<PAGE>   1
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                               UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

                                FORM  10-K

(Mark One)
/ X /     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934
          For the fiscal year ended October 31, 1998.
                                   or
/   /     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934
          For the transition period from           to                         
                              
                     Commission file number: 333-18019
                                             ---------
                              WCI STEEL, INC.         
         (Exact name of registrant as specified in its charter)

                OHIO                              34-1585405     
      (State of incorporation)        (I.R.S. Employer Identification No.)    
       
    1040 PINE AVE., S.E., WARREN, OHIO            44483-6528
  (Address of principal executive offices)        (Zip Code) 
                         
Registrant's telephone number, including area code: (330) 841-8314
             
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

          Title of each class      Name of exchange on which registered
          -------------------      ------------------------------------
                None

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

  None.
               
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the last 90 days.
                                                 / X /  Yes  /  / No
                                                                              
                    
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K.                      / X /

The aggregate market value of the voting stock of the registrant held by
non-affiliates of the registrant at December 11, 1998 was $0. 




<PAGE>   2

The number of shares of Common Stock (no par value, $.01 stated value) of the
registrant outstanding as of December 11, 1998 was 100.

DOCUMENTS INCORPORATED BY REFERENCE

  None.
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<PAGE>   3
                        WCI STEEL, INC. AND SUBSIDIARIES
                                   FORM 10-K 
                                     INDEX   
                        --------------------------------
                                                                   
                                                                   
PART I                                                              Page No.
------------------------------------------------------------------  -------- 

     Item  1.  Business                                                 4
     
     Item  2.  Properties                                              13  

     Item  3.  Legal Proceedings                                       13
          
     Item  4.  Submission of Matters to a Vote of Security Holders     13
PART II
------------------------------------------------------------------
     Item  5.  Market for Registrant's Common Equity and
               Related Stockholder Matters                             14
                                                                 
     Item  6.  Selected Financial Data                                 15
          
     Item  7.  Management's Discussion and Analysis of
               Financial Condition and Results of 
               Operations                                              17

     Item  8.  Financial Statements and Supplementary Data             24

     Item  9.  Changes in and disagreements with Accountants
               on Accounting and Financial Disclosure                  42
PART III
------------------------------------------------------------------
     Item 10.  Directors and Executive Officers of the Registrant      43
          
     Item 11.  Executive Compensation                                  44
          
     Item 12.  Security Ownership of Certain Beneficial Owners
               and Management                                          46
                                                                 
     Item 13.  Certain Relationships and Related Transactions          46
PART IV
------------------------------------------------------------------
     Item 14.  Exhibits, Financial Statement Schedule,
               and Reports on Form 8-K                                 48
                                                       
     Financial Statement Schedule
      (including  Independent Auditors Report on Financial
       Statement Schedule)                                             49
               
     Signatures                                                        51
     
     Exhibit Index                                                     52
<PAGE>
<PAGE>   4 
                                   PART I

ITEM 1.  BUSINESS

GENERAL

WCI Steel, Inc. (WCI or Company), a niche oriented integrated producer of
value-added, custom steel products, was incorporated in Ohio in 1988 and
commenced operations on September 1, 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 1,412,490 tons in fiscal 1998 (77,244 tons of which were
semi-finished) and 1,328,931 tons in fiscal 1997 (22,642 tons of which were
semi-finished).  Custom flat rolled products, which include high carbon,
alloy, high strength, silicon electrical and galvanized steel, constituted
approximately 62.4% of net tons shipped during fiscal 1998 (66.0% excluding
semi-finished steel shipments) and 67.6% during fiscal 1997 (68.8% excluding
semi-finished steel shipments).  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.  Shipping volume was adversely affected in the fourth
fiscal quarter of 1998 by a significant increase in imports of foreign
produced flat rolled steel which is continuing.  See "Competition" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

PRODUCTS

    OVERVIEW

WCI produces a wide range of custom flat rolled steel products, including
high carbon, alloy, high strength, silicon electrical and galvanized 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.  Export sales were approximately 2% of net
sales during the last three fiscal years.

<TABLE>
<CAPTION>

                             Net Tons Shipped               Percent of Total 

                             Fiscal Year Ended              Fiscal Year Ended
                                October 31,                    October 31, 
                         1998      1997      1996        1998      1997      1996
<S>                   <C>       <C>       <C>           <C>       <C>       <C>
Custom Products:
 Hot and Cold
  Rolled.............   502,149   481,740   426,945      35.5      36.2      30.5            
  Coated.............   379,045   416,854   382,352      26.9      31.4      27.4 
                        -------   -------   -------      ----      ----      ----
Total Custom Products   881,194   898,594   809,297      62.4      67.6      57.9
Total Commodity......   531,296   430,337   587,435      37.6      32.4      42.1
                        -------   -------   -------      ----      ----      ----
Total Steel 
 Products...........  1,412,490 1,328,931 1,396,732     100.0%    100.0%    100.0%
                      ========= ========= =========     =====     =====     =====

</TABLE>
<PAGE>   5 

    CUSTOM PRODUCTS

High Carbon, Alloy, High Strength---WCI has developed markets for 
high carbon, alloy and 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 width 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 market, WCI competes with several other domestic
integrated producers, as well as various steel producers in Canada, Europe
and Japan.  In the high strength market, WCI competes with several major
integrated producers and minimills.

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 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, the
Company's product also competes with cold rolled motor laminations produced
by several other integrated steelmakers which have been developed as a
substitute product for silicon steel in certain applications.

Galvanized---Galvanized steel is zinc-coated sheet steel produced on WCI's
hot dipped galvanizing line.  The market for galvanized sheet steel is
divided into two broad categories: heavy and light gauge steel.  Heavy gauge
galvanized steel, which is generally hot rolled based, is used in the
manufacture of electrical boxes, culvert coil and grain bins, as well as many
other end uses.    

WCI's galvanized finishing line is well suited to produce heavy gauge hot
rolled steel, and as a result, a majority of WCI's galvanized shipments are
in this sector.  WCI competes with several other integrated producers and
minimills, as well as independent producers in the heavy gauge galvanized
steel market.

COMMODITY PRODUCTS

In fiscal 1998, WCI shipped 531,296 tons in the aggregate of hot and cold
rolled low carbon, sheet and strip and low carbon semi-finished steel, which
represented approximately  37.6% of the Company's net tons shipped.  Hot
rolled low carbon sheet is sold to steel service centers or manufacturers 



<PAGE>   6

producing a broad array of products, including tubing, stampings and roll
formed parts.  Cold rolled 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 and several minimills.


MARKETING

WCI's marketing, sales and customer service functions are coordinated 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 300 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% of WCI
Sales' volume in fiscal 1998 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 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.

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







<PAGE>   7

CUSTOMERS

WCI's customer base is dominated by steel converters and steel service
centers, which in fiscal 1998 represented 72% 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.


<TABLE>
<CAPTION>

                                           Fiscal Year Ended
                                              October 31,
Customer Category                     1998       1997       1996

 <S>                                 <C>        <C>        <C>
 Conversion/further processing......  47.6%      42.5%      44.6%
 Steel service centers..............  24.4       23.3       24.0
 Construction.......................  12.1       15.8       11.5
 Electrical equipment...............   6.2        7.3        7.1
 Direct automotive..................   4.7        6.3        8.1
 Other..............................   5.0        4.8        4.7
                                     ------     ------     ------
   Total............................ 100.0%     100.0%     100.0%   
                                     ======     ======     ======
</TABLE>


In fiscal years 1998, 1997 and 1996, WCI's twenty largest customers
represented approximately 57%, 57% and 56%, respectively, of net sales.  
No customer accounted for as much as 10% of net sales in fiscal years 1998,
1997 or 1996.


BACKLOG

On October 31, 1998, WCI's order backlog was approximately 155,000 net tons
with an approximate value of $76 million compared to approximately 232,000
net tons with an approximate value of $116 million at October 31, 1997, based
in each case on the then current prices.  Under the applicable orders, WCI is
scheduled to ship substantially all of the orders in the October 31, 1998
backlog by February 28, 1999.  Although customers may cancel orders included
in the backlog, such cancellations have be negligible in the past.


COMPETITION

The domestic steel industry is highly competitive.  Despite significant
reductions in raw steel production capacity by major domestic producers in
the 1980s, the domestic industry continues to be adversely affected by excess
world capacity.

In the United States, WCI competes with many other domestic steel companies. 
WCI also faces increasing competitive pressures from minimills.  Minimills
are generally smaller volume steel producers that use ferrous scrap metals as
their basic raw material.  Compared to integrated producers, minimills, which
rely on less capital intensive hot metal sources, have certain advantages. 
Because minimills typically are not unionized, they have more flexible work
rules which have resulted in lower employment costs per net ton shipped. 


<PAGE>   8

Since 1989, significant flat rolled minimill capacity has been constructed
and these minimills now compete with integrated producers in product areas
that traditionally had not faced significant competition from minimills.   
These minimills compete with the Company primarily in the commodity flat
rolled steel market and more recently in certain custom flat rolled steel
markets.  In addition, the increased competition in commodity product markets
has resulted in certain integrated producers increasing product offerings to
compete with the Company's custom products.  This increased competition has
also increased the price volatility of certain of the Company's custom
products.

During 1998, the domestic steel market continued to experience significant
increases in imports of foreign produced flat rolled steel.  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 the third calendar quarter of 1998, there
was an unprecedented increase in imports of flat rolled steel from Russia,
Asia, particularly Japan and Korea, and Brazil.  This caused significant
price decreases in the domestic steel market.  The increase in imported
product offerings has adversely affected the supply-demand balance and
resulted in a significant reduction in production levels, shipping volume and
prices for domestic producers.  Certain domestic steel producers filed unfair
trade cases with the U.S. International Trade Commission in September 1998
claiming that hot rolled steel was being illegally exported to the United
States from Japan, Russia and Brazil at prices below the producers' cost. 
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."

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,
sinter 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.

RAW MATERIALS

WCI's steelmaking operations are dependent on reliable supplies of various
raw materials, principally iron ore pellets, coke and energy.  WCI believes

<PAGE>   9

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 fiscal 1999.  Iron ore pellets satisfied approximately  
73% of WCI's iron ore requirements in fiscal 1998, while WCI's sinter plant
provided the balance. The iron ore pellet contract requires WCI to purchase
all of its iron ore pellet requirements for 1999 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 liquid iron and is an essential
ingredient in steelmaking.  WCI has contracts with two integrated steel
producers for its estimated coke requirements through fiscal 1999.  WCI's
coke requirements are approximately 600,000 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. 
As the Company does not own a coke battery, it is dependent upon commercially
available domestic or imported coke to sustain its operations.  Although the 
Company believes that there will be adequate supplies of domestic or imported
coke available for its purposes after the expiration of its contracts in
1999, there can be no assurance to such effect. 


     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 to 2002 from a local utility.   
WCI can generate approximately 20% of its own electrical needs.  Natural gas
is also purchased pursuant to a supply contract that extends to 2000.  Oxygen
is delivered, under a contract that extends to 2002, from supplier-owned
plants located at the Warren facility.  Pursuant to a contract entered into
in 1988, WCI is required to purchase all coke oven gas produced at an
adjoining coke plant, which is usable by WCI, at a price based upon, but at a
discount to, natural gas prices.


ENVIRONMENTAL MATTERS

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 disposal.  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 have changed rapidly in recent years, and the Company may 
be subject to more stringent environmental laws and regulations in the    
future.  During 1998 the Environmental Protection Agency (EPA) adopted        
new standards regulating particulate matter and ozone emissions.  Data        
relating to these standards is to be collected and analyzed with              
<PAGE> 10

implementation as early as 2004.  Like much of the steel, utilities and       
other industries, the Company's current operations are not expected to
comply with these standards if implemented as currently adopted.  The
Company cannot currently assess the impact of these standards on its
results of operations or financial condition.  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 defendant in three civil actions instituted by the             
Department of Justice, on behalf of the EPA, in the United States             
District Court for the Northern District of Ohio.  The first action,          
instituted on June 29, 1995, under the Clean Water Act, alleges numerous      
violations of the Company's National Pollution Discharge Elimination          
System (NPDES) permit alleged to have occurred during the years 1989 through
1996.  The second action, instituted on March 29, 1996, under the Clean Air
Act, alleges violations by the Company of the work practice, inspection and
notice requirements for demolition and renovation of the National             
Emission Standard for Hazardous Air Pollutants for Asbestos and also          
violations of the particulate standard and the opacity limits applicable      
to the Company's facilities in Warren, Ohio.  The third action,               
instituted on May 11, 1998, under the Resource Conservation and Recovery      
Act of 1976, as amended (RCRA), alleges violations of RCRA, the Ohio          
Administrative Code (OAC) and the Company's hazardous waste management        
permit issued pursuant to RCRA and OAC related to the Company's               
management of hazardous waste in surface impoundments at the Warren, Ohio     
facility.  The action alleges that from September 1988 to the present the     
Company operated hazardous waste management units at the Warren facility      
without the proper permits pursuant to RCRA.  Each action seeks a civil       
penalty of not more than the statutory maximum of $25,000 per day per         
violation ($27,500 per day per violation for violations since January 30,     
1997 in the case of the RCRA action) and also an injunction against           
continuing violations.  In addition, on December 17, 1997, the Company
received a compliance order from the EPA alleging certain violations of the
Company's NPDES permit, including exceedances of permit limits for pH and oil
and grease and failure to identify and sample for residual chlorine.  The
Company believes that imposition of the statutory maximum penalties for the
alleged violations is unlikely based upon past judicial penalties imposed
under the Acts and that it has defenses to liability.  The Company has been
attempting to negotiate consent decrees with the EPA to settle the Clean
Water Act and Clean Air Act actions and the compliance order dated December
17, 1997.  A trial for the RCRA action has been scheduled for June 1999.  If
the Company is unable to reach a negotiated settlement of these actions, and
if a substantial penalty similar to the statutory maximum penalty were
imposed, it would have a material adverse effect on the operating results and
financial condition of the Company.

As a condition of a previous operating permit issued under RCRA, the Company
will be required to undertake a corrective action program with respect to     
historical material handling practices at the Warren facility.  The           
Company is currently undertaking the first investigation step of the          
corrective action program, the RCRA Facility Investigation (RFI), which       
is expected to be completed in 1999.  The RFI workplan identifies             
thirteen historical solid waste management units which are the subject of     
the RFI, including areas of the facility which are the subject of the         
RCRA civil action filed on May 11, 1998 described above.  The final scope     
of the corrective action required to remediate or reclaim any                 
contamination that may be present at or emanating from the Warren             
<PAGE>   11

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

WCI received from the EPA a formal request dated April 1, 1994 for
information pursuant to Section 3007 of RCRA and Section 104(e) of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended (CERCLA).  The request required WCI to submit information relating
to the generation, storage, treatment and disposal of solid or hazardous
wastes or hazardous substances at the Warren facility.  The request also
required WCI to submit certain financial information and other information
needed to evaluate the facility's compliance with the RCRA and CERCLA
requirements.  The Company made the requested information available to the
EPA during 1994 and the EPA examined the information in March 1997.  The
request did not identify violations, seek to impose penalties or monetary
sanctions or require the performance of remedial activities or other capital
expenditures.  Among other items, the request sought information about a
specific area at which waste management occurred at the Warren facility under
a prior owner.  This area was remediated by the prior owner before the
facility was sold to WCI, and the area is also scheduled to be investigated
under the corrective action RFI.  Under EPA guidance, the area will not be
addressed under CERCLA when it is included in the corrective action process. 
Because of the past remediation of the area by a prior owner and the
inclusion of the area in the corrective action process, WCI believes that the
area would not be regarded as a priority risk under CERCLA.

The Company operates a landfill at its Warren facility which receives waste
materials from the iron and steel-making operations.  The Ohio EPA has issued
a permit to install a new lined landfill to replace this landfill.  The plan
involves closure by removal of the present landfill by selling approximately
one-third of its contents to established markets for construction materials
and recycling most of the remaining contents over an extended period at the
sinter plant in Youngstown, Ohio operated by the Company's subsidiary,
Youngstown Sinter Company, and disposing of any non-salable or non-recyclable
material in the new lined landfill.  Youngstown Sinter Company is presently
exploring modifications to sulfur dioxide emission regulations applicable to
the sinter plant to enable it to comply with applicable sulfur dioxide
emission levels, as well as allow faster recycling of the present landfill
contents.  The Company does not believe that the sinter plant's noncompliance
will result in any material expenditures.  The new lined landfill
construction and existing landfill closure, if pursued, is expected to be
completed in seven consecutive phases.  The estimated cost through Phase I is
approximately $2.7 million to $3.7 million expended over three years and the
estimated cost for Phase II is approximately $1.5 million expended over six
years. Construction is expected to begin during fiscal 1999.

EMPLOYEES

As of October 31, 1998, WCI had 542 salaried employees and 1,633 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 four-year collective bargaining agreement
that expires September 1, 1999.  

<PAGE>   12

BENEFIT PLANS


     Hourly Profit Sharing Plan

Certain hourly employees represented by the USWA participate in a profit
sharing plan under which the Company pays 12% of pretax income as defined in
the profit sharing agreement.  The Company 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 defined contribution retirement plans that cover substantially all
employees.  WCI funds contributions to these plans as earned on a monthly
basis.  Company contributions to the plans are based on employee age, length
of service and compensation.

The Company 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 the Company's defined contribution plan and
benefits from a predecessor company's defined benefit pension plan, will
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 will receive upon retirement a monthly benefit equal to $35
times the number of years of service with WCI or its predecessors.  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 Health Care Plans

WCI provides postretirement health care benefits to employees who retire
while meeting certain age and service eligibility requirements.  The Company
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 the Company and one of its
subsidiaries to secure the Company's obligation for postretirement health
care benefits.  Minimum Company contributions are $.50 per hour worked or a
minimum of approximately $1.5 million per year.  








<PAGE>   13

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 and terne coating lines and other finishing facilities. 
The blast furnace was relined during 1995 as part of its planned maintenance,
a procedure which is performed on a routine basis every six to eight years. 

Youngstown Sinter Company, a subsidiary of the Company, owns and operates a
sinter plant located in Youngstown, Ohio on 51 acres.  The sinter plant
converts plant waste dusts and iron ore into resources useable in the blast
furnace, reducing WCI's iron ore pellet feed requirements by approximately
27% in fiscal 1998.

Niles Properties, Inc., a subsidiary of the Company, is located approximately
five miles from the Warren facility, and has approximately 525,000 square
feet of building space with five long-term tenants occupying 70% of the
facility.  WCI is continuing to seek other appropriate tenants.

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

See Note 4 to the Consolidated Financial Statements, Part II, Item 8, for a
description of liens related to the Company's property, plant and equipment.

ITEM 3.  LEGAL PROCEEDINGS

On January 23, 1996, two retired employees instituted an action against the
Company and the USWA in the United States District Court for the Northern
District of Ohio alleging in substance that certain distributions made by the
Company to employees and benefit plans violated certain agreements, the
Employee Retirement Income Security Act, the National Labor Relations
Act and common law.  On July 31, 1997 the court granted the Company's motion
to dismiss this action and entered judgement in favor of the Company and the
USWA.  The plaintiffs have filed an appeal regarding the court's decision to
dismiss. The appellate court heard the plaintiff's appeal in June 1998 and
has not rendered a decision.
       
On April 5, 1996, an employee instituted an action for damages against WCI in
the Court of Common Pleas, Trumbull County, Ohio, alleging that, under Ohio
law, her privacy rights were violated and that she was subjected to sexual
harassment.  The case went to trial on August 24, 1998 and the judge directed
a verdict in favor of the Company.  The plaintiff has filed an appeal
regarding the directed verdict.

In addition, the Company is involved in various claims and lawsuits
incidental to the ordinary course of business.

For a description of pending litigation related to environmental matters, see
"Item 1.  Business-Environmental Matters."

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, 1998.


<PAGE>   14

                                 PART II



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

The Company is a direct wholly-owned subsidiary of Renco Steel Holdings, Inc.
(Renco Steel).  There is no established public trading market for the
Company's common stock.  Since December 1996, the Company has had one
shareholder.  The Company paid cash dividends three times during fiscal 1997
aggregating $118,000,000 and four times during fiscal 1998 aggregating
$14,100,000.  See Note 4 to the Consolidated Financial Statements, Part II,
Item 8 for limitations on dividends.













































<PAGE>   15


ITEM 6.  SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>

                                            Fiscal Year Ended October 31, 
                                   1994(1)    1995(2)    1996(3)    1997(4)      1998
                                (Dollars and tons in thousands, except per ton amounts)
<S>                              <C>        <C>         <C>        <C>        <C>
Statement of Income Data:
 Net Sales.....................  $709,363   $630,990    $660,801   $668,470   $665,741
 Cost of products sold.........   574,610    544,789     550,609    547,545    560,951
                                 --------   --------    --------   --------   --------
 Gross margin..................   134,753     86,201     110,192    120,925    104,790
 Depreciation and amortization.    19,868     21,178      22,547     23,174     25,240
 Selling, general and
  administrative expenses......    34,889     19,675      22,074     29,355     17,343
                                 --------   --------    --------   --------   --------
 Operating income..............    79,996     45,348      65,571     68,396     62,207
 Interest expense..............    28,709     25,787      24,968     31,690     32,057
 Interest and other income.....     1,505      6,212       6,545      1,239      2,308
                                 --------   --------    --------   --------   --------
 Income before income taxes,
  extraordinary losses on
  early retirement of debt
  and cumulative effect of
  change in accounting
  principle....................    52,792     25,773      47,148     37,945     32,458
 Income taxes..................    21,939     10,313      19,108     14,482     12,365
                                 --------   --------    --------   --------   --------
 Income before extraordinary
  losses on early retirement
  of debt and cumulative effect
  of change in accounting 
  principle....................  $ 30,853   $ 15,460    $ 28,040   $ 23,463   $ 20,093
                                 ========   ========    ========   ========   ========
Other Operating Data:
 Net tons shipped..............     1,468      1,222       1,397      1,329      1,412
 Percent custom products.......      56.9%      59.4%       57.9%      67.6%      62.4%
 Average selling price per net
  ton shipped..................  $    483   $    516    $    473   $    503   $    471
 Average cost per net ton
  shipped......................       391        446         394        412        397 
 Average gross margin per
  net ton shipped..............        92         71          79         91         74 
 Average operating income per
  net ton shipped..............        54         37          47         51         44

Balance Sheet Data:
 Cash, cash equivalents and
  short-term investments.......    71,426    106,548     139,541     18,989     62,195
 Working capital (excluding
  cash, cash equivalents and
  short-term investments)......    69,193     61,881      42,093     66,913     45,645
 Property, plant and equipment,
  net..........................   196,212    189,733     205,121    224,620    217,624
 Total assets..................   481,596    519,159     567,453    470,751    460,286
 Total debt (including current
  portion).....................   216,108    213,854     211,506    302,937    301,618
 Shareholder's equity (deficit)    43,877     59,495      79,880    (90,866)   (84,873)

<FN>
------------------------
  (1)  Fiscal 1994 Statement of Income reflects $11.1 million of compensation expenses
       related to the Company's initial public offering and the offering of the 10.5% 
       senior notes.



<PAGE>   16

  (2)  Fiscal 1995 results were adversely impacted by a 54 day labor contract dispute and
       resulting work stoppage commencing September 1, 1995 and a 36 day blast furnace
       reline commencing on April 1, 1995.

  (3)  The Company's custom product mix and the results for fiscal 1996 were adversely
       impacted by a 54 day labor contract dispute and resulting work stoppage which was
       concluded on October 24, 1995.

  (4)  Fiscal 1997 statement of income reflects $8.6 million of compensation expenses  
       related to the debt refinancing and equity redemption transactions effected in        
       November 1997.

</FN>
</TABLE>
















































<PAGE>   17

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.

Throughout 1998, the United States has experienced an increase in imports of
steel products.  In the third calendar quarter of 1998, steel imports reached
record levels and reflected an increase of 56% over the comparable period of
1997.  On September 30, 1998, several domestic producers filed unfair trade
cases against Japan, Russia and Brazil seeking anti-dumping duties on hot
rolled steel imports.  On November 13, 1998, the International Trade
Commission (ITC) made a preliminary ruling that hot rolled steel 
imports from Japan, Russia and Brazil have caused injury to the domestic
steel industry.  On November 23, 1998, the Commerce Department made an
affirmative finding of critical circumstances with respect to imports of hot
rolled steel from Russia and Japan, which, if subsequently upheld by the ITC,
will require that duties imposed on imports of hot rolled steel from these
countries be retroactive 90 days from the ITC's final rulings, or about mid-
November 1998.

This unprecedented surge in imports has created a supply imbalance in the
domestic steel market and has resulted in significantly lower order intake
rates, production levels, shipping volumes and selling prices for domestic
producers, including WCI.  The effects of these circumstances are reflected,
in part, in WCI's operating results for its fourth fiscal quarter of 1998,
including lower shipping volume and transaction prices discussed more fully
below.  As of October 31, 1998, the Company has experienced a significant
decline in order backlog, is experiencing erosion in transaction prices for
its forward order book and has, therefore, reduced its production levels
throughout its operations.  Management has taken steps to reduce the costs of
the Company's operations and has continued to maintain low levels of steel
inventory in concert with its forward order book.  However, these steps will
not fully mitigate the effects of the current circumstances.  Accordingly,
management expects that production levels and shipping volume will be
significantly lower during the first fiscal quarter of 1999 and perhaps
subsequent quarters if the present supply imbalance does not improve. 
Moreover, management anticipates that sales prices will be lower throughout
1999 compared to 1998.  As a result of these conditions, management expects
that the Company will incur a net loss in its first fiscal quarter of 1999. 
Management believes that it has sufficient liquidity to support its
operations for the foreseeable future.

RESULTS OF OPERATIONS

Fiscal 1998 Compared to Fiscal 1997

Net sales in 1998 were $665.7 million on 1,412,490 tons shipped, representing
a 0.4% decrease in net sales and a 6.3% increase in tons shipped compared to
1997.  Shipping volume increased in 1998 due to the shipment of 77,244 tons
of lower value added semi-finished steel compared with 22,642 tons in 1997. 
Shipments during the fourth quarter of 1998 were 308,284 tons compared to
341,020 tons in the comparable period in 1997.  Shipments during the fourth
quarter of 1998 were adversely affected by the recent surge in the amount of
flat roll steel exported to the United States, as addressed above.  Excluding
semi-finished steel, net sales per ton shipped decreased 4.7% to $483 in 1998
compared to $507 for 1997, primarily as a result of lower selling prices and,
to a lesser extent, changes in product mix.  Excluding semi-finished steel,

<PAGE>   18

custom carbon, alloy and electrical steel accounted for 66.0% of shipments in
1998 compared to 68.8% in 1997.

Gross margin (sales less cost of goods sold) was $104.8 million in 1998
compared to $120.9 million in 1997.  The decrease in gross margin is
primarily attributable to the lower selling prices discussed above offset
somewhat by lower production costs, a LIFO inventory benefit and lower
variable compensation expense in 1998.

Operating income was $62.2 million, $44 per ton, for 1998 compared to $68.4
million, $51 per ton for 1997.  The operating results for 1997 include $8.6
million of compensation charges related to the debt refinancing and equity 
redemption transactions effected in November 1997.  Excluding the charges 
incurred as a result of these transactions, operating income was $77.0
million during 1997 or $58 per ton shipped.  The decrease in operating income
in 1998 reflects the lower gross margin discussed above and higher
depreciation charges as a result of the hot strip mill upgrade substantially
completed in late 1997, offset by a decrease in selling, general and
administrative expenses in 1998 as a result of lower variable compensation
and legal expenses.

As a result of the items discussed above, income before extraordinary items
was $20.1 million in 1998 compared to $23.5 million in 1997.  During 1997 the
Company recognized an extraordinary loss of $19.6 million, net of income
taxes, on the early retirement of $206.1 million principal amount of Senior
Notes.  As a result, the Company had net income of $3.9 million for 1997.

Fiscal 1997 Compared to Fiscal 1996

Net sales in 1997 were $668.5 million on 1,328,931 tons shipped, representing
a 1.2% increase in net sales and a 4.9% decrease in tons shipped compared to 
1996.  The upgrade of the hot strip mill, substantially completed during
1997, required several equipment outages and resulted in lower shipping
volume during the second and third quarters of 1997.  Net sales per ton
shipped increased 6.3% to $503 compared to $473 for 1996.  This increase is
primarily the result of changes in product mix with shipments of custom
carbon, alloy and electrical steels accounting for 67.6% in 1997 and 57.9% in
1996 and, to a lesser extent, increases in product selling prices.  The
Company's custom product mix in 1996 was adversely effected by a 54 day labor
contract dispute and resulting  work stoppage which was concluded on October
24, 1995.  In addition, shipments during 1997 and 1996 included 22,642 tons
and 45,904 tons, respectively, of lower value added semi-finished steel.  

Gross margin (net sales less cost of goods sold) was $120.9 million in 1997
compared to $110.2 million in 1996.  The increase in gross margin reflects
the increase in selling prices and improvement in product mix offset somewhat
by higher LIFO inventory charges and lower shipping volume in 1997.  

Operating income was $68.4 million, $51 per ton shipped, for 1997 compared to
$65.6 million, $47 per ton shipped, for 1996.  The operating results for 1997
reflect the increase in gross margin discussed above offset by $8.6 million
of compensation charges related to the debt refinancing and equity redemption
transactions effected in November 1997. Excluding the charges incurred as a
result of these transactions, operating income was $77.0 million during 1997
or $58 per ton shipped.




<PAGE>   19

Interest expense increased to $31.7 million in 1997 compared to $25.0 million 
in 1996 as a result of the issuance of $300 million 10% Senior Secured Notes 
(Senior Secured Notes) and the retirement of $206.1 million principal` amount
of 10.5% Senior Notes (Senior Notes) on November 27, 1996.  Interest income 
decreased to $1.1 million in 1997 compared to $6.2 million in 1996 as a
result of lower cash, cash equivalent and short-term investments in 1997 due
to the debt refinancing and equity redemption transactions.

As a result of the items discussed above, income before the extraordinary
loss was $23.5 million in 1997 compared to $28.0 million in 1996.  During
1997, the Company recognized an extraordinary loss of $19.6 million, net of
income taxes, on the early retirement of $206.1 million principal amount of
Senior Notes.  As a result, the Company had net income of $3.9 million in
1997.

LIQUIDITY AND CAPITAL RESOURCES

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
has met these requirements in each fiscal year since 1992 from cash balances
and cash provided by operating activities.  The Company's primary sources of
liquidity as of October 31, 1998 consisted of cash and cash equivalents of  
$62.2 million and available borrowing under its $100 million revolving credit
agreement (Revolver).

The Revolver has a maximum borrowing limit of $100 million, is secured by
eligible inventories and receivables, as defined therein, and expires on 
December 29, 1999.  As of October 31, 1998, WCI had no borrowings outstanding 
under the Revolver, with a borrowing limit of $88.9 million based on eligible
inventories and receivables, net of $6.6 million in outstanding letters of
credit.

  Cash from Operations

Cash provided by operating activities was $74.1 million for 1998 compared to
$39.6 million and $78.0 million for 1997 and 1996, respectively.  The
increase in operating cash flow in 1998 compared to 1997 resulted primarily
from working capital changes including a reduction in steel inventory of
$23.9 million. 

As of October 31, 1998, at pricing then in effect, WCI had commitments under 
raw material supply contracts of approximately $51.3 million for 1999 and 
$2.6 million thereafter.

  Capital Expenditures

Capital expenditures were $15.6 million, $39.9 million and $35.4 million
during 1998, 1997 and 1996, respectively.  Subject to market and business
conditions, capital expenditures are expected to range between $20 million
and  $30 million in 1999.  The higher level of capital investment in 1997 and
1996 reflects expenditures on an upgrade of the Company's hot strip mill and
the  installation of a new hydrogen anneal facility. Management has funded
the Company's capital expenditures in 1998, 1997 and 1996 through cash
balances and cash provided by operating activities.  At October 31, 1998, the
Company had commitments for capital expenditures of approximately $2.1
million.


<PAGE>   20

  Debt Transactions

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.  Renco Steel intends to meet its debt service
obligations from its cash balances and earnings thereon and through
distributions from the Company, including payments pursuant to a tax sharing
agreement and dividends as permitted under the Company's outstanding
indebtedness.

The Revolver and the indenture governing the Senior Secured Notes contain
numerous covenants and prohibitions that limit the financial activities of
the Company, including requirements that the Company satisfy certain
financial ratios and limitations on the incurrence of additional
indebtedness.  The ability of the Company to meet its debt service
requirements and to comply with such covenants will be dependent upon future 
operating performance and financial results of the Company, which will be
subject to financial, economic, political, competitive and other factors
affecting the Company, many of which are beyond its control.

  Dividends

During 1998, the Company paid dividends of $14.1 million and expects that
further dividends will be declared and paid up to the amount permitted under
the Senior Secured Notes indenture.  As of October 31, 1998, $0.2 million was
available for dividends under the Senior Secured Notes indenture.

  Postretirement Benefit Plans

The Company provides postretirement health care and life insurance benefits
to substantially all employees who retire from the Company upon meeting
certain age and length of service eligibility requirements.  Under terms of
the Company's labor contract, the Company is required to pay current claims
and to contribute $.50 per hour worked by certain hourly employees, or a
minimum of $1.5 million annually to a trust established to fund future
benefits.  Claims paid by the Company totaled $3.1 million, $2.4 million and
$1.7 million during 1998, 1997 and 1996, respectively.  

The Company has a defined benefit pension plan which covers substantially all
bargained for employees.  The Company contributed $3.1 million to the plan
during 1998 and made minimal contributions to the plan during 1997. The
Company intends to contribute approximately $1.6 million per quarter to the
plan during 1999 and 2000 which is expected to satisfy the minimum funding
requirements of ERISA for those periods.

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 $0.5
million, $0.8 million and $0.3 million in 1998, 1997 and 1996, respectively. 
Future environmental capital expenditures may be dependent in part upon the





PAGE>   21

outcome of certain pending environmental matters.  Operating costs for
control and monitoring equipment, excluding depreciation and amortization
expense, were $9.6 million, $10.8 million and $9.6 million for 1998, 1997 and
1996, respectively.  Operating costs for fiscal 1999 for control and
monitoring equipment are not expected to increase significantly from the
prior periods.

Environmental laws and regulations have changed rapidly in recent years, 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.  During 1998, the EPA adopted new standards
regulating particulate matter and ozone emissions.  Data relating to these
standards is to be collected and analyzed with implementation scheduled for
2004.  Like much of the steel, utilities and other industries, WCI's current
operations are not expected to comply with these standards if implemented as
currently adopted.  WCI cannot currently assess the impact of these standards
on its results of operations or financial condition.  In addition, the EPA
has asserted certain alleged environmental violations against the Company
which are described in Note 12 to the Consolidated Financial Statements.

Year 2000 Business Matters

Many information and process control systems used in the current business
environment were designed to use only two digits in the date field and thus
may not function properly in the year 2000.  Over the past several years, the
Company has been assessing and modifying its business systems to be year 2000
ready and has completed in excess of 95% of the required program changes and
has completed, or has nearly completed, the replacement/upgrading of
purchased systems.  The Company is testing each individual application for
year 2000 readiness and has completed testing of approximately 50% of the
applications and, after completing additional remediation on approximately 5%
of the programs tested, has found them to be year 2000 ready.  The Company is
developing a comprehensive enterprise-wide testing plan for its business
systems.  The initial test is scheduled for April 1999 and further
remediation may be required after this test.  The Company has a second
enterprise-wide test scheduled for July 1999, if necessary.  The Company has
completed an inventory of its process control environment including
automation, instrumentation and components with embedded chips.  An
assessment has been completed on approximately 90% of the inventory, with
approximately 87% of the assessed inventory being year 2000 ready.  The
Company expects to complete the assessment, remediation and testing of the
process control systems and components by May 1999.  The Company is planning
an enterprise-wide test for process control in mid-1999.  The Company does
not expect year 2000 issues related to its business systems or process
control environment to cause any significant disruption to operations.  Based
on information available at this time, the Company estimates that the
incremental costs associated with achieving year 2000 readiness will be
approximately $2 million in 1999 and are expected to be incurred primarily in
the first two quarters of the year.

In conjunction with its efforts to achieve year 2000 readiness, the Company
is also monitoring the status of the year 2000 readiness programs at its
significant suppliers and business partners through questionnaires which were
sent to each such entity.  The Company has received responses from 
approximately 75% of these entities.  The Company is evaluating these
responses and intends to follow-up with each entity during 1999 to monitor 

<PAGE>   22

the status of its year 2000 readiness efforts.  The Company will use
information learned from this process in developing its contingency plans to
mitigate the effect of suppliers that will not be year 2000 ready on a timely
basis.

While the Company is developing contingency plans for the sourcing and
transportation of raw material components critical to its operations, the
Company is presently dependent on a single source for certain of its energy,
raw materials and transportation needs.  If certain vendors are unable to
supply the energy, raw materials or transportation services on a timely basis
in the year 2000, it could result in the Company being unable to operate or
require the Company to operate at a reduced level.  In addition, the lack of
accurate and timely year 2000 information from suppliers of automation and
process control systems and components or suppliers' inability to provide
year 2000 ready replacement components could result in the Company being
unable to operate, or require the Company to operate at a reduced level, in
the year 2000.

Labor Matters

At October 31, 1998, the Company had 1,633 hourly employees, most of which
are represented by the USWA, with which the Company has a four-year
collective bargaining agreement that expires September 1, 1999.  While the
Company does not expect any disruption to its operations as a result of the
expiration of the current agreement, the Company has experienced such
disruptions in the past and no assurance can be given that there will not be
a disruption to operations at the expiration of this agreement.  The Company
is unable to estimate the effect on its results of operations that a new
labor agreement may have.

Accounting Standards

In March 1998, the American Institute of Certified Public Accounts issued its
Statement of Position No. 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1").  SOP 98-1
provides guidelines for companies to capitalize or expense costs incurred to
develop or obtain internal-use software.  The Company will adopt SOP 98-1
effective November 1, 1999.  The incremental impact on results of operations
of adoption of SOP 98-1 has not been determined, although it is likely that
it will be initially favorable since certain qualifying costs will be
capitalized and amortized over future periods.    

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities."  This new standard requires recognition of all
derivatives as either assets or liabilities at fair value.  The Company does
not believe adoption of the standard will have a material effect on either
financial position or results of operations.  The Company plans to adopt the
standard effective November 1, 1999, as required.

Forward-Looking Statements

This report includes "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 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

<PAGE>   23

other important factors include, among others:  general economic and business
conditions; increasing industry capacity and levels of imports of steel or
steel products; industry trends, including product pricing; competition; 
currency fluctuations; the loss of any significant customer; availability of
qualified personnel; effects of future collective bargaining agreements;
major equipment failures; unanticipated problems encountered in the year 2000
readiness program; and availability of replacement equipment to achieve year
2000 readiness.  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.
<PAGE>
<PAGE>   24

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
                       WCI STEEL, INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                 ( Dollars in thousands, except per share amount )
                                                           October 31,
                                                    ------------------------
                                                       1998          1997
                                                    ---------      ---------
<S>                                                 <C>            <C>
ASSETS
Current assets
  Cash and cash equivalents.........................$  62,195      $  18,989             
  Accounts receivable, less allowances for doubtful          
    accounts of $904 and $1,627, respectively.......   48,724         65,202         
  Inventories.......................................   87,140        106,293 
  Recoverable income taxes..........................        -          4,273   
  Deferred income taxes.............................    8,610          8,188
  Prepaid expenses..................................    1,144          1,640     
                                                    ---------      ---------
       Total current assets.........................  207,813        204,585     
Property, plant and equipment, net..................  217,624        224,620        
Other assets, net...................................   34,849         41,546    
                                                    ---------      ---------
            Total assets............................$ 460,286      $ 470,751      
                                                    =========      =========
LIABILITIES and SHAREHOLDER'S EQUITY
Current liabilities
  Current portion of long-term debt.................$     116      $   1,319
  Accounts payable..................................   46,620         64,123
  Accrued liabilities...............................   50,907         51,504
  Income taxes......................................    2,330          1,737
                                                    ---------      ---------
       Total current liabilities....................   99,973        118,683    

Long-term debt, excluding current portion...........  301,502        301,618 
Deferred income taxes...............................   13,368          7,497     
Postretirement health care benefits.................   92,738         85,755         
Pension benefits....................................   23,524         31,489         
Other liabilities...................................   14,054         16,575   
                                                    ---------      ---------
            Total liabilities.......................  545,159        561,617
                                                    ---------      --------- 
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 $.01 per
    share, 40,000,000 shares authorized, 100 shares
    issued and outstanding..........................        -              -
  Accumulated deficit...............................  (84,873)       (90,866) 
                                                    ---------      ---------
            Total shareholder's equity (deficit)....  (84,873)       (90,866)        
Commitments and contingencies.......................        -              -
            Total liabilities and                   ---------      ---------
            shareholder's equity (deficit)..........$ 460,286      $ 470,751      
                                                    =========      =========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>








<PAGE>   25

<TABLE>
<CAPTION>
                              WCI STEEL, INC. AND SUBSIDIARIES
                              CONSOLIDATED STATEMENTS OF INCOME
                                  (Dollars in thousands)
                                                       Years ended October 31,  
                                                  -------------------------------  
                                                     1998       1997       1996  
                                                  ---------  ---------  ---------
  <S>                                             <C>        <C>        <C>       
  Net sales.......................................$ 665,741  $ 668,470  $ 660,801   
  Operating costs and expenses
   Cost of products sold..........................  560,951    547,545    550,609
   Depreciation and amortization..................   25,240     23,174     22,547
   Selling, general and administrative expenses...   17,343     29,355     22,074
                                                  ---------  ---------  ---------
                                                    603,534    600,074    595,230    
                                                  ---------  ---------  ---------
     Operating income.............................   62,207     68,396     65,571     
                                                  ---------  ---------  ---------
  Other income (expense)
   Interest expense...............................  (32,057)   (31,690)   (24,968)   
   Interest and other income, net.................    2,308      1,239      6,545      
                                                  ---------  ---------  ---------
                                                    (29,749)   (30,451)   (18,423)   
                                                  ---------  ---------  ---------
     Income before income taxes and 
       extraordinary loss.........................   32,458     37,945     47,148     
  Income tax expense..............................   12,365     14,482     19,108     
                                                  ---------  ---------  ---------         
     Income before extraordinary loss.............   20,093     23,463     28,040     
  Extraordinary loss on early retirement of 
    debt, net of income taxes.....................        -     19,606          -     
                                                  ---------  ---------  ---------
     Net income...................................$  20,093  $   3,857  $  28,040  
                                                  =========  =========  =========
 








<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>

















<PAGE>   26
<TABLE>
<CAPTION>
                               WCI STEEL, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)
                                    (Dollars in thousands)

                                          Years ended October 31, 1998, 1997 and 1996
                                  --------------------------------------------------------- 
                                                                                    Total
                                                                                    Share-
                                                    Additional Retained            holder's
                                  Preferred  Common  Paid-In   Earnings  Treasury  Equity    
                                    Stock     Stock  Capital  (Deficit)   Stock    (Deficit) 
                                  --------  -------- --------  --------  --------  --------
                   
<S>                               <C>       <C>       <C>      <C>       <C>       <C> 
Balance at October 31, 1995.......       -  $    366  $   458  $ 58,671  $      -  $ 59,495
Net income........................       -         -        -    28,040         -    28,040
Dividends paid on Common Stock....       -         -        -    (6,567)        -    (6,567)
Treasury stock purchases..........       -         -        -         -    (1,200)   (1,200)
Other.............................       -         -      112         -         -       112
                                  --------  --------  -------  --------  --------  --------
Balance at October 31, 1996.......       -  $    366  $   570  $ 80,144  $ (1,200) $ 79,880
Net income........................       -         -        -     3,857         -     3,857
Dividends paid on Common Stock....       -         -        -  (118,000)        -  (118,000)
Repurchase of Common Stock........       -      (366)    (901)  (56,867)    1,200   (56,934)
Other.............................       -         -      331         -         -       331
                                  --------  --------  -------  --------  --------  --------
Balance at October 31, 1997.......       -         -        -  $(90,866)        -  $(90,866)
Net income........................       -         -        -    20,093         -    20,093
Dividends paid on Common Stock....       -         -        -   (14,100)        -   (14,100)
                                  --------  --------  -------  --------  --------  --------
Balance at October 31, 1998.......       -         -        -  $(84,873)        -  $(84,873)
                                  ========  ========  =======  ========  ========  ======== 

<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>




























<PAGE>   27
<TABLE>
<CAPTION>
                            WCI STEEL, INC. AND SUBSIDIARIES
                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Dollars in thousands)

                                                   Years ended October 31,  
                                                -------------------------------  
                                                  1998       1997       1996  
                                                ---------  ---------  ---------
<S>                                            <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.....................................$  20,093  $   3,857  $  28,040 
Adjustments to reconcile net income to net
 cash provided by operating activities  
  Depreciation and amortization................   22,309     20,243     19,617 
  Amortization of deferred maintenance costs...    2,931      2,931      2,930       
  Amortization of financing costs..............    1,321      1,435      2,180   
  Postretirement health care benefits..........    6,983      3,960      5,508   
  Pension benefits.............................    1,583      5,101      6,507             
  Provision for losses on accounts receivable..     (475)        64       (646)      
  Deferred income taxes........................    5,449      5,581     (5,537)   
  Extraordinary loss...........................        -     32,786          -  
  Other........................................      142        356         (6)    
  Cash provided (used) by changes in certain 
   assets and liabilities
    Accounts receivable........................   16,953        603    (31,607)     
    Inventories................................   19,153     (9,618)     4,414    
    Prepaid expenses and other assets..........   (3,069)      (389)      (132)     
    Accounts payable...........................  (17,503)   (15,015)    31,398 
    Accrued liabilities........................   (4,135)     9,707      1,113
    Income taxes payable and recoverable, net..    4,866    (12,585)    14,398   
    Other liabilities..........................   (2,521)    (9,437)      (182)   
                                               ---------  ---------  --------- 
Net cash provided by operating activities......   74,080     39,580     77,995 
                                               ---------  ---------  --------- 
CASH FLOWS FROM INVESTING ACTIVITIES
  Additions to property, plant and equipment...  (15,565)   (39,902)   (35,384)    
  Gross proceeds from the sale of assets.......      110        135        497          
  Short-term investments, net..................        -     49,146    (36,864)         
                                               ---------  ---------  --------- 
Net cash (used) provided by investing  
  activities...................................  (15,455)     9,379    (71,751)   
                                               ---------  ---------  --------- 
CASH FLOWS FROM FINANCING ACTIVITIES
  Net proceeds from issuance of Senior Secured
    Notes......................................        -    290,103          -
  Repurchase of Senior Notes...................        -   (233,085)         -
  Repurchase of Common Stock...................        -    (56,934)         -
  Dividends paid...............................  (14,100)  (118,000)    (6,567)          
  Principal payments on other long-term debt...   (1,319)    (2,449)    (2,348)  
  Purchases of treasury stock..................        -          -     (1,200)             
                                               ---------  ---------  ---------
Net cash used by financing activities..........  (15,419)  (120,365)   (10,115) 
                                               ---------  ---------  ---------
Net increase (decrease) in cash and cash   
  equivalents..................................   43,206    (71,406)    (3,871)
Cash and cash equivalents at beginning 
  of year......................................   18,989     90,395     94,266  
                                               ---------  ---------  ---------
Cash and cash equivalents at end of year.......$  62,195  $  18,989  $  90,395  
                                               =========  =========  =========







<PAGE>   28

  Supplemental disclosure of cash flow 
   information
      Cash paid for interest...................$  30,763  $  21,412  $  22,888  
      Cash paid for income taxes ..............    2,050      8,306     10,247  

<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>




















































<PAGE>   29

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

(1) Summary of Significant Accounting Policies
-----------------------------------------------------------------------------
    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 value-added, 
    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, high strength, silicon electrical and galvanized steel. 
    In addition, the Company produces commodity grade low carbon flat rolled  
    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 1998, 1997 and 1996, no single customer accounted for 10% or more
    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 four-year agreement with the USWA that
    expires September 1, 1999.  
  
    (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 maturities of three months or less from the date of acquisition.

    (d)  Inventories

    Inventories are stated at the lower of cost or market. Cost is determined
    by the last-in, first-out (LIFO) method.

    (e)  Property, Plant and Equipment

    Property, plant and equipment is 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 
    4 to 25 years with a weighted average of 17 years). Expenditures for      
    normal repairs and maintenance are charged to expense as incurred.


<PAGE>   30    

    (f)  Other Assets

    Deferred financing costs, included in other assets, are amortized using
    the effective yield method over the term of the related financing and
    deferred blast furnace maintenance costs, also included in other assets,  
    are amortized using the straight-line method over a six-year              
    period.

    (g)  Income Taxes

    The Company is included in the consolidated income tax return of Renco.
    Under the terms of a tax sharing agreement, income taxes are
    allocated to the Company on a separate return basis, except that
    transactions for the purchase of goods and services between the Company,  
    its subsidiaries, Renco and Renco's other subsidiaries are accounted for  
    on a cash basis rather than an accrual basis and the Company does not     
    receive the benefit of net operating tax loss carryforwards, unless such  
    tax losses were generated by the net tax timing differences between       
    financial reporting and tax return treatment in calculating the           
    allocation of income taxes.

    (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 items in the consolidated financial statements for 1997 and 1996  
    have been reclassified to conform to the 1998 presentation.












<PAGE>   31

(2)  Inventories
-----------------------------------------------------------------------------
    Inventories consist of the following:
                                                October 31,
                                            1998           1997
                                         ------------------------    
                                          (Dollars in thousands)
    Raw materials........................ $  36,259     $  33,725 
    Finished and semi-finished product...    58,332        82,216 
    Supplies.............................        86           561 
                                          ---------     ---------
                                             94,677       116,502 
    Less LIFO reserve....................     7,537        10,209 
                                          ---------     ---------
                                          $  87,140     $ 106,293      
                                          =========     ========= 

(3) Property, Plant and Equipment
-----------------------------------------------------------------------------
    Property, plant and equipment is comprised of the following:

                                                  October 31,
                                             1998          1997
                                          -----------------------    
                                           (Dollars in thousands)
    Land and improvements................ $     435     $     463
    Buildings............................    27,445        27,433
    Machinery and equipment..............   327,353       313,628 
    Construction in progress.............     3,821         6,265  
                                          ---------     ---------
                                            359,054       347,789 
    Less accumulated depreciation........   141,430       123,169 
                                          ---------     ---------
                                          $ 217,624     $ 224,620 
                                          =========     ========= 
(4)  Long-Term Debt
-----------------------------------------------------------------------------
     Long-term debt consists of the following:
                                                 October 31,
                                             1998         1997
                                          -----------------------    
                                           (Dollars in thousands)
    Senior Secured Notes with interest
      at 10% payable semi-annually,
      due 2004........................... $ 300,000     $ 300,000
    Revolving Credit Facility(Revolver) 
      with interest at prime plus 0.5%
      (8.50% at October 31, 1998)
      payable monthly....................         -             -
    Other................................     1,618         2,937  
                                          ---------     ---------
                                            301,618       302,937      
    Less current portion of long-term
      debt...............................       116         1,319 
                                          ---------     ---------
                                          $ 301,502     $ 301,618 
                                          =========     =========

<PAGE>   32                                           

    The $300 million 10% Senior Secured Notes due 2004 (Senior Secured Notes) 
    are secured by a second priority lien on substantially all of the         
    existing property, plant and equipment of the Company which will become a 
    first priority lien if all of the 10.5% Senior Notes due 2002 (Senior     
    Notes) are extinguished ($.3 million currently outstanding).  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, also holds a   
    second priority lien on the security for the Senior Secured Notes, which  
    lien will remain a second priority lien even if the lien in favor of the  
    Senior Secured Notes becomes a first priority lien.

    The Company has a $100,000,000 Revolver secured by and subject to
    eligible inventories and receivables as defined, reduced by any
    outstanding letters of credit.  The Revolver is subject to an annual 
    commitment fee of .5% of the unused balance up to $75,000,000 payable     
    monthly. There were no borrowings outstanding under the Revolver
    as of or during the year ended October 31, 1998.  The Revolver, which
    expires December 29, 1999, also provides for up to an aggregate amount of
    $20,000,000 in letters of credit. The Company had a borrowing limit of    
    $88,945,000 based on eligible inventory and receivables net of $6,586,000 
    in letters of credit outstanding at October 31, 1998.  The Revolver is    
    subject to a penalty of $500,000 if terminated, without being refinanced  
    with the same lender, prior to December 29, 1998 and $250,000 thereafter  
    if terminated before expiration.

    On November 27, 1996, the Company completed the sale of the Senior        
    Secured Notes.  The proceeds from the Senior Secured Notes, with existing 
    cash balances of the Company, were used to complete an equity tender      
    offer in which substantially all the common stock of the Company not
    held by Renco, its then parent corporation, was acquired, complete a      
    tender offer in which the Company acquired $206.1 million principal       
    amount of the then outstanding Senior Notes at a premium, pay a $108      
    million dividend to Renco, make contractual compensation payments to      
    certain executives of the Company and pay related transaction costs.  

    The Company's Revolver and Senior Secured Notes contain certain financial
    and other covenants, including maintenance of specified levels of net
    worth as defined, working capital, 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 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 $243,000 was available for dividends and other
    transactions with affiliates at October 31, 1998.

    Aggregate principal payments on long-term debt for the five years
    subsequent to October 31, 1998 are as follows: $116,000 in 1999,        
    $122,000 in 2000, $128,000 in 2001, $415,000 in 2002, and $838,000
    in 2003.


<PAGE>   33

    As of October 31, 1998, the fair value of the Senior Secured Notes was    
    $282,000,000 based on the quoted market price.  


(5)   Accrued Liabilities
-----------------------------------------------------------------------------

    Accrued liabilities included employment related costs of $28,941,000      
    and $28,442,000 and interest of $12,528,000 and $12,555,000 at October    
    31, 1998 and 1997, respectively.

(6)   Employee Compensation Plans
-----------------------------------------------------------------------------

    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 $11,761,000, $24,588,000 and $14,000,000,     
    for the years ended October 31, 1998, 1997 and 1996, respectively.  
    Certain amounts under these plans represent deferred compensation.

(7)   Pension Plans
-----------------------------------------------------------------------------

    The Company has defined contribution retirement plans under which it      
    expensed approximately $5,684,000, $5,929,000 and $5,376,000 for          
    the years ended October 31, 1998, 1997 and 1996, respectively.

    The Company also has a defined benefit pension plan for substantially all 
    hourly employees.  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,
                                                        1998          1997
                                                      ----------------------
                                                       (Dollars in thousands) 

        Projected benefit obligation................. $ 47,839      $ 49,077
        Plan assets at fair value....................   19,015        15,930
                                                      --------      --------
        Projected benefit obligation in excess
          of plan assets.............................   28,824        33,147 
        Unrecognized net gain from past experience
          different from that assumed and effects
          of changes in assumptions..................   15,846        13,697  
        Unrecognized prior service cost..............  (31,480)      (35,237)
        Additional minimum liability.................   14,972        20,982  
                                                      --------      --------
        Accrued pension cost.........................   28,162        32,589
        Less pension liability due within one year...    4,638         1,100
                                                      --------      --------
        Long-term pension liability.................. $ 23,524      $ 31,489 
                                                      ========      ========

    An assumed discount rate of 7.0% and 7.25% in 1998 and 1997,              
    respectively, and an expected return on plan assets of 8.5% were used for 
    purposes of valuing the benefits under the defined benefit pension plan.


<PAGE>   34

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


                                                        1998          1997
                                                      ---------    ---------
                                                      (Dollars in thousands)
        Projected benefit obligation at 
          beginning of year.......................... $  49,077    $  48,498
        Service cost.................................      (430)        (332)
        Interest cost................................     3.237        3,404
        Actuarial gains..............................    (2,578)      (1,274)
        Benefits paid................................    (1,467)      (1,219)
                                                      ---------    ---------

        Projected benefit obligation at end of year.. $  47,839    $  49,077
                                                      =========    =========




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

  
                                                        1998          1997    
                                                      ---------   ---------- 
                                                      (Dollars in thousands)
        Plan assets at beginning of year............. $  15,930    $  13,936  
        Actual return on assets......................     1,452        3,188  
        Employer contributions.......................     3,100           25  
        Benefits paid................................    (1,467)      (1,219)
                                                      ---------    ---------  
        Plan assets at end of year..................  $  19,015    $  15,930
                                                      =========    ========= 
              

    The following table sets forth the components of pension expense: 

                                                  Years Ended October 31,
                                             1998        1997         1996 
                                          ----------------------------------
                                                (Dollars in thousands)

        Service cost..................... $    (430)  $    (332)   $    (213)
        Interest cost....................     3,237       3,404        3,477 
        Expected return on plan assets...      (963)       (932)        (534)
        Amortization of unrecognized:
            Prior service cost...........     3,757       3,756        3,831
            Actuarial gain and losses, net     (918)       (770)          (4)
                                          ---------   ---------    --------- 
                                          $   4,683   $   5,126    $   6,557
                                          =========   =========    ========= 

 




<PAGE>   35

(8)   Postretirement Health Care Benefits
-----------------------------------------------------------------------------
    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,
                                                        1998          1997
                                                     -----------------------
                                                      (Dollars in thousands)
    
        APBO........................................ $ 130,821     $ 108,998
        Plan assets at fair value...................    12,953         8,485 
                                                     ---------     --------- 
        APBO in excess of plan assets...............   117,868       100,513
        Unrecognized prior service cost resulting
          from plan amendments......................    (5,459)       (6,859)
        Unrecognized net loss from past experience
          different from that assumed and from 
          changes in assumptions....................   (19,671)       (7,899)
                                                     ---------     ---------
        Accrued postretirement benefit cost......... $  92,738     $  85,755 
                                                     =========     =========
    


    The APBO was determined using a discount rate of 7.0% and 7.25% in 
    1998 and 1997, respectively, an expected return on plan assets of 8.5%,   
    and an assumed health care cost trend rate of 7% in 1999, gradually       
    declining to 5% after 2003. Assuming a 1% increase in the health care     
    cost trend rate, the APBO at October 31, 1998 would increase by           
    $21,937,000 along with an increase in the 1998 service and interest       
    cost components of $2,126,000.  Assuming a 1% decrease in the health
    care cost trend rates the APBO at October 31, 1998 would decrease by
    $17,492,000 along with a decrease in the 1998 service and interest cost
    components of $1,691,000.  The following table sets forth a               
    reconciliation of the beginning and end of year APBO:

                                                        1998          1997
                                                     ---------     ---------
                                                      (Dollars in thousands)

        APBO at beginning of year................... $ 108,998     $  89,545
        Service cost................................     3,068         2,232
        Interest cost...............................     8,441         7,260
        Amendments..................................         -         3,902
        Actuarial gains and losses, net.............    13,369         8,442
        Benefits paid...............................    (3,055)       (2,383)
                                                     ---------     ---------
        APBO at end of year......................... $ 130,821     $ 108,998
                                                     =========     =========









<PAGE>   36

    The following table sets forth a reconciliation of the beginning and end
    of year fair value of plan assets:
                                                        1998          1997
                                                      --------     --------
                                                      (Dollars in thousands)

        Plan assets at beginning of year............  $  8,485     $  3,332
        Actual return on assets.....................     1,912        1,254
        Employer contributions......................     2,556        3,899
                                                      --------     --------
        Plan assets at end of year..................  $ 12,953     $  8,485
                                                      ========     ========

    Net periodic postretirement benefit costs included the following 
    components:
                                                 Years Ended October 31,
                                              1998        1997        1996
                                           --------------------------------
                                                 (Dollars in thousands)       
                    
        Service cost..................... $  3,068    $  2,232     $  2,272   
         Interest cost...................    6,441       7,260        6,541 
        Expected return on plan assets...     (804)       (333)           -   
        Amortization of unrecognized:                      
          Prior service cost.............    1,400       1,400        1,582
          Actuarial (gain) loss..........      489        (317)         (72)
                                          --------    --------     --------
        Net periodic postretirement 
          benefit cost................... $ 12,594    $ 10,242     $ 10,323 
                                          ========    ========     ========
  
    The Company is required to contribute a minimum of $.50 per hour worked   
    by certain hourly employees to a Voluntary Employee Beneficiaries         
    Association Trust (VEBA Trust) established to fund future postretirement  
    health care and life insurance benefits.  In accordance with the          
    Company's labor contract, the Company will continue to pay current claims 
    as incurred until the trust assets exceed 50% of the APBO for the hourly  
    employees who are beneficiaries of the trust.

(9)  Income Taxes
-----------------------------------------------------------------------------
    The provision for income tax expense (benefit) is comprised of the
    following:
                                                 Years Ended October 31,
                                              1998       1997        1996
                                           -------------------------------- 
                                                 (Dollars in thousands)
        Federal income taxes
          Current........................ $  6,317    $  8,301     $ 18,861 
          Deferred.......................    5,009       4,461       (3,714) 
        State income taxes
          Current........................      599         600        5,784 
          Deferred.......................      440       1,120       (1,823) 
                                          --------    --------     --------
        Provision for
          income taxes................... $ 12,365    $ 14,482     $ 19,108 
                                          ========    ========     ========
 <PAGE>   37               

    In addition to the above income taxes, the Company recognized $13,180,000
    of current income tax benefits in 1997 related to the extraordinary loss  
    on the early retirement of debt (see note 4). 
    
    
    A reconciliation between income tax expense reported and income tax
    expense computed by applying the federal statutory rate to income before
    income taxes and extraordinary loss follows:

                                                 Years Ended October 31,
                                              1998       1997        1996
                                           ---------------------------------
                                                (Dollars in thousands)
        Income taxes at federal
            statutory rate...............  $ 11,360    $ 13,282     $ 16,502  
        State income taxes, net of 
           federal income tax benefit....       675       1,118        2,574 
        Other............................       330          82           32
                                           --------    --------     --------
                                           $ 12,365    $ 14,482     $ 19,108 
                                           ========    ========     ========


    Deferred income taxes result from temporary differences in the financial
    basis and tax basis of assets and liabilities.  Total deferred tax assets
    amounted to approximately $50,461,000 and $51,492,000 as of October 31,
    1998 and 1997; the most significant items comprising the deferred tax
    assets were postretirement benefits of $31,141,000 and $30,084,000,       
    respectively, and compensation accruals of $5,965,000 and $7,137,000,    
    respectively.  Total deferred tax liabilities amounted to approximately   
    $55,219,000 and $50,801,000 as of October 31, 1998 and 1997,              
    respectively, consisting primarily of deferred taxes on inventory of      
    $3,065,000 and $3,526,000, respectively, and fixed assets of $52,037,000  
    and $46,810,000, respectively.  The Company had no valuation allowance    
    for realization of deferred tax assets as of October 31, 1998 or 1997.
  
(10)  Leases
-----------------------------------------------------------------------------
    The Company leases a portion of its operating and data processing
    equipment. Minimum future lease payments under noncancellable operating
    leases are $1,797,000, $1,460,000, $1,009,000, $537,000, $231,000 and     
    $331,000 for the years ending October 31, 1999, 2000, 2001, 2002, 2003    
    and thereafter, respectively. Rent expense for noncancellable operating   
    leases amounted to approximately $1,811,000, $1,386,000 and $1,094,000,   
    for the years ended October 31, 1998, 1997 and 1996, respectively.

(11)  Related Party Transactions
-----------------------------------------------------------------------------
    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, 2001. Total expense for
    management services fees amounted to $1,200,000 for each of the years
    ended October 31, 1998, 1997 and 1996.  
 
    To obtain the advantages of volume, Renco purchases certain insurance     
    coverage for its subsidiaries, including the Company, and the actual
    cost of such insurance, without markup, is reimbursed by the covered

<PAGE>   38

    subsidiaries.  The major areas of the Company's insurance coverage
    obtained under the Renco programs are 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 1998, 1997 and 1996, the Company incurred costs of              
    approximately $1.8 million, $1.7 million and $2.0 million, respectively,  
    under the Renco insurance program.  The Company believes that its         
    insurance costs under this program were less than it would have incurred  
    if it had obtained its insurance directly.

    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.  Renco Steel intends
    to meet its debt service obligations from its cash balances and earnings
    thereon and through distributions from the Company, including payments
    pursuant to a tax sharing agreement and dividends as permitted under the
    Company's outstanding indebtedness as described in Note 4.

(12)  Commitments and Contingencies
-----------------------------------------------------------------------------
    At October 31, 1998, the Company had commitments to purchase data         
    processing services of approximately $19,552,000 in the aggregate over    
    the remaining 3.5 years of its management information systems agreement   
    and purchased services of approximately $5,458,000, $5,463,000 and        
    $5,322,000 in 1998, 1997 and 1996, respectively, under the agreement.
    At October 31, 1998, at pricing then in effect, the Company had           
    firm commitments for the purchase of raw materials and gases of           
    approximately $51,258,000 in 1999 and $2,591,000 thereafter.  In         
    addition, at October 31, 1998 the Company had commitments for capital     
    expenditures of approximately $2,065,000.

    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 disposal.  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 have changed rapidly in recent years, and the Company may 
    be subject to more stringent environmental laws and regulations in the    
    future.  During 1998 the Environmental Protection Agency (EPA) adopted    
    new standards regulating particulate matter and ozone emissions.  Data    
    relating to these standards is to be collected and analyzed with          
    implementation as early as 2004.  Like much of the steel, utilities and   
    other industries, the Company's current operations are not expected to
    comply with these standards if implemented as currently adopted.  The
    Company cannot currently assess the impact of these standards on its
    results of operations or financial condition.  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 defendant in three civil actions instituted by the         
    Department of Justice, on behalf of the EPA, in the United States         
    District Court for the Northern District of Ohio.  The first action,      
<PAGE>   39 

    instituted on June 29, 1995, under the Clean Water Act, alleges numerous  
    violations of the Company's National Pollution Discharge Elimination      
    System permit alleged to have occurred during the years 1989 through
    1996.  The second action, instituted on March 29, 1996, under the Clean
    Air Act, alleges violations by the Company of the work practice,
    inspection and notice requirements for demolition and renovation of the
    National Emission Standard for Hazardous Air Pollutants for Asbestos and
    also violations of the particulate standard and the opacity limits
    applicable to the Company's facilities in Warren, Ohio.  The third
    action, instituted on May 11, 1998, under the Resource Conservation and   
    Recovery Act of 1976, as amended (RCRA), alleges violations of RCRA, the  
    Ohio Administrative Code (OAC) and the Company's hazardous waste          
    management permit issued pursuant to RCRA and OAC related to the          
    Company's management of hazardous waste in surface impoundments at the
    Warren, Ohio facility.  The action alleges that from September 1988 to    
    the present the Company operated hazardous waste management units at the
    Warren facility without the proper permits pursuant to RCRA.  Each action 
    seeks a civil penalty of not more than the statutory maximum of $25,000   
    per day per violation ($27,500 per day per violation for violations since 
    January 30, 1997 in the case of the RCRA action) and also an injunction   
    against continuing violations.  The Company believes that imposition of
    the statutory maximum penalties for the alleged violations is unlikely    
    based upon past judicial penalties imposed under the Acts and that it has 
    defenses to liability.  The Company has been attempting to negotiate      
    consent decrees with the EPA to settle the Clean Water Act and Clean Air  
    Act actions.  A trial for the RCRA action has been scheduled for June     
    1999.  If the Company is unable to reach a negotiated settlement of these 
    actions, and if a substantial penalty similar to the statutory maximum    
    penalty were imposed, it would have a material adverse effect on the      
    operating results and financial condition of the Company.

    As a condition of a previous operating permit, the Company will be        
    required to undertake a corrective action program with respect to         
    historical material handling practices at the Warren facility.  The       
    Company is currently undertaking the first investigation step of the      
    corrective action program, the RCRA Facility Investigation (RFI), which   
    is expected to be completed in 1999.  The RFI workplan identifies         
    thirteen historical solid waste management units which are the subject of 
    the RFI, including areas of the facility which are the subject of the     
    RCRA civil action filed on May 11, 1998 described above.  The final scope 
    of the corrective action required to remediate or reclaim any             
    contamination that may be present at or emanating from the Warren         
    facility 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    
    program would not have a material adverse effect on the operating results 
    or financial condition of the Company. 

    On January 23, 1996, two retired employees instituted an action against   
    the Company and the United Steelworkers of America (USWA) in the United   
    States District Court for the Northern District of Ohio alleging in       
    substance that certain distributions made by the Company to employees and 
    benefit plans violated certain agreements, the Employee Retirement Income 
   

 

<PAGE>   40

   Security Act, the National Labor Relations Act and common law.  On July    
   31, 1997, the court granted the Company's motion to dismiss this action    
   and entered judgement in favor of the Company and the USWA.  The           
   Plaintiffs have filed an appeal regarding the court's decision to          
   dismiss.

   On April 5, 1996, an employee instituted an action for damages against WCI 
   in the Court of Common Pleas, Trumbull County, Ohio, alleging that, under  
   Ohio common law, her privacy rights were violated and that she had been    
   subjected to sexual harassment.  The case went to trial on August 24, 1998 
   and the judge directed a verdict in favor of the Company.  The plaintiff   
   has filed an appeal regarding the directed verdict.

   In addition to the above 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     
   quarterly 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.
 
(13)  Selected Quarterly Data (Unaudited)
-----------------------------------------------------------------------------
   The following is a summary of unaudited quarterly results for the years
   ended October 31, 1998 and 1997:

                                         Three Months Ended 1998
                             January 31    April 30    July 31    October 31
                         ----------------------------------------------------
                                         (Dollars in thousands)
   Net sales.............   $ 166,592   $ 177,860   $ 174,947   $ 146,342 
   Gross margin..........      24,744      28,656      30,000      21,390
   Net income............       4,201       6,516       7,148       2,228
                        
                                         Three Months Ended 1997
                             January 31    April 30    July 31    October 31
                         ----------------------------------------------------
                                         (Dollars in thousands)
   Net sales.............   $ 160,907   $ 172,634   $ 165,917   $ 169,012
   Gross margin..........      29,298      31,343      31,559      28,725
   Income before
     extraordinary loss..       1,713       7,777       8,150       5,823
   Net income (loss).....     (17,893)      7,777       8,150       5,823


   During the three months ended January 31, 1997, the Company recognized
   $8,577,000 of compensation expenses and an extraordinary loss, net of      
   income taxes, of $19,606,000 related to the debt refinancing and equity    
   redemption transactions effected in November 1997.  During the three       
   months ended October 31, 1997, the Company recorded a charge of $2,123,000 
   under the LIFO inventory valuation method.



<PAGE> 41

                         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, 1998 and 1997, and the related consolidated
statements of income, shareholder's equity (deficit), and cash flows for each
of the years in the three-year period ended October 31, 1998.  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 generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. 
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, 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, 1998 and 1997, and the results
of their operations and their cash flows for each of the years in 
the three-year period ended October 31, 1998, in conformity with generally
accepted accounting principles.


/S/ KPMG PEAT MARWICK LLP
-------------------------

KPMG Peat Marwick LLP                

Cleveland, Ohio
December 3, 1998


















<PAGE>  42

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

         None.























































<PAGE>   43

                                  PART III


ITEM 10.  DIRECTORS AND OFFICERS

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

Name                               Age    Position
Ira Leon Rennert..................  64    Chairman of the Board and Director
Edward R. Caine...................  60    President and Chief Executive
                                            Officer
David A. Howard...................  39    Vice President, Sales
Patrick T. Kenney.................  58    Vice President, Operations
Patrick G. Tatom..................  48    Vice President, Commercial
Bret W. Wise......................  38    Vice President, Finance and
                                            Chief Financial Officer


Ira Leon Rennert has been Chairman, Chief Executive Officer and
principal shareholder of WCI's indirect parent company, Renco (including
predecessors), since Renco's first acquisition in 1975, and Chairman of
WCI since its formation in 1988.  Renco holds controlling interests in a
number of manufacturing and distribution concerns operating in
businesses not competing with WCI, including Renco Metals, Inc., AM
General Corporation, The Doe Run Resources Corporation, Lodestar Holdings,
Inc., and Renco Steel Holdings, Inc.,(WCI's parent company), for all of which
he serves as a Director.  


Edward R. Caine has been President and Chief Executive Officer since
April 1, 1996.  Mr. Caine was a Director of the Company 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.


David A. Howard has served as Vice President, Sales since August 1, 1998. 
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.  


Patrick T. Kenney has served as Vice President, Operations since June
1994 and, prior to that, as General Superintendent of Finishing
Operations of WCI since its inception.


Patrick G. Tatom has served as Vice President, Commercial since November
1, 1995 and served as Vice President, Sales from February 1994 through
October 31, 1995 and as General Manager of Sales from September 1988 to
February 1994.






<PAGE>   44

Bret W. Wise joined WCI as Vice President, Finance and Chief Financial
Officer effective September 1, 1994.  Prior to joining WCI, Mr. Wise was
a partner with the accounting and consulting firm of KPMG Peat Marwick
LLP and had been with that firm in various capacities from June 1982
through August 31, 1994.

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

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

ITEM 11.  EXECUTIVE COMPENSATION

The following table sets forth certain information concerning compensation of
the named executive officers by the Company for services rendered to it in
all capacities during fiscal 1998, 1997 and 1996:

<TABLE>
<CAPTION>
                                       Summary Compensation Table
                                    Annual                  Long-term
                                Compensation (1)           Compensation
                               -----------------  --------------------------- 
                      Fiscal                       Restricted       LTIP        All Other
Name and Position      Year   Salary    Bonus    Stock Awards(2)  Payouts(3) Compensation(4)
<S>                          <C>       <C>          <C>            <C>          <C>
Ira Leon Rennert(5)... 1998      -         -            -               -       $1,200,000
 Chairman of the       1997      -         -            -               -        1,200,000
 Board                 1996      -         -            -               -        1,200,000

Edward R. Caine....... 1998  $259,133  $100,000         -          $  597,500   $   20,000
 President and Chief   1997   259,133   100,000         -           5,900,000       25,370
 Executive Officer     1996   159,616   360,394     $115,625          386,945       18,977
 (since April 1, 1996)

David A. Howard....... 1998  $ 99,168  $ 40,000         -          $   10,542   $    6,981
 Vice President,       1997    92,385    25,000         -               8,333        6,656
 Sales                 1996    85,972    25,000         -                -           4,850
 (Since August 1, 1998)  

Patrick T. Kenney..... 1998  $132,567  $ 50,000         -          $  239,000   $   16,413
 Vice President,       1997   132,567    50,000         -           2,360,000       16,413
 Operations            1996   132,494    50,000     $ 32,375          543,533       14,563

Patrick G. Tatom...... 1998  $131,067  $ 50,000         -          $  239,000   $   12,501
 Vice President,       1997   131,067    50,000         -           2,360,000       12,501
 Commercial            1996   130,983    50,000     $ 32,375          404,248       10,782
 
Bret W. Wise.......... 1998  $142,860  $ 50,000         -          $  239,000   $   10,515
 Vice President,       1997   142,860    50,000         -           2,360,000       10,164
 Finance and Chief     1996   142,848    50,000     $ 46,250          310,748        8,275
 Financial Officer
----------------------
<FN>

(1)     Value of perquisites and other personal benefits did not exceed the lesser of
        $50,000 or 10% of total salary and bonus per named executive officer.






<PAGE>   45

(2)     The amounts shown as "Restricted Stock Awards" in the table for each named executive
        officer for fiscal 1996 represent the value of restricted stock grant awards made in
        June 1996 computed as the number of restricted shares granted multiplied by the
        closing market price for the Common Stock on the last full trading day before the
        restricted stock grant award.  The number of restricted shares granted to each of
        the named executive officers in June 1996 was 25,000 shares to Mr. Caine, 7,000
        shares to each of Messrs. Kenney and Tatom and 10,000 shares to Mr. Wise.  The
        restriction on 25% of the shares originally granted to the named executive officers
        was scheduled to expire on July 1 of each of 1997, 1999, 2002 and 2004.  The Company
        waived the transfer restrictions applicable to the restricted shares to permit the
        holders of such shares to tender their shares in the equity redemption effected in   
        November 1996. See Note 4 to the consolidated financial statements for a description 
        of this transaction.

(3)     The amounts shown as "LTIP Payouts" in the table for each named executive officer
        represent contractual payments under such officer's Net Worth Appreciation
        Agreement which provides that the exceutive officers receive a fixed percentage of   
        any dividend paid by the Company.  See "Net Worth Appreciation Agreements."

(4)     The other compensation shown, except for Mr. Rennert for all periods (See note 5),
        consists of WCI contributions to a defined contribution pension plan.

(5)     Mr. Rennert receives no compensation directly from WCI.  He is Chairman of the Board
        and the principal stockholder of Renco which receives a management fee from WCI
        pursuant to a Management Consultant Agreement.  The amounts shown as all other
        compensation to Mr. Rennert are the management fees paid by WCI to Renco for each
        fiscal year.  See "Stock Ownership and Certain Relationships and Transactions."
</FN>
</TABLE>

Net Worth Appreciation Agreements

The named executive officers (with the exception of Mr. Rennert) are each
parties to Net Worth Appreciation Agreements with the Company, pursuant to
which each earns as deferred compensation a fixed percentage, ranging from 1%
to 5%, of cumulative net income, as defined, during the term of their
employment as executive officers. Assuming all of the Company's named
executive officers had retired at October 31, 1998 and their respective
maximum percentage had vested, an aggregate of $3,855,014 would have been
payable to such executive officers pursuant to the Net Worth Appreciation
Agreements. 

The Net Worth Appreciation Agreements also provide that in the event of
payment of a dividend, the active participants are entitled to receive a
percentage of the dividend equal to their full net worth percentage under
their agreement.  In the event substantially all the assets of the Company
are sold, active participants are deemed to be vested and are entitled to
receive a payment equal to their percentage of the net proceeds of the sale
as defined in the agreements.  The agreements also provide for payments in
the event of permanent disability or death.

Active participants are entitled to receive the balance of the vested amount
earned under their Net Worth Appreciation Agreement in 40 equal quarterly
payments commencing upon the earlier of age 62 or twenty years after the date
the participant was first employed by the Company.  Receipt by each employee
of his payment is conditioned on his observance of his confidentiality and 
non-compete agreement with the Company.







<PAGE>   46

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
          
The following table sets forth certain information as of December 11, 1998
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 the Company during the last fiscal year, and by all directors and
executive officers of the Company as a group.  Except as otherwise noted, and
subject to certain terms and conditions in the Renco Steel indenture and the
related pledge agreement, the persons named in the table below have sole
voting and investment power with respect to all shares shown as beneficially
owned by them.

<TABLE>
<CAPTION>
                                                                  Beneficial Ownership
                                                                as of December 11, 1998
                                                                -----------------------
                                                                  Shares of
Name of Beneficial Owners and Address of 5% Beneficial Owners    Common Stock   Percent
<S>                                                                  <C>         <C>
Renco Steel Holdings, Inc....................................        100         100.0%
 1040 Pine Avenue, S.E.
 Warren, OH 44483

The Renco Group, Inc.(1).....................................        100         100.0%
 30 Rockefeller Plaza, Suite 4225
 New York, NY 10112

Ira Leon Rennert (1).........................................        100         100.0%
 c/o The Renco Group, Inc.
 30 Rockefeller Plaza, Suite 4225
 New York, NY 10112

All directors and executive officers as a group (6 persons)...       100         100.0%

--------------------
<FN>
(1)     Renco is deemed to beneficially own the Common Stock of the Company owned
        by Renco Steel due to the ownership by Renco of all the outstanding shares of        
        Common Stock of Renco Steel, and Mr. Rennert is deemed to beneficially own the       
        Common Stock of the Company deemed owned by Renco due to the ownership through       
        trusts established by him for himself and members of his family of a total of 97.9%  
        of the outstanding Common Stock of Renco.
<FN>
</TABLE>

By virtue of Renco Steel's ownership of all the outstanding shares of Common
Stock of WCI and Renco's ownership of all the outstanding shares of Common
Stock of Renco Steel, and Mr. Rennert's ownership of a 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 the Company's outstanding shares
of Common Stock, including the election of the Board of Directors.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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, 2001 and thereafter shall continue for additional
terms of three years each unless sooner terminated by either party by giving
six months prior written notice.  In the year ended October 31, 1998, WCI 

<PAGE>   47

incurred management fees in the amount of $1,200,000.  The Company believes
that the cost of obtaining the type and quality of services rendered by Renco 
under the Management Consultant Agreement was, and continues to be, no less
favorable than that at which the Company could obtain such services from
unaffiliated entities.

WCI is included in the consolidated income tax return of Renco.  Under the
terms of a tax sharing agreement, 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 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.  

To obtain the advantages of volume, Renco purchases 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 are property, business interruption, general, product and auto
liability, workers' compensation (other than Ohio for which the Company is 
self insured) and casualty umbrella.  The premiums for director and officer,
fidelity, fiduciary, property, business interruption, auto liability and
casualty umbrella are allocated by Renco substantially as indicated in the
underlying policies.  General and product liability and workers' compensation
coverages (excluding the Ohio self insured program) are 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 include historical guaranteed cost premium, 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.

In fiscal 1998, the Company incurred costs of approximately $1.8 million
under the Renco insurance program.  The Company believes that its insurance
costs under this program were less than it would have incurred if it had
obtained its insurance directly.  

During 1998, the Company purchased approximately $0.8 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.




<PAGE> 48

                                        PART IV

ITEM 14.  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 report
thereon of the independent auditors dated December 3, 1998, are included in
this report for ITEM 8. and is incorporated by reference herein.

      Consolidated Balance Sheets at October 31, 1998 and 1997.

      Consolidated Statements of Income for the fiscal years ended
                      October 31, 1998, 1997 and 1996.

      Consolidated Statements of Shareholder's Equity (Deficit) for the       
                fiscal years ended October 31, 1998, 1997 and 1996.

      Consolidated Statements of Cash Flows for the fiscal years ended
                      October 31, 1998, 1997 and 1996.
 
      Notes to Consolidated Financial Statements.
     
      Independent Auditors' Report.


2. Financial Statement Schedule.

      Independent Auditors' Report on Financial Statement Schedule.

      Schedule II - Valuation and Qualifying Accounts.

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

      The information called for by this paragraph is contained in the
      Exhibit Index of this report which is incorporated herein by reference.

(b) Reports on Form 8-K.

No current reports on Form 8-K were filed during the last quarter of the
period covered by this report.















<PAGE>   49

              INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE



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


Under date of December 3, 1998, we reported on the consolidated balance
sheets of WCI Steel, Inc. and subsidiaries as of October 31, 1998 and 1997,
and the related consolidated statements of income, shareholder's equity
(deficit), and cash flows for each of the years in the three-year period
ended October 31, 1998, 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 the Company'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.



/S/ KPMG PEAT MARWICK LLP
-------------------------

KPMG Peat Marwick LLP

Cleveland, Ohio
December 3, 1998


























<PAGE>   50
<TABLE>
<CAPTION>

                                      WCI STEEL, INC. AND SUBSIDIARIES
                              SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
                                     ALLOWANCE FOR DOUBTFUL ACCOUNTS
                            FOR THE YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996.
                                         (DOLLARS IN THOUSANDS)
 

                                                      ADDITIONS
                                    BALANCE AT  ------------------------          BALANCE AT
                                    BEGINNING   CHARGED TO  CHARGES TO  DEDUCTIONS    END
CLASSIFICATION                       OF YEAR    EXPENSE (b)   OTHER        (c)      OF YEAR
--------------                      ----------- ----------- ----------  ---------- ---------
 
<S>                                 <C>          <C>          <C>         <C>       <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS (a):
Year ended October 31, 1998......   $1,627       $ (475)      $   --      $  248    $  904

Year ended October 31, 1997......    1,600           64           --          37     1,627

Year ended October 31, 1996......    2,258         (646)          --          12     1,600
  
-------------------------

<FN> 
(a) Allowance for doubtful accounts is shown as a reduction of accounts receivable in the    
    Company's Consolidated Financial Statements.
 
(b) Charges (credits) to expense for the provision for doubtful accounts.
 
(c) Trade receivables written-off.
</FN> 

</TABLE>
 




























<PAGE>   51


                                 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 15th day
of December 1998. 

                               WCI STEEL, INC.
                                                                   
                                  By:   /s/ Edward R. Caine
                                            ---------------
                                            Edward R. Caine
                                            President and Chief Executive
                                             Officer
                                             
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 15th day of December, 1998. 

      Signature                  Title

/s/ Ira Leon Rennert
    ----------------
    Ira Leon Rennert             Chairman of the Board and Director


/s/ Edward R. Caine
    ---------------
    Edward R. Caine              President and Chief Executive Officer
                                 (principal executive officer)

/s/ Bret W. Wise
    ------------
    Bret W. Wise                 Vice President, Finance and 
                                  Chief Financial Officer
                                 (principal financial and accounting officer)

/s/ John P. Jacunski           
    ----------------
    John P. Jacunski             Controller



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.







<PAGE>   52
                                          Exhibit Index

<TABLE>
<CAPTION>
 EXHIBIT
   NO.                                            DESCRIPTION
----------  --------------------------------------------------------------------------------
<C>           <S>
 
3.1           --Articles of Incorporation of the Registrant, filed April 13, 1998 and
                Articles of Amendment filed May 18, 1988, July 15, 1988, November 29, 1991,
                December 14, 1993 and July 13, 1994.(7)
 
3.2           --Code of Regulations of the Registrant, as amended December 16, 1996.(11)
 
4.1           --Indenture, dated as of December 14, 1993, among Renco Steel, Inc. (which
                subsequently was merged into the Registrant), as issuer, the Registrant, as
                guarantor, and Shawmut Bank Connecticut, National Association (now known as
                Fleet National Bank), as trustee, relating to the 10 1/2% Senior Notes Due
                2002, Series A and the 10 1/2% Senior Notes Due 2002, Series B of the
                Registrant containing, as exhibits, specimens of the Series A Senior Notes
                and Series B Senior Notes).(3)

4.1.1         --First Supplemental Indenture to the indenture, dated as of December 14,
                1993, among Renco Steel, Inc. (which subsequently was merged into the
                Registrant), as issuer, the Registrant, as guarantor, and Shawmut Bank
                Connecticut, National Association (now known as Fleet National Bank), as
                trustee, relating to the 10 1/2% Senior Notes Due 2002, Series A and the 10
                1/2% Senior Notes Due 2002, Series B of the Registrant (containing, as
                exhibits, specimens of the Series A Senior Notes and Series B Senior
                Notes).(3)
 
4.1.2         --Second Supplemental Indenture to the indenture, dated as of December 14,
                1993, among Renco Steel, Inc. (which subsequently was merged into the
                Registrant), as issuer, the Registrant, as guarantor, and Shawmut Bank
                Connecticut, National Association (now known as Fleet National Bank), as
                trustee, relating to the 10 1/2% Senior Notes Due 2002, Series A and the 10
                1/2% Senior Notes Due 2002, Series B of the Registrant (containing, as
                exhibits, specimens of the Series A Senior Notes and Series B Senior
                Notes).(11)
 
4.2           --Indenture, dated as of November 27, 1996, between the Registrant, as issuer,
                and Fleet National Bank, as trustee, relating to the 10% Senior Secured
                Notes due 2004, Series A, and the 10% Senior Secured Notes due 2004, Series
                B of the Registrant (containing, as exhibits, specimens of the Series A
                Senior Secured Notes and Series B Senior Secured Notes).(11)

10.1          --[Intentionally Omitted]

10.2.2        --Amended and Restated Net Worth Appreciation Agreement, effective November 1,
                1995, between the Registrant and Patrick T. Kenney.(11)
 
10.2.3        --Amended and Restated Net Worth Appreciation Agreement, effective November 1,
                1995, between the Registrant and Patrick G. Tatom.(11)

10.2.4        --Amended and Restated Net Worth Appreciation Agreement, effective November 1,
                1995, between the Registrant and Bret W. Wise.(11)

10.2.7        --Net Worth Appreciation Agreement, effective April 1, 1996, between the
                Registrant and Edward R. Caine.(11)

10.2.8        --Net Worth Appreciation Agreement, effective August 1, 1998, between the
                Registrant and David A. Howard.

10.3          --Management Consultant Agreement, dated October 1, 1992, between Registrant
                and The Renco Group, Inc.(1)
 
10.3.1        --Amendment No. 1, dated April 22, 1994, to Management Consultant
                Agreement.(4)

</TABLE>

<PAGE>   53 

<TABLE>
<CAPTION>
 EXHIBIT
   NO.                                            DESCRIPTION
----------  -------------------------------------------------------------------------------
<C>           <S>

10.4          --Amended and Restated Loan and Security Agreement dated December 29, 1992
                between the Registrant and Congress Financial Corporation and Security
                Pacific Business Credit Inc. (the "Revolving Credit Agreement").(1)
 
10.4.1        --Amendment No. 1 to the Revolving Credit Agreement, dated December 14,
                1993.(3)
 
10.4.2        --[Intentionally Omitted]
 
10.4.3        --Indemnification Agreement, dated as of December 14, 1993, among the
                Registrant and the lenders under the Revolving Credit Agreement.(3)
 
10.4.4        --Intercreditor Agreement, dated December 14, 1993, among the Shawmut Bank
                Connecticut, National Association, Congress Financial Corporation and
                Security Pacific Business Credit Inc.(3)
 
10.4.5        --Amendment No. 2 to the Revolving Credit Agreement, dated July 13, 1994.(5)
 
10.4.6        --Amendment No. 3 to the Revolving Credit Agreement, dated March 28, 1995.(8)
 
10.4.7        --Amendment No. 4 to the Revolving Credit Agreement, dated February 23,
                1996.(9)
 
10.4.8        --Amendment No. 5 to the Revolving Credit Agreement, dated March 8, 1996.(9)
 
10.4.9        --Amendment No. 6 to the Revolving Credit Agreement, dated June 17, 1996.(10)
 
10.4.10       --Amendment No. 7 to the Revolving Credit Agreement, dated November 27,
                1996.(11)

10.4.11       --Intercreditor Agreement, dated November 27, 1996, between Fleet National
                Bank and Congress Financial Corporation.(11)

10.4.12       --Amendment No. 8 to the Revolving Credit Agreement, dated October 31, 1997.
                (12)

10.4.13       --Guarantee by Registrant, WCI Steel Production Control Services Inc., WCI
                Steel Metallurgical Services Inc. and Niles Properties, Inc. in favor of
                Congress Financial Corporation and Security Pacific Business Credit, Inc.,
                dated October 31, 1997. (12)

10.4.14       --Guarantee by WCI Steel Production Control Services Inc., WCI Steel
                Metallurgical Services Inc. and WCI Steel Sales L.P. in favor of Congress
                Financial Corporation and Security Pacific Business Credit, Inc., dated
                October 31, 1997. (12)

10.5.1        --Intercreditor Agreement, dated November 27, 1996, among Fleet National Bank,
                Bank One Trust Company, N.A. and the Registrant.(11)
 
10.5.2        --Indemnification Agreement, dated as of November 27, 1996, between the
                Registrant and Bank One Trust Company, N.A. (11)

10.7          --Loan Agreement, dated as of May 1, 1990, between the Director of Development
                of the State of Ohio and Youngstown Sinter Company (Ohio Enterprise Bond
                Fund Program).(1)
 
10.8          --Agreement, dated June 11, 1990, between the City of Youngstown, Ohio and
                Youngstown Sinter Company (with UDAG Grant Agreement).(1)

</TABLE> 



<PAGE>   54

<TABLE>
<CAPTION>
 EXHIBIT
   NO.                                            DESCRIPTION
----------  --------------------------------------------------------------------------------
<C>           <S>

21            --List of Subsidiaries of Registrant.(12)

27            --Financial Data Schedule.
 
----------------
<FN> 
(1) Incorporated by reference to the same-numbered exhibit filed with the Company's
    Registration Statement on Form S-4, as amended (File No. 33-58648), originally filed
    with the Commission on February 23, 1993.
 
(2) Incorporated by reference to Exhibit 22 filed with the Company's Registration Statement
    on Form S-4, as amended (File No. 33-58648), originally filed with the Commission on
    February 23, 1993.
 
(3) Incorporated by reference to the same-numbered exhibit filed with the Company's
    Registration Statement on Form S-4 (File No. 33-74108), filed with the Commission on
    January 14, 1994.
 
(4) Incorporated by reference to same-numbered exhibit filed with the Company's
    Pre-Effective Amendment No. 2 to Registration Statement on Form S-1 (File No. 33-75722),
    filed with the Commission on April 28, 1994.
 
(5) Incorporated by reference to exhibit 10.4.5 filed with the Company's Pre-Effective
    Amendment No. 3 to Registration Statement on Form S-1 (File No. 33-75722), filed with
    the Commission on May 4, 1994.
 
(6) Incorporated by reference to the Company's Form 10-Q for the quarterly period ended July
    31, 1994 (File No. 1-13028).
 
(7) Incorporated by reference to the Company's Form 10-K for the fiscal year ended October
    31, 1994 (File No. 1-13028).
 
(8) Incorporated by reference to the Company's Form 10-Q for the quarterly period ended
    April 30, 1995 (File No. 1-13028).
 
(9) Incorporated by reference to the Company's Form 10-Q for the quarterly period ended
    April 30, 1996 (File No. 1-13028).

(10) Incorporated by reference to the Company's Form 10-Q for the quarterly period ended
     July 31, 1996 (File No. 1-13028).

(11) Incorporated by reference to same-numbered exhibit filed with the Company's
     Registration Statement on Form S-4, as amended (File No. 333-18019), originally filed
     with the Commission on December 17, 1996.

(12) Incorporated by reference to the Company's Form 10-K for the fiscal year ended October
     31, 1997 (File No. 333-18019).

</FN>
</TABLE>