---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

|(Mark One)                                  
|--------------------------------------------
|ý                                           
|For the fiscal year ended October 31, 2002. 
|or                                          
|o                                           
|For the transition period
from            to
|Commission file number: 333-48245           

RENCO STEEL HOLDINGS, INC.(Exact name of registrant as specified in its charter)

|OHIO(State of incorporation)                                                              |  | 34-1854775(I.R.S. Employer Identification No.)
|----------------------------------------------------------------------------------------- |  | ----------------------------------------------
|30 ROCKEFELLER PLAZA, 42nd FL, NEW YORK,
NEW YORK(Address of principal executive offices) |  | 10112(Zip Code)                               
|Registrant's telephone number, including area code:(330) 399-6884                        

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

Title of each class

Name of exchange on which registeredNone


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 last 90 days.

o Yes    ý No

Note:
the Registrant files pursuant to an indenture but is not otherwise subject to Section 13 or 15(d) filing requirements.

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

The
aggregate market value of the voting stock of the registrant held by non-affiliates of the registrant at March 12, 2003 was $0.

The
number of shares of Common Stock (no par value, $.01 stated value) of the registrant outstanding as of March 12, 2003 was 100.

---

---

---



RENCO STEEL HOLDINGS, INC. AND SUBSIDIARIES  FORM 10-K  INDEX

|PART I                                                                                                   |               |                                                                                       | 3 
|-------------------------------------------------------------------------------------------------------- | ------------- | ------------------------------------------------------------------------------------- | --
|                                                                                                         | Item 1.       | Business                                                                              |   
|                                                                                                         | Item 2.       | Properties                                                                            |   
|                                                                                                         | Item 3.       | Legal Proceedings                                                                     |   
|                                                                                                         | Item 4.       | Submission of Matters to a Vote of Security Holders                                   |   
|PART II                                                                                                  |               |                                                                                       | 11
|                                                                                                         | Item 5.       | Market for Registrant's Common Equity and Related Stockholder Matters                 |   
|                                                                                                         | Item 6.       | Selected Financial Data                                                               |   
|                                                                                                         | Item 7.       | Management's Discussion and Analysis of Financial Condition and Results of Operations |   
|                                                                                                         | Item 7A.      | Quantitative and Qualitative Disclosures about Market Risk                            |   
|                                                                                                         | Item 8.       | Financial Statements and Supplementary Data of the Company                            |   
|                                                                                                         |               | Financial Statements and Supplementary Data of WCI                                    |   
|                                                                                                         | Item 9.       | Changes in and disagreements with Accountants on Accounting and Financial Disclosure  |   
|PART III                                                                                                 |               |                                                                                       | 59
|                                                                                                         | Item 10.      | Directors and Executive Officers of the Registrant                                    |   
|                                                                                                         | Item 11.      | Executive Compensation                                                                |   
|                                                                                                         | Item 12.      | Security Ownership of Certain Beneficial Owners and Management                        |   
|                                                                                                         | Item 13.      | Certain Relationships and Related Transactions                                        |   
|                                                                                                         | Item 14.      | Disclosure Controls                                                                   |   
|PART IV                                                                                                  |               |                                                                                       | 63
|                                                                                                         | Item 15.      | Exhibits, Financial Statement Schedule, and Reports on Form 8-K                       |   
|Financial Statement Schedule
    (including Independent Auditors Report on Financial Statement Schedule) |               | 65                                                                                   
|                                                                                                         | Signatures    |                                                                                       | 67
|                                                                                                         | Exhibit Index |                                                                                       | 70

2

---



PART I

ITEM 1. BUSINESS

GENERAL

Renco Steel Holdings, Inc. (Renco Steel) is a holding company incorporated in Ohio on January 20, 1998 and is a wholly owned subsidiary of The Renco
Group, Inc. (Renco). On January 29, 1998, Renco contributed to Renco Steel its interest in its wholly owned subsidiary, WCI Steel, Inc. (WCI). Renco Steel, together with WCI, are
hereinafter referred to as the Company.

WCI,
a niche oriented integrated producer of value-added, custom steel products, was incorporated in Ohio in 1988. WCI's primary facility covers approximately 1,100 acres in Warren,
Ohio, with additional facilities owned by subsidiaries located in Niles and Youngstown, Ohio, all of which are situated between Cleveland and Pittsburgh. WCI currently produces approximately 185
grades of flat rolled custom and commodity steel products. Total shipments were 1,281,140 tons in fiscal 2002 and 1,041,209 tons in fiscal 2001. Custom flat rolled products, which include high carbon,
alloy, ultra high strength, silicon electrical and heavy gauge galvanize steel, constituted approximately 48.5% of net tons shipped during fiscal 2002 and 51.5% during fiscal 2001 (see "Overview"
below for a discussion of custom products). Major users of WCI products are steel converters, steel service centers, construction product companies, electrical equipment manufacturers and, to a lesser
extent, automobile and automotive parts manufacturers.

WCI
and the industry continue to face difficult and volatile market conditions. During 2000 and 2001 there was intense downward pressure on steel prices due to the surge of imports into
the United States. This resulted in WCI incurring a net loss of $100.8 million in 2001. Order entry rates and steel prices increased significantly during 2002 as a result of significant
capacity reductions caused by the closing of a number of steel producers and the effects of the implementation of the Section 201 tariffs. As a result
of the increased shipping volume and prices, WCI returned to profitability during the fourth quarter of 2002. However, for the full year of 2002 WCI incurred a net loss of $37.6 million. In
addition to incurring significant losses during the last two years, WCI had negative cash flows which have reduced the cash resources available to support its operations.

Many
of the steel companies shut down in the past two years have been restarted by other companies with cost structures significantly lower than WCI's. This low cost capacity returning
to the market coupled with continued high levels of imports and a slowing manufacturing sector has resulted in reduced volume and pricing expectations for the first half of 2003. As a result, WCI
expects to incur a net loss for 2003.

WCI's
liquidity depends on its operating performance and borrowing availability under its revolving credit facility. If market conditions fail to improve adequately, operating losses
will continue and WCI will be unable to meet certain covenants associated with its revolving credit facility. Under these circumstances, if WCI is unable to obtain waivers of covenant violations or
secure additional financing sources to fund expected operating losses, it would likely have a material adverse effect on WCI's operations.

The
profitability of the Company is largely dependent upon WCI's results. The Company incurred net losses of $55.2 million and $128.8 million in 2002 and 2001 respectively.
Renco Steel's liquidity is solely dependent on funding from Renco and from Renco's irrevocable waiver of interest it is entitled to receive from its substantial ownership ($103,770,000 principal
amount as of the date hereof) of Renco Steel's $120 million principal 107/8% Senior Secured Notes due 2005 (Senior Secured Notes). Failure to receive continued support from Renco
will have a material adverse effect on Renco Steel's financial condition and liquidity position.

3

---

PRODUCTS

Overview

WCI
produces a wide range of custom flat rolled steel products, including high carbon, alloy, ultra high strength, silicon electrical and heavy gauge galvanize steel. WCI's custom products are
characterized by small order quantities, specialized chemistries, narrow widths and value added processing, with an emphasis on customer specific quality requirements and delivery performance.

WCI's
commodity steel product sales consist principally of hot and cold rolled low carbon sheet steel, other high strength applications and light gauge galvanize products. Export sales
were approximately 1.7% of net sales during the last three fiscal years.

The
table below shows WCI's product mix for the last three years.

|                         |                 | Net Tons Shipped
Fiscal Year Ended
October 31, |         | Percent of Total
Fiscal Year Ended
October 31, |        
|------------------------ | --------------- | ---------------------------------------------- | ------- | ---------------------------------------------- | -------
|
|Custom Products:         |                 |                                                |         |                                                |        
|                         | Hot Rolled      |                                                | 407,090 |                                                | 302,389
|                         | Cold Rolled     |                                                | 24,828  |                                                | 19,450 
|                         | Coated products |                                                | 189,631 |                                                | 214,460
|                         |                 |                                                |         |                                                |        
|Total Custom Products    |                 | 621,549                                        |         | 536,299                                        |        
|Total Commodity Products |                 | 659,591                                        |         | 504,910                                        |        
|                         |                 |                                                |         |                                                |        
|Total Steel Products     |                 | 1,281,140                                      |         | 1,041,209                                      |        
|                         |                 |                                                |         |                                                |        

Custom
Products

High
Carbon, Alloy, Ultra High StrengthWCI has developed markets for high carbon, alloy and ultra high strength steel products that are sold to strip converters, steel
service centers, and automobile and automotive parts manufacturers. Products required by the strip converter customers are characterized by small order quantities, relatively narrow widths and
specific metallurgical properties. WCI presently produces over 100 specialized chemistries for these markets.

WCI's
customers in this sector, in turn, supply end-users which have highly specific product needs requiring the strip converter to order steel with close gauge tolerances,
minimal crown profiles, critical surface qualities and, in certain cases, in narrow widths.

In
the high carbon and alloy markets, WCI competes with several other domestic integrated and minimill producers, as well as various steel producers in Canada, Europe and Japan. In the
ultra high strength market, WCI competes with several integrated mills.

SiliconSilicon
electrical steel is sheet steel that exhibits certain electrical or magnetic properties. The magnetic properties of this product permit electric motors to run
at high speeds for extended periods of time with greater efficiency while minimizing heat loss.

The
market for silicon electrical sheet steel can be divided into two main segments: grain oriented silicon sheet and non-grain oriented silicon sheet. The distinction
between grain and non-grain oriented silicon sheet pertains to the electrical properties of the steel. WCI's silicon annealing line is designed for production of non-grain
oriented silicon sheet and all of WCI's silicon shipments are in this
segment. Presently, there is one domestic competitor in this segment and several foreign competitors. In addition, WCI's product also has experienced increasing competition from
cold-rolled motor laminations produced by several other integrated steelmakers, which have been developed as a substitute product for silicon steel in certain applications. Due to the
migration of certain motor

4

---

manufacturing capability to Mexico and Asia, the market to which WCI can cost effectively supply its product is contracting.

Heavy
gauge galvanizeGalvanize steel is zinc-coated sheet steel produced on WCI's hot dipped galvanizing line. The market for galvanize sheet steel is divided
into two broad categories: heavy and light gauge steel. Heavy gauge galvanize steel, which is generally hot rolled based, is used in the manufacture of electrical boxes, culvert coil, construction
hardware, HVAC components and automotive stampings, as well as many other end uses.

WCI's
galvanize finishing line is well suited to produce heavy gauge hot rolled steel. WCI competes with several other integrated producers and minimills, as well as independent
producers in the heavy gauge galvanize steel market.

Commodity
Products

In
fiscal 2002, WCI shipped 659,591 tons in the aggregate of sheet and strip products consisting of hot and cold rolled low carbon, other high strength and light gauge galvanize steel,
which represented approximately 51.5% of WCI's net tons shipped. Hot rolled low carbon and high strength sheet is sold to steel service centers or manufacturers producing a broad array of products,
including tubing, stampings and roll formed parts. Cold rolled low carbon and light gauge galvanize sheet and strip is purchased by service centers, container manufacturers, and the automotive and
appliance industries. In these commodity steel markets, WCI competes with all major integrated producers, minimills, and independent producers.

MARKETING

WCI's marketing, sales and customer service functions are conducted through three wholly owned subsidiaries, WCI Steel Sales LP (WCI Sales), WCI Steel
Metallurgical Services Inc. (WCI Metallurgical Services) and WCI Steel Production Control Services Inc. (WCI Production Services).

WCI
Sales is responsible for developing and implementing a sales and marketing strategy aimed at increasing the sales of custom steel products and building the strategic customer base.
WCI Sales employs a direct sales force covering approximately 230 active accounts and other potential steel
accounts within WCI's geographic market. Over 50% of WCI Sales' shipments are to customers within 200 miles of the Warren facility, and as a result of this concentration of active and potential
customers in its service area, WCI Sales believes that it has a competitive advantage over competitors located farther away.

Sales
outside WCI's geographic market are made through independent sales representatives on a commission basis. Although transportation costs can be prohibitive at extreme distances from
the Warren facility, select custom products are competitively priced outside WCI Sales normal target markets. WCI Sales believes that independent sales representatives provide the most
cost-effective method to access these customers. Approximately 4.8% of WCI Sales' volume in fiscal 2002 was sold through the independent sales representatives.

Marketing
and pricing are centralized at the Warren facility, where the marketing strategy and pricing levels are established for all WCI products. WCI Sales has a marketing staff that
works closely with the sales and technical service representatives to coordinate the implementation of the sales and marketing strategy.

WCI
Metallurgical Services is responsible for developing the specialized chemistries that support WCI's custom product mix. In addition, WCI Metallurgical Services has a staff of
technical service representatives with strong metallurgical and technical backgrounds who assist the sales force in the field. Together, WCI believes the sales force and the technical staff comprise a
knowledgeable team qualified to identify and meet customer needs.

5

---

WCI
Production Services provides order entry and order status services to assist WCI Sales in meeting customer needs. It also provides customer service and utilizes a fully automated
computerized sales network that furnishes the sales force and customers with product specifications and timely order status information.

CUSTOMERS

WCI's customer base is dominated by steel converters and steel service centers, which in fiscal 2002 represented 76.7% of shipments. The remaining shipments were
directly to end-users.

The
following table sets forth the percentage of WCI's net tons shipped to various markets for the past three fiscal years.

| |                               | Fiscal Year Ended
October 31, |     
| | ----------------------------- | ----------------------------- | ----
|
|
| | Conversion/further processing |                               | 59.1
| | Steel service centers         |                               | 17.6
| | Construction                  |                               | 11.3
| | Electrical equipment          |                               | 3.3 
| | Direct automotive             |                               | 4.4 
| | Other                         |                               | 4.3 
| |                               |                               |     
| |                               | Total                         |     
| |                               |                               |     

In
fiscal years 2002, 2001 and 2000, WCI's twenty largest customers represented approximately 63%, 62% and 62%, respectively, of net sales. The Company's largest customer, Worthington
Industries, represented approximately 11.7%, 9.8% and 10.1% of net sales in fiscal 2002, 2001 and 2000, respectively.

BACKLOG

On October 31, 2002, WCI's order backlog was approximately 195,000 net tons with an approximate value of $89 million compared to approximately
135,000 net tons with an approximate value of $52 million at October 31, 2001, based in each case on the then current prices. Under the applicable orders, WCI shipped substantially all
of the orders in the October 31, 2002 backlog by January 31, 2003. Although customers may cancel orders included in the backlog, such cancellations have been negligible in the past.

COMPETITION

The domestic steel market is highly competitive. Competition in the domestic steel market is intensified by excess world capacity which results in significant
steel imports to the United States. This competition affects the prices WCI can charge for its products and the utilization of its production facilities.

In
the United States WCI competes with many other integrated producers and minimills in most of its custom products. Minimills are generally smaller volume steel producers that use
ferrous scrap metals as their basic raw material in an electric furnace production process. Compared to most integrated producers, minimills, which rely on less capital-intensive hot metal sources,
have certain production cost advantages. Because minimills typically are not unionized, they have more flexible work rules, which have resulted in lower employment costs per net ton shipped. Through
the use of various higher quality raw materials and the development of thin slab casting technology, electric furnace producers are able to compete directly with producers of higher value products,
including high carbon, alloy and coated products. The penetration of the minimills into the high carbon and alloy product

6

---

markets has resulted from the distortion of steel supply created by a significant level of imports in flat rolled steel products into the United States. This penetration has influenced the pricing
structure of these products and has reduced the premium WCI is able to receive on these products compared to commodity products. In addition, certain integrated producers, which had ceased operations,
have been restarted. These restarted integrated facilities have a number of competitive advantages over other integrated operations, including lower manning, more flexible work arrangements, lower
benefit costs, and lower debt obligations. With several other integrated producers operating under bankruptcy court protection, changes to the competitive steel environment are expected to continue.

During
the last several years steel imports into the U.S. have adversely affected shipping volume and have contributed significantly to pricing volatility. During this period, WCI and
the steel industry have filed various trade cases against hot-rolled and cold-rolled carbon steel flat products from various countries in response to this increase in imports.
While various duties have been imposed on these products from certain countries, to date these duties have been ineffective in reducing overall steel imports to the U.S.

In
response to the surging imports, in June 2001 the U.S. Trade Representative, at the direction of President Bush, requested an investigation by the International Trade
Commission under Section 201 of the Trade Act of 1974 to determine whether steel is being imported into the U.S. in such quantities as to be a substantial cause of serious injury to the U.S.
steel industry.

This
investigation culminated on March 5, 2002 when President Bush issued his remedy regarding the Section 201 investigation which became effective for imports entering the
U.S. on or after March 20, 2002. This remedy includes a tariff rate quota on carbon and alloy slabs of 30% in excess of 5.4 million tons per year adjusting over a three year period to
18% on imports in excess of 6.4 million tons and a 30% tariff on hot-rolled, cold-rolled and coated sheet and strip declining over a three year period to 18%. These
remedies pertain to imports from all countries except Canada, Mexico, Jordan, Israel and certain developing countries. Since the March 2002 Section 201 remedy was imposed, the U.S.
government has limited its effectiveness by excluding millions of tons of steel products originally covered by those tariffs. More than 700 exclusion requests to the 201 tariffs have been granted,
affecting approximately 30% of the steel initially covered under the Section 201 remedy. These tariffs will be reviewed in September 2003 and may be adjusted at that time.

The
relative strength of the U.S. dollar and economy versus the strength of foreign currencies and economies can significantly affect the import/export trade balance for flat rolled
steel. In addition to competition from domestic and foreign steel producers, materials such as aluminum, cement, composites, glass and plastics compete as substitutes for steel in many markets.

MANUFACTURING PROCESS

In WCI's primary steelmaking process, iron ore pellets, coke, limestone, and other raw materials are consumed in the blast furnace to produce "hot metal." Hot
metal is further converted into liquid steel through the basic oxygen furnace (BOF) process where impurities are removed, recycled scrap is added and metallurgical properties for end use are
determined on a batch-by-batch basis. WCI's BOF has two vessels, each with a steelmaking capacity of 182 tons per heat. From the BOF, the heats of steel are sent to the ladle
metallurgy facility (LMF), where the temperature and chemistry of the steel are adjusted to precise tolerances. In addition, the steel may be vacuum degassed to further improve its cleanliness. Liquid
steel from the LMF then is formed into slabs through the process of continuous casting. The twin-strand continuous slab caster (Continuous Caster) allows WCI to cast all of its steel
products. After continuous casting, slabs then are reheated, reduced and finished by extensive rolling, shaping, tempering and, in certain cases, by the application of coatings at WCI's downstream
operations. Finished products are usually shipped to customers in the form of coils. WCI has linked its steelmaking and rolling equipment with a computer based integrated manufacturing control system
to coordinate production and sales activities.

7

---

RAW MATERIALS

WCI's steelmaking operations are dependent on reliable supplies of various raw materials, principally iron ore pellets, coke, scrap and energy. WCI believes that
it has adequate sources of its principal raw materials to meet its present needs.

Iron
Ore Pellets

WCI
has a contract with a major supplier of iron ore pellets for its requirements through calendar 2004. Iron ore pellets satisfied approximately 97.7% of WCI's iron requirements for the
blast furnace in fiscal 2002. The iron ore pellet contract requires WCI to purchase all of its iron ore pellet requirements through 2004 from the contracting vendor. WCI carries an increased level of
iron ore pellet inventory immediately preceding the winter months, due to the curtailment of vendor shipments during the winter as a result of the freezing of the Great Lakes.

Coke

Coke
is the principal fuel used to produce hot metal and is an essential ingredient in steelmaking. WCI has a contract with an integrated steel producer for a majority of its estimated
coke requirements through calendar 2004. WCI's coke requirements are approximately 670,000 tons per year. The domestic supply of coke has decreased significantly over the last decade and may decrease
further in the future due to the requirements of the Clean Air Act and the financial condition of certain producers. As WCI does not own a coke battery, it is dependent upon commercially available
domestic or imported coke to sustain its operations. Although WCI believes that there will be adequate supplies of domestic or imported coke available for its purposes after the expiration of its
contracts in 2004, there can be no assurance to such effect.

Scrap

WCI
uses scrap steel to supplement the hot metal produced at the blast furnace for the steel making process. Scrap steel accounted for approximately 26.0% of WCI's liquid steel
production in fiscal 2002. Scrap steel is readily available and is purchased on an as-needed basis.

Energy
and Gases

WCI's
steel operation consumes large amounts of electricity, natural gas, oxygen and other industrial gases. WCI purchases its electrical power requirements under a contract that extends
through March 2005 from a local utility. WCI can generate approximately 20% of its electrical needs. Natural gas is also purchased pursuant to supply contracts, certain of which extend through
March 2003. Oxygen is delivered, under a contract that extends through April 2017, from a supplier-owned facility located at the Warren facility.

ENVIRONMENTAL MATTERS

In common with much of the steel industry, WCI's facilities are located on sites that have been used for heavy industrial purposes for decades. WCI is and will
continue to be subject to numerous federal, state and local environmental laws and regulations governing, among other things, air emissions, waste water discharge and solid and hazardous waste
management. WCI has made and intends to continue to make the necessary expenditures for environmental remediation and compliance with environmental laws and regulations. Environmental laws and
regulations continue to change and have generally become more stringent, and WCI may be subject to more stringent environmental laws and regulations in the future. Compliance with more stringent
environmental laws and regulations could have a material adverse effect on WCI's financial condition and results of operations.

WCI
is subject to a consent decree as a result of a civil action instituted by the Department of Justice (DOJ), on behalf of the Environmental Protection Agency (EPA). Work required
under the consent decree was completed during January 2003 with the exception of final reporting. The consent

8

---

decree also provides for stipulated penalties in the event of noncompliance which WCI does not believe will be material.

As
a condition of a previous Resource Conservation and Recovery Act (RCRA) operating permit, WCI is required to undertake a corrective action program with respect to on-site
waste management practices at the Warren facility. The work plan for the initial phase of the investigation step of the corrective action program, the RCRA Facility Investigation (RFI), identifies
thirteen solid waste management units to be investigated. WCI has completed and submitted its RFI Phase 1 report to the EPA. WCI has also completed human health and ecological risk assessments, the
results of which will be used to identify whether any further investigative steps are required to complete the RFI. WCI submitted its risk assessment reports to the EPA, and is awaiting a response.
Any additional investigative steps, such as sampling, would then be undertaken in 2003 and 2004 as phase two of the RFI. The final scope of corrective action required to address any contamination that
may be present at or emanating from the solid waste management units at the Warren facility, including the potential for remediation, is dependent upon the completion and findings of the RFI and the
development and approval of a corrective action program. Accordingly, WCI is unable at this time to estimate the final cost of the corrective action program or the period over which such costs may be
incurred and there can be no assurance that any such corrective action program would not have a material adverse effect on the operating results or financial condition of WCI.

WCI
completed construction of the first phase of a new landfill during 2002 which is currently operational at its Warren facility, which receives waste materials from the iron and
steel-making operations. WCI has a plan which has been approved by the EPA for closure of the former landfill through recycling by providing approximately one-third of its contents to
established markets for construction materials and disposing of any non-salable or non-recyclable material in the new lined landfill. WCI is not permitted to put any new
material on the former landfill. WCI is permitted to cease the recycling process and close the landfill under an EPA approved plan at WCI's discretion.

The
EPA issued a unilateral administrative order (Order) to WCI pursuant to Section 7003 of RCRA, effective on September 24, 2002. The order asserts that WCI's handling of
solid waste in various impoundment areas presents an imminent and substantial endangerment to health or the environment by virtue of potential harm to wildlife, including migratory birds, that may
land on or enter the areas. The Order required WCI, among other things, to (i) take immediate measures to deter and discourage wildlife from landing on or entering the areas, (ii) remove
all oily wastes from the impoundments, and (iii) remove all remaining oily sludge from the banks and bottoms of the impoundments. RCRA provides for civil penalties of up to $5,500 per day for
noncompliance with the Order. In written comments, WCI raised several concerns and objected to both the issuance of the Order and its scope, including portions of the Order calling for removal of all
oily material from the impoundments. WCI also submitted a draft work plan to EPA setting forth a number of activities that WCI considers reasonably necessary to abate any alleged endangerment, and
began implementing the draft work plan in the fall of 2002. In January 2003, EPA approved portions of the draft work plan and disapproved other portions. EPA also issued an Amended Order, dated
January 21, 2003. The Amended Order requires WCI to continue implementing its immediate deterrent measures. For impoundments that are a required part of WCI's ongoing operations, the Amended
Order requires WCI to either install a netting system over the impoundments or remove all oily material. For the inactive areas, the Amended Order requires that all oily material be removed. WCI is
currently evaluating the feasibility of EPA's demands, including timing, and available options for responding to the Amended Order.

In
addition, WCI received correspondence dated December 27, 2002 from the U.S. Attorney's office on behalf of the United States Fish & Wildlife Service alleging that WCI
has violated Section 703(a) of the Migratory Bird Treaty Act (a misdemeanor). WCI and its legal counsel met with the Assistant U.S. Attorney in February 2003 to discuss possible
resolutions for this matter, and those

9

---

discussions are ongoing. WCI believes that it will resolve this matter in a manner that will not have a material adverse effect on WCI's financial position or results of operations.

A
liability has been established for an amount, which WCI believes is adequate, based on information currently available, to cover the costs to resolve the above described matters,
including remediation, if any, except for any costs of corrective action that may result from the RFI for which no estimate can currently be made. The outcome of the above described matters could have
a material adverse effect on the future operating results of WCI in a particular quarter or annual period; however, WCI believes that the effect of such matters will not have a material adverse effect
on WCI's consolidated financial position.

EMPLOYEES

As of October 31, 2002, WCI had 437 salaried employees and 1,363 hourly employees. Most of the employees are located at the Warren facility with
most of the hourly employees being represented by the United Steelworkers of America (USWA) with which WCI has a five-year collective bargaining agreement that expires October 31,
2004.

BENEFIT PLANS

Hourly
Profit Sharing Plan

Certain
hourly employees represented by the USWA participate in a profit sharing plan under which WCI pays 12% of pretax income as defined in the profit sharing agreement. WCI advances
one-half of the amounts due under this plan on a quarterly basis, within 45 days following the end of each fiscal quarter, and pays the remaining amounts by February 15 of
the subsequent year.

Salaried
Variable Compensation Plan

WCI
has a variable compensation plan for salaried employees known as the Company Performance Compensation Program (CPC). Under the CPC, salaried employees receive variable compensation
based on WCI's pretax income as defined in the plan. CPC payments are measured as a percentage of the employees base salary and paid quarterly.

Pension
Plans

WCI
has a defined contribution retirement plan that covers substantially all salaried employees. WCI funds contributions to this plan as earned on a monthly basis. Contributions to the
plan are based on employee age and compensation.

WCI
has a defined benefit floor offset pension plan, which covers substantially all hourly employees at the Warren facility. The plan, when combined with benefits from WCI's defined
contribution plan
which was frozen effective September 1, 1999 and benefits from a predecessor company's defined benefit pension plan, provide a minimum level of pension benefits for eligible employees. Benefits
are based on age and years of service, but not compensation. Under this plan, employees who retired on or before August 31, 1999 receive a monthly benefit equal to $35 (Benefit Multiplier)
times the number of years of service with WCI or its predecessors. Effective September 1, 2000 for retirements on or after September 1, 1999, the Benefit Multiplier increased from $35 to
$52.50 for years of service up to 30 and $70 for years of service in excess of 30. On September 1, 2002 for retirements on or after September 1, 1999, the Benefit Multiplier further
increased to $56.25 for years of service up to 30 and $75 for years of service in excess of 30. If the employee has at least 30 years of service at retirement, the monthly benefit is subject to
certain minimums based on age at retirement. No named executive officer is eligible to participate in this plan.

Postretirement
Benefit Plans

WCI
provides postretirement health care and life insurance benefits to substantially all employees who retire upon meeting certain age and length of service eligibility requirements. WCI
has established

10

---

a trust to hold contributions to fund future postretirement health care and life insurance obligations related to the hourly workforce. This trust holds liens on certain assets of WCI and one of its
subsidiaries to secure WCI's obligation for postretirement health care benefits. As a result of the collective bargaining agreement effective September 1, 1999, WCI was permitted to pay current
claims up to $8.8 million from the trust. That limit was reached during the three months ended July 31, 2001 thereafter requiring WCI to pay claims from corporate assets. Claims paid by
WCI or trust totaled $7.1 million, $5.4 million and $4.4 million during fiscal years 2002, 2001, and 2000, respectively.

ITEM 2. PROPERTIES

WCI's Warren, Ohio facility, situated on approximately 1,100 acres, includes a blast furnace, a two vessel BOF shop, an LMF and a vacuum degasser, a
twin-strand Continuous Caster, a 56-inch hot strip mill, 54-inch tandem and temper mills, annealing facilities, a silicon continuous annealing line,
hot-dip galvanizing line and other finishing facilities. The blast furnace was last relined during 1995 as part of its planned maintenance, a procedure which is performed on a routine
basis every six to ten years.

Youngstown
Sinter Company (YSC), a wholly owned subsidiary of WCI, owns a sinter plant located in Youngstown, Ohio on 51 acres. YSC idled its plant indefinitely effective July 15,
2001. YSC had been in operation since 1991 producing a clinker-type material (Sinter) from steelmaking by-products such as slag and ore fines. The sinter was then used as a
substitute feed stock in WCI's blast furnace facility located in Warren, Ohio. The sinter plant may be restarted in the future if economically advantageous.

Niles
Properties, Inc., a subsidiary of WCI, located approximately five miles from the Warren facility, has approximately 525,000 square feet of building space with one
long-term tenant occupying approximately 5% of the facility.

WCI
believes that its facilities are well maintained and they are considered satisfactory for their purposes.

See
Part II, Item 8, Note 5 to the Company's Consolidated Financial Statements for a description of liens related to the Company's property, plant and equipment.

ITEM 3. LEGAL PROCEEDINGS

See Item 1, Environmental Matters, for information as to legal proceedings relating to environmental matters. The Company is contingently liable with respect to
lawsuits and other claims incidental to the ordinary course of its business.

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

No matters were submitted to a vote of security holders during the quarter ended October 31, 2002.

PART II

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

Renco Steel is a direct wholly-owned subsidiary of Renco. There is no established public trading market for Renco Steel's common stock. Since its inception in
January, 1998, Renco Steel has had one shareholder. Renco Steel owns all of the stock of WCI. There is no established public trading market for WCI's common stock. Renco Steel did not pay dividends in
fiscal year 2002 or 2001. Renco Steel was not permitted to pay dividends at October 31, 2002 under the terms of the indenture governing the Senior Secured Notes. The Senior Secured Notes are
secured by a pledge of all the outstanding capital stock of WCI. See Part II, Item 8, Note 5 to the Consolidated Financial Statements for limitations on dividends.

11

---

ITEM 6.    SELECTED FINANCIAL DATA

|                              |                                                                               | Fiscal Year Ended October 31, |  
|----------------------------- | ----------------------------------------------------------------------------- | ----------------------------- | -
|
|
|Statement of Operations Data: |                                                                               |                               |  
|                              | Net Sales                                                                     |                               | $
|                              | Cost of products sold                                                         |                               |  
|                              |                                                                               |                               |  
|                              | Gross margin                                                                  |                               |  
|                              | Depreciation and amortization                                                 |                               |  
|                              | Selling, general and administrative expenses                                  |                               |  
|                              | Unusual charges                                                               |                               |  
|                              |                                                                               |                               |  
|                              | Operating (loss) income                                                       |                               |  
|                              | Interest expense                                                              |                               |  
|                              | Interest, investment and other income (expense)                               |                               |  
|                              |                                                                               |                               |  
|                              | (Loss) income before income taxes                                             |                               |  
|                              | Income taxes                                                                  |                               |  
|                              |                                                                               |                               |  
|                              | Net (loss) income                                                             |                               | $
|                              |                                                                               |                               |  
|Other Operating Data:         |                                                                               |                               |  
|                              | Net tons shipped                                                              |                               |  
|                              | Percent custom products                                                       |                               |  
|                              | Average selling price per net ton shipped                                     |                               | $
|                              | Average cost per net ton shipped                                              |                               |  
|                              | Average gross margin per net ton shipped                                      |                               |  
|                              | Average operating (loss) income per net ton shipped                           |                               |  
|Balance Sheet Data:           |                                                                               |                               |  
|                              | Cash and cash equivalents                                                     |                               | $
|                              | Restricted cash, cash equivalents and short-term investments                  |                               |  
|                              | Other investments                                                             |                               |  
|                              | Working capital (excluding cash, cash equivalents and short-term investments) |                               |  
|                              | Property, plant and equipment, net                                            |                               |  
|                              | Total assets                                                                  |                               |  
|                              | Total debt (including current portion)                                        |                               |  
|                              | Shareholder's (deficit) equity                                                |                               |  



---

12

---



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

Unless otherwise indicated, references to a year are to the Company's fiscal year ended October 31.

Management's
discussion and analysis of its financial condition and results of operations are based upon the Company's financial statements, which have been prepared in accordance with
accounting standards generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and liabilities at year-end, and the reported amount of revenues and expenses during the year. Management regularly
evaluates these estimates, including those related to the carrying value of property, plant and equipment, valuation allowances for receivables and inventories, liabilities for environmental
obligations, potential litigation claims and settlements, and assets and obligations related to employee benefits. Management's estimates are based on historical experience and various other
assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Accordingly, actual results may differ materially from current expectations under different assumptions or conditions.

Management
believes that the following critical accounting policies affect the more significant judgments and estimates used in the preparation of the financial statements.

DepreciationProperty,
plant and equipment are recorded at cost. Depreciation is calculated on the straight-line method over the estimated useful lives of the assets (buildings
20 to 30 years and machinery and equipment 2 to 30 years with a weighted average of 17 years). Expenditures for normal repairs and maintenance are charged to expense as incurred.

Asset
ImpairmentsThe Company evaluates the impairment of its property, plant and equipment on an individual asset basis or by logical groupings of assets. Asset impairments are recognized
when the carrying value of those productive assets exceed their aggregate projected undiscounted cash flows. If future demand and market conditions are less favorable than those projected by
management, asset write-downs may be required.

Allowances
for Doubtful AccountsThe Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of customers to make required payments. If the
financial
condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

13

---

InventoriesThe
Company determines the cost of inventories under the last-in, first-out (LIFO) method. The Company writes down inventories for the difference
between the carrying value of the inventories and the estimated market value on a product by product basis. If actual market conditions become less favorable than those projected by management,
additional write-downs may be required.

Environmental
RemediationThe Company provides for remediation costs and penalties when the responsibility to remediate is probable and the amount of associated costs is reasonably
determinable. Remediation liabilities are accrued based on estimates of known environmental exposures and are discounted in certain instances. The Company regularly monitors the progress of
environmental remediation. Should studies indicate that the cost of remediation is different than previously estimated,a change to the accrual would be recorded in the period in which such
determination was made.

Accruals
for Potential Litigation Claims and SettlementsThe Company records accruals for potential litigation claims and settlements when legal counsel advises that an obligation is
probable and reasonably estimable. Changes in findings and negotiations as the cases progress cause changes in the recorded accruals.

Pensions
and Other Postretirement Benefits (OPEB)Net pension and OPEB expense are recorded for benefits based on, among other things, assumptions of the discount rate, estimated return on
plan assets, the mortality of participants and the current level and escalation of health care costs in the future. Changes in these and other factors and differences between actual and assumed
changes in the present value of liabilities or assets of the Company's benefit plans above certain thresholds could cause net annual expense to increase or decrease materially from year to year.

RESULTS OF OPERATIONS

Fiscal 2002 Compared to Fiscal 2001

Net
sales in 2002 were $502.0 million on 1,281,140 tons shipped, representing a 21.5% increase in net sales and a 23.0% increase in tons shipped compared to 2001. Shipping volume
for 2002 began to increase substantially during the second fiscal quarter and stabilized to more historical levels during the second half of the fiscal year. In addition, selling prices increased
dramatically throughout 2002. This is
a result of a variety of favorable factors that included a decrease in domestic supply due to the closing of facilities during the past several years, the implementation of tariffs under a favorable
Section 201 decision on certain imported steel which became effective for imports entering the U.S. on or after March 20, 2002, and a conclusion to inventory reductions by customers and
a slight improvement in overall economic activity. Net sales per ton shipped decreased 1.3% to $392 in the 2002 period compared to $397 for the 2001 period, with net selling prices increasing 3.5%
offset with a less favorable product mix. Shipments of custom carbon, alloy and electrical steels accounted for 48.5% of total shipments in 2002 compared to 51.5% in 2001. Net sales per ton shipped
for the fourth quarter of 2002 were $439 compared to $397 for the third quarter of 2002 and $371 for the fourth quarter of 2001.

Gross
margin (sales less cost of products sold) was $28.6 million in 2002 compared to gross margin (loss) of ($17.6) million in 2001. The increase in gross margin reflects lower
per ton production costs resulting from significantly higher volume and its effect on fixed operating costs per ton and higher shipping volume coupled with higher transaction prices, partially offset
by a less favorable product mix as discussed above. The 2002 period included favorable adjustments to inventory valuation reserves of $4.6 million. The 2001 period included unfavorable
adjustments to inventory valuation reserves of $1.2 million. Excluding these adjustments the gross margin was $24.0 million in 2002 compared to a gross margin (loss) of ($16.4) million
for 2001. Production volume in 2002 was approximately 87% of operating capacity compared to approximately 74% in 2001.

14

---

Operating
income (loss) was ($8.5) million, or ($7) per ton, in 2002 compared to operating income (loss) of ($64.7) million, or ($62) per ton, in 2001. The decrease in operating loss
reflects lower depreciation expense and the increase in gross margin discussed above and also included significant non-recurring items for both periods. The operating loss for the 2002
period included a $1.6 million gain realized from the resolution of contract issues relating to the sale of a third party owned coke plant adjacent to WCI's facility and a charge of
$2.1 million to establish a reserve for amounts due from a financially distressed customer. The operating loss for the 2001 period included a charge of $3.9 million associated with YSC's
indefinite idling of its operating facility on July 15, 2001, a charge of $2.1 million to establish a reserve for amounts due from a financially distressed steel company and a charge of
$1.7 million to write-off costs incurred in an unsuccessful attempt to acquire another steel maker. Excluding the gain and adjustments to inventory valuation reserves and the
non-recurring charges for the 2002 period, the operating loss was ($12.7) million or ($10) per ton for fiscal year 2002. Excluding the charges and adjustments to inventory valuation
reserves in the 2001 period, the operating loss was ($55.8) million or ($54) per ton for fiscal year 2001.

Interest
and other income (expense), net was $0.5 million in 2002 compared to ($18.5) million in 2001. Declining cash balances during the 2002 period and the total liquidation of
limited partnership investments in the third quarter of 2001 resulted in a decrease in interest and investment income of $2.9 million. In the 2001 period, the Company recorded a charge of
$10.8 million to write down the carrying value of Acme Metals 10.875% Senior Unsecured Notes owned predominantly by WCI and to a much lesser extent by Renco Steel. A charge of
$10.8 million was also recorded in 2001 for the loss on the impairment of costs in excess of acquired net assets.

As
a result of the items discussed above, the Company had a loss before taxes of $55.2 million in 2002 compared to a loss before taxes of $128.8 million in 2001. In 2002,
the Company recorded a charge to other comprehensive income for an adjustment to WCI's minimum pension liability of $27.8 million. As a result, total comprehensive loss for the years ended
October 31, 2002 and 2001 were $83.0 million and $128.8 million respectively.

Effective
November 1, 1998, the Company was designated as a qualified subchapter S subsidiary by Renco. Accordingly, the Company is generally not subject to income taxes.

Fiscal
2001 Compared to Fiscal 2000

Net
sales in 2001 were $413.1 million on 1,041,209 tons shipped ($105.7 million and 284,503 tons shipped for the fourth quarter), representing a 26.3% decrease in net sales
and a 17.7% decrease in tons shipped compared to 2000. Shipping volume for the 2001 period was lower due primarily to lower customer demand resulting from a general slowing in the U.S. economy coupled
with high levels of imported steel. Net sales per ton shipped decreased 10.4% to $397 in 2001 compared to $443 in 2000, with net selling prices down 12.2% offset somewhat by changes in product mix.
Shipments of custom carbon, alloy and electrical steels accounted for 51.5% of total shipments in 2001 compared to 52.1% in 2000. Net sales per ton shipped for the fourth quarter of 2001 were $371
compared to $395 for the third quarter of 2001 and $436 for the fourth quarter of 2000. The decrease in net sales per ton for the fourth quarter compared to the third quarter resulted primarily from
changes in product mix. On October 31, 2001, WCI's order backlog was approximately 135,000 net tons compared to approximately 144,000 net tons at October 31, 2000.

Gross
margin (loss) (sales less cost of products sold) was ($17.6) million in 2001 compared to gross margin of $73.5 million in 2000. The decrease in gross margin reflects the
lower shipping volume and transaction prices discussed above and higher per ton production costs resulting from significantly lower production volume and its effect on fixed operating costs per ton.
Production volume in 2001 was approximately 74% of operating capacity compared to approximately 89% in 2000. In addition, the Company recorded inventory valuation charges totaling $2.6 million
in the fourth quarter of 2001 compared to $1.2 million in the fourth quarter of 2000.

15

---

Operating income (loss) was ($64.7) million, or ($62) per ton, in 2001 compared to operating income of $30.8 million, or $24 per ton, in 2000. The decrease in operating income for
the 2001 period reflects the lower gross margin discussed above along with a charge of $3.9 million associated with YSC's indefinite idling of its operating facility on July 15, 2001
(See "Note 15: Unusual Charges"), a charge of $2.1 million to establish a reserve for amounts due from a financially distressed steel company and a charge of $1.7 million to
write-off costs incurred in an unsuccessful attempt to acquire another steel maker, Acme Metals, Inc. (See "Note 15: Unusual Charges"). Excluding these charges, the operating
loss was ($57.0) million, or ($55) per ton for fiscal year 2001.

Interest,
investment and other income (expense), net, was ($18.5) million in 2001 compared to $10.4 million in 2000. In the 2001 period the Company recorded a charge of
$10.8 million to write down the carrying value of Acme Metals, Inc. 10.875% Senior Unsecured Notes owned predominantly by WCI and to a much lesser extent by Renco Steel (See
"Note 15: Unusual Charges"). A charge of $10.8 million was also recorded for the loss on the impairment of costs in excess of acquired net assets (See "Note 15: Unusual Charges").
In the 2000 period, WCI recorded a gain of $2.8 million as a result of an agreement with the United Steelworkers, which permitted WCI to pay certain medical benefits from assets in a trust
previously restricted for other benefits. Interest income was $2.8 million in 2001 compared to interest income of $4.8 million for 2000. The decrease in interest income was due primarily
to lower cash balances and lower interest rates in the 2001 period compared to the 2000 period. Earnings from Renco Steel's investments, other than WCI was $0.2 million in 2001 compared to
$2.0 million in 2000 due to significantly lower investment balances in 2001 compared to 2000. In the third quarter of 2001 Renco Steel completely liquidated its investments in limited
partnership funds.

As
a result of the items discussed above, the Company had a loss before taxes of $128.8 million in 2001 compared to a loss before taxes of $4.5 million in 2000.

Effective
November 1, 1998, the Company was designated as a qualified subchapter S subsidiary by Renco. Accordingly, the Company is generally not subject to income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Renco
Steel

In
February 1998, Renco Steel issued $120.0 million principal amount of 107/8% Senior Secured Notes which are secured by the stock of WCI. Interest on the
Senior Secured Notes is payable semi-annually in arrears on February 1, and August 1 of each year.

As
of October 31, 2002 and the date hereof, Renco respectively owns $77,770,000 and $103,770,000 face value of Renco Steel's Senior Secured Notes. Renco continues to seek
additional Senior Secured Notes to purchase. Renco is entitled to receive interest payments from Renco Steel in accordance with the terms of the indenture governing the Senior Secured Notes. From
February 1, 2001 to the February 1, 2003 interest payment date, Renco has irrevocably waived its right to collect interest on the Senior Secured Notes it owns. As a result of Renco's
waiver, Renco Steel recorded capital contributions of $7.5 million and $4.8 million, in the years ended October 31, 2002 and 2001, respectively. Such amounts were also recorded as
interest expense in the Company's statement of operations for the years ended October 31, 2002 and 2001.

Renco
Steel's liquidity requirements result from its debt service obligations related to the Senior Secured Notes, as well as to a nominal extent general corporate overhead. In the most
recent past, Renco Steel has met these requirements solely from support by Renco, in the form of loans and the waiver of interest as discussed above. Renco has provided loans amounting to
$7.7 million at October 31, 2002 representing principal of $7.3 million and $0.4 million of accrued interest.

In
past years, Renco Steel received cash distributions from WCI and earned investment income from investments in limited partnership funds. The investments were liquidated in the third
quarter of

16

---

2001 and Renco Steel does not expect to receive distributions from WCI in the foreseeable future due to significant losses sustained by WCI in the past two years. WCI's ability to pay dividends to
Renco Steel is restricted by the terms of the indenture governing WCI's 10% Senior Secured Notes due 2004 (Senior Secured Notes of WCI). Pursuant to the indenture, dividends are generally limited to
50% of WCI's cumulative earnings since October 31, 1996 (Dividend Basket). As of October 31, 2002, WCI had a negative Dividend Basket of $146.2 million, therefore, WCI will not be
permitted to pay dividends to Renco Steel until its earnings exceed such amount. Other than allowable dividends, WCI's assets may not be utilized by Renco Steel. Renco Steel's ability to meet its debt
service and working capital needs, given WCI's inability to provide dividends in the foreseeable future, will be completely dependent upon future support from Renco. Renco may make future advances or
contributions to Renco Steel and may waive its right to future interest payments on the Senior Secured Notes. Renco has no obligation to do so.

The
indenture governing the Senior Secured Notes contains numerous covenants and prohibitions that limit the financial activities of Renco Steel, including, among others, limitations on
the incurrence of additional indebtedness and additional liens. The ability of Renco Steel to comply with such covenants will be completely dependent upon future support from Renco. The limitation on
the incurrence of
additional indebtedness is $15.0 million from a related party and $15 million from other sources that may include related parties. Based upon existing loans from Renco at
October 31, 2002, approximately $22.3 million is permitted for future borrowing.

At
October 31, 2002 Renco Steel was in compliance with the terms of the indenture governing the Senior Secured Notes. The Senior Secured Notes have been classified as a current
liability on the Company's consolidated balance sheets as of October 31, 2002 and 2001 due to Renco Steel's insufficient liquidity position.

As
discussed above, Renco Steel's ability to meet its debt service and working capital obligations is completely dependent upon support from Renco. Failure to receive such support will
have a material adverse effect on Renco Steel's financial condition and liquidity position. In addition to Renco Steel's liquidity issues, the Company is also experiencing liquidity issues at WCI as
described below. If WCI is unable to improve its financial position, it is likely to have a material adverse effect on Renco Steel's financial condition.

Dividends

During
2002, Renco Steel did not pay a dividend. At October 31, 2002, Renco Steel was not permitted to pay dividends under the terms of the Senior Secured Notes indenture.

Cash
from Operations

Cash
(used) provided by the Company's operating activities was ($60.6) million for 2002 compared to ($57.7) million and $24.8 million for 2001 and 2000, respectively. The decrease
in operating cash flow in 2002 compared to 2001 resulted primarily from changes in working capital due to an increase in accounts receivable and inventory resulting from increased revenue and shipping
volume and by an increase in pension funding partially offset by a significant reduction in net loss.

WCI

WCI's liquidity requirements result from capital investments, working capital requirements, postretirement health care and pension funding, interest expense and,
to a lesser extent, principal payments on its indebtedness. WCI's primary sources of liquidity as of October 31, 2002 consisted of cash and cash equivalents of $2.8 million and available
borrowing under its revolving credit agreement (WCI Revolver).

17

---

The
WCI Revolver has a maximum borrowing limit of $100 million, is secured by inventories and receivables and is subject to eligibility requirements, as defined therein. As of
October 31, 2002, WCI had net borrowings outstanding of $32.1 million.

On
March 6, 2003 WCI and its lenders agreed to an amendment to the WCI Revolver. The amendment extended the maturity date of the WCI Revolver to June 30, 2004, eliminated
the working capital covenant, redefined net worth to exclude accumulated other comprehensive income or loss and added an earnings before interest, taxes, depreciation and amortization (EBITDA)
covenant. Additionally, the amended minimum availability covenant is zero unless WCI is unable to meet an EBITDA test in which case the minimum availability is $5 million, reduced from
$25 million prior to the amendment.

Simultaneous
with the execution of the amendment to the WCI Revolver, Renco agreed to participate in WCI's Revolver by funding $15 million with such participation being
subordinated in right of payment to that of the other lenders.

After
reflecting the March 6, 2003 amendment, as of October 31, 2002, WCI would have had net borrowing availability of $53.0 million based on eligible inventory and
receivables after deducting $32.1 million of borrowings outstanding and $14.9 million in letters of credit outstanding. As of January 31, 2003, assuming the WCI Revolver amendment
effective March 6, 2003 had been in effect, WCI would have had net borrowing availability of $36.1 million based on eligible inventories and receivables after deducting
$41.8 million of borrowings outstanding, and $14.9 million in letters of credit outstanding.

WCI
and the industry continue to face difficult and volatile market conditions. During 2000 and 2001 there was intense downward pressure on steel prices due to the surge of imports into
the United States. This resulted in WCI incurring a net loss of $100.8 million in 2001. Order entry rates and steel prices increased significantly during 2002 as a result of significant
capacity reductions caused by the closing of a number of steel producers and the effects of the implementation of the Section 201 tariffs. As a result of the increased shipping volume and
prices, WCI returned to profitability during the fourth quarter of 2002. However, for the full year of 2002 WCI incurred a net loss of $37.6 million. In addition to incurring significant losses
during the last two years, WCI had negative cash flows which have reduced the cash resources available to support its operations.

Many
of the steel companies shut down in the past two years have been restarted by other companies with cost structures significantly lower than WCI's. This low cost capacity returning
to the market coupled with continued high levels of imports and a slowing manufacturing sector has resulted in
reduced volume and pricing expectations for the first half of 2003. As a result, WCI expects to incur a net loss for 2003.

WCI's
liquidity depends on its operating performance and borrowing availability under the WCI Revolver. If market conditions fail to improve adequately, operating losses will continue
and WCI will be unable to meet certain covenants associated with the WCI Revolver. Under these circumstances, if WCI is unable to obtain waivers of covenant violations or secure additional financing
sources to fund expected operating losses, it would likely have a material adverse effect on WCI's operations.

The
WCI Revolver and the indenture governing the Senior Secured Notes of WCI contain numerous covenants and prohibitions that limit the financial activities of WCI, including
requirements that WCI satisfy certain financial ratios and limitations on the incurrence of additional indebtedness. WCI is required to maintain a minimum net worth, excluding accumulated other
comprehensive income or loss, of not less than negative $260 million. A minimum cumulative EBITDA covenant has been established for each month through October 2003 at which point it
becomes a rolling twelve month covenant. The minimum cumulative EBITDA covenant was $8.0 million for the three months ended January 31, 2003, $12.5 million for the six months
ended April 30, 2003, $19.1 million for the

18

---

nine months ended July 31, 2003 and $26.9 million for the twelve months ended October 31, 2003. After October 2003 the minimum EBITDA covenant is $26.9 million over
the previous twelve month period. In addition, if WCI is unable to meet certain minimum cumulative EBITDA targets, then WCI is required to maintain minimum borrowing availability of $5 million.
A minimum cumulative EBITDA target has been established for each month through October 2003 at which point it becomes a rolling twelve month covenant. The minimum cumulative EBITDA related to
the minimum availability covenant is $8.7 million as of January 31, 2003, $13.4 million as of April 30, 2003, $20.3 million as of July 31, 2003 and
$28.6 million as of October 31, 2003 and thereafter. The ability of WCI to meet its debt service requirements and to comply with such covenants will be dependent upon future operating
performance and financial results of WCI, which will be subject to financial, economic, political, competitive and other factors affecting WCI, many of which are beyond its control.

Cash
from Operations

Cash
provided (used) by operating activities was ($53.1) million for 2002 compared to ($44.1) million and $38.1 million for 2001 and 2000, respectively. The decreased operating
cash flow in 2002 compared to 2001 resulted primarily from changes in working capital due to an increase in accounts receivable and inventory resulting from increased revenue and shipping volume and
by an increase in pension funding partially offset by a significant reduction in net loss.

As
of October 31, 2002, at pricing then in effect, WCI had commitments under raw material supply contracts of approximately $9.3 million for 2003, $5.7 million for
2004 and $70.7 million thereafter.

Capital
Expenditures

Capital
expenditures by WCI were $11.0 million, $13.6 million and $15.6 million for 2002, 2001 and 2000, respectively. Capital expenditures are expected to be
approximately $15 million for all of fiscal 2003. At October 31, 2002, WCI had commitments for capital expenditures of approximately $1.4 million. WCI expects to complete a reline
of its blast furnace in 2004 or later at an estimated cost of up to $30 million.

Dividends

WCI
paid no dividends and was not permitted to do so under the Senior Secured Notes of WCI indenture during fiscal year 2002. WCI does not expect to be permitted to pay dividends for the
foreseeable future based on limitations under the Senior Secured Notes of WCI indenture.

Postretirement
Benefit Plans

WCI
provides postretirement health care and life insurance benefits to substantially all employees who retire upon meeting certain age and length of service eligibility requirements. WCI
has established a trust to hold contributions to fund future postretirement health care and life insurance obligations related to the hourly workforce. This trust holds liens on certain assets of WCI
and one of its subsidiaries to secure WCI's obligation for postretirement health care benefits. As a result of the collective bargaining agreement effective September 1, 1999, WCI was permitted
to pay current claims up to $8.8 million from the trust. That limit was reached during the three months ended July 31, 2001, thereafter requiring WCI to pay claims from corporate assets.
Claims paid by WCI or trust totaled $7.1 million, $5.4 million and $4.4 million during fiscal years 2002, 2001, and 2000, respectively.

WCI
has a defined benefit pension plan (DBP) which covers substantially all bargained for employees. WCI expects to contribute approximately $26.2 million, $20.6 million
and $19.0 million to the DBP during fiscal years 2003, 2004 and 2005, respectively, which is expected to satisfy the minimum funding requirements of ERISA for those periods. WCI contributed
$29.6 million, $7.2 million, and $4.2 million to the DBP during the fiscal years ended October 31, 2002, 2001 and 2000, respectively.

19

---

Environmental
Matters

WCI
has incurred and, in the future, will continue to incur capital expenditures for matters relating to environmental control and monitoring.

Capital
expenditures for environmental control and monitoring were $3.0 million, $2.6 million and $0.7 million in 2002, 2001 and 2000, respectively. Operating costs
for control and monitoring equipment, excluding depreciation and amortization expense, were $9.5 million, $8.9 million and $9.3 million for 2002, 2001 and 2000, respectively.
Operating costs for fiscal 2003 for control and monitoring equipment are not expected to increase significantly from the prior periods.

Environmental
laws and regulations continue to change and generally have become more stringent, and WCI may be subject to more stringent environmental laws and regulations in the future.
Compliance with more stringent environmental laws and regulations could have a material adverse effect on WCI's consolidated financial position and future results of operations.

Labor
Matters

Most
of WCI's hourly employees are represented by the USWA, with which WCI has a five-year collective bargaining agreement effective September 1, 1999 that expires
October 31, 2004. This contract provides for a wage increase of $1 per hour that becomes effective March 1, 2003.

Outlook

WCI's
order backlog was approximately 149,000 tons at January 31, 2003, 195,000 tons at October 31, 2002 and 135,000 tons at October 31, 2001. Shipping volume during
the first fiscal quarter of 2003 was 303,000 tons including approximately 21,000 tons of semifinished steel. Excluding semifinished product sales, net sales per ton was $443, flat compared to the
fourth quarter of 2002 with costs of goods sold per ton of $396, an increase of approximately 8% compared to the fourth quarter of 2002 due primarily to lower capacity utilization. As a result, WCI
incurred a loss of $4.1 million during the first quarter of 2003. Volume for the second quarter of 2003 is expected to be approximately 300,000 tons including 20,000 tons of semifinished
products. Excluding semifinished product shipments, net sales per ton shipped in the second quarter of 2003 is expected to decline approximately 3% with cost of goods sold per ton being flat compared
to the first quarter. As a result, WCI expects to incur a net loss during the second quarter of 2003. WCI expects to generate free cash flow (cash provided by operating activities less capital
expenditures) of approximately $12 million during the second quarter of 2003 due primarily to a reduction in working capital.

Renco
Steel's sole source of liquidity has become advances and contributions from its parent, Renco, since its two former sources are no longer available. Renco Steel's investments in
limited partnerships were liquidated in the third quarter of 2001 and dividend payments from WCI are currently prohibited
under the terms of the indenture governing the Senior Secured Notes of WCI due to WCI's significant losses in the past two years. WCI is required to earn in excess of its cumulative losses, as
defined, before it is permitted to resume dividend payments to Renco Steel. At October 31, 2002, cumulative losses were $146.2 million. It is not anticipated that WCI will be able to
generate earnings in excess of its cumulative losses in the foreseeable future and therefore, Renco Steel does not expect to receive any dividends from WCI. Funding from Renco will be necessary for
Renco Steel to meet its debt service, and to a much lesser extent, its administrative requirements. Renco advanced an additional loan of $0.9 million enabling Renco Steel to pay the interest on
February 1, 2003 on the outstanding Senior Secured Notes not owned by Renco.

Accounting
Standards

In
August 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 143, Accounting for Asset Retirement Obligations. Statement 143 applies to legal
obligations associated with the retirement of certain long-lived assets. It requires companies to record the fair value of the liability

20

---

for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the company capitalizes a cost by increasing the carrying amount of the related
long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement
of the liability, the company either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. Statement 143 is required to be adopted in fiscal years beginning after
June 15, 2002. The Company has not yet determined the effect, if any, that adopting Statement 143 will have on future earnings and financial position.

In
July 2002, the FASB issued Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This statement requires companies to recognize costs
associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. The statement is to be applied prospectively to exit or disposal
activities initiated after December 31, 2002, and is not expected to have a significant impact on the Company's financial position and results of operations.

Forward-Looking
Statements

This
report includes "forward-looking statements" which involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or
achievements of the Company to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and other
important factors include, among others: general economic and business conditions; demand for Company products; changes in industry capacity and levels of imports of steel or steel products;
effectiveness of the Section 201 remedies; industry trends, including product pricing; competition; currency fluctuations; the loss of any significant customers; availability of qualified
personnel; major equipment failures;
future loans from Renco; future waivers of interest by Renco in regard to the Senior Secured Notes it owns; changes in, or the failure or inability to comply with, government regulation, including,
without limitation, environmental regulations; and the outcome of legal matters. These forward-looking statements speak only as of the date of this report. The Company expressly disclaims any
obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any such statement is based.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the third quarter of 2001 Renco Steel liquidated its investment in a limited partnership fund. The limited partnership fund invested in a variety of financial
assets, including, equity, debt, commodity contracts, futures and derivative securities. Renco Steel has not invested in any similar funds since the third quarter of 2001 and does not expect to have
resources available in the foreseeable future to make new investments in such limited partnership funds.

WCI
is exposed to commodity price risk with respect to natural gas and zinc. WCI uses forward purchase contracts to manage the volatility related to the exposure. No contracts are
entered into for speculative purposes. Based on WCI's commodity hedge exposure at October 31, 2002 and 2001, a hypothetical 10 percent change in market rates applied to the fair value of
the contracts would have no material impact on earnings, cash flow, or financial position.

21

---



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

RENCO STEEL HOLDINGS, INC. AND SUBSIDIARIES  CONSOLIDATED BALANCE SHEETS  (Dollars in thousands, except per share amount)

|                                            |                                                                                                                   | October 31,                                 |        
|------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | -------
|
|ASSETS                                      |                                                                                                                   |                                             |        
|Current assets                              |                                                                                                                   |                                             |        
|                                            | Cash and cash equivalents                                                                                         |                                             | $      
|                                            | Restricted cash and cash equivalents                                                                              |                                             |        
|                                            | Accounts receivable, less allowances for doubtful accounts of $3,436 and $3,100, respectively                     |                                             |        
|                                            | Inventories                                                                                                       |                                             |        
|                                            | Prepaid expenses                                                                                                  |                                             |        
|                                            |                                                                                                                   |                                             |        
|                                            | Total current assets                                                                                              |                                             |        
|Property, plant and equipment, net          |                                                                                                                   |                                             | 222,184
|Intangible pension asset, net               |                                                                                                                   |                                             | 36,054 
|Other assets, net                           |                                                                                                                   |                                             | 4,392  
|                                            |                                                                                                                   |                                             |        
|                                            |                                                                                                                   | Total assets                                |        
|                                            |                                                                                                                   |                                             |        
|LIABILITIES and SHAREHOLDER'S DEFICIT       |                                                                                                                   |                                             |        
|Current liabilities                         |                                                                                                                   |                                             |        
|                                            | Current portion of long-term debt                                                                                 |                                             | $      
|                                            | Accounts payable                                                                                                  |                                             |        
|                                            | Accrued liabilities                                                                                               |                                             |        
|                                            | Due to related party                                                                                              |                                             |        
|                                            |                                                                                                                   |                                             |        
|                                            |                                                                                                                   | Total current liabilities                   |        
|Long-term debt, excluding current portion   |                                                                                                                   |                                             | 332,405
|Postretirement health care benefits         |                                                                                                                   |                                             | 123,378
|Pension benefits, excluding current portion |                                                                                                                   |                                             | 47,536 
|Other liabilities                           |                                                                                                                   |                                             | 15,608 
|                                            |                                                                                                                   |                                             |        
|                                            |                                                                                                                   | Total liabilities                           |        
|                                            |                                                                                                                   |                                             |        
|Shareholder's deficit                       |                                                                                                                   |                                             |        
|                                            | Common stock, no par value, stated value $.01 per share, 850 shares authorized, 100 shares issued and outstanding |                                             |        
|                                            | Additional paid-in capital                                                                                        |                                             |        
|                                            | Accumulated deficit                                                                                               |                                             |        
|                                            | Accumulated other comprehensive loss                                                                              |                                             |        
|                                            |                                                                                                                   |                                             |        
|                                            |                                                                                                                   | Total shareholder's deficit                 |        
|Commitments and contingencies               |                                                                                                                   |                                             |       
|                                            |                                                                                                                   |                                             |        
|                                            |                                                                                                                   | Total liabilities and shareholder's deficit |        
|                                            |                                                                                                                   |                                             |        

See
accompanying notes to consolidated financial statements.

22

---

RENCO STEEL HOLDINGS, INC. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF OPERATIONS  (Dollars in thousands)

|                                                                |                                                      | Years ended October 31,  |        
|--------------------------------------------------------------- | ---------------------------------------------------- | ------------------------ | -------
|
|Net sales                                                       |                                                      | $                        | 502,047
|Operating costs and expenses                                    |                                                      |                          |        
|                                                                | Cost of products sold                                |                          |        
|                                                                | Depreciation and amortization                        |                          |        
|                                                                | Selling, general and administrative expenses         |                          |        
|                                                                | Unusual charges                                      |                          |        
|                                                                |                                                      |                          |        
|                                                                |                                                      |                          | 510,566
|                                                                |                                                      |                          |        
|                                                                |                                                      | Operating (loss) income  |        
|                                                                |                                                      |                          |        
|Other income (expense)                                          |                                                      |                          |        
|                                                                | Interest expense                                     |                          |        
|                                                                | Interest, investment and other income (expense), net |                          |        
|                                                                |                                                      |                          |        
|                                                                |                                                      |                          | (46,691
|                                                                |                                                      |                          |        
|                                                                |                                                      | Loss before income taxes |        
|Income taxes                                                    |                                                      |                          |       
|                                                                |                                                      |                          |        
|                                                                |                                                      | Net loss                 |        
|Other comprehensive loss  minimum pension liability adjustment |                                                      |                          | (27,828
|                                                                |                                                      |                          |        
|Total comprehensive loss                                        |                                                      | $                        | (83,038
|                                                                |                                                      |                          |        

See
accompanying notes to consolidated financial statements.

23

---



RENCO STEEL HOLDINGS, INC. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF SHAREHOLDER'S DEFICIT  (Dollars in thousands)

|                            |                                                               | Years ended October 31, 2002, 2001, and 2000 |  
|--------------------------- | ------------------------------------------------------------- | -------------------------------------------- | -
|
|Balance at October 31, 1999 |                                                               | $                                            | 
|                            | Net loss                                                      |                                              |  
|                            | Dividends paid on Common Stock                                |                                              |  
|                            |                                                               |                                              |  
|Balance at October 31, 2000 |                                                               |                                              | 
|                            | Net loss                                                      |                                              |  
|                            | Capital contribution                                          |                                              |  
|                            |                                                               |                                              |  
|Balance at October 31, 2001 |                                                               |                                              | 
|                            | Net loss                                                      |                                              |  
|                            | Capital contribution                                          |                                              |  
|                            | Other comprehensive lossminimum pension liability adjustment |                                              |  
|                            |                                                               |                                              |  
|Balance at October 31, 2002 |                                                               | $                                            | 
|                            |                                                               |                                              |  

See
accompanying notes to consolidated financial statements.

24

---

RENCO STEEL HOLDINGS, INC. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF CASH FLOWS  (Dollars in thousands)

|                                                                                      |                                                                   | Years ended October 31,           |        
|------------------------------------------------------------------------------------- | ----------------------------------------------------------------- | --------------------------------- | -------
|
|CASH FLOWS FROM OPERATING ACTIVITIES                                                  |                                                                   |                                   |        
|Net loss                                                                              |                                                                   | $                                 | (55,210
|Adjustments to reconcile net loss to net cash (used) provided by operating activities |                                                                   |                                   |        
|                                                                                      | Depreciation and amortization                                     |                                   |        
|                                                                                      | Amortization of deferred maintenance costs                        |                                   |        
|                                                                                      | Amortization of financing costs and bond discount                 |                                   |        
|                                                                                      | Postretirement health care benefits                               |                                   |        
|                                                                                      | Pension benefits                                                  |                                   |        
|                                                                                      | Provision for losses on accounts receivable                       |                                   |        
|                                                                                      | Gain on other investments                                         |                                   |        
|                                                                                      | Asset impairment and other charges                                |                                   |        
|                                                                                      | Other                                                             |                                   |        
|                                                                                      | Cash provided (used) by changes in certain assets and liabilities |                                   |        
|                                                                                      |                                                                   | Accounts receivable               |        
|                                                                                      |                                                                   | Inventories                       |        
|                                                                                      |                                                                   | Prepaid expenses and other assets |        
|                                                                                      |                                                                   | Accounts payable                  |        
|                                                                                      |                                                                   | Accrued liabilities               |        
|                                                                                      |                                                                   | Other liabilities                 |        
|                                                                                      |                                                                   | Due to parent                     |        
|                                                                                      |                                                                   |                                   |        
|                                                                                      | Net cash (used) provided by operating activities                  |                                   |        
|                                                                                      |                                                                   |                                   |        
|CASH FLOWS FROM INVESTING ACTIVITIES                                                  |                                                                   |                                   |        
|                                                                                      | Additions to property, plant and equipment                        |                                   |        
|                                                                                      | Gross proceeds from the sale of assets                            |                                   |        
|                                                                                      | Proceeds from sale of other investments                           |                                   |        
|                                                                                      | Purchase of other investments                                     |                                   |        
|                                                                                      |                                                                   |                                   |        
|                                                                                      | Net cash used by investing activities                             |                                   |        
|                                                                                      |                                                                   |                                   |        
|CASH FLOWS FROM FINANCING ACTIVITIES                                                  |                                                                   |                                   |        
|                                                                                      | Net borrowings under WCI's Revolving Credit Facility              |                                   |        
|                                                                                      | Other changes in long-term debt                                   |                                   |        
|                                                                                      | Dividends paid                                                    |                                   |        
|                                                                                      | Capital contribution made by parent                               |                                   |        
|                                                                                      |                                                                   |                                   |        
|Net cash provided (used) by financing activities                                      |                                                                   |                                   | 42,153 
|                                                                                      |                                                                   |                                   |        
|Net (decrease) increase in cash and cash equivalents                                  |                                                                   |                                   | (29,465
|Total cash and cash equivalents at beginning of period                                |                                                                   |                                   | 32,269 
|                                                                                      |                                                                   |                                   |        
|Total cash and cash equivalents at end of period                                      |                                                                   | $                                 | 2,804  
|                                                                                      |                                                                   |                                   |        
|Supplemental disclosure of cash flow information                                      |                                                                   |                                   |        
|                                                                                      | Cash paid for interest                                            |                                   |        
|                                                                                      | Cash paid for income taxes                                        |                                   |        

See
accompanying notes to consolidated financial statements.

25

---



RENCO STEEL HOLDINGS, INC. AND SUBSIDIARIES        Notes to Consolidated Financial Statements

(1)    Summary of Significant Accounting Policies

(a)  Basis
of Presentation

Renco
Steel Holdings, Inc. (Renco Steel) is a holding company incorporated in the State of Ohio on January 20, 1998 and is a wholly owned subsidiary of The Renco
Group, Inc. (Renco). On January 29, 1998, Renco contributed to Renco Steel its interest in its wholly owned subsidiary WCI Steel, Inc. (WCI). Accordingly, the accompanying
consolidated financial statements include the accounts of Renco Steel and WCI (collectively, the Company).

Renco's
investment in WCI included the effects of certain purchase accounting adjustments related to the acquisition of treasury stock by WCI in fiscal 1997 that were not reflected in
the financial statements of WCI. Accordingly, the Company's consolidated financial statements include the accounts of WCI and reflect the purchase accounting adjustments of $44.1 million in the
aggregate as initially recorded in 1997. The purchase accounting adjustments reflected differences in the basis of accounting for certain assets and liabilities in Renco Steel's financial statements
as compared to WCI's financial statements and affected the valuation of inventories, property, plant and equipment, intangible pension assets, excess of cost over net assets acquired, deferred income
taxes, postretirement health care benefits and the related depreciation and amortization. All significant intercompany profits, transactions, and balances have been eliminated in consolidation.

(b)  Nature
of Operations

WCI
is a niche oriented integrated producer of value-added, custom steel products. WCI produces a wide range of custom flat rolled products at its primary facility in Warren, Ohio,
including high carbon, alloy, ultra high strength, silicon electrical and heavy gauge galvanize steel. In addition, WCI produces commodity grade products that consist of low carbon, high strength and
light gauge galvanize steel. WCI's primary customers are steel converters, steel service centers, construction product companies, electrical equipment manufacturers and to a lesser extent, automobile
and automotive parts manufacturers located principally in the United States.

During
2002, 2001, and 2000, WCI's largest customer accounted for 11.7%, 9.8%, and 10.1%, respectively, of net sales. Concentration of credit risk related to trade receivables is limited
due to the large number of customers in a variety of industries. Approximately 50% of WCI's shipments are to customers within 200 miles of its primary facility.

Since
its inception, WCI has had labor agreements with the United Steelworkers of America (USWA) and other organized labor organizations. The USWA represents approximately 75% of WCI's
employees. WCI has a five-year agreement with the USWA that expires October 31, 2004.

(c)  Cash
and Cash Equivalents

Cash
and cash equivalents include cash on hand and short-term investments with original maturities of three months or less.

(d)  Inventories

Inventories
are stated at the lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method. Market value is determined based on expected
selling price of each product.

26

---

(e)  Property,
Plant and Equipment

Property,
plant and equipment are recorded at cost. Depreciation is calculated on the straight-line method over the estimated useful lives of the assets (buildings 20 to
30 years and machinery and equipment 2 to 30 years with a weighted average of 17 years). Expenditures for normal repairs and maintenance are charged to expense as incurred.

(f)    Other
Assets

Deferred
financing costs, included in other non-current assets, are amortized using the effective yield method over the term of the related financing.

(g)  Income
Taxes

On
January 15, 1999, Renco filed an election with the consent of its shareholders with the Internal Revenue Service to change its taxable status from that of a subchapter C
corporation to that of a subchapter S corporation, effective November 1, 1998. At the same time, Renco elected for the Company to be treated as a qualified subchapter S subsidiary (QSSS). Most
states in which the Company operates will follow similar tax treatment. QSSS status requires the ultimate shareholders to include their pro rata share of the Company's income or loss in their
individual tax returns. The Company provides for state and local income taxes for the taxing jurisdictions which do not recognize QSSS status, however, management believes this is not material to the
Company. However, under the "built in gains" provisions of the tax law, certain federal and state taxes may become payable and would be charged to the Company's statement of operations. Such taxes are
measured by the excess of the fair market value of assets over their tax basis on the effective date of the subchapter S subsidiary election if the associated assets are disposed of within the
ten-year post-election period. With the exception of the Company's investments in limited partnership funds, which have previously been liquidated, management has not and does
not intend to trigger any taxes under the built-in-gain provisions of the tax law.

(h)  Environmental
Compliance Costs

Environmental
expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and
which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or remedial expenditures are probable, and the cost can be
reasonably estimated. Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or development of, or commitment to, a plan of action based on the then
known facts.

(i)    Use
of Estimates in Preparation of Consolidated Financial Statements

The
preparation of financial statements in conformity with generally accepted accounting principles 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 consolidated financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

(j)    Reclassifications

Certain
amounts in the consolidated financial statements for 2001 have been reclassified to conform to the 2002 presentation.

(2)    Other Matters (Unaudited)

The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed below, the Company has incurred recurring
losses from operations and negative cash flows that raise substantial doubt about its ability to continue

27

---

as a going concern. The management of WCI is undertaking a comprehensive assessment of its business to address these issues as described below. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

WCI
and the industry continue to face difficult and volatile market conditions. During 2000 and 2001 there was intense downward pressure on steel prices due to the surge of imports into
the United States. This resulted in the Company incurring a net loss of $128.8 million in 2001. Order entry rates and steel prices increased significantly during 2002 as a result of significant
capacity reductions caused by the closing of a number of steel producers and the effects of the implementation of the Section 201 tariffs. As a result of the increased shipping volume and
prices, the Company returned to profitability during the fourth quarter of 2002. However, for the full year of 2002 the Company incurred a net loss of $55.2 million. In addition to incurring
significant losses during the last two years, the Company had negative cash flows which have reduced the cash resources available to support its operations.

Many
of the steel companies shut down in the past two years have been restarted by other companies with cost structures significantly lower that WCI's. This low cost capacity returning
to the market coupled with continued high levels of imports and a slowing manufacturing sector has resulted in reduced volume and pricing expectations for the first half of 2003. As a result, the
Company expects to incur a net loss for 2003.

WCI's
liquidity depends on its operating performance and borrowing availability under its revolving credit facility. If market conditions fail to improve adequately, operating losses
will continue and WCI will be unable to meet certain covenants associated with its revolving credit facility. Under these circumstances, if WCI is unable to obtain waivers of covenant violations or
secure additional financing sources to fund expected operating losses, it would likely have a material effect on WCI's operations.

WCI
has attempted to conserve cash by reducing operating costs and deferring capital spending. However, these measures have not and are not expected to allow WCI to generate positive
cash flow on a sustained basis in the current operating environment. As a result, WCI is undertaking a comprehensive assessment of its business including its equipment and facilities, organizational
structure, labor practices and utilization, vendor relationships and capital structure. From this assessment WCI intends to develop a business plan that addresses its cost competitiveness in the
industry and ensures that WCI has adequate resources to fund its operations and capital expenditure needs.

Renco
Steel's liquidity is solely dependent on funding from Renco and from Renco's irrevocable waiver of interest it is entitled to receive from its substantial ownership of Renco
Steel's Senior Secured Notes. Renco has no obligation to provide such support to Renco Steel. Failure to receive such support will have a material adverse effect on Renco Steel's financial condition
and liquidity position. Renco shall also continue to pursue the purchase of Senior Secured Notes in the public market.

At
October 31, 2002 Renco Steel was in compliance with the terms of the indenture governing the Senior Secured Notes. The Senior Secured Notes have been classified as a current
liability on the Company's consolidated balance sheets as of October 31, 2002 and 2001 due to Renco Steel's insufficient liquidity position.

28

---

(3)    Inventories

Inventories
consist of the following:

|                                   |  | October 31,
|---------------------------------- |  | -----------
|
|
|Raw materials                      |  | $          
|Finished and semi-finished product |  |            
|Supplies                           |  |            
|                                   |  |            
|                                   |  |            
|Less LIFO reserve                  |  |            
|                                   |  |            
|                                   |  | $          
|                                   |  |            

(4)    Property, Plant and Equipment

Property,
plant and equipment consist of the following:

|                              |  | October 31,
|----------------------------- |  | -----------
|
|
|Land and improvements         |  | $          
|Buildings                     |  |            
|Machinery and equipment       |  |            
|Construction in progress      |  |            
|                              |  |            
|                              |  |            
|Less accumulated depreciation |  |            
|                              |  |            
|                              |  | $          
|                              |  |            

(5)    Long-Term Debt

Long-term
debt consists of the following:

|                                                                                                                                                        |  | October 31,
|------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------
|
|
|Senior Secured Notes (net of unamortized discount of $140 and $202, respectively) with interest at 10.875%, payable semi-annually, due February 1, 2005 |  | $          
|Senior Secured Notes of WCI with interest at 10% payable semi-annually, due December 1, 2004                                                            |  |            
|Revolving Credit Facility of WCI (WCI Revolver) with interest at prime rate (5.51% at October 31, 2002) payable monthly                                 |  |            
|Other                                                                                                                                                   |  |            
|                                                                                                                                                        |  |            
|                                                                                                                                                        |  |            
|Less current portion of long-term debt                                                                                                                  |  |            
|                                                                                                                                                        |  |            
|                                                                                                                                                        |  | $          
|                                                                                                                                                        |  |            

In
February 1998, Renco Steel issued $120.0 million principal amount of 107/8% Senior Secured Notes due 2005 (Senior Secured Notes). The Senior Secured Notes
are secured by a pledge of all the outstanding capital stock of WCI. WCI incurred significant losses in 2001 and 2002 and therefore has not been permitted to pay dividends to Renco Steel since the
third quarter of 2000 under the terms of

29

---

the indenture governing WCI's $300.0 million 10% Senior Secured Notes due 2004 (Senior Secured Notes of WCI) and does not expect to pay dividends to Renco Steel in the foreseeable future.
Funding for the February 2002 and the August 2002 interest payments was provided by loans of $3.4 million and $2.8 million, respectively, from Renco.

As
of October 31, 2002 and the date hereof, Renco respectively owns $77,770,000 and $103,770,000 face value of Renco Steel's Senior Secured Notes. Renco is entitled to receive
interest payments from Renco Steel in accordance with the terms of the indenture governing the Senior Secured Notes. In 2002 and 2001, Renco irrevocably waived its right to receive interest payments
of $7.5 million and $4.8 million, respectively, on the Senior Secured Notes it owned. Such waivers have been recorded by the Company as capital contributions. Renco continued to
irrevocably waive its right to receive interest in 2003, up to the February 1, 2003 interest payment date.

Under
WCI's loan agreements, there are no amounts available for dividends and certain other transactions with affiliates at October 31, 2002. Accordingly, WCI's assets, other than
allowable dividends, may not be utilized by Renco Steel. Cash and cash equivalent balances of WCI of $2.2 million and $32.2 million at October 31, 2002 and 2001 respectively, have
been classified as "Restricted Cash and Cash Equivalents" in the financial statements.

Renco
Steel's Senior Secured Notes contain covenants which limit the incurrence of additional indebtedness, payments to shareholders, sale of assets, change of control, transactions with
affiliates and impairment of security interest. Renco Steel is generally permitted to declare and pay dividends and make other transactions with affiliates provided no condition of default exists or
will exist and the accumulated amount of such transactions is not greater than fifty percent (50%) of the net income, as defined, which definition excludes the earnings of subsidiaries unless actually
received in cash by Renco Steel, as a dividend, (less 100% of any net loss) earned for periods subsequent to January 31, 1998 when taken as a single accounting period. At October 31,
2002, Renco Steel was not permitted to pay dividends under the terms of its indebtedness. Renco Steel's ability to incur additional indebtedness is limited to $15 million from related parties
and $15 million from other sources that may include related parties. Based upon the outstanding amount of loans provided by Renco and accrued interest thereon, at October 31, 2002
approximately $22.3 million was permitted for future borrowings. There is no assurance that Renco Steel's future funding requirements will be provided by Renco or could be obtained from
unrelated sources.

At
October 31, 2002 Renco Steel was in compliance with the terms of the indenture governing the Senior Secured Notes. The Senior Secured Notes have been classified as a current
liability on the Company's consolidated balance sheets as of October 31, 2002 and 2001 due to Renco Steel's insufficient liquidity position.

Renco
Steel's ability to meet its debt service and working capital obligations is completely dependent upon support from Renco. Renco is not obligated to provide such support to Renco
Steel. Failure to receive such support will have a material adverse effect on Renco Steel's financial condition and liquidity position.

The
Senior Secured Notes of WCI are secured by a first priority lien on substantially all of the existing property, plant and equipment of WCI. A Voluntary Employee Beneficiaries
Association trust fund, established to hold WCI contributions to fund postretirement health care and life insurance obligations for the benefit of hourly employees, holds a second priority lien on the
security for the Senior Secured Notes of WCI.

WCI
has a $100,000,000 Revolving Credit Facility (WCI Revolver) secured by inventories and receivables and subject to eligibility requirements, as defined, reduced by any outstanding
letters of credit. The WCI Revolver is subject to a monthly service fee of $15,000, and an annual commitment fee of 0.5% of the unused balance up to $60,000,000 payable monthly. There were borrowings
of $32,086,000 outstanding under the WCI Revolver as of October 31, 2002. The WCI Revolver also provides for up to an aggregate amount of $20,000,000 in letters of credit.

30

---

On March 6, 2003 WCI and its lenders agreed to amend the WCI Revolver. The WCI Revolver had been subject to a minimum availability covenant of $20 million or
$25 million depending on WCI's cumulative earnings before interest, taxes, depreciation and amortization (EBITDA). This covenant was replaced under the amendment as discussed below.
Additionally, the WCI Revolver's expiration date was extended to June 30, 2004. At October 31, 2002, WCI had net borrowing availability of $53,043,000 based on eligible inventory and
receivables after deducting $32,086,000 of borrowings outstanding, and $14,870,000 in letters of credit outstanding after reflecting the amendment effective March 6, 2003. Simultaneous with the
execution of the amendment to the WCI Revolver, Renco agreed to participate in WCI's Revolver by funding $15 million with such participation being subordinated in right of payment to that of
the other lenders.

The
WCI Revolver and Senior Secured Notes of WCI contain certain financial and other covenants, including maintenance of specified levels of net worth as defined, EBITDA, and debt
service and limitations on capital expenditures. Additional covenants limit the incurrence of additional indebtedness, payments affecting subsidiaries, transactions with affiliates, sale/leaseback
transactions, impairment of security interest, consolidations, mergers and transfer of WCI's assets. WCI is required to maintain a minimum net worth excluding accumulated other comprehensive income or
loss related to WCI's defined benefit pension plan of not less than negative $260 million. A minimum cumulative EBITDA covenant has been established for each month through October 2003
at which point it becomes a rolling twelve month covenant. The minimum cumulative EBITDA covenant is $8.0 million for the three months ended January 31, 2003, $12.5 million for
the six months ended April 30, 2003, $19.1 million for the nine months ended July 31, 2003 and $26.9 million for the twelve months ended October 31, 2003. After
October 2003 the minimum EBITDA covenant is $26.9 million over the previous twelve month period. Interest is charged on the WCI Revolver at prime rate plus 1.5% or as to Eurodollar Rate
Loans, a rate of 3.5% in excess of the Adjusted Eurodollar Rate applicable for the interest period selected by WCI. In addition, if WCI is unable to meet certain minimum cumulative EBITDA targets,
then WCI is required to maintain minimum borrowing availability of $5 million. A minimum cumulative EBITDA target has been established for each month through October 2003 at which point
it becomes a rolling twelve month covenant. The minimum cumulative EBITDA related to the minimum availability covenant is $8.7 million as of January 31, 2003, $13.4 million as of
April 30, 2003, $20.3 million as of July 31, 2003 and $28.6 million as of October 31, 2003 and thereafter.

WCI
is permitted to declare and pay dividends, and make other transactions with affiliates provided no condition of default exists or will exist, and the accumulated amount of such
transactions is no greater than fifty percent (50%) of the consolidated net income, as defined (less 100% of any consolidated net loss) earned for periods subsequent to October 31, 1996 when
taken as a single accounting period less management fees paid to Renco in excess of $1,200,000 annually for the same period. Under these agreements there are no amounts available for dividends and
other transactions with affiliates at October 31, 2002.

Aggregate
principal payments on long-term debt for the five years subsequent to October 31, 2002 are as follows: $3,892,000 in 2003, $32,308,000 in 2004, $420,064,000
in 2005 and $34,000 in 2006 and none thereafter (the Senior Secured Notes are due on February 1, 2005 and are included in the 2005 amount, but are classified as current liabilities on the
consolidated balance sheets as discussed above).

As
of October 31, 2002, based on the quoted market price, the fair value of the Senior Secured Notes was $12,000,000 and fair market value of the Senior Secured Notes of WCI was
$90,000,000.

31

---

Accrued
liabilities consist of the following.

|                                       |  | October 31,
|-------------------------------------- |  | -----------
|
|
|Payroll                                |  | $          
|Employee Benefits                      |  |            
|Defined benefit pension plan (current) |  |            
|Retiree healthcare (current)           |  |            
|Interest                               |  |            
|Other                                  |  |            
|                                       |  |            
|                                       |  | $          
|                                       |  |            

WCI
has variable compensation plans for the benefit of substantially all employees. The amount of compensation due under these plans is based on WCI's income as defined under each plan.
Total expense under the plans was $1,813,000, $685,000 and $4,929,000 for the years ended October 31, 2002, 2001, and 2000, respectively. Certain amounts under these plans represent deferred
compensation.

WCI
has defined contribution retirement plans under which it expensed approximately $1,971,000, $1,859,000 and $2,083,000 for the years ended October 31, 2002, 2001 and 2000,
respectively.

WCI
also has a defined benefit pension plan for substantially all hourly employees which provides minimum pension benefits based on age, years of service, and benefits provided under
WCI's frozen defined contribution plan and a predecessor company's defined benefit plan. As a result of the collective bargaining agreement effective September 1, 1999 with the USWA, the plan
was amended to provide an increase in pension benefits. In addition, as active employees retire, assets from WCI's frozen defined contribution component of the plan are transferred to the defined
benefit component of the plan with a corresponding increase in the projected benefit obligation.

The
following table sets forth the actuarial present value of benefit obligations and funded status of the defined benefit pension plan:

|                                                                                                                    |  | October 31, |        
|------------------------------------------------------------------------------------------------------------------- |  | ----------- | -------
|
|
|Projected benefit obligation                                                                                        |  | $           | 133,181
|Plan assets at fair value                                                                                           |  |             | 59,344 
|                                                                                                                    |  |             |        
|Projected benefit obligation in excess of plan assets                                                               |  |             | 73,837 
|Unrecognized net gain (loss) from past experience different from that assumed and effects of changes in assumptions |  |             | (29,135
|Unrecognized prior service cost                                                                                     |  |             | (34,894
|Accumulated other comprehensive loss                                                                                |  |             | 27,828 
|Intangible pension asset                                                                                            |  |             | 36,053 
|                                                                                                                    |  |             |        
|Accrued pension cost                                                                                                |  |             | 73,689 
|Less pension liability due within one year                                                                          |  |             | 26,153 
|                                                                                                                    |  |             |        
|Long-term pension liability                                                                                         |  | $           | 47,536 
|                                                                                                                    |  |             |        

32

---

An
assumed discount rate of 6.75% and 7.0% and an expected return on plan assets of 9.0% in 2002 and 2001 were used for purposes of valuing the benefits under the defined benefit pension
plan.

The
following table sets forth a reconciliation of the beginning and end of year projected benefit obligation:

|                                                  |  | 2002 |         | 2001 |  
|------------------------------------------------- |  | ---- | ------- | ---- | -
|
|Projected benefit obligation at beginning of year |  | $    | 98,682  |      | $
|Service cost                                      |  |      | 4,231   |      |  
|Interest cost                                     |  |      | 7,824   |      |  
|Transfers from DC plan                            |  |      | 2,737   |      |  
|Actuarial losses, net                             |  |      | 27,419  |      |  
|Benefits paid                                     |  |      | (7,712  | )    |  
|                                                  |  |      |         |      |  
|Projected benefit obligation at end of year       |  | $    | 133,181 |      | $
|                                                  |  |      |         |      |  

The
following table sets forth a reconciliation of the beginning and end of year fair value of plan assets:

|                                 |  | 2002 |        | 2001 |  
|-------------------------------- |  | ---- | ------ | ---- | -
|
|Plan assets at beginning of year |  | $    | 36,906 |      | $
|Actual return on assets          |  |      | (2,230 | )    |  
|Employer contributions           |  |      | 29,643 |      |  
|Benefits paid                    |  |      | (7,712 | )    |  
|Transfers from DC plan           |  |      | 2,737  |      |  
|                                 |  |      |        |      |  
|Plan assets at end of year       |  | $    | 59,344 |      | $
|                                 |  |      |        |      |  

The
following table sets forth the components of pension expense:

|                               |  | Years Ended October 31, |       
|------------------------------ |  | ----------------------- | ------
|
|
|Service cost                   |  | $                       | 4,231 
|Interest cost                  |  |                         | 7,824 
|Expected return on plan assets |  |                         | (3,887
|Amortization of unrecognized:  |  |                         |       
|Prior service cost             |  |                         | 5,936 
|Actuarial (gains) losses, net  |  |                         | 123   
|                               |  |                         |       
|                               |  | $                       | 14,227
|                               |  |                         |       

33

---

The
following table sets forth the accumulated postretirement benefit obligation (APBO) of the Company's postretirement health care and life insurance plans:

|                                                                                                       |  | Years Ended October 31, |        
|------------------------------------------------------------------------------------------------------ |  | ----------------------- | -------
|
|
|APBO                                                                                                   |  | $                       | 166,352
|Plan assets at fair value                                                                              |  |                         | 8,022  
|                                                                                                       |  |                         |        
|APBO in excess of plan assets                                                                          |  |                         | 158,330
|Unrecognized prior service cost resulting from plan amendments                                         |  |                         | (1,487 
|Unrecognized net loss from past experience different from that assumed and from changes in assumptions |  |                         | (25,965
|                                                                                                       |  |                         |        
|Accrued postretirement benefit cost                                                                    |  |                         | 130,878
|Less portion due within one year                                                                       |  |                         | 7,500  
|                                                                                                       |  |                         |        
|                                                                                                       |  | $                       | 123,378
|                                                                                                       |  |                         |        

The
APBO was determined using a discount rate of 6.75% and 7.0% and an expected return on plan assets of 9.0% in 2002 and 2001, and an assumed health care cost trend rate of 8.0% in
2003, gradually declining to 5.0% after 2005. Assuming a 1% increase in the health care cost trend rate, the APBO at October 31, 2002 would increase by $25,347,000 along with an increase in the
2002 service and interest cost components of $2,478,000. Assuming a 1% decrease in the health care cost trend rates, the APBO at October 31, 2002 would decrease by $20,229,000 along with a
decrease in the 2002 service and interest cost components of $1,940,000.

The
following table sets forth a reconciliation of the beginning and end of year APBO:

|                              |  | 2002 |         | 2001 |  
|----------------------------- |  | ---- | ------- | ---- | -
|
|APBO at beginning of year     |  | $    | 154,369 |      | $
|Service cost                  |  |      | 2,887   |      |  
|Interest cost                 |  |      | 10,314  |      |  
|Actuarial (gains) losses, net |  |      | 5,926   |      |  
|Benefits paid                 |  |      | (7,144  | )    |  
|                              |  |      |         |      |  
|APBO at end of year           |  | $    | 166,352 |      | $
|                              |  |      |         |      |  

The
following table sets forth a reconciliation of the beginning and end of year fair value of plan assets:

|                                 |  | 2002 |        | 2001 |  
|-------------------------------- |  | ---- | ------ | ---- | -
|
|Plan assets at beginning of year |  | $    | 9,234  |      | $
|Actual return on assets          |  |      | (1,212 | )    |  
|Benefits paid                    |  |      |       |      |  
|                                 |  |      |        |      |  
|Plan assets at end of year       |  | $    | 8,022  |      | $
|                                 |  |      |        |      |  

34

---

Net periodic postretirement benefit costs included the following components:

|                                         |                       | Years Ended October 31, |       
|---------------------------------------- | --------------------- | ----------------------- | ------
|
|
|Service cost                             |                       | $                       | 2,887 
|Interest cost                            |                       |                         | 10,314
|Expected return on plan assets           |                       |                         | (831  
|Amortization of unrecognized:            |                       |                         |       
|                                         | Prior service cost    |                         |       
|                                         | Actuarial (gain) loss |                         |       
|                                         |                       |                         |       
|Net periodic postretirement benefit cost |                       | $                       | 14,207
|                                         |                       |                         |       

As
a result of the tax status described in Note 1(g), the Company is generally not subject to income taxes. The Company's book basis in its assets and liabilities exceeded its tax
basis by approximately $21,840,000 and $13,612,000 as of October 31, 2002 and 2001, respectively.

WCI
leases a portion of its operating and data processing equipment. Rent expense for noncancellable operating leases amounted to approximately $1,475,000, $1,741,000 and $1,914,000 for
the years ended October 31, 2002, 2001 and 2000, respectively.

The
following table is a summary of future minimum payments under capitalized leases and under operating leases that have initial or remaining noncancelable lease terms in excess of one
year at October 31, 2002.

|Fiscal year ended October 31,                       |      | Capitalized
Leases |     | Operating
Leases
|--------------------------------------------------- | ---- | ------------------ | --- | ----------------
|
|                                                    | 2003 |                    |     | 598             
|                                                    | 2004 |                    |     | 237             
|                                                    | 2005 |                    |     | 70              
|                                                    | 2006 |                    |     | 35              
|                                                    |      | Thereafter         |     |                 
|                                                    |      |                    |     |                 
|Total minimum lease payments                        |      |                    | 940 |                 
|                                                    |      |                    |     |                 
|Imputed interest                                    |      |                    | (68 | )               
|                                                    |      |                    |     |                 
|Present value of minimum capitalized lease payments |      |                    | 872 |                 
|Less current portion                                |      |                    | 553 |                 
|                                                    |      |                    |     |                 
|Long-term capitalized lease obligations             |      | $                  | 319 |                 
|                                                    |      |                    |     |                 

Assets
recorded under capital leases and included in property, plant and equipment in the consolidated balance sheets consists of machinery and equipment of $1,344,000 and $522,000 at
October 31, 2002 and 2001, respectively, and $307,000 and $38,000 of accumulated depreciation as of October 31, 2002 and 2001, respectively.

As
of October 31, 2002 and the date hereof, Renco respectively owns $77,770,000 and $103,770,000 face value of Renco Steel's Senior Secured Notes. Renco is entitled to receive
interest payments from Renco Steel in accordance with the terms of the indenture governing the Senior Secured Notes,

35

---

however, Renco has irrevocably waived its right to collect interest on the Senior Secured Notes it owned for the interest payments that were made, beginning with the August 2001 payment and
each interest payment thereafter. In the years ended October 31, 2002 and 2001, Renco Steel recorded capital contributions of $7.5 million and $4.8 million, respectively, to
reflect the Renco waiver.

Renco
Steel borrowed $6.2 million and $1.1 million from Renco in 2002 and 2001, respectively, under the terms of three separate promissory notes. Interest accrues monthly
at a rate of 8.75% per annum. At October 31, 2002 and 2001, $7.7 million and $1.1 million, respectively, were outstanding, representing principal and accrued interest. The
obligation is payable upon Renco's demand and Renco's right to payment is contractually subordinated to the right of payment under the Senior Secured Notes.

WCI
has a management services agreement with Renco under which Renco provides certain management services to WCI. Under terms of this agreement, WCI is charged a monthly fee of $100,000.
The term of this agreement extends to October 31, 2004. Total expense for management services fees amounted to $1,200,000 for each of the years ended October 31, 2002, 2001 and 2000.

During
2002 and in preceding years since its inception, Renco purchased certain insurance coverage for its subsidiaries, including the Company, and the actual cost of such insurance,
without markup, was reimbursed by the covered subsidiaries. The major areas of the Company's insurance coverage obtained under the Renco programs were property, business interruption, general, product
and auto liability, workers' compensation (other than Ohio for which WCI is self insured) and casualty umbrella.

In
fiscal 2002, 2001 and 2000, the Company incurred costs of approximately $6.3 million, $2.3 million and $2.0 million, respectively, under the Renco insurance
program. The increase in 2002 was due mainly to severe capacity restraints and excessive price increases by both property insurers and reinsurers following the September 2001 terrorist attacks.

During
2002, WCI purchased approximately $0.7 million of zinc and other alloys from Doe Run Peru S.R. Ltd., an indirect subsidiary of Renco. WCI believes that such
purchases were on an arm's length basis at a price no less favorable than at which WCI could obtain from unaffiliated entities. Also during 2002, WCI sold approximately $40,000 of flat rolled steel
products on an arm's length basis to Unarco Material Handling, Inc., a direct subsidiary of Renco.

At
October 31, 2002, WCI had commitments to purchase data processing services of approximately $2,856,000 in the aggregate over the remaining 6 months of its management
information systems agreement and purchased services of approximately $5,560,000, $5,594,000 and $5,496,000 in 2002, 2001 and 2000, respectively, under the agreement.

WCI
has entered into a 15 year agreement for the supply of certain gases commencing in 2002. This contract requires WCI to pay a minimum monthly amount on a take or pay basis.
Commitments under this contract total approximately $5.4 million per year and are subject to escalation.

At
October 31, 2002, at pricing then in effect, WCI had firm commitments for the purchase of raw materials and gases of approximately $9,348,000 in 2003, $5,656,000 in 2004,
$5,656,000 in 2005, $5,656,000 in 2006, $5,656,000 in 2007 and $53,730,000 thereafter. In addition, at October 31, 2002 WCI had commitments for capital expenditures of approximately $1,426,000.

In
common with much of the steel industry, WCI's facilities are located on sites that have been used for heavy industrial purposes for decades. WCI is and will continue to be subject to
numerous federal, state and local environmental laws and regulations governing, among other things, air emissions, waste water discharge and solid and hazardous waste management. WCI has made and
intends to continue to make the necessary expenditures for environmental remediation and compliance

36

---

with environmental laws and regulations. Environmental laws and regulations continue to change and have generally become more stringent, and WCI may be subject to more stringent environmental laws
and regulations in the future. Compliance with more stringent environmental laws and regulations could have a material adverse effect on WCI's financial condition and results of operations.

WCI
is subject to a consent decree as a result of a civil action instituted by the Department of Justice (DOJ), on behalf of the Environmental Protection Agency (EPA). Work required
under the consent decree was completed in January 2003 with the exception of final reporting. The consent decree also provides for stipulated penalties in the event of noncompliance which WCI
does not believe will be material.

As
a condition of a previous Resource Conservation and Recovery Act (RCRA) operating permit, WCI is required to undertake a corrective action program with respect to on-site
waste management practices at the Warren facility. The workplan for the initial phase of the investigation step of the corrective action program, the RCRA Facility Investigation (RFI), identifies
thirteen solid waste management units to be investigated. WCI has completed and submitted its RFI Phase 1 report to the EPA. WCI has also completed human health and ecological risk assessments, the
results of which will be used to identify whether any further investigative steps are required to complete the RFI. WCI submitted its risk assessment reports to the EPA, and is awaiting a response.
Any additional investigative steps, such as sampling, would then be undertaken in 2003 and 2004 as phase two of the RFI. The final scope of corrective action required to address any contamination that
may be present at or emanating from the solid waste management units at the Warren facility, including the potential for remediation, is dependent upon the completion and findings of the RFI and the
development and approval of a corrective action program. Accordingly, WCI is unable at this time to estimate the final cost of the corrective action program or the period over which such costs may be
incurred and there can be no assurance that any such corrective action program would not have a material adverse effect on the operating results or financial condition of WCI.

The
EPA issued a unilateral administrative order (Order) to WCI pursuant to Section 7003 of RCRA effective September 24, 2002. The Order asserts that WCI's handling of
solid waste in various impoundment areas presents an imminent and substantial endangerment to health or the environment by virtue of potential harm to wildlife, including migratory birds, that may
land on or enter the areas. The Order required WCI, among other things, to (i) take immediate measures to deter and discourage wildlife from landing on or entering the areas, (ii) remove
all oily wastes from the impoundments, and (iii) remove all remaining oily sludge from the banks and bottoms of the impoundments. RCRA provides for civil penalties of up to $5,500 per day for
noncompliance with the Order. In written comments, WCI raised several concerns and objected to both the issuance of the Order and its scope, including portions of the Order calling for removal of all
oily material from the impoundments. WCI also submitted a draft work plan to the EPA setting forth a number of activities that WCI considers reasonably necessary to abate any alleged endangerment, and
began implementing the draft work plan in the fall of 2002. In January 2003, the EPA approved portions of the draft work plan and disapproved other portions. The EPA also issued an Amended
Order, dated January 21, 2003. The Amended Order requires WCI to continue implementing its immediate deterrent measures. For impoundments that are a required part of WCI's ongoing operations,
the Amended Order requires WCI to either install a netting system over the impoundments or remove all oily material. For the inactive areas, the Amended
Order requires that all oily material be removed. WCI is currently evaluating the feasibility of the EPA's demands, including timing, and available options for responding to the Amended Order.

In
addition, WCI received correspondence dated December 27, 2002 from the U.S. Attorney's office on behalf of the United States Fish & Wildlife Service alleging that WCI
has violated Section 703(a) of the Migratory Bird Treaty Act (a misdemeanor). WCI and its legal counsel met with the Assistant U.S. Attorney in February 2003 to discuss possible
resolutions for this matter, and those discussions are ongoing. WCI believes that it will resolve this matter in a manner that will not have a material adverse effect on WCI's financial position or
results of operations.

37

---

In addition to the above-described matters, WCI is contingently liable with respect to lawsuits and other claims incidental to the ordinary course of its business. A liability has been
established for an amount, which WCI believes is adequate, based on information currently available, to cover the costs to resolve the above described matters, including remediation, if any, except
for any costs of corrective action that may result from the RFI for which no estimate can currently be made. The outcome of the above described matters could have a material adverse effect on the
future operating results of WCI in a particular quarter or annual period; however, WCI believes that the effect of such matters will not have a material adverse effect on WCI's consolidated financial
position.

In
applying Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information," the Company considers its operating and
management structure and the types of information subject to regular review by its "chief operating decision maker." On this basis, the Company's only reportable segment is WCI. The segment
disclosures are presented on this basis for fiscal years 2002, 2001 and 2000.

The
accounting policies of the segment are consistent with those described for the consolidated financial statements in the summary of significant accounting policies (see
Note 1). All revenues are generated by WCI. Geographic revenues are based on the region in which the customer invoice was generated and all revenue was generated within the United States. The
Company measures segment profit for internal reporting purposes as net income.

A
complete reconciliation of segment income to consolidated net (loss) income is presented below:

|      |                    | 2002 |         | 2001    |   | 2000     |         
|----- | ------------------ | ---- | ------- | ------- | - | -------- | --------
|WCI   |                    | $    | (37,569 | )       | $ | (100,805 | )       
|Other |                    |      | (17,641 | )       |   | (28,034  | )       
|      |                    |      |         |         |   |          |         
|      | Total Consolidated |      | $       | (55,210 | ) | $        | (128,839
|      |                    |      |         |         |   |          |         

Other
net (loss) income consists primarily of the interest income, investment and other income (expense), interest expense and income tax benefits of Renco Steel and the effects of the
purchase accounting adjustments (Note 1), as outlined below.

Interest
Income, Investment and Other Income (Expense)

|      |                    | 2002 |     | 2001 |   | 2000   
|----- | ------------------ | ---- | --- | ---- | - | -------
|WCI   |                    | $    | 544 |      | $ | (7,608 
|Other |                    |      | 1   |      |   | (10,917
|      |                    |      |     |      |   |        
|      | Total Consolidated |      | $   | 545  |   | $      
|      |                    |      |     |      |   |        

In
2001, WCI's expense was largely the result of a charge of $10.5 million related to the write down of an investment in a distressed competitor it previously considered
acquiring. The $10.9 million expense attributed to Other was primarily the result of the impairment of the unamortized balance of costs in excess of acquired net assets.

Interest
Expense

|      |                    | 2002 |        | 2001    |   | 2000  
|----- | ------------------ | ---- | ------ | ------- | - | ------
|WCI   |                    | $    | 33,179 |         | $ | 31,980
|Other |                    |      | 14,057 |         |   | 13,679
|      |                    |      |        |         |   |       
|      | Total Consolidated |      | $      | 47, 236 |   | $     
|      |                    |      |        |         |   |       

38

---

Depreciation
and Amortization

|                                             |                    | 2002 |        | 2001   |   | 2000  
|-------------------------------------------- | ------------------ | ---- | ------ | ------ | - | ------
|WCI                                          |                    | $    | 18,987 |        | $ | 20,870
|Purchase accounting adjustments (See Note 1) |                    |      | 3,065  |        |   | 3,605 
|                                             |                    |      |        |        |   |       
|                                             | Total Consolidated |      | $      | 22,052 |   | $     
|                                             |                    |      |        |        |   |       

Assets

|      |                    | 2002 |         | 2001    |   | 2000   
|----- | ------------------ | ---- | ------- | ------- | - | -------
|WCI   |                    | $    | 391,626 |         | $ | 406,613
|Other |                    |      | 35,248  |         |   | 39,291 
|      |                    |      |         |         |   |        
|      | Total Consolidated |      | $       | 426,874 |   | $      
|      |                    |      |         |         |   |        

Assets
listed above as Other include investments and cash equivalents held by Renco Steel of zero, zero and $8.6 million in 2002, 2001 and 2000, respectively, and the effects of
the purchase accounting adjustments discussed in Note 1.

All
expenditures for long lived assets were made by the segment of WCI and all long lived assets are located within the United States.

The
Youngstown Sinter Company (YSC), a wholly owned subsidiary of WCI, idled its plant indefinitely effective July 15, 2001. YSC had been in operation since 1991 producing a
clinker-type material (Sinter) from steelmaking by-products such as slag and ore fines. The sinter was then used as a substitute feed stock in WCI's blast furnace facility
located in Warren, Ohio. WCI recorded a charge of $3.9 million (included in Unusual charges) during the three months ended April 30, 2001 to reflect plant idling costs, of which
$3.0 million represents the recognition of an impairment in the value of the assets of the facility. The sinter plant may be restarted in the future if economically advantageous.

During
2000 and 2001 WCI attempted to acquire substantially all of Acme Steel Company's assets. WCI was unsuccessful in completing the acquisition due to Acme Steel's failure to meet
certain conditions in the letter of intent. This resulted in the Company recording a charge of $10.8 million during the quarter ended January 31, 2001 to write down the carrying value of
Acme Metals Senior Unsecured Notes owned primarily by WCI (included in Interest, investment and other income (expense), net) and a charge of $1.7 million, recorded during the quarter ended
October 31, 2001, to expense certain accumulated acquisition costs (included in Unusual Charges).

In
the quarter ended October 31, 2001, the Company incurred a charge of $10.8 million to record the impairment of the unamortized balance of cost in excess of acquired net
assets (included in Interest, investment and other income (expense), net). The Company's amortization expense was $0.5 million in the year ended October 31, 2001.

39

---

The
following is a summary of unaudited quarterly results for the years ended October 31, 2002 and 2001:

|                  |  | Three Months Ended 2002
|----------------- |  | -----------------------
|
|
|Net sales         |  | $                      
|Gross margin      |  |                        
|Net income (loss) |  |                        

|                  |  | Three Months Ended 2001 |        
|----------------- |  | ----------------------- | -------
|
|
|Net sales         |  | $                       | 98,191 
|Gross margin      |  |                         | (3,778 
|Net income (loss) |  |                         | (36,934

During
the three months ended April 30, 2002, WCI recorded a $1.6 million gain realized from the resolution of contract issues related to the sale of a third party owned
coke plant adjacent to WCI's facility.

During
the three months ended January 31, 2001 the Company recorded a charge of $10,836,000 to write down the carrying value of Acme Metals 10.875% Senior Unsecured Notes owned
predominantly by WCI and to a much lesser extent by Renco Steel.

WCI
recorded a charge of $3,909,000 during the three months ended April 30, 2001 to reflect plant idling costs associated with the indefinite idling of YSC, of which $2,982,000
represents the recognition of an impairment in the value of the assets of the facility.

During
the three months ended October 31, 2001, the Company recorded a charge of $10,816,000 to write off the unamortized book value of the goodwill that was previously recorded
to reflect purchase accounting adjustments relating to the acquisition of treasury stock by WCI in fiscal 1997. A charge of $1,695,000 was also recorded to expense certain accumulated acquisition
costs related to the Acme Steel acquisition efforts.

During
the three months ended October 31, 2001 WCI recorded inventory valuation charges totaling $2,605,000.

40

---



INDEPENDENT AUDITORS' REPORT

To
the Shareholder and Board of Directors
Renco Steel Holdings, Inc. and Subsidiaries:

We
have audited the accompanying consolidated balance sheets of Renco Steel Holdings, Inc. and subsidiaries (a wholly-owned subsidiary of The Renco Group, Inc.) as of October 31,
2002 and 2001, and the related consolidated statements of operations, shareholder's deficit, and cash flows for each of the years in the three-year period ended October 31, 2002.
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements 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, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Renco Steel Holdings, Inc. and subsidiaries as of
October 31, 2002 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended October 31, 2002, in conformity with
accounting principles generally accepted in the United States of America.

The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial
statements, the Company has suffered recurring losses from operations and negative cash flows that raise substantial doubt about its ability to continue as a going concern. Management's plans in
regard to these matters
are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

|                     |  | 
|-------------------- |  | 
|                     |  | 
|                     |  | 
|/S/ KPMG LLPKPMG LLP |  | 
|                     |  | 
|                     |  | 

Cleveland,
Ohio
January 17, 2003
Except as to Note 5, which is as of March 6, 2003

41

---



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

WCI STEEL, INC. AND SUBSIDIARIES  CONSOLIDATED BALANCE SHEETS  (Dollars in thousands, except per share amount)

|                                          |                                                                                                                          | October 31,                                          |        
|----------------------------------------- | ------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------- | -------
|
|ASSETS                                    |                                                                                                                          |                                                      |        
|Current assets                            |                                                                                                                          |                                                      |        
|                                          | Cash and cash equivalents                                                                                                |                                                      | $      
|                                          | Accounts receivable, less allowances for doubtful accounts of $3,436 and $3,100, respectively                            |                                                      |        
|                                          | Inventories                                                                                                              |                                                      |        
|                                          | Prepaid expenses and other current assets                                                                                |                                                      |        
|                                          |                                                                                                                          |                                                      |        
|                                          |                                                                                                                          | Total current assets                                 |        
|Property, plant and equipment, net        |                                                                                                                          |                                                      | 185,433
|Intangible pension asset, net             |                                                                                                                          |                                                      | 38,831 
|Other assets, net                         |                                                                                                                          |                                                      | 3,171  
|                                          |                                                                                                                          |                                                      |        
|                                          |                                                                                                                          | Total assets                                         |        
|                                          |                                                                                                                          |                                                      |        
|LIABILITIES and SHAREHOLDER'S EQUITY      |                                                                                                                          |                                                      |        
|Current liabilities                       |                                                                                                                          |                                                      |        
|                                          | Current portion of long-term debt                                                                                        |                                                      | $      
|                                          | Accounts payable                                                                                                         |                                                      |        
|                                          | Accrued liabilities                                                                                                      |                                                      |        
|                                          |                                                                                                                          |                                                      |        
|                                          |                                                                                                                          | Total current liabilities                            |        
|Long-term debt, excluding current portion |                                                                                                                          |                                                      | 332,405
|Postretirement health care benefits       |                                                                                                                          |                                                      | 122,932
|Pension benefits                          |                                                                                                                          |                                                      | 47,480 
|Other liabilities                         |                                                                                                                          |                                                      | 15,608 
|                                          |                                                                                                                          |                                                      |        
|Total liabilities                         |                                                                                                                          |                                                      | 638,457
|Shareholder's equity (deficit)            |                                                                                                                          |                                                      |        
|                                          | Preferred stock, par value $1,000 per share, 5,000 shares authorized, none issued                                        |                                                      |        
|                                          | Common stock, no par value, stated value $.01 per share, 40,000,000 shares authorized, 100 shares issued and outstanding |                                                      |        
|                                          | Additional paid-in capital                                                                                               |                                                      |        
|                                          | Accumulated deficit                                                                                                      |                                                      |        
|                                          | Accumulated other comprehensive loss                                                                                     |                                                      |        
|                                          |                                                                                                                          |                                                      |        
|                                          |                                                                                                                          | Total shareholder's equity (deficit)                 |        
|Commitments and contingencies             |                                                                                                                          |                                                      |       
|                                          |                                                                                                                          |                                                      |        
|                                          |                                                                                                                          | Total liabilities and shareholder's equity (deficit) |        
|                                          |                                                                                                                          |                                                      |        

See
accompanying notes to consolidated financial statements.

42

---

WCI STEEL, INC. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF OPERATIONS  (Dollars in thousands)

|                                                                       |                                              | Years ended October 31, |        
|---------------------------------------------------------------------- | -------------------------------------------- | ----------------------- | -------
|
|Net sales                                                              |                                              | $                       | 502,047
|Operating costs and expenses                                           |                                              |                         |        
|                                                                       | Cost of products sold                        |                         |        
|                                                                       | Depreciation and amortization                |                         |        
|                                                                       | Selling, general and administrative expenses |                         |        
|                                                                       | Unusual charges                              |                         |        
|                                                                       |                                              |                         |        
|                                                                       |                                              |                         | 506,981
|                                                                       |                                              |                         |        
|Operating income (loss)                                                |                                              |                         | (4,934 
|                                                                       |                                              |                         |        
|Other income (expense)                                                 |                                              |                         |        
|                                                                       | Interest expense                             |                         |        
|                                                                       | Interest and other income (expense), net     |                         |        
|                                                                       |                                              |                         |        
|                                                                       |                                              |                         | (32,635
|                                                                       |                                              |                         |        
|Income (loss) before income taxes                                      |                                              |                         | (37,569
|Income tax (benefit) expense                                           |                                              |                         |       
|                                                                       |                                              |                         |        
|Net income (loss)                                                      |                                              | $                       | (37,569
|Other comprehensive income (loss)minimum pension liability adjustment |                                              |                         | (27,828
|                                                                       |                                              |                         |        
|Total comprehensive income (loss)                                      |                                              | $                       | (65,397
|                                                                       |                                              |                         |        

See
accompanying notes to consolidated financial statements.

43

---



WCI STEEL, INC. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)  (Dollars in thousands)

|                            |                                                                                    | Years ended October 31, 2002, 2001 and 2000 |  
|--------------------------- | ---------------------------------------------------------------------------------- | ------------------------------------------- | -
|
|Balance at October 31, 1999 |                                                                                    | $                                           | 
|                            |                                                                                    |                                             |  
|                            | Net income/(loss)                                                                  |                                             |  
|                            | Dividends paid on common stock                                                     |                                             |  
|                            |                                                                                    |                                             |  
|Balance at October 31, 2000 |                                                                                    |                                             | 
|                            |                                                                                    |                                             |  
|                            | Net income/(loss)                                                                  |                                             |  
|                            |                                                                                    |                                             |  
|Balance at October 31, 2001 |                                                                                    |                                             | 
|                            |                                                                                    |                                             |  
|                            | Net income/(loss)                                                                  |                                             |  
|                            | Accumulated other comprehensive income (loss)minimum pension liability adjustment |                                             |  
|                            |                                                                                    |                                             |  
|Balance at October 31, 2002 |                                                                                    | $                                           | 
|                            |                                                                                    |                                             |  

See
accompanying notes to consolidated financial statements.

44

---

WCI STEEL, INC. AND SUBSIDIARIES  CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS  (Dollars in thousands)

|                                                                                               |                                                                   | Years ended October 31,           |        
|---------------------------------------------------------------------------------------------- | ----------------------------------------------------------------- | --------------------------------- | -------
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                          |                                                                   |                                   |        
|Net income (loss)                                                                              |                                                                   | $                                 | (37,569
|Adjustment to reconcile net income (loss) to net cash provided (used) by operating activities: |                                                                   |                                   |        
|                                                                                               | Depreciation and amortization                                     |                                   |        
|                                                                                               | Amortization of deferred maintenance costs                        |                                   |        
|                                                                                               | Amortization of financing costs                                   |                                   |        
|                                                                                               | Postretirement health care benefits                               |                                   |        
|                                                                                               | Pension benefits                                                  |                                   |        
|                                                                                               | Provision for losses on accounts receivable                       |                                   |        
|                                                                                               | Asset impairment and other charges                                |                                   |        
|                                                                                               | Other                                                             |                                   |        
|                                                                                               | Cash provided (used) by changes in certain assets and liabilities |                                   |        
|                                                                                               |                                                                   | Accounts receivable               |        
|                                                                                               |                                                                   | Inventories                       |        
|                                                                                               |                                                                   | Prepaid expenses and other assets |        
|                                                                                               |                                                                   | Accounts payable                  |        
|                                                                                               |                                                                   | Accrued liabilities               |        
|                                                                                               |                                                                   | Other liabilities                 |        
|                                                                                               |                                                                   |                                   |        
|                                                                                               | Net cash provided (used) by operating activities                  |                                   |        
|                                                                                               |                                                                   |                                   |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                          |                                                                   |                                   |        
|                                                                                               | Additions to property, plant and equipment                        |                                   |        
|                                                                                               | Gross proceeds from the sale of assets                            |                                   |        
|                                                                                               |                                                                   |                                   |        
|                                                                                               | Net cash used by investing activities                             |                                   |        
|                                                                                               |                                                                   |                                   |        
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                          |                                                                   |                                   |        
|                                                                                               | Net borrowings under Revolving Credit Facility                    |                                   |        
|                                                                                               | Other changes in long-term debt                                   |                                   |        
|                                                                                               | Dividends paid                                                    |                                   |        
|                                                                                               |                                                                   |                                   |        
|                                                                                               | Net cash provided (used) by financing activities                  |                                   |        
|                                                                                               |                                                                   |                                   |        
|Net increase (decrease) in cash and cash equivalents                                           |                                                                   |                                   | (29,493
|Cash and cash equivalents at beginning of year                                                 |                                                                   |                                   | 32,244 
|                                                                                               |                                                                   |                                   |        
|Cash and cash equivalents at end of year                                                       |                                                                   | $                                 | 2,751  
|                                                                                               |                                                                   |                                   |        
|Supplemental disclosure of cash flow information                                               |                                                                   |                                   |        
|                                                                                               | Cash paid for interest                                            |                                   | $      
|                                                                                               | Cash paid for income taxes                                        |                                   |        

See
accompanying notes to consolidated financial statements.

45

---



WCI STEEL, INC. AND SUBSIDIARIES  Notes to Consolidated Financial Statements

WCI
Steel, Inc. (Company or WCI) is a wholly owned subsidiary of Renco Steel Holdings, Inc. (Renco Steel) and an indirect wholly owned subsidiary of The Renco
Group, Inc. (Renco).

(a)  Nature
of Operations

The
Company is a niche oriented integrated producer of valueadded, custom steel products. The Company produces a wide range of custom flat rolled products at its primary facility in
Warren, Ohio, including high carbon, alloy, ultra high strength, silicon electrical and heavy gauge galvanize steel. In addition, the Company produces commodity grade products that consist of low
carbon, high strength and light gauge galvanize steel. The Company's primary customers are steel converters, steel service centers, construction product companies, electrical equipment manufacturers
and to a lesser extent, automobile and automotive parts manufacturers located principally in the United States.

During
2002, 2001, and 2000, sales to the Company's largest customer accounted for 11.7%, 9.8%, and 10.1%, respectively, of net sales. Concentration of credit risk related to trade
receivables is limited due to the large number of customers in a variety of industries. Approximately 50% of WCI's shipments are to customers within 200 miles of its primary facility.

Since
its inception, the Company has had labor agreements with the United Steelworkers of America (USWA) and other organized labor organizations. The USWA represents approximately 75% of
the Company's employees. The Company has a five year agreement with the USWA that expires October 31, 2004.

(b)  Principles
of Consolidation

The
consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany profits, transactions, and balances have been
eliminated in consolidation.

(c)  Cash
and Cash Equivalents

Cash
and cash equivalents include cash on hand and short-term investments with original maturities of three months or less.

(d)  Inventories

Inventories
are stated at the lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method. Market value is determined based on expected
selling price of each product.

(e)  Property,
Plant and Equipment

Property,
plant and equipment are recorded at cost. Depreciation is calculated on the straightline method over the estimated useful lives of the assets (buildings 20 to 30 years
and machinery and equipment 2 to 30 years with a weighted average of 17 years). Expenditures for normal repairs and maintenance are charged to expense as incurred.

(f)    Other
Assets

Deferred
financing costs, included in other non-current assets, are amortized using the effective yield method over the term of the related financing.

(g)  Income
Taxes

On
January 15, 1999, Renco filed an election with the consent of its shareholders with the Internal Revenue Service to change its taxable status from that of a subchapter C
corporation to that of a subchapter S corporation, effective November 1, 1998. At the same time, Renco elected for the

46

---

Company to be treated as a qualified subchapter S subsidiary (QSSS). Most states in which the Company operates follow similar tax treatment. QSSS status requires the ultimate shareholders to include
their pro rata share of the Company's income or loss in their individual tax returns. The Company provides for state and local income taxes for the taxing jurisdictions which do not recognize QSSS
status, however, management believes this is not material to the Company. However, under the "built in gains" provisions of the tax law, certain federal and state taxes may become payable and would be
charged to the Company's statement of operations. Such taxes are measured by the excess of the fair market value of assets over their tax bases on the effective date of the subchapter S subsidiary
election if the associated assets are disposed of within the ten-year post-election period. Management has not and does not intend to trigger any taxes under the
built-in-gains provisions of the tax law.

(h)  Environmental
Compliance Costs

Environmental
expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and
which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or remedial expenditures are probable, and the cost can be
reasonably estimated. Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or the Company's development of, or commitment to, a plan of action based
on the then known facts.

(i)    Use
of Estimates in Preparation of Consolidated Financial Statements

The
preparation of financial statements in conformity with generally accepted accounting principles 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 consolidated financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

(j)    Reclassifications

Certain
amounts in the consolidated financial statements for 2001 have been reclassified to conform to the 2002 presentation.

The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed below, the Company has incurred recurring
losses from operations and negative cash flows that raise substantial doubt about its ability to continue as a going concern. Management is undertaking a comprehensive assessment of its business to
address these issues as described below. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The
Company and the industry continue to face difficult and volatile market conditions. During 2000 and 2001 there was intense downward pressure on steel prices due to the surge of
imports into the United States. This resulted in the Company incurring a net loss of $100.8 million in 2001. Order entry rates and steel prices increased significantly during 2002 as a result
of significant capacity reductions caused by the closing of a number of steel producers and the effects of the implementation of the Section 201 tariffs. As a result of the increased shipping
volume and prices, the Company returned to profitability during the fourth quarter of 2002. However, for the full year of 2002 the Company incurred a net loss of $37.6 million. In addition to
incurring significant losses during the last two years, the Company had negative cash flows which have reduced the cash resources available to support its operations.

Many
of the steel companies shut down in the past two years have been restarted by other companies with cost structures significantly lower that WCI's. This low cost capacity returning
to the market coupled with continued high levels of imports and a slowing manufacturing sector has resulted

47

---

in reduced volume and pricing expectations for the first half of 2003. As a result, the Company expects to incur a net loss for 2003.

The
Company's liquidity depends on its operating performance and borrowing availability under its revolving credit facility. If market conditions fail to improve adequately, operating
losses will continue and the Company will be unable to meet certain covenants associated with its revolving credit facility. Under these circumstances, if the Company is unable to obtain waivers of
covenant violations or secure additional financing sources to fund expected operating losses, it would likely have a material effect on WCI's operations.

The
Company has attempted to conserve cash by reducing operating costs and deferring capital spending. However, these measures have not and are not expected to allow the Company to
generate positive cash flow on a sustained basis in the current operating environment. As a result, the Company is undertaking a comprehensive assessment of its business including its equipment and
facilities, organizational structure, labor practices and utilization, vendor relationships and capital structure. From this assessment WCI intends to develop a business plan that addresses WCI's cost
competitiveness in the industry and ensures that the Company has adequate resources to fund its operations and capital expenditure needs.

Inventories
consist of the following:

|                                   |  | October 31,
|---------------------------------- |  | -----------
|
|
|Raw materials                      |  | $          
|Finished and semi-finished product |  |            
|Supplies                           |  |            
|                                   |  |            
|                                   |  |            
|Less LIFO reserve                  |  |            
|                                   |  |            
|                                   |  | $          
|                                   |  |            

Property,
plant and equipment consist of the following:

|                              |  | October 31,
|----------------------------- |  | -----------
|
|
|Land and improvements         |  | $          
|Buildings                     |  |            
|Machinery and equipment       |  |            
|Construction in progress      |  |            
|                              |  |            
|                              |  |            
|Less accumulated depreciation |  |            
|                              |  |            
|                              |  | $          
|                              |  |            

48

---

Long-term
debt consist of the following:

|                                                                                                             |  | October 31,
|------------------------------------------------------------------------------------------------------------ |  | -----------
|
|
|Senior Secured Notes with interest at 10% payable semi-annually, due December 1, 2004                        |  | $          
|Revolving Credit Facility (Revolver) with interest at prime rate (5.51% at October 31, 2002) payable monthly |  |            
|Other                                                                                                        |  |            
|                                                                                                             |  |            
|                                                                                                             |  |            
|Less current portion of long-term debt                                                                       |  |            
|                                                                                                             |  |            
|                                                                                                             |  | $          
|                                                                                                             |  |            

The
$300 million 10% Senior Secured Notes due December 1, 2004 (Senior Secured Notes) are secured by a first priority lien on substantially all of the existing property,
plant and equipment of the Company. A Voluntary Employee Beneficiaries Association trust fund, established to hold Company contributions to fund postretirement health care and life insurance
obligations for the benefit of hourly employees, holds a second priority lien on the security for the Senior Secured Notes.

The
Company has a $100,000,000 Revolver secured by inventories and receivables and subject to eligibility requirements, as defined, reduced by any outstanding letters of credit. The
Revolver is subject to a monthly service fee of $15,000 and an annual commitment fee of 0.5% of the unused balance up to $60,000,000 payable monthly. There were borrowings of $32,086,000 outstanding
under the Revolver as of October 31, 2002. The Revolver also provides for up to an aggregate amount of $20,000,000 in letters of credit.

On
March 6, 2003 the Company and its lenders agreed to amend the Revolver. The Revolver has been subject to a minimum availability covenant of $20 million or
$25 million depending on the Company's cumulative earnings before interest, taxes, depreciation and amortization (EBITDA). This covenant was replaced under the amendment as discussed below.
Additionally, the Revolver's expiration date was extended to June 30, 2004. At October 31, 2002, the Company had net borrowing availability of $53,043,000 based on eligible inventory and
receivables after deducting $32,086,000 of borrowings outstanding, and $14,870,000 in letters of credit outstanding after reflecting the amendment effective March 6, 2003. Simultaneous with the
execution of the amendment to the Revolver, Renco agreed to participate in the Company's Revolver by agreeing to fund $15 million with such participation being subordinated in right of payment
to that of the other lenders.

The
Company's Revolver and Senior Secured Notes contain certain financial and other covenants, including maintenance of specified levels of net worth as defined, EBITDA, and debt service
and limitations on capital expenditures. Additional covenants limit the incurrence of additional indebtedness, payments affecting subsidiaries, transactions with affiliates, sale/leaseback
transactions, impairment of security interest, consolidations, mergers and transfer of the Company's assets. The Company is required to maintain a minimum net worth excluding accumulated other
comprehensive income or loss related to the Company's defined benefit pension plan of not less than negative $260 million. A minimum cumulative EBITDA covenant has been established for each
month through October 2003 at which point it becomes a rolling twelve month covenant. The minimum cumulative EBITDA covenant is $8.0 million for the three months ended January 31,
2003, $12.5 million for the six months ended April 30, 2003, $19.1 million for the nine months ended July 31, 2003 and $26.9 million for
the twelve months ended October 31, 2003. After October 2003 the minimum EBITDA covenant is $26.9 million over the previous twelve month period. Interest is charged on the
Revolver at prime rate plus 1.5% or as to Eurodollar Rate Loans, a rate of 3.5% in excess of the

49

---

Adjusted Eurodollar Rate applicable for the interest period selected by the Company. In addition, if the Company is unable to meet certain minimum cumulative EBITDA targets, then the Company is
required to maintain minimum borrowing availability of $5 million. A minimum cumulative EBITDA target has been established for each month through October 2003 at which point it becomes a
rolling twelve month covenant. The minimum cumulative EBITDA related to the minimum availability covenant is $8.7 million as of January 31, 2003, $13.4 million as of
April 30, 2003, $20.3 million as of July 31, 2003 and $28.6 million as of October 31, 2003 and thereafter. The Company is permitted to declare and pay dividends, and
make other transactions with affiliates provided no condition of default exists or will exist, and the accumulated amount of such transactions is no greater than fifty percent (50%) of the
consolidated net income as defined (less 100% of any consolidated net loss) earned for periods subsequent to October 31, 1996 when taken as a single accounting period, less management fees paid
to Renco in excess of $1,200,000 annually for the same period. Under these agreements, there were no amounts available for dividends and other transactions with affiliates at October 31, 2002.

Aggregate
principal payments on long term debt for the five years subsequent to October 31, 2002 are as follows: $3,892,000 in 2003, $32,308,000 in 2004, $300,063,000 in 2005,
$34,000 in 2006 and none thereafter.

As
of October 31, 2002, the fair value of the Senior Secured Notes was $90,000,000 based on the quoted market price.

Accrued
liabilities consist of the following:

|                                       |  | October 31
|-------------------------------------- |  | ----------
|
|
|Payroll                                |  | $         
|Employee benefits                      |  |           
|Defined benefit pension plan (current) |  |           
|Retiree healthcare (current)           |  |           
|Interest                               |  |           
|Other                                  |  |           
|                                       |  |           
|                                       |  | $         
|                                       |  |           

The
Company has variable compensation plans for the benefit of substantially all employees. The amount of compensation due under these plans is based on the Company's income as defined
under each plan. Total expense under the plans was $1,813,000, $685,000 and $4,929,000 for the years ended October 31, 2002, 2001 and 2000, respectively. Certain amounts under these plans
represent deferred compensation.

The
Company has defined contribution retirement plans under which it expensed approximately $1,971,000, $1,859,000 and $2,083,000 for the years ended October 31, 2002, 2001 and
2000, respectively.

The
Company also has a defined benefit pension plan for substantially all hourly employees which provides minimum pension benefits based on age, years of service, and benefits provided
under the
Company's frozen defined contribution plan and a predecessor company's defined benefit plan. As a result of the collective bargaining agreement effective September 1, 1999 with the USWA, the
plan was amended to provide an increase in pension benefits. In addition, as active employees retire, assets from

50

---

the Company's frozen defined contribution component of the plan are transferred to the defined benefit component of the plan with a corresponding increase in the projected benefit obligation.

The
following table sets forth the actuarial present value of benefit obligations and funded status of the Company's defined benefit pension plan:

|                                                                                                                    |  | October 31, |        
|------------------------------------------------------------------------------------------------------------------- |  | ----------- | -------
|
|
|Projected benefit obligation                                                                                        |  | $           | 133,181
|Plan assets at fair value                                                                                           |  |             | 59,344 
|                                                                                                                    |  |             |        
|Projected benefit obligation in excess of plan assets                                                               |  |             | 73,837 
|Unrecognized net gain (loss) from past experience different from that assumed and effects of changes in assumptions |  |             | (28,032
|Unrecognized prior service cost                                                                                     |  |             | (38,831
|Accumulated other comprehensive loss                                                                                |  |             | 27,828 
|Intangible pension asset                                                                                            |  |             | 38,831 
|                                                                                                                    |  |             |        
|Accrued pension cost                                                                                                |  |             | 73,633 
|                                                                                                                    |  |             |        
|Less pension liability due within one year                                                                          |  |             | 26,153 
|                                                                                                                    |  |             |        
|Long-term pension liability                                                                                         |  | $           | 47,480 
|                                                                                                                    |  |             |        

An
assumed discount rate of 6.75% and 7.0% and an expected return on plan assets of 9.0% and 9.0% in 2002 and 2001, respectively were used for purposes of valuing the benefits under the
defined benefit pension plan.

The
following table sets forth a reconciliation of the beginning and end of year projected benefit obligation:

|                                                  |  | October 31, |        
|------------------------------------------------- |  | ----------- | -------
|
|
|Projected benefit obligation at beginning of year |  | $           | 98,682 
|Service cost                                      |  |             | 4,231  
|Interest cost                                     |  |             | 7,824  
|Transfers from DC plan                            |  |             | 2,737  
|Actuarial (gains) losses, net                     |  |             | 27,419 
|Benefits paid                                     |  |             | (7,712 
|                                                  |  |             |        
|Projected benefit obligation at end of year       |  | $           | 133,181
|                                                  |  |             |        

The
following table sets forth a reconciliation of the beginning and end of year fair value of plan assets:

|                                 |  | October 31, |       
|-------------------------------- |  | ----------- | ------
|
|
|Plan assets at beginning of year |  | $           | 36,906
|Actual return on assets          |  |             | (2,230
|Employer contributions           |  |             | 29,643
|Benefits paid                    |  |             | (7,712
|Transfers from DC plan           |  |             | 2,737 
|                                 |  |             |       
|Plan assets at end of year       |  | $           | 59,344
|                                 |  |             |       

51

---

The following table sets forth the components of pension expense:

|                               |                                   | Years Ended October 31, |       
|------------------------------ | --------------------------------- | ----------------------- | ------
|
|
|Service cost                   |                                   | $                       | 4,231 
|Interest cost                  |                                   |                         | 7,824 
|Expected return on plan assets |                                   |                         | (3,887
|Amortization of unrecognized:  |                                   |                         |       
|                               | Prior service cost                |                         |       
|                               | Actuarial (gains) and losses, net |                         |       
|                               |                                   |                         |       
|                               |                                   | $                       | 14,542
|                               |                                   |                         |       

The
following table sets forth the accumulated postretirement benefit obligation (APBO) of the Company's postretirement health care and life insurance plans:

|                                                                                                       |  | October 31, |        
|------------------------------------------------------------------------------------------------------ |  | ----------- | -------
|
|
|APBO                                                                                                   |  | $           | 166,352
|Plan assets at fair value                                                                              |  |             | 8,022  
|                                                                                                       |  |             |        
|APBO in excess of plan assets                                                                          |  |             | 158,330
|Unrecognized prior service cost resulting from plan amendments                                         |  |             | (1,927 
|Unrecognized net loss from past experience different from that assumed and from changes in assumptions |  |             | (25,971
|                                                                                                       |  |             |        
|Accrued postretirement benefit cost                                                                    |  |             | 130,432
|Less portion due within one year                                                                       |  |             | 7,500  
|                                                                                                       |  |             |        
|                                                                                                       |  | $           | 122,932
|                                                                                                       |  |             |        

The
APBO was determined using a discount rate of 6.75% and 7.0% and an expected return on plan assets of 9.0% and 9.0% in 2002 and 2001, respectively and an assumed health care cost
trend rate of 8.0% in 2003, gradually declining to 5.0% after 2005. Assuming a 1% increase in the health care cost trend rate, the APBO at October 31, 2002 would increase by $25,347,000 along
with an increase in the 2002 service and interest cost components of $2,478,000. Assuming a 1% decrease in the health care cost trend rate, the APBO at October 31, 2002 would decrease by
$20,229,000 along with a decrease in the 2002 service and interest cost components of $1,940,000.

The
following table sets forth a reconciliation of the beginning and end of year APBO:

|                              |  | October 31, |        
|----------------------------- |  | ----------- | -------
|
|
|APBO at beginning of year     |  | $           | 154,369
|Service cost                  |  |             | 2,887  
|Interest cost                 |  |             | 10,314 
|Actuarial (gains) losses, net |  |             | 5,926  
|Benefits paid                 |  |             | (7,144 
|                              |  |             |        
|APBO at end of year           |  | $           | 166,352
|                              |  |             |        

52

---

The
following table sets forth a reconciliation of the beginning and end of year fair value of plan assets:

|                                 |  | October 31, |       
|-------------------------------- |  | ----------- | ------
|
|
|Plan assets at beginning of year |  | $           | 9,234 
|Actual loss on assets            |  |             | (1,212
|Benefits paid                    |  |             |      
|                                 |  |             |       
|Plan assets at end of year       |  | $           | 8,022 
|                                 |  |             |       

Net
periodic postretirement benefit costs included the following components:

|                                         |                       | Years Ended October 31, |       
|---------------------------------------- | --------------------- | ----------------------- | ------
|
|
|Service cost                             |                       | $                       | 2,887 
|Interest cost                            |                       |                         | 10,314
|Expected return on plan assets           |                       |                         | (831  
|Amortization of unrecognized:            |                       |                         |       
|                                         | Prior service cost    |                         |       
|                                         | Actuarial (gain) loss |                         |       
|                                         |                       |                         |       
|Net periodic postretirement benefit cost |                       | $                       | 14,257
|                                         |                       |                         |       

As
a result of the tax status described in Note (1)(g), the Company is generally not subject to income taxes. As of October 31, 2002 and 2001, the Company's tax basis in
its assets and liabilities exceeded its book basis by approximately $15,103,000 and $19,860,000, respectively.

The
Company leases a portion of its operating and data processing equipment. Rent expense for noncancellable operating leases amounted to approximately $1,475,000, $1,741,000 and
$1,914,000, for the years ended October 31, 2002, 2001 and 2000, respectively.

53

---

The
following table is a summary of future minimum payments under capitalized leases and under operating leases that have initial or remaining noncancelable lease terms in excess of one
year at October 31, 2002.

|Fiscal year ended October 31,                       |      | Capitalized
Leases |     | Operating
Leases
|--------------------------------------------------- | ---- | ------------------ | --- | ----------------
|
|                                                    | 2003 |                    | $   | 598             
|                                                    | 2004 |                    |     | 237             
|                                                    | 2005 |                    |     | 70              
|                                                    | 2006 |                    |     | 35              
|                                                    |      | Thereafter         |     |                 
|                                                    |      |                    |     |                 
|Total minimum lease payments                        |      |                    | 940 |                 
|                                                    |      |                    |     |                 
|Imputed interest                                    |      |                    | (68 | )               
|                                                    |      |                    |     |                 
|Present value of minimum capitalized lease payments |      |                    | 872 |                 
|Less current portion                                |      |                    | 553 |                 
|                                                    |      |                    |     |                 
|Long-term capitalized lease obligations             |      | $                  | 319 |                 
|                                                    |      |                    |     |                 

Assets
recorded under capital leases and included in property, plant and equipment in the Company's Balance Sheets consists of machinery and equipment of $1,344,000 and $522,000 at
October 31, 2002 and October 31, 2001, respectively, and $307,000 and $38,000 of accumulated depreciation as of October 31, 2002 and 2001, respectively.

The
Company has a management services agreement with Renco under which Renco provides certain management services to the Company. Under terms of this agreement, the Company is charged a
monthly fee of $100,000. The term of this agreement extends to October 31, 2004. Total expense for
management services fees amounted to $1,200,000 for each of the years ended October 31, 2002, 2001 and 2000.

For
2002, 2001, and 2000, Renco purchased certain insurance coverage for its subsidiaries, including the Company, and the actual cost of such insurance, without markup, is reimbursed by
the covered subsidiaries. The major areas of the Company's insurance coverage obtained under the Renco programs were property, business interruption, general, product and auto liability, workers'
compensation (other than Ohio for which the Company is self insured) and casualty umbrella.

In
fiscal 2002, 2001 and 2000, the Company incurred costs of approximately $6.3 million, $2.3 million and $2.0 million, respectively, under the Renco insurance
program. The increased cost in 2002 is due, in part, to severe capacity constraints and excessive price increases by both property insurers and reinsurers following the September 2001 terrorist
attacks.

During
2002, the Company purchased approximately $0.7 million of zinc and other alloys from Doe Run Peru S.R. Ltd., an indirect subsidiary of Renco. The Company believes
that such purchases were on an arm's length basis at a price no less favorable than at which the Company could obtain from unaffiliated entities. Also during 2002, the Company sold approximately
$40,000 of flat rolled steel products on an arm's length basis to UNARCO Material Handling Inc., a direct subsidiary of Renco.

Renco
Steel is a holding company formed by Renco in January 1998, which owns all the outstanding shares of capital stock of the Company. In February 1998, Renco Steel
issued $120 million principal amount 10.875% Senior Secured Notes due 2005. These notes are secured by a pledge of all the outstanding capital stock of the Company. Historically, Renco Steel
has met its debt service

54

---

obligations from its cash balances and earnings thereon, through distributions from the Company as permitted under the Company's outstanding indebtedness as described in Note 5 and, most
recently, from cash infusions from Renco. The Company does not expect to be permitted to pay dividends for the foreseeable future.

At
October 31, 2002, the Company had commitments to purchase data processing services of approximately $2,856,000 in the aggregate over the remaining 6 months of its
management information systems agreement and purchased services of approximately $5,560,000, $5,594,000 and $5,496,000 in 2002, 2001 and 2000, respectively, under the agreement.

The
Company entered into a 15 year agreement for the supply of certain gases commencing in 2002. This contract requires the Company to pay a minimum monthly amount on a take or
pay basis. Commitments under this contract total approximately $5.4 million per year and are subject to escalation.

At
October 31, 2002, at pricing then in effect, the Company had firm commitments for the purchase of raw materials and gases of approximately $9,348,000 in 2003, $5,656,000 in
2004, $5,656,000 in 2005, $5,656,000 in 2006, $5,656,000 in 2007 and $53,730,000 thereafter. In addition, at October 31, 2002 the Company had commitments for capital expenditures of
approximately $1,426,000.

In
common with much of the steel industry, the Company's facilities are located on sites that have been used for heavy industrial purposes for decades. The Company is and will continue
to be subject to numerous federal, state and local environmental laws and regulations governing, among other things, air emissions, waste water discharge and solid and hazardous waste management. The
Company has made and intends to continue to make the necessary expenditures for environmental remediation and compliance with environmental laws and regulations. Environmental laws and regulations
continue to change and have generally become more stringent, and the Company may be subject to more stringent environmental laws and regulations in the future. Compliance with more stringent
environmental laws and regulations could have a material adverse effect on the Company's financial condition and results of operations.

The
Company is subject to a consent decree as a result of a civil action instituted by the Department of Justice (DOJ), on behalf of the Environmental Protection Agency (EPA). Work
required under the consent decree was completed in January 2003 with the exception of final reporting. The consent decree also provides for stipulated penalties in the event of noncompliance
which the Company does not believe will be material.

As
a condition of a previous Resource Conservation and Recovery Act (RCRA) operating permit, the Company is required to undertake a corrective action program with respect to
on-site waste management practices at the Warren facility. The workplan for the initial phase of the investigation step of the corrective action program, the RCRA Facility Investigation
(RFI), identifies thirteen solid waste management units to be investigated. The Company has completed and submitted its RFI Phase 1 report to the EPA. The Company has also completed human health and
ecological risk assessments, the results of which will be used to identify whether any further investigative steps are required to complete the RFI. The Company submitted its risk assessment reports
to the EPA and is awaiting a response. Any additional investigative steps, such as sampling, would then be undertaken in 2003 and 2004 as phase two of the RFI. The final scope of corrective action
required to address any contamination that may be present at or emanating from the solid waste management units at the Warren facility, including the potential for remediation, is dependent upon the
completion and findings of the RFI and the development and approval of a corrective action program. Accordingly, the Company is unable at this time to estimate the final cost of the corrective action
program or the period over which such costs may be incurred and there can be no assurance that any such corrective action

55

---

program would not have a material adverse effect on the operating results or financial condition of the Company.

The
EPA issued a unilateral administrative order (Order) to the Company pursuant to Section 7003 of RCRA effective September 24, 2002. The Order asserts that the Company's
handling of solid waste in various impoundment areas presents an imminent and substantial endangerment to health or the environment by virtue of potential harm to wildlife, including migratory birds,
that may land on or enter the areas. The Order required the Company, among other things, to (i) take immediate measures to deter and discourage wildlife from landing on or entering the areas,
(ii) remove all oily wastes from the impoundments, and (iii) remove all remaining oily sludge from the banks and bottoms of the impoundments. RCRA provides for civil penalties of up to
$5,500 per day for noncompliance with the Order. In written comments, the Company raised several concerns and objected to both the issuance of the Order and its scope, including portions of the Order
calling for removal of all oily material from the impoundments. The Company also submitted a draft work plan to the EPA setting forth a number of activities that the Company considers reasonably
necessary to abate any alleged endangerment, and began implementing the draft work plan in the fall of 2002. In January 2003, the EPA approved portions of the draft work plan and disapproved
other portions. The EPA also issued an Amended Order, dated January 21, 2003. The Amended Order requires the Company to continue implementing its immediate deterrent measures. For impoundments
that are a required part of the Company's ongoing operations, the Amended Order requires the Company to either install a netting system over the impoundments or remove all oily material. For the
inactive areas, the Amended Order requires that all oily material be removed. The Company is currently evaluating the feasibility of the EPA's demands, including timing, and available options for
responding to the Amended Order.

In
addition, the Company received correspondence dated December 27, 2002 from the U.S. Attorney's office on behalf of the United States Fish & Wildlife Service alleging
that the Company has violated Section 703(a) of the Migratory Bird Treaty Act (a misdemeanor). The Company and its legal counsel met with the Assistant U.S. Attorney in February 2003 to
discuss possible resolutions for this matter, and those discussions are ongoing. The Company believes that it will resolve this matter in a manner that will not have a material adverse effect on the
Company's financial position or results of operations.

In
addition to the above-described matters, the Company is contingently liable with respect to lawsuits and other claims incidental to the ordinary course of its business. A liability
has been established for an amount, which the Company believes is adequate, based on information currently available, to cover the costs to resolve the above described matters, including remediation,
if any, except for any costs of corrective action that may result from the RFI for which no estimate can currently be made. The outcome of the above described matters could have a material adverse
effect on the future operating results of the Company in a particular quarter or annual period; however, the Company believes that the effect of such matters will not have a material adverse effect on
the Company's consolidated financial position.

The
Youngstown Sinter Company (YSC), a wholly owned subsidiary of WCI, idled its plant indefinitely effective July 15, 2001. YSC had been in operation since 1991 producing a
clinker-type material (Sinter) from steelmaking by-products such as slag and ore fines. The sinter was then used as a substitute feed stock in WCI's blast furnace facility
located in Warren, Ohio. WCI recorded a charge of $3.9 million
(included in Unusual charges) during the three months ended April 30, 2001 to reflect plant idling costs, of which $3.0 million represents the recognition of an impairment in the value
of the assets of the facility. The sinter plant may be restarted in the future if economically advantageous.

56

---

During
2000 and 2001 WCI attempted to acquire substantially all of Acme Steel Company's assets. WCI was unsuccessful in completing the acquisition due to Acme Steel's failure to meet
certain conditions in the letter of intent. This resulted in WCI recording a charge of $10.5 million during the quarter ended January 31, 2001 to write down the carrying value of Acme
Metals Senior Unsecured Notes owned by WCI (included in Interest and other income (expense), net) and a charge of $1.7 million, recorded during the quarter ended October 31, 2001, to
expense certain accumulated acquisition costs (included in Unusual Charges).

The
following is a summary of unaudited quarterly results for the years ended October 31, 2002 and 2001:

|                    |  | Three Months Ended 2002
|------------------- |  | -----------------------
|
|
|Net sales           |  | $                      
|Gross margin (loss) |  |                        
|Net income (loss)   |  |                        

|                    |  | Three Months Ended 2001 |        
|------------------- |  | ----------------------- | -------
|
|
|Net sales           |  | $                       | 98,191 
|Gross margin (loss) |  |                         | (3,849 
|Net income (loss)   |  |                         | (32,510

During
the three months ended April 30, 2002 the Company recorded a $1.6 million gain realized from the resolution of contract issues relating to the sale of a third party
owned coke plant adjacent to WCI's facility.

During
the three months ended January 31, 2001 the Company recorded a charge of $10,484,000 to write down the carrying value of Acme Metals 10.875% Senior Unsecured Notes owned by
WCI.

The
Company recorded a charge of $3,909,000 during the three months ended April 30, 2001 to reflect plant idling costs associated with the indefinite idling of YSC, of which
$2,982,000 represents the recognition of an impairment in the value of the assets of the facility.

During
the three months ended October 31, 2001, the Company recorded a charge of $1,695,000 to expense certain accumulated acquisition costs related to the Acme Steel acquisition
efforts.

During
the three months ended October 31, 2001 the Company recorded inventory valuation charges totaling $2,605,000.

57

---



INDEPENDENT AUDITORS' REPORT

To
the Shareholder and Board of Directors
WCI Steel, Inc. and Subsidiaries:

We
have audited the accompanying consolidated balance sheets of WCI Steel, Inc. and subsidiaries (a wholly owned subsidiary of Renco Steel Holdings, Inc.) as of
October 31, 2002 and 2001, and the related consolidated statements of operations, shareholder's equity (deficit), and cash flows for each of the years in the three-year period ended
October 31, 2002. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial
statements 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, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of WCI Steel, Inc. and subsidiaries as of
October 31, 2002 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended October 31, 2002, in conformity with
accounting principles generally accepted in the United States of America.

The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated
financial statements, the Company has suffered recurring losses from operations and negative cash flows that raise substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters
are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/S/
KPMG LLP

KPMG
LLP

Cleveland,
Ohio
December 3, 2002, except as to Note 5 which is as of March 6, 2003

58

---



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

None.

PART III

ITEM 10. DIRECTORS AND OFFICERS

The following table sets forth certain information regarding the directors and executive officers of Renco Steel:

|Name             |  | Age |  | Position                                     
|---------------- |  | --- |  | ---------------------------------------------
|Ira Leon Rennert |  | 68  |  | Chairman of the Board, President and Director
|Roger L. Fay     |  | 57  |  | Vice President and Chief Financial Officer   

Ira
Leon Rennert has been Chairman, Chief Executive Officer and principal shareholder of Renco Steel's parent company, Renco (including predecessors), since Renco's first acquisition in
1975, Chairman of Renco Steel since its inception, President since January 1, 2002 and Chairman of WCI since its formation in 1988. Renco holds controlling interests in a number of
manufacturing and mining concerns operating in businesses not competing with the Company, including US Magnesium LLC, AM General LLC and The Doe Run Resources Corporation (Doe Run). Mr. Rennert
serves as Chairman of the Board of Directors of Doe Run and Manager of AM General LLC. Mr. Rennert also serves as Chairman of the Board of Directors of Lodestar Holdings, Inc. in which
he indirectly holds a controlling interest, and Renco Metals, Inc. Renco Metals, Inc, (effective August 2, 2001) and Lodestar Holdings, Inc, (effective April 27, 2001) and their
respective subsidiaries are currently operating under Chapter 11 of the U.S. Bankruptcy Code.

Roger
L. Fay has been Vice President and Chief Financial Officer of Renco Steel since its inception and Vice PresidentFinance of Renco since 1983. Mr. Fay is a
certified public accountant.

Since
inception, Mr. Rennert has been the sole Director of Renco Steel.

The
sole director of Renco Steel serves at the pleasure of Renco Steel's sole shareholder, Renco, for an unspecified term. The executive officers of Renco Steel serve at the pleasure of
Renco Steel's sole director for an unspecified term.

59

---

Executive Officers of WCI

The
following sets forth the executive officers of WCI, who are not officers of Renco Steel and who are not involved in the management or day-to-day operations of
Renco Steel:

Edward
R. Caine has been President and Chief Executive Officer since April 1, 1996. Mr. Caine was a Director of WCI from April 1, 1996 through December 16,
1996. Prior to joining WCI, Mr. Caine had 37 years of experience in the steel industry with U.S. Steel, most recently as General Manager of U.S. Steel's Fairfield, Alabama integrated
steel operations from April 1991 to March 1996.

Patrick
G. Tatom has served as Executive Vice President and Chief Operating Officer since January 1, 2002 and as Executive Vice President from June 1999 through
December 2001, as Vice President, Commercial from November 1995 to May 1999, Vice President, Sales from February 1994 through October 1995, and General Manager of
Sales from September 1988 to February 1994.

David
A. Howard has served as Vice President, Commercial since June 1, 1999 and as Vice President, Sales from August 1998 through May 1999. Mr. Howard, who
has been with the company since its inception in 1988, has held various positions within the Company, including Marketing Manager, Regional Sales Manager and General Manager of Sales.

John
P. Jacunski has served as Vice President, Finance and Chief Financial Officer since November 1, 1999 and as Controller from May 1995 to October 1999. Prior to
joining WCI, Mr. Jacunski was a manager in an international accounting and consulting firm in various capacities from September 1988 through April 1995.

Brian
J. Mitchell has served as Vice President, Environmental and Engineering since June 1, 1999 and, prior to that, as General Superintendent of Primary Operations of WCI since
its inception. Mr. Mitchell retired from WCI effective January 31, 2003.

Since
December 16, 1996, Mr. Rennert has been the sole Director of WCI.

The
sole director of WCI serves at the pleasure of WCI's sole shareholder, Renco Steel Holdings, Inc., for an unspecified term. The executive officers of WCI serve at the pleasure
of WCI's sole director for an unspecified term.

ITEM 11. EXECUTIVE COMPENSATION

The executive officers of Renco Steel do not receive any compensation from Renco Steel or its subsidiaries. Renco receives a management consultant fee from WCI.
See "Item 13. Certain Relationships and Related Transactions."

The
executive officers of WCI do not receive any compensation from Renco Steel.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of March 12, 2003 regarding the beneficial ownership of Common Stock by each beneficial owner of 5%
or more of the Common Stock, each director and each named executive officer of Renco Steel during the last fiscal year, and by all directors and executive officers of Renco Steel as a group. Except as
otherwise noted, the persons named in the

60

---

table below have sole voting and investment power with respect to all shares shown as beneficially owned by them.

|                                                                                                  |  | Beneficial Ownership
as of March 12, 2003 | 
|------------------------------------------------------------------------------------------------- |  | ----------------------------------------- | 
|
|The Renco Group, Inc.
30 Rockefeller Plaza, Suite 4225
New York, NY 10112                         |  | 100                                       | 
|Ira Leon Rennert(1)
c/o The Renco Group, Inc.
30 Rockefeller Plaza, Suite 4225
New York, NY 10112 |  | 100                                       | 
|Roger L. Fay                                                                                      |  |                                          | 
|All directors and executive officers as a group (2 persons)                                       |  | 100                                       | 

---

By
virtue of Renco's ownership of all the outstanding shares of Common Stock of Renco Steel, and Mr. Rennert's ownership of the majority of the Common Stock of Renco,
Mr. Rennert is in position to control actions that require the consent of a majority of the holders of Renco Steel's outstanding shares of Common Stock, including the election of the Board of
Directors.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

As of the date hereof, Renco owns $103,770,000 face value of Renco Steel's Senior Secured Notes. Renco purchased the Senior Secured Notes in several unrelated
transactions beginning in late November 2000 and continues to seek available Senior Secured Notes to purchase. Renco is entitled to receive interest payments from Renco Steel in accordance with
the terms of the indenture governing the Senior Secured Notes, however, Renco has irrevocably waived its right to receive interest since February 1, 2001 on the Senior Secured Notes it owned
and also waived its right to the interest payment that was paid on February 1, 2003. In the years ended October 31, 2002 and 2001, respectively, Renco Steel recorded capital
contributions of $7.5 million and $4.8 million to reflect the Renco waiver. Such amounts were also recorded as interest expense in the Company's statement of operations for the years
ended October 31, 2002 and 2001.

Renco
Steel borrowed $6.2 million and $1.1 million from Renco in 2002 and 2001, respectively, under the terms of three separate promissory notes. Interest accrues monthly
at a rate of 8.75% per annum. At October 31, 2002 and 2001, $7.7 million and $1.1 million, respectively, was outstanding representing principal and accrued interest. The
obligation is payable upon Renco's demand and Renco's right to payment is contractually subordinated to the right of payment under the Senior Secured Notes.

Under
a Management Consultant Agreement, effective October 1, 1992, as amended, between Renco and WCI, WCI pays a monthly fee of $100,000 to Renco. The Management Consultant
Agreement provides that WCI shall not make any payment thereunder which would violate any of its agreements with respect to any of its outstanding indebtedness. The Management Consultant Agreement
extends to October 31, 2004 and thereafter shall continue for additional terms of three

61

---

years each unless sooner terminated by either party by giving six months prior written notice. In the year ended October 31, 2002, WCI incurred management fees in the amount of $1,200,000.

Under
the terms of a tax sharing agreement, between WCI and Renco Steel, income taxes are allocated to WCI on a separate return basis except that transactions for the purchase of goods
and services between WCI and its subsidiaries and Renco and its other subsidiaries are accounted for on a cash basis rather than on an accrual basis and WCI does not receive the benefit of net
operating tax loss carryforwards, unless such tax losses were generated by the net tax timing differences between WCI's financial reporting and tax return treatment in calculating the allocation of
income taxes. Renco Steel has agreed to indemnify WCI for any tax imposed on or paid by WCI in excess of the amount payable by WCI and its subsidiaries under the tax sharing agreement. On
January 15, 1999 Renco elected subchapter S tax treatment effective November 1, 1998. At the same time, Renco elected for Renco Steel and WCI to be treated as qualified subchapter S
subsidiaries (QSSS). While in this status, the activity within the tax sharing agreement will be applicable only to prior years audit adjustments and/or current and future year state filings where
QSSS is not recognized and multiple Renco subsidiaries operate.

During
2002 and in preceding years since its inception, Renco purchased certain insurance coverage for its subsidiaries, including the Company, and the actual cost of such insurance,
without markup, was reimbursed by the covered subsidiaries. The major areas of the Company's insurance coverage obtained under the Renco programs were property, business interruption, general, product
and auto liability, workers' compensation (other than Ohio for which WCI is self insured) and casualty umbrella. The premiums for director and officer, fidelity, fiduciary, property, business
interruption, and casualty umbrella were allocated by Renco substantially as indicated in the underlying policies. General and product liability, auto liability and workers' compensation coverage
(excluding the Ohio self-insured program) purchased by Renco were loss sensitive programs with both fixed and variable premium components. The fixed premium component for this coverage is
allocated to each insured Renco subsidiary based on factors that included historical guaranteed cost premiums, the overall growth of each subsidiary and an assessment of risk based on loss experience.
The fixed component is subject to revision resulting from the insurance carrier's audit of actual premium factors. As claims (the variable component) are paid, each insured within the loss sensitive
program is charged for its claims up to a maximum amount and subject to an overall maximum for all insured subsidiaries. Each insured Renco subsidiary has been assigned an individual maximum cost
based on historical guaranteed cost premiums. The overall and individual subsidiary maximums are subject to revision based on audit of actual premium factors. If an insured Renco subsidiary reaches
its individual maximum cost, the other insured subsidiaries are required to share proportionately in the excess cost of the subsidiary which has reached its individual maximum. The Company has not
been required to make any payments under this provision, since the inception of the program in 1994.

In
fiscal 2002, 2001 and 2000 WCI incurred costs of approximately $6.3 million, $2.3 million and $2.0 million, respectively, under the Renco insurance program. The
increase in 2002 was due mainly to severe capacity constraints and excessive price increases by both property insurers and reinsurers following the September 2001 terrorist attacks.

During
2002, WCI purchased approximately $0.7 million of zinc and other alloys from Doe Run Peru S.R. Ltd., an indirect subsidiary of Renco. WCI believes that such
purchases were on an arm's length basis at a price no less favorable than at which WCI could obtain from unaffiliated entities. Also during 2002, WCI sold approximately $40,000 of flat rolled steel
products on an arm's length basis to Unarco Material Handling, Inc., a direct subsidiary of Renco.

WCI
amended its revolving credit facility in March 2003. Simultaneous with the execution of the amendments to the revolving credit facility, Renco agreed to participate in this
facility by funding $15 million with such participation being subordinated in right of payment to that of the other lenders.

62

---

ITEM 14. DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS

Disclosure
Controls

Within
90 days before filing this report, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Our disclosure controls and
procedures are the controls and other procedures that we designed to ensure that information required to be disclosed in reports that we file or submit to the SEC is: (1) accumulated and
communicated to management, including our Chairman of the Board of Directors and Chief Financial Officer, to allow timely decisions regarding required disclosures and is (2) recorded,
processed, summarized and reported within the time periods specified in applicable law and regulations. Based on this evaluation, our Chairman of the Board of Directors and Chief Financial Officer
concluded that, as of the date of their evaluation, our disclosure controls and procedures were effective.

Internal
Controls

Since
the date of the evaluation described above, there have not been any significant changes in our internal accounting controls or in other factors that could significantly affect
those controls.

PART IV

ITEM 15. Exhibits, Financial Statement Schedule, and Reports on Form 8-K

(a)
Documents Filed as a Part of This Report.

1.
Consolidated Financial Statements.

The
consolidated financial statements listed below together with the reports thereon of the independent auditors dated January 17, 2003, except as to Note 5 which is as of
March 6, 2003 for the Company and December 3, 2002, except as to Note 5 which is as of March 6, 2003 for WCI.



63

---



2.
Financial Statement Schedule.



3.
Exhibits Required to be Filed by Item 601 of Regulation S-K.



(b)
Reports on Form 8-K.



64

---



INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE

To
the Shareholder and Board of Directors
Renco Steel Holdings, Inc. and Subsidiaries:

Under
date of January 17, 2003, except as to Note 5 which is as of March 6, 2003, we reported on the consolidated balance sheets of Renco Steel Holdings, Inc. and
subsidiaries as of October 31, 2002 and 2001, and the related consolidated statements of operations, shareholder's deficit, and cash flows for each of the years in the three-year
period ended October 31, 2002, which are contained as part of this report herein. In connection with our audits of the aforementioned consolidated financial statements, we also audited the
related financial statement schedule (Schedule IIValuation and Qualifying Accounts) also contained as part of this report herein. This financial statement schedule is the
responsibility of Renco Steel Holdings, Inc.'s management. Our responsibility is to express an opinion on the financial statement schedule based on our audits.

In
our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the
information set forth therein.

The
audit report on the consolidated financial statements of Renco Steel Holdings, Inc. and subsidiaries referred to above contains an explanatory paragraph that states that the Company's
recurring losses from operations and negative cash flows raise substantial doubt about the entity's ability to continue as a going concern. The financial statement schedule does not include any
adjustments that might result from the outcome of this uncertainty.

|                     |  | 
|-------------------- |  | 
|                     |  | 
|/S/ KPMG LLPKPMG LLP |  | 
|                     |  | 

Cleveland,
Ohio
January 17, 2003

65

---



RENCO STEEL HOLDINGS, INC. AND SUBSIDIARIES  SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS  ALLOWANCE FOR DOUBTFUL ACCOUNTS  FOR THE YEARS ENDED OCTOBER 31, 2002, 2001 AND 2000    
(DOLLARS IN THOUSANDS)

|                                     |  |   |       | ADDITIONS |       |  |   | 
|------------------------------------ |  | - | ----- | --------- | ----- |  | - | 
|
|ALLOWANCE FOR DOUBTFUL ACCOUNTS (a): |  |   |       |           |       |  |   | 
|Year ended October 31, 2002          |  | $ | 3,100 |           | 2,483 |  |  | 
|Year ended October 31, 2001          |  |   | 750   |           | 2,603 |  |  | 
|Year ended October 31, 2000          |  |   | 874   |           | 37    |  |  | 



---

66

---



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 on the 12th day of March, 2003.

| |  | RENCO STEEL HOLDINGS, INC.
| |  | --------------------------
| |  | By:                       
| |  |                           

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 the 12th
day of March, 2003.

|Signature                            |  | Title                                                                               
|------------------------------------ |  | ------------------------------------------------------------------------------------
|/s/ Ira Leon RennertIra Leon Rennert |  | Chairman of the Board, President and Director                                       
|/s/ Roger L. FayRoger L. Fay         |  | Vice President, Chief Financial Officer (principal financial and accounting officer)

Supplemental
Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act.

No
annual report to security holders covering the registrant's last fiscal year and no proxy statement, form of proxy or other proxy soliciting material with respect to any annual or other meeting of
security holders has been or will be sent to security holders.

67

---

CERTIFICATION

I,
Ira Leon Rennert, certify that:





Date:
March 12, 2003

/s/ Ira L. RennertIra L. Rennert
Chairman of the Board and
President


68

---

CERTIFICATION

I,
Roger L. Fay, certify that:





Date:
March 12, 2003

/s/ Roger L. FayRoger L. Fay
Vice President, Finance and
Chief Financial Officer


69

---



Exhibit Index

|EXHIBIT
NO. |  | DESCRIPTION
|----------- |  | -----------
|            |  |            
|3.1         |  |           
|3.2         |  |           
|4.1         |  |           
|4.3         |  |            
|10.1        |  |           
|10.1.1      |  |           
|10.1.2      |  |           
|10.1.3      |  |           
|10.1.4      |  |           
|10.1.5      |  |           

70

---

|EXHIBIT
NO. |  | DESCRIPTION
|----------- |  | -----------
|            |  |            
|10.1.6      |  |           
|10.1.7      |  |           
|10.1.8      |  |           
|10.1.9      |  |           
|10.2        |  |           
|10.2.9      |  |           
|10.2.10     |  |           
|10.2.11     |  |           
|10.2.13     |  |           
|10.2.14     |  |           
|10.2.15     |  |           
|10.2.16     |  |           
|10.2.17     |  |           

71

---

|EXHIBIT
NO. |  | DESCRIPTION
|----------- |  | -----------
|            |  |            
|10.3        |  |           
|10.4        |  |           
|10.5        |  |           
|10.8        |  |           
|21          |  |           
|99.1        |  |           
|99.2        |  |           

---



72

---

73

---

QuickLinks