.

Cost of sales totaled $1,140.8 million, or 90.1% of net sales, for the year
ended December 31, 2000 compared with cost of sales of $1,048.8 million, or
99.6% of net sales, for the year ended December 31, 1999. Cost of sales for the
year ended December 31, 2000 consisted of $885.9 million on hot-rolled products
and $254.9 million on cold-finished products compared with $822.9 million on
hot-rolled products and $225.9 million on cold-finished products for the year
ended December 31, 1999. The decrease in cost of sales as a percentage of sales
was primarily due to the efficiencies of operating the combined operations for a
full year. Savings also resulted from idling the ingot process in Canton in the
latter part of 1999 and the Johnstown plant shutdown in August of 2000.

Selling, general and administrative expenses were $54.7 million, or 4.3% of net
sales, for the year ended December 31, 2000 compared with $82.5 million, or 7.8%
of net sales, for the year ended December 31, 1999. The reduction in selling,
general and administrative expenses as a percentage of net sales was due to
non-recurring costs related to the combination of companies and the elimination
of redundant positions in 2000.

Depreciation and amortization expense was $61.5 million for the year ended
December 31, 2000 compared with $42.4 million for the year ended December 31,
1999. This resulted from the fact that the depreciation for property and
equipment related to the Lorain plant was not included for the period from
January 1, 1999 to August 12, 1999, as this was prior to the date of the
Combination.


                                       19
<PAGE>   20


Workforce reduction charges were $0.8 million for the year ended December 31,
2000 compared with $77.2 million for the year ended December 31, 1999. The
decrease in workforce reduction charges resulted from fewer Early Retirement
Buyouts ("ERBs") during 2000.

During 2000, the Company shutdown two of its production facilities; the
Johnstown, Pennsylvania melt shop facility and the Canton, Ohio 12" rolling mill
facility, and announced the shutdown of its Willimantic, Connecticut
cold-finishing facility to occur during 2001. The Johnstown facility closed in
August 2000, and the Canton 12" facility closed in October of 2000. These
actions were undertaken in an attempt to reduce costs and improve efficiency. As
a result of these actions, the Company recorded restructuring charges of $74.6
million during the year.

During the fourth quarter of 2000, the Company recognized a non-cash impairment
charge of $79.6 million related to the write-off of its unamortized goodwill
balance. The industry-wide market conditions and the Company's high level of
indebtedness following the Combination have adversely impacted operations and
the Company's ability to implement its consolidation plan. These factors have
lead to the need to significantly revise the Company's operating plan and
related financial forecast. Based on the Company's current capital structure,
the revised operating plan and corresponding anticipated future operating cash
flows less anticipated capital expenditures are expected to be insufficient to
recover the unamortized goodwill balance. Accordingly, the carrying value of the
Company's goodwill balance has been reduced to zero.

Net interest expense was $117.5 million for the year ended December 31, 2000
compared with $89.2 million for the year ended December 31, 1999. The increase
was primarily due to higher average borrowings outstanding following the
completion of the Combination.

The provision for income taxes for the years ended December 31, 2000 and 1999
consisted of currently payable income taxes, primarily foreign income taxes owed
by CDSC.

For the year ended December 31, 1999, the Company also recorded an extraordinary
loss of $23.9 million from the early extinguishment of debt. This loss arose
from the repayment of certain debt in connection with the completion of the
Combination.

As a result, the Company reported a net loss of $287.2 million for the year
ended December 31, 2000 compared with a net loss of $328.2 million for the year
ended December 31, 1999.

YEAR ENDED DECEMBER 31, 1999 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1998
Net sales for the year ended December 31, 1999 totaled $1,052.9 million on
shipments of approximately 1,878,000 net tons compared with net sales of $484.9
million for the year ended December 31, 1998 on shipments of approximately
833,000 net tons. Net sales for the year ended December 31, 1999 were comprised
of $727.8 million for hot-rolled and $325.1 million for cold-finished, compared
with hot-rolled net sales of $258.8 million and cold-finished net sales of
$226.1 million for the year ended December 31, 1998. The decrease in net selling
value per ton in the current year period is the result of a change in the
product mix toward lower value products combined with an overall decrease in
selling prices for both hot-rolled and cold-finished products as the Company
initiated efforts to reduce excess inventory levels.

The Company believes that the shipments following the completion of the
Combination were adversely affected by difficult market conditions in the
non-automotive sector, particularly during the third quarter, which led to lower
volumes and lower prices including reduced volumes at key customers. Management
believes that shipments to service centers especially suffered due to high
inventory levels coupled with higher than expected import levels. In addition,
shipments were significantly impacted by problems encountered in integrating the
three companies, particularly in the area of computer systems processing orders
and shipments, affecting customer service. For example, significant problems
were experienced with existing SAP information systems used at the Lorain
facility. The Company also had problems with systems at the Lackawanna facility,
a former BarTech facility, which were converted to systems employed at Republic.
Production was also adversely affected by a burn-through fault in one of two
basic oxygen process (BOP) vessels at the Lorain facility which idled the vessel
from September 22 through October 18


                                       20
<PAGE>   21

and disrupted production cycles in the other vessel as well as casting and
rolling operations at the Lorain facility. The Company believes that its efforts
to implement quality measures and teams in order to improve product delivery
reliability are having a positive effect. However, its program to address
information systems problems that have impacted inventory and sales management,
financial controls and product delivery is expected to require most of 2000, and
possibly some of first-half 2001, for completion.

Cost of sales totaled $1,048.8 million, or 99.6% of net sales, for the year
ended December 31, 1999 compared with cost of sales of $483.9 million, or 99.8%
of net sales, for the year ended December 31, 1998. Cost of sales for the year
ended December 31, 1999 consisted of $822.9 million on hot-rolled products and
$225.9 million on cold-finished products compared with $269.8 million on
hot-rolled products and $214.1 million on cold-finished products for the year
ended December 31, 1998. The increase in cost of sales as a percentage of sales
was primarily generated by a loss on contracts of approximately $13.6 million
and a $7.9 million write-down in inventory following a reassessment of
inventories subsequent to the Combination. This was partially offset by a
decrease in raw material prices.

Selling, general and administrative expenses were $82.5 million, or 7.8% of net
sales, for the year ended December 31, 1999 compared with $38.0 million, or 7.8%
of net sales, for the year ended December 31, 1998. There was no change in
selling, general and administrative expenses as a percentage of net sales
primarily because benefits derived from the combination of the selling, general
and administrative functions following the Combination were offset by expenses
incurred in the current year in relation to the Combination.

Depreciation and amortization expense was $42.4 million for the year ended
December 31, 1999 compared with $16.1 million for the year ended December 31,
1998. Approximately $22.8 million of the $26.3 million increase in depreciation
and amortization expense was due to an increase in fixed assets as a result of
the Combination.

Workforce reduction charges were $77.2 million for the year ended December 31,
1999 compared with $18.7 million for the year ended December 31, 1998. The
increase in workforce reduction charges resulted from 549 voluntary Early
Retirement Buyouts ("ERB's") being accepted during 1999 as compared to 200 ERB's
in 1998. Through December 31, 1999, 749 voluntary ERB packages had been
accepted.

The Company had other expense, net of $7.1 million for the year ended December
31, 1999 compared with other income of $2.9 million for the year ended December
31, 1998. The current year expense primarily consists of bad debt provisions.

Net interest expense was $89.2 million for the year ended December 31, 1999
compared with $43.2 million for the year ended December 31, 1998. Approximately
$42.3 of the $46.0 million increase in net interest expense was attributable to
the higher average borrowings outstanding following the completion of the
Combination. The remainder of the increase was attributable to higher average
interest rates on the new borrowings compared to the borrowings repaid in
connection with the Combination.

The provision for income taxes for the years ended December 31, 1999 and 1998
consisted of currently payable income taxes, primarily foreign income taxes owed
by CDSC.

For the year ended December 31, 1999, the Company also recorded an extraordinary
loss of $23.9 million from the early extinguishment of debt. This loss arose
from the repayment of certain debt in connection with the completion of the
Combination.

As a result, the Company reported a net loss of $328.2 million for the year
ended December 31, 1999 compared with a net loss of $113.6 million for the year
ended December 31, 1998.

LIQUIDITY AND CAPITAL RESOURCES

The Company's sources of liquidity include cash and cash equivalents, cash from
operations, and amounts available under its revolving credit facility.
Subsequent to the Petition Date, sources of liquidity also

                                       21
<PAGE>   22

include its debtor-in-possession facility, which is provided by the same group
of banks that provided the revolving credit facility.

The Company's primary liquidity needs prior to the Petition Date relate to
working capital needs, funding requirements relating to its agreement with the
Pension Benefit Guaranty Corporation (the "PBGC"), capital expenditures and
other costs relating to the Company's consolidation plan, debt service
requirements and tax distributions to the Company's members.

Financial Restructuring
-----------------------

On July 17, 2000, the Company underwent a financial restructuring
("Restructuring") to improve its liquidity position and to assist in making the
semiannual interest payment on its senior secured notes. The Restructuring
consisted of the following four components:

1)   Several of the Company's direct and indirect equity investors made secured
     loans aggregating approximately $30.0 million to Republic Technologies
     International, LLC. In exchange for these loans, the lenders received notes
     of $30.0 million aggregate principal amount and warrants to purchase an
     aggregate of 15.0 million shares of Class D common stock, par value $0.001
     per share of the Parent Company. These notes mature on August 1, 2010, and
     may be prepaid in certain instances and must be prepaid upon a change of
     control of the Company. The interest rate on the notes is 9.5% and is
     payable in arrears on each February 1 and August 1, beginning in 2006 and
     continuing thru 2010, or earlier if the lenders consent.
2)   The PBGC agreed to defer approximately $46.0 million of payments due under
     the original memorandum of understanding between the Company and the PBGC
     in 2000 and 2001, to the years 2002 and 2003. The deferred amount is due in
     eight equal quarterly installments starting on January 1, 2002.
3)   USX agreed to further defer $30.0 million in payables deferred at the time
     of the Combination. These payables, which were originally due in July 2001,
     were deferred to July 2003 with the same terms.
4)   The Company restructured its revolving credit facility with Fleet National
     Bank (formerly known as BankBoston, N.A.) which permitted the new
     subordinated debt mentioned above, as follows:
           a.     The cap on the amount to be borrowed against the Canton bloom
                  and rolling facility was reduced from $125.0 million to $92.0
                  million, with the reduction in the eligible fixed asset cap
                  being deferred until March 2002, with subsequent decreases of
                  $7.5 million per quarter until July 2004;
           b.     The commitment cap was reduced from $425.0 million to $395.0
                  million, with subsequent reductions through January 1, 2002;
           c.     The reserve of $50.0 million was eliminated;
           d.     A minimum liquidity requirement of $3.0 million was
                  established;
           e.     Minimum EBITDA requirements were established through June
                  2004;
           f.     Capital expenditure caps were revised for fiscal years 2000
                  through 2004.

On October 6, 2000, Bethlehem Steel Corporation and the Parent Company arranged
for the deferral of the redemption of $5.5 million Cumulative Preferred Stock,
issued by the Parent Company. The original redemption date was September 26,
2000. On September 29, 2000, the Company redeemed $.5 million of Class A
Members' Interest so that the Parent Company could redeem the same amount of
Cumulative Preferred Stock. The Company as of December 31, 2000 redeemed an
additional $1.2 million of Class A Member's Interest. The parties previously
acknowledged that the redemption would be made in installments during 2001, $0.1
million of which was made prior to the Petition Date. Since filing under Chapter
11, no shares have been redeemed.

PBGC Obligations
----------------

In connection with the Combination, Republic Technologies International, LLC
agreed with the PBGC to fund $178 million into the Republic Engineered Steels,
Inc. USWA Defined Benefit Plan, a defined benefit pension plan for employees
represented by the USWA in connection with the headcount reduction and related
early retirement benefits contemplated by the Company's consolidation plan. Of
the $178 million,


                                       22
<PAGE>   23

$66.5 million has been funded through April 2001. Republic Technologies
International, LLC, under the terms of the current amended PBGC agreement, was
required to make quarterly contributions in accordance with the following
schedule: $2.0 million per quarter for the next two payments, $14.8 million per
quarter for the next three payments, and $14.2 million per quarter for the next
four payments, and one final quarterly payment of $6.3 million. These funding
levels are subject to the outcome of the Chapter 11 proceedings. In addition,
pursuant to the Company's consolidation plan, Republic Technologies
International, LLC was to offer a combination of early retirement buyout
packages to its employees. The actual cost of the early retirement buyout
packages and voluntary retirement plans will depend on the outcome of the
Chapter 11 proceedings and the mix of such arrangements offered to and accepted
by the hourly employees represented by the USWA.

In addition, with respect to the USS/Kobe Union Eligible Pension Plan, a defined
benefit plan for union employees, the Company agreed with the PBGC to maintain a
specified level of funding based on statutory funding requirements. The
contributions were to be made as follows: for the year 2001, an amount necessary
to avoid an accumulated funding deficiency plus $6 million , an amount so that
the December 31, 2001 credit balance equals that of December 31, 2000 with
interest plus $2 million; for 2002, an amount so that the December 31, 2002
credit balance equals that of December 2001 with interest plus $2 million; for
2003, an amount so that the December 31, 2003 credit balance equals that of
December 31, 2002 with interest plus $2 million. Beginning with 2004, the
Company was to make contributions to maintain the December 31, 2003 credit
balance with interest. As security for such obligation, the Company has provided
the PBGC with a $5 million letter of credit. The Company currently estimates
that approximately $52.2 million of fundings will be required to obtain the
December 31, 2004 required balance. These funding levels are also subject to the
outcome of the Chapter 11 proceedings.

Capital Expenditures
--------------------

The Company invested $13.1 million in capital expenditures during the year 2000.
The amendment of the Company's revolving credit facility, another component of
the Restructuring, limited capital expenditures to $19.0 million in 2000, $24
million in 2001, $27 million in 2002, $33.5 million in 2003 and $23.0 million in
2004. The Company's debtor-in-possession facility limits capital expenditures to
$29.0 million in 2001 and $30.2 million in 2002. The Company's four-year
consolidation plan originally contemplated construction of a new large bar mill
which management estimates would cost approximately $90 million. The plan to
construct this facility is currently under review and subject to the outcome of
the Chapter 11 proceedings. Additionally, under the terms of the amended
revolving credit facility the Company was permitted to obtain off-balance sheet
financing of up to $66 million for three other capital projects, none of which
were completed prior to the Petition Date. This provision was not part of the
debtor-in-possession facility.

Debt Service Requirements
-------------------------

The Company has obtained a debtor-in-possession credit facility, however,
liquidity will be impacted by the uncertainty of the bankruptcy proceedings,
including restructuring and settlement of prepetition obligations, the terms of
the debtor-in-possession credit facility and the ability to obtain other
financing. As a result of these uncertainties, there can be no assurance
existing or future sources of liquidity will be adequate.

The following are descriptions of the Company's debt service requirements prior
to the Petition Date. The accrual and payment of interest on debt facilities,
other than the debtor-in-possession facility, has been suspended subsequent to
the Petition Date. All such debt service requirements are subject to the outcome
of the Chapter 11 proceedings.

In connection with the Restructuring mentioned above, on July 17, 2000, several
equity investors made loans of approximately $30 million in aggregate principal
amounts to Republic Technologies. In exchange for these loans, the lenders
received notes of $30 million aggregate principal amount and warrants to
purchase an aggregate of 15 million shares of Class D common stock, par value
$0.001 per share, of the Parent Company. These notes mature on August 1, 2010,
and may be prepaid in certain instances and must


                                       23
<PAGE>   24

be prepaid upon a change of control of the Company. The interest rate on the
notes is 9.5% and is payable in arrears on each February 1 and August 1,
beginning in 2006 and continuing thru 2010, or earlier if the lenders consent.
The notes are secured by a second mortgage on the Canton bloom and rolling
facility.

In conjunction with the Combination, Republic Technologies completed a private
offering of $425 million of senior secured notes and warrants and entered into a
$425 million revolving credit facility. The proceeds of this private offering,
together with approximately $239 million of borrowings under the revolving
credit facility and the proceeds from new equity contributions, were applied to
refinance a substantial portion of the indebtedness of Republic, RES Holding,
BarTech and USS/Kobe at the time of the Combination. As part of the
Restructuring referred to above, commitments under the revolving credit facility
were reduced from $425 million to $395 million.

As a result of the Combination and the other transactions, the Company and
Republic Technologies have significant amounts of debt, with the interest
payments on the senior secured notes and interest and principal repayments under
the new credit facility representing significant obligations. The senior secured
notes require semi-annual interest payments on January 15 and July 15 every year
until they mature on July 15, 2009. The senior secured notes require that tender
offers be made for such securities with certain proceeds from asset sales in the
event that such proceeds are not applied to specified purposes within certain
time periods. The loans under the revolving credit facility require periodic
payments of interest and mature on August 13, 2004. The revolving credit
facility requires prepayment of loans and reductions of commitments with net
proceeds of specified asset dispositions, casualty and condemnation recovery
events, issues of equity and incurrence of permitted indebtedness. Additionally,
the amendment of the revolving credit facility, as discussed above, establishes
minimum requirements for EBITDA and liquidity.

The senior secured notes and the new credit facility each contain significant
affirmative and negative covenants including separate provisions imposing
restrictions on additional borrowings, certain investments, certain payments,
sale or disposal of assets, payment of dividends and change of control
provisions, in each case, subject to certain exceptions. The ability of Holdings
to receive distributions from Republic Technologies and its subsidiaries is
significantly restricted by the terms of the senior secured notes and the
revolving credit agreement. Under the terms of the senior secured notes, subject
to certain exceptions, generally neither Republic Technologies nor its
subsidiaries may declare or pay any dividend or make any other distribution or
payment on or in respect of capital stock, unless, at the time of and after
giving effect to the proposed payment, (1) no Default (as defined in the senior
secured note indenture) shall have occurred and be continuing, (2) immediately
after giving effect to such payment, the Consolidated Fixed Charge Coverage
Ratio (as defined in the senior secured note indenture) of Republic Technologies
would be equal to or greater than 2.5 to 1, and (3) the aggregate amount of all
restricted payments declared or made from and after the issue date would not
exceed the 50% of the Consolidated Net Income (as defined in the senior secured
note indenture) of Republic Technologies accrued on a cumulative basis during
the period, taken as one accounting period, beginning on October 1, 1999 and
ending on the last day of the fiscal quarter of Republic Technologies
immediately preceding the date of such proposed restricted payment or, if such
aggregate cumulative Consolidated Net Income of Republic Technologies for such
period shall be a deficit, minus 100% of such deficit, plus the cash proceeds
from certain equity offerings and value of certain investments. Under the terms
of the revolving credit facility, neither Republic Technologies nor its
subsidiaries may declare or pay any dividend to Holdings or make any other
distribution or payment to Holdings on or in respect of capital stock other than
distributions or payments for certain limited purposes and in limited amounts.

The senior secured notes are secured, subject to exceptions and limitations, by
(1) a first priority lien on, and security interest in, substantially all of the
existing assets of the issuers and the restricted subsidiaries, other than (a)
the Canton bloom and rolling facilities and Cartersville, Georgia cold-finishing
facilities, (b) inventory, (c) accounts receivable and (d) intellectual property
and related assets, and (2) a first priority lien, shared on an equal and
ratable basis with the lenders under the revolving credit facility, on the
equity interests of Republic Technologies and its restricted subsidiaries. This
collateral is subject to release without substitution under a limited number of
circumstances. Borrowings under the revolving credit facility are secured by a
first priority perfected security interest in (1) the equity interests of
Republic Technologies and its restricted subsidiaries, shared on an equal and
ratable basis with the senior secured


                                       24
<PAGE>   25

notes and (2) all presently owned and subsequently acquired accounts receivable,
inventory, intellectual property and related assets of Republic Technologies and
guarantors and the real estate and fixed assets comprising, and the intellectual
property relating to, the bloom and rolling facility, including the related melt
shop.

The obligations under the senior secured notes are unconditionally and
irrevocably guaranteed jointly and severally by Holdings and each of its
subsidiaries other than Republic Technologies, RTI Capital Corp. (the co-issuer
of the senior secured notes) and Oberlin Insurance Company. The obligations
under the revolving credit facility are unconditionally and irrevocably
guaranteed jointly and severally by Holdings and each of its subsidiaries other
than Republic Technologies and Oberlin Insurance Company.

Tax Distributions
-----------------

The Company and Republic Technologies are limited liability companies that are
expected to be treated as a partnership for income tax purposes and accordingly
are not an income taxpaying entity. However, pursuant to the limited liability
company agreement of the Company's parent, the Company's parent will be required
to make cash distributions to its members to the extent necessary to satisfy tax
obligations regarding members' investment in Republic Technologies, Inc. To the
extent the Company's parent is required to make these tax distributions,
Republic Technologies will be required to make equivalent cash distributions to
the Company. However, the Company believes that certain of its parent's members
have net operating loss carryforwards which may be available to offset a
significant portion of their taxable income attributable to their investment in
the Company's parent and reduce but not eliminate, the need for tax
distributions. Use of these net operating losses is subject to various
limitations and uncertainties and accordingly, the Company cannot make any
assurances that these net operating loss carryforwards will reduce the need for
tax distributions or that they will not be otherwise utilized.

Republic and USS/Kobe participated in Enterprise Zone Agreements granting
abatements from certain Ohio real and personal property taxes. USS/Kobe was
party to three 10 year agreements with a municipal subdivision (City of Lorain)
granting USS/Kobe a 50% abatement of taxes on specified investment in real
property, equipment and inventory, conditioned upon the company's best efforts
to maintain certain employment levels, subject to certain exceptions. The
reduction in taxes under these agreements amounted to approximately $2.9 and
$2.5 million in 2000 and 1999, respectively. Republic was party to a 10 year
agreement with a municipal subdivision (Canton Township) granting Republic a 75%
abatement of Ohio personal property taxes on certain investments in new
equipment. The reduction in taxes under the terms of this agreement amounted to
approximately $1.6 and $1.2 million in 2000 and 1999, respectively.

Liquidity Sources and Other Factors Affecting Liquidity
-------------------------------------------------------

The Company's lower than expected sales in 2000 caused its liquidity to be
negatively affected. The Company's liquidity position has also been negatively
impacted by the implementation of its consolidation plan as a result of the time
lag between the incurrence of certain costs and the receipt of the expected cash
flow benefits, such as in the case of headcount reductions requiring lump sum
payouts.

During 2000, management sought to improve the Company's liquidity position by
taking a number of actions including increasing spot prices, reducing
administrative staff, implementing cost cutting programs, reducing inventories,
and closing operations. The Company closed operations at the Johnstown melt
facility and the Canton 12" rolling facility during 2000, and in the fourth
quarter, announced plans to close its Baltimore, Maryland Specialty Steel
facility. The Company has announced plans to close its Willimantic
cold-finishing plant in 2001. In addition, the Company reduced its planned
capital expenditures from $48.0 to $13.1 million for the year 2001, obtained
deferrals of approximately $46.0 million of certain quarterly 2000 and 2001
Pension Benefit Guaranty Corporation ("PBGC") funding requirements until 2002
and 2003, obtained a deferral from the Ohio Environmental Protection Agency (the
"Ohio EPA") of $1.2 of committed environmental expenditures until 2001,
restructured the Company`s revolving credit facility, and obtained a deferral
from Bethlehem Steel Company on the redemption of Cumulative Preferred Stock
issued by Bar Tech and currently an obligation of Republic Technologies.
Additionally, on July 17, 2000, Republic Technologies received approximately
$30.0 million aggregate principal amount of loans made from certain of its
direct and indirect equity investors in exchange for notes


                                       25
<PAGE>   26

of Republic Technologies and warrants to purchase Class D common stock of
Republic Technologies International, Inc.

Notwithstanding these actions, on April 2, 2001, the Company and the majority of
its subsidiaries filed voluntary petitions for reorganization under Chapter 11
of the Federal Bankruptcy Code in the United States Bankruptcy Court.

Although the Company has obtained a debtor-in-possession credit facility, the
Company may need to obtain additional financing to meet its cash flow
requirements. Restrictive covenants included in the debtor-in-possession credit
facility and oversight by the Bankruptcy Court limit the Company's ability to
incur additional indebtedness, or sell assets (most of which are pledged), and
may otherwise limit the operational and financial flexibility of the Company.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

Effective December 31, 2000, the Company adopted Emerging Issues Task Force
Issue No. 00-10, Accounting for Shipping and Handling Fees and Costs.
Accordingly, freight charges on shipments to customers are now classified as
cost of goods sold, whereas previously they were classified as an offset to
sales. All prior year amounts have been reclassified to conform to the current
presentation.

The Financial Accounting Standards Board (the "FASB") issued Statement of
Financial Accounting Standards No. 133 - "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133") in June 1998, and in June 2000, issued
Statement of Financial Accounting Standards No. 138 - "Accounting for Certain
Derivative Instruments and Certain Hedging Activities an amendment of FASB
Statement No. 133", which will now be effective for financial statements for all
quarters of all years beginning after June 15, 2000. The adoption of SFAS 133 as
of January 1, 2001 did not have a material effect on the Company's results of
operations or financial position.

ENVIRONMENTAL MATTERS

As is the case with most steel producers, the Company could incur significant
costs related to environmental issues in the future, in particular those arising
from remediation costs for historical waste disposal practices at its current
and former facilities. The Company's operations are subject to federal, state
and local, and in the case of the CDSC facilities, foreign, environmental laws
and regulations that in the event of environmental contamination could result in
the Company incurring significant liabilities.

The Company continuously monitors its compliance with applicable environmental
laws and regulations and believes that it currently is in substantial compliance
with them. The Company anticipates that its expenditures for environmental
control measures during the next twenty-four months will be approximately $6.4
million. The Company believes that costs in relation to remediation related to
historical waste disposal practices are likely to be in the range of $15.4
million to $25.1 million over the lives of the Company's facilities although
some third-party estimates are substantially higher. The Company's reserve to
cover probable environmental liabilities, including the matters discussed in
Item 1 - "Business", was approximately $19.6 million as of December 31, 2000.
Except as noted in Item 1 - "Business", the Company is not otherwise aware of
any significant environmental compliance and remediation costs for which the
establishment of a reserve would be appropriate. To the extent the Company
incurs any such remediation costs, these costs will most likely be incurred over
a number of years; however, future regulatory action regarding historical
disposal practices at its facilities, as well as continued compliance with
environmental requirements, may require the Company to incur significant costs
that may have a material adverse effect on its future financial performance. For
further information on environmental matters see Item 1 - "Business".

FORWARD LOOKING STATEMENTS

Statements included in this filing with the SEC (including those portions of
Management's Discussion and Analysis that refer to the future) may contain
forward-looking statements that are not historical facts but


                                       26
<PAGE>   27

refer to management's intentions, beliefs, or expectations for the future. It is
important to note that the Company's actual results could differ materially from
those projected in such forward-looking statements. Certain factors that could
cause actual results to differ from those in such forward-looking statements
include, but are not limited to, the following:

     -    the Company's ability to increase sales to existing and new customers,
          particularly sales to automotive and industrial equipment
          manufacturers;
     -    the Company's ability to implement its consolidation plan and to
          realize the expected benefits of the Combination in the time frame and
          at the costs currently contemplated;
     -    market conditions and general risks associated with the steel
          industry; and
     -    the matters discussed under the caption "Risk Factors" in the
          Company's Registration Statement on Form S-4.

The reader should not place undue reliance on the forward-looking statements
contained in this report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risks due to changes in interest rates with
respect to certain of its long-term debt. The table below presents principal
cash flows and weighted average interest rates of the Company's long-term debt
at December 31, 2000 by expected maturity dates as well as the respective fair
value amounts.

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

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

<TABLE>
<CAPTION>
(in millions)             2001       2002         2003       2004      2005     Thereafter      Total     Fair Value
                        --------- ----------- ------------- -------- --------- -------------- ----------- ------------
<S>                        <C>          <C>           <C>      <C>       <C>          <C>        <C>           <C>
Fixed:
  Senior Notes                                                                      $425.0      $425.0        $44.6
  Interest rate                                                                      13.75%

  Revenue Bonds:
     Solid Waste
           Revenue
            Series 1996                                                             $ 53.7      $ 53.7        $ 5.9
     Interest rate                                                                    9.00%

     Solid Waste
           Revenue
           Series 1994                                                              $ 20.2      $ 20.2        $ 2.2
     Interest rate                                                                    8.25%

  All other                $ 2.3        $2.4          $2.0     $1.3      $1.3        $36.0      $ 45.3        $45.3
  Average
     interest rates         4.86%       4.89%         4.50%    3.00%     3.00%        8.29%

Variable                   $ 9.0                                                     $ 8.4       $17.4        $17.4
  Average rates               (1)         (1)           (1)      (1)       (1)          (1)         (1)          (1)
</TABLE>


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


                                       27
<PAGE>   28


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

During the past two fiscal years, there were no disagreements with the Company's
accountants on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of the Company's accountants would have caused it
to make reference to such disagreement in connection with its report.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Company's executive officers and directors as of March 31, 2001 are as
follows:

<TABLE>
<CAPTION>
Name:                             Age:         Position:

<S>                               <C>          <C>
Joseph F. Lapinsky                51           Chief Executive Officer, President, Chief Operating
                                               Officer and Director
John G. Asimou                    55           Executive Vice President and General Manager,
                                               Cold-Finished Bar Operations
Stephen Graham                    44           Executive Vice President and Chief Financial Officer
James T. Thielens, Jr.            42           Vice President, Commercial, Hot Rolled Bar
Charles T. Cochran                46           Vice President, Commercial, Cold Finished Bar
Noel J. Huettich                  55           Vice President, Hot Rolled Bar Operations
Joseph Kaczka                     53           Vice President, Finance and Controller
John B. George                    54           Vice President, Finance, Treasurer and Secretary
Richard C. Lappin                 56           Chairman and Director
Robert Friedman                   57           Director
David Blitzer                     31           Director
Lynn R. Williams                  76           Director
John Connelly                     54           Director
Albert E. Ferrara, Jr.            52           Director
</TABLE>

JOSEPH F. LAPINSKY has over 27 years of experience in the steel industry and
became President and Chief Operating Officer of BarTech and Republic in October
1998. Mr. Lapinsky also became a director of Republic at that time. Mr. Lapinsky
became Chief Executive Officer and a director of RTI in February 2000. Mr.
Lapinsky served as a corporate Vice President and President of Republic's Hot
Rolled Bar Division from January 1997 to September 1998. Prior to that time he
served as General Manager of Republic's hot-rolled bar operations from September
1995 to January 1997. Prior to that time he was Executive Vice President of
Autumn Industries, Inc. from September 1991 to September 1995 and Executive Vice
President of CSC Industries, Inc. from December 1987 to September 1991.

JOHN G. ASIMOU has over 32 years of experience in the steel industry and became
Executive Vice President and General Manager, Cold Finished Bar Division for
Republic and BarTech in October 1998. Mr. Asimou served as Executive Vice
President of Technology and Development of the Company from August 1996 until
September 1998. From 1993 to 1996, Mr. Asimou was Vice President - Quality &
Technology for Birmingham Steel Corporation. From 1986 to 1993, Mr. Asimou
served as General Manager - Quality and Technology of American Steel & Wire
Corporation. From 1984 to 1986, Mr. Asimou was Metallurgical Service Engineer
for Bethlehem Steel Corporation. From 1968 to 1984, Mr. Asimou served in various
SBQ bar and rod assignments for United States Steel Corporation, a fully
integrated steel producer.


                                       28
<PAGE>   29

STEPHEN GRAHAM became Executive Vice President and Chief Financial Officer in
February 2000. From 1997 to February 2000, Mr. Graham served as Vice President,
Finance/Chief Financial Officer of Dura Automotive Systems, Inc., an
international automotive systems supplier. He also held positions as Chief
Financial Officer for Cambridge Industries, Inc., a plastics manufacturer, from
1996 - 1997, and as Vice President, Finance/Chief Financial Officer for Truck
Components, an automotive and industrial components manufacturer, from 1994 -
1996.

JAMES T. THIELENS, JR. has over 20 years of experience in the steel industry and
became Vice President, Commercial; Hot Rolled Bar Division for BarTech and
Republic in October 1998. Mr. Thielens served as Vice President, Sales and
Marketing, of Republic's Hot Rolled Bar Division from March 1997 until September
1998. He served as General Manager of Marketing for Republic from March 1995 to
March 1997 and as a Regional Sales Manager of Republic's Bar Products Division
from April 1994 to March 1995. Prior to that time he held various sales and
marketing positions at Republic since its formation in 1989.

CHARLES T. COCHRAN has over 24 years of experience in the steel industry and
became Vice President, Commercial, Cold Finished Bar Division for BarTech and
Republic October 1998. Mr. Cochran served as Vice President, Sales and
Marketing, of Republic's Cold Finished Bar Division from January 1997 to
September 1998. He served as Vice President, Sales and Marketing of Republic's
Bar Products Division from January 1995 to January 1997. From May 1994 to
January 1995 he was Republic's General Manager, Cold Finished Bar Division.
Prior to that time he held various regional sales positions at Republic since
its formation in 1989.

NOEL J. HUETTICH has over 30 years of experience in the steel industry and
became Vice President, Hot Rolled Bar Operations for Republic Technologies
International in November 2000. Prior to this appointment, Mr. Huettich was the
general manager for the Lorain plant, after having served as manager for both
the Canton and Massillon facilities. In his 29 years at Republic, Huettich has
held positions of increasing responsibility including manager of process
metallurgy, manager of the Canton No. 4 melt shop and manager of the Canton
Bloom Cast facility, where he was part of the successful start-up.

JOSEPH KACZKA became Vice President of Finance and Controller for RTI in
September 1999. Mr. Kaczka joined RTI following over 31 years of service with
USS/Kobe Steel Company and its predecessor companies. He most recently served as
Treasurer and Controller for USS/Kobe Steel Company, which he had held since
1997. From 1995 through 1997, Mr. Kaczka held the position of Treasurer for
USS/Kobe Steel Company and from 1989 through 1995 he served as Controller for
USS/Kobe Steel Company. Prior to 1989, he held various positions at USX
locations in Pennsylvania, Alabama and Ohio.

JOHN B. GEORGE has over 31 years of experience in the steel industry and became
Vice President of Finance and Treasurer for BarTech and Republic in October
1998. He was also appointed Secretary in December 1998. Prior to joining the
Company, Mr. George previously served as Treasurer of Republic Engineered
Steels, Inc., since April 1991. From November 1989 to April 1991, he was
Assistant Treasurer for Republic Engineered Steels, Inc.

RICHARD C. LAPPIN became a director of Republic in January 1999. Mr. Lappin
became Chairman of the Board of RTI, Inc. in November 1999. Mr. Lappin is a
Senior Managing Director of The Blackstone Group, L.P., with which he has been
associated since 1999. Prior to this time, Mr. Lappin served as President of
Farley Industries, which included West-Point Pepperell, Inc., Acme Boot Company,
Inc., Tool and Engineering Inc., Magnus Metals, Inc. and Fruit of the Loom Inc.
Mr. Lappin is also a director of American Axle & Manufacturing Inc., Clark
Refining Holdings, Inc., Collins & Aikman Corporation and Prime Succession, Inc.

ROBERT FRIEDMAN has been a Senior Managing Director of The Blackstone Group,
L.P. since March 1999. From 1975 to March 1999, Mr. Friedman was a partner with
the law firm of Simpson Thatcher & Bartlett. Mr. Friedman is also a director of
American Axle & Manufacturing Inc., Clark Refining Holdings, Inc. and Corp.
Group.


                                       29
<PAGE>   30

LYNN R. WILLIAMS has been retired since 1994. From 1983 until his retirement,
Mr. Williams served as President of the USWA.

JOHN J. CONNELLY has over 31 years experience in the steel industry and became
Vice President, Business Development and Long Range Planning for U.S. Steel
Group a unit of USX Corporation in January 2001. Mr. Connelly was elected
president of USSI in July 1989, a position he held until November 1999. In
October 1994 he was named Vice President - International Business for the U.S.
Steel Group and served as president of USX Engineers and Consultants, Inc. from
October 1994 to September 1996. In December 1999, Mr. Connelly was named as Vice
President long-range planning and international business.

ALBERT E. FERRARA, JR. has served as vice President - Strategic Planning of USX
since 1997. From 1994 to 1997, Mr. Ferrara served as the President of USX Realty
Development, an affiliate of USX.

DAVID BLITZER was elected as a director of Republic in September 1998. Mr.
Blitzer is a Senior Managing Director of the Blackstone Group, L.P., which he
joined in 1991. He also currently serves on the board of directors of Haynes
International, Inc., Imperial Home Decor Group, Inc., Volume Services America,
Inc. and Volume Services, Inc.

ITEM 11.  EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth for the fiscal years ended December 31, 2000,
1999, and 1998, the compensation paid by the Company and its affiliates to its
Chief Executive Officer and each of its three most highly compensated executive
officers:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                                                                                               ALL OTHER
        NAME AND PRINCIPLE POSITION            YEAR            SALARY($)         BONUS($)     COMPENSATION
                                                                                                 ($)(b)
-------------------------------------------------------------------------------------------------------------
<S>                                            <C>             <C>            <C>                    <C>
Joseph F. Lapinsky                             2000            $394,145          $125,000            $29,023
Chief Executive Officer, President & Chief     1999            $275,000           $36,675             $2,640
Operating Officer (a)                          1998            $229,160       (c)$363,075                N/A
-------------------------------------------------------------------------------------------------------------
Thomas N. Tyrrell                              2000             $66,667          $187,500           $735,448
Former Chief Executive Officer (a)             1999            $400,000           $75,000             $3,840
                                               1998            $367,000          $175,000             $4,620
-------------------------------------------------------------------------------------------------------------
John G. Asimou                                 2000            $225,346           $93,750             $3,619
Executive Vice President and General           1999            $225,000           $52,500             $2,160
Manager, Cold Finished Bar Division            1998            $191,250           $87,500             $2,525
-------------------------------------------------------------------------------------------------------------
Stephen Graham                                 2000            $230,000        (d)$20,000            $33,431
Executive Vice President & Chief Financial     1999                 N/A               N/A                N/A
Officer (a)                                    1998                 N/A               N/A                N/A
-------------------------------------------------------------------------------------------------------------
Charles T. Cochran                             2000            $160,246           $31,250            $10,341
Vice President, Commercial-Cold Finished       1999            $160,000           $25,825             $8,220
                                               1998            $156,244           $89,745            $13,529
-------------------------------------------------------------------------------------------------------------
John B. George                                 2000            $145,462           $43,750             $7,457
Vice President, Finance and Treasurer          1999            $145,000           $18,375            $18,366
                                               1998            $117,327           $32,295            $10,094
-------------------------------------------------------------------------------------------------------------
</TABLE>

(a)      Mr. Tyrrell resigned from the Company in February 2000. Mr. Lapinsky
         was named Chief Executive Officer at that time.


                                       30
<PAGE>   31


         Mr. Graham joined the Company in February 2000.
(b)      The amounts set forth in this column for Messrs. Lapinsky and Asimou
         include amounts of annual premiums paid by the Company under group term
         life insurance for such officers. The life insurance carries a maximum
         value of four times base salary for Mr. Lapinsky (beginning in 2000),
         and two times base salary for each other officer (and for Mr. Lapinsky
         in 1999), and has no cash surrender value. This column also includes
         severance received by Mr. Tyrrell who is no longer employed by Republic
         Technologies International, LLC.
(c)      In fiscal 1998, Mr. Lapinsky received a retention bonus of $83,075 and
         signing bonuses totaling $280,000 upon assuming his new positions with
         Bar Tech and Republic.
(d)      Mr. Graham received a bonus of $20,000 in 2000 in conjunction with his
         hiring.

EMPLOYMENT AGREEMENTS

Mr. Lapinsky entered into an employment agreement effective in March 2000. This
agreement will continue in effect until December 31, 2004, unless either Mr.
Lapinsky or the Company gives written notice of termination no later than
September 30, 2001. If no such notice is given, the agreement automatically
extends for an additional 12-month period ending December 31, subject to
additional annual extentions. The annual base salary specified in Mr. Lapinsky's
contract is currently $495,000, as well as, an annual increase based on
performance. Mr. Lapinsky was also entitled to receive an annual bonus, which
will be no less than $150,000.

Mr. Graham entered into an employment agreement with Republic Technologies
International effective January 10, 2000. The employment agreement for Mr.
Graham will continue until September 30, 2000, and will renew annually
thereafter each October 1st for one-year renewal terms unless terminated by Mr.
Graham, or the Company at least 90 days prior to the expiration date. The annual
base salary of Mr. Graham is currently $230,000 with a provision for an annual
increase based on performance. Mr. Graham was also entitled to receive an annual
bonus, which will be no less than $75,000 for 2000.

Mr. Asimou entered into an employment agreement with BarTech and Republic
effective October 1, 1998. This agreement will continue until September 30,
2001, and will renew annually thereafter each October 1st for one-year renewal
terms unless terminated by Mr. Asimou, or the Company at least 90 days prior to
the expiration date. The annual base salary for Mr. Asimou currently is
$236,250, also the Employment Agreement provides for an annual increase based on
performance. Mr. Asimou was entitled to receive an annual bonus, which would be
no less than $75,000 for fiscal years 1999 and 2000.

As a result of signing the Employment Agreements, Mr. Asimou forfeited his
rights to prior vested and unvested options to purchase common stock of the
Company.

DIRECTORS' COMPENSATION AND CONSULTING ARRANGEMENTS

The Company's directors receive no remuneration for serving as directors. All
directors are reimbursed for reasonable expenses incurred in attending director
meetings.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Republic Technologies is a limited liability company whose managing member is
Republic Technologies International, Inc. A number of material arrangements
relating to the voting or disposition of equity securities of Republic
Technologies International, Inc. and Republic Technologies are included in an
equityholders agreement, described under Item 13, "Certain Relationships and
Related Party Transactions". Except as indicated below, the following table sets
forth information as to the approximate beneficial ownership of the voting
securities of Republic Technologies International, Inc. after the consummation
of the Combination, assuming exercise of outstanding warrants, conversion of
outstanding convertible


                                       31
<PAGE>   32

preferred stock and exchange by USX and Kobe of their membership interests in
the Company into Republic Technologies, Inc. common stock, by the following:

         -    owners of more than 5% of the outstanding equity;
         -    each of the Company's directors and named executive officers;
              and
         -    all of the Company's executive officers and directors as a
              group.

The following table does not take into account options that are expected to be
granted to management in the future. Blackstone has the right to appoint a
majority of the directors of Republic Technologies International, Inc. for so
long as it beneficially owns at least 25% of the fully diluted common stock of
Republic Technologies International, Inc. Except as indicated in the footnotes
to this table, the Company believes that the persons named in the table have
sole voting and investment power with respect to all equity interests shown as
beneficially owned by them. Unless otherwise indicated below, the address for
each of our beneficial owners is c/o Republic Technologies International
Holdings, LLC, 3770 Embassy Parkway, Akron, Ohio 44333-8367.


<TABLE>
<CAPTION>
                                                                                 OWNERSHIP OF REPUBLIC
                                                                                   TECHNOLOGIES, INC.
                                                                            ------------------------------
                                                                              NUMBER OF        PERCENTAGE
NAME                                                                          SHARES(#)         OWNED(%)
----                                                                          ----------        ---------
<S>                                                                          <C>                   <C>
Blackstone Management Associates II L.L.C. ("BMA II")(1)(6)                  12,110,808            52.2%
 345 Park Avenue
  New York, New York 10154
Veritas Capital Management L.L.C. ("VCM")(2)                                  3,678,970            15.8%
  660 Madison Avenue
  New York, New York 10021
USX Corporation(3)                                                            3,989,457            17.2%
  600 Grant Street
  Pittsburgh, Pennsylvania 15219
Kobe Steel, Ltd.(4)                                                             927,790             4.0%
  10-26 Wakinohama Cho
  2 Chome Chuo-ku
  Kobe City Hyogo
FirstEnergy Services Corp.(5)                                                   429,478             1.9%
  76 South Main Street
  Akron, Ohio 44308
Joseph F. Lapinsky                                                                   --               --
Stephen Graham                                                                       --               --
John B. George                                                                       --               --
Richard C. Lappin(1)(6)                                                      12,110,808            52.2%
Robert Friedman(1)(6)                                                        12,110,808            52.2%
David Blitzer(1)(6)                                                          12,110,808            52.2%
Lynn R. Williams                                                                     --               --
Albert E. Ferrara, Jr.                                                               --               --
John Connelly                                                                        --               --
R. Jeffrey Pollock                                                                   --               --
All directors and named executive officers as a group (23 persons)(6)        15,789,778            68.0%
</TABLE>

(1)  BMA II's beneficial ownership interest in the Company is held indirectly
     through Republic Technologies, Inc. BMA II beneficially owns all of the
     536,829 outstanding shares of Class B common stock of Republic
     Technologies, Inc., 393,701, or approximately 73.3%, of the total 536,865
     outstanding shares of Class C common stock of Republic Technologies, Inc.
     and 2,147,388, or approximately 67.3%, of the total 3,191,637 outstanding
     shares of Class D common stock of Republic Technologies, Inc. Of BMA II's
     Class B common stock, 423,132 shares are held directly by BRW Steel
     Holdings, L.P., a Delaware limited partnership initially organized by
     persons associated with Veritas in connections with the initial formation
     of BarTech, and 113,697 shares are held by BRW Steel Offshore Holdings,
     L.P., a Delaware limited partnership initially organized by persons
     associated


                                       32
<PAGE>   33


     with Blackstone and Veritas in connection with Blackstone's initial
     investment in BarTech. Blackstone, a Delaware limited partnership for which
     BMA II is the sole general partner, is the Class B general partner of BRW
     Steel Holdings, and pursuant to the limited partnership agreement of BRW
     Steel Holdings exercises all voting and dispositive powers with respect to
     the Class B common stock held by BRW Steel Holdings. BMA II controls the
     Class B general partners of BRW Steel Offshore Holdings, and pursuant to
     the limited partnership of BRW Steel Offshore Holdings, exercises all
     voting and dispositive powers with respect to the Class B common stock held
     by BRW Steel Offshore Holdings. Accordingly, because BMA II has voting and
     dispositive control with respect to all of the shares of Class B common
     stock held by these partnerships, it may be deemed to beneficially own
     these shares. The shares of Class C and Class D common stock beneficially
     owned by BMA II are held directly by Blackstone Capital Partners II
     Merchant Banking Fund, Blackstone Family Investment Partnership II L.P.,
     Delaware limited partnerships for which BMA II is the sole general partner,
     and Blackstone Offshore Capital Partners II L.P., a Cayman Islands exempted
     limited partnership for which BMA II is the general partner with voting and
     dispositive power. Accordingly, BMA II may be deemed to beneficially own
     all of the shares of Class C and Class D common stock held by Blackstone
     Capital Partners II Merchant Banking Fund, Blackstone Offshore Capital
     Partners II L.P. and Blackstone Family Investment Partnership II. Messers.
     Peter G. Peterson and Stephen A. Schwarzman are the founding members of BMA
     II and control BMA II. Accordingly, they may be deemed to share beneficial
     ownership of the shares of Republic Technologies, Inc. held by BMA II,
     although they disclaim this beneficial ownership. In connection with the
     restructuring of July 2000, 15 million warrants, convertible to one share
     each of common stock were issued. BMA II owns 9,032,890 or approximately
     60.2% of the total warrants.

(2)  VCM's beneficial ownership interest in the Company is held indirectly
     through Republic Technologies, Inc. VCM beneficially owns 196,410, or
     approximately 66.5%, of the total 295,199 outstanding shares of Class A
     common stock of Republic Technologies, Inc. (which includes outstanding
     warrants for 91,609 shares of Class A common stock), 143,164, or
     approximately 26.7% of the total 536,865 outstanding shares of Class C
     common stock of Republic Technologies, Inc. and 732,878, or approximately
     23.0%, of the total 3,191,637 outstanding shares of Class D common stock of
     Republic Technologies, Inc. Of VCM's Class A common stock, 154,811 shares
     are held directly by BRW Steel Holdings, L.P., a Delaware limited
     partnership initially organized by persons associated with VCM in
     connection with the initial formation of BarTech, and 41,599 shares are
     held by BRW Steel Offshore Holdings, L.P., a Delaware limited partnership
     initially organized by persons associated with Blackstone and Veritas in
     connection with Blackstone's initial investment in BarTech. BRW Partners,
     Inc., a Delaware corporation controlled by the principals of VCM, is the
     Class A general partner of both BRW Steel Holdings and BRW Steel Offshore
     Holdings, and pursuant to the limited partnership agreements of these
     partnerships, exercises all voting and dispositive powers with respect to
     the Class A common stock held by these partnerships. Accordingly, because
     VCM has voting and dispositive control with respect to all of the shares of
     Class A common stock held by these partnerships, it may be deemed to
     beneficially own these shares. The shares of Class C common stock
     beneficially owned by VCM are held directly by BRW Steel Holdings II, L.P.,
     a Delaware limited partnership, and Veritas Capital, L.L.C. and KDJ,
     L.L.C., each Delaware limited liability companies. The general partner of
     BRW Steel Holdings II is BRW Partners, L.L.C., a limited liability company
     controlled by VCM. Each of Veritas Capital and KDJ are also controlled by
     VCM. Accordingly, VCM may be deemed to beneficially own all of these shares
     of Class C common stock. The shares of Class D common stock beneficially
     owned by VCM are held directly by The Veritas Capital Fund, L.P., a
     Delaware limited partnership of which VCM controls the general partner with
     voting and dispositive power. Accordingly, VCM may be deemed to
     beneficially own all of the shares of Class D common stock held by The
     Veritas Capital Fund. The beneficial ownership number for VCM does not
     include .06% of the fully diluted common stock held by an investor that is
     related to, but not an affiliate of, VCM.

(3)  USX's beneficial ownership interest in the Company is held directly by USX
     Republic Technologies Holdings, Inc., a Delaware corporation and an
     indirect subsidiary of USX. Under the equityholders agreement described
     under Item 13, "Certain Relationships and Related Party Transactions", USX
     may exchange its ownership interests in the Company for Class D common
     stock and warrants of Republic


                                       33
<PAGE>   34


     Technologies, Inc. at any time after consummation of the Transactions, and
     under some circumstances may be required to do so by Blackstone. The
     Company has assumed such exchange in the above table.

(4)  Kobe's beneficial ownership interest in the Company is held directly by
     Kobe Republic Technologies Holdings, Inc., a Delaware corporation and an
     indirect subsidiary of Kobe. Under the equityholders agreement described
     under Item 13, "Certain Relationships and Related Party Transactions", Kobe
     may exchange its ownership interests in the Company for Class D common
     stock and warrants of Republic Technologies, Inc. at any time after
     consummation of the Transactions, and under some circumstances may be
     required to do so by Blackstone. The Company has assumed such exchange in
     the above table.

(5)  In connection with the consummation of the Transactions, FirstEnergy or its
     affiliate purchased 30 thousand shares of the Class C Convertible Preferred
     Stock of Republic Technologies, Inc., which shares are immediately
     convertible, at the option of FirstEnergy, into the indicated number of
     shares of Republic Technologies, Inc. common stock beneficially owned by
     FirstEnergy. The conversion of FirstEnergy's shares has been assumed in the
     table above.

(6)  Messrs. Lappin, Friedman and Blitzer are affiliated with Blackstone in the
     capacities described under Item 10, "Directors and Executive Officers".
     Messrs. Lappin, Friedman and Blitzer disclaim beneficial ownership of any
     equity of the Company or Republic Technologies, Inc. beneficially owned by
     BMA II.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

MASTER RESTRUCTURING AGREEMENT

The Combination was effected pursuant to a master restructuring agreement
entered into among Republic Technologies International, Inc., the Company,
Republic Technologies International, LLC, Blackstone, Veritas, USX, Kobe and
various of their affiliates and related investors. The master restructuring
agreement contains customary representations, warranties, covenants and
indemnities. Indemnification claims under the master restructuring agreement are
generally satisfied through adjustments to our owners' relative ownership
interests.

EQUITYHOLDERS' AGREEMENT

The following are descriptions of the Company's equityholders' agreement prior
to the Petition Date. All such agreements are subject to the outcome of the
Chapter 11 proceedings.

In connection with the completion of the Combination, Republic Technologies
International Inc., Blackstone, Veritas, USX, Kobe, FirstEnergy, various of
their affiliates and other equityholders of Republic Technologies International,
Inc. entered into an equityholders agreement regarding their ownership of the
Company's equity and the common stock of Republic Technologies International
Inc.

Election of Directors. The equityholders agreement provides that the parties
will vote their shares of Republic Technologies International Inc. common stock
to elect a board of directors that includes the following individuals:

    -        six directors designated by Blackstone;
    -        two directors designated by Veritas;
    -        two directors designated by USX;
    -        two directors designated by Kobe; and
    -        one director designated by the United Steelworkers union.

In each of the cases above other than the United Steelworkers, the right to
designate one or more directors is subject to decrease or termination if the
respective party's ownership level falls below thresholds specified in the
equityholders agreement. In addition, for so long as Blackstone is entitled to
designate six


                                       34
<PAGE>   35

directors, it has the right upon its request to appoint additional directors so
as to obtain majority board control.

Fundamental Matters. Until the third anniversary of an initial public offering
of Republic Technologies International, Inc. common stock and provided that each
of USX and Kobe maintains specified equity ownership levels, the consent of each
of USX and Kobe is required for Republic Technologies International, Inc. to
take specified actions, which, subject to various exceptions, include the
following:

     -   entering into or modifying specified types of material contracts
         between Republic Technologies International, Inc. and affiliates of
         Blackstone or Veritas;
     -   issuing equity interests in Republic Technologies International, Inc.
         and its subsidiaries, other than specified allowances for management
         incentives, strategic transactions and an initial public offering;
     -   incurring indebtedness other than pursuant to the Combination-related
         transactions, refinancings of indebtedness existing at the time of the
         Combination or otherwise permitted to be incurred by the equityholders
         agreement, indebtedness pursuant to undrawn commitments under existing
         credit facilities, and other incremental indebtedness not to exceed
         $500 million;
     -   other than pursuant to Republic Technologies International, Inc.'s
         existing capital expenditures budget, making annual capital
         expenditures in excess of $50 million during the period ending August
         13, 2004;
     -   merging Republic Technologies International, Inc. with or into any
         other entity, or the acquisition of the capital stock or assets of any
         other person, subject to various exceptions; and
     -   selling two-thirds or more of the consolidated assets of Republic
         Technologies International, Inc., subject to various exceptions.

In addition, USX and Kobe generally have the right in connection with an initial
public offering of Republic Technologies International, Inc. common stock to
purchase additional shares in the public offering to the extent necessary to
maintain their ownership percentage.

Exchange Events. Each of the affiliates of USX and Kobe that initially hold
interests in the Company have the right, subject to specified requirements, to
exchange the interests then owned by it for shares of Class D common stock of
Republic Technologies International, Inc. In addition, these parties are also
entitled to receive in the exchange warrants designed to mitigate the dilutive
effect of the warrants issued with the outstanding Senior Secured Notes issued
by Republic Technologies and RTI Capital Corp. and other Republic Technologies
International, Inc. warrants. If these exchanges are completed, Republic
Technologies International, Inc. will own 100% of Holdings. Blackstone also
generally may require these exchanges to occur upon an initial public offering
of the common stock of Republic Technologies International, Inc.

Transfers of Common Stock. Unless an initial public offering of Republic
Technologies International, Inc.'s common stock has occurred, transfers of
common stock prior to August 13, 2004 require the consent of Blackstone, except
for transfers:

          (1) to an affiliate,
          (2) pursuant to the "tag-along" provision discussed below,
          (3) pursuant to the "drag-along" provision discussed below,
          (4) after three years following the closing of the Combination,
              transfers subject to a right of first offer on the part of
              Blackstone and,
          (5) pursuant to the exercise of the registration rights discussed
              below.

The equityholders' agreement also provides that, without the prior consent of
Blackstone, USX and Kobe may only transfer equity interests in the Company to
each other or to Republic Technologies International, Inc.

Tag-Along Rights. The equityholders' agreement grants to the parties the right,
subject to specified conditions, in connection with a proposed transfer of
common stock by either Blackstone or Veritas, to


                                       35
<PAGE>   36

require the proposed transferee to purchase a proportionate percentage of the
shares owned by the other parties, as applicable, at the same price and upon the
same economic terms.

Drag-Along Rights. So long as Blackstone owns 31% or more of the outstanding
common stock of Republic Technologies International, Inc. on a fully diluted
basis, Blackstone has the right, subject to specified conditions, in connection
with an offer by a third party to purchase all of the outstanding shares of
common stock of Republic Technologies International, Inc. held by the parties,
to require the other parties to transfer all shares owned by them to this third
party at the same price and on the same economic terms as the offer accepted by
Blackstone.

Registration Rights. The equityholders agreement gives Blackstone the right to
"demand" that Republic Technologies International, Inc. register its shares
under the federal securities laws on three separate occasions. The
equityholders' agreement also grants three "demand" registrations to USX, three
"demand" registrations to Kobe, one "demand" registration to FirstEnergy and,
subject to conditions, three "demand" registrations to Veritas. The demand
registration rights granted to USX, Kobe, FirstEnergy and Veritas may, with
limited exceptions, generally only be exercised after an initial public offering
of Republic Technologies International, Inc. common stock has occurred. In
addition, the equityholders agreement grants "piggyback" registration rights to
each of the equityholders each time Republic Technologies, Inc. files a
registration statement in connection with a sale of common stock, except for
registration statements relating to

         (1) shares underlying management options,
         (2) the offering contemplated by the new labor agreement with the
             United Steelworkers union or
         (3) an initial public offering consisting only of primary shares.

PAYMENT OF FEES AND EXPENSES

From April 1996 to August 13, 1999, Blackstone and Veritas received annual
monitoring fees from BarTech equal to approximately $.9 million per year
pursuant to a monitoring agreement. Under the terms of the monitoring agreement,
Blackstone and Veritas provided management and financial monitoring services to
BarTech. Blackstone and Veritas have split the monitoring fees paid evenly
between them. Blackstone and Veritas have also been reimbursed by BarTech for
their out-of-pocket expenses incurred in providing such services.

In connection with the acquisition of Republic in 1998, RES Holding paid
transaction fees of $3.4 million to Blackstone and $.8 million to Veritas and
reimbursed them for all related out-of-pocket expenses. In addition, pursuant to
a monitoring agreement entered into with RES Holding, Blackstone and Veritas
were entitled to receive an annual monitoring fee for providing management and
financial monitoring services equal to approximately $1.1 million, with
Blackstone receiving 75% and Veritas receiving 25% of this monitoring fee.
Blackstone and Veritas have also been reimbursed by RES Holding and Republic for
their out-of-pocket expenses incurred in providing these services. Approximately
$2.4 million of accrued but unpaid BarTech and RES Holding monitoring fees were
paid following the Combination.

In connection with the Combination, the Company paid transaction fees in the
aggregate of $4.0 million to Blackstone, Veritas, USX and affiliates of Kobe. In
addition, the Company reimbursed Blackstone, Veritas, USX and Kobe for their
out-of-pocket expenses related to the Combination. Upon consummation of the
Combination, the Company entered into a new monitoring agreement with
Blackstone, Veritas, USX and Kobe that replaced the existing monitoring
agreements regarding BarTech and Republic, with the parties to receive an
aggregate annual fee of $4.0 million.

In addition, in the future, Blackstone, Veritas, USX and Kobe or their
affiliates may receive customary fees for other advisory and transactional
services rendered to the Company. If such services are rendered in the future,
the fees will be negotiated from time to time on an arms-length basis and will
be based on the services performed and the fees charged to third parties for
comparable services.


                                       36
<PAGE>   37

SALES TO AND AGREEMENTS WITH BLACKSTONE AFFILIATES

During the year ended December 31, 2000 and the year ended December 31, 1999,
the Company had approximately $112.9 million and $97.8 million, respectively, of
net sales to American Axle & Manufacturing, a company controlled by Blackstone.
All such sales were in the ordinary course of business and on arms-length terms.

AGREEMENTS WITH USX, KOBE, FIRSTENERGY AND THEIR AFFILIATES

In connection with the Combination, the Company entered into the following
agreements with USX, Kobe and FirstEnergy (another equity investor in the
Company's parent) or their affiliates:

ROUND SUPPLY AGREEMENT
----------------------
The Company entered into a five-year supply agreement with USX and the new
tubular steel company owned by USX, which provides for the tubular joint venture
purchasing all of its requirements for steel rounds at its Lorain, Ohio pipemill
from the Company up to a maximum of 400,000 tons per year for a price equal to
the Company's production costs plus an agreed upon margin per ton. The tubular
company also has the right to purchase up to an additional 200,000 tons per year
for a price equal to the Company's fixed production costs plus an agreed upon
margin per ton. If the tubular company is unable to purchase at least 400,000
tons of steel rounds per year for its Lorain, Ohio pipemill, USX is required to
purchase any shortfall, under specified circumstances, to satisfy the steel
round requirements of its Fairfield, Alabama pipemill facility that can not be
satisfied from USX's internal production of steel rounds. The Company sold
$184.6 million of seamless rounds to USX in the year ended December 31, 2000.

COKE SUPPLY AGREEMENT
---------------------
The Company entered into a five-year supply agreement with USX, which provides
that Republic Technologies purchase substantially all of its requirements for
coke for use in its Lorain, Ohio blast furnace from USX. The purchase price for
coke is based on market prices and adjusted annually, subject to most favored
nations provisions for price and other conditions, which allow the Company to
receive the most favorable terms that USX grants to any of its coke customers.
The Company purchased $69.6 million worth of coke from USX in the year ended
December 31, 2000.

PELLET SUPPLY AGREEMENT
-----------------------
Under this agreement, the Company agreed to purchase all of its iron ore pellet
requirements for its Lorain, Ohio blast furnace from USX for a period of five
years. The purchase price for pellets is generally based on market prices and
will be adjusted annually, subject to most favored nations provisions for price
and other conditions, which allow the Company to receive the most favorable
terms that USX grants to any of its pellet customers. The Company purchased
$93.5 million of iron ore pellets from USX in the year ended December 31, 2000.

TECHNOLOGY TRANSFER AGREEMENTS
------------------------------
The Company entered into technology transfer and related agreements with Kobe
and one of its affiliates which provides the Company with a license to use
various Kobe technology and requires Kobe to provide the Company with various
technical assistance in return for annual payments to Kobe of approximately $1.0
million.

SAFE HARBOR LEASE MATTERS AGREEMENT
-----------------------------------
Pursuant to the master restructuring agreement, the Company received certain
property formerly owned by USS/Kobe that qualifies as "Safe Harbor Lease
Property," thus affording USX and Kobe with tax benefits. The Safe Harbor Lease
Matters Agreement contains covenants and warranties to ensure that the property
remains qualified as Safe Harbor Lease Property and to ensure the continuation
of the tax benefits.

ENERGY MANAGEMENT AGREEMENT
---------------------------
In connection with the consummation of the Combination, the Company entered into
an agreement with FirstEnergy under which it appointed FirstEnergy as its
exclusive representative for the procurement of energy supply and services. As a
result of this arrangement, it is likely that much of the Company's energy


                                       37
<PAGE>   38

purchasing requirements will eventually be filled by FirstEnergy. Also in
connection with the consummation of the Combination, FirstEnergy purchased $30
million of the Series C convertible preferred stock of Republic Technologies
International, Inc.

In connection with the Combination, the Company also entered into an agreement
with the new tubular steel company owned by USX regarding the provision of
various utilities and an agreement with USX regarding the provision of various
transitional services. In addition, at the closing of the Combination, the
Company entered into an agreement with USX regarding payment of certain payables
owed by USS/KOBE Steel Company to USX.



                                       38
<PAGE>   39



                                     PART IV

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

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

                  Independent Auditors' Report

                  Consolidated/Combined Statements of Operations - For the Year
                  Ended December 31, 2000, the Periods From August 13, 1999 to
                  December 31, 1999 and January 1, 1999 to August 12, 1999, and
                  the Year Ended December 31, 1998

                  Consolidated Balance Sheets - December 31, 2000 and 1999

                  Consolidated/Combined Statements of Members'
                  Interest/Stockholders' Deficit - For the Year Ended December
                  31, 1998, the Periods From January 1, 1999 to August 12, 1999
                  and August 13, 1999 to December 31, 1999, and the Year Ended
                  December 31, 2000

                  Consolidated/Combined Statements of Cash Flows - For the Year
                  Ended December 31, 2000, the Periods From August 13, 1999 to
                  December 31, 1999 and January 1, 1999 to August 12, 1999, and
                  the Year Ended December 31, 1998

                  Notes to Consolidated/Combined Financial Statements - For the
                  Year Ended December 31, 2000, the Periods From August 13, 1999
                  to December 31, 1999 and January 1, 1999 to August 12, 1999,
                  and the Year Ended December 31, 1998

(a) (2)  Financial Statement Schedule

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

                           Schedule II - Valuation and Qualifying Accounts

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

(a) (3)  Exhibits

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

         2.1*                Master Restructuring Agreement, dated as of August
                             13, 1999, among Republic Technologies, Inc., RES
                             Holding Corporation ("RES Holding"), Republic
                             Engineered Steels, Inc ("Republic"), Blackstone
                             Capital Partners II Merchant Banking Fund L.P.
                             ("BCP II"), Blackstone Offshore Capital Partners II
                             L.P. ("BOCP II"), Blackstone Family Investment
                             Partnership II L.P. ("BFIP II"), The Veritas
                             Capital Fund L.P. ("Veritas Fund"), HVR Holdings,
                             LLC ("HVR"), USX Corporation ("USX"), Kobe Steel,
                             Ltd. ("Kobe"), Kobe Delaware Inc. ("Kobe
                             Delaware"), USS Lorain Holding Company, Inc. ("USS
                             Lorain"), USX Republic Technologies Holdings, Inc.
                             ("USX Holdings"), Kobe/Lorain Inc. ("Kobe/Lorain"),
                             Kobe Republic Technologies Holdings Inc. ("Kobe
                             Holdings"), Republic


                                       39
<PAGE>   40


                             Technologies International, LLC, Lorain Tubular
                             Company, LLC ("Lorain Tubular") and USS/Kobe Steel
                             Company ("USS/Kobe SteelCo").

         3.1*                Limited Liability Company Agreement of Republic
                             Technologies International Holdings, LLC

         4.1*                Indenture, dated as of August 13, 1999, Republic
                             Technologies International, LLC, Republic
                             Technologies Capital Corp. ("Republic Technologies
                             CapCo."), Republic Technologies International, Inc.
                             ("Republic Technologies, Inc."), Nimishillen &
                             Tuscarawas, LLC ("N&T"), Bliss & Laughlin, LLC
                             ("B&L"), Canadian Drawn Steel Company, Inc.
                             ("CDSC"), and United States Trust Company of New
                             York, as Trustee.

         4.2*                Form of 13 3/4% Senior Secured Note due 2009,
                             Series B (included in Exhibit 4.1)

         4.3*                Notes Exchange and Registration Rights Agreement,
                             dated as of August 13, 1999, among Republic
                             Technologies International, LLC, Republic
                             Technologies CapCo, Republic Technologies, N&T,
                             B&L, CDSC, Chase, DLJ and BBRS.

         4.4*                Security Agreement, dated as of August 13, 1999,
                             among Republic Technologies International, LLC,
                             Republic Technologies CapCo, Republic Technologies
                             International Holdings, LLC, N&T, B&L, CDSC and the
                             United States Trust Company of New York, as
                             Collateral Agent.

         4.5*                Form of Mortgage, Assignment of Leases, Security
                             Agreement and Fixture Filing, dated as of August
                             13, 1999, by Republic Technologies International,
                             LLC, to United States Trust Company of New York, as
                             Mortgagee.

         4.6*                Master Pledge Agreement, dated as of August 13,
                             1999, among Republic Technologies International,
                             LLC, Republic Technologies CapCo, Republic
                             Technologies International Holdings, LLC, N&T, B&L,
                             CDSC and United States Trust Company of New York,
                             as Collateral Agent.

         4.7*                Amended and Restated Intercreditor and
                             Subordination Agreement, dated as of August 13,
                             1999, among United States Trust Company of New
                             York, as Collateral Agent, United States Trust
                             Company of New York, as Trustee, the Pennsylvania
                             Lenders (as defined therein), BankBoston, N.A., as
                             Agent, Republic Technologies International, LLC,
                             Republic Technologies International Holdings, LLC,
                             Republic Technologies CapCo, N&T, B&L and CDSC.

         4.8*                Pledge Intercreditor Agreement, dated as of August
                             13, 1999, among the Secured Parties (as defined
                             therein) and United States Trust Company of New
                             York, as Collateral Agent.

         10.1*               Revolving Credit Agreement, dated as of August 13,
                             1999, among Republic Technologies International,
                             LLC, BankBoston, N.A., as Administrative Agent and
                             Co-Book Manager, Bank of America, N.A, as
                             Syndication Manager and Co-Book Manager, The Chase
                             Manhattan Bank , as Documentation Agent and Co-Book
                             Manager, the Lending Institutions Named Therein,
                             and BBRS and Bank of America, N.A., as
                             Co-Arrangers.


                                       40

<PAGE>   41


         10.2*               Security Agreement, dated as of August 13, 1999,
                             among Republic Technologies International, LLC,
                             Republic Technologies International Holdings, LLC,
                             Republic Technologies CapCo, N&T, B&L, CDSC and
                             BankBoston, N.A.

         10.3*               Trademark Collateral Security and Pledge Agreement,
                             dated as of August 13, 1999, between Republic
                             Technologies International, LLC and BankBoston,
                             N.A.

         10.4*               Patent Collateral Security and Pledge Agreement,
                             dated as of August 13, 1999, between Republic
                             Technologies International, LLC and BankBoston,
                             N.A.

         10.5*               Canadian Security Agreement, dated as of August 13,
                             1999, between CDSC and BankBoston, N.A.

         10.6*               Assignment of Intellectual Property, dated as of
                             August 13, 1999, by CDSC to BankBoston, N.A.

         10.7*               Open-End Mortgage, Security Agreement, Assignment
                             of Rents, Income and Proceeds, dated as of August
                             13, 1999, from Republic Technologies International,
                             LLC to BankBoston, N.A.

         10.8*               Amended and Restated Equityholders Agreement, dated
                             as of August 13, 1999, among BCP II, BOCP II, BFIP
                             II, Veritas Fund, Veritas Capital, LLC, KDJ, LLC,
                             BRW Steel Holdings, L.P., BRW Steel Holdings II,
                             L.P., BRW Steel Offshore Holdings, L.P., Republic
                             Technologies International, LLC, Inc., RES Holding,
                             Republic Technologies International Holdings, LLC,
                             USX, USX Holdings, Kobe Delaware, Kobe, Kobe
                             Holdings, HVR, Sumitomo Corporation of America,
                             FirstEnergy Services Corp., Triumph Capital
                             Investors II, L.P., TCI-II Investors, L.P., First
                             Dominion Capital, LLC, TCW Leveraged Income Trust,
                             L.P., TCW Leveraged Income Trust II, L.P., TCW
                             Shared Opportunity Fund, L.P., Shared Opportunity
                             Fund IIB, LLC, Shared Opportunity Fund III, LLC,
                             and the other equityholders named therein.

         10.9*               Round Supply Agreement, dated as of August 13,
                             1999, between Republic Technologies International,
                             LLC and USX.

         10.10*              Master Energy Services and Supply Agreement, dated
                             as of August 13, 1999, between Republic
                             Technologies International, LLC and FirstEnergy
                             Services Corp.

         10.11*              Transition, Administration and Utilities Services
                             Agreement, dated as of August 13, 1999, between
                             Lorain Tubular and Republic Technologies
                             International, LLC.

         10.12*              Letter Agreement, dated August 13, 1999, among
                             Republic Technologies International, LLC and USX.

         10.13*              Letter Agreement, dated August 13, 1999, among
                             Republic Technologies International, LLC, Lorain
                             Tubular, Kobe and USX.

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


                                       41
<PAGE>   42


                             Technologies International, LLC and BRW Steel
                             Corporation-Johnstown. (Filed as exhibit to the
                             Registration Statement on Form S-4 of Bar
                             Technologies Inc. (SEC Registration No. 333-4254)
                             and incorporated by reference and made a part
                             hereof.)

         10.15               Amendment No. 1 to the Master Agreement dated
                             September 21, 1994, by and among the Commonwealth
                             of Pennsylvania, acting by and through the
                             Department of Commerce, the Pennsylvania Industrial
                             Development Authority, the Commonwealth of
                             Pennsylvania, acting by and through the Department
                             of Community Affairs, the Johnstown Industrial
                             Development Corporation, the County of Cambria, the
                             City of Johnstown and Republic Technologies
                             International, LLC. (Filed as exhibit to the
                             Registration Statement on Form S-4 of Bar
                             Technologies Inc. (SEC Registration No. 333-4254)
                             and incorporated by reference and made a part
                             hereof.)

         10.16*              Amendment No. 2 to the Master Agreement dated
                             August 1999 among the Johnstown Industrial
                             Development Corporation, the County of Cambria, the
                             City of Johnstown and Republic Technologies
                             International, LLC.

         10.17               Economic Development Partnership Loan Agreement
                             dated September 21, 1994, between the City of
                             Johnstown and Republic Technologies International,
                             LLC. (Filed as exhibit to the Registration
                             Statement on Form S-4 of Bar Technologies Inc. (SEC
                             Registration No. 333-4254) and incorporated by
                             reference and made a part hereof.)

         10.18               Economic Development Set-Aside Loan Agreement dated
                             as of July 6, 1995, between the City of Johnstown
                             and Republic Technologies International, LLC.
                             (Filed as exhibit to the Registration Statement on
                             Form S-4 of Bar Technologies Inc. (SEC Registration
                             No. 333-4254) and incorporated by reference and
                             made a part hereof.)

         10.19               Economic Development Set-Aside Loan Agreement dated
                             July 6, 1995, between the City of Johnstown and
                             Republic Technologies International, LLC. (Filed as
                             exhibit to the Registration Statement on Form S-4
                             of Bar Technologies Inc. (SEC Registration No.
                             333-4254) and incorporated by reference and made a
                             part hereof.)

         10.20               Section 108 Loan Agreement dated July 20, 1994, by
                             and between the City of Johnstown, the County of
                             Cambria and Republic Technologies International,
                             LLC. (Filed as exhibit to the Registration
                             Statement on Form S-4 of Bar Technologies Inc. (SEC
                             Registration No. 333-4254) and incorporated by
                             reference and made a part hereof.)

         10.21               Amendment No. 1 to Section 108 Loan Agreement,
                             dated August 1994, by and among the City of
                             Johnstown, the County of Cambria and Republic
                             Technologies. (Filed as exhibit to the Registration
                             Statement on Form S-4 of Bar Technologies Inc. (SEC
                             Registration No. 333-4254) and incorporated by
                             reference and made a part hereof.)

         10.22               Community Development Block Grant Loan Agreement
                             dated November 3, 1995, between Cambria County and
                             Republic Technologies International, LLC. (Filed as
                             exhibit to the Registration Statement on Form S-4
                             of Bar Technologies Inc. (SEC Registration No.
                             333-4254) and incorporated by reference and made a
                             part hereof.)


                                       42
<PAGE>   43

         10.23               BID Loan Agreement dated March 12, 1996, between
                             Johnstown Industrial Development Corporation and
                             Republic Technologies International, LLC. (Filed as
                             exhibit to the Registration Statement on Form S-4
                             of Bar Technologies Inc. (SEC Registration No.
                             333-4254) and incorporated by reference and made a
                             part hereof.)

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

         10.25               Trust Indenture dated as of October 1, 1994,
                             between BankOne, Columbus, N.A. ("BankOne") and the
                             Ohio Water Development Authority (the "Authority").
                             (Filed as an exhibit to Quarterly Report on Form
                             10-Q of Republic Engineered Steels, Inc. for the
                             quarter ended September 30, 1994 and incorporated
                             by reference and made a part hereof.)

         10.26               Trust Indenture dated as of June 1, 1996, between
                             BankOne and the Authority. (Filed as an exhibit to
                             Annual Report on Form 10-K of Republic Engineered
                             Steels, Inc. for the fiscal year ended June 30,
                             1996 and incorporated by reference and made a part
                             hereof.)

         10.27               Loan Agreement dated as of October 1, 1994, between
                             Republic Technologies and the Authority. (Filed as
                             an exhibit to Quarterly Report on Form 10-Q of
                             Republic Engineered Steels, Inc. for the quarter
                             ended September 30, 1994 and incorporated by
                             reference and made a part hereof.)

         10.28               Loan Agreement dated as of June 1, 1996, between
                             Republic Technologies International, LLC and the
                             Authority. (Filed as an exhibit to Annual Report on
                             Form 10-K of Republic Engineered Steels, Inc. for
                             the fiscal year ended June 30, 1996 and
                             incorporated by reference and made a part hereof.)

         10.29               Project Note dated October 1, 1994, by Republic
                             Technologies International, LLC to the Trustee.
                             (Filed as an exhibit to Quarterly Report on Form
                             10-Q of Republic Engineered Steels, Inc. for the
                             quarter ended September 30, 1994 and incorporated
                             by reference and made a part hereof.)

         10.30               Project Note dated June 1, 1996, by Republic
                             Technologies International, LLC to the Trustee.
                             (Filed as an exhibit to Annual Report on Form 10-K
                             of Republic Engineered Steels, Inc. for the fiscal
                             year ended June 30, 1996 and incorporated by
                             reference and made a part hereof.)

         10.31               Project Bond dated October 1, 1994, issued by the
                             Authority. (Filed as an exhibit to Quarterly Report
                             on Form 10-Q of Republic Engineered Steels, Inc.
                             for the quarter ended September 30, 1994 and
                             incorporated by reference and made a part hereof.)

         10.32               Project Bond dated as of June 1, 1996, issued by
                             the Authority. (Filed as an exhibit to Annual
                             Report on Form 10-K of Republic Engineered Steels,
                             Inc. for the fiscal year ended June 30, 1996 and
                             incorporated by reference and made a part hereof.)


                                       43
<PAGE>   44

         10.33*              Participation Agreement dated as of August 13,
                             1999, between Republic Technologies International,
                             LLC and USX.

         10.34               Employment Agreement dated October 1, 1998, between
                             the Company and Mr. Joseph Lapinsky, President and
                             Chief Operating Officer. (Filed as exhibit to
                             Annual Report on Form 10-K of Bar Technologies Inc.
                             for the fiscal year ended January 2, 1999 and
                             incorporated by reference and made a part hereof.)

         10.35               Employment Agreement dated October 1, 1998, between
                             the Company and Mr. John Asimou, Executive Vice
                             President and General Manager, Cold-Finished Bar
                             Division. (Filed as exhibit to Annual Report on
                             Form 10-K of Bar Technologies Inc. for the fiscal
                             year ended January 2, 1999 and incorporated by
                             reference and made a part hereof.)

         10.36*              Employment Agreement, dated July 1, 1999, between
                             Republic Technologies International, LLC and Mr.
                             George F. Babcoke.

         10.37*              Master Collective Bargaining Agreement dated as of
                             September 30, 1998 among Republic Technologies
                             International, LLC, Republic Technologies
                             International Holdings, LLC and the United
                             Steelworkers of America (the "USWA").

         10.38*              1999 Settlement Agreement, dated as of August 2,
                             1999, between BarTech, Republic, Republic
                             Technologies International, LLC and the USWA.

         10.39*              Agreement dated as of November 2, 1998, between
                             Pension Benefit Guaranty Corporation and RES
                             Holding.

         10.40*              Transaction and Monitoring Fee Agreement dated
                             August 13, 1999, among Blackstone Management
                             Partners L.P., Veritas, USX, Kobe and Republic
                             Technologies International, LLC.

         10.41**             Amendment No. 3 to the Revolving Credit Agreement
                             among Republic Technologies International, LLC,
                             International Holdings, LLC, Republic Technologies
                             Capital Corp., Bliss & Laughlin, LLC, CDSC,
                             Nimishillen & Tuscarawas, LLC and Fleet National
                             Bank (f/k/a BankBoston, N.A.) dated July 17, 2000.

         10.42**             Amendment to the Memorandum of Understanding dated
                             November 2, 1998 between Republic Technologies
                             International, LLC and the PBGC, dated December 29,
                             1999.

         10.43**             Second Amendment to the Memorandum of Understanding
                             dated November 2, 1998 between Republic
                             Technologies International, LLC and the PBGC, dated
                             March 15, 2000.

         10.44**             Third Amendment to the Memorandum of Understanding
                             dated November 2, 1998 between Republic
                             Technologies International, LLC and the PBGC, dated
                             March 22, 2000.

         10.45**             Fourth Amendment to the Memorandum of Understanding
                             dated November 2, 1998 between Republic
                             Technologies International, LLC and the PBGC, dated
                             March 29, 2000.


                                       44
<PAGE>   45


         10.46**             Fifth Amendment to the Memorandum of Understanding
                             dated November 2, 1998 between Republic
                             Technologies International, LLC and the PBGC, dated
                             March 31, 2000.

         10.47**             Sixth Amendment to the Memorandum of Understanding
                             dated November 2, 1998 between Republic
                             Technologies International, LLC and the PBGC, dated
                             April 12, 2000.

         10.48**             Seventh Amendment to the Memorandum of
                             Understanding dated November 2, 1998 between
                             Republic Technologies International, LLC and the
                             PBGC, dated June 28, 2000.

         10.49**             Eighth Amendment to the Memorandum of Understanding
                             dated November 2, 1998 between Republic
                             Technologies International, LLC and the PBGC, dated
                             July 14, 2000.

         10.50**             Subordinated Credit Agreement among Republic
                             Technologies International, LLC (as Borrower),
                             Blackstone, USX RTI Holdings, Inc., Sumitomo
                             Corporation of America, Triumph Capital Investors
                             II, L.P. and First Dominion Capital, LLC (as
                             Lenders) dated July 17, 2000.

         10.51               Debtor-in-Possession Revolving Credit Agreement
                             among Republic Technologies International, LLC,
                             Fleet Capital Corporation, Bank of America, N.A.,
                             and The Chase Manhattan Bank dated April 3, 2001

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

         21*                 Subsidiaries of the Registrant.


         *        Filed as an exhibit to the Registration Statement on Form S-4
                  (File No. 333-90709) of Republic Technologies International,
                  LLC and Republic Technologies Capital Corp, as co-issuers, and
                  Republic Technologies International Holdings, LLC and the
                  other guarantors named therein and incorporated by reference
                  and made a part hereof.

         **       Filed as an exhibit to the Form 10-Q (File No. 333-90709-04)
                  of Republic Technologies International Holdings, LLC for the
                  three and six month periods ended June 30, 2000.




(b) Reports on Form 8-K
         None







                                       45
<PAGE>   46


                                   SIGNATURES

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

                              Republic Technologies International Holdings, LLC
                              -------------------------------------------------
                                                 (Registrant)

Date: May 16, 2001                         By: /s/ Joseph F. Lapinsky
                                               ----------------------
                                                  Joseph F. Lapinsky
                                                  Chief Executive Officer,
                                                    President and Chief
                                                    Operating Officer

         By: /s/ Joseph A. Kaczka          By: /s/ Stephen Graham
             --------------------              ------------------
                Joseph A. Kaczka                   Stephen Graham
                Vice President, Finance,           Executive Vice President and
                  Controller and Chief              Chief Financial Officer
                  Accounting Officer

                                POWER OF ATTORNEY

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

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on May 8, 2001.


/s/ Joseph F. Lapinsky                           /s/ Robert Friedman
----------------------                           -------------------
     Joseph F. Lapinsky, Chief Executive             Robert Friedman, Director
         Officer, President, Chief Operating
         Officer and Director                    /s/ David Blitzer
                                                 -----------------
                                                     David Blitzer, Director

/s/ Richard C. Lappin                            /s/ Lynn R. Williams
---------------------                            -------------------
    Richard C. Lappin, Chairman and Director         Lynn R. Williams, Director

                                                 /s/ John Connelly
                                                     John Connelly, Director

/s/ Albert E. Ferrara, Jr.                       /s/ Stephen Graham
--------------------------                       ------------------
    Albert E. Ferrara, Jr., Director                 Stephen Graham,
                                                     Executive Vice President
                                                     and Chief Financial
                                                     Officer




                                       46
<PAGE>   47





INDEPENDENT AUDITORS' REPORT

To the Board of Directors of
Republic Technologies International Holdings, LLC

We have audited the accompanying consolidated balance sheets of Republic
Technologies International Holdings, LLC and subsidiaries (the "Company") as of
December 31, 2000 and 1999, and the related consolidated statements of
operations, members' interest, and cash flows for the year ended December 31,
2000 and the period from August 13, 1999 to December 31, 1999. We have also
audited the combined statements of operations, stockholders' deficit, and cash
flows of the Predecessor, Bar Technologies Inc. and Republic Engineered Steels,
Inc. while under common ownership and common management, for the period from
January 1, 1999 to August 12, 1999 and the year ended December 31, 1998. Our
audits also included the financial statement schedule for the years ended
December 31, 2000, 1999 and 1998 listed in the Index at Item 14(a)(2). These
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.

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

In our opinion, such financial statements present fairly, in all material
respects, the consolidated financial position of the Company as of December 31,
2000 and 1999, and the consolidated results of its operations and its cash flows
for the year ended December 31, 2000 and for the period from August 13, 1999 to
December 31, 1999, and the combined results of operations and cash flows of the
Predecessor for the period from January 1, 1999 to August 12, 1999 and the year
ended December 31, 1998 in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, such financial
statement schedule for the years ended December 31, 2000, 1999 and 1998, when
considered in relation to the basic consolidated/combined financial statements
taken as a whole, presents fairly in all material respects the information set
forth therein.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1, the
Company's recurring losses and negative cash flows from operations, current
liabilities in excess of current assets, and voluntary petitions filed on
April 2, 2001 for protection under Chapter 11 of the Federal Bankruptcy Code
raise substantial doubt about its ability to continue as a going concern.
Management's plans concerning these matters are also described in Note 1. The
accompanying consolidated financial statements do not include adjustments
relating to the recovery and classification of asset carrying amounts or the
amount and classification of liabilities that might result from the outcome of
this uncertainty.



/s/ DELOITTE & TOUCHE LLP

Cleveland, Ohio
May 11, 2001


                                       47
<PAGE>   48

       REPUBLIC TECHNOLOGIES INTERNATIONAL HOLDINGS, LLC AND SUBSIDIARIES
                 CONSOLIDATED/COMBINED STATEMENTS OF OPERATIONS
    For the Year Ended December 31, 2000, the Periods From August 13, 1999 to
  December 31, 1999 and January 1, 1999 to August 12, 1999, and the Year Ended
                               December 31, 1998
                            (In thousands of dollars)

<TABLE>
<CAPTION>
                                                              The Company - Consolidated      The Predecessor - Combined
                                                              ---------------------------     ---------------------------
                                                                             Period From      Period From
                                                              Year Ended    August 13, 1999  January 1, 1999  Year Ended
                                                              December 31,  to December 31,  to August 12,    December 31,
                                                                 2000             1999            1999            1998
                                                              -----------     -----------     -----------     -----------
<S>                                                           <C>             <C>             <C>             <C>
Net sales                                                     $ 1,265,401     $   527,580     $   525,326     $   484,864
Cost of goods sold (including freight expense of
     $24,593; $7,646; $12,455; and $12,294, respectively)       1,140,750         550,435         498,342         483,911
                                                              -----------     -----------     -----------     -----------

Gross profit (loss)                                               124,651         (22,855)         26,984             953

Selling, general and administrative expense                        54,709          50,013          32,491          38,007

Monitoring fees (Note 13)                                           4,000           1,500           1,331           1,367

Depreciation and amortization expense                              61,475          20,492          21,889          16,107

Special charges:

   Workforce reduction charges (Note 10)                              753          35,180          42,065          18,708

   Restructuring charges (Note 18)                                 74,658               -               -               -

   Goodwill impairment charge (Note 19)                            79,608               -               -               -

Loss (gain) on sale of assets                                      (4,790)              -               -               -

Other (income) expense, net                                         6,678           7,233            (144)         (2,903)
                                                              -----------     -----------     -----------     -----------

Operating loss                                                   (152,440)       (137,273)        (70,648)        (70,333)

Interest expense, net                                             117,495          45,317          43,845          43,222
                                                              -----------     -----------     -----------     -----------

Loss before income taxes                                         (269,935)       (182,590)       (114,493)       (113,555)

Provision for income taxes (Note 11)                                  468             434             420               3
                                                              -----------     -----------     -----------     -----------

Loss from continuing operations                                  (270,403)       (183,024)       (114,913)       (113,558)

Loss from disposition of discontinued operations (Note 16)         16,831           6,378               -               -
                                                              -----------     -----------     -----------     -----------

Loss before extraordinary item                                   (287,234)       (189,402)       (114,913)       (113,558)

Extraordinary loss from early
   extinguishment of debt (Note 4)                                      -          23,874               -               -
                                                              -----------     -----------     -----------     -----------
Net loss                                                      $  (287,234)    $  (213,276)       (114,913)       (113,558)
                                                              ===========     ===========      -----------     -----------

Preferred stock dividends                                                                             224             385
                                                                                              -----------     -----------
Net loss applicable to common shares                                                          $  (115,137)    $  (113,943)
                                                                                              ===========     ===========
</TABLE>

The accompanying notes are an integral part of these statements.









                                       48
<PAGE>   49
       REPUBLIC TECHNOLOGIES INTERNATIONAL HOLDINGS, LLC AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2000 AND 1999
                            (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                                                 December 31,    December 31,
                                                                     2000            1999
                                                                 -----------     -----------
<S>                                                              <C>             <C>
ASSETS

Current assets:
        Cash and cash equivalents                                $     1,795     $     4,637
        Accounts receivable, less allowances of $25,210 and
        $27,237, respectively                                        129,278         157,166
        Inventories (Note 5)                                         271,154         284,668
        Assets held for sale (Note 16)                                 9,306          15,219
        Prepaid expenses and other current assets                     11,389           7,907
                                                                 -----------     -----------

Total current assets                                                 422,922         469,597

Property, plant and equipment:
        Land and improvements                                         15,039          15,875
        Buildings and improvements                                    35,126          43,032
        Machinery and equipment                                      716,437         736,300
        Construction-in-progress                                      13,802          25,361
                                                                 -----------     -----------

Total property, plant and equipment                                  780,404         820,568

Accumulated depreciation                                            (102,492)        (56,802)
                                                                 -----------     -----------

Net property, plant and equipment                                    677,912         763,766

Assets held for sale (Note 16)                                         7,294           9,009

Intangible assets, net of accumulated amortization                    79,783         163,479
        of $15,842 and $11,203, respectively (Notes 6 and 19)

Other assets                                                           9,173           9,406
                                                                 -----------     -----------

Total assets                                                     $ 1,197,084     $ 1,415,257
                                                                 ===========     ===========
</TABLE>


The accompanying notes are an integral part of these statements.

                                       49
<PAGE>   50


       REPUBLIC TECHNOLOGIES INTERNATIONAL HOLDINGS, LLC AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2000 AND 1999
                            (IN THOUSANDS OF DOLLARS)


<TABLE>
<CAPTION>
                                                                        December 31,          December 31,
                                                                            2000                  1999
                                                                        -----------           -----------
<S>                                                                       <C>                   <C>
LIABILITIES AND MEMBERS' INTEREST

Current liabilities:
       Accounts payable                                                   $ 234,811             $ 196,050
       Accrued interest                                                      34,220                26,494
       Accrued compensation and benefits                                     38,310                50,162
       Other postretirement benefits (Note 10)                               15,794                15,365
       Defined benefit pension obligations (Note 10)                         20,854                42,000
       Accrued environmental liabilities (Note 15)                            3,668                 4,035
       Other accrued liabilities                                             63,127                53,564
       Current maturities of long-term debt (Note 7)                         11,318                 2,391
       Revolving credit facility (Note 8)                                   329,398               336,397
                                                                        -----------           -----------
Total current liabilities                                                   751,500               726,458

Long-term debt (Note 7)                                                     502,254               481,062
Other postretirement benefits (Note 10)                                     217,620               207,186
Defined benefit pension obligations (Note 10)                                69,089                53,562
Accrued environmental liabilities (Note 15)                                  15,933                17,373
Other liabilities                                                            43,101                40,758
                                                                        -----------           -----------
Total liabilities                                                         1,599,497             1,526,399

Mandatory redeemable members' interest - Class A Units                        3,800                 5,500

Members' interest:
       Class B Units                                                       (435,689)             (146,594)
       Class C Units                                                         32,125                30,625
       Accumulated other comprehensive loss                                  (2,649)                 (673)
                                                                        -----------           -----------
Total members' interest                                                    (406,213)             (116,642)
                                                                        -----------           -----------

Total liabilities and members' interest                                 $ 1,197,084           $ 1,415,257
                                                                        ===========           ===========
</TABLE>

The accompanying notes are an integral part of these statements.


                                       50
<PAGE>   51
<TABLE>

                                 REPUBLIC TECHNOLOGIES INTERNATIONAL HOLDINGS, LLC AND SUBSIDIARIES
                             CONSOLIDATED/COMBINED STATEMENTS OF MEMBERS' INTEREST/STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1998, THE PERIODS FROM JANUARY 1, 1999 TO AUGUST 12, 1999 AND AUGUST 13, 1999 TO DECEMBER 31, 1999,
                                                AND THE YEAR ENDED DECEMBER 31, 2000
                                                      (IN THOUSANDS OF DOLLARS)

<CAPTION>
                                           Republic Technologies
                                              International                              Bar Technologies Inc.
                                              Holdings, LLC          -------------------------------------------------------------
                                       ---------------------------   Series B     Class A     Class B       Class C
                                         Class B         Class C     Preferred     Common      Common       Common       Warrants
                                          Units           Units        Stock       Stock       Stock         Stock     Outstanding
                                       ----------        ---------  ---------     -------     --------      -------    -----------
<S>                                       <C>              <C>           <C>         <C>        <C>          <C>           <C>
Balance, January 1, 1998                                                 $ -         $ -        $ 1          $ 1       $ 5,119
 Initial capitalization of Republic
  on September 8, 1998                                                     -           -          -            -             -
 Net loss                                                                  -           -          -            -             -
 Other comprehensive income:
  Foreign currency translation
   adjustment                                                              -           -          -            -             -
  Minimum pension liability
   adjustment                                                              -           -          -            -             -
 Preferred stock dividends                                                -           -          -            -             -
                                                                   -----------------------------------------------------------------
 Balance, December 31, 1998                                                -           -          1            1         5,119
                                                                   -----------------------------------------------------------------
 Net loss                                                                  -           -          -            -             -
 Other comprehensive income:
  Foreign currency translation
   adjustment                                                              -           -          -            -             -
  Minimum pension liability
   adjustment                                                              -           -          -            -             -
 Preferred stock dividends                                                 -           -          -            -             -
                                      --------------------------------------------------------------------------------------------
 Balance, August 12, 1999                                                  -           -          1            1         5,119
                                      --------------------------------------------------------------------------------------------
 Exchange of members' interest to
  effect combination                       $ 67,468        $ 30,000        -           -         (1)          (1)       (5,119)
 Accrual of preferred return                   (786)            625        -           -          -            -             -
 Net loss                                  (213,276)              -        -           -          -            -             -
 Other comprehensive income:
  Foreign currency translation
   adjustment                                     -               -        -           -          -            -             -
                                      --------------------------------------------------------------------------------------------
 Balance, December 31, 1999                (146,594)         30,625        -           -          -            -             -
                                      --------------------------------------------------------------------------------------------
 Accrual of preferred return                 (1,861)          1,500        -           -          -            -             -
 Net loss                                  (287,234)              -        -           -          -            -             -
 Other comprehensive income:
  Foreign currency translation
   adjustment                                     -               -        -           -          -            -             -
  Minimum pension liability
   adjustment                                     -               -        -           -          -            -             -
                                      --------------------------------------------------------------------------------------------
 Balance, December 31, 2000               $(435,689)       $ 32,125      $ -         $ -        $ -          $ -           $ -
                                      ============================================================================================

<CAPTION>


                                       Republic                                                       Total
                                      Engineered                                 Accumulated         Members'
                                      Steels, Inc. Additional                       Other           Interest/
                                        Common      Paid-In      Accumulated     Comprehensive     Stockholders'      Comprehensive
                                        Stock       Capital        Deficit       Income (Loss)        Deficit         Income (Loss)
                                      ------------ ----------    -----------     -------------     -------------      -------------
<S>                                      <C>       <C>            <C>           <C>                <C>                <C>
Balance, January 1, 1998                           $ 63,055       $(116,061)        $ (494)         $ (48,379)
 Initial capitalization of Republic
  on September 8, 1998                    $ -        95,455               -              -             95,455
 Net loss                                   -             -        (113,558)             -           (113,558)        $ (113,558)
 Other comprehensive income:
 Foreign currency translation
  adjustment                                -             -               -           (697)              (697)              (697)
 Minimum pension liability
  adjustment                                -             -               -         (2,491)            (2,491)            (2,491)
  Preferred stock dividends                 -             -            (385)             -               (385)
                                      -----------------------------------------------------------------------         -----------
 Balance, December 31, 1998                 -       158,510        (230,004)        (3,682)           (70,055)        $ (116,746)
                                      -----------------------------------------------------------------------         ===========
 Net loss                                   -             -        (114,913)             -           (114,913)        $ (114,913)
 Other comprehensive income:
  Foreign currency translation
   adjustment                               -             -               -            157                157                157
  Minimum pension liability
   adjustment                               -             -               -          2,491              2,491              2,491
 Preferred stock dividends                  -             -            (224)             -               (224)
                                      -----------------------------------------------------------------------         -----------
 Balance, August 12, 1999                   -       158,510        (345,141)        (1,034)          (182,544)        $ (112,265)
                                      -----------------------------------------------------------------------         ===========
 Exchange of members' interest to
  effect combination                        -      (158,510)        345,141              -            278,978
 Accrual of preferred return                -             -               -              -               (161)
 Net loss                                   -             -               -              -           (213,276)        $ (213,276)
 Other comprehensive income:
  Foreign currency translation
   adjustment                               -             -               -            361                361                361
                                      -----------------------------------------------------------------------         -----------
 Balance, December 31, 1999                 -             -               -           (673)          (116,642)        $ (212,915)
                                      -----------------------------------------------------------------------         ===========
 Accrual of preferred return                -             -               -              -               (361)
  Net loss                                  -             -               -              -           (287,234)        $ (287,234)
  Other comprehensive income:
   Foreign currency translation
    adjustment                              -             -               -           (383)              (383)              (383)
   Minimum pension liability
    adjustment                              -             -               -         (1,593)            (1,593)            (1,593)
                                      -----------------------------------------------------------------------         -----------
 Balance, December 31, 2000               $ -           $ -             $ -       $ (2,649)        $ (406,213)        $ (289,210)
                                      =======================================================================         ===========
</TABLE>

The accompanying notes are an integral part of these statements.




                                       51
<PAGE>   52
<TABLE>
                                 REPUBLIC TECHNOLOGIES INTERNATIONAL HOLDINGS, LLC AND SUBSIDIARIES
                                           CONSOLIDATED/COMBINED STATEMENTS OF CASH FLOWS
                   FOR THE YEAR ENDED DECEMBER 31, 2000, THE PERIODS FROM AUGUST 13, 1999 TO DECEMBER 31, 1999 AND
                              JANUARY 1, 1999 TO AUGUST 12, 1999, AND THE YEAR ENDED DECEMBER 31, 1998
                                                      (IN THOUSANDS OF DOLLARS)

<CAPTION>
                                                                                     The Company -   The Predecessor - Combined
                                                                    The Company -   Consolidated    ---------------------------
                                                                    Consolidated     Period From      Period From
                                                                      Year Ended   August 13, 1999  January 1, 1999  Year Ended
                                                                     December 31,  to December 31,   to August 12,  December 31,
                                                                        2000            1999              1999         1998
                                                                     ------------  ---------------   ------------- -------------

<S>                                                                   <C>            <C>            <C>            <C>
Cash flows from operating activities:
    Net loss                                                          $(287,234)     $(213,276)     $(114,913)     $(113,558)
    Adjustments to reconcile net cash used
        in operating activities:
    Extraordinary loss from early extinguishment of debt (Note 4)             -         23,874              -              -
    Gain on sale of fixed assets                                         (4,790)             -              -              -
    Restructuring charges                                                74,658              -              -              -
    Goodwill impairment charge                                           79,608              -              -              -
    Depreciation and amortization                                        61,475         23,170         21,889         16,120
    Accretion of original issue discount                                  2,604            879          5,750          1,393
    Amortization of deferred financing cost                               4,114          4,138          1,483          2,819
    Changes in operating assets and liabilities:
        (Increase) decrease in accounts receivable                       27,888         70,712        (61,295)        (5,393)
        (Increase) decrease in inventory                                 12,681         (6,744)        (6,645)         6,992
        (Increase) decrease in prepaid assets                            (3,482)        10,052         (3,237)        (9,564)
        Increase (decrease) in accounts payable                          38,761        (81,847)       111,959          8,345
        Increase (decrease) in accrued compensation and
            benefits                                                    (11,852)        (1,290)         2,774         17,498
        Increase (decrease) in defined benefit pension
            obligations                                                  (7,212)        10,294         (3,140)        17,841
        Increase (decrease) in other postretirement benefits             10,863         14,184         14,720          6,070
        Increase (decrease) in accrued environmental liabilities         (1,807)         1,489          1,805           (689)
        Increase (decrease) in other current liabilities                (20,406)        17,408         (3,349)        12,942
     Other                                                               13,723        (11,893)       (23,228)        12,909
                                                                      ---------      ---------      ---------      ---------
NET CASH USED IN OPERATING ACTIVITIES                                   (10,408)      (138,850)       (55,427)       (26,275)
                                                                      ---------      ---------      ---------      ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures                                                (13,065)        (9,679)       (21,788)       (18,474)
    Disposition of property, plant and equipment                          9,009              -              -              -
    Acquisition, net of cash acquired                                         -         14,621              -       (154,260)
                                                                      ---------      ---------      ---------      ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                      (4,056)         4,942        (21,788)      (172,734)
                                                                      ---------      ---------      ---------      ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from long-term debt                                         30,000        419,950            387         83,780
    Net (payments)/proceeds under revolving credit facilities            (6,999)       272,025         80,816         25,350
    Repayments of long-term debt                                         (2,485)      (685,131)        (3,277)        (2,405)
    Preferred stock dividends                                                 -              -           (224)          (385)
    Redemption of class A members' interest                              (1,700)             -              -              -
    Payment of preferred return                                            (450)             -              -              -
    Deferred financing costs                                             (6,361)       (30,274)             -              -
    Proceeds from capital contributions                                       -        155,025              -         95,455
                                                                      ---------      ---------      ---------      ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                12,005        131,595         77,702        201,795
                                                                      ---------      ---------      ---------      ---------
Effect of exchange rate changes on cash                                    (383)           358            157           (229)

NET (DECREASE) INCREASE IN CASH AND CASH
    EQUIVALENTS                                                          (2,842)        (1,955)           644          2,557
Cash and cash equivalents - beginning of period                           4,637          6,592          5,948          3,391
                                                                      ---------      ---------      ---------      ---------
Cash and cash equivalents - end of period                             $   1,795      $   4,637      $   6,592      $   5,948
                                                                      =========      =========      =========      =========

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest                                                $  95,964      $  26,329      $  41,224      $  20,584
                                                                      =========      =========      =========      =========
Cash paid for income taxes                                            $   1,075      $     128      $     156      $     196
                                                                      =========      =========      =========      =========
</TABLE>

The accompanying notes are an integral part of these statements.




                                       52
<PAGE>   53


       REPUBLIC TECHNOLOGIES INTERNATIONAL HOLDINGS, LLC AND SUBSIDIARIES
               NOTES TO CONSOLIDATED/COMBINED FINANCIAL STATEMENTS
             FOR THE YEAR ENDED DECEMBER 31, 2000, THE PERIODS FROM
               AUGUST 13, 1999 TO DECEMBER 31, 1999 AND JANUARY 1,
                   1999 TO AUGUST 12, 1999, AND THE YEAR ENDED
                                DECEMBER 31, 1998
              (IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED)


NOTE 1 - NATURE OF OPERATIONS, ORGANIZATION, AND OTHER RELATED INFORMATION
         INCLUDING SUBSEQUENT EVENTS - PROCEEDINGS UNDER CHAPTER 11 OF THE
         BANKRUPTCY CODE

Republic Technologies International Holdings, LLC and subsidiaries ("Republic
Technologies" or the "Company") manufactures and markets special bar quality
("SBQ") steel products. SBQ steel products are high quality hot-rolled and
cold-finished carbon and alloy steel bars and rods used primarily in critical
applications in automotive and industrial equipment. The Company produces a wide
range of SBQ steel products and supplies a diverse customer base that includes
leading automobile and industrial equipment manufacturers and their first tier
suppliers.

The Company was formed in a combination completed on August 13, 1999 (the
"Combination"). The Combination was completed through a series of mergers, asset
transfers and related steps as set forth in a Master Restructuring Agreement
among Bar Technologies Inc. ("BarTech"), Republic Engineered Steels, Inc.
("Republic"), USS/Kobe Steel Company and various of their affiliates. Following
the Combination, Republic Technologies International, LLC, a newly formed legal
entity and a wholly owned subsidiary of the Company, directly or indirectly owns
and operates all of the assets of BarTech, Republic and USS/Kobe Steel Company's
SBQ steel products business ("USS/Kobe").

BarTech and Republic have been operated under common management and ownership
control since prior to the Combination. The consolidated financial statements of
Republic Technologies are being presented from the date of the Combination.
Comparative combined financial statements are being presented for BarTech and
Republic for the periods that they were under common control prior to the
Combination (the "Predecessor").

Republic has been under common management and control since September 8, 1998,
the date acquired. The acquisition of Republic has been accounted for as a
purchase. The combining of BarTech and Republic in the Combination is being
accounted for as a common control merger like a pooling of interests. The
acquisition of USS/Kobe as part of the Combination is being accounted for as a
purchase. See Note 4 for additional information related to the common control
combination of BarTech and Republic and information related to the acquisitions
of Republic and USS/Kobe.

The Company is in the process of exiting its Specialty Steel Division and
expects to complete the disposition during the second quarter of 2001 (see Note
16). The Company sold certain assets from its Baltimore plant in January 2001
and is currently in the process of selling the remaining real estate and assets
of the Specialty Steel Division. The Company is also attempting to sell real
estate and equipment at various locations throughout the organization, due to
the other various facility closings that have been announced.

For the year ended December 31, 2000 and the period from August 13, 1999 to
December 31, 1999, the Company reported net losses of $287.2 million and $213.3
million, respectively. Similarly, the Predecessor reported net losses of $114.9
million and $113.6 million for the period from January 1, 1999 to August 12,
1999 and the year ended December 31, 1998, respectively. Current liabilities
exceed current assets by $328.6 million at December 31, 2000. The Company is
highly leveraged, and certain recent developments have had a material adverse
effect on the Company's ability to service its debts. The industry-wide market
conditions, the Company's high level of indebtedness following the Combination,
and an overall softening of the U. S. economy has substantially diminished the
Company's liquidity, adversely impacted operations and undermined its ability to
implement strategic business initiatives in the short term.


                                       53
<PAGE>   54

On April 2, 2001 ("Petition Date"), Republic Technologies International, LLC,
and its immediate parent, Republic Technologies International Holdings, LLC, and
its subsidiaries, Bliss & Laughlin, LLC and RTI Capital Corp. (collectively,
"Debtors"), filed voluntary petitions for reorganization under Chapter 11
("Chapter 11") of the Federal Bankruptcy Code ("Bankruptcy Code") in the United
States Bankruptcy Court in the Northern District of Ohio, Eastern Division
("Court"). The Company's Canadian subsidiary, Canadian Drawn Steel Company,
Inc., and its subsidiary Nimishillen & Tuscarawas, LLC in the United States were
not included in the filing.

The Debtors are currently managing their affairs and operating their business as
debtors-in-possession while the Chapter 11 cases are pending. As
debtors-in-possession, the Debtors may not engage in transactions outside of the
ordinary course of business without approval, after hearing, of the Bankruptcy
Court. As part of the Chapter 11 cases, the Debtors will develop a
reorganization plan that will restructure their liabilities. A filing date for
such a plan has not been determined.

Under Chapter 11 proceedings, actions by creditors to collect claims in
existence at the filing date ("prepetition") are stayed ("deferred"), absent
specific Court authorization to pay such claims, while the Company continues to
manage the business as debtor-in-possession. The Company received approval from
the Court to pay or otherwise honor certain of its prepetition obligations,
including employee wages and certain employee benefits. The amount of the claims
to be filed by the creditors could be significantly different than the amount of
the liabilities recorded by the Company. The Company has many executory
contracts and other agreements that could be rejected during the Chapter 11
proceedings.

Under Chapter 11, the rights of and ultimate payments by the Company to
prepetition creditors and to equity investors may be substantially altered. This
could result in claims being liquidated in the Chapter 11 proceedings at less
(and possibly substantially less) than 100% of their face value and the equity
of the Company's equity investors being diluted or cancelled. The Company's
prepetition creditors and its equity investors will each have votes in the plan
of reorganization. The Company has not yet proposed a plan of reorganization.
Due to material uncertainties, it is not possible to determine the additional
amount of claims that may arise or ultimately be filed, or to predict the length
of time the Company will operate under the protection of Chapter 11, the outcome
of the Chapter 11 proceedings in general, whether the Company will continue to
operate under its current organizational structure, or the effect of the
proceedings on the business of the Company or its subsidiaries or on the
interests of the various creditors and security holders.

As a result of the Chapter 11 filings, Events of Default, as defined in the
related debt agreements, have occurred subsequent to December 31, 2000 with
respect to all of the Company's secured and undersecured debt.

On April 3, 2001, the Company has entered into a Debtor-in-Possession Revolving
Credit Agreement ("DIP Credit Agreement") with Fleet Capital Corporation ("Fleet
Capital") and other lenders who are parties thereto to provide secured
debtor-in-possession financing to the Company. The maximum borrowings under the
DIP Credit Agreement are $420 million in the aggregate and include a
sub-facility of $50 million for the issuance of letters of credit. Advances
under the DIP Credit Agreement bear interest at a base rate used by Fleet
Capital, plus the applicable margin; or a Eurodollar rate on deposits for a
given period, plus the applicable margin. The applicable margin on base rate
loans is 1.5% and on Eurodollar loans is 3.5%. The applicable margin on base
rate and Eurodollar loans may be increased by 2% under specified circumstances.
A borrowing base limits the amount available at any time. The DIP Credit
Agreement grants a security interest in accounts receivable, inventory,
intellectual property and related assets of the Company, and the real estate and
fixed assets comprising, and the Canton Ohio Caster and Continuing Rolling
Facility, including the related melt shop. The DIP Credit Agreement also
contains certain restrictive covenants which, among other things, restrict
Republic Technologies' ability to incur additional indebtedness or guarantee the
obligations of others, change its line of business, merge, consolidate and
acquire or sell assets or stock, pay dividends, or prepay or amend the notes or
any of its subordinated indebtedness. The Company is also required to maintain
minimum cumulative EBITDA as defined in the DIP Credit Agreement and limit its
net capital expenditures.


                                       54
<PAGE>   55

Although the Company has entered into the DIP Credit Agreement, the Company may
need to obtain additional financing to meet its cash flow requirements.
Restrictive covenants included in the debtor-in-possession credit facility and
oversight by the Bankruptcy Court limit the Company's ability to incur
additional indebtedness, or sell assets (most of which are pledged), and may
otherwise limit the operational and financial flexibility of the Company.

GOING CONCERN MATTERS - The accompanying consolidated/combined financial
statements have been prepared on a going concern basis of accounting and do not
reflect any adjustments that might result if the Company is unable to continue
as a going concern. The Company's recurring losses and negative cash flows from
operations, current liabilities in excess of current assets and the subsequent
Chapter 11 cases raise substantial doubt about the Company's ability to continue
as a going concern. As discussed above, management intends to submit a plan for
reorganization to the Bankruptcy Court. The ability of the Company to continue
as a going concern and appropriateness of using the going concern basis is
dependent upon, among other things, (i) the Company's ability to comply with
debtor-in-possession financing agreements, (ii) submission and confirmation of a
plan of reorganization under the Bankruptcy Code, (iii) the Company's ability to
achieve profitable operations after such confirmation, and (iv) the Company's
ability to generate sufficient cash from operations to meet its obligations.

Management believes that a plan of reorganization, as it is being developed and
subject to approval of the Bankruptcy Court, and the debtor-in-possession
financing, along with cash provided by operations, will provide sufficient
liquidity to allow the Company to continue as a going concern; however, there
can be no assurance that the sources of liquidity will be available or
sufficient to meet the Company's needs. The consolidated financial statements do
not include any adjustments relating to recoverability and classification of
recorded asset amounts or the amount and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.

FINANCIAL STATEMENT PRESENTATION - A plan of reorganization could materially
change the amounts currently recorded in the consolidated financial statements.
The accompanying consolidated/combined financial statements do not give effect
to any adjustment to the carrying value of assets or amounts and classifications
of liabilities that might be necessary as a result of resolving the bankruptcy.
For financial statement periods after April 2, 2001 (the Petition Date), the
Company's consolidated financial statements will be presented in accordance with
the AICPA Statement of Position 90-7, Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code. On confirmation of a plan of
reorganization, the Company expects to utilize "Fresh Start Accounting" in
accordance with the guidelines for accounting for emergence from bankruptcy.
Under Fresh Start Accounting, a revaluation of Company assets to reflect current
values can be expected.

NOTE 2 - BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

The accompanying consolidated/combined financial statements contain results for
BarTech for the years ended December 31, 2000 and 1999, and January 2, 1999, the
results for Republic for the years ended December 31, 2000 and 1999, and for the
period from September 8, 1998 to December 31, 1998, and the results for USS/Kobe
for the year ended December 31, 2000 and the period from August 13, 1999 to
December 31, 1999. Prior period results are not comparable with the current
periods due to the acquisitions of Republic on September 8, 1998 and USS/Kobe on
August 13, 1999.

The consolidated financial statements include the accounts of Republic
Technologies and its wholly owned subsidiaries. The combined financial
statements include the accounts of BarTech and its wholly owned subsidiaries and
Republic and its wholly owned subsidiaries for the periods that they were under
common control prior to the Combination. All significant intercompany balances
have been eliminated in consolidation.

The Company operates in three separate segments: hot-rolled, cold-finished and
specialty steels. In connection with the acquisition of Republic, the Company
determined its intent to sell the specialty steels segment of the business
("Specialty Steel Division"). The Company manages the reportable segments as
separate strategic business units. Differences between the segments include
manufacturing techniques and


                                       55
<PAGE>   56

equipment, competition and end-users. The Company sold certain assets from its
Baltimore specialty steel plant in January 2001 and is currently in the process
of selling the remaining real estate and assets of the Specialty Steel Division.
The accompanying consolidated/combined financial statements reflect the
Specialty Steel Division as a discontinued business in accordance with
Accounting Principles Board Opinion No. 30. See Note 16 for further information
related to discontinued operations.

The combination of USS/Kobe into Republic Technologies and the Republic
acquisition were accounted for as purchases as of their respective acquisition
dates. Under purchase accounting, the total purchase price of Republic has been
allocated to the assets acquired and liabilities assumed based on their
respective fair values as of September 8, 1998. The total purchase price of
USS/Kobe has been allocated to the assets acquired and liabilities assumed as of
August 13, 1999, based on their respective fair values, resulting in a reduction
in property, plant and equipment for the excess of the fair value of the net
assets of USS/Kobe over the purchase price (i.e., purchase discount). See Note 4
for further information related to business combinations.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS - The Company considers all short-term investments
with maturities at the date of purchase of three months or less to be cash
equivalents.

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

PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at cost
and include improvements that significantly extend the useful lives of existing
plant and equipment. The Company provides for depreciation of property, plant
and equipment on the straight-line method based upon the estimated useful lives
of the assets. The range of estimated useful lives of the Company's assets are
as follows:

                  Buildings and improvements         20 - 40 years
                  Land improvements                  10 - 20 years
                  Machinery and equipment             3 - 30 years

Repairs and maintenance costs are expensed as incurred. Capital expenditures
that cannot be put into use immediately are included in
construction-in-progress. As these projects are completed, they are transferred
to depreciable assets. Net gains or losses related to asset dispositions are
recognized in the Company's operating results in the period in which the
disposition occurs.

INTANGIBLE ASSETS - Intangible assets consist primarily of goodwill, trademarks,
patented and unpatented technology and other intangible assets arising from the
acquisitions of BarTech and Republic. Prior to the goodwill impairment charge
recorded during 2000 (see Note 19), goodwill was being amortized over the period
of expected benefit of 40 years. Other acquisition related intangible assets are
being amortized over the period of expected benefit ranging from 28 months to 40
years. Intangible assets also include deferred loan and bond fees. The deferred
loan and bond fees are being amortized using the effective interest rate method
over the lives of the related debt instruments.

IMPAIRMENT OF LONG-LIVED ASSETS - Long-lived assets, consisting of property,
plant and equipment and intangible assets, are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the recovery amount or fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.

INCOME TAXES - The Company is a limited liability company that is treated
similar to a partnership for U.S. federal and state income tax purposes and,
accordingly, has no income tax provision or deferred income tax


                                       56
<PAGE>   57

assets or liabilities related to these jurisdictions. Amounts for income taxes
consist primarily of a provision for foreign taxes relating to the Company's
Canadian subsidiary, Canadian Drawn Steel Company, Inc. ("CDSC"). Prior to the
Combination, the Predecessor accounted for income taxes pursuant to the asset
and liability method.

ENVIRONMENTAL COSTS - The Company and other steel companies have in recent years
become subject to increasingly stringent environmental laws and regulations. It
is the policy of the Company to endeavor to comply with applicable environmental
laws and regulations. The Company established a liability for an amount which
the Company believes is adequate, based on information currently available, to
cover costs of remedial actions it will likely be required to take to comply
with existing environmental laws and regulations.

The recorded amounts represent an estimate of the environmental remediation
costs associated with future events triggering or confirming the costs that, in
management's judgment, are likely to occur. This estimate is based on currently
available facts, existing technology, and presently enacted laws and
regulations, and it takes into consideration the likely effects of inflation and
other societal and economic factors. The precise timing of such events cannot be
reliably determined at this time due to absence of any deadlines for remediation
under the applicable environmental laws and regulations pursuant to which such
remediation costs will be expended. No claims for recovery are netted against
the stated amount.

MEMBERS' INTEREST - The Company has three classes of member interest units:
Class A, Class B and Class C. Class A units, which are mandatorily redeemable
and initially consisted of 1,100 units, have a stated value of $5,000 per unit
and carry a preferred return of $350 per unit, which is paid quarterly. Class B
units, consisting of 1,000 units, have no stated value and are allocated all net
income/loss after preferred returns have been allocated. Class C units,
consisting of 30,000 units have a stated value of $1,000 per unit and carry a
preferred return of 5% of stated value which is payable in kind or cash at the
Company's option. The accumulated and unpaid preferred return was $2.1 million
and $0.6 million at December 31, 2000 and 1999, respectively. Both Class A and C
units have distribution and dissolution preferences ahead of Class B units. The
mandatory redemption feature of the Class A units causes it to be classified in
the consolidated balance sheets outside of the members' interest section. During
2000, the Company redeemed $1.7 million of Class A members' interest.

REVENUE RECOGNITION - The Company records revenues at the time the product is
shipped to its customers. Sales are made with no right of return. Reserves are
established for estimated returns and allowances when revenues are recognized.

FOREIGN CURRENCY TRANSLATION - Asset and liability accounts of the Company's
foreign subsidiary, CDSC, are translated into U. S. dollars using current
exchange rates in effect at the balance sheet date and for revenue and expense
accounts using a weighted average exchange rate during the period. Translation
adjustments are reflected as a component of members' interest/stockholders'
deficit.

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

USE OF ESTIMATES - The preparation of financial statements, in conformity with
accounting principles generally accepted in the United States of America,
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

In preparation of the consolidated/combined financial statements included
herein, the Company uses estimates for, among others, defined benefit pension
obligations, other postretirement benefit obligations, environmental
remediation, shutdown reserves, and loss on discontinued operation, all of which
are significant to the consolidated/combined financial statements taken as a
whole. Changes in circumstances in the near term could have an impact on these
estimates, and the change in estimate could have a material effect on the
consolidated/combined financial statements.


                                       57
<PAGE>   58

NEW ACCOUNTING PRONOUNCEMENTS - Effective December 31, 2000, the Company adopted
Emerging Issues Task Force Issue No. 00-10, Accounting for Shipping and Handling
Fees and Costs. Accordingly, freight charges on shipments to customers are now
classified as cost of goods sold, whereas previously they were classified as an
offset to sales. All prior year amounts have been reclassified to conform to the
current presentation.

The Financial Accounting Standards Board (the "FASB") issued Statement of
Financial Accounting Standards No. 133 - "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133") in June 1998, and in June 2000, issued
Statement of Financial Accounting Standards No. 138 - "Accounting for Certain
Derivative Instruments and Certain Hedging Activities an amendment of FASB
Statement No. 133, which will now be effective for financial statements for all
quarters of all years beginning after June 15, 2000. The adoption of SFAS 133 as
of January 1, 2001 did not have an effect on the Company's results of operations
or financial position.

RECLASSIFICATIONS - Certain reclassifications have been made to prior period
financial statements to conform to current period presentation.

NOTE 4 - BUSINESS COMBINATIONS

On August 13, 1999, the Combination of BarTech, Republic and USS/Kobe was
completed. The Combination occurred through a series of mergers, asset transfers
and related steps that resulted in the formation of the Company. Assuming
exercise of outstanding warrants and conversion of outstanding convertible
preferred stock of the Company's parent and exchange of Members' Interests by
USX Corporation ("USX") and Kobe Steel, Ltd. ("Kobe"), Blackstone Capital
Partners II Merchant Banking Fund L.P. and its affiliates (together,
"Blackstone") indirectly owns approximately 52.15 percent and Veritas Capital
Fund, L.P. and its affiliates (together, "Veritas") indirectly owns
approximately 15.80 percent of the combined operations, while USX indirectly
owns approximately 17.18 percent and Kobe indirectly owns approximately 4.00
percent of the combined operations. In conjunction with the Combination, the
Company entered into a new credit facility and applied proceeds from borrowings
under this new credit facility, together with proceeds of an offering of the
senior secured notes and warrants, including warrants sold separately from the
senior secured notes concurrent with the Combination, and new equity
contributions, to refinance a substantial portion of the indebtedness of
Republic, RES Holding (Republic's parent), BarTech and USS/Kobe.

Combined and separate results of BarTech and Republic during the periods
preceding the Combination, while under common control, were as
follows:

<TABLE>
<CAPTION>
                                     BarTech          Republic      Adjustment    Combined
                                     -------          --------      ----------    --------

<S>                                   <C>               <C>                        <C>
Period from January 1, 1999
  to August 12, 1999:
    Net sales                         $157,523          $367,803            --     $525,326
    Net loss                           (25,279)          (89,634)           --     (114,913)


Year ended December 31, 1998:
    Net sales                         $279,311          $205,553            --     $484,864
    Net loss                           (41,978)          (47,277)     $(24,303)    (113,558)
</TABLE>


The combined financial results presented above include adjustments made to
conform accounting policies of the two companies. The only adjustment impacting
net loss was the restatement of Republic's cost of goods sold to change the
inventory accounting policy from last-in, first-out (LIFO) to first-in,
first-out (FIFO). The amount of intercompany profit in inventory at the end of
each period is not significant.


                                       58
<PAGE>   59

In connection with the combination of BarTech and Republic, the Company recorded
one-time charges for investment banking and professional fees in the period from
August 13, 1999 to December 31, 1999 of approximately $7.9 million. The
transaction costs related to the acquisition of USS/Kobe are included in the
purchase price.

The Company also recorded an extraordinary loss for call and tender offer
premiums, prepayment penalties and write-off of unamortized deferred financing
costs associated with the retirement of various borrowings of BarTech and
Republic refinanced in connection with the Combination during the period from
August 13, 1999 to December 31, 1999 of $23.9 million.

Blackstone and Veritas acquired control of Republic on September 8, 1998 for a
price of $7.25 per share of Republic common stock with the intent of combining
BarTech and Republic, subject to a refinancing of the combined companies' debt.
The purchase price totaled approximately $154,260, including transaction related
expenses and net of cash acquired of $4.0 million. RES Holding and its wholly
owned subsidiary, RES Acquisition were formed for the purpose of acquiring
Republic. The source of funds contributed to RES Acquisition consisted of (i) a
capital contribution of $95.5 million by RES Holding representing proceeds from
the issuance of its common stock to Blackstone, Veritas, and HVR Holdings,
L.L.C. and (ii) borrowings of approximately $65.0 million under a RES Holding
credit facility. RES Acquisition acquired control of Republic on September 8,
1998 and RES Acquisition merged with and into Republic on September 21, 1998.

The acquisition of Republic has been accounted for as a purchase and, pursuant
to the provisions of SEC Staff Accounting Bulletin No. 54 ("SAB No. 54") and the
rules of pushdown accounting, the acquisition gave rise to a new basis of
accounting. The purchase price and related acquisition expenses exceeded the
fair value of net assets acquired by $72.6 million and has been recognized as
goodwill to be amortized over 40 years. The results of Republic's operations are
included in the consolidated/combined financial statements from its September 8,
1998 acquisition date.

The acquisition of USS/Kobe has also been accounted for using the purchase
method of accounting. The purchase price for USS/Kobe totaled approximately
$102.7 million, including transaction costs and net of cash acquired of $14.6
million. Consideration in the transaction included equity to the sellers valued
at approximately $83.8 million and seller debt assumed of $23.8 million. Under
purchase accounting, the total purchase cost is allocated to the assets acquired
and liabilities assumed of USS/Kobe based on their respective fair values as of
August 12, 1999. The excess of the fair value of the net assets of USS/Kobe over
the purchase price (i.e., purchase discount) of $0.9 million has been recorded
as a reduction of property, plant and equipment.



                                       59
<PAGE>   60



The purchase price has been allocated to the assets purchased and liabilities
assumed based upon the fair values on the date of the acquisition as follows:

<TABLE>
<CAPTION>
                                                            Republic       USS/Kobe
                                                            ---------      ---------
<S>                                                         <C>
Purchase price:
  Cash consideration                                        $ 143,901
  Fair value of equity consideration                                       $  83,756
  Additional seller debt assumed                                              23,844
  Acquisition fees and expenses                                14,401          9,764
                                                            ---------      ---------
          Total purchase price                                158,302        117,364
  Book value of net assets acquired                            85,100        206,859
                                                            ---------      ---------
  Excess purchase price over (discount from) book value
    of net assets acquired                                     73,202        (89,495)

Allocation of purchase price:
  Increase in inventory                                       (16,980)        (3,290)
  Decrease in prepaids and other current assets                    --          1,077
  (Increase) decrease in property, plant and equipment         (6,729)         7,783
  (Increase) decrease in intangible and other assets          (39,352)         2,475
  Decrease in deferred tax asset                               54,829             --
  Decrease in accounts payable                                     --           (217)
  Increase in accrued expenses                                 10,848          8,388
  Increase in defined benefit pension obligation               41,357         26,247
  (Decrease) increase in other postretirement benefits        (45,344)        47,032
  Other, net                                                      726             --
                                                            ---------      ---------
Goodwill                                                    $  72,557          $  --
                                                            =========      =========
</TABLE>

The following pro forma information presents the consolidated results of
operations assuming the Combination was completed as of the beginning of January
1998:

<TABLE>
<CAPTION>
                                                  Year Ended December 31,
                                                  ------------------------
(in millions)                                        1999          1998
                                                  ----------    ----------

<S>                                               <C>           <C>
Net sales                                         $  1,327.7    $  1,592.0
Cost of goods sold (including freight expense
    of $20.1 and $12.3, respectively)                1,323.0       1,489.3
                                                  ----------    ----------

Gross profit                                             4.7         102.7

Selling, general and administrative
   expense                                              95.1          94.2

Depreciation and amortization expense                   64.2          75.5

Workforce reduction charges                             77.2          18.7

Other (income) loss, net                                 7.7          (3.3)
                                                  ----------    ----------

Operating loss                                        (239.5)        (82.4)

Interest expense, net                                  102.4          97.9

Provision for income taxes                                --            --
                                                  ----------    ----------
Net loss from continuing operations               $   (341.9)   $   (180.3)
                                                  ==========    ==========
</TABLE>




                                       60
<PAGE>   61



NOTE 5 - INVENTORIES

The components of inventories are as follows:

                                December 31, 2000       December 31, 1999
                                -----------------       -----------------

Raw materials                        $ 21,583             $ 64,055

Semi-finished and finished goods      249,571              220,613
                                     --------             --------

Total                                $271,154             $284,668
                                     ========             ========





At December 31, 2000 and 1999, inventories are net of market reserves and
obsolescence reserves aggregating $6.7 million and $13.6 million, respectively.

NOTE 6 - INTANGIBLE ASSETS

Intangible assets consisted of the following:

<TABLE>
<CAPTION>
                                                               December 31, 2000       December 31, 1999
                                                               -----------------       -----------------

<S>                                                               <C>                      <C>
Goodwill, net of accumulated amortization of $3,634 (Note 19)                              $ 81,783

Patented and unpatented technology, net of accumulated
     amortization of $9,706 and $5,546                            $ 45,594                   49,754

Deferred loan and bond fees, net of accumulated amortization
     of $6,136 and $2,023                                           34,189                   31,942
                                                                  --------                 --------
                                                                  $ 79,783                 $163,479
                                                                  ========                 ========
</TABLE>


                                       61
<PAGE>   62

NOTE 7 - LONG-TERM DEBT

Long-term debt of the Company consists of the following:

<TABLE>
<CAPTION>
                                                                                 December 31,  December 31,
                                                                                    2000          1999
                                                                                 ------------  ------------
<S>                                                                                <C>          <C>
REPUBLIC TECHNOLOGIES INTERNATIONAL, LLC:
   13 3/4% Senior Secured Notes, due July 15, 2009                                 $425,000     $425,000
   Johnstown Enterprise Grant, interest rate at 3%, due on various dates                391          429
       through November 15, 2009
    Financial Restructuring Notes, interest rate at 9.5%, due August 1, 2010         30,000           --
FORMER REPUBLIC:
   9% Solid Waste Revenue Bonds, Series 1996, due June 1, 2021                       53,700       53,700
   8 1/4% Solid Waste Revenue Bonds, Series 1994, due October 1, 2014                20,200       20,200
FORMER BARTECH:
   Business Infrastructure Development ( "BID ") Program, interest rate at            2,091        2,258
      3.0%, due on various dates through April 1, 2001
   Economic Development Partnership ( "EDP I "), interest rate at 3.0%, due           5,182        5,707
    on various dates through October 1, 2009
   Economic Development Partnership ( "EDP II "), interest rate at 3.0%,
      due on various dates through July 1, 2010                                       1,191        1,300
   Economic Development Partnership ( "EDP III "), interest rate at 3.0%,
      due on various dates through October 1, 2010                                    2,753        3,000
   Community Development Block Grant Program ("CDBG"), interest rate
      at 3.0%, due on various dates through July 1, 2010                                569          618
   Housing and Urban Development 108 ( "HUD ") Bonds, interest rates
      between 6.6% and 8.2%, due on various dates through September 26, 2003          3,150        4,500
   Industrial Revenue Bond ( "IRB "), interest rate is variable, calculated
      weekly, representing minimum rate required to sell bonds in a
      secondary market, due December 1, 2018                                          3,600        3,600
FORMER USS/KOBE:
   Environmental Bonds:
     1984 Series, interest due monthly at a variable rate based on the average
        of thirty-day yield evaluations at par of not less than twenty issuers
        of tax-exempt securities, principal due December 1, 2001                      9,000        9,000
     1995 Series, variable rate tax-exempt securities, principal due November
        16, 2015                                                                      4,745        4,745
                                                                                   --------     --------
                                                                                    561,572      534,057
Less original issue discount                                                         48,000       50,604
Less current maturities                                                              11,318        2,391
                                                                                   --------     --------
Long-term debt                                                                     $502,254     $481,062
                                                                                   ========     ========

</TABLE>

On April 2, 2001, Republic Technologies International, LLC and its immediate
parent, Republic Technologies International Holdings, LLC, and its subsidiaries,
Bliss & Laughlin, LLC and RTI Capital Corp., filed voluntary petitions for
reorganization under Chapter 11 of the Federal Bankruptcy Code in the United
States Bankruptcy Court in the Northern District of Ohio, Eastern Division.
Refer to Note 1 for further information related to this filing.

13 3/4% SENIOR SECURED NOTES
On August 13, 1999, Republic Technologies International, LLC and its subsidiary,
Republic Technologies Capital Corp., co-issued senior secured obligations
amounting to $425 million aggregate principal amount maturing on July 15, 2009
("Senior Secured Notes") in a private offering. Interest on the Senior Secured
Notes is payable semi-annually on each January 15 and July 15, commencing
January 15, 2000, to the holders of record of Senior Secured Notes at the close
of business on January 1 and July 1 immediately preceding such interest payment
date.



                                       62
<PAGE>   63

The Senior Secured Notes are redeemable, in whole or in part, at the option of
the issuers, at any time on or after July 15, 2004, at the redemption prices,
which are expressed as percentages of principal amount, set forth below, plus
accrued and unpaid interest and liquidated damages, if any, to the redemption
date, if redeemed during the 12-month period beginning on the years indicated
below:

YEAR                                                  PERCENTAGE
2004                                                   106.875%
2005                                                   105.156%
2006                                                   103.438%
2007                                                   101.719%
2008 and thereafter                                    100.000%

In addition, at any time and from time to time prior to July 15, 2002, the
issuers may, at their option, following one or more Public Equity Offerings (as
defined in the indenture related to the Senior Secured Notes (the "Indenture"))
redeem up to an aggregate of 35% of the principal amount of notes originally
issued from the holders, on a pro rata basis, at a redemption price equal to
113.750% of the principal amount thereof, plus accrued and unpaid interest and
liquidated damages, if any, to the date of redemption; provided at least 65%
aggregate principal amount of Senior Secured Notes would remain outstanding
immediately after giving effect to any such redemption; provided, further, that
if the Public Equity Offering is by Republic Technologies International, LLC,
the Company or any other direct or indirect parent company of the Company, the
net proceeds thereof shall have been contributed to Republic Technologies
International, LLC or used to buy Capital Stock (other than Disqualified Capital
Stock) (as such terms are defined in the Indenture) of Republic Technologies
International, LLC on or prior to the date of redemption.

The Senior Secured Notes are initially secured by, subject to exceptions and
limitations, (1) a first priority lien on, and security interest in,
substantially all of the real and personal properties of the Company and its
restricted subsidiaries, other than real and personal property located at the
Canton Ohio Caster and Continuing Rolling Facility ("Canton CR") and
Cartersville, Georgia facilities and inventory, accounts receivable,
intellectual property and related assets and (2) a first priority lien, shared
on an equal and ratable basis with the lenders of Republic Technologies
International, LLC's credit facility, on Republic Technologies' equity interests
and its restricted subsidiaries. Collateral is subject to release without
substitution under a number of circumstances. The Senior Secured Notes contain
affirmative and negative covenants including provisions for restrictions on
additional borrowings, certain investments, certain payments, sale or
disposition of assets, payment of dividends and change of control provisions.

The Senior Secured Notes are fully and unconditionally guaranteed on a senior
basis, jointly and severally, by the Company and by all of Republic Technologies
International, LLC's subsidiaries, except for Republic Technologies Capital
Corp., a co-issuer of the securities, and Oberlin Insurance Company ("OIC"). The
Company has no assets other than its investment in Republic Technologies
International, LLC. Separate condensed consolidating financial information of
the guarantor subsidiaries and non-guarantor subsidiaries is not presented as
the non-issuer, non-guarantor subsidiary represents less than one percent of the
Company's assets and revenues and the Company believes that such information is
not material to investors.

Financial Restructuring Notes
-----------------------------
In connection with the financial restructuring mentioned above, on July 17,
2000, several equity partners made loans of $30 million in aggregate principal
amount to Republic Technologies International, LLC. In exchange for these loans,
the lenders received notes of $30 million aggregate principal amount and
warrants to purchase an aggregate of 15 million shares of Class D common stock
of Republic Technologies International, Inc., at par value of $0.001 per share.
These notes mature on August 1, 2010, and may be prepaid in certain instances
and must be prepaid upon a change of control of the Company. The interest rate
on the notes is 9.5% and is payable in arrears on each February 1 and August 1
commencing on August


                                       63
<PAGE>   64

1, 2006 or earlier if the lenders consent. The notes are secured by a second
mortgage on the Canton CR facility.

FORMER REPUBLIC LOAN AGREEMENTS
On June 1, 1996, Republic obtained $53.7 million of financing through the
issuance of 9% Solid Waste Revenue Bonds, Series 1996, due June 1, 2021 in
connection with the solid waste disposal facilities installed at its Canton
facility. These bonds were issued in addition to the Solid Waste Revenue Bonds,
Series 1994 noted below, to assist in financing the facilities. As of December
31, 2000 and 1999, Republic had available $344 thousand and $351 thousand,
respectively, of the $53.7 million which is classified as long-term restricted
cash in the accompanying consolidated/combined balance sheets.

On October 28, 1994, Republic obtained $20.2 million of financing through the
issuance of 8 1/4% Solid Waste Revenue Bonds, Series 1994, due October 1, 2014
in connection with the solid waste disposal facilities installed at the Canton
facility.

FORMER BARTECH ECONOMIC DEVELOPMENT FINANCING
In connection with the acquisition of the assets of The Bethlehem Steel Company
("Bethlehem") Bar, Rod and Wire Division and its original modernization and
expansion plan, BarTech entered into loan agreements with lenders in
Pennsylvania to procure a portion of the financing for the transaction.

Pennsylvania Debt
-----------------
BarTech entered into the Master Agreement with the Commonwealth of Pennsylvania
and various of its agencies (collectively, the "Commonwealth") on July 18, 1994.
Pursuant to the Master Agreement, BarTech entered into loan agreements with the
Commonwealth, through its Department of Commerce and Department of Community
Affairs. The total amount committed to BarTech by the Commonwealth pursuant to
the Master Agreement was $33.0 million. The remaining loans related to this
agreement have been made by the Business Infrastructure Development Program
("BID"), the Economic Development Partnership ("EDP") and the Community
Development Block Grant Program ("CDBG").

BarTech previously obtained approval from the Pennsylvania Industrial
Development Authority ("PIDA") regarding the deferral of principal on its BID
loan, and principal and interest deferral on its EDP loans. BarTech resumed
principal payments related to PIDA and BID loans and principal and interest
payments related to EDP loans in January 2000. All deferred loans are required
to be amortized over their original maturity schedule with no deferral of final
maturity.

During 2000, the Company shutdown its Johnstown, Pennsylvania plant that was
financed with the Pennsylvania debt. Following the facility closure, the City of
Johnstown (the "City") and the County of Cambria (the "County") filed lawsuits
indicating that the plant shutdown was an event of default under the original
promissory notes with the City and County. At the time of the Combination in
August 1999, the plaintiffs agreed to subordinate their liens to the first lien
provided to the trustee on behalf of the Senior Secured Notes as set forth in
the Intercreditor Agreement. The Intercreditor Agreement prohibits the
plaintiffs from taking any action to foreclose upon or execute on the collateral
securing the debt. As a result of the Company's Chapter 11 filing, the cases
against the debtors have been stayed. It is anticipated that the Company will
seek injunctive relief to extend the stay to its non-debtor affiliates.

As of December 31, 2000 and 1999, $11.8 million and $12.9 million, respectively,
in aggregate principal amount of Commonwealth Loans were outstanding.

Industrial Revenue Bonds
------------------------
In December 1988, the Development Authority of Cartersville, Georgia issued $3.6
million in aggregate principal amount of its tax exempt industrial revenue
bonds, or "IRBs," the proceeds of which were loaned to BarTech's Bliss &
Laughlin subsidiary and used to partially fund the construction and equipping of
Bliss & Laughlin's Cartersville, Georgia facility. The Cartersville IRBs bear
interest at a rate equal to the minimum rate of interest which, in the opinion
of the remarketing agent for the Cartersville IRBs, would be necessary to sell
Cartersville IRBs in the secondary market. The interest rate paid on the
Cartersville IRBs averaged 4.63% during calendar year 2000 and was 4.79% at
December 31, 2000. Principal payments of


                                       64
<PAGE>   65

$300 thousand are due on the Cartersville IRBs on each December 1 beginning in
2009 and continuing through 2012. Thereafter, payments of $400 thousand are due
on each December 1 until the final payment on December 1, 2018. The Cartersville
IRBs are secured by Bliss & Laughlin's Cartersville, Georgia facility and the
equipment located at the facility. As of December 31, 2000 and 1999, $3.6
million of indebtedness was outstanding under the Cartersville IRBs.

The Chase Manhattan Bank ("Chase") has issued an irrevocable transferable letter
of credit to secure payment of the principal of, interest on and the purchase
price of the Cartersville IRBs, in a stated amount equal to the principal on the
Cartersville IRBs, plus an amount equal to 210 days of interest on the
Cartersville IRBs at a rate of 12% per year. Draws on the letter of credit are
secured by a first priority lien on bonds purchased as a result of the draw
pursuant to the terms of the reimbursement agreement and a pledge and security
agreement entered into between Bliss & Laughlin and Chase.

USS/KOBE ENVIRONMENTAL BONDS

1984 EIRBs
----------
In December 1984, the Ohio Water Development Authority issued $9.0 million in
aggregate principal amount of tax exempt variable rate demand environmental
improvement revenue bonds, or "1984 EIRBs," the proceeds of which were loaned to
USX and used to finance the cost of pollution control equipment at the Lorain,
Ohio facility, which was contributed by USX to USS/Kobe Steel Company in 1989.
The 1984 EIRBs are special obligations of the State of Ohio exempt from various
forms of federal, state and local income taxation and are therefore subject to
mandatory redemption upon the occurrence of a determination of taxability, and
are further subject to optional and mandatory redemption and tender prior to
maturity pursuant to the terms of the trust indenture agreement concerning the
1984 EIRBs.

The interest rate paid on the 1984 EIRBs averaged 3.41% during calendar year
2000 and was 4.6% at December 31, 2000. The 1984 EIRBs mature on December 1,
2001. As of December 31, 2000 and 1999, $9.0 million of indebtedness was
outstanding under the 1984 EIRBs.

In connection with the original issuance of the 1984 EIRBs, PNC Bank, N.A.
("PNC") issued an irrevocable, direct-pay letter of credit to secure payment of
the principal of, interest on, and the purchase price of the 1984 EIRBs, in an
amount equal to the principal of the 1984 EIRBs plus an amount equal to 75 days
of interest on the 1984 EIRBs at a rate of 15% per year. Draws on the letter of
credit are secured by a first priority lien on bonds purchased as a result of
the draw pursuant to the terms of the reimbursement agreement and a pledge and
security agreement entered into between PNC and USX.

In connection with the consummation of the Combination, Republic Technologies
International, LLC agreed to pay the debt service on the 1984 EIRBs, including
remarketing fees and amounts due under the PNC letter of credit. The Company may
need to make payments in respect of the 1984 EIRBs earlier than scheduled if USX
terminates the PNC letter of credit or otherwise makes early payment in respect
of the 1984 EIRBs.

1995 EIRBs
----------
In November 1995, the Ohio Air Quality Development Authority issued $10.2
million of its tax exempt variable rate environmental improvement revenue bonds,
or "1995 EIRBs," the proceeds of which were loaned to USX for the purpose, in
part, of refinancing its outstanding $4.7 million Ohio Air Quality Development
Authority Floating Rate Environmental Improvement Revenue Bonds, Series B. These
Series B bonds had been issued in 1980 to finance the cost of pollution control
equipment at the Lorain facility. The 1995 EIRBs are special obligations of the
State of Ohio exempt from various forms of federal, state and local income
taxation and are therefore subject to mandatory redemption upon the occurrence
of a determination of taxability, and are further subject to optional and
mandatory redemption and tender prior to maturity pursuant to the terms of the
trust indenture agreement concerning the 1995 EIRBs.

The interest rate paid on the 1995 EIRBs averaged 3.25% during calendar year
2000 and was 3.25% at December 31, 2000. The 1995 EIRBs mature on November 1,
2015. As of December 31, 2000 and 1999, $4.7 million of indebtedness was
outstanding under the 1995 EIRBs.

                                       65
<PAGE>   66


The Wachovia Bank of North Carolina, N.A. ("Wachovia") has issued an
irrevocable, direct-pay letter of credit to secure payment of the principal of,
interest on, and the purchase price of the 1995 EIRBs, in a stated amount equal
to the principal amount of the 1995 EIRBs plus an amount equal to 210 days of
interest on the 1995 EIRBs at a rate of 12% per year. Draws on the letter of
credit are secured by a first priority lien on bonds purchased as a result of
the draw pursuant to the terms of the reimbursement agreement and a pledge and
security agreement entered into between Wachovia and USX.

In connection with the consummation of the Combination, Republic Technologies
International, LLC agreed to pay 46.7% of the debt service on the 1995 EIRBs,
including 46.7% of the remarketing fees and amounts due under the Wachovia
letter of credit. The Company may need to make payments in respect of the 1995
EIRBs earlier than scheduled if USX terminates the Wachovia letter of credit or
otherwise makes early payment in respect of the 1995 EIRBs.

Maturities of the Company's long-term debt at December 31, 2000, prior to the
bankruptcy filing as discussed in Note 1, is as follows:

                                2001                $ 11,318
                                2002                   2,404
                                2003                   2,040
                                2004                   1,278
                                2005                   1,317
                          Thereafter                 543,215
                                      -----------------------
                               Total                $561,572
                                      =======================

NOTE 8 - REVOLVING CREDIT FACILITIES

In connection with the Combination, Republic Technologies International, LLC
entered into a senior revolving credit facility ("Revolver") with Fleet Capital
Bank (formerly known as BankBoston, N.A.), as administrative agent, and other
lenders. The Revolver was for a total principal amount of up to $425.0 million
and secured by accounts receivable, inventory, intellectual property and related
assets of the Company, and the real estate and fixed assets comprising, and the
intellectual property relating to, the Canton CR, including the related melt
shop. The amount available at any time was limited by a borrowing base. The
borrowing base equaled 60% of eligible inventory subject to a maximum; plus 85%
of eligible accounts receivable; plus the lesser of (a) 67% of the appraised
liquidation in place value of the Canton CR facility plus the appraised value of
the related property in Canton, Ohio, provided that no downward adjustment based
on any revaluation was made prior to March 31, 2001 and, (b) $125.0 million,
minus the product of $4.5 million and the number of quarters elapsed beginning
with the quarter ended December 31, 2000; minus a reserve of between $35.0
million and $50.0 million, which was to be adjusted based on the amount of
undrawn available amounts under the facility.

On July 17, 2000 the Revolver was restructured to permit the new subordinated
debt mentioned in Note 7, as follows:

a.       The cap on the amount to be borrowed against the Canton CR facility was
         reduced from $125.0 million to $92.0 million, with the reduction in the
         eligible fixed asset cap being deferred until the first quarter of
         2002, with subsequent decreases of $7.5 million per quarter until July
         2004;
b.       The commitment cap was reduced from $425.0 million to $395.0 million,
         with subsequent reductions through January 1, 2002;
c.       The reserve of $50.0 million was eliminated;
d.       A minimum liquidity requirement of $3.0 million was established;
e.       Minimum EBITDA requirements were established through June 2004;
f.       The acquisition of off-balance sheet financing for the new four stand
         mill ("4 - Project") and large bar finishing/inspection equipment and
         certain other projects was permitted; and
g.       Capital expenditure caps were revised for fiscal years 2000 through
         2004.

                                       66
<PAGE>   67

There were $329.4 million of borrowings under the Revolver outstanding at
December 31, 2000. The weighted average interest rate for the year 2000 was
9.88%. Amounts available under the Revolver at December 31, 2000 were
approximately $19.1 million.

Borrowings under the Revolver bear interest, at the Republic Technologies
International, LLC's option, of either: a base rate used by Fleet Capital, plus
an applicable margin; or a eurodollar rate on deposits for one, two, three or
six month periods, plus the applicable margin. The applicable margin on base
rate loans is 1.25% and on eurodollar loans is 3.25%. The applicable margin on
base rate and eurodollar loans may be increased by .25% under specified
circumstances. As of December 31, 2000, the Fleet Capital Base Rate and the
eurodollar rate was 9.5% and 6.79%, respectfully, and the applicable margins
were 1.5% and 3.5%, respectively.

Republic Technologies International, LLC must also pay a commitment fee on the
unused commitments under the Revolver facility equal to 0.50% per annum, payable
monthly in arrears.

The Revolver contains covenants that among other things, restrict the Company's
ability to incur additional indebtedness or guarantee the obligations of others,
change its line of business, merge, consolidate and acquire or sell assets or
stock, pay dividends, or prepay or amend the notes or any of its subordinated
indebtedness. The Company must also meet minimum quarterly EBITDA requirements
at September and December 2000, and March 2001, and minimum trailing twelve
month EBITDA requirements quarterly beginning in June 2001 and ceasing in June
2004.

The Company, during 2000, violated a debt covenant under the Revolver with
respect to obtaining financing from a third party for the 4-stand project at the
Lorain plant prior to December 31, 2000. As a result, a waiver was obtained
subsequent to December 31, 2000 that eliminated the requirement to obtain
financing from a third party.

See Note 1 for discussion of the Bankruptcy filing and the Company's DIP Credit
Agreement which replaced the Revolver on April 3, 2001.

On September 8, 1998, the acquisition by RES Acquisition of Republic was
partially funded with short-term borrowings of approximately $65.0 million (the
"RES Holding Facility") under the Credit Agreement dated September 8, 1998
between RES Holding and The Chase Manhattan Bank ("Chase"), as administrative
agent. The maturity of the RES Holding Facility was June 8, 1999, however, the
agreement was extended to September 30, 1999. This debt was refinanced with
proceeds of the financing completed concurrent with the Combination.

BarTech had a revolving credit agreement with a group of banks with Chase as
agent which originally provided BarTech with borrowings in an aggregate
principal amount of up to $90.0 million, of which $5.4 million was in the form
of letters of credit. This revolving credit agreement was subsequently amended
in September 1997 to provide for the addition of a new revolving sub-facility
("Sub-Facility") and amended certain portions of the original revolving credit
agreement. The Sub-Facility component of the amended agreement provided BarTech
with up to $15.0 million of additional borrowing capacity based on a higher
receivable and inventory advance rate than in the revolving credit agreement.

On May 5, 1999, BarTech further amended its revolving credit agreement ("BarTech
Amended Agreement") in conjunction with the formation of the Republic
Technologies International Marketing, LLC ("Marketing JV"). The BarTech Amended
Agreement provided for a reduction in BarTech's borrowing capacity to $77.0
million, of which $5.3 million was in the form of letters of credit. In
addition, amounts available under BarTech's Sub-Facility were reduced to $2.0
million with this BarTech Amended Agreement. By July 31, 1999, amounts available
under the BarTech Amended Agreement were further reduced to $71.5 million and
amounts were no longer available under BarTech's Sub-Facility. The maturity date
of the BarTech Amended Agreement remained April 2, 2000 and was secured by
certain assets and stock of BarTech.


                                       67
<PAGE>   68

The BarTech Amended Agreement was extinguished with proceeds of the financing
completed concurrent with the Combination. The Marketing JV was terminated as a
result of the Combination.

NOTE 9 - DEFINED CONTRIBUTION BENEFIT PLANS

The Company currently has a defined contribution retirement plan that covers
substantially all salary and non-union hourly employees. Company contributions
to the plan are based on age and compensation. The Company provides a defined
contribution retirement plan for the former BarTech United Steel Workers of
America ("USWA") employees. The Company contribution is seventy cents for every
hour worked. This plan will be discontinued March 1, 2001 and the participants
merged into the defined benefit plan (see Note 10). The former Republic USWA
employees were covered under a defined contribution retirement plan, which was,
discontinued September 8, 1998 under the terms of the Master Collective Barging
Agreement (collectively, the "Master CBA") and the assets merged into the
defined benefit plan (see Note 10). The Company funds contributions to these
plans as accrued. Contributions to these plans by the Company and its
predecessors were $4.4 million, $2.0 million, $2.3 million, and $1.3 million for
the year ended December 31, 2000, the period August 13, 1999 to December 31,
1999, the period January 1, 1999 to August 12, 1999 and the year ended December
31, 1998, respectively.

The Company has a profit sharing plan covering all of its USWA employees.
Amounts provided to the profit sharing pool were based on percentages of the
consolidated excess cash flows of the Company, as defined in the Master CBA.
There was no expense relating to this plan for any of the periods presented.

NOTE 10 - DEFINED BENEFIT PENSION AND OTHER POSTRETIREMENT BENEFITS

In connection with the Republic acquisition in September 1998, a new Master
Collective Bargaining Agreement and settlement agreement (collectively, the
"Master CBA") covering all of the former Republic and BarTech facilities with
employees represented by the USWA were entered into with the USWA. The Master
CBA replaced the existing collective bargaining agreements with the USWA, other
than selected plant-specific agreements. In connection with the Combination, the
scope of the Master CBA was extended to cover the former USS/Kobe Lorain, Ohio
facility. The Master CBA expires on October 31, 2003. The Master CBA provides
for improvements in the existing defined benefit pension plans covering
employees at former Republic facilities, former USS/Kobe facilities and the
former Bliss & Laughlin Harvey, Illinois facility, and the creation of a defined
benefit pension plan obligation covering employees at former BarTech facilities.
The existing defined benefit pension plans may be consolidated into one defined
benefit pension plan in the future, which will contain terms found in
traditional steel industry defined benefit pension plans.

The Master CBA requires Republic Technologies International, LLC to offer Early
Retirement Buyouts ("ERBs") to at least 1,000 employees and permits Republic
Technologies International, LLC to offer a Voluntary Severance Plan ("VSP"). The
purpose of these programs is to reduce the hourly workforce by a net reduction
of over 1,900 hourly employees over four years. These programs are substantially
voluntary in nature. Accordingly, the costs associated with these workforce
reductions are being recognized as the offers are accepted by the employees and
intended to be awarded by Republic Technologies International, LLC. Through
December 31, 2000, 780 voluntary ERB packages were accepted. As such, Republic
Technologies has recorded $96.7 million of workforce reduction charges to date
for early retirement benefits and special termination payments.

Under the terms of Master CBA, if the ERBs and VSPs do not achieve targeted
headcount reductions, Republic Technologies International, LLC will have the
flexibility to reduce the hourly workforce by approximately 300 employees in
addition to the number of accepted ERBs and VSPs. Pursuant to the Master CBA,
USWA represented employees will be eligible for Supplemental Unemployment
Benefits (SUB) and the continuation of certain health insurance benefits.

The following is a general description of the Company and its predecessors'
defined benefit plans.


                                       68
<PAGE>   69

REPUBLIC
The Company (formerly Republic) maintains a defined benefit "floor offset" plan,
which covers all former Republic USWA employees. The plan, when combined with
benefits from an LTV Steel Defined Benefit Pension Plan, will provide a minimum
level of pension benefits for USWA employees. Benefits are based on a
combination of employees' age and years of service. The Company's policy is to
fund this plan based on legal requirements and tax considerations.

Republic entered into a memorandum of understanding with the PBGC on November 2,
1998, pursuant to which (1) the PBGC agreed to forebear from instituting
proceedings to terminate the USWA Defined Benefit Plan as a result of the
acquisition of Republic or the prospective combination with BarTech, (2) in
January 1999, Republic funded the pension plan with an approximate $27.0 million
initial contribution and (3) Republic made an additional contribution to such
pension plan in the amount of $20.0 million on July 1, 1999. The agreement with
the PBGC contemplated additional quarterly contributions commencing October 1,
1999 in accordance with the following schedule: $7.5 million per quarter for the
first four payments, $7.625 million per quarter for the next four payments,
$9.075 million per quarter for the next four payments and $8.475 million per
quarter for the final four payments.

Republic amended the memorandum of understanding with the PBGC on July 14, 2000.
According to this Amendment, Republic has agreed to the following terms with
PBGC:

a.   During the year 2000, Republic shall pay $2.0 million of the $7.5
     million required contribution, due in January, April and July,
     deferring the balance of the contributions.

b.   During the year 2000, Republic shall pay $2.0 million of the $7.625
     million required contribution, due in October, deferring the balance of
     the contribution.

c.   During the year 2001, Republic shall pay $2.0 million of the $7.625
     million required contribution, due in January, April, and July,
     deferring the balance of the contribution.

d.   During the year 2001, Republic shall pay $2.0 million of the $9.075
     million required contribution, due in October, deferring the balance of
     the contribution.

e.   Republic shall pay the total deferred amount of approximately $46.1
     million (items A thru D above) in eight equal quarterly installments
     commencing on January 1, 2002 and continuing through October 1, 2003.
     The amount of each deferred installment of the required contributions
     shall be added to the amount of each of the required contributions
     Republic is obligated to make in the years 2002 and 2003.

The Company (formerly Republic) also sponsors postretirement plans for health
care and life insurance that cover most full-time employees. The plans pay
stated percentages of most necessary medical expenses incurred by retirees,
after subtracting payments by Medicare or other providers and after a stated
deductible has been met. Hourly employees become eligible for benefits after
completing 15 years of service and reaching age 60. Salary employees become
eligible for benefits if they retire after reaching age 65.

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

BLI and CDSC also sponsor postretirement plans for health care and life
insurance that cover most full-time employees. The plans pay stated percentages
of most necessary medical expenses incurred by retirees, after subtracting
payments by Medicare or other providers and after a stated deductible has been
met.


                                       69


<PAGE>   70
Participants become eligible for benefits if they retire from BLI after reaching
age 55 with 10 or more years of service.

USS/KOBE
The Company (formerly USS/Kobe) sponsors two noncontributory defined benefit
plans covering substantially all former USS/Kobe employees. Benefits under these
plans are based upon years of service and final average pensionable earnings, or
a minimum benefit based upon years of service, whichever is greater. Assets held
by the plans are invested primarily in corporate equity and debt securities and
interest bearing cash accounts. In addition, pension benefits from USS/Kobe's
two defined contribution plans, which cover participating employees, are based
upon years of service and career earnings.

In connection with the Combination, Republic Technologies International, LLC
agreed with the PBGC to maintain a specified level of funding for the USS/Kobe
Union Eligible Pension Plan, a defined benefit plan for union employees, based
on statutory funding requirements. The agreement with the PBGC with respect to
this plan contemplates that contributions will be made as follows: for the year
2000, an amount necessary to avoid an accumulated funding deficiency plus $4.0
million; for 2001, an amount so that the December 31, 2001 credit balance equals
that of December 31, 2000 with interest plus $2.0 million; for 2002, an amount
so that the December 31, 2002 credit balance equals that of December 2001 with
interest plus $2.0 million; for 2003, an amount so that the December 31, 2003
credit balance equals that of December 31, 2002 with interest plus $2.0 million.
The agreement with the PBGC further contemplates that, beginning with 2004,
Republic Technologies will make contributions to maintain the December 31, 2003
credit balance with interest. As security for such obligation, Republic
Technologies International, LLC has provided the PBGC with a $5.0 million letter
of credit. The Company currently estimates that approximately $52.2 million of
fundings will be required in connection with these obligations through December
2004.

The components of the net periodic pension costs are summarized as follows:

<TABLE>
<CAPTION>

                                                                   Period From    Period From
                                                                    August 13,     January 1,
                                                    Year ended       1999 to        1999 to        Year ended
                                                   December 31,    December 31,    August 12,     December 31,
                                                       2000            1999           1999            1998
                                                  -------------------------------------------------------------
<S>                                                 <C>             <C>            <C>             <C>
Service cost                                        $  9,527        $  3,744       $  3,719        $  2,376
Interest cost on projected benefit obligations        20,517           7,746          4,662           2,733
Expected return on plan assets                       (19,222)         (6,811)        (3,024)         (2,006)
Amortization of prior service cost                       102              (7)            30              40
Recognized net actuarial (gain)/loss                    (327)            (26)           169              21
Curtailment (gain)/loss                                 (338)          2,962             --              --
                                                  -------------------------------------------------------------
Net periodic pension cost                           $ 10,259        $  7,608       $  5,556        $  3,164
                                                  =============================================================
</TABLE>

Net periodic postretirement benefit cost included the following components:

<TABLE>
<CAPTION>

                                                                     Period From    Period From
                                                                     August 13,      January 1,
                                                     Year ended        1999 to        1999 to        Year ended
                                                    December 31,    December 31,     August 12,     December 31,
                                                        2000            1999            1999            1998
                                                  ---------------------------------------------------------------
<S>                                                 <C>             <C>            <C>             <C>
Service cost of benefit earned                      $  2,198        $    748       $  1,047        $    774
Interest on accumulated postretirement benefit
   obligations                                        17,013           4,289          6,004           2,449

Amortization of prior service cost                        11

Recognized net actuarial (gain)/loss                      (5)            (53)           (74)             42
                                                  ---------------------------------------------------------------
Net periodic postretirement cost                    $ 19,217        $  4,984       $  6,977        $  3,265
                                                  ===============================================================
</TABLE>


                                       70
<PAGE>   71


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

<TABLE>
<CAPTION>

                                                          Pension Plans                Other Postretirement Benefits
                                                   ------------------------------     ------------------------------
                                                    December 31,   December 31,         December 31,   December 31,
                                                        2000           1999                 2000           1999
                                                   ------------------------------     ------------------------------
<S>                                                  <C>            <C>                  <C>            <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year              $284,569       $101,295             $233,515       $101,302
Service cost                                            9,527          7,463                2,198          1,795
Interest cost                                          20,517         12,408               17,013         10,293
Acquisitions                                               --        145,045                   --        107,556
Foreign currency exchange rate change                   (343)            533                (100)            201
Actuarial (gain) loss                                   5,350       (18,671)                1,115            173
Curtailment  loss                                         247         51,800                   --         20,817
Special termination benefits                               --          3,357                   --             --
Plan transfers                                          3,894             --                   --             --
Benefits paid                                        (24,491)       (18,661)             (15,447)        (8,622)
                                               ------------------------------      ------------------------------
Benefit obligation at end of year                     299,270        284,569              238,294        233,515
                                               ------------------------------      ------------------------------

CHANGE IN PLAN ASSETS:
Fair value of plant assets at beginning of
year                                                  211,133         32,802                9,299             --
Actual return on plan assets                            6,381         19,822                  527             --
Employer contribution                                  18,113         55,221               15,447          8,622
Acquisitions                                               --        121,340                   --          9,299
Foreign currency exchange rate change                   (405)            609                   --             --
Benefits paid                                        (24,491)       (18,661)             (15,447)        (8,622)
Plan transfers                                          3,894             --                   --             --
Assets transferred out                                     --             --              (9,826)             --
                                               ------------------------------      ------------------------------
Fair value of plan assets at end of year              214,625        211,133                   --          9,299
                                               ------------------------------      ------------------------------


Funded status-underfunded                            (84,645)       (73,436)            (238,294)      (224,216)
Unrecognized net actuarial (gain) loss                  (516)       (19,565)                4,731          1,665
Unrecognized prior service cost                         1,195          1,316                  149             --
                                               ------------------------------      ------------------------------
Net amount recognized                               $(83,966)      $(91,685)           $(233,414)     $(222,551)
                                               ==============================      ==============================

Amounts recognized in the statement
of financial position consist of:
       Prepaid benefit cost                          $  4,384       $  3,877                   --             --
       Accrued benefit liability                     (89,943)       (95,562)           $(233,414)     $(222,551)
       Accumulated other comprehensive loss             1,593             --                   --             --
                                               ------------------------------      ------------------------------
Accrued benefit costs                               $( 83,966)      $(91,685)           $(233,414)     $(222,551)
                                               ==============================      ==============================

WEIGHTED AVERAGE ASSUMPTIONS:
Discount rate                                            7.47%          7.47%                7.49%          7.50%
Expected return on plan assets                           8.94%          8.98%
Rate of compensation increase                            2.60%          3.95%
</TABLE>



                                       71
<PAGE>   72



The accumulated benefit obligation, projected benefit obligation, and fair value
of plan assets for the pension plans with accumulated benefit obligations in
excess of plan assets are summarized as follows:

                                                  2000         1999
                                                  ----         ----
Accumulated benefit obligation                 $284,459      $262,189
Projected benefit obligation                    287,197       263,725
Plan assets at fair value                       200,702       186,452


For measurement purposes, a weighted average annual rate of increase in the per
capita cost of covered health care claims of 6.5% was assumed for fiscal 2000;
the rate assumed to decrease by approximately 0.5% per year to 4.5% for fiscal
2004, and remain at that level thereafter.

To illustrate the health care cost trend on amounts reported, changing the
assumed health care cost trend rates by one percentage point in each year would
have the following effects as of and for the fiscal year ended December 31,
2000:

                                                 One Percentage Point
                                             ---------------------------
                                               Increase        Decrease
                                             -----------     -----------

Effect on total service and interest
  cost components                              $ 1,760        $  (926)
Effect on accumulated postretirement
  benefit obligation                            17,437        (15,277)


NOTE 11 - INCOME TAXES

The Company is a limited liability company that is treated as a partnership for
income tax purposes and accordingly is not an income taxpaying entity. However,
pursuant to the limited liability company agreement, the Company is required to
make cash distributions to its members to the extent necessary to satisfy their
respective tax obligations. However, the Company believes that certain of its
members have net operating loss carryforwards which may be available to offset a
significant portion of their taxable income attributable to their investment in
the Company and reduce but not eliminate, the need for tax distributions. Use of
these net operating losses is subject to various limitations and uncertainties
and accordingly, the Company cannot give any assurances that these net operating
loss carryforwards will reduce the need for tax distributions or that they will
not be otherwise utilized.

The provision for income taxes included in the accompanying consolidated/
combined statements of operations for all periods presented represents a
provision for foreign income taxes. Deferred income taxes related to the foreign
subsidiary are recorded as a component of other accrued liabilities in the
consolidated balance sheet. Prior to the Combination, a benefit for domestic
income taxes is not included in the accompanying combined statements of
operations since the Company's deferred tax benefits for net operating loss
carryforwards were entirely offset by provisions for deferred tax valuation
allowances.

NOTE 12 - SEGMENTS AND RELATED INFORMATION

The Company operates in three reportable segments: hot-rolled, cold-finished,
and specialty steels. As discussed previously in Note 1, the Company intends to
sell its specialty steel division and accordingly, the accompanying
consolidated/combined financial statements reflect that division as a
discontinued operation in accordance with Accounting Principles Board Opinion
No. 30. As such, the following tables do not reflect specialty steels as a
reportable segment. The Company manages the reportable segments as separate
strategic business units. Differences between the segments include manufacturing
techniques and equipment, competition, and end-users. The Company measures
segment performance based on earnings before interest, taxes, depreciation and
amortization, other postretirement benefits, workforce reduction charges and
other (income) loss, net ("EBITDA, as defined").


                                       72
<PAGE>   73

HOT-ROLLED
Hot-rolled bars and rods are processed from blooms and billets on rolling mills
to change the internal physical properties, size or shape of the steel.
Desirable characteristics of hot-rolled products include internal soundness,
uniformity of chemical composition and freedom from surface imperfection. The
Company's hot-rolled products include rounds, squares and hexagons, in both
cut-lengths and coils. Customers for hot-rolled products include manufacturers
of automotive parts, industrial equipment, independent forgers, steel service
centers and converters. The Company's hot-rolled products are used in the
manufacture of end-use products such as automotive drive trains, engine and
transmission parts, bearings and tractor components.

COLD-FINISHED
Cold-finishing is a value-added process which improves the physical properties
of hot-rolled bars and rods. Cold-finished products are produced from hot-rolled
bars by cold-drawing, turning, grinding, thermal treating or a combination of
these processes. The manufacturing process allows for production of products
with more precise size and straightness tolerances, as well as improved strength
and surface finish, that provides customers with a more efficient means of
producing a number of end products by often eliminating processing steps in the
customers' use of the products. The Company's cold-finished products include
rounds, squares, hexagons, and flats, all of which can be further processed by
turning, grinding or polishing, or a combination thereof. Customers for
cold-finished products include manufacturers of automotive parts, industrial
equipment, steel service centers and distributors. The Company's cold-finished
products are used in the manufacture of end-use products such as automotive
steering assemblies, electrical motor shafts, ball and roller bearings, valves
and hand tools.

Prior to August 13, 1999, intersegment sales were made at current market prices
and were eliminated in consolidation.

<TABLE>
<CAPTION>

                                                         For the Year Ended December 31, 2000
                                 --------------------------------------------------------------------------------------
                                                                                      Inter Segment
                                                        Cold-            Total         Elimination/    Consolidated/
                                    Hot-Rolled         Finished         Segments          Other           Combined
                                 --------------------------------------------------------------------------------------
<S>                                <C>               <C>               <C>             <C>              <C>
Net sales                          $1,114,833        $  280,615        $1,395,448      $ (130,047)      $1,265,401
Depreciation and amortization          55,273             6,202            61,475              --           61,475
Segment profit (EBITDA,
   as defined)                         68,123            13,779            81,902              --           81,902
Segment assets                      1,029,916           145,414         1,175,330          21,754        1,197,084
Capital expenditures                   11,977             1,088            13,065              --           13,065
</TABLE>



<TABLE>
<CAPTION>

                                                  For the Period From August 13, 1999 to December 31, 1999
                                 --------------------------------------------------------------------------------------
                                                                                      Inter Segment
                                                        Cold-            Total         Elimination/    Consolidated/
                                    Hot-Rolled         Finished         Segments          Other           Combined
                                 --------------------------------------------------------------------------------------
<S>                                <C>               <C>               <C>             <C>              <C>
Net sales                          $   465,267       $   121,233       $   586,500     $   (58,920)     $  527,580
Depreciation and amortization           18,331             2,161            20,492              --          20,492
Segment profit (EBITDA,
    as defined)                        (74,589)             (259)          (74,848)             --         (74,848)
Segment assets                       1,216,231           169,992         1,386,223          29,034       1,415,257
Capital expenditures                    11,891             1,121            13,012              --          13,012
</TABLE>


                                       73
<PAGE>   74


<TABLE>
<CAPTION>

                                                  For the Period From January 1, 1999 to August 12, 1999
                                 --------------------------------------------------------------------------------------
                                                                                      Inter Segment
                                                        Cold-            Total         Elimination/    Consolidated/
                                    Hot-Rolled         Finished         Segments          Other           Combined
                                 --------------------------------------------------------------------------------------
<S>                                <C>               <C>               <C>             <C>             <C>
Net sales                          $ 354,458         $ 203,842         $ 558,300       $ (32,974)      $ 525,326
Depreciation and amortization         17,051             4,838            21,889              --          21,889
Segment profit (EBITDA,
    as defined)                          953            (3,449)           (2,496)             --          (2,496)
Capital expenditures                  18,784             1,574            20,358              --          20,358
</TABLE>



<TABLE>
<CAPTION>

                                                            For the Year Ended December 31, 1998
                                 --------------------------------------------------------------------------------------
                                                                                      Inter Segment
                                                        Cold-            Total         Elimination/    Consolidated/
                                    Hot-Rolled         Finished         Segments          Other           Combined
                                 --------------------------------------------------------------------------------------
<S>                                <C>               <C>               <C>             <C>             <C>
Net sales                          $ 308,702         $ 226,091         $ 534,793       $ (49,929)      $ 484,864
Depreciation and amortization         13,029             3,078            16,107              --          16,107
Segment profit (EBITDA,
    as defined)                      (15,187)            6,346            (8,841)             --          (8,841)
Segment assets                       515,735           167,594           683,329         204,736         888,065
Capital expenditures                  12,772             2,778            15,550              --          15,550
</TABLE>

NOTE 13 - RELATED PARTY TRANSACTIONS

From April 1996 to August 13, 1999, Blackstone and Veritas received annual
monitoring fees from BarTech equal to $0.9 million per year pursuant to a
monitoring agreement. Under the terms of the monitoring agreement, Blackstone
and Veritas provided management and financial monitoring services to BarTech.
Blackstone and Veritas have split the monitoring fees paid evenly between them.
BarTech has also reimbursed Blackstone and Veritas for their out-of-pocket
expenses incurred in providing such services.

In connection with the acquisition of Republic in 1998, RES Holding paid
transaction fees of $3.4 million to Blackstone and $800 thousand to Veritas and
reimbursed them for all related out-of-pocket expenses. In addition, pursuant to
a monitoring agreement entered into with RES Holding, Blackstone and Veritas
were entitled to receive an annual monitoring fee for providing management and
financial monitoring services equal to $1.125 million, with Blackstone receiving
75% and Veritas receiving 25% of this monitoring fee. RES Holding has reimbursed
Blackstone and Veritas for their out-of-pocket expenses incurred in providing
these services. Approximately $2.4 million of accrued but unpaid BarTech and RES
Holding monitoring fees were paid following the Combination.

In connection with the Combination, the Company paid transaction fees in the
aggregate of $4.0 million to Blackstone, Veritas, USX and affiliates of Kobe. In
addition, the Company reimbursed Blackstone, Veritas, USX, and Kobe for their
out-of-pocket expenses related to the Combination. Upon consummation of the
Combination, the Company entered into a new monitoring agreement with
Blackstone, Veritas, USX and Kobe that replaced the existing monitoring
agreements regarding BarTech and Republic, with the parties to receive an
aggregate annual fee of $4.0 million.

In addition, in the future, Blackstone, Veritas, USX and Kobe or their
affiliates may receive customary fees for other advisory and transactional
services rendered to the Company. If such services are rendered in the


                                       74
<PAGE>   75


future, the fees will be negotiated from time to time on an arms-length basis
and will be based on the services performed and the fees charged to third
parties for comparable services.

During the year ended December 31, 2000, the periods from August 13, 1999 to
December 31, 1999 and January 1, 1999 to August 12, 1999, and the year ended
December 31, 1998, the Company had approximately $112.9 million, $43.6 million,
$54.2 million, and $89.0 million, respectively, of net sales to American Axle &
Manufacturing, a company controlled by Blackstone. All such sales were in the
ordinary course of business and on arms-length terms.

The Company and Haynes Specialty Steels Company, a subsidiary of Haynes, a
company controlled by Blackstone, were parties to a facilities management
agreement dated as of April 15, 1999, by which Haynes agreed to manage the
Company's Baltimore, Maryland and Canton, Ohio (Harrison Avenue) specialty steel
finishing facilities. The Company continued to own these facilities and approved
all material expenditures and financial decisions of Haynes with respect to
these facilities. As compensation for the services provided, Haynes received
management fees equal to the total compensation costs, including benefits, of
the Haynes personnel providing management services to the Company that was
allocable to the time these personnel devoted to these facilities. In addition,
Haynes was reimbursed by the Company for all of its reasonable out-of-pocket
expenses incurred in connection with the provision of management services. This
agreement was terminated during 2000.

In connection with the Combination, the Company entered into the following
agreements with USX, Kobe and FirstEnergy Service Corp. ("FirstEnergy") (another
equity investor in the Company's indirect parent) or their affiliates:

ROUND SUPPLY AGREEMENT
----------------------
The Company entered into a five-year supply agreement with USX and the new
tubular company owned by USX, which provides for the tubular joint venture
purchasing all of its requirements for steel rounds at its Lorain, Ohio pipemill
from the Company up to a maximum of 400,000 tons per year for a price equal to
the Company's production costs plus an agreed upon margin per ton. The tubular
company also has the right to purchase up to an additional 200,000 tons per year
for a price equal to the Company's fixed production costs plus an agreed upon
margin per ton. If the tubular company is unable to purchase at least 400,000
tons of steel rounds per year for its Lorain, Ohio pipemill, USX is required to
purchase any shortfall, under specified circumstances, to satisfy the steel
round requirements of its Fairfield, Alabama pipemill facility that can not be
satisfied from USX's internal production of steel rounds. The Company sold
$184.6 million of seamless rounds to USX in the year ended December 31, 2000.

COKE SUPPLY AGREEMENT
---------------------
The Company entered into a five-year supply agreement with USX, which provides
that Republic Technologies purchase substantially all of its requirements for
coke for use in its Lorain, Ohio blast furnace from USX. The purchase price for
coke is based on market prices and adjusted annually, subject to most favored
nations provisions for price and other conditions, which allow the Company to
receive the most favorable terms that USX grants to any of its coke customers.
The Company purchased $69.6 million of coke from USX in the year ended December
31, 2000.

PELLET SUPPLY AGREEMENT
-----------------------
Under this agreement, the Company agreed to purchase all of its iron ore pellet
requirements for its Lorain, Ohio blast furnace from USX for a period of five
years. The purchase price for pellets is generally based on market prices and
will be adjusted annually, subject to most favored nations provisions for price
and other conditions, which allow the Company to receive the most favorable
terms that USX grants to any of its pellet customers. The Company purchased
$93.5 million of iron ore pellets from USX in the year ended December 31, 2000.

TECHNOLOGY TRANSFER AGREEMENTS
------------------------------
The Company entered into technology transfer and related agreements with Kobe
and one of its affiliates which provides the Company with a license to use
various Kobe technology and requires Kobe to provide the Company with various
technical assistance in return for annual payments to Kobe of $1.0 million.


                                       75
<PAGE>   76


SAFE HARBOR LEASE MATTERS AGREEMENT
-----------------------------------
Pursuant to the master restructuring agreement, the Company received certain
property formerly owned by USS/Kobe that qualifies as "Safe Harbor Lease
Property," thus affording USX and Kobe with tax benefits. The Safe Harbor Lease
Matters Agreement contains covenants and warranties to ensure that the property
remains qualified as Safe Harbor Lease Property and to ensure the continuation
of the tax benefits.

ENERGY MANAGEMENT AGREEMENT
---------------------------
In connection with the consummation of the Combination, the Company entered into
an agreement with FirstEnergy under which it appointed FirstEnergy as its
exclusive representative for the procurement of energy supply and services. As a
result of this arrangement, it is likely that much of the Company's energy
purchasing requirements will eventually be filled by FirstEnergy. Also in
connection with the consummation of the Combination, FirstEnergy purchased $30.0
million of the Series C convertible preferred stock of Republic Technologies
International, Inc. (the Company's ultimate parent).

In connection with the Combination, the Company also entered into an agreement
with the new tubular steel company owned by USX regarding the provision of
various utilities and an agreement with USX regarding the provision of various
transitional services. In addition, at the closing of the Combination, the
Company entered into an agreement with USX regarding payment of certain payables
owed by USS/KOBE to USX.

NOTE 14 - COMMITMENTS AND CONTINGENCIES

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

The Company uses certain lease arrangements to supplement its financing
activities. Rental expense under operating leases was approximately $10.2
million, $2.7 million, $1.3 million, and $2.4 million for the year ended
December 31, 2000, the period from August 13, 1999 to December 31, 1999, the
period from January 1, 1999 to August 12, 1999 and the year ended December 31,
1998, respectively. At December 31, 2000, total minimum lease payments under
noncancellable operating leases are $7.2 million in 2001, $4.6 million in 2002,
$2.6 million in 2003, $1.0 million in 2004, $0.6 million in 2005 and $1.8
million thereafter. The Company sublets BarTech's former Seven Hills, Ohio
headquarters building which provided income of approximately $88 thousand in
1999 and $231 thousand in 2000, and will offset future minimum lease obligations
by approximately $200 thousand in 2001-2004 and $100 thousand thereafter.

On December 3, 1998, Republic entered into a technical exchange agreement with
Sanyo Special Steel Company of Japan ("Sanyo") for a total of $6.0 million. The
forty-eight month agreement involves technical assistance in melting, refining,
and casting technologies. Republic also entered into an agreement to share in
the cost and benefits of a similar agreement between BarTech and Sanyo dated
January 25, 1999. The BarTech and Sanyo agreement is also for a period of
forty-eight months with total payments of $6.0 million. Obligations under both
agreements as of December 31, 2000 are as follows: 2001--$2.4 million and
2002--$1.8 million.

Republic Technologies International, Inc., the Company's ultimate parent, has
$5.5 million Series A Preferred Stock outstanding that was mandatorily
redeemable on September 26, 2000, payment for which is expected to be made by
Republic Technologies International, Inc. from distributions or loans from the
Company. On October 6, 2000, Bethlehem Steel Corporation and Republic
Technologies International, Inc. arranged for the deferral of the redemption of
$5.5 million Series A Preferred Stock. On September 29, 2000, the Company
redeemed $0.5 million of Class A Members' Interest so that the Parent Company
could redeem the same amount of Cumulative Preferred Stock. The Company as of
December 31, 2000 redeemed an additional $1.2 million of Class A Member's
Interest. The parties previously acknowledged that the redemption would be made
in


                                       76
<PAGE>   77


installments during 2001, $0.1 million of which was made prior to the Petition
Date. Since filing under Chapter 11, no shares have been redeemed.

NOTE 15 - ENVIRONMENTAL COMPLIANCE

The Company is subject to a broad range of federal, state, and local
environmental laws and regulations, including those governing discharges into
the air and water, the handling and disposal of solid and hazardous wastes, and
the remediation of contamination associated with the disposal of waste. The
Company continuously monitors its compliance with such environmental laws and
regulations and, accordingly, believes that it is currently in substantial
compliance with such laws and regulations. The Company expects to expend
approximately $6.4 million during the next twenty-four months for environmental
control measures. As is the case with most steel producers, the Company could
incur significant costs related to environmental compliance, in particular those
arising from remediation costs for historical waste disposal practices at
certain of the Company's facilities. The Company believes that these costs are
most likely to be in the range of $15.4 million to $25.1 million over the lives
of the Company's facilities. This range represents the estimated aggregate cost
to resolve the environmental contingencies. The Company does not anticipate any
third-party recoveries. The reserve to cover potential current and noncurrent
environmental liabilities was approximately $19.6 million and $21.4 million as
of December 31, 2000 and 1999, respectively, substantially all of which is
classified as a long-term obligation in the accompanying consolidated/combined
balance sheets.

The reserve has been established and is monitored based on continuing reviews of
the reserve, each matter comprising the reserve, and whether any new matters
should be included in the reserve, using currently available information
relative to enacted laws and regulations and existing technology. These reviews
are performed periodically by an in-house committee comprised of representatives
experienced in environmental matters from the environmental, operating, and
accounting departments in consultation with outside legal and technical experts,
as necessary.

NOTE 16 - DISCONTINUED OPERATIONS

In connection with its acquisition of Republic, the Company determined its
intent to sell its specialty steel division and accordingly, the accompanying
consolidated financial statements reflect that division as a discontinued
operations in accordance with Accounting Principles Board Opinion No. 30. An
estimate of the operating results of the specialty steels division during the
phase-out period from the acquisition date to the estimated ultimate disposition
date was made and included as a fair value adjustment as part of the allocation
of the Republic purchase price. During the period from August 13, 1999 to
December 31, 1999, a provision of $6.4 million was made for the estimated
additional loss related to the ultimate disposition of the specialty steels
division. In the year ended December 31, 2000, an additional provision of $16.8
million was made for the estimated additional loss from disposition, including a
charge of $7.0 million taken for the permanent shutdown of the Baltimore
Specialty facility.

The Company sold certain assets from its Baltimore plant in January 2001 and is
currently in the process of selling the remaining real estate and assets of the
specialty steels division. Management anticipates the disposition to be
completed during the second quarter of 2001.

<TABLE>
<CAPTION>

                                Year Ending          Period From             Period From            Period From
                               December 31,      August 13, 1999 to      January 1, 1999 to     September 8, 1998 to
                                   2000           December 31, 1999        August 12, 1999       December 31, 1998
                             -----------------------------------------------------------------------------------------
<S>                              <C>               <C>                     <C>                    <C>
Net sales                        $ 44,556          $ 16,991                $ 30,016               $ 21,382
Gross loss                         (7,645)           (3,779)                 (1,249)                  (530)

Loss before income taxes          (12,614)           (5,441)                 (3,480)                (2,281)
Provision for income taxes             --                --                      --                     --
                             -----------------------------------------------------------------------------------------
Net loss                         $(12,614)         $ (5,441)               $ (3,480)              $ (2,281)
                             =========================================================================================
</TABLE>


                                       77
<PAGE>   78


The components of net assets of discontinued operations included in the
Company's balance sheets as assets held for sale were as follows:

<TABLE>
<CAPTION>

                                                       December 31, 2000         December 31, 1999
                                                    -----------------------   -----------------------
<S>                                                         <C>                       <C>
Assets held for sale, current- Inventories                  $  9,306                  $15,219
                                                    =======================   =======================

Assets held for sale, non-current - Property,
      plant and equipment                                   $  7,294                  $ 9,009
                                                    =======================   =======================
</TABLE>


NOTE 17 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS AND SIGNIFICANT
          GROUP CONCENTRATION OF CREDIT RISK

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

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

REDEEMABLE MEMBERS' INTEREST - CLASS A
     It is not practicable to estimate the fair value of this members' interest,
     which is not publicly traded.

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

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

<TABLE>
<CAPTION>

                                      December 31, 2000             December 31, 1999
                                  ---------------------------   --------------------------
                                   Carrying         Fair         Carrying        Fair
                                    Amount          Value         Amount         Value
                                  ------------   ------------   ------------  ------------
<S>                                 <C>           <C>            <C>           <C>
Cash and cash equivalents           $  1,795      $  1,795       $  4,637      $  4,637
Long-term debt                       513,572       115,400        483,453       370,527
Redeemable members' interest           3,800           N/A          5,500           N/A
</TABLE>


                                       78
<PAGE>   79


NOTE 18 - RESTRUCTURING CHARGES AND RESERVES

During 2000, the Company shutdown two of its production facilities: the
Johnstown, Pennsylvania melt shop facility and the Canton, Ohio 12" rolling mill
facility, and announced the shutdown of its Willimantic, Connecticut
cold-finishing facility to occur during 2001. The Johnstown facility closed in
August 2000, and the Canton 12" facility closed in October of 2000. These
actions were undertaken in an attempt to reduce costs and improve efficiency. As
a result of these actions, the Company recorded charges of $74.7 million during
the year.

The Company recorded restructuring charges of $66.5 million during the year
related to the closing of the Johnstown facility. These charges consisted of a
$40.6 million write-down of property, plant, and equipment, $6.0 million of
facility closure costs, and $3.2 million in additional environmental remediation
required as a result of the closure. The restructuring charges also included
hourly employee separation costs of $16.0 million for hourly workers and $.7
million for non-hourly severance. The hourly employee separation charge was
based on estimates of the cost of an agreement reached with the USWA.

Restructuring charges of $3.5 million were also recorded during the year related
to the announced closing of the Willimantic facility. These charges consisted of
a $3.2 million write-down of property, plant, and equipment and $.3 million in
additional environmental remediation required as a result of the closure. No
charges have been recorded for employee separation costs as it is currently
anticipated that most affected employees will be offered suitable alternative
employment at other Company facilities or a combination of voluntary ERBs and
VSPs.

Unlike the closure of the Johnstown facility, the closure of the Canton 12"
rolling facility was part of the Company's original consolidation plan
contemplated at the time of the Republic acquisition. Fair value adjustments to
the fixed assets and shutdown reserves related to the Canton 12" facility were
recorded at the date of the Republic acquisition. Charges for hourly labor of
$1.4 million were recorded during 2000 related to employment security provisions
in the labor agreement with the USWA. The Company has not recorded a provision
for hourly employee separation costs. It is currently anticipated that most
affected hourly employees will be offered suitable alternative employment at
other nearby facilities or a combination of voluntary ERBs and VSPs.

The Company had previously recorded a reserve for the reduction of non-union
labor and other shutdown reserves at the date of the Republic acquisition
related to the manufacturing locations selected for closure (the Canton 12"
rolling facility and the Chicago 11" rolling facility) amounting to $4.4 million
and $1.9 million, respectively. Adjustments reducing these previously recorded
reserves due to changes in estimates were recorded in 2000 amounting to $1.4
million.

Additionally, a reserve for the reduction of administrative labor amounting to
$4.6 million during 2000 was recorded as a restructuring charge in the
consolidated statement of operations.

The activity impacting the accruals for restructuring during the year ended
December 31, 1998, the period from January 1, 1999 to August 12, 1999, the
period from August 13, 1999 to December 31, 1999, and the year ended December
31, 2000, based on available information, is summarized in the table below:


                                       79
<PAGE>   80


<TABLE>
<CAPTION>

                                                 Asset Write-      Labor &            Facility
                                                    Downs         Severance            Closure           Total
                                                                                        Costs
                                                --------------- ---------------     --------------    -------------
<S>                                             <C>             <C>                  <C>              <C>
January 1, 1998                                                       $     --            $    --         $     --
    Purchase accounting adjustments                                      3,534                 --            3,534
    Provision                                                               --                320 (a)          320
    Amount utilized                                                         --                 --               --
    Adjustments                                                             --                 --               --
                                                                      --------            -------         --------
December 31, 1998                                                        3,534                320            3,854
                                                                      --------            -------         --------

    Purchase accounting adjustments                                        860              1,917            2,777
    Provision                                                               --                 --               --
    Amount utilized                                                     (1,128)                --           (1,128)
    Adjustments                                                             --                 --               --
    Reclass against environmental liabilities                               --               (792)            (792)
                                                                      --------            -------         --------
August 12, 1999                                                          3,266              1,445            4,711
                                                                      --------            -------         --------

    Provision                                                               --                 --               --
    Amount utilized                                                     (2,179)                --           (2,179)
    Adjustments                                                           (323) (a)            --             (323)
                                                                      --------            -------         --------
December 31, 1999                                                          764              1,445            2,209
                                                                      --------            -------         --------

    Provision                                       $   43,739          22,851              9,502           76,092
    Amount utilized                                                     (5,047)            (2,476)          (7,523)
    Adjustments                                                             --             (1,434)          (1,434)
    Reclass against inventory                                                                (652)            (652)
    Reclass against property, plant and
         equipment                                     (43,739)                                            (43,739)
                                                    ----------        --------           --------        ---------
December 31, 2000                                   $      --         $ 18,568           $  6,385        $  24,953
                                                    ==========        ========           ========        =========
</TABLE>

(a)  Amount is recorded in selling, general and administrative expense.

NOTE 19 - GOODWILL IMPAIRMENT CHARGE

During the fourth quarter of 2000, the Company recognized a non-cash impairment
charge of $79.6 million related to the write-off of its unamortized goodwill
balance. The industry-wide market conditions and the Company's high level of
indebtedness following the Combination have adversly impacted operations and the
Company's ability to implement its consolidation plan. These factors have lead
to the need to significantly revise the Company's operating plan and related
financial forecast. Based on the Company's current capital structure, the
revised operating plan and corresponding anticipated future operating cash flows
less anticipated capital expenditures are expected to be insufficient to recover
the unamortized goodwill balance. Accordingly, the carrying value of the
Company's goodwill balance has been reduced to zero.


                                       80
<PAGE>   81


                REPUBLIC TECHNOLOGIES INTERNATIONAL HOLDINGS, LLC
                                   SCHEDULE II
                        VALUATION AND QUALIFYING ACCOUNTS

              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                             Additions
                                            --------------------------------------------
                                                                           Charged to
                               Balance at    Charged to                  Other Accounts                     Balance at
                                Beginning     Costs and                    - Describe       Deductions     End of Year
         Description             of Year      Expenses     Recoveries                      from Reserves
------------------------------ ------------ -------------- ------------ ----------------- ---------------- -------------
<S>          <C>                  <C>              <C>        <C>          <C>                  <C>            <C>
ALLOWANCE FOR DOUBTFUL
  ACCOUNTS:
             2000                 $  8,798        $10,534                                                      $ 19,332
             1999                    2,679          6,534    $ 40         $  403 (b)(d)        $(858)             8,798
             1998                      817            448     (11)         1,630 (a)(b)(c)      (205)             2,679

RESERVES FOR
  INVENTORIES:
             2000                  $13,585                                                     $ (6,935)       $  6,650
             1999                    2,364        $11,221                                                        13,585
             1998                                   2,364                                                         2,364

VALUATION ALLOWANCE
  FOR DEFERRED TAX ASSETS:
             2000                      N/A            N/A     N/A            N/A                    N/A             N/A
             1999                      N/A            N/A     N/A            N/A                    N/A             N/A
             1998                  $42,736        $16,934                                                       $59,670
</TABLE>


(a)  Includes allowance recognized in connection with the acquisition of
     Republic Engineered Steels, Inc.

(b)  Foreign currency translation.

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

(d)  Includes allowance recognized in connection with the acquisition of
     USS/Kobe Steel Company's SBQ bar division.


                                       81